Repsol Invests $217 Million In Sustainable Jet Fuel Production

Repsol has invested a whopping €200 million ($217 million) in southeast Spain to set up a plant that converts used cooking oil into sustainable aviation fuel (SAF). 

While the project has piqued widespread interest, the company is concerned about Europe's regulatory environment and legal instability that might impede the industry's growth.

Oliver Fernandez, the director for air-fuel in Madrid, noted, "(In Europe) there is a legal instability and a regulatory machinery that is very complex and very discouraging towards seeking new solutions.” 

Fernandez believes that the complex and discouraging regulatory environment for developing new solutions in Europe is falling behind compared to the U.S.'s supportive approach to financing companies and promoting innovation. 

Europe's aviation sector has set a target to increase the usage of SAF to 10% of all jet fuel by 2030, a challenging task since it currently costs up to five times more than traditional jet fuel.

SAF is one of the most effective ways to decarbonize aviation. Increasing its use is crucial for airlines to be considered sustainable under the European Union's green finance rules, which affect their cost of raising money. 

Unfortunately, SAF accounts for less than 1% of jet fuel used, and airlines- who operate on thin margins and are heavily indebted due to the pandemic- argue that much more needs to be done to increase production and lower costs.

European producers need support financing the investment costs to scale up. Governments must commit to certain prices for 10-15 years to ensure investment security, but this has yet to happen. 

Repsol, for instance, has only produced sufficient SAF to power a few test flights for Iberia, an IAG-owned carrier. 

Even the largest SAF producer, Neste, based in Finland, needs help seeking raw materials and building new plants to meet European targets.

Despite these hurdles, smaller producers like Velocys and Fulcrum are building facilities to scale up SAF production.  

Joe Horrocks-Taylor, a climate analyst at Columbia Threadneedle Investments, stated, "Most companies we speak with have already secured sufficient SAF supply to meet at least half of their 2030 procurement targets, which is exactly the market signal needed to support further SAF scale up.” 

Repsol is optimistic about the demand for SAF, investing an additional €103 million in a plant to make synthetic jet fuel out of CO2, which will open in 2025. 

Emilio Mayoral, the lead engineer overseeing the plant's construction, stated that the synthetic jet fuel "will be impossible to distinguish chemically from the jet fuel made from oil.” 

Europe faces significant challenges to increasing SAF usage, but smaller producers and investments in new plants offer a glimmer of hope. Despite these challenges, the demand for SAF remains strong, and the industry will continue to work towards decarbonizing aviation.

By MIchael Kern for Oilprice.com

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