We have spent a lot of time in our ESG and Climate work talking about the huge impending challenge of producing enough sustainable aviation fuel to meet airlines desired needs for 2030 and beyond and we highlighted a Ryanair release yesterday that suggested that the company would struggle to meet its 12.5% goal by 2030. The Honeywell schematic in the exhibit below is one of many different processes that are being considered to meet both the demand for sustainable aviation fuel and renewable diesel and gasoline demand. With gasoline more likely to be replaced with increased numbers of EVs over time, we believe that the sustainable fuel focus will switch to aviation as the main priority, and we will need every technology that we can get to meet the volume needs. Waste oil and vegetable oil, with carbon capture around the refining process, is one route, fermentation-based processes are another, and waste to oil is a third, although we remain skeptical about the reliability and economics around a waste gasification-based approach.
The decarbonization of the airline industry remains a hot topic. The energy density issue shown in the exhibit below is a correct assessment of why commercial aviation faces a challenge to transition to electric power. Not only is the energy density too low - which restricts weight/range - but electric power can only turn things, and propellor-based flying has speed limitations relative to jets. The announcements from the airlines to date on electric power have focused on low capacity short-haul opportunities. With this in mind and as noted in the article headlining of the exhibit below, electric power is not the only decarbonizing option for airlines. Hydrogen is the very long-term future - Airbus is saying not before 2050, but in the meantime, the push should be for low carbon or carbon-neutral biofuels. These are essentially plug-in fuels that are identical to current aviation fuel but made either from waste oils or from carbohydrates. Many of the oil majors are working on waste oil or vegetable oil-based processes, especially in California where the LCFS credit helps pay for the conversion, and companies like Gevo and Aemetis are working on carbohydrate-based routes through fermentation. If the carbohydrate, corn in the case of Gevo, is sourced from sustainable agriculture the carbon values of the fuel can be very low and potentially zero or negative through the life cycle. The airlines are going to have to pay up for the low carbon fuel if they want to bid the fuel away from the high credit markets like California diesel and gasoline, but this route could decarbonize the airlines significantly and relatively quickly with the right pricing structure and enough capital.