Fuelling change: Why biofuels matter for transport’s energy transition?

Sustainable aviation fuel, also known as SAF, is two to four times more expensive than conventional fossil-based jet fuel [1]. SAF, in its neat form, can reduce lifecycle emissions by up to 80% [2], making it a key decarbonisation pathway for the aviation industry. However, if it’s so much more expensive than its fossil equivalent, which airlines are going to purchase it voluntarily? ??

This ‘chicken and egg’ conundrum has been at the heart of many alternative energy developments over the last few decades and highlights the reality for companies across the transport sector looking to reach net zero by 2050.???

Positively, there are signs that this cycle is perhaps beginning to break. Renewable diesel (sometimes referred to as HVO), for example, saw 65% higher consumption in 2021 than just two years prior [3].???

One major benefit that may be driving this increase in demand is that many biofuels - often referred to as drop-in fuels - require no engine modification to be used, allowing for rapid and scalable uptake. Meanwhile, in parts of the world where biofuels are mandated, growth is being driven by governments requiring fuel providers to blend fossil fuels with a percentage of biofuels.???

Policy around biofuels will be increasingly vital for the decarbonisation of hard-to-abate sectors. These are sectors, such as aviation, marine, and heavy-duty transport, that are more difficult to decarbonise. Why? Because businesses within these sectors need fuels with high energy density, and solutions that may work for other sectors, such as electrification in road transport or hydrogen, have not yet been proven to work or are not yet available at scale in hard-to-abate sectors today.

Instead, these sectors will require biofuels and e-fuels (produced from water, renewable and/or decarbonised electricity, and recycled carbon dioxide) to decarbonise. According to the International Energy Agency (IEA), biofuels should contribute 15% of transport’s energy demand by 2030 according to their Net Zero Scenario [3].

What makes biofuels attractive???

Covering a range of liquid and gaseous fuels, many biofuels can be used today in existing infrastructure and vehicles. While some can be used neat, such as renewable diesel and bioLNG, others can be blended with their fossil equivalents, including bioethanol, which can be blended with gasoline.??

Then there are the carbon reduction benefits, with advanced biofuels and e-fuels having the potential to reduce lifecycle greenhouse gas (GHG) emissions by at least 50%, the current generation of biofuels anywhere between 20% and 80% reduction in GHG emissions [4]. Precisely how much depends on the feedstock and processing technology used; for instance, renewable natural gas (RNG) produced from animal manure can even be carbon negative [3].??

Furthermore, the high energy density of these fuels makes them an extremely suitable alternative to their fossil equivalents for planes, vessels, and heavy-duty vehicles. Using existing battery technology, a 19-seat electric plane would only have an effective range of around 30 miles or 50km; increase the number of seats to 100 and the range falls to below six miles, which is less than 10km [6].

The advantages of biofuels extend beyond their ability to decarbonise transport. For many governments, investing in biofuels represents an opportunity to invest in their local agricultural sector, and reduce reliance on fuel imports.??

What’s more, using biofuels can repurpose waste from materials like cow manure, organic waste and waste oils (such as used cooking oil), while supporting the further development of sustainable feedstocks and technologies – including solid municipal waste and CO2. As well as helping to decarbonise transport, biofuels and e-fuels, done right, can contribute to an energy transition that works for people and the planet.???

Where do the biggest demand opportunities lie???

While, today, biofuels are mainly mandated for use in road transport, we expect to see wider growth in their use across the entire transport sector moving forward, especially in the hard-to-abate sectors. Beyond this, they also hold potential for the chemicals, mining and construction sectors, and a broader part of the transport system including aviation and marine.

In aviation, leaders expect sustainable aviation fuel (SAF) to account for more than 60% of the sector’s emission reductions towards 2050 [5]. Part of which is driven by the fact that, though seen as long-term solutions, zero-emissions technologies such as hydrogen or electrification are not yet commercially viable in this space.??

For heavy-duty road transport, there are a wider range of viable solutions available today. However, the average age of a European truck is 13 years and whilst 3.4% of new trucks sales in the EU are alternative-powered vehicles, they only represent 0.7% of all trucks on the road today[8]. While this figure is growing, the near-to-mid-term efficiencies enabled by biofuels mean they will continue to play a significant role in the decarbonisation of legacy fleets worldwide. ??

This means that biofuels, alongside zero-emissions solutions, will be essential levers to pull as we move to decarbonise heavy duty road transport. Especially when you consider that nearly half of sector vehicles worldwide are likely to still be diesel internal combustion engines by 2050 [9].???

Why is policy and advocacy so vital to development???

There is undoubtedly huge potential for biofuels and e-fuels to drive the decarbonisation of transport, but to unlock this potential, we need to create the right environment. Policy will play an essential role in this, by synchronising the demand and supply for biofuels. To stimulate demand, governments can put in place targets and mandates for the uptake of biofuels. To stimulate supply, governments can provide fiscal support and grants for new projects and technological developments. Synchronising this support, so that there is supply at the same time as there is demand, will be the critical role for governments.????

Demand is growing for decarbonisation solutions, with the number of companies taking action to reduce their supply chain emissions rapidly increasing [10]. However, despite this desire to act, the lack of scale, availability and complexity and cost of developing the technologies to create more biofuels means the prices of biofuels and e-fuels remain high.???

In shipping, estimates suggest that the total cost of ownership of sustainable alternatives could still be at least 1.3 times higher than conventional fuels in 2030 [10]. Arriving at the right price point in all areas of transport will require technology de-risking and commercialisation, as well as increased supply at scale of sustainable feedstocks, with policy mechanisms to support this.??

Governments have gone a long way to start building those supportive policy frameworks but there is still more to do to create a cohesive system that both creates the supply and builds consistent demand in sectors where deployment is still low.?

It has been predicted that the transport sector will emit up to 21 billion metric tonnes of GHG emissions in 2050 without further policy action – meaning we can’t afford not to act [11].???

Thankfully, governments increasingly recognise the importance of biofuels’ role in decarbonising transport, leading to the regular review and updating of regulations. For example the EU is aiming to achieve a 14% share for renewable energy in transport by 2030 by requiring member states to ensure at least 4.5% of these sectors’ energy comes from advanced biofuels. In the US, the Inflation Reduction Act is helping to incentivise biofuel production alongside other low-carbon technologies like carbon capture, utilisation and storage, and the Low Carbon Fuel Standard is set to see more widespread, and stringent, adoption across the Americas.???

While these are positive signs, businesses will continue to need regulation and broader policy support to help create a stable climate for investment over the next two decades and beyond, while feedstock availability, sustainability governance and the synchronisation between supply and demand must all be addressed.???

Without that stability – and we do not yet fully have it – investor confidence will remain low, and progress will be slow.???

Developing the fuels of the future???

Biofuels and e-fuels undeniably have a major role to play in the energy transition, but only if we all put the work into making them available at scale. Which is why, at Shell, we continue to leverage our experience in establishing global supply chains and our expertise in an integrated value-chain approach to help grow our production capacity. The latter being evident in our end-to-end approach – from feedstocks to supply chains to working directly with customers.???

This will require the continued development of new pathways for expanding production of advanced biofuels and e-fuels of the future, and the scaling of established production pathways, as we navigate issues such as how to scale feedstock sustainably and how to ensure the security of supply or offtake.???

It will also require an acceleration of industry collaboration to help build these supply chains; government support in the form of regulation stability for investment; and a concerted industry-wide effort to synchronise supply and demand.???

All of which will help us achieve our ambition of becoming a net-zero emissions energy business by 2050, so that we can better support our customers and partners in meeting their own decarbonisation goals.???

Follow me to make sure you don’t miss further articles on this topic, which will explore these issues and more as Shell works to strengthen the role of biofuels and e-fuels throughout the energy transition.??

?

Sources:

[1] IATA - Incentives Needed to Increase SAF Production ?

[2] saf-what-is-saf.pdf (iata.org)

[3] Praveen Bains and Jeremy Moorhouse. “Biofuels .” International Energy Agency. September 2022.?

[4] Carbon accounting differs per region and country. The above numbers have been taken from the following source: Environmental Protection Agency. “Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis (EPA-420-R-10-006) .” 2010.??

[5] Shell, Deloitte. “Decarbonising Aviation: Cleared for Take-Off .” 2021.?

[6] MIT Technology Review. “This is what’s keeping electric planes from taking off .” 2022.?

[7] European Automobile Manufacturers’ Association. “Average age of the EU vehicle fleet, by country. ” ACEA. April 02, 2022.?

[8] European Automobile Manufacturers’ Association. “Fact sheet: trucks .” ACEA. October 26, 2021.?

[9] Shell Commercial Road Transport. “Sectoral Strategy Paper and Project Umbrella Research.” ?

[10] McKinsey. “Driving decarbonization: Accelerating zero-emission freight transport .” 2022.?

[11] ICCT. “The International Council on Clean Transportation .” N.D.?