The journey to cleaner skies starts now
Sustainable aviation fuel is now a prerequisite for low-carbon air transport. Discover our expert’s view on the subject: watch the video of Laurent Floquet, Head of Aviation Finance EMEA (transcript below).
HOW TO SCALE UP THE PRODUCTION OF SUSTAINABLE AVIATION FUEL?
There is no discussion that Sustainable Aviation Fuel is the main lever that is available to the air transport sector in order to achieve its net zero 2050 target.
Depending on studies, SAF represents between half and two thirds of the decarbonisation solution.
The need for scaling up production of SAF is therefore undisputed, and demand for the product will be absolutely massive in the years to come, which is in itself a good starting point to attract capital.
However, the role that banks can play will differ significantly depending on which production pathway is used for the production of SAF, noting that there are currently nine approved pathways.
For the technologically-mature pathways such as HEFA, which utilizes used cooking oil and animal fats as feedstock, bank debt can be available to support the development of new, or the adaptation of existing, production facilities, such as refineries retrofitting. Sustainable availability of feedstock is however a concern for this pathway as well as for a few other biomass-based pathways which are looking to implement fairly "proven" technologies.
The solution to the feedstock bottleneck lies to a large extent in so-called e-Fuels, "electro-fuels", also known as "synthetic fuels" or "power-to-liquid". These are produced with green electricity, water and carbon capture and there is therefore no limitation on the feedstock per se. However, building enough renewable electricity and green hydrogen production capacity will take significant time and will require massive investment. There are also some technological risks embedded in the ability to scale up production that need to be addressed. For these disruptive pathways, banks with a worldwide franchise like Societe Generale can play a major facilitation role, leveraging on their worldwide corporate and financial institutions connections to link up innovative e-SAF startup and projects with private equity and venture capital across the globe.
HOW MUCH CAPITAL WILL BE NEEDED TO REACH THE SAF OUTPUT LEVELS THAT ARE NEEDED BY THE SECTOR?
Obviously, a tricky question. According to the Mission Possible Partnership's aviation transition strategy, bringing global aviation to net zero by 2050 will require an additional investment of about 175 billion US dollars in capital every year over the next three decades. The bulk of this amount will be required for SAF production units and related upstream inputs, namely renewable electricity, hydrogen and CO2 capture. However, this 175 billion US dollar figure would not be distributed equally across the decades to come. In the 2020s, MPP estimates that an average of 38 to 49 billion US dollars of average annual investments would be sufficient to kick off the transition.
IS SOCIETE GENERALE ALREADY ACTIVE IN eFUELS?
Yes indeed, Societe Generale is at the forefront of the drive to nurture the emergence of e-SAF and more globally e-Fuels.
Societe Generale was appointed in June this year by Highly Innovative Fuel Global, a world leader in e-Fuels, to provide financial advisory towards the deployment of 50 billion US dollars of capital for the development, construction and operation of facilities able to produce 150,000 barrels of e-Fuels per day.
Another concrete example of Societe Generale's engagement is the mandate awarded by e-SAF producer Nordic Electrofuel (NEF) to help them raise equity for their first e-Fuel industrial-scale demonstration plant facility in Norway. Nordic Electrofuel is uniquely positioned to capture the market potential of e-SAF in Europe, thanks to its access to renewable wind and hydropower in Norway and proven technology, and it is expected that Norway will supply almost half of European e-SAF volumes in 2035.
Last but not least, looking upstream and more globally, Societe Generale acted as sole financial advisor in the creation and structuring of "Clean H2 Infra Fund", the world's largest global fund exclusively dedicated to clean hydrogen infrastructure solutions. Green hydrogen is relevant to the aviation industry not only as a major upstream input into e-SAF, but also as direct fuel for future hydrogen-powered aircraft. The fund recently reached financial close
at 2 billion US dollars, way above initial target, and gathers a consortium of top-tier industrial and financial investors from all corners of the globe, including Airbus... And of course, via its insurance arm, Societe Generale.