1 00:00:00,160 --> 00:00:02,960 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:03,240 --> 00:00:07,440 Speaker 1: the B andF podcast. Sustainable aviation fuel, or SAFF for short, 3 00:00:07,640 --> 00:00:11,319 Speaker 1: is the most immediate solution to decarbonize aviation, and since 4 00:00:11,400 --> 00:00:15,560 Speaker 1: staff feedstocks include either organic material like biomass or waste 5 00:00:15,640 --> 00:00:18,320 Speaker 1: products like used cooking oil, it has a lower carbon 6 00:00:18,320 --> 00:00:21,560 Speaker 1: footprint when compared to conventional jet fuel. With off take 7 00:00:21,600 --> 00:00:24,319 Speaker 1: agreements for SAFF surging in the past two years, the 8 00:00:24,400 --> 00:00:27,560 Speaker 1: industry has been showing promise, but of course hurdles remain. 9 00:00:27,880 --> 00:00:30,600 Speaker 1: In this case, it's due to bottlenecks and supply or 10 00:00:30,760 --> 00:00:34,159 Speaker 1: competition for feedstocks with renewable diesel, and a lack of 11 00:00:34,200 --> 00:00:37,760 Speaker 1: technology diversification. On today's show, we highlight some of the 12 00:00:37,760 --> 00:00:40,880 Speaker 1: findings from B and EF's recently published twenty twenty four 13 00:00:41,080 --> 00:00:44,680 Speaker 1: Sustainable Aviation Fuel Outlook. To talk us through the details 14 00:00:44,720 --> 00:00:47,640 Speaker 1: are two of B and EF's renewable fuels analysts, Daisy 15 00:00:47,720 --> 00:00:50,520 Speaker 1: Robinson and Rose Oates. We get into the longer term 16 00:00:50,520 --> 00:00:53,680 Speaker 1: outlook for sustainable aviation fuel, as well as the policies 17 00:00:53,720 --> 00:00:56,640 Speaker 1: and strategies in different parts of the world meant to 18 00:00:56,800 --> 00:01:01,120 Speaker 1: encourage production and adoption. BNF subscribers can find this report 19 00:01:01,200 --> 00:01:04,440 Speaker 1: and related research on staff at benif dot com or 20 00:01:04,480 --> 00:01:07,360 Speaker 1: at BNF on the Bloomberg terminal. Make sure to subscribe 21 00:01:07,360 --> 00:01:10,520 Speaker 1: to switched On on Apple Podcasts, Spotify, or wherever you 22 00:01:10,560 --> 00:01:13,039 Speaker 1: get your podcasts, and consider giving us a review to 23 00:01:13,080 --> 00:01:15,920 Speaker 1: make us more discoverable by others. But right now, let's 24 00:01:15,959 --> 00:01:29,200 Speaker 1: speak with Daisy and Rose about sustainable aviation fuel. Rose, 25 00:01:29,200 --> 00:01:30,920 Speaker 1: thank you for joining us on today's show. 26 00:01:31,040 --> 00:01:32,240 Speaker 2: It's a pleasure to be here. 27 00:01:32,520 --> 00:01:35,240 Speaker 1: And our second flower name Daisy. Good to have you 28 00:01:35,240 --> 00:01:36,200 Speaker 1: on the show today. 29 00:01:35,920 --> 00:01:37,039 Speaker 3: Too, Thanks for having me. 30 00:01:37,160 --> 00:01:39,800 Speaker 1: All right, so here we go sustainable aviation fuels. Now, 31 00:01:39,840 --> 00:01:44,839 Speaker 1: this falls firmly into airlines and airplanes generally fall into 32 00:01:44,880 --> 00:01:47,080 Speaker 1: this hard to abate space wherever AND's trying to still 33 00:01:47,120 --> 00:01:50,160 Speaker 1: figure out how we're going to decarbonize it. And invariably 34 00:01:50,400 --> 00:01:54,160 Speaker 1: you see these occasional electric planes that can hold one 35 00:01:54,160 --> 00:01:57,040 Speaker 1: passenger that are being developed, and we'll see how that 36 00:01:57,160 --> 00:02:00,840 Speaker 1: technology actually continues forward. But we're gonna talk today about 37 00:02:00,880 --> 00:02:04,160 Speaker 1: sustainable aviation fuel, which is the more near term and 38 00:02:04,200 --> 00:02:07,640 Speaker 1: more immediate fix or partial fix for this space. Can 39 00:02:07,680 --> 00:02:11,720 Speaker 1: you provide some context around how important sustainable aviation fuel 40 00:02:11,919 --> 00:02:13,880 Speaker 1: is to decarbonizing airplanes. 41 00:02:14,600 --> 00:02:18,520 Speaker 3: So when we look at airline decarbonization strategies, which is 42 00:02:18,560 --> 00:02:21,720 Speaker 3: something that we're tracking quite closely at BINA, pretty much 43 00:02:21,800 --> 00:02:24,680 Speaker 3: every major airline that we're tracking has some form of 44 00:02:24,960 --> 00:02:28,880 Speaker 3: sustainable aviation fuel strategy, whether that's kind of an explicit 45 00:02:28,960 --> 00:02:31,920 Speaker 3: target to have a certain percentage of their jet fuel 46 00:02:31,960 --> 00:02:35,080 Speaker 3: consumption as SAFF by a certain day in the future, 47 00:02:35,280 --> 00:02:37,320 Speaker 3: or whether it's just kind of investing in the R 48 00:02:37,360 --> 00:02:41,160 Speaker 3: and D or collaborating with startups. So pretty much every 49 00:02:41,320 --> 00:02:43,960 Speaker 3: major airline has something like that, and when we look 50 00:02:44,000 --> 00:02:47,400 Speaker 3: at decarbonization strategies overall, this is something kind of we're 51 00:02:47,440 --> 00:02:51,120 Speaker 3: tracking over time, and by the latest count, over thirty 52 00:02:51,160 --> 00:02:54,160 Speaker 3: percent of those strategies are to do with SAF in 53 00:02:54,240 --> 00:02:56,800 Speaker 3: some shape or form. Like you mentioned, there's a bunch 54 00:02:56,800 --> 00:03:00,720 Speaker 3: of other options like electrification or hydrogen craft. They're looking 55 00:03:00,760 --> 00:03:03,799 Speaker 3: into those as well, but these are either like electrication, 56 00:03:04,280 --> 00:03:07,200 Speaker 3: you know, kind of contained to the more short haul journeys, 57 00:03:07,360 --> 00:03:09,679 Speaker 3: or for hydrogen it's much much more long term. We're 58 00:03:09,720 --> 00:03:13,560 Speaker 3: talking decades away. So SAF is something that is probably 59 00:03:13,560 --> 00:03:16,640 Speaker 3: one of the very few near term solutions that can 60 00:03:16,680 --> 00:03:20,120 Speaker 3: be implemented and acted on today. So that's why it's 61 00:03:20,240 --> 00:03:21,760 Speaker 3: so important for airlines. 62 00:03:22,280 --> 00:03:25,000 Speaker 1: What do these decarbonization targets look like. Are they all 63 00:03:25,080 --> 00:03:27,200 Speaker 1: roughly in the same percentage terms or are they very 64 00:03:27,240 --> 00:03:28,680 Speaker 1: widely airlined to airline. 65 00:03:29,080 --> 00:03:32,560 Speaker 3: Normally, for saf it's around ten percent by twenty thirty, 66 00:03:32,760 --> 00:03:35,160 Speaker 3: that's the typical one that we see, but it does 67 00:03:35,240 --> 00:03:38,520 Speaker 3: have some variations. So the airlines in Asia tend to 68 00:03:38,560 --> 00:03:40,400 Speaker 3: be a little bit more conservative, so that tends to 69 00:03:40,480 --> 00:03:43,560 Speaker 3: be around five percent SAFF by twenty thirty. The cargo 70 00:03:43,600 --> 00:03:47,360 Speaker 3: airlines like FEDEXDHL, they've gone a bit higher, so they're 71 00:03:47,400 --> 00:03:50,480 Speaker 3: targeting thirty percent by twenty thirty. So there is some variation, 72 00:03:50,600 --> 00:03:53,040 Speaker 3: but generally speaking ten percent by twenty thirty is the 73 00:03:53,120 --> 00:03:54,320 Speaker 3: overarching theme. 74 00:03:54,640 --> 00:03:56,880 Speaker 1: I have on occasion looked at these maps where they 75 00:03:56,920 --> 00:03:58,920 Speaker 1: show you all the different airplanes that are in the 76 00:03:58,960 --> 00:04:01,160 Speaker 1: sky at any given moment, and for those who haven't 77 00:04:01,160 --> 00:04:03,480 Speaker 1: looked at that, it's absolutely wild to just see how 78 00:04:03,480 --> 00:04:05,600 Speaker 1: many different routes there are and how many planes there 79 00:04:05,600 --> 00:04:08,440 Speaker 1: are in the sky at any point in time. When 80 00:04:08,440 --> 00:04:11,120 Speaker 1: we look into the future and actually even just look 81 00:04:11,120 --> 00:04:13,400 Speaker 1: at the past few years, what has been the increase 82 00:04:13,440 --> 00:04:17,279 Speaker 1: in air traffic and essentially is this expected to grow 83 00:04:17,440 --> 00:04:19,200 Speaker 1: over the next few years. 84 00:04:19,520 --> 00:04:24,000 Speaker 3: Yeah, great question. So obviously COVID really hit aviation hard. 85 00:04:24,160 --> 00:04:27,960 Speaker 3: We're pretty much back to pre pandemic levels now. Everybody's 86 00:04:28,040 --> 00:04:32,560 Speaker 3: keen to keep flying, keep traveling, and BEENA actually expect 87 00:04:32,839 --> 00:04:35,599 Speaker 3: demand for air travel and for jet fueld to double 88 00:04:35,640 --> 00:04:38,560 Speaker 3: by twenty fifty, which again is kind of why SAF 89 00:04:38,680 --> 00:04:42,360 Speaker 3: is so important, because without solutions like SAF, that's all 90 00:04:42,480 --> 00:04:44,119 Speaker 3: just going to be fossil jet fuel. 91 00:04:44,520 --> 00:04:46,840 Speaker 1: So two things are happening at the same time. One, 92 00:04:47,080 --> 00:04:51,520 Speaker 1: airlines are increasingly looking at adding more bile fuels to 93 00:04:51,520 --> 00:04:53,520 Speaker 1: the jet fuel that they have, and at the same time, 94 00:04:54,160 --> 00:04:56,480 Speaker 1: more airplanes are going to be joining the sky if 95 00:04:56,520 --> 00:04:59,719 Speaker 1: these forecasts hold true. So let's talk about the demand side, 96 00:05:00,040 --> 00:05:02,520 Speaker 1: sort of demand scenarios have we looked at for sustainable 97 00:05:02,560 --> 00:05:05,679 Speaker 1: aviation fuel and you know, really, does the demand currently 98 00:05:05,720 --> 00:05:08,080 Speaker 1: outstriped supply or at what point do we think that 99 00:05:08,080 --> 00:05:09,599 Speaker 1: that will becoming imbalance. 100 00:05:10,080 --> 00:05:12,360 Speaker 2: Yeah, that's a great question. So at the minute, we've 101 00:05:12,360 --> 00:05:14,960 Speaker 2: certainly seen that in a certain regions, such as in 102 00:05:15,000 --> 00:05:17,760 Speaker 2: the US and in Europe, there's a really high demand 103 00:05:17,760 --> 00:05:19,800 Speaker 2: and a growing demand, and that's kind of due to 104 00:05:19,960 --> 00:05:22,279 Speaker 2: certain policies that are being put in place by the governments. 105 00:05:22,839 --> 00:05:26,480 Speaker 2: So the EU is really big on saff mandates. So 106 00:05:26,680 --> 00:05:30,039 Speaker 2: they are about to install the Fuel Aviation, which is 107 00:05:30,080 --> 00:05:32,800 Speaker 2: basically a blending mandate that will be legally binding in 108 00:05:32,839 --> 00:05:35,040 Speaker 2: all the countries in the EU, and they're going to 109 00:05:35,080 --> 00:05:38,280 Speaker 2: have to meet certain blending rates from twenty twenty five. 110 00:05:38,360 --> 00:05:40,799 Speaker 2: It starts at two percent and then it gradually increases 111 00:05:40,800 --> 00:05:42,880 Speaker 2: every five years all the way to seventy percent of 112 00:05:42,960 --> 00:05:45,320 Speaker 2: jet field demand in twenty fifty. So it's definitely gonna 113 00:05:45,320 --> 00:05:47,120 Speaker 2: be a big challenge kind of meeting that with supply 114 00:05:47,320 --> 00:05:49,440 Speaker 2: in the YOUU because from our tracking of projects of 115 00:05:49,440 --> 00:05:51,520 Speaker 2: saff production in twenty twenty three, there was less than 116 00:05:51,560 --> 00:05:55,159 Speaker 2: one billion gallons of saff production and that it just 117 00:05:55,160 --> 00:05:57,120 Speaker 2: pales in comparison to the kind of saff demand in 118 00:05:57,160 --> 00:05:59,960 Speaker 2: the EU, So that is probably going to be short 119 00:06:00,160 --> 00:06:01,919 Speaker 2: for the next few years, all the way to twenty 120 00:06:01,960 --> 00:06:04,159 Speaker 2: thirty and then whereas in the US they have the 121 00:06:04,160 --> 00:06:07,000 Speaker 2: SAFT Grand Challenge and which starts with three billion gallons 122 00:06:07,040 --> 00:06:09,560 Speaker 2: of saff by twenty thirty being blended in the region 123 00:06:09,600 --> 00:06:11,520 Speaker 2: and then it goes all the way up to basically 124 00:06:11,560 --> 00:06:14,200 Speaker 2: equivalent to one hundred percent of jet field demand. So yeah, 125 00:06:14,200 --> 00:06:16,440 Speaker 2: there's definitely those two regions in particular. I think there's 126 00:06:16,440 --> 00:06:18,840 Speaker 2: going to be a huge demand all the way from 127 00:06:19,080 --> 00:06:22,279 Speaker 2: now to twenty fifty and then and that kind of 128 00:06:22,279 --> 00:06:25,240 Speaker 2: other regions such as APAC. There's kind of a few 129 00:06:25,279 --> 00:06:27,520 Speaker 2: countries are starting to bring in policies, but it's a 130 00:06:27,560 --> 00:06:30,560 Speaker 2: lot more fragmented. There's not one common aviation market, so 131 00:06:30,680 --> 00:06:33,360 Speaker 2: it'll be harder for this supplied growl there because it's 132 00:06:33,440 --> 00:06:35,560 Speaker 2: much more challenging for first movers because it will be 133 00:06:35,640 --> 00:06:38,320 Speaker 2: much more expensive and the demand might not necessarily scale 134 00:06:38,360 --> 00:06:39,000 Speaker 2: up as quickly. 135 00:06:39,320 --> 00:06:41,480 Speaker 3: Yeah, I would also say that one of the big 136 00:06:41,560 --> 00:06:44,080 Speaker 3: challenges with SAFA is it's a lot more expensive than 137 00:06:44,320 --> 00:06:46,920 Speaker 3: jet fuel, and so it kind of does rely on 138 00:06:47,000 --> 00:06:49,640 Speaker 3: policy to create that market. So we've got these two 139 00:06:49,640 --> 00:06:52,920 Speaker 3: scenarios that we've run in our Sustainable Aviation Fuel outlook 140 00:06:52,960 --> 00:06:55,640 Speaker 3: for demand. The first one is kind of our base case, 141 00:06:55,680 --> 00:06:58,680 Speaker 3: which just takes policy that's already existing and so that 142 00:06:58,839 --> 00:07:03,039 Speaker 3: pretty much is the EU mandates that Rose explained and 143 00:07:03,080 --> 00:07:06,080 Speaker 3: also the US policy, and so just relying on that, 144 00:07:06,160 --> 00:07:09,440 Speaker 3: and then an element of these voluntary staff targets that 145 00:07:09,600 --> 00:07:12,960 Speaker 3: airlines are setting themselves, we get to about three and 146 00:07:12,960 --> 00:07:16,040 Speaker 3: a half percent of jetfield demand by twenty thirty. And 147 00:07:16,080 --> 00:07:18,920 Speaker 3: then our second scenario is what we call the boosted 148 00:07:18,920 --> 00:07:22,840 Speaker 3: policy scenario, where there's a lot of other policies around 149 00:07:22,880 --> 00:07:25,720 Speaker 3: the world being considered that just haven't been implemented yet. 150 00:07:25,760 --> 00:07:29,040 Speaker 3: So there's a few in the Apat region and elsewhere. 151 00:07:29,080 --> 00:07:30,560 Speaker 3: So if we add in all of these that are 152 00:07:30,600 --> 00:07:33,920 Speaker 3: under consideration, that number goes to just under eight percent 153 00:07:34,120 --> 00:07:37,800 Speaker 3: of global jetfield demand by twenty thirty. And it's important 154 00:07:37,840 --> 00:07:40,400 Speaker 3: to also note that these are just policies that are 155 00:07:40,400 --> 00:07:44,720 Speaker 3: currently being either implemented or under consideration, so there's a 156 00:07:44,760 --> 00:07:48,280 Speaker 3: lot of scope there to actually increase if more regions 157 00:07:48,320 --> 00:07:50,600 Speaker 3: and countries come up with new ones that haven't yet 158 00:07:50,640 --> 00:07:51,480 Speaker 3: been announced. 159 00:07:51,720 --> 00:07:53,960 Speaker 1: Would you say that the EU has the most aggressive 160 00:07:53,960 --> 00:07:56,320 Speaker 1: targets at this point time, given that it's seventy percent 161 00:07:56,360 --> 00:07:57,160 Speaker 1: by twenty fifty. 162 00:07:57,760 --> 00:07:58,000 Speaker 3: Yes. 163 00:07:58,520 --> 00:08:01,400 Speaker 1: How has the Inflation Redaction Act played into this in 164 00:08:01,440 --> 00:08:01,920 Speaker 1: the US? 165 00:08:02,320 --> 00:08:05,680 Speaker 3: Yeah, So the Inflation Reduction Act has been quite important 166 00:08:05,680 --> 00:08:08,720 Speaker 3: for saf because, first of all, the US market is 167 00:08:08,760 --> 00:08:11,960 Speaker 3: the biggest market in the world for biofuels, but historically 168 00:08:12,080 --> 00:08:14,840 Speaker 3: it's always focused on road fuels, and so the Inflation 169 00:08:14,880 --> 00:08:18,680 Speaker 3: Reduction Act is quite important because it's trying to address 170 00:08:18,760 --> 00:08:23,880 Speaker 3: that imbalance between incentivizing road fuels and incentivizing biofuels for aviation. 171 00:08:24,200 --> 00:08:27,240 Speaker 3: So in the past, the way the US market is 172 00:08:27,280 --> 00:08:29,880 Speaker 3: built for biofuels is it kind of stacks these credits 173 00:08:29,920 --> 00:08:32,680 Speaker 3: on top of each other, and historically aviation was missing 174 00:08:32,720 --> 00:08:35,360 Speaker 3: out because it got less credits than road fuels, so 175 00:08:35,559 --> 00:08:39,560 Speaker 3: producers are always incentivized to produce road biofuels instead of aviation. 176 00:08:39,760 --> 00:08:42,640 Speaker 3: So now the change is adding an additional tax credit 177 00:08:42,760 --> 00:08:46,440 Speaker 3: for sustainable aviation fuel, which aims to level that playing 178 00:08:46,480 --> 00:08:49,240 Speaker 3: field and make it more attractive for producers to be 179 00:08:49,280 --> 00:08:50,960 Speaker 3: producing aviation fuels instead. 180 00:08:51,200 --> 00:08:52,880 Speaker 1: I'm glad you brought up road fuels because I have 181 00:08:52,960 --> 00:08:55,000 Speaker 1: a very basic question here, which has to do with 182 00:08:55,080 --> 00:08:57,240 Speaker 1: the fact that when we talk about cars that can 183 00:08:57,280 --> 00:08:59,960 Speaker 1: take biofuels, the engine actually has to be specifically just 184 00:09:00,320 --> 00:09:02,920 Speaker 1: in order to be able to handle that. Can sustainable 185 00:09:02,920 --> 00:09:06,600 Speaker 1: aviation fuels be used on the exact same aircraft we 186 00:09:06,640 --> 00:09:08,800 Speaker 1: have in the sky right now, or do these engines 187 00:09:08,920 --> 00:09:10,360 Speaker 1: need to be made differently? 188 00:09:10,840 --> 00:09:14,120 Speaker 3: Yeah, for now. That's one of the big pluses of 189 00:09:14,280 --> 00:09:16,760 Speaker 3: sustainable aviation fuel is that it's a drop in fuel 190 00:09:16,840 --> 00:09:19,000 Speaker 3: and so when you compare it to something like hydrogen, 191 00:09:19,040 --> 00:09:22,280 Speaker 3: which would require a complete overhaul of the current infrastructure, 192 00:09:22,320 --> 00:09:26,520 Speaker 3: whether that's engines, logistics, any of that stuff, Refueling needs 193 00:09:26,559 --> 00:09:29,400 Speaker 3: to be changed, which is really time consuming and really expensive. 194 00:09:29,520 --> 00:09:31,640 Speaker 3: So the big benefit of SAF is that you don't 195 00:09:31,640 --> 00:09:33,120 Speaker 3: need to do any of that because it's a drop 196 00:09:33,120 --> 00:09:36,640 Speaker 3: in fuel. So in theory it can be used as 197 00:09:36,679 --> 00:09:38,719 Speaker 3: a like for light replacement for jet fuel. You know, 198 00:09:38,760 --> 00:09:41,240 Speaker 3: there's some aromatics blending that needs to take place, and 199 00:09:41,280 --> 00:09:43,800 Speaker 3: at the moment there's regulations in place that you can 200 00:09:43,840 --> 00:09:46,040 Speaker 3: only blend it up to fifty percent, but the industry 201 00:09:46,080 --> 00:09:48,760 Speaker 3: is working pretty hard on addressing that and in time 202 00:09:49,040 --> 00:09:51,240 Speaker 3: it's expected that that will go to one hundred percent. 203 00:09:51,400 --> 00:09:53,760 Speaker 3: So when it comes to road biofuels, some of the 204 00:09:53,840 --> 00:09:57,640 Speaker 3: kind of more traditional biofuels like ethanol biodiesel, they're limited 205 00:09:57,640 --> 00:09:59,880 Speaker 3: to very low level blending and if you want it 206 00:09:59,920 --> 00:10:01,440 Speaker 3: to go higher than that, you would have to have 207 00:10:01,480 --> 00:10:04,000 Speaker 3: a specialized engine, which is called a flex fuel vehicle. 208 00:10:04,040 --> 00:10:06,160 Speaker 3: But they were also a drop in biofuels on road 209 00:10:06,200 --> 00:10:09,400 Speaker 3: as well, aka renewable diesel, which is the main competitor 210 00:10:09,679 --> 00:10:12,760 Speaker 3: with SAF. When it comes to supply because producers can 211 00:10:12,800 --> 00:10:15,240 Speaker 3: either make this renewable diesel, which is a drop in 212 00:10:15,280 --> 00:10:17,600 Speaker 3: fuel for diesel, or saf. 213 00:10:17,520 --> 00:10:20,320 Speaker 1: Now, we did a show recently on another hard to 214 00:10:20,400 --> 00:10:24,640 Speaker 1: evate sector, So maritime and the International Maritime Organization of 215 00:10:24,679 --> 00:10:27,000 Speaker 1: the IMO has been a driving force in trying to 216 00:10:27,040 --> 00:10:30,200 Speaker 1: set emission standards on their side. We've talked about how 217 00:10:30,320 --> 00:10:33,400 Speaker 1: companies have their own emission standards, and then there's policy 218 00:10:33,440 --> 00:10:36,640 Speaker 1: intervention different parts of the world. Is there a third party, 219 00:10:36,880 --> 00:10:40,400 Speaker 1: non governmental organization across the aviation space that's doing a 220 00:10:40,400 --> 00:10:41,000 Speaker 1: similar thing. 221 00:10:41,360 --> 00:10:44,120 Speaker 2: Yes, so there is the international body IATA, which is 222 00:10:44,120 --> 00:10:46,959 Speaker 2: the International Air Transport Association, and yeah, it's part of 223 00:10:47,000 --> 00:10:50,080 Speaker 2: the roadmap. SAFF will contribute sixty five percent of the 224 00:10:50,120 --> 00:10:52,600 Speaker 2: emission reduction as part of the goal for net zero 225 00:10:52,679 --> 00:10:53,520 Speaker 2: by twenty fifty. 226 00:10:53,760 --> 00:10:55,920 Speaker 1: So we've talked a bit about the airlines and about 227 00:10:56,040 --> 00:10:58,600 Speaker 1: the targets that are out there, but let's talk about 228 00:10:58,600 --> 00:11:01,200 Speaker 1: the infrastructure. And I'm thinking about airports and where we're 229 00:11:01,200 --> 00:11:04,679 Speaker 1: actually refueling these planes. Now, logic would lead me to 230 00:11:04,720 --> 00:11:07,200 Speaker 1: believe that the largest number of airports would be in 231 00:11:07,240 --> 00:11:10,319 Speaker 1: Europe given these aggressive targets, But really where and how 232 00:11:10,360 --> 00:11:14,000 Speaker 1: many airports are reactually seeing have the capacity to deliver 233 00:11:14,160 --> 00:11:16,640 Speaker 1: the fuels that are required in Is this a Battlemack. 234 00:11:16,960 --> 00:11:20,520 Speaker 3: Yeah. At the moment, staff is highly concentrated in the world. 235 00:11:20,800 --> 00:11:24,320 Speaker 3: I would say the highest concentration is in California actually, 236 00:11:24,360 --> 00:11:28,439 Speaker 3: because that is really the epicenter of renewable fuels globally 237 00:11:28,679 --> 00:11:32,000 Speaker 3: thanks to their low carbon fuel standard policy. So really 238 00:11:32,080 --> 00:11:35,800 Speaker 3: San Francisco and LA are the big kind of centers 239 00:11:35,880 --> 00:11:37,920 Speaker 3: for saf refueling. And so when you look at the 240 00:11:37,960 --> 00:11:41,720 Speaker 3: availability at airports and off take agreements actually, because that's 241 00:11:41,720 --> 00:11:44,480 Speaker 3: one thing we've been tracking is with these off take agreements, 242 00:11:44,600 --> 00:11:47,880 Speaker 3: quite often they will disclose a location for where that 243 00:11:48,080 --> 00:11:50,920 Speaker 3: SAFF is going to actually be exchanged, and typically it 244 00:11:50,960 --> 00:11:54,040 Speaker 3: tends to be there. But over time this is changing 245 00:11:54,120 --> 00:11:56,720 Speaker 3: and it's becoming a little bit less concentrated. So, like 246 00:11:56,760 --> 00:11:59,840 Speaker 3: you say, European airports are getting involved because the mandates 247 00:11:59,840 --> 00:12:02,920 Speaker 3: have actually been implemented yet, but that market is definitely 248 00:12:03,200 --> 00:12:06,559 Speaker 3: catching up with California. So we are seeing some kind 249 00:12:06,559 --> 00:12:10,600 Speaker 3: of hubs emerging, like the UK for example, and France 250 00:12:10,720 --> 00:12:14,080 Speaker 3: because France also has its own blending mandate as well. 251 00:12:14,280 --> 00:12:15,960 Speaker 2: I'd just like to add on to that, there is 252 00:12:16,000 --> 00:12:18,320 Speaker 2: one your port particular in Singapore, the Government of said 253 00:12:18,320 --> 00:12:21,640 Speaker 2: a really interesting blending mandate there which includes one percent 254 00:12:21,679 --> 00:12:24,160 Speaker 2: of all flights that leave Singapore from twenty twenty six, 255 00:12:24,360 --> 00:12:27,040 Speaker 2: and basically the passengers will pay a lavay that's going 256 00:12:27,120 --> 00:12:28,840 Speaker 2: to cover the cost of the staff. And I think 257 00:12:28,920 --> 00:12:31,240 Speaker 2: it'll be easy to implement, as the government responsible for 258 00:12:31,320 --> 00:12:33,640 Speaker 2: kind of sourcing the saff there and then the leavy 259 00:12:33,679 --> 00:12:34,360 Speaker 2: will pay for it. 260 00:12:34,640 --> 00:12:37,640 Speaker 3: That's kind of an interesting mechanism actually, because one of 261 00:12:37,679 --> 00:12:40,960 Speaker 3: the big uncertainties about staff is the cost, and particularly 262 00:12:41,000 --> 00:12:43,400 Speaker 3: where there isn't policy in place, that's kind of a 263 00:12:43,400 --> 00:12:47,120 Speaker 3: big challenge for airlines not knowing how big this liability 264 00:12:47,280 --> 00:12:49,880 Speaker 3: could be. So the Singapore government has gone about it 265 00:12:49,920 --> 00:12:52,280 Speaker 3: in a kind of interesting way where they come up 266 00:12:52,320 --> 00:12:55,880 Speaker 3: with a price expectation going forward and they fix the 267 00:12:55,960 --> 00:12:59,319 Speaker 3: levee based on that expectation, and that levee gets passed 268 00:12:59,320 --> 00:12:59,959 Speaker 3: through to passenger. 269 00:13:00,360 --> 00:13:02,360 Speaker 2: Yeah, it would only add an additional cost of twelve 270 00:13:02,440 --> 00:13:04,400 Speaker 2: US dollars from single war to London, and then the 271 00:13:04,400 --> 00:13:06,400 Speaker 2: business class passengers will pea slightly more. 272 00:13:06,520 --> 00:13:09,440 Speaker 3: So then they fix that levee and then the income 273 00:13:09,440 --> 00:13:12,840 Speaker 3: from that levee will enable them to purchase the quantities 274 00:13:12,840 --> 00:13:15,920 Speaker 3: of SAP, so they've fixed the price and varying the 275 00:13:15,960 --> 00:13:20,040 Speaker 3: volume basically, so their target for how much SAF is 276 00:13:20,040 --> 00:13:23,000 Speaker 3: being blended is slightly variable. So it starts at one 277 00:13:23,040 --> 00:13:25,320 Speaker 3: percent in twenty twenty six, and then they aim to 278 00:13:25,360 --> 00:13:28,080 Speaker 3: increase that to between three and five percent, depending on 279 00:13:28,120 --> 00:13:30,880 Speaker 3: how much they can actually procure using the income from 280 00:13:30,920 --> 00:13:31,480 Speaker 3: that levee. 281 00:13:31,720 --> 00:13:33,840 Speaker 1: And that's across all of the airlines that are going 282 00:13:33,840 --> 00:13:36,080 Speaker 1: in and out of Singapore, so it's not just associated 283 00:13:36,120 --> 00:13:40,240 Speaker 1: with a specific airline that has a more stringent target exactly. 284 00:13:40,320 --> 00:13:43,560 Speaker 3: So that's the beauty of mandates because it creates this 285 00:13:43,679 --> 00:13:46,520 Speaker 3: level playing field. This is a big challenge for an 286 00:13:46,559 --> 00:13:50,920 Speaker 3: international industry like aviation is competition because of the high prices. 287 00:13:50,920 --> 00:13:53,440 Speaker 3: Airlines are kind of hesitant to be the first mover 288 00:13:53,640 --> 00:13:57,720 Speaker 3: because that will directly impact their competitiveness. And so mandates 289 00:13:57,760 --> 00:14:00,839 Speaker 3: create this level playing field across every everyone. Everyone has 290 00:14:00,840 --> 00:14:02,760 Speaker 3: to blend the same amount, everybody has to pay the 291 00:14:02,800 --> 00:14:06,320 Speaker 3: same for this premium product, and so that's why it's 292 00:14:06,360 --> 00:14:09,720 Speaker 3: seen as a necessary step in order to boost demand. 293 00:14:09,920 --> 00:14:11,520 Speaker 1: I mean, if you go back in our back catalog, 294 00:14:11,559 --> 00:14:14,080 Speaker 1: just a couple episodes ago, we had the chief sustainability 295 00:14:14,120 --> 00:14:17,720 Speaker 1: officer at United Airlines, which is the number one user 296 00:14:17,800 --> 00:14:20,280 Speaker 1: of staff in the world at the moment, and she 297 00:14:20,360 --> 00:14:23,600 Speaker 1: talked a bit about this issue of the higher premium 298 00:14:23,640 --> 00:14:27,160 Speaker 1: for it and the passing it on to the customers 299 00:14:27,160 --> 00:14:28,480 Speaker 1: and whether or not the customers are going to be 300 00:14:28,520 --> 00:14:30,720 Speaker 1: willing to pay it, and what those incentives really look like. 301 00:14:31,000 --> 00:14:33,320 Speaker 1: Can we talk a little bit about that price differential? 302 00:14:33,520 --> 00:14:36,400 Speaker 1: How big is it if we didn't actually amortize it 303 00:14:36,440 --> 00:14:38,920 Speaker 1: across all of the different airlines like Singapore is doing. 304 00:14:39,240 --> 00:14:41,880 Speaker 1: What sort of premium is an individual airline paying? 305 00:14:42,200 --> 00:14:45,200 Speaker 3: So it really depends on the type of saff because yeah, 306 00:14:45,200 --> 00:14:47,240 Speaker 3: we haven't gone into too much detail about the different 307 00:14:47,240 --> 00:14:50,000 Speaker 3: pathways to produce staff, but there's several different kind of 308 00:14:50,040 --> 00:14:52,920 Speaker 3: routes you can go down. But it starts around three 309 00:14:53,040 --> 00:14:56,720 Speaker 3: times multiplier versus conventional jet fuel. That's kind of the 310 00:14:56,720 --> 00:14:59,800 Speaker 3: starting point. So the traditional staff that's on the market now, 311 00:15:00,000 --> 00:15:02,280 Speaker 3: it's the cheapest to market. They say it's around three 312 00:15:02,320 --> 00:15:05,560 Speaker 3: to five times more than conventional jet fuel, and that 313 00:15:05,840 --> 00:15:08,120 Speaker 3: multiplier goes all the way up to nine times if 314 00:15:08,120 --> 00:15:10,880 Speaker 3: you're looking at something like e fuels or power to liquids, 315 00:15:10,960 --> 00:15:13,239 Speaker 3: which are much less developed at the moment. 316 00:15:13,280 --> 00:15:15,840 Speaker 2: So these kind of alternative technologies like power liquids, they 317 00:15:15,840 --> 00:15:18,000 Speaker 2: are looking at like five to nine times the price, 318 00:15:18,160 --> 00:15:19,920 Speaker 2: so they seem a bit unattainable at the moment in 319 00:15:20,040 --> 00:15:22,240 Speaker 2: terms of cost. However, some of certain regions in the 320 00:15:22,240 --> 00:15:24,280 Speaker 2: world that EU they're starting to turn their backs to 321 00:15:24,360 --> 00:15:27,640 Speaker 2: the more traditional staff just to the nature of the feedstocks. 322 00:15:27,640 --> 00:15:30,080 Speaker 2: They want to look more advanced bile fuels and power liquids, 323 00:15:30,080 --> 00:15:31,960 Speaker 2: which will, like the comm at higher cost. So that 324 00:15:32,080 --> 00:15:33,480 Speaker 2: is interesting to see how that will play it. 325 00:15:33,800 --> 00:15:35,760 Speaker 1: Why is there a luck to some of these higher 326 00:15:35,800 --> 00:15:36,840 Speaker 1: cost bile. 327 00:15:36,520 --> 00:15:39,160 Speaker 2: Fuels, It's just because they want to move away from 328 00:15:39,200 --> 00:15:41,200 Speaker 2: so there's a lot of competition with agricultures. So it's 329 00:15:41,200 --> 00:15:43,280 Speaker 2: things like they don't want crops going in the main 330 00:15:43,320 --> 00:15:46,360 Speaker 2: growing season for food going to aviation. And there's alternative 331 00:15:46,360 --> 00:15:48,960 Speaker 2: technologies like it's called gas to liquids where they can 332 00:15:48,960 --> 00:15:54,320 Speaker 2: basically convert waste feedstocks from agriculture forestry into fuels. But 333 00:15:54,360 --> 00:15:56,960 Speaker 2: it's still quite a nascent technology that you in particular 334 00:15:56,960 --> 00:15:58,880 Speaker 2: are looking more towards those types of fuels, so then 335 00:15:58,880 --> 00:16:00,680 Speaker 2: they're not competing basically food crops. 336 00:16:01,080 --> 00:16:04,880 Speaker 3: Yeah, ultimately it comes down to feedstock, which is possibly 337 00:16:04,920 --> 00:16:07,480 Speaker 3: the biggest challenge when it comes to scaling up SAF. 338 00:16:07,720 --> 00:16:10,720 Speaker 3: So the more traditional route, which pretty much all of 339 00:16:10,720 --> 00:16:13,440 Speaker 3: the SAF that's available today, is via this route that 340 00:16:13,560 --> 00:16:17,280 Speaker 3: is called heifer and that relies on oil type feedstocks 341 00:16:17,320 --> 00:16:19,600 Speaker 3: like vegetable oils or use cooking oils. So it's the 342 00:16:19,680 --> 00:16:25,280 Speaker 3: cheapest to produce, but it also sees pretty constrained feedstock supply, 343 00:16:25,440 --> 00:16:28,360 Speaker 3: and so that's potentially limiting growth of the sector in 344 00:16:28,400 --> 00:16:30,520 Speaker 3: the future. And then so the reason that there's a 345 00:16:30,560 --> 00:16:33,800 Speaker 3: lot of talk around these other more expensive technologies is 346 00:16:33,840 --> 00:16:36,720 Speaker 3: that they have the ability to convert a much more 347 00:16:36,720 --> 00:16:39,720 Speaker 3: abundant supply of feedstocks and waste feedstocks as well, so 348 00:16:39,760 --> 00:16:43,200 Speaker 3: agricultural residues, municipal solid waste even And then when you 349 00:16:43,200 --> 00:16:46,120 Speaker 3: get to ethiels, they are quite different because they don't 350 00:16:46,120 --> 00:16:49,200 Speaker 3: rely on biogenic feedstock at all, and so they don't 351 00:16:49,240 --> 00:16:53,080 Speaker 3: come with the same potential land use issues that biogenic 352 00:16:53,120 --> 00:16:57,080 Speaker 3: feedstocks do. So interestingly, the EU is quite big on 353 00:16:57,240 --> 00:16:59,800 Speaker 3: e fields or quite big on trying to encourage this 354 00:17:00,000 --> 00:17:02,880 Speaker 3: gale up of this market, which currently is very very nascent, 355 00:17:02,960 --> 00:17:06,639 Speaker 3: doesn't really exist yet in any commercial scale, so that 356 00:17:06,720 --> 00:17:09,600 Speaker 3: euse actually set a sub target for these feels, whereas 357 00:17:09,600 --> 00:17:12,160 Speaker 3: I don't know if you want to elaborate on those, yeah, yeah. 358 00:17:12,000 --> 00:17:14,200 Speaker 2: Happy to. They kind of map blendy mandate I mentioned 359 00:17:14,200 --> 00:17:16,959 Speaker 2: before the refield EU aviation. They have a sub blending 360 00:17:16,960 --> 00:17:19,280 Speaker 2: target which starts in twenty thirty with zero point two 361 00:17:19,280 --> 00:17:21,919 Speaker 2: percent of get field demand being perat liquids, and then 362 00:17:21,960 --> 00:17:24,479 Speaker 2: it goes up to thirty five percent in twenty fifty, 363 00:17:24,520 --> 00:17:26,920 Speaker 2: which is half of the bull mandate. But I think 364 00:17:26,960 --> 00:17:29,160 Speaker 2: that it will be challenging because currently the supply there's 365 00:17:29,320 --> 00:17:33,000 Speaker 2: two or three pilot plant level efuel production facilities around 366 00:17:33,000 --> 00:17:35,280 Speaker 2: the globe, so it really needs to scale up massively. 367 00:17:35,280 --> 00:17:37,520 Speaker 2: But it's seeing a lot of investments. Some countries like Japan, 368 00:17:37,760 --> 00:17:40,560 Speaker 2: UK are putting money into it, so there is a transferred. 369 00:17:40,119 --> 00:17:40,560 Speaker 1: To scale up. 370 00:17:40,600 --> 00:17:42,760 Speaker 2: But currently it's difficult just because of the high cost 371 00:17:42,960 --> 00:17:45,600 Speaker 2: and it relies on green hydrogen which is expensive, and 372 00:17:45,640 --> 00:17:48,399 Speaker 2: it also relies on carbon so either carbon dioxide that 373 00:17:48,400 --> 00:17:50,800 Speaker 2: other comes from direct air capture which also needs to 374 00:17:50,800 --> 00:17:53,879 Speaker 2: be scaled up, or potentially from a biogenic seal two source. 375 00:17:54,040 --> 00:17:55,560 Speaker 2: So it's sung like an eth mool plant or a 376 00:17:55,560 --> 00:17:57,680 Speaker 2: paper and pulp mill plant. So it does face a 377 00:17:57,720 --> 00:18:00,720 Speaker 2: lot more challenges than the traditional kind of hydro process technology, 378 00:18:00,760 --> 00:18:03,159 Speaker 2: which is already used extensively in the US to day 379 00:18:03,200 --> 00:18:05,520 Speaker 2: to make renewable diesels. E mean, it'll be interesting to 380 00:18:05,520 --> 00:18:07,080 Speaker 2: see how those technologies skill up. 381 00:18:07,359 --> 00:18:09,320 Speaker 1: It seems like there are a lot of different variables 382 00:18:09,359 --> 00:18:11,720 Speaker 1: here in terms of the feedstocks that could have a 383 00:18:11,880 --> 00:18:15,240 Speaker 1: dramatic impact on the future, depending upon supply. So when 384 00:18:15,480 --> 00:18:18,800 Speaker 1: you take a moment to actually think about the forecasts 385 00:18:18,880 --> 00:18:21,520 Speaker 1: in the longer term, how many different avenues did you 386 00:18:21,600 --> 00:18:23,280 Speaker 1: need to go down, and how do you go about 387 00:18:23,320 --> 00:18:26,920 Speaker 1: even thinking about creating a forecast? And how many I guess, 388 00:18:26,960 --> 00:18:29,080 Speaker 1: how do you narrow down the variables to the scenarios 389 00:18:29,080 --> 00:18:29,880 Speaker 1: that you're going to look at? 390 00:18:30,240 --> 00:18:32,439 Speaker 3: Yeah, no, I think when it comes to trying to 391 00:18:32,480 --> 00:18:35,600 Speaker 3: forecast demand, it is it's very difficult at this stage 392 00:18:35,600 --> 00:18:38,440 Speaker 3: because the industry is so new and there is very 393 00:18:38,440 --> 00:18:41,320 Speaker 3: little policy to go by, and policy really will be 394 00:18:41,359 --> 00:18:44,520 Speaker 3: the driver of this until costs come down, because it's 395 00:18:44,640 --> 00:18:48,760 Speaker 3: very difficult to rely on voluntary targets alone when the 396 00:18:48,800 --> 00:18:52,200 Speaker 3: costs are so much higher. Our forecasts are predominantly based 397 00:18:52,200 --> 00:18:55,320 Speaker 3: on those policies that exist. But then longer term, when 398 00:18:55,440 --> 00:18:58,399 Speaker 3: demand really starts to pick up, because between now and 399 00:18:58,440 --> 00:19:01,960 Speaker 3: twenty thirty, you know, it's sarting from practically nothing. So 400 00:19:02,119 --> 00:19:05,160 Speaker 3: even though it is growing very rapidly, we still only 401 00:19:05,160 --> 00:19:08,320 Speaker 3: get to around five percent of total demand by twenty thirty. 402 00:19:08,359 --> 00:19:10,920 Speaker 3: But beyond twenty thirty, when the mandates start to kick 403 00:19:10,960 --> 00:19:13,920 Speaker 3: in and when that scale really starts to get significant, 404 00:19:13,960 --> 00:19:17,040 Speaker 3: that's when the feedstock constraints really start to kick in. 405 00:19:17,119 --> 00:19:20,080 Speaker 3: And so yeah, there's a lot of uncertainty about how 406 00:19:20,160 --> 00:19:22,280 Speaker 3: this is going to play out. We've looked at the 407 00:19:22,320 --> 00:19:26,080 Speaker 3: potential supply of these different feedstocks and how they're going 408 00:19:26,119 --> 00:19:29,520 Speaker 3: to interact with each other going forward. We've estimated the 409 00:19:29,560 --> 00:19:33,920 Speaker 3: supply of global waste oils, greases, and fats, and according 410 00:19:33,920 --> 00:19:37,119 Speaker 3: to our two demand scenarios, if you think about the 411 00:19:37,119 --> 00:19:40,920 Speaker 3: boosted policy scenario, demand will actually outstrip that supply before 412 00:19:40,960 --> 00:19:43,800 Speaker 3: the end of the decade, which is pretty significant because 413 00:19:43,880 --> 00:19:46,719 Speaker 3: at the moment that's the feedstock that everybody's relying on. 414 00:19:46,880 --> 00:19:48,920 Speaker 3: And beyond that there's going to be a serious need 415 00:19:48,960 --> 00:19:52,960 Speaker 3: to scale up these alternative technologies or explore different feedstock 416 00:19:53,000 --> 00:19:56,080 Speaker 3: avenues that can be converted via the heifer pathway. 417 00:19:56,440 --> 00:19:58,920 Speaker 1: How concentrated is the market in terms of the companies 418 00:19:58,960 --> 00:20:00,680 Speaker 1: that are actually playing in it, because when you bring 419 00:20:00,800 --> 00:20:03,080 Speaker 1: up different cooking wastes and those things, it makes me 420 00:20:03,119 --> 00:20:05,800 Speaker 1: think of nest Ay and the actual drive that they 421 00:20:05,840 --> 00:20:09,399 Speaker 1: have to get household cooking waste back to use as 422 00:20:09,400 --> 00:20:12,439 Speaker 1: a feedstock. That does feel like it would require some 423 00:20:12,600 --> 00:20:15,880 Speaker 1: major logistical support and scaling around the world in order 424 00:20:15,920 --> 00:20:18,240 Speaker 1: to meet demand. So we're back here too, how do 425 00:20:18,320 --> 00:20:20,280 Speaker 1: we get enough of this fuel? But also how many 426 00:20:20,280 --> 00:20:23,040 Speaker 1: companies are actually concentrating on this and how are they 427 00:20:23,040 --> 00:20:25,000 Speaker 1: going to be able to scale it? So is it 428 00:20:25,080 --> 00:20:28,040 Speaker 1: a really fragmented market or are we talking about a 429 00:20:28,080 --> 00:20:30,439 Speaker 1: few companies that really are the future of this. 430 00:20:31,000 --> 00:20:33,560 Speaker 3: Yeah, it's a really interesting one in terms of the 431 00:20:33,600 --> 00:20:37,480 Speaker 3: market structure because you've got in terms of who's actually 432 00:20:37,600 --> 00:20:41,040 Speaker 3: making fuel today, it's highly concentrated, and it tends to 433 00:20:41,119 --> 00:20:44,199 Speaker 3: be big oil refiners because they've got the scale and 434 00:20:44,240 --> 00:20:48,000 Speaker 3: the expertise and the infrastructure. So you've got neste to 435 00:20:48,160 --> 00:20:51,919 Speaker 3: tell any Diamond green diesel in the US P sixty 436 00:20:52,000 --> 00:20:55,760 Speaker 3: six all oil names, and now we're starting to see 437 00:20:55,880 --> 00:20:59,679 Speaker 3: these producers they've got the infrastructure to actually convert and 438 00:21:00,119 --> 00:21:03,600 Speaker 3: use to fuel, but they're integrating into the feedstock industry 439 00:21:03,640 --> 00:21:05,680 Speaker 3: as well. So you mentioned NESTE. They're a really good 440 00:21:05,680 --> 00:21:09,240 Speaker 3: example of a company that's been really proactive in making 441 00:21:09,600 --> 00:21:13,119 Speaker 3: deals and acquisitions in order to get priority access to 442 00:21:13,160 --> 00:21:16,960 Speaker 3: these low carbon feedstocks. So they acquired two waste collection 443 00:21:17,200 --> 00:21:19,560 Speaker 3: companies in the US, for example, so that they have 444 00:21:19,640 --> 00:21:21,760 Speaker 3: priority access to use cooking oil, which is the kind 445 00:21:21,760 --> 00:21:24,560 Speaker 3: of most high in demand feedstock for SAFF. And I 446 00:21:24,560 --> 00:21:28,320 Speaker 3: think going forward we might see different geographies going in 447 00:21:28,320 --> 00:21:30,680 Speaker 3: different ways. So for example, China, there's a lot of 448 00:21:30,720 --> 00:21:33,439 Speaker 3: potential there for used cooking oil, and we're starting to 449 00:21:33,480 --> 00:21:38,320 Speaker 3: see more production facilities being planned where the feedstock is. 450 00:21:38,400 --> 00:21:41,400 Speaker 3: So for example, just this month, to Tell Energies and 451 00:21:41,600 --> 00:21:45,160 Speaker 3: Sinopec agreed or announced an agreement to build a SAFF 452 00:21:45,200 --> 00:21:48,119 Speaker 3: production facility in China at one of Signipec's refineries. And 453 00:21:48,160 --> 00:21:50,160 Speaker 3: I think we might see more of this to come, 454 00:21:50,400 --> 00:21:54,440 Speaker 3: trying to not just think about where the facilities are, 455 00:21:54,440 --> 00:21:57,120 Speaker 3: but where the feedstock is, to try and locate yourself 456 00:21:57,240 --> 00:21:58,919 Speaker 3: near ample feedstock supply. 457 00:21:59,240 --> 00:22:02,080 Speaker 1: Now you'd mentioned a little bit earlier off take agreements, 458 00:22:02,240 --> 00:22:04,359 Speaker 1: and I know you're used to spending your time talking 459 00:22:04,359 --> 00:22:07,400 Speaker 1: to sophisticated commodities investors. But for the benefit of those 460 00:22:07,440 --> 00:22:10,560 Speaker 1: who might be listening today who aren't falling into that category, 461 00:22:10,600 --> 00:22:12,760 Speaker 1: can you explain what an off take agreement is and 462 00:22:12,800 --> 00:22:15,280 Speaker 1: then how important it is to the adoption of SAFF. 463 00:22:15,680 --> 00:22:18,280 Speaker 2: Yeah, so off take agreements are basically essential for the 464 00:22:18,320 --> 00:22:21,240 Speaker 2: scale up of SAFF because SAFF comes set of premium 465 00:22:21,280 --> 00:22:24,040 Speaker 2: to fossil basedjet fuel as well as the industry requiring 466 00:22:24,080 --> 00:22:26,360 Speaker 2: scale up is important for general investment in the industry. 467 00:22:26,440 --> 00:22:28,200 Speaker 2: So the kind of nature of the agreements we see 468 00:22:28,280 --> 00:22:30,879 Speaker 2: are generally between producers and airlines and they tend to 469 00:22:30,920 --> 00:22:33,760 Speaker 2: be very long term, over several years, five to ten years, 470 00:22:33,800 --> 00:22:35,919 Speaker 2: and sometimes they come with an investment in the company 471 00:22:36,000 --> 00:22:38,960 Speaker 2: it's a small startup or otherwise it is just they'll 472 00:22:39,000 --> 00:22:41,320 Speaker 2: pay for the fuel over that entire time period. And 473 00:22:41,359 --> 00:22:43,760 Speaker 2: I think it's important for the airlines to just lock 474 00:22:43,800 --> 00:22:46,680 Speaker 2: in a future supply, especially for when all these mandates 475 00:22:46,720 --> 00:22:49,359 Speaker 2: will come in the EU for example, as well as 476 00:22:49,400 --> 00:22:51,520 Speaker 2: just helping the industry grow, because I'd say that in 477 00:22:51,600 --> 00:22:54,080 Speaker 2: terms of the main players in industry of SAFF production, 478 00:22:54,160 --> 00:22:57,000 Speaker 2: there's as Daisy mentioned, the kind of large refiners who 479 00:22:57,000 --> 00:22:59,880 Speaker 2: have all the existing infrastructure they're able to convert exist 480 00:23:00,119 --> 00:23:02,440 Speaker 2: refineries to produce renewable fields in a couple of years. 481 00:23:02,520 --> 00:23:03,919 Speaker 2: You have the other side of the coin, which is 482 00:23:04,000 --> 00:23:06,640 Speaker 2: kind of startups. Then they just require a lot of capital. 483 00:23:06,760 --> 00:23:09,600 Speaker 2: Right now, like gasification has high kpex as well as 484 00:23:09,600 --> 00:23:11,879 Speaker 2: the paratial liquids is still being developed. So I think 485 00:23:11,920 --> 00:23:14,960 Speaker 2: it's really important for those newer, smaller companies to get 486 00:23:14,960 --> 00:23:17,679 Speaker 2: a lot of investments from airlines and other companies, So 487 00:23:17,720 --> 00:23:19,320 Speaker 2: I of take agreements that are going to play a 488 00:23:19,359 --> 00:23:21,359 Speaker 2: large role in just the general scale up of supply. 489 00:23:21,680 --> 00:23:24,479 Speaker 2: One of the issues with the sector is that, for example, 490 00:23:24,560 --> 00:23:27,080 Speaker 2: there's some large plants being planned in like Chile to 491 00:23:27,119 --> 00:23:29,639 Speaker 2: produce SAFF, but there's a lot of airlines concentrated on 492 00:23:29,640 --> 00:23:31,359 Speaker 2: other parts the world that wouldn't nessarily fly there. So 493 00:23:31,359 --> 00:23:33,480 Speaker 2: that's why a lot of these book and claim systems 494 00:23:33,480 --> 00:23:36,400 Speaker 2: are being promoted, because as well as the production facilities 495 00:23:36,440 --> 00:23:38,520 Speaker 2: need to be located near feedstocks, they also need to 496 00:23:38,560 --> 00:23:41,439 Speaker 2: be located on like popular flight paths, or obviously they 497 00:23:41,440 --> 00:23:43,480 Speaker 2: can be transported. But a lot of companies are looking 498 00:23:43,480 --> 00:23:45,199 Speaker 2: to book and claim systems where they can kind of 499 00:23:45,240 --> 00:23:47,320 Speaker 2: say that they've bought the SAFF, but it doesn't necessarily 500 00:23:47,320 --> 00:23:49,600 Speaker 2: have to go and there the exact plane, but you 501 00:23:49,640 --> 00:23:51,600 Speaker 2: get the credit and it still flies in a plane. 502 00:23:51,800 --> 00:23:54,720 Speaker 3: Yeah, I think the industry is still figuring it out, 503 00:23:54,840 --> 00:23:57,280 Speaker 3: but yeah, it seems like there's this book and claim 504 00:23:57,440 --> 00:24:01,680 Speaker 3: system emerging which essentially acts like an offset where the 505 00:24:01,840 --> 00:24:05,040 Speaker 3: fuel that you're purchasing doesn't necessarily have to be loaded 506 00:24:05,080 --> 00:24:07,920 Speaker 3: into your plane at a specific airport, but you can 507 00:24:07,960 --> 00:24:10,560 Speaker 3: bank the credit and purchase it. So I guess it's 508 00:24:10,640 --> 00:24:11,920 Speaker 3: fungible in that way. 509 00:24:12,000 --> 00:24:14,359 Speaker 1: It seems very similar to like a renewable power purchase 510 00:24:14,400 --> 00:24:18,040 Speaker 1: agreement in that you're producing the renewable energy somewhere, but 511 00:24:18,119 --> 00:24:20,520 Speaker 1: the actual electrons that are showing up but your home 512 00:24:20,600 --> 00:24:23,640 Speaker 1: or your facility are not necessarily generated in that way. 513 00:24:23,920 --> 00:24:26,520 Speaker 2: We've even seen like a couple of announcements of corporations 514 00:24:26,520 --> 00:24:28,440 Speaker 2: who are trying to like Microsoft AMS, and they're trying 515 00:24:28,440 --> 00:24:31,560 Speaker 2: to offset their Scope three emissions like business travel and stuff. 516 00:24:31,600 --> 00:24:34,320 Speaker 2: So they started purchasing staff, but obviously they're not earlines, 517 00:24:34,359 --> 00:24:36,720 Speaker 2: so they don't have any infrastructure to use this app. 518 00:24:36,760 --> 00:24:38,679 Speaker 2: So that's quite interesting new avenue that we're kind of 519 00:24:39,000 --> 00:24:41,639 Speaker 2: being explored. But once again, it's really brand new, so 520 00:24:41,840 --> 00:24:43,200 Speaker 2: I don't know what direction will goal. 521 00:24:43,520 --> 00:24:45,760 Speaker 3: Yeah, And I think it's important to add that a 522 00:24:45,760 --> 00:24:47,760 Speaker 3: lot of these off take agreements, they don't tend to 523 00:24:47,800 --> 00:24:51,480 Speaker 3: be necessarily legally binding, but they're still very important in 524 00:24:51,840 --> 00:24:55,600 Speaker 3: establishing this market because it's a statement of intention, really, 525 00:24:55,680 --> 00:24:58,600 Speaker 3: and airlines are doing all they can to show their 526 00:24:58,600 --> 00:25:01,359 Speaker 3: support in every way they can to this market and 527 00:25:01,400 --> 00:25:04,280 Speaker 3: helping it to scale up basically. So I think that's 528 00:25:04,320 --> 00:25:06,359 Speaker 3: why these off take agreements are important. 529 00:25:06,680 --> 00:25:10,440 Speaker 1: So well, aviation is this global industry because literally, these 530 00:25:10,480 --> 00:25:14,040 Speaker 1: planes are flying all over the world. The feedstocks seem 531 00:25:14,119 --> 00:25:16,680 Speaker 1: to be really this pinch point in terms of staff 532 00:25:16,720 --> 00:25:20,760 Speaker 1: adoption and availability, and the natural resources that are given 533 00:25:20,800 --> 00:25:23,600 Speaker 1: country or region are actually endowed with are quite local. 534 00:25:23,680 --> 00:25:25,760 Speaker 1: Can you talk about some of the issues there and 535 00:25:25,800 --> 00:25:29,639 Speaker 1: maybe opportunities that might be arising out of different regional 536 00:25:29,720 --> 00:25:33,359 Speaker 1: assets and commodities that are the feedstocks that are producing 537 00:25:33,520 --> 00:25:33,960 Speaker 1: the fuel. 538 00:25:34,440 --> 00:25:37,399 Speaker 3: There's kind of a theme emerging of, you know, the 539 00:25:37,440 --> 00:25:40,920 Speaker 3: different technologies can convert different types of feedstocks, So the 540 00:25:40,960 --> 00:25:43,639 Speaker 3: different technologies are probably going to end up emerging in 541 00:25:43,800 --> 00:25:46,919 Speaker 3: specific geographies where they have abundance of those feedstocks. So 542 00:25:46,960 --> 00:25:49,960 Speaker 3: an example is alcohol to jet, which is a technology 543 00:25:50,040 --> 00:25:53,320 Speaker 3: under development which can convert ethanol. So it's quite an 544 00:25:53,320 --> 00:25:57,120 Speaker 3: interesting one because specifically the US and Brazil are huge 545 00:25:57,119 --> 00:25:59,800 Speaker 3: ethanol markets which are blended into road fields. But over 546 00:25:59,800 --> 00:26:02,960 Speaker 3: time time, as we expect road field demand to be 547 00:26:03,000 --> 00:26:06,560 Speaker 3: eroded by electric vehicles, there's this huge ethanol market which 548 00:26:06,600 --> 00:26:09,159 Speaker 3: is going to be displaced, and so there's now a 549 00:26:09,160 --> 00:26:12,000 Speaker 3: lot of talk around whether this ethanol can be converted 550 00:26:12,040 --> 00:26:14,720 Speaker 3: into SAF because SAFA is an industry where demand is 551 00:26:14,760 --> 00:26:17,520 Speaker 3: expected to grow a lot, but feedstock constraints is a 552 00:26:17,600 --> 00:26:21,240 Speaker 3: huge problem. So trying to match up these two problems 553 00:26:21,280 --> 00:26:24,760 Speaker 3: of declining demand on road versus a need for an 554 00:26:24,800 --> 00:26:28,600 Speaker 3: alternative source of feedstock with SAF. So that's still very 555 00:26:28,680 --> 00:26:31,800 Speaker 3: much under discussion, but there's kind of an expectation that 556 00:26:31,920 --> 00:26:35,400 Speaker 3: markets like Brazil or the US could be big hubs 557 00:26:35,440 --> 00:26:38,880 Speaker 3: potentially for this alcohol to jet technology. But again it's 558 00:26:39,240 --> 00:26:43,280 Speaker 3: very very new. The first operational commercial scale plant only 559 00:26:43,320 --> 00:26:46,600 Speaker 3: opened earlier this year in the US, so yeah, still 560 00:26:46,680 --> 00:26:47,880 Speaker 3: very early days. 561 00:26:47,760 --> 00:26:50,960 Speaker 1: Which in many respects presents an opportunity because these are 562 00:26:51,040 --> 00:26:54,520 Speaker 1: existing production facilities that need to find customers for long 563 00:26:54,600 --> 00:26:56,960 Speaker 1: term growth for their business, and so what you're saying 564 00:26:57,040 --> 00:27:00,000 Speaker 1: is that they could switch to this new customer universe. 565 00:27:00,280 --> 00:27:02,560 Speaker 1: Would it stay local in terms of the customers that 566 00:27:02,560 --> 00:27:05,080 Speaker 1: they're trying to service, So would it stay within North 567 00:27:05,119 --> 00:27:08,159 Speaker 1: America or South America depending upon where it's produced, or 568 00:27:08,240 --> 00:27:09,960 Speaker 1: is this something that's going to get shipped all over 569 00:27:10,000 --> 00:27:12,040 Speaker 1: the world before then being put on a plane and 570 00:27:12,040 --> 00:27:13,320 Speaker 1: then flown all over the world. 571 00:27:13,600 --> 00:27:16,520 Speaker 3: Yeah, I mean I think that's still TBD. Really. So 572 00:27:16,560 --> 00:27:20,359 Speaker 3: there's discussion in Brazil because Brazil is a very feedstock 573 00:27:20,560 --> 00:27:24,640 Speaker 3: rich region and right now doesn't really have any saff 574 00:27:24,720 --> 00:27:27,720 Speaker 3: conversion capacity to speak of, and so now there's this 575 00:27:27,840 --> 00:27:31,080 Speaker 3: drive to try and emerge as a big saf region 576 00:27:31,119 --> 00:27:34,480 Speaker 3: and capitalize on this feedstock abundance that they have. So 577 00:27:34,600 --> 00:27:37,600 Speaker 3: there is discussion some of the big ethanol players are 578 00:27:37,640 --> 00:27:41,320 Speaker 3: looking into potentially building some of these alcohol to jet facilities. 579 00:27:41,520 --> 00:27:43,679 Speaker 3: But yeah, so I guess watch this space. 580 00:27:43,960 --> 00:27:46,639 Speaker 1: So this is really a space of emerging technologies that 581 00:27:46,680 --> 00:27:50,480 Speaker 1: are going to be changing aviation, certainly in the medium 582 00:27:50,560 --> 00:27:52,919 Speaker 1: term and potentially in the long term as well. So 583 00:27:53,000 --> 00:27:56,320 Speaker 1: within these different feedstocks that we're talking about and different 584 00:27:56,320 --> 00:27:58,680 Speaker 1: things that are being piloted and really a lot of innovation. 585 00:27:59,000 --> 00:28:01,320 Speaker 1: It's easy to get excited about innovation at least from 586 00:28:01,359 --> 00:28:03,879 Speaker 1: my standpoint, because you see all of the potential. So 587 00:28:03,960 --> 00:28:05,919 Speaker 1: what are some of the innovations in this space that 588 00:28:05,960 --> 00:28:07,439 Speaker 1: you are most excited about. 589 00:28:07,720 --> 00:28:10,560 Speaker 2: Well, for me, I'm particularly excited about by metaphor was 590 00:28:10,600 --> 00:28:13,760 Speaker 2: pertal liquid technology because you have a bit of tagline 591 00:28:13,800 --> 00:28:16,240 Speaker 2: that's like you can make the feel from thinnear in 592 00:28:16,359 --> 00:28:19,439 Speaker 2: theory because the carbon source is common outside and so 593 00:28:19,600 --> 00:28:22,360 Speaker 2: for me in terms of technology, it's really fascinating. It's 594 00:28:22,400 --> 00:28:23,919 Speaker 2: just that there will be a lot of hurdles in 595 00:28:23,960 --> 00:28:26,320 Speaker 2: terms of the price and improving the technology before it 596 00:28:26,320 --> 00:28:27,720 Speaker 2: can really scale up. But for me, that could be 597 00:28:27,760 --> 00:28:30,160 Speaker 2: a really good technology that won't be limited by feedstocks. 598 00:28:30,640 --> 00:28:33,480 Speaker 3: For me, I think that heifer will always play a 599 00:28:33,520 --> 00:28:36,600 Speaker 3: really important role because that's the dominant technology. So I'm 600 00:28:36,680 --> 00:28:40,040 Speaker 3: kind of excited to see how that industry innovates to 601 00:28:40,080 --> 00:28:44,280 Speaker 3: come up with these novel feedstocks to remove this potential 602 00:28:44,320 --> 00:28:48,440 Speaker 3: bottleneck for feedstock, So coming up with novel crops, or 603 00:28:48,560 --> 00:28:52,360 Speaker 3: there's genetically modified crops that have a higher oil content 604 00:28:52,440 --> 00:28:54,760 Speaker 3: so you can get more out of the crop, things 605 00:28:54,800 --> 00:28:57,240 Speaker 3: like that. So I'm kind of enjoying seeing these different 606 00:28:57,280 --> 00:29:01,000 Speaker 3: developments on innovating on the feedstocks of things. 607 00:29:01,360 --> 00:29:03,640 Speaker 1: Rose Daisy, thank you very much for coming to talk 608 00:29:03,720 --> 00:29:06,880 Speaker 1: about sustainable aviation fuels. I'm really curious to see what 609 00:29:06,920 --> 00:29:09,400 Speaker 1: happens with the different feedstocks. It seems like there are 610 00:29:09,440 --> 00:29:11,840 Speaker 1: going to be many in many parts of the world. 611 00:29:12,200 --> 00:29:22,040 Speaker 2: Thanks a lot, Daniel, thank you for having us. 612 00:29:23,200 --> 00:29:26,320 Speaker 1: Today's episode of Switched On was produced by Cam Gray 613 00:29:26,520 --> 00:29:30,200 Speaker 1: with production assistance from Kamala Shelling. Bloomberg NIF is a 614 00:29:30,240 --> 00:29:33,360 Speaker 1: service provided by Bloomberg Finance LP and its affiliates. This 615 00:29:33,480 --> 00:29:36,640 Speaker 1: recording does not constitute, nor should it be construed as investment, 616 00:29:36,680 --> 00:29:40,120 Speaker 1: a vice, investment recommendations, or a recommendation as to an 617 00:29:40,120 --> 00:29:43,320 Speaker 1: investment or other strategy. Bloomberg ANIF should not be considered 618 00:29:43,360 --> 00:29:46,680 Speaker 1: as information sufficient upon which to base an investment decision. 619 00:29:46,760 --> 00:29:49,720 Speaker 1: Neither Bloomberg Finance LP nor any of its affiliates makes 620 00:29:49,760 --> 00:29:53,480 Speaker 1: any representation or warranty as to the accuracy or completeness 621 00:29:53,520 --> 00:29:56,520 Speaker 1: of the information contained in this recording, and any liability 622 00:29:56,560 --> 00:29:59,240 Speaker 1: as a result of this recording is expressly disclaimed.