Insight Conversation: Alexander Kueper, Neste

This seven-part Insight Conversation series examines the opportunities and challenges in the Asian biofuels sector. In this first part, we speak to Neste about the rapidly growing SAF industry. In the next edition, we will spotlight India's biofuels sector with Zuari Envien's CEO Pinaki Mukherjee.

The global aviation industry produces about 2.5% of all human-induced carbon dioxide emissions. The industry is currently working toward a self-imposed target of being carbon neutral by 2050. With some clean fuel technologies such as batteries or hydrogen still in the development phase, transitioning away from petroleum-based fuels to sustainable aviation fuel, or SAF, has managed to reduce aviation's carbon footprint at scale.

As a drop-in fuel, SAF is chemically identical to conventional jet fuel. This means that airplane engines do not need to be modified to run on SAF, giving aviation an accessible pathway to immediately cutting back on their carbon emissions. Additionally, by making SAF out of wastes, such as used cooking oil, agricultural residues or animal tallow, can cut greenhouse gas emissions by a larger margin compared with traditional jet fuels.

Finland-based Neste is the world's largest producer of SAF refined from wastes and residues, with refineries set up in Porvoo, Rotterdam and Singapore. Neste Vice President for Renewable Aviation Business Alexander Kueper talks to S&P Global Commodity Insights senior editor Aditya Kondalamahanty about feedstocks, production challenges and policies influencing the industry. Kueper has more than two decades of experience in the aviation industry, and currently leads Neste's global renewable aviation business.

Producing SAF through the hydrogenated esters and fatty acids, known as HEFA, process comes with the limitation of finding high quality feedstock. How is Neste addressing this challenge?

Neste produces its SAF from used cooking oil and animal fat waste, 100% renewable waste and residue raw materials. Neste produces HEFA SAF using our proprietary refining technology. It is estimated that the global availability of waste and residue oils and fats suited for our currently used technology will exceed 40 million mt/ year globally by 2030. This means there are enough raw materials available to significantly ramp-up SAF production using the HEFA-pathway in the coming years.

Currently we are sourcing renewable raw materials globally from more than 60 countries on five continents and are growing our waste and residue sourcing, while exploring new raw materials and developing technologies such as power-to-liquids to diversify our raw material portfolio further. 

Given the complex nature of aviation fuel supply chains, what would you say were the biggest challenges in setting up a reliable SAF supply chain in Asia?

SAF is a so-called drop-in fuel, which means it can be used in existing aircraft engines and fuel infrastructure without the need for modifications or investments. In that sense there are no challenges to using SAF. To be clear, SAF is blended with conventional jet fuel up to 50% before use. Once blended, it complies with aviation fuel specifications and is certified as regular jet fuel, and then supplied to airports using the same infrastructure as conventional jet fuel.

However, one of the biggest challenges is ramping-up SAF production as its availability is currently limited. Neste is the world's leading producer of SAF and has expanded its SAF production capability to 1 million mt/year with the completion of the expansion of our Singapore refinery in 2023. This will grow to 1.5 million mt/year in 2024 when the modification of our existing refinery in the Netherlands (Rotterdam) to enable SAF production is completed.

Currently SAF production costs are still two-three times the cost of regular jet fuel. What are your projections for SAF prices in 2024?

The cost of SAF is currently in general two to three times higher than the cost of fossil jet fuel. However, this is comparing apples to pears as the cost of fossil jet fuel does not include the cost of carbon emissions and climate impact. We are not able to comment any further on future SAF prices.

In Asia, ethanol feedstocks are more abundant compared to oil and fats wastes. Do you see a potential for alcohol-to-jet or Fischer-Tropsch pathways to produce SAF at scale?

There are currently eight SAF production pathways approved, including HEFA and alcohol-to-jet, or AtJ. The HEFA-pathway is commercially the most viable pathway right now and is used by Neste. Most SAF produced today is HEFA SAF and this will remain the dominant type in the coming years. At the same time, we need to work on developing other pathways to produce SAFs and other propulsion technologies.

Neste is innovating new raw materials such as novel vegetable oils, algae and lignocellulosics and at the same time exploring new production technologies such as power-to-liquids, or eSAF.

At the intersection of policy and private participation, where do you think big investments and government support are most needed to decarbonize air transport at scale?

As mentioned before, one of the biggest challenges is ramping-up SAF production as its availability is currently limited. Policy support can play a crucial role as this can create the demand certainty needed to attract investments into new SAF production capacity. At the same time policy support can provide support for airlines, who are operating in a highly competitive environment and for which fuel is a major cost component.