Airlines could save big with just a little biofuel

PUBLISHED : Monday, 01 August, 2011, 12:00am
UPDATED : Monday, 01 August, 2011, 12:00am


China's carriers may be able to save the 800 million yuan (HK$968 million) penalty they are set to pay upon the implementation of a new European emission standard next year, if they replace a tenth of the jet kerosene they now use on European routes with biofuels, experts say.

That should amount to only 100,000 tonnes of alternative fuel for the country's three largest carriers - Air China, China Eastern Air, and China Southern Air - which together consumed around 10 million tonnes of jet fuel last year.

European routes were responsible for about 10 per cent of that total fuel consumption.

However, suppliers may not be able to meet even such a modest demand, since no biofuel producer has yet delivered an effective and sustainable supply of the new product - which means that even if anyone could produce enough quantity to meet the demand, it would not be cost effective.

PetroChina, the only local manufacturer of renewable aviation fuel in China to date, has produced just 15 tonnes of jatropha-derived biofuel for Air China's trial application on a Boeing 747 on August 10. Jatropha oil is vegetable oil produced from the seeds of the Jatropha curcas, a plant that can grow in low-yielding soil conditions.

Other alternative fuel sources include camelina, often grown as a rotational crop with wheat and other cereal crops; algae, grown on marginal lands that are not used for growing food and which produces up to 15 times more oil per square kilometre than other biofuel crops; and halophytes, marsh grasses that grow in salt water.

'The industry is just at the beginning,' said Al Bryant, vice-president for research and technology at Boeing China. 'But China can be No 1 and have the industry well before others if they put their minds to it. They have the resources of both feedstock and finance, and they have a system that allows much faster action to be taken.'

While carriers from around the world have been performing flight tests on the new energy form since 2008, there was not yet a single supplier equipped to produce the alternative fuels on a large scale.

However, following the renewable jet fuel's certification in July and tightening of the European emission law, which may cost global airlines Euro3.4 billion (HK$38.1 billion) next year alone, securing a cheap and stable supply of cleaner fuel has become a more pressing issue for stakeholders in the aviation industry.

In the United States, alternative fuel manufacturer Solazyme listed its shares in Silicon Valley three months ago in preparation for potential new investment and expansion. Meanwhile in China, Boeing entered a memorandum of agreement with Air China, PetroChina, and Honeywell earlier this year to jointly research biofuel.

The agreement targets the use of a biofuel derived from algae.

'We are now looking at three to four different feedstocks that will supply the oil necessary for producing jet fuel. Since the processing plants will be located where the feedstock is, biofuel is very much a regional solution,' Bryant said.

Starting next year, airlines landing in Europe will be forced to buy carbon credits to cover each tonne of carbon they emit in excess of the new cap, which is set at 97 per cent of average annual emissions between 2004 and 2006.

Two thousand airlines worldwide - 33 from the mainland, Hong Kong, and Macau - will be affected by the new law if the three American airlines that lodged a lawsuit against the unilaterally-imposed legislation lose their case.

Earlier this month, the American Society for Testing and Materials approved the use of a fuel mixture containing up to 50 per cent biofuel in commercial and military aircraft. But the International Air Transport Association said it would take 30 years for the new fuel to make up half of the world's jet-fuel consumption.

An expert specialising in China's research in the alternative energy said it would take much less than a 50-50 blend to satisfy the new emission rule.

'A 10 per cent mix could do the job,' the expert said, meaning as long as one tenth of the fuel now used on flights between China and Europe was replaced by jet biofuel, China's carriers could be spared the 800 million yuan penalty they may have to pay in the first year of the new system.

The central government has not yet come up with policies concerning the development of the new aviation fuel, but many people expect financial subsidies or other forms of incentives will eventually be granted to national refineries or carriers for research and production of the fuel.