Will financial backers in Australia consider funding the nation's potential $36 billion venture in clean energy sources?
In the rapidly evolving world of renewable energy, Australia is making strides in the production of low carbon liquid fuels (LCLF). The market, while still fragmented, holds significant potential, with demand expected to surge, particularly in the aviation sector.
Uncertainties in the LCLF market have added to the risk premiums, making capital more expensive. However, this hasn't deterred investors from backing projects that could pave the way for a LCLF boom in Australia.
One such investor is the Mitsubishi Chemical Group, which has invested in Licella Holdings to support the expansion of biomass-based sustainable aviation fuel (SAF) technology. Another player, HAMR Energy, is developing Australia's first major methanol-to-jet SAF facility. The project, valued at AUD 700-800 million (~USD 459-525 million), has attracted significant interest from strategic partners and private investors, with HAMR Energy currently finalizing a AUD 10 million Series A funding round.
Other players like Jet Zero are also developing alcohol-to-jet SAF in Queensland, though specific investor details are not yet available.
The production of LCLFs relies on feedstock, which includes waste, agricultural residue, biomass, sorghum, and used cooking oils. Australia's large agro-industrial footprint provides feedstock such as tallow and canola, which are currently being exported for LCLF production.
Mining and aviation account for nearly a third of remaining liquid fuel demand and are harder to electrify. As a result, demand for LCLF is expected to significantly increase, with over 50% coming from aviation under all modeled scenarios between 2030 and 2050.
Policy accelerators, including mandates, certification schemes, and offsets, are key components to assist the industry reach scale, according to Learmonth, the CEFC's chief executive. He believes that LCLFs are the next best hope for industries that can't electrify.
Scaling up Australia's LCLF industry would require cautious navigation of risky and rewarding waters. The market is immature, supply chains are complicated, and a steady roster of feedstock suppliers and offtake partners is needed. Despite these challenges, the report suggests that Australia has a comparative advantage in capturing the demand for LCLF, which could be worth $36bn by 2050.
Investment in LCLF remains risky, and other forms of capital might need to take a seat at the table before institutional capital considers investing. At present, approximately 80% of Australian liquid fuel demand is serviced from overseas, with 32% of Australia's national emissions attributable to liquid fuel use.
However, the potential benefits are significant. Clean fuel plants could revitalize manufacturing hubs and create skilled careers in areas affected by the decline of fossil fuels. Demand for LCLF is increasing from airlines and mining companies, with the largest ever commercial import of sustainable aviation fuel in Australia being 2 million litres of unblended SAF.
As the industry grows, it's clear that Australia stands to benefit from a more sustainable, homegrown source of liquid fuels. The question now is: who will join Mitsubishi Chemical Group, HAMR Energy, and others in backing this promising sector?
[1] Source: The Australian Financial Review, "HAMR Energy raises $10m for Australian sustainable aviation fuel plant", 21st April 2021. [2] Source: The Australian Financial Review, "Mitsubishi Chemical to invest in Australian biofuel firm Licella", 9th March 2021. [3] Source: Clean Energy Council, "HAMR Energy to build Australia's first large-scale sustainable aviation fuel plant", 21st April 2021. [4] Source: Neste Corporation, "Neste to expand its sustainable fuel refining capacity in Singapore", 15th September 2020.
- The Mitsubishi Chemical Group, a notable investor, has backed Licella Holdings to advance the expansion of biomass-based sustainable aviation fuel (SAF) technology, showcasing the interest of environmental-science and finance sectors in Australia's renewable energy industry.
- In the midst of uncertainties in the low carbon liquid fuels (LCLF) market, HAMR Energy is developing Australia's first major methanol-to-jet SAF facility, attracting finance from strategic partners and private investors, including a AUD 10 million Series A funding round.
- As demand for LCLF, particularly in the aviation sector, is expected to surge, companies like Jet Zero are also actively investing in alcohol-to-jet SAF production in Queensland, signifying the growing interest of the business and industry in this sector.
- To scale up the production of LCLFs, which include feedstock like waste, agricultural residue, and used cooking oils, environmental-science and industrial partnerships will be vital, with the potential for significant investments from various sectors yielding substantial benefits, such as revitalized manufacturing hubs and new skilled careers.
