Is There A Future for the Shell-Vattenfall eSAF Deal?
Everywhere you look, renewable energy is being invested in.
The International Energy Agency reported that US$1.34tn had been allocated by governments for clean energy investment support between 2020 and 2023.
Looking to the private sector, leaders from BlackRock, Morgan Stanley, BNP Paribas and NatWest told MSCI’s Capital for Climate Conference that green investment is a growing power source.
Some of the largest companies in the world are investing in renewable energy – Google and BlackRock recently announced a 1GW solar development in Taiwan, Amazon has been as the largest corporate purchaser of renewable energy in the world for the fourth consecutive year and Iberdrola and Masdar partnering entering a US$16.1bn energy partnership.
Global investment in clean energy is set to reach almost double the amount going into fossil fuels in 2024.
Total energy investment worldwide is expected to exceed US$3tn in 2024 for the first time, with US$2tn set to go toward clean technologies including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps. The remainder, slightly over US$1tn, is going to coal, gas and oil.
Meanwhile, Shell has pulled out of a planned electro-sustainable aviation fuel (eSAF) project with energy company Vattenfall.
The deal between Shell and Vattenfall
“Vattenfall and Shell have decided to pause their collaboration in the HySkies electrofuel project while Vattenfall continues the search for new partners,” said Vattenfall in a statement.
“While Shell sees a future in the HySkies project, including opportunities for future potential collaborations, currently there is a different belief in timelines for the project to be realised.”
The project was designed to speed up the transition towards electrofuels for aviation and launched in 2021. Initially designed to produce 82,000 tonnes of e-SAF and 9,000 tonnes of renewable diesel each year with a capex of €780m ($845m), the venture was awarded a €80.2mn ($87mn) grant in January 2023. It was due to begin operations in March 2027.
“Both companies have requested for a termination of the grant agreement for financial support via the EU Innovation Fund, considering it is infeasible for the project to succeed within the framework of that agreement and aiming to free up funds for others to use in their ambitions to decarbonise,” Vattenfall’s statement said.
Meet Vattenfall
State-owned Swedish power utility company Vattenfall is one of Europe's largest producers and retailers of electricity and heat and operates in an array of markets — mainly Sweden, Germany, the Netherlands, Denmark and the UK.
Founded 115 years ago, Vattenfall has one of the cleanest electricity mixes of any European utility and aims to phase out coal by 2030 and reach net zero emissions by 2040.
Shell’s energy projects
At the start of 2024, Shell had around 2.5 GW of renewable capacity in operation, 4.1 GW under construction/contract and around 40.2 GW of potential capacity in the pipeline globally.
Whilst the majority of Shell’s energy projects are oil and gas, the company’s energy portfolio focuses on solar, wind and hydrogen. As well as offering renewables to customers, it also uses it to decarbonise its own operations.
Shell first entered the wind power industry more than 20 years ago. In 2000, the company was part of a consortium that installed the first offshore wind turbine in UK waters before investing in offshore wind in the US in 2001.
Does this project have a future?
Aviation is heralded as one of the least sustainable activities, accounting for 2.5% of global CO₂ emissions and having contributed around 4% to global warming to date, so it is undeniable that projects like this are essential to decarbonisation. SAF has a significantly lower carbon footprint compared to traditional jet fuel and airlines can use it and invest in its development to reduce carbon emissions. The exploration of eSAF is an important step in boosting sustainable transport.
“When new technologies are being investigated, like in HySkies, there can be adjustments in early stages of projects, such as the feasibility study phase,” says Per Sundell, Senior Business Developer, Vattenfall.
“However, Vattenfall believes strongly in the opportunities of the Forsmark region to decarbonise heavy industries, and we will continue our investigations to identify potential suitable partners to join our ambitions towards a fossil free future.”
The future of this project, however, seems very uncertain.
“With Vattenfall´s high belief in the opportunities of the Forsmark region to decarbonise heavy industries through fossil free electricity, hydrogen and captured CO2, the full potential is currently under review and investigations are ongoing to identify potential suitable industrial partners to join our ambitions towards a fossil free future," said the Vattenfall statement.
Are you looking for an eSAF project? Vattenfall is looking for partners.
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