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Part one: The future of aviation fuel, the decarbonization challenge

By Charlotte Dubec and Daniel Bannister | October 20, 2023

Decarbonizing aviation will be a long, challenging and expensive process. A better industry could emerge though.
Aerospace
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The first commercial aircraft took off from St Petersburg, Florida, in the United States, on New Year’s Day in 1914, taking a single passenger on a 17-mile journey to neighboring Tampa.

Most modern aircraft are significantly bigger, technically infinitely more complex, and operate within a far more complicated infrastructure than the seaplane used in that historic 23-minute flight, but the basic design is still recognizable - fixed wings attached to a central fuselage and a liquid petroleum-based fuel source.

After a hundred and ten years of incremental, evolutionary change though, this basic footprint seems to be about to go through a revolution. There are now serious discussions and credible early designs emerging that suggest that the future of flight could be battery- or hydrogen-based. Moving to either of these power sources would be better for the environment in the long-term, but it would require a significant redesign of both aircraft themselves and the aviation infrastructure that supports them.

Metamorphosis, rarely painless

The reason for the change is that the aviation industry and the societies that it supports have recognized the need to move away from fossil fuels. As we have discussed in several recent articles, all credible scientific evidence suggests that human activity is having a significant impact on the global environment, the burning of fossil fuels is the key contributor, and the aviation industry is currently reliant on fossil fuels.

While the aviation industry is currently estimated to contribute around 2.5% of the world’s human-induced CO2 emissions[1], there is the potential for this proportion to rise dramatically with the growing global demand for air travel, coupled with other industries’ decarbonization programs.[2]

Various governments around the world have put in place a range of decarbonization targets mostly aligned to the United Nations Paris Agreement[3], which has been widely translated into the adoption of policies that are aimed at decarbonizing economies by 2050 at the latest.

A quarter of a century timeline might be relatively simple for most industries to accommodate, but it presents several significant hurdles for aviation.

Start at the bottom line

The industry faced the challenges created by COVID-19 relatively successfully in the main, but the financial impact of the accompanying lockdowns was significant. To put it simply, the industry needs a period of post-pandemic recuperation. Unfortunately, making a wholesale change in the way that aircraft operate to meet decarbonization commitments requires a significant evolution in both hardware and infrastructure. This will limit the industry’s opportunity to catch its breath.

The process is going to be expensive. Research carried out by the Air Transportation Systems Laboratory (part of University College London) suggests that adopting alternative fuels to mitigate the industry’s CO2 emissions by 2050 will require investment in the range of $0.5 trillion to $2.1 trillion over the three decades from 2022, depending on the chosen fuel pathway. According to the research, funding the transition could require a 15% increase in ticket prices[4] emphasizing the need for proactive policies, technological innovation, and global collaboration.

The choices ahead

The aviation industry has several decisions to make. Aircraft are generally expected to have a working life of up to three decades, so a proportion of the aircraft being produced today could still be in service in 2050.

The financial implications of removing these aircraft from service early to make way for a new generation of more environmentally friendly replacements would be considerable. It’s also worth noting that most modern aircraft are technically very complex, require a great deal of expensive hardware that is difficult to produce, and only a proportion of it can be recycled. The environmental implications of putting a generation of aircraft into early retirement would also be high.

At the same time though, introducing a new generation of aircraft and running the infrastructure that they will need in parallel with the existing hardware that will still need to be in service during the transition could also be prohibitively expensive.

SAF, the heir apparent?

If the industry does change the way that aircraft are powered and moves away from traditional jet fuel, at this point there are three main options on the table: sustainable aviation fuel (SAF), hydrogen or batteries.

SAF is a drop-in alternative which can be adopted by the current generation of aircraft and existing aviation infrastructure with relatively little challenge from a hardware perspective.

SAF is struggling with both supply and cost issues, which we discuss in this related article, but the bigger drawback is that at this point it only dilutes rather than eliminates the use of CO2 emitting fossil derived fuel. There is a great deal of very technical scientific research being done all over the world to create an entirely synthetic jet fuel, but at this stage this is a long way from being commercially viable.

As a result, SAF is being seen as a stopgap replacement for traditional aviation fuel.

Hydrogen or batteries?

In the longer term, it looks like either hydrogen or batteries will emerge as the main replacement for jet fuel. Either will require significant infrastructure changes and hefty investment on the part of the aviation community. We discuss the strengths and weaknesses of the two alternatives in this article, but given the vastly different infrastructure requirements of traditional fuel or SAF, batteries, or hydrogen, the cost of parallel running infrastructure for different fuels might well be prohibitive.

While it is unlikely that we will reach a situation where all three technologies are in place simultaneously, it would be financially helpful for the industry to commit to either batteries or hydrogen sooner rather than later. The problem is that decisions can’t really be made until the science behind it all becomes clearer.

It is worth noting though that while the timescales and the financial aspects of the process of transforming the aviation industry are challenging, the way that the new technologies are likely to be implemented will help smooth the process. The development path that is likely to be followed is that the new technologies will be tested and start to mature on smaller, regional services and infrastructure before making their way up to be adopted at larger airlines and airports.

This means that major airports and airlines may be able to avoid committing to either of the new power sources until a long way down the development path when a clear preference emerges.

The contrail conundrum

One factor that may complicate the decision is the potential environmental implications of aircraft condensation trails, known widely as contrails. It is estimated that two-thirds of aviation’s climate impact is attributed to non-carbon dioxide emissions, with contrails standing out as the predominant contributing factor. These vapor trails are formed as the heat of fuel-burning aircraft engines condenses water in the atmosphere which becomes ice crystals[5]. These ice crystals form a barrier that absorbs heat and keeps it in the atmosphere rather than allowing it to dissipate into space. Unfortunately, in their current forms, SAFs, or indeed hydrogen alternatives, will mean that aircraft will still likely create contrails as they transport people and goods across the sky.

Optimizing and altering flight paths could potentially reduce the impact of contrails being formed in concentrated areas, but the actual benefits are difficult to quantify and at this stage, airlines lack an incentive to actively investigate ways to mitigate contrail formation. The complexity of logistics and the relatively high level of uncertainty surrounding contrails and their impact make it challenging to develop, let alone implement, targeted policies.

Insurance and risk management perspectives

While the changes being discussed to airlines and the aerospace infrastructure that support them will involve fundamental re-examination of the aviation insurance sector’s risk models, the challenge is likely to be relatively minor.

Airframe manufacturers will generate a great deal of data as they put their new hardware through its paces and the insurance industry is adept at interpreting the risk management implications of this kind of data. It would still require careful consideration by the insurance markets though because some of what is being proposed represents a radical overhaul of a design that has evolved gradually over the last 110 years.

Betamax with wings

The evolution of aviation fuel is going to be fundamental to making the aviation sector more environmentally friendly. SAF, hydrogen, and batteries are currently the three main contenders to support the future of flight, and we currently have steady development timescales for expected milestones.

There is always a possibility that a breakthrough will be made in a completely separate area such as quantum batteries or nuclear though, so there is a balance to be achieved between investing in the future and committing to an approach that doesn’t catch on. No matter which way things go, the insurance markets will continue to provide support to the aviation industry as it evolves.

There are several potential routes for the aviation industry to reduce its contribution to the annual amount of human-induced carbon in the atmosphere. Given the current speed of research and development, there is a good chance that at some point in the next five years it will become clearer which technology will emerge as the preferred approach.

The WTW Research Network (WRN) combines a scientific perspective with grounded understanding of how insurance and risk management interacts with clients across a range of sectors in different locations around the world. It offers a unique perspective when it comes to how issues such as the changing fuel mix are likely to evolve in the aviation industry in the coming years. The WRN will continue to work with the WTW Global Aviation & Space team and its clients to keep them informed about how the technology, and the debate surrounding it, develops.

What is becoming increasingly clear is that in the end, the cost of change will be high, but the cost of doing nothing will be even higher.

WTW is committed to living up to its ESG responsibilities and supporting clients as they look to enhance the way that they work and reduce any negative impacts of their business activities. We work with several global legal and academic organizations that help us respond to client concerns about their climate-related legal risk measurement and management. If you would like to hear more about our ESG activities, please visit our ESG webpage. As part of this, the WTW Research Network is an active participant in the Towards Zero Carbon Aviation (TOZCA) project, spearheaded by the Air Transportation Systems Laboratory at the University College London. TOZCA is evaluating several technologies, including fuels, to work out which have the potential to help aviation achieve net-zero by 2050 globally, and has support from the aerospace industry, governments and regulators. The three-year project’s scenario analysis report is due to be delivered in Q4, 2024.

Footnotes

  1. Climate change and flying: what share of global CO2 emissions come from aviation? Return to article
  2. Climate liability: A question of when for the aviation industry? Return to article
  3. United Nations Paris Agreement Return to article
  4. Cost and emissions pathways towards net-zero climate impacts in aviation Return to article
  5. The contribution of global aviation to anthropogenic climate forcing for 2000 to 2018 Return to article
Authors

ESG Lead for Global Aviation & Space

Weather & Climate Risks Research Lead
WTW Research Network, WTW
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Contact

Pat Doherty
CEO, Australasian Aviation Division

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