Energy Revolution – Part 7
Massive Investment in Renewable Energy and R&D Needed to Decarbonise Aviation
26th of October, 2021 - torck capital management AG
Last week’s blog article discussed deep decarbonisation strategies in the shipping sector, where direct electrification is more challenging and hydrogen-based solutions have the highest decarbonisation potential. Aviation is another sector that remains one of the hardest to decarbonise. Nothing propels commercial aircraft as efficiently and economically as fossil fuel. But as other sectors move more quickly to cut their emissions, aviation’s share of global greenhouse gas (GHG) emissions will increase. Its decarbonisation potential and current clean energy technology transition pathways are, therefore, the focus of this week’s article.
Currently aviation contributes around 2.5% of global energy-related CO2 emissions – the same as shipping. Although CO2 emissions per passenger flight have fallen 54% since 1990 thanks to operational and technical efficiency measures adopted by commercial airlines, according to the Air Transport Action Group (ATAG), commercial passenger flight activity has grown by about 2.5-fold since 2000 and is projected by IRENA to increase another 200% by 2050. Aviation could, therefore, be churning out up to 24% of worldwide CO2 emissions as decarbonisation picks up in other sectors. However, aircraft also emit nitric oxide, water vapor, and fine particulates. A recent study has shown that the full impact of aviation may, therefore, be around 3.5% of all human-induced climate impact.
ATAG points out four main ways to deliver net-zero aviation (see Figure 1): electric/hybrid aircraft, use of drop-in fuels (including bio-jet), a switch to alternative fuels (for instance to synthetic fuels) and carbon capture.
In electric aircraft, electric motors replace combustion engines for propulsion. The electric energy is, thereby, stored in batteries. As an alternative to batteries, fuel cells could also be envisaged. It is important to note here that long-haul flights (250+ seats and >150 minute flights) by large aircraft are realistically not going to become fully electric before 2050 at least. The problem is that batteries do not yet offer the power-to-weight ratio needed to be feasible and will not for some time. So not only would an electric aircraft have to carry the same weight throughout the flight, which keeps the energy requirement constant, but to keep its current range, it was also calculated that an aircraft would need batteries weighing 30 times more than its current fuel intake – in other words, the aircraft would never take off.
These limiting factors mean that most industry experts think there are specific types of aircraft that will be electrified first. The biggest changes are expected to happen in the regional aircraft space (50-100 seats and 30-90 minute flights) and the commuter market (9-50 seats and <60 minute flights). By gradually introducing electric aircraft that could replace conventional aircraft on short-haul routes of 1,500km or less, which according to Roland Berger account for 30% of aviation emissions, the environmental impact of flying could begin to improve. Battery technology has improved enough for current all-electric aircraft prototypes to complete flights of more than 100 km and carry as many as 15-20 passengers.
United Airlines recently announced what could be an important step toward electric commercial flight. It invested in Heart Aerospace, a Sweden-based electric aircraft startup, and agreed to buy up to 200 electric aircraft with a commercially viable range for short-range flights of 400km with 19 passengers. Heart Aerospace is aiming for the ES-19 to enter commercial use in 2026. Alice aircraft, first unveiled by Eviation in 2017, could also become one of the first all-electric aircraft in commercial operation. Depending on the certification process, Alice could go in service by 2024. ATAG expects that scaling electric aircraft up to regional and short-haul flights (100-150 seats and 45-120 minute flights) will take until 2035-2040. Moreover, Roland Berger counted that there are already more than 200 electrically powered aircraft in development – an increase of 30% from 2018 to 2019. Many of these aircraft are hybrid models, whereby the share of electricity provided for propulsion starts at 10-20%.
The developments in the aviation sector are set to further push improvements in battery storage systems, which are necessary for the 25-fold increase in battery capacity additions in the IEA’s Sustainable Development Scenario between 2020 and 2040. This could particularly drive the demand for battery metals.
In the meantime, hydrogen propulsion systems are being considered for improving the carbon footprint of aircraft. Thereby, hydrogen, which is a carbon-free fuel, can either be used for combustion through modified gas-turbines, replacing jet fuel, or as an electrical power source in fuel cells. Airbus is very confident that hydrogen is one of the technologies that can drive the aviation sector towards net zero emissions and plans to bring a hydrogen aircraft to market by 2035. In fact, the power-to-weight ratio of hydrogen is three times higher than traditional jet fuel. It is therefore, an increasingly viable option.
The challenge with liquid hydrogen is that, despite its higher power-to-weight ratio, it has a four times larger volume than jet fuel and needs to be kept in cryogenic form at -253°C to not boil off. The use of fuel cell systems for power generation may further add weight challenges, which may impose range and capacity restrictions for commercial aviation. Overall, the introduction of hydrogen propulsion systems requires the development of new aircraft designs and engine systems, as well as storage progression. And in a next step, manufacturers most importantly must complete safety and operational certification in these completely new types of technology. In order to ensure that air travel remains one of the safest modes of transport despite the rapid growth in traffic, new technology will have to take time to mature. It may, therefore, be that it takes until 2050 before hydrogen propulsion systems can serve the decarbonisation of aviation in any substantial way.
Considering the limitations to both electrical systems and hydrogen solutions, means that it is likely for aircraft to mainly be hybrids, combining traditional gas turbines with power from on-board generators. These are suggested by Roland Berger to begin their roll-out by 2030. During the transition period, synthetic fuels based on electrolytic hydrogen (so-called power-to-liquid) have the potential to replace conventional jet fuel and reduce emissions, albeit not to the same degree as a solution purely based on hydrogen and at currently four to six times higher prices. These synthetic fuels could be used with existing airplanes and refuelling infrastructure. To become competitive for the use in the aviation sector, where, depending on flight length, airlines incur costs ranging from 20% to as much as 40% for fuel, massive investment is needed in both renewable energy and fuel production.
This last point holds for all the discussed ways of delivering net-zero aviation as they all require increased production and new distribution systems of low carbon electricity (and green hydrogen) to become a reality. Last week’s announcement of France’s president Macron, who unveiled a €30 billion investment to ramp up tech innovation and heavy industry of which “billions” would go to creating Europe’s first low-carbon airplane and the opening green-hydrogen factories, demonstrates the political awareness for the need of more sustainable air travel. The significance of such developments is clear for the demand of battery and base metals, which are used at every stage from mineral-intensive renewable energy production and storage to distribution and fuel production.
Continue reading with part 8 here.
About torck capital management
torck capital management is an asset management boutique based in Zurich. Well-established in the Swiss financial industry, our goal is for torck to become the leading boutique of choice for exponential opportunity investments. We aspire to both drive meaningful change with our investments and seize exponential return opportunities in times of market disruption. Our new “Energy Revolution Fund” – launched at the end of September 2021 – builds on the thesis that a worldwide clean energy transition will kick-start another “super cycle” of rising commodity prices, which was last seen in the early 2000s when China’s economic growth took off. With investments in hand-picked junior mining companies that ensure an adequate supply of minerals for the clean energy transition, we see the potential for our next exponential opportunity.
Follow our upcoming blog articles to learn more about how the clean energy transition will impact the demand for critical minerals and create a strong investment case for junior mining companies.