Australia's $36bn potential in clean fuels faced the test of investor support.
In a significant move towards a greener future, Australia is gearing up to boost its production of low-carbon liquid fuels (LCLF), with a particular focus on sustainable aviation fuels (SAF). According to a recent report, HAMR Energy, a local low-carbon liquid fuels company, is leading the charge in this regard.
HAMR Energy is currently undertaking a substantial investment of around A$700-800 million to build Australia’s first large-scale methanol-to-jet SAF production facility. The aim is to produce 125 million litres of SAF annually, using low-carbon methanol derived from forestry residues and green hydrogen. The company is in the final stages of a $10 million Series A funding round, with strong interest from strategic partners and private investors, indicating multiple stakeholders backing the project.
While no other major Australian or international investors in SAF production within Australia were identified, HAMR Energy is undoubtedly the most prominent and concrete SAF investor and developer in the country at present.
Demand for SAF on the Rise
The demand for LCLFs is increasing, particularly from airlines and mining companies. The report suggests that over 50% of the demand for LCLFs could come from aviation between 2030 and 2050. This surge in demand is driven by the need to reduce carbon emissions, especially in sectors that are harder to electrify, such as mining and aviation, which account for nearly a third of remaining liquid fuel demand.
The Challenges Ahead
Scaling up Australia's LCLF industry is not without its challenges. The production of LCLFs relies on feedstock, such as waste, agricultural residue, biomass, sorghum, and used cooking oils, which plays into Australia's large agro-industrial footprint. Moreover, the market for LCLFs is still immature, with complicated supply chains and a high cost gap with traditional alternatives.
Despite these challenges, the report makes a case for LCLF to be amongst the candidates for investment as Australia decarbonizes, with its legacy industries coming under stress. The report suggests that Australia's financiers might look to LCLF as a potential candidate for investment due to a first mover advantage.
The Potential Benefits
If successful, the scaling up of Australia's LCLF industry could have numerous benefits. Clean fuel plants could revitalize manufacturing hubs and create skilled careers in certain areas. A new report from the Clean Energy Finance Corporation and Deloitte suggests that Australia has a comparative advantage in capturing this demand, which could be worth $36bn by 2050.
Navigating the Risks
However, investing in LCLFs remains risky. Other forms of capital might need to take a seat at the table before institutional capital considers LCLF investments. The report includes a production cost analysis and estimation of Australia's LCLF cost curve, aiming to help navigate these risky and rewarding waters.
In conclusion, the report identifies seven 'market accelerators' to pave the way for a LCLF boom in Australia, including the use of concessional finance to de-risk private investments. With HAMR Energy leading the charge, Australia is well on its way to becoming a significant player in the global SAF market.
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The renewable energy industry, particularly the production of sustainable aviation fuels (SAF), is attracting substantial investments, with HAMR Energy leading the way by investing A$700-800 million in building Australia's first large-scale methanol-to-jet SAF production facility. This investment is indicative of the growing interest from strategic partners and private investors in the finance sector for investing in renewable energy.
As the demand for low-carbon liquid fuels (LCLF) rises, especially in the aviation sector, LCLF could become a lucrative market to invest in for Australia's financiers, offering potential benefits such as revitalizing manufacturing hubs and creating skilled careers. However, navigating the risks associated with LCLF investments remains crucial, with the report suggesting that production cost analysis and the use of concessional finance could help de-risk such investments.
