Shell quits Swedish e-SAF plant plan

Shell has exited a planned renewable hydrogen-based sustainable aviation fuel (e-SAF) project in Sweden, and it and utility Vattenfall will not take up an €80.2mn ($87mn) EU Innovation Fund grant.

"Vattenfall and Shell have agreed to pause their collaboration" on the HySkies project that they launched in 2021, the Swedish firm said. It had said in February there was "a different belief in timelines for the project to be realised" and that the companies had "agreed to open up the collaboration for potential other partners to join Vattenfall."

The company reiterated this today, noting it is still reviewing the project and is seeking other partners. Shell sees "a future" in HySkies, "including opportunities for future potential collaborations". It recently paused construction of a biofuels plant in Rotterdam, and said today it expects to write down up to $1bn against that project.

The Swedish collaboration initially also involved US biojet producer Lanzatech, but Vattenfall did not specify whether the firm remains part of the plans.

The companies "have requested for a termination of the grant agreement for financial support via the EU Innovation Fund," Vattenfall said today. The companies are "considering it is infeasible for the project to succeed within the framework of that agreement and [are] aiming to free up funds for others to use in their ambitions to decarbonise," Vattenfall said.

HySkies was selected for the grant in January 2023. The project in Sweden's eastern Forsmark region was envisaged to produce around 82,000 t/yr of e-SAF and 9,000 t/yr of renewable diesel, using hydrogen from a 200MW electrolysis plant, biogenic CO2 captured from a waste-to-energy plant and sustainable ethanol. It was slated to start operations in March 2027 and required capital costs were estimated at close to €780mn.

E-SAF has been touted by some as one of the most promising commercial opportunities for hydrogen derivatives, primarily because of clear EU mandates that will oblige its use from 2030.

Vattenfall said it might pursue different options in the Forsmark region as well, noting "the full potential" for decarbonising heavy industry in the area is "under review".

HySkies is not the first project for which developers have returned EU Innovation Fund grants. German utility Uniper said earlier this year it had to hand back a grant awarded last year after its plans got delayed because it could not secure a power purchase agreement from a wind power developer.

By Stefan Krumpelmann