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sustainable fuels

Panelists Share SAF Ambitions But Disagree on Policy

Copyright © 2021 Energy Intelligence Group
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A new pledge by the world’s airlines to reach carbon neutrality by 2050 is shining a spotlight on sustainable aviation fuel (SAF) just as the new industry prepares for what could be a bumpy takeoff.

Wednesday’s Energy Intelligence Forum Panel on Sustainable Skies? How Airlines and Fuel Producers Are Trying to Fly Carbon-Free came just days after global airline body the International Air Transport Association (IATA) doubled its climate ambitions.

IATA is now targeting net zero by 2050, up from an earlier promise to only halve carbon emissions by that date. That will require a massive scale-up of sustainable aviation fuel (SAF) from 7.9 billion liters (2 billion gallons) or 2% of airline fuel demand in 2025 to 65% of total airline fuel uplift or 449 billion liters (119 billion gallons) by 2050 by IATA's reckoning.

Forum panelists representing key players in the SAF industry in the US and Europe disagreed about the best policy approach to drive SAF’s commercialization, but jointly marveled at how airlines had continued signing SAF offtake agreements throughout the pandemic.

Continental Drift

US airline group Airlines4America’s Nancy Young decried the EU’s new SAF blending mandate — due to start at 2% in 2025 — as premature: “Coming out of the pandemic, this is not the time to put a new tax on travelers,” she grumbled, suggesting that incentives should come first. SAF currently costs around three to five times the price of regular jet fuel, which cash-strapped airlines will have to pass on to passengers.

Instead, Young lauded the US’ whole-government approach, which aims to boost US SAF production from 4.5 million gallons per year currently to 3 billion gallons/yr — enough to cut US airline emissions by 20% — by 2030. That would set the US on the path to net zero, which would require 22 billion-29 billion gallons/yr of SAF by 2050.

Launched last month, Biden's SAF Grand Challenge will provide $4.3 billion across seven federal departments. That includes money to the Department of Agriculture to ensure that US farmers are growing the right biomass feedstocks in the first place as well as funds for the Department of Energy to provide loan guarantees for new SAF plants. An SAF blenders tax credit that could provide around $1.50 per gallon to US SAF producers is included in Biden’s separate $3.5 trillion spending plan.

“People will have to get used to the idea that flying will become more expensive,” said Neste’s Thorsten Lange as he sought to defend the EU’s vastly different approach. Brussels is guaranteeing SAF demand in order to kick-start investment without providing much in the way of supply-side incentives. Lange noted that corporations were already lining up to pay the difference between SAF and fossil jet as they look to sharpen their ESG credentials and prove they’ve met upcoming Scope 3 emissions reductions.

But Lange also criticized the EU for not being more ambitious — the SAF blending mandate rises only slowly to 5% by 2030 before jumping to 20% by 2035 — and suggested Brussels was being too narrow minded when it came to possible SAF feedstocks. He said a focus on waste-based streams unnecessarily excluded cover crops and oil crops grown on degraded land that could be just as sustainable.

Where Is Big Oil?

Airlines4America’s Young expressed surprise that US oil companies weren’t more interested in SAF given the potential size of the market. Most SAF plants in the US are being developed by technology firms with the support of airlines rather than traditional fuel suppliers. The exceptions are European majors Royal Dutch Shell that has invested in LanzaJet and BP working with rival SAF producer Fulcrum.

The hope now is that the new US SAF blenders tax credit will encourage those refiners already involved in renewable diesel to take the next step into SAF. Neste has already taken that route in Europe: It converted its Porvoo oil refinery in Finland to make renewable diesel more than a decade ago but switched to SAF three years ago as demand began to grow. Phillips 66 and Marathon are already undertaking similar refinery conversions in the US.

LanzaJet’s CEO Jimmy Samartzis ran through what he described as an “attractive stack of incentives” to produce SAF in the US, which already has the national Renewable Fuels Standard and California's Low-Carbon Fuel Standard. He expects the new SAF blenders tax credit added on top to be $1.25-$1.75 per gallon with the precise figure anchored to carbon performance. Eligible SAF needs to offer at least a 50% carbon saving with every extra percentage point attracting an additional penny of credit. The firm is targeting 1 billion gallons/yr of SAF production by 2030 although not all of it will be in the US.

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