Sustainable aviation fuel still in short supply due to cost: IHS Markit
Airlines need green fuel that is cheaper and more widely available to decarbonize, according to a briefing from IHS Markit's Climate & Sustainability service.
With aviation accounting for 12% of transportation's CO2 emissions globally, the industry is under pressure in Europe and North America to contribute its share towards a global net-zero solution.
Sustainable aviation fuel (SAF) is a lower-carbon fuel typically made using biofuel or hydrogen and carbon. In the commercial environment, it has been used in a blend with conventional jet fuel in ratios of up to 50% for existing engines since 2011, and will make up the majority of the mix as low-carbon technology develops.
When blending to these higher levels, airlines will be passing along the relative cost of SAF to consumers, raising concerns. Mixing 63% SAF with A1 Jet Fuel per anticipated EU proposals would increase ticket prices on a flight from Amsterdam to New York by about $120, according to IHS Markit data. SAF prices are currently about five times higher than prices for conventional jet fuel, data on European spot market prices collected by OPIS show. OPIS is an IHS Markit unit.
The disruption to the aviation industry as a result of the COVID-19 pandemic makes cost issues even more prominent today. "It must also be considered that airlines are operating in a notoriously low-margin, capital-intensive environment, and many have precarious financial positions as a result of the severe disruption they have faced in the past year. In this context, it is hard to foresee any airline voluntarily making a large volume commitment to SAF as long as the price differential with conventional jet fuel remains substantial," wrote IHS Markit analysts in the report.
The industry has called for policies that finance SAF production. In US states like Oregon and California, SAF is made somewhat more affordable by the states' Low-Carbon Fuel Standard (LCFS), which awards credits for SAF, but IHS Markit analysts said further financial support is needed to produce the volumes that will be needed for nationwide adoption.
Norway is the only country in the world to introduce a SAF mandate: all jet fuel supplied in the country has been required to include at least 0.5% SAF since January 2020.
Other European countries have announced plans for similar mandates in the past two years. Sweden, Finland, France, Spain, Germany, and the Netherlands have either confirmed or are planning mandates. Several of these states called for the European Commission to encourage the growth of the SAF market in a statement in February.
Aiming to meet some of these demands, the EU's ReFuelEU Aviation initiative could require airlines to use SAF blended to a 2% level, with the percentage scaling up every five years to reach as much as 63% by 2050 under preliminary proposals. This initiative, which could cover flights with origins and destinations outside the EU, aims to boost the use of SAF so the EU can realize its recently legislated 2050 climate neutrality target, which was promised under the European Green Deal.
Following on from a consultation in 2020, the EC announced it would propose ReFuelEU alongside a swathe of "Fit for 55%" legislation aiming to meet that emissions target on 14 July. ReFuelEU will target low-carbon fuel supply and demand for industries such as shipping and aviation.
Global mandates are a long way off, although aviation industry bodies are mulling commitments to use more SAF. The International Air Transport Association (IATA) pledged to propose a net-zero policy for adoption by its members in October 2021. The delegates of the UN-affiliated International Civil Aviation Organization (ICAO) also promised to target a "significant percentage" of SAF in the aviation fuel mix by 2050.
But beyond the borders of Europe and North America, state support for SAF is "virtually non-existent," IHS Markit found. "While a global policy consensus is unlikely to emerge in the near term, it is likely that policy support for SAF in Europe and North America will continue to strengthen, potentially considerably so," it said.
In recent weeks, European fuel industry players aired plans for ramping up production capacity in anticipation of demand created by proposed rules like ReFuelEU.
Shell's SAF projects are at an advanced planning stage, with final investment decisions pending. At a refinery in Wesseling, Germany, where Shell began operations for a 10-MW electrolyzer on 2 July, it will produce biomass- and green hydrogen-based SAF. Shell has pledged to reduce its refining of "traditional fuel" and create more chemicals from waste in line with plans to become a net-zero-emissions business by 2050.
On 6 July, TotalEnergies, as the French major Total is known after a recent rebranding, announced a partnership with energy services company Veolia at its La Mède biorefinery to explore production of new biofuels from microalgae. TotalEnergies plans to start selling cooking oil-based SAF produced at the refinery.
SAF is not the only fuel on the drawing board to reduce aviation emissions. On 21 June, Air Liquide announced plans to study liquid hydrogen supply at 30 airports globally with airplane manufacturer Airbus. Airbus' VP of Zero-Emission Aircraft Glenn Llewellyn has called hydrogen the "most promising" zero-emissions technology, noting it could be used in both fuel cells or combustion engines for airplanes. But the CEO of rival American airplane manufacturer Boeing, David Calhoun, has said hydrogen technology is a long way off.
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