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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Biofuels Aren’t Going To Replace Conventional Jet Fuel Anytime Soon

  • SAF production is well off track to replace traditional jet fuels in time to avert dangerous climate change.
  • High land usage and costs pose significant hurdles to the widespread adoption of SAFs.
  • Despite these challenges, the SAF sector is poised for major growth, with major U.S. airlines committing to SAF targets and forward purchase agreements signaling increased demand.
Airplane

Back in 2008, Virgin Atlantic flew a Boeing 747 between London and Amsterdam partly powered by a biofuel made from Brazilian babassu nuts and coconuts, with Sir Richard Branson hailing the event as a “vital breakthrough”. Last year, the airline one-upped the original event by staging the first transatlantic flight using 100% of these fuels, rather than in a blend with traditional jet fuel. These demos gave hope to aviation enthusiasts that it’s just a matter of time before Europe’s Flygskam, aka flight-shaming, is finally atoned with aircraft dramatically cutting down their greenhouse gas emissions. The aviation sector accounts for nearly 8% of global oil production and ~ 2.6% of greenhouse gas emissions, an emissions profile comparable to Japan’s, the world’s 5th largest emitter of GHGs.

Unfortunately, the adoption of sustainable aviation fuels (SAFs) by airlines has been disappointing: in 2022, U.S. aircraft consumed a mere 15.8 million gallons of SAF compared to 11.9 billion gallons of conventional jet fuel. That’s miles off Biden’s target of 3 billion gallons of SAF annual consumption by 2030. 

And now some climate experts are growing increasingly skeptical of the ability of SAF to play a useful role in the fight against climate change. A  report by the Institute for Policy Studies, a progressive think-tank, has found that currently, there’s “no realistic or scalable alternative” to standard kerosene-based jet fuels, adding that SAFs are well off track to replace them in a timeframe needed to avert dangerous climate change, despite public subsidies.

While there are kernels of possibility, we should bring a high level of skepticism to the claims that alternative fuels will be a timely substitute for kerosene-based jet fuels,” the report said. According to Chuck Collins, co-author of the report, producing SAFs on a scale required to fully replace traditional jet fuel would require massive subsidies and huge trade-offs that would take resources away from more urgent decarbonization priorities.

It’s a huge greenwashing exercise by the aviation industry. It’s magical thinking that they will be able to do this,” Collins has railed, adding, “It’s just not scalable.”

The IPS report points out that meeting Biden’s target by producing ethanol biofuels would require 114m acres of corn in the US, good for a 20% increase in current land area given over to the crop. The feat appears even more unrealistic in the UK whereby 50% of all agricultural land would have to be given up to sustain current flight passenger levels if jet fuel was entirely replaced.

Agricultural land use changes could threaten global food security as well as nature-based carbon sequestration solutions such as the preservation of forests and wetlands. As such, SAF production may actively undermine the Paris agreement goal of achieving greatly reduced emissions by 2050,” the report states.

Other than high land usage, high costs is yet another hurdle that’s been plaguing the SAF sector. Energy pricing agency Argus Media has reported SAF prices at $6.69 per gallon, more than double $2.85 for a gallon of U.S. jet fuel.  Fuel typically accounts for 25% of an airline's operating expenses, and replacing just 10% of ordinary jet fuel with SAF would have a major impact on airlines’ bottom lines. The economics are equally dire for SAF producers, with the $1.75 per gallon tax credit provided under the Inflation Reduction Act (IRA) not enough to offset poor margins.

SAF Growth Runways

Despite these headwinds, the SAF sector appears headed for major growth. The aviation sector has already committed to six billion liters of SAF in forward purchase agreements,  or 10x the global SAF production at only 600 million liters in 2023. Small production runs is a big reason for the large cost differential between conventional jet fuel and SAF; however, SAFs are likely to become cheaper  as the industry scales up and adopts more robust supply agreements. 

Some major U.S. airlines are onboard with Biden’s SAF agenda, with Delta Air Lines (NYSE:DAL) and Southwest Airlines (NYSE:LUV) having committed to replace 10% of their jet fuel with SAF by 2030. Thankfully, most SAF brands are ‘drop-in’ fuels, designed to be mixed with traditional fuels, meaning no changes or extra investments are needed from airports. Two years ago, California-based renewable natural gas and renewable fuels company Aemetis Inc. (NASDAQ: AMTX) signed a multi-year agreement with International Airlines Group (IAG) to supply 78,400 tonnes of sustainable aviation fuel to help power both British Airways and Irish flag carrier Aer Lingus’ flights from San Francisco Airport from 2025. Back in February, Aemetis unveiled its 5-Year Growth Plan wherein it revealed it has received the final Authority to Construct air permits for a 78 million gallon per year SAF production facility. The company’s SAF biorefinery will utilize renewable oils, renewable hydrogen and hydroelectric power to produce low-carbon intensity renewable jet and diesel fuel. 

 Last year, European regulators introduced a mandate to ensure SAF constitutes 2% of fuel available at EU airports by 2025, a figure set to increase to 6% in 2030, 20% in 2035 and 70% in 2050. The EU parliament approved the mandate in January, although member states are yet to vote on it.

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By Alex Kimani for Oilprice.com

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