By Aamir Shams, André de Fontaine, and Sommer Yesenofski
The Sustainable Aviation Fuel (SAF) market is at a critical inflection point. High-integrity SAF is poised to drive massive decarbonization in the aviation sector, while also reducing air pollution to the benefit of communities near airports. Today, constrained SAF supplies, limited purchasing options, and lack of transparency around pricing complicate efforts to cut emissions from flying but the industry is rapidly evolving. We are on the cusp of seeing new market infrastructure, policy enablers, and SAF technologies that can pave the way toward a more competitive and scalable SAF market. The actions being taken today will help determine how quickly this market grows and achieves the deep GHG emissions reductions needed from the aviation sector.
SAF Production: Cleared for Takeoff?
After years of being stuck on the tarmac, SAF production appears ready to take flight. Volumes today are minuscule – less than 0.03% of global aviation fuel demand – but growing rapidly. Existing suppliers are in the middle of expansion plans that will boost their SAF capacity by factors of 10 or more; oil majors are ramping up investment; and a fleet of new producers with innovative technologies are signing agreements to potentially delivery 100s of millions of gallons of SAF to airlines over the next decade.
With these investments, independent analysts expect SAF production to grow to 7 billion gallons per year, by 2030, or 5% of total jet fuel demand.1 Still, industry veterans are wary, having seen previous production expansion plans fizzle. Sustained demand from airlines and their customers, coupled with supporting policy instruments, will be needed for today’s SAF projections to be fully realized.
Feedstocks: Different Routes to Final Destination
While SAF currently has 9 ASTM-approved2 pathways, only one is currently producing SAF at commercial scale – the Synthesized paraffinic kerosene from hydro processed esters and fatty acids (HEFA) process. HEFA-based fuels can provide significant carbon benefits relative to conventional jet fuel, but its dependence on finite feedstock (fats, oils and greases) will likely limit its scalability to less than 10% of total jet fuel supplies by 2050.3
Partly as a result, increased investment is flowing to new conversion technologies such as Alcohol-to-Jet (ATJ) and Gasification combined with a Fischer-Tropsch process. These conversion pathways use feedstocks, such as agricultural and forest residues, as well as municipal solid waste, which are more abundant and often easier to collect than the fats, oils and greases that dominate today’s market. Commercial-scale deployment of these fuel types is right around the corner, with several airline offtake agreements recently announced.
Over the medium-to-long term, Power-to-Liquids (PtL) are seen as the most-scalable option to produce SAF because the process requires only water, renewable electricity, and carbon as inputs to production. But PtL requires a complete ecosystem of industries – including cheap renewable electricity, green hydrogen, carbon capture, as well as the actual fuel synthesis through various means – to come together in a way that has not yet been demonstrated at commercial scale.
The bottom line is that the HEFA-based fuels available today and carrying appropriate third-party sustainability certifications offer near-term, real, and significant CO2 reductions. These fuels are appropriate investment options for companies seeking to cut their travel footprint today. Around mid-decade, more fuel options should emerge using novel conversion pathways and feedstocks with enhanced environmental benefits. Post-2030, commercial-scale PtL should gradually penetrate the market, offering a clearer path forward to scalable net zero aviation solutions.
Policy Drivers: Bringing Cruising Altitude Within Reach
SAF today is neither plentiful nor cheap. Pricing varies, but total unsubsidized costs can be four times more, on a per gallon basis, than conventional jet fuel. Carbon savings from SAF, while significant, are also relatively expensive, measured on a $ per ton of abated CO2e basis. Policymakers around the world are taking aggressive steps to lower costs and increase supplies. In the U.S., tax credits and other financial incentives, are making a huge difference in cutting the cost of SAF, while in the E.U. proposed volumetric mandates are expected to drive new supplies. Some of the current and proposed incentives in the U.S. alone include:
In the US, these credits have narrowed, but not closed, the premium gap with conventional fuels, highlighting the ongoing need for innovation and production scale up to bring down SAF costs. Publicly-funded research and development initiatives, such as those organized under the U.S. government’s SAF Grand Challenge, will continue to be crucial.
Strong Demand Signals: Building the Plane while Flying It
Important market, technology, and policy drivers are coming together to help drive the SAF market forward. But the industry can fly further and faster through collaboration. Corporate travelers, in particular, have an important role to play: companies of all stripes log millions of miles on commercial airlines each year and while in the past emissions from those flights were considered among the most difficult to abate, today, new methods and channels of customer engagement to purchase SAF are emerging such as the Sustainable Aviation Buyers Alliance (SABA).
SABA’s mission is to accelerate the path to net-zero aviation by working with top aviation customers and major airlines to drive investment in high-integrity SAF, catalyze new SAF production and technological innovation, and support member engagement in policy-making efforts. As a part of its mission, SABA is in the process of establishing a rigorous, transparent SAF certificate system enabling air transport customers to invest in high quality SAF to meet ambitious climate goals. This means corporate customers can cover all or part of the SAF premium, enabling airlines to purchase more SAF, and in return receive robust emission attribute certificates that entitle them to the emissions reduction claims generated by the fuel. Importantly, SABA published its Sustainability Framework in December 2022 to help guide purchasing decisions made by its members, and others, to ensure they only buy fuel with high environmental integrity. Alongside this, SABA is launching and managing collective SAFc procurements on behalf of its members. By aggregating demand across major corporations, SABA is sending a stronger demand signal to the market to scale high-integrity SAF.
Other NGOs are also active in this space, including the Clean Skies for Tomorrow Coalition which, among other initiatives, recently published SAFc Emissions Accounting and Reporting Guidelines, the Smart Freight Center, which developed important insetting guidance for SAF, and the First Movers Coalition, which is helping drive demand for advanced SAF technologies. Together, these groups and their memberships are working to overcome the barriers to high-integrity SAF and create a SAF market that works for companies, air carriers, and our planet. Collaboration among these organizations is key to leverage their respective strengths and ensure consistency across guidance and frameworks in this rapidly evolving market.
[1] Bloomberg New Energy Finance, 2022 Sustainable Aviation Fuel Outlook, August 31, 2022. https://about.bnef.com/blog/2022-sustainable-aviation-fuel-outlook/#:~:text=Demand%20for%20SAF%20will%20reach,no%20new%20policies%20are%20enacted.
[2] ASTM International, formerly known as American Society for Testing and Materials, is an international standards organization that develops and publishes voluntary consensus technical standards for a wide range of materials, products, systems, and services. In order to be used in commercial flights, aviation fuel must be ASTM certified.
[3] Waypoint 2050: Aviation Benefits Beyond Borders. September 2021. https://aviationbenefits.org/media/167417/w2050_v2021_27sept_full.pdf
