Sustainable aviation fuel (SAF) is emerging as the leading way to reduce carbon emissions from the world’s vast commercial aviation sector, with California becoming North America’s leading testbed. The potential is large, but SAF supplies are limited and costs are high. Even in best-case California, significant policy changes are needed for this promising fuel to reach full commercial potential.
Worldwide, commercial aviation contributes a small — but growing — percentage of transportation-related greenhouse gas (GHG) emissions. Over the last decade, airlines have taken successful action to reduce their GHG emissions, primarily by improving engine and aircraft efficiency, which proportionally reduces exhaust emissions of carbon dioxide (CO2). However, this “fleet modernization” is reaching diminishing returns to reduce carbon emissions from the global jet fleet. Unlike ground vehicles, it is not yet practicable to build safe, commercially viable aircraft powered by combustion-free electric-drive technology.
Even in best-case California, significant policy changes are needed for this promising fuel to reach full commercial potential.
Enter Sustainable Aviation Fuel
Over the last five years, SAF has emerged as the best approach to rapidly reduce GHG emissions from commercial and business aviation. SAF is a renewable, low-carbon-intensity substitute for conventional jet fuel (CJF), and replacing CJF with SAF requires no significant modifications to jet engines or fuel storage/dispensing systems. Currently, SAF must be blended with at least 50% CJF to be dispensed in commercial aircraft, but it appears likely that use of “neat” (100%) SAF is on the near horizon.
What makes SAF a big deal? Every neat SAF gallon that displaces a CJF gallon reduces full-fuel-cycle GHG emissions by roughly 60-75% (per current SAF pathways). These are big reductions available to airlines, without the need to implement major hardware changes to aircraft or fuel systems. Moreover, advanced SAF production pathways on the commercial horizon can deliver even greater GHG-reduction benefits. Also, studies indicate SAF reduces smog-causing pollutants emitted by jet aircraft. Thus, wide-scale use of SAF can improve ambient air quality in cities across America.
What is Holding SAF Back?
Like all renewable fuels, it currently costs significantly more to produce SAF than its petroleum-based counterpart, CJF. In California, airlines can affordably purchase SAF, due to the state’s landmark Low Carbon Fuel Standard (LCFS), which monetizes GHG-reduction values of transportation fuels. Oregon has a similar, smaller program. But even in these states, SAF demand exceeds supply, and the existing policy landscape does not favor a large-scale ramp-up of production.
SAF is a renewable, low-carbon-intensity substitute for CJF, and requires no significant modifications to jet engines.
Unique market dynamics are at play here. SAF is co-produced with renewable diesel (RD), a rapidly growing low-GHG replacement for conventional diesel in trucks and other ground transportation applications. Currently, the same feedstocks (fats and oils) and process (hydrotreatment) are used to make both fuels. Producers can control relative yields, but they currently choose to produce much more RD than SAF. This is largely because existing policy and monetary structures favor RD. The upshot is that producing RD is significantly more valuable (roughly 8%) than SAF, on a per-gallon basis. Furthermore, to obtain a larger SAF yield, producers must increase costs. This also reduces the overall volume of biofuel produced.
Demand is Growing for both RD and SAF
Not surprisingly, to date RD production and sales have dwarfed those of SAF. RD constitutes about 21% of the total diesel fuel annually dispensed in California today for ground transportation; SAF constitutes slightly more than 1% of the state’s aviation fuel market. However, these market dynamics could change quickly. Demand is growing rapidly for both RD and SAF. Large existing RD/SAF producers (e.g., Neste and World Energy) are expanding biorefinery production capacities and are poised to modify operations to increase SAF yield — as high as 50%. These and other jet fuel producers are now building entirely new biofuel plants to meet future SAF demand.
Under existing policies and processes, producers are likely to continue maximizing RD yield at their biofuel refineries. But they stand ready to make SAF a co-equal product — as soon as it makes good business sense. If policy changes can assign similar (or better) value on decarbonizing aviation compared to ground transportation, SAF production and consumption may surpass RD within a few years. For now, big RD/SAF producers make enough SAF to develop long-term business relationships with airline customers, and position themselves for change. They envision SAF as a near- to mid-term game changer for decarbonizing the world’s rapidly growing commercial aviation sector.
SAF is co-produced with renewable diesel (RD), a rapidly growing low-GHG replacement for diesel in trucks and ground equipment.
The COVID-19 pandemic presents new market dynamics for SAF expansion. Although the pandemic has sharply reduced CJF consumption by commercial airlines, SAF consumption has more than doubled. Relatedly, traditional petroleum companies like Phillips 66, Marathon Petroleum, Valero Energy, and Shell are now converting (or exploring converting) existing, increasingly underutilized conventional petroleum refineries to co-produce RD and SAF. Reportedly, they see opportunity to “come back better” from the pandemic-imposed slowdown in jet travel.
California Leading the Way to Improve SAF Policy
Much is being done to make SAF a mainstream aviation fuel in the U.S. San Francisco International Airport (SFO) and Los Angeles International Airport (LAX) are at the forefront of such efforts. In particular, SFO is spearheading policy improvements for producing and consuming SAF. The nation’s seventh largest airport, SFO seeks to annually displace 200 million gallons of CJF with SAF by 2025. This will require an estimated 16 new SAF production plants. To help make all this come together, SFO has joined with major airlines, SAF producers, and the Commercial Aviation Alternative Fuels Initiative (CAAFI). Collectively, they are facilitating large SAF “offtake” agreements between airlines and SAF producers, and ensuring that airport fuel farms in the Bay Area and Southern California can accommodate large SAF volumes.
The story of SAF is dynamic. Headlines about SAF policies and production are emerging almost daily. To learn more about SAF, download “Sustainable Aviation Fuel: Greenhouse Gas Reductions from Bay Area Commercial Aircraft,” a GNA report commissioned by the Bay Area Air Quality Management District.
Additionally, GNA will host a related webinar, Emergence of Sustainable Aviation Fuel to Decarbonize Commercial Air Travel, on March 24. It will feature a panel of distinguished government and industry speakers discussing the GHG-reduction benefits of SAF, key efforts at California airports to increase SAF’s limited supply and expand displacement of conventional jet fuel, and necessary policy changes for SAF to reach its full commercial potential. More details about the speakers will be announced in the coming days.
