Green Jet Fuel Mandates Lift Demand for Scarce Supply
Apr 24, 2024
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Experts Daisy Robinson and Rose Oates discuss the challenges and progress of sustainable aviation fuel industry, including supply scarcity and resource competition. They delve into regional policies driving cleaner jet fuels, feedstocks for SAF production, and the greenium SAF faces compared to traditional fuels.
Sustainable Aviation Fuel (SAF) offers a scalable technology to decarbonize aviation, but faces challenges with supply scarcity.
Regional policies such as blending mandates and technological diversification are driving the uptake of cleaner jet fuels.
Deep dives
Importance of Sustainable Aviation Fuel in Decarbonization
Sustainable Aviation Fuel (SAF) is pivotal for airlines' decarbonization strategies due to its immediate implementation compared to other long-term options like electrification or hydrogen aircraft. Major airlines worldwide have set targets to include SAF in their fuel mix by a certain percentage by 2030. SAF offers a near-term solution to combat aviation emissions, with demand projected to double by 2050.
Challenges and Opportunities in Meeting SAF Demand
While airlines aim for a 10% SAF target by 2030, the actual percentage may vary by region, with varying levels of ambition across different airlines. Market forecasts suggest a surge in demand for SAF, especially in the EU and the US due to blending mandates. However, the current production of SAF falls short of meeting the growing demand, leading to supply challenges in the short to medium term.
Policy Mandates Driving SAF Adoption
Policies like the EU Fuel Aviation Mandate and the US SAF Grand Challenge are crucial drivers for the widespread adoption of SAF. The EU mandate requires increasing blending rates up to 70% of jet fuel demand by 2050, while the US aims for 3 billion gallons of SAF blended by 2030. Such mandates create a level playing field for airlines and encourage investment in SAF production.
Feedstock Constraints and Innovations in SAF Production
Feedstock availability poses a significant challenge to scaling up SAF production, with traditional feedstocks like vegetable oils facing supply constraints. Innovations in technologies like Alcohol to Jet offer exciting possibilities by converting ethanol into SAF. Genetic modifications to crops, as well as advancements in power-to-liquid technologies, show promise in addressing feedstock limitations and driving sustainable aviation fuel forward.
Sustainable aviation fuel, or SAF, has the potential to help decarbonize aviation and is the most scalable technology for this hard-to-abate sector in the near term. With offtake agreements for SAF surging over the past two years, the nascent industry has been showing promise. However, hurdles remain due to scarcity of supply, resource competition from renewable diesel, and a lack of technological diversification.
On today’s show, Dana is joined by Daisy Robinson and Rose Oates, two members of BloombergNEF’s renewable fuels team. Together they discuss the regional policies that are driving the uptake of cleaner jet fuels, the different feedstocks used to produce SAF, and the greenium that SAF faces when compared with traditional fuels.
Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal or on bnef.com