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Green jet fuel gaining traction but likely to stay niche

Highlights

Emerging more cost competitive on increasing supplies

Could account for 2% of global jet demand by 2025

Airlines embracing SAF to boost their green credentials

London — As the financial elite flew to Switzerland for the World Economic Forum this week in their private jets, talk of clean or greener jet fuel is making headlines, but it is likely to be a niche fuel.

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Sustainable aviation fuel (SAF) as it is being called by the industry, is gradually becoming more cost competitive due to its rising supply as more airlines adopt the cleaner fuel which is being supported by better technology.

SAF, also known as biojet fuel, is now around three or four times more expensive than jet fuel, compared with four years ago when it was 17 times more expensive, according to S&P Global Platts data.

Platts assessed the CIF Northwest European jet fuel flat price at $611.75/mt Tuesday.

If supply and technology continues to improve, SAF may even verge on being affordable. But the prevailing feeling among airlines seems to be that the price of airline tickets will

increase due to the inclusion of SAF.

"It is a very important development for air transport. Pricing and economics also matter, as does putting the environment first [after safety]," a jet fuel trader who works for a European airline said. "If passengers value it then it will gain traction but not at any price. The whole topic will evolve as political and stakeholder pressure grows."

2% by 2025

SAF is a renewable alternative to traditional jet fuel that the global aviation industry has explored over the past decade, with five production technologies approved to convert sustainable feedstocks into fuel. It is mostly manufactured from bio-waste, namely agricultural waste fats and/or oils, or residue raw materials.

But this market remains miniscule in comparison to the 12 million mt/day of jet fuel traded globally, according to industry traders.

A representative from the International Air transport Association (IATA) told Platts that SAF currently accounts for only 0.01% of global jet fuel use. However, the aviation industry wants to increase that to 2% by 2025.

SAF is blended with petroleum Jet A1 so that the Defstan specifications are still met, while also lessening the environmental footprint of flying.

The amount of SAF that can be blended into Jet A1 depends on the purity of the initial petroleum-based product.

Stringent jet fuel specifications, for example a flashpoint of 38 degrees C and maximum freeze point of -47 degrees C, have been a hurdle to achieving greener jet fuel.

Still, biojet fuel is likely to be a growing topic of conversation this year.

Green credentials

Airlines are stepping up efforts to bolster their green credentials in the face of a media backlash as the Swedish concept of flygskam, or flight shaming, has gained ground.

Finland's Neste, which has been at the forefront of renewable fuels, currently producing 100,000 mt/year. The refiner is targeting a production of over 1 million mt of renewable jet fuel by 2022.

BP signed a 10-year offtake agreement for 50 million gal/year with Fulcrum BioEnergy, a US-based producer of low-carbon jet fuel made from municipal waste.

Air BP, the aviation division of BP, currently supplies over 7 billion gal/year of jet kerosene and aviation gasoline to its customers.

Last year, KLM agreed a deal to purchase sustainable aviation fuel produced by Neste for flights from Amsterdam's Schiphol airport.

KLM is also encouraging potential customers to exhaust all other transport options before booking a flight. "We will [...] start replacing one daily flight connection with seat capacity on the train. Over time, we aim to reduce the number of flights between Brussels and Schiphol to zero," it said in its recent marketing campaign.

And this month, Lufthansa signed a SAF agreement with Shell to ensure that flights out of San Francisco to Frankfurt, Munich and Zurich will be fueled by a jet fuel specification that contains up to 30% SAF.