Singapore — Sustainable Aviation Fuel is expected to see increased growth momentum, with a rising number of airlines and other stakeholders embracing it amid regulatory requirements, consumer expectations and progress in certification schemes, Robert Boyd, Assistant Director -- Aviation Environment at the International Air Transport Association said Sept. 15.
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"About 10 years ago, there was no SAF and there were big questions around it ... will it hurt the engines, how will it affect aircraft performance, how do they certify it and will it be safe," he said at the S&P Global Platts 36th Asia Pacific Petroleum Virtual Conference, or APPEC 2020.
"We've nearly performed about a quarter of a million of flights on SAF in the last few years," he said, adding that while it is still a young industry, it is growing very fast and had already translated into about $6.5 billion in forward purchase agreements worldwide.
In 2009, the industry set a strategic direction entailing three steps. The first one was a pre-2020 ambition, which was to achieve 1.5% average fuel efficiency annually from 2009 to 2020. The average has been about 2.3% per annum, he said. "So, that's good."
The second step is to stabilize net aviation CO2 emissions at the 2020 levels with carbon neutral growth. He explained that the aviation industry is committed to not exceed its 2020 net carbon emission levels. In this regard, a positive outcome is that there is one global agreement and not what could have ended up being multiple agreements and that too by different governments, Boyd said.
The long term goal is to reduce aviation's net CO2 emissions to 50% of what they were in 2005 by 2050, and that's the important part for sustainable fuels.
As far as the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA, goes, SAF can also be used as a mechanism to reduce the offsetting obligations, Boyd said.
"While I don't think SAF will be the primary compliance tool used, almost all airlines have become educated on SAF and how they can use it," he said.
Currently, there are around 40-50 airlines with experience in using SAF, and that could easily ramp up significantly in the coming years, Boyd said, adding that other stakeholders were also increasingly participating in offtake agreements for SAF.
Amazon's air cargo operation -- Amazon Air -- for example, secured up to 6 million gallons, or about 23 million liters, of SAF under a recent deal.
"The aviation industry is going through the most devastating crisis it has ever experienced ... the global financial crisis in 2009 was pretty tough. But that was a blip [when compared to this]," Boyd said.
In June, air cargo volumes were down 18% year on year and passenger volumes plunged 87%, Boyd said. "So, the industry has to be mindful."
Global revenue passenger kilometers, or RPKs, are not likely to recover to 2019 levels until about 2024, while the balance of risks and uncertainty in the industry remains tilted to the downside, he said, adding that a slightly disjointed response from different governments worldwide in opening up their borders has also been a setback.
The industry is in a "very fragile financial state" with a record net loss of $84 billion likely this year, Boyd said.
Still, there is no walking away from the environmental targets set and there is a lot of policy momentum that will underpin SAF use in the next three to five years, Boyd said.
SAF pricing and adoption
"I think there is growing emphasis on clean, green sustainable fuels, you can see it happening in diesel, gasoline, fuel oil, and cleaner aviation fuel is next ... SAF is gaining recognition in Europe and the US, and it will take time to spread globally, and for it to take off, it has to be widely recognized and accepted by the public," an industry source said Sept. 15
SAF, however, comes at a costly price compared to fossil jet fuel. A 10% uptake of SAF in the jet fuel mix translates to an average cost of $40-$50 per passenger, Neste, the largest sustainable aviation fuel producer, said earlier in an International Air Transport Association webinar.
According to Platts data, the price spread between SAF in Northwest Europe and FOB Singapore jet fuel/kerosene stood at $153.05/b at the Sept. 14 close.
"Previously, the emphasis on SAF was not that serious [in Asia], but in recent months, we have been hearing major companies turning their business direction to renewables and non-fossil fuel businesses," another industry source said.
"So, I guess COVID-19 has actually expedited some reactions in this aspect. As consumers, safety is the main consideration [on the aviation front]," he added.