Fundamentals and the Future

At the National Biodiesel and Renewable Diesel Summit, industry experts discussed the complexities of the current sustainable aviation fuel industry, as well as opportunities and challenges for the industry in the years ahead.
By Katie Schroeder | August 15, 2023

The market opportunities around sustainable aviation fuel (SAF) have attracted the attention of the ethanol industry. In June, at the National Biodiesel & Renewable Diesel Summit—colocated with ethanol industry’s largest conference, the Fuel Ethanol Workshop, held in Omaha, Nebraska,—experts from the SAF industry, biofuels industry and government discussed ethanol’s potential as a feedstock for SAF via the alcohol-to-jet pathway. On panel, “Reviewing the Dynamics and Trajectories of Renewable Diesel and Sustainable Aviation Fuel Markets,” presenters discussed SAF market factors and prices, the importance of SAF in helping the aviation industry meet decarbonization goals, and public policy related to SAF technology development. Panelists included Nicolle Castro, managing editor of Americas Biofuels with S&P Global Platts; Steve Csonka, executive director of the Commercial Aviation Alternative Fuels Initiative; and Ben Simon, biotechnology officer with the U.S. Department of Environment and Energy.

Understanding the Market
During her presentation, Castro discussed SAF price dynamics and the market factors connected to SAF costs in the U.S. S&P Global Commodity Insights has been developing price assessments to help producers better understand these markets and the impact of policies such as tax credits on their profitability. The three major determining factors of SAF prices include feedstock prices, environmental credits and tax incentives, Castro explained. S&P Global Commodity Insights also tracks the cost of low-carbon hydrogen, known as blue hydrogen, because of its impact on SAF production prices. As the primary objectives of the SAF Grand Challenge are to expand SAF supply and end use, reduce cost and enhance sustainability, it is important for producers to know where the industry stands regarding these goals. “It’s extremely relevant from a producer’s perspective to understand what is going to be involved in the production cost model, what the main price trends are, and what to expect in terms of public policies and how that impacts the price model," Castro said. "And also from a consumer’s perspective, to identify what is going to be the financial impact of expanding the SAF credit for jet fuel." 

Tax credits and public policy are vital to help airlines meet decarbonization goals and support the expansion of the SAF industry without greatly impacting the social economy, she explained. The price spread between SAF with environmental credits and SAF without credits is nearly $1,500 per metric ton.
“Exactly when is the U.S. planning to get to 3.5 billion gallons of SAF to the market?" Castro said. "Is it possible? Yes, it is, however we still need to go through some challenging moments in the next seven years to achieve not just that production, but also to make it possible for airlines in terms of cost-effective alternative to jet fuel."  

The Fundamentals of the SAF Industry
Csonka outlined the background of the SAF industry, the aviation industry’s decarbonization goals, SAF policy and progress being made toward these goals. Established in 2006, CAAFI operates as a public-private partnership between the aviation industry and the U.S. government, working to foster the development and commercialization of SAF. CAAFI and its community are pursuing a foundation of future success for the aviation industry, Csonka explained, no matter the type of feedstock or conversion process.

Most airlines have made commitments to reaching net zero carbon emissions by 2050, with some airlines pursuing a more aggressive deadline of net zero by 2040. Csonka explained that the U.N. body, the International Civil Aviation Organization, implemented a program called the Carbon Offsetting and Reduction Scheme (CORSIA), which sets the benchmark of actual emissions in 2019, meaning that the aviation industry cannot surpass this benchmark without offsetting the emissions in some way. “The industry recognized, as well as the federal government did, that we needed to address aviation emissions, and part of the reason for that is the reliance or the impact of the aviation industry on the U.S. economy—second in gross domestic product and balance of trade, only behind agriculture,” he said.

Csonka referred to SAF as the only viable approach to GHG reduction in the aviation industry; however, significant feedstock must be unlocked to make those reductions a reality. In order meet the projected demand of 27 billion gallons of jet fuel across all aviation sectors in the U.S., the SAF industry needs to double its capacity in the U.S. each year, Csonka explained. “The really good news is that some of these entities themselves have committed to aspire to producing a billion gallons themselves as they build the first plant, and then are able to replicate,” he said.

The SAF industry is on track to reach the goal of 3 billion gallons for 2030, but it will be much more difficult to reach the 2050 SAF goal of 35 billion gallons. Of the current U.S. capacity of 1.8 billion gallons, 70% comes from fats, greases and oils, a feedstock that is nearly maxed out. “The rest is coming from alcohol conversions, municipal solid waste, probably some pyrolysis stuff comes into play, but we need to unlock significant regions of feedstock viability, as well as technology, in order to achieve that 2050 goal,” Csonka said.

The execution concept for the SAF Grand Challenge is interwoven with the use of ethanol as the alcohol-to-jet feedstock at the first-generation, 1.5- generation and second-generation level. Currently, ethanol is the most widely available feedstock, as hydrogen is not practical for long-range or medium-haul flights, and technology needed for battery-powered flight is not yet viable for large aircraft. The ethanol industry’s goal of reaching net zero is encouraging because it is a great opportunity for the SAF industry, he explained. “It opens the door for using ethanol as a feedstock with this kind of sustainability associated with it,” Csonka said. “And allows us to achieve carbon indexes for vital fuel production that qualifies for policy support that’s available here in the U.S. ..."
Csonka also described some of the government policies at both the state and federal level that are supporting the industry. The Illinois state legislature passed a tax rebate for airlines using SAF in the state. “That’s a sizable credit in terms of dollars per gallon," he said. "It's limited in its total scope, but it creates a nice opportunity for folks thinking about delivering fuel into Chicago." Washington state has implemented a similar tax rebate, aimed at SAF production instead of use. The aviation industry is ready to deal with the higher prices of SAF compared to standard aviation fuel over time, he said, but will welcome tax credits where it can get them.

Research and Government Funding
Simon explained that corn ethanol is a “no-brainer” as a near-term feedstock for SAF, though further carbon reduction is needed. In an effort to support decarbonization, DOE has awarded grants to first-generation ethanol facilities for the purpose of exploring solutions such as regenerative agriculture and carbon capture and sequestration or utilization. These facilities that received grants for feasibility studies include Lincolnway Energy, Green Plains for the study of gasification of corn stover, as well as Renew CO2 partnering with Ace Ethanol to explore catalytic electrolysis of CO2. The hydroprocessed esters and fatty acid (HEFA) process, which uses fats, oils and greases as feedstock for SAF, is the other near-term resource. “We have some projects looking at yellow grease, which is typically is too dirty to clean up to go into those HEFA processes,” he said.

There are long-term feedstocks that need more R&D prior to scale up or demonstration. DOE is interested in funding R&D for projects using municipal solid waste (MSW), woody biomass and purpose-grown feedstocks, such as algae and switchgrass. MSW and woody biomass will be of interest in the 2026 to 2030 timeframe, while feedstocks such as ag waste are expected to be an option in the 2030 to 2040 timeframe. Energy crops and algae are further down the road, becoming of interest between 2040 and 2050. CO2 is another feedstock that BETO is interested in researching for utilization. “What I appreciate with utilizing CO2 is not every ethanol facility is going to have access to these CO2 pipelines,” he said. “It's a great technology—there’s tax credits out there for it, there are people doing it—but if you’re not lucky enough to be in that area, what are you going to do? We want to fund those demonstration projects on CO2 utilization.”

The DOE has a total of $118 million available in funding available to accelerate domestic biofuel production. Simon also outlined funding options for projects at different scales, explaining cost-share and throughput requirements. The three types of development scales DOE is funding include prepilot, pilot and demonstration, and first-generation corn ethanol emissions reduction. Each scale has its own unique requirements. As of January 2023, Marquis Energy and partner LanzaTech were awarded funds for a prepilot project exploring gas fermentation to turn CO2 into ethanol. Green Plains, Lincolnway Energy and Renew CO2 each received funding for feasibility studies to explore a variety of GHG reduction technologies. 

“The goal is by 2035, 85% end reduction versus fossil based sources,” Simon said. The DOE’s 7th Energy Earthshot sets the goal of 50% replacement of fossil-fuel based sources across the rail, marine, off-road and hydrocarbon chemical sectors, alongside 100% replacement in the aviation sector.

SAF producers are in demand, as evidenced by the fact that the first 12 to 13 SAF facilities have all signed offtake agreements with airlines for their full production capacity prior to any concrete being poured in the ground, as Csonka pointed out. The SAF industry has a long runway to grow, expand and innovate.

Author: Katie Schroeder
Staff Writer, SAF Magazine
[email protected]