The price of sustainable aviation fuel
The price of sustainable aviation fuel (SAF)
Discover the key factors affecting SAF pricing, from production costs to regulatory challenges, and how innovations like FT CANS are driving cost reductions.
30 October 2024
Understanding SAF pricing
Sustainable aviation fuel (SAF) is becoming increasingly recognised as a crucial solution for reducing carbon emissions in the aviation industry. When used in aircrafts, SAF offers the ability to reduce net CO2 emissions by up to 80% without engine modification. According to the International Air Transport Association (IATA), SAF could contribute 60-70% of the aviation sector’s reduction of emissions needed to achieve net zero in the next 20-30 years. However, one of the major hurdles for the widespread adoption of SAF is the price.
Currently, SAF can cost between two to seven times more than traditional jet fuel. This is a significant challenge in an industry that is highly sensitive to operating costs, particularly fuel.
SAF pricing today
Today, SAF pricing is largely determined by production costs. Given the growing demand for SAF and the limited supply, the market remains underdeveloped. As production scales and the availability of diverse feedstocks increases, prices are expected to decrease, eventually closing the gap between SAF and fossil-based jet fuel.
Cultivating the SAF industry, and hence closing the gap, will require collaboration between governments and industry leaders to implement synchronised policies, provide incentives, and facilitate the investments needed for scaling SAF production. These efforts are essential if the aviation industry is to meet its net-zero targets by 2050.
At Johnson Matthey, we are committed to making SAF more affordable and accessible on a global scale. By working with key customers, such as DG Fuels, we are making SAF a commercially viable option for airlines. Our FT CANSTM technology, developed with bp, is pivotal in this effort.
How FT CANS technology lowers SAF costs
FT CANS technology is transforming SAF production by focusing on three key areas: utilising diverse feedstocks, minimising capital expenditure (CAPEX), and reducing scale-up risks.
1. Using diverse feedstocks
A significant factor in reducing the price of SAF is diversifying the types of feedstocks used in production. FT CANS technology uses syngas feedstock which can be produced from a wide range of materials, including municipal solid waste, biomass, and captured carbon dioxide with hydrogen. This adaptability allows flexible SAF production to take place in a wide range of regions, based on local resources. Additionally, competition among feedstock providers can help to lower input prices, making SAF more affordable.
2. Minimising capital expenditure
FT CANS reduces SAF costs through innovative design. Its advanced catalyst formulation and optimised reactor structure allow for three times the production capacity within the same reactor size. The technology also requires fewer tubes than conventional reactors, resulting in CAPEX savings of around 50%. These financial savings make SAF production more profitable and enable producers to offer more competitive prices to airlines.
3. Reducing scale-up risks
Scaling up SAF production is a complex challenge, but FT CANS technology simplifies the process. Unlike other systems that require large-scale transitions, FT CANS uses a fixed-bed system, where scaling up only requires adding more tubes rather than increasing the reactor size. This approach reduces technical risks, making SAF projects more attractive to investors and helping producers secure the funding needed for larger operations.
Currently, FT CANS technology has been selected for projects of varying scales, from smaller facilities like the Repsol-Aramco plant in Spain to large-scale ventures such as DG Fuels' plant in Louisiana.
Regulatory factors impacting SAF pricing
The global SAF market faces a complex interplay of regional legislation, supply chains, and logistical challenges. One of the key hurdles for the SAF industry is navigating the differences in government support, mandates, and certifications across regions, which affects both the production and utilisation of SAF. These discrepancies significantly influence the cost of SAF, as producers must align their operations with local legislative requirements to access financial incentives and support systems.
For instance, SAF incentives such as those in the US and mandates like ReFuelEU Aviation all have different legislations and certifications required to meet the criteria and receive full support. Criteria for these incentives may restrict the feedstocks used based on their origin or the overall carbon intensity of the process.
Another key factor in reducing the cost of SAF lies in addressing the logistics of feedstock sourcing and supply chains. Different regions offer varying carbon intensities and access to feedstocks, and optimising these supply chains can help reduce the financial burden of SAF production. However, this optimisation is currently heavily reliant on government incentives, as without proper legislative support, SAF projects may struggle to achieve profitability. As the global SAF industry matures, these supply chains should become more robust and offer an additional route to lower the cost of SAF.
While legislation is crucial for driving SAF production and adoption, it must be aligned with the ultimate goal of reducing carbon intensity. By producing SAF as efficiently as possible and working across supply chains to reduce emissions, companies can achieve lower costs and create more sustainable processes. However, without consistent and aligned government support, SAF risks remaining a fragmented and expensive solution for airlines.
Future outlook in SAF pricing
The future of SAF is promising, but significant challenges remain. As demand for SAF grows, technological advancements and infrastructure development will be essential to meet this demand. Feedstock diversification, such as exploring alternatives like municipal solid waste, methanol, and CO2, will be key to addressing feedstock scarcity and reducing production costs. Methanol-to-jet projects may be come a significant pathway, provided the technology continues to evolve. The ability to convert waste materials into SAF not only addresses environmental concerns but also provides an avenue for municipalities to tackle growing waste management issues.
Airlines like Air France-KLM are already leading the way with major SAF purchases and ambitious sustainability targets. However, for SAF to become a long-term solution, continued collaboration between governments, producers, and airlines will be necessary to close the cost gap with traditional jet fuel.
FT CANS technology provides a clear path forward by reducing costs, improving scalability, and uses diverse feedstocks. As the industry continues to innovate, SAF is poised to play a central role in the future of sustainable aviation.
This article has been adapted from the 'Price of SAF' webinar, hosted by Sustainable Aviation Futures on 26th September 2024.
