How United and Other US Airlines Lost Momentum on Sustainable Jet Fuel

October 05, 2023

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by Ben Elgin (Bloomberg) Despite soaring rhetoric, American carriers are far behind their European counterparts in implementing this climate fix. -- ... Only a half-dozen companies make commercial quantities of SAF, which accounts for about 0.1% of the world’s jet-fuel supply and costs at least twice as much to produce. Almost every major airline has pledged to use at least 10% sustainable jet fuel by 2030. For most, including United, this would amount to a hundredfold increase in only seven years.

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United consumed 2.9 million gallons of SAF last year, representing 0.08% of its fuel supply. That puts the company slightly ahead of its US counterparts but far behind several airlines in Europe, which have to prepare to meet new requirements that don’t exist in the US.

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Air France-KLM has more than quadrupled United’s total by using 13.9 million gallons of SAF, making it the world leader by volume. Scandinavian Airlines, on the other hand, used 0.96% SAF, the highest percentage among passenger airlines and more than 10 times United’s percentage.

The lackluster performance in the US shines a spotlight on starkly different approaches to spurring SAF around the world. European Union rules will require 2% SAF usage by 2025, 20% by 2035, and 70% by 2050. Governments in the UK and Japan have proposed similar rules. Many European airlines, including Air France-KLM, have supported the EU regulatory approach. Australia’s biggest carrier, Qantas Airways Ltd., recently called on the government to introduce its own requirements “to help kick-start local production of SAF.”

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Regulators in California are considering including jet fuel under the state’s low-carbon fuel standard, which could force airlines to use more SAF or potentially pay penalties.

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Instead of mandates, (United Airlines' Chief Executive Officer Scott) Kirby argues, governments need to pour financial incentives into the space, much the way they did for wind and solar over the past couple of decades. “Today it’s cheaper to produce a megawatt of electricity with wind and solar than it is with fossil fuels,” he says. “I believe the same thing can and will happen in SAF if we invest in it.”

Although generous tax credits certainly helped spur wind and solar, so have mandates: About half of all growth in US clean electricity since 2000 is linked to state laws requiring that electric utilities get a certain share of their power from renewable sources, according to a recent report from Lawrence Berkeley National Laboratory.

Kirby says United’s attempts to build the market are more significant than simply counting its SAF usage. The centerpiece of these efforts is a $75 million investment in a sustainable flight fund, which has put money into a half-dozen clean-fuel startups.

That certainly eclipses the investments of other big US airlines. But $75 million adds up to less than 1% of United’s annual jet-fuel bill. And this amount is unlikely to move the needle much for SAF developers, who often need a half-billion dollars to build a plant. To put this in broader perspective, McKinsey & Co. estimates that the world needs to invest about $175 billion a year—mostly on developing new sustainable fuels—if airlines are going to achieve their midcentury climate targets.

Critics contend that United and other US airlines, by balking at higher prices for cleaner fuels and lobbying against mandates, are standing in the way of meaningful progress on SAF.

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On a scorching August afternoon, with the nearby San Gabriel Mountains cloaked in haze, a dense web of steel pipes, tubes, scaffolding and towers thrums with life. This refinery, owned by Boston-based biofuels producer World Energy LLC, was the sole maker of SAF in the US for the past seven years. Its first domestic competitor came online in May.

Instead of petroleum, the refinery is fed by oven-black rail cars full of animal fat with the consistency of Crisco. The shipments come from slaughterhouses across the US, Canada and Australia. Most of the fat is converted into renewable diesel for trucks. Each year the refinery also churns out about 8 million gallons of jet fuel for use at Los Angeles International Airport and other nearby facilities.

World Energy’s SAF produces less than half of the greenhouse gases of conventional options. And it exists, in part, thanks to United’s help.

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Guaranteed cash flow made the project more attractive to financial backers. United also shared in the refinery’s upside. If the fuel could fetch a higher price than the airline would pay (which it eventually did), the producer could sell it elsewhere—and split the premiums with United.

“United has been absolutely critical in getting SAF off the ground,” says Gene Gebolys, World Energy’s CEO, who declined to discuss the deal’s terms. “They moved when others wouldn’t.”

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But if airlines are unwilling to pay more for cleaner fuels, it thrusts the responsibility onto the public, primarily through government incentives. This, in effect, would lead to all taxpayers subsidizing the wealthiest, who fly the most. In the US, adults in households earning more than $150,000 fly more than five times as often as those in households making less than $50,000, according to a 2018 survey by Airlines for America.

It’s a different story in Europe, where airlines are already absorbing this added cost—and passing it along to travelers. Air France-KLM, for instance, adds a surcharge of €1 to €24 ($1 to $25) to all flights departing from France and the Netherlands to help cover the extra cost of SAF. The airline said it expects the added expense to total €100 million this year and says it could reach €1 billion by the end of the decade if costs don’t drop.

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“The real market is for decarbonized flight,” Gebolys says. He’s referring to a nascent market where companies such as Microsoft Corp. and Deloitte that book a lot of corporate travel buy certificates that represent a certain quantity of sustainable jet fuel. This payment helps cover the cost premium of SAF, which makes it competitive with conventional jet fuel and spurs producers such as World Energy to deliver more of it into the market. The buyer of the certificates then takes credit for that cleaner jet fuel—and applies the carbon savings to its own footprint.

Microsoft recently announced a 10-year deal to purchase SAF certificates from World Energy representing 44 million gallons of SAF, which will allow the tech company to trim its reported emissions by almost a half-million tons over the next decade. READ MORE

Half of Germany’s electricity needed for Lufthansa to use 100% SAF, says CEO (Travel Tomorrow)

Price of sustainable aviation fuel will remain higher than traditional kerosene, says IATA chief (ZBR (Google Translation))

Public policy is required to promote the production of SAF in Mexico (Mexico Now)

Excerpt from Travel Tomorrow: Lufthansa Group CEO, Carsten Spohr has stated that the energy required to produce enough sustainable aviation fuel (SAF) to power the entire Lufthansa fleet would require half of Germany’s electricity supply.

His comments came at a conference on 25 September where Spohr was discussing the challenges of decarbonising aviation while keeping prices affordable for consumers. He pointed out that there is still insufficient supply of renewable energy to power SAF production, while, at the same time, if the electricity market would allocate the needed resources to fuel production, the cost of electricity would skyrocket for regular consumers, which is not acceptable.

The use of SAF is still at the beginning of market scaling, and the supply volumes available today and the share of SAF in the Lufthansa Group’s total fuel consumption are correspondingly small.
Lufthansa Group statement to Forbes

Lufthansa becomes first international aviation group to offer fare for carbon neutral flying

Spohr expressed reluctance over SAF’s contribution to decarbonising the industry long term, as its cost will have to be passed down to passengers. However, it is currently the best available solution, especially for long haul flights.

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Previously, Spohr responded to a new mandate adopted by the European Parliament regarding minimum required SAF blend in the EU. “From today’s point of view, it won’t work to have even the availability of the quantities that are demanded of us, not to mention the high costs that in the end the passenger will have to bear”, he said.

Members of the European Parliament voted on 13 September to increase the amount of mandatory SAF to be used in the EU by 2050, as part of the ReFuelEU Aviation Regulation. READ MORE

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