United States: SAF production slowed by costs and low margins

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L’US goal to quickly increase the production of sustainable aviation fuel (SAF) could come up against production costsexperts told Reuters.

US President Joe Biden, who has made the fight against climate change a central pillar of his administration, launched the challenge in 2021 of providing at least 3 billion gallons of SAF per year by 2030, which represents a sharp increase compared to 15.8 million current gallonsaccording to US government data.

S&P Global Commodity Insights estimates that U.S. SAF production will reach 2.1 billion gallons by 2030, based on upcoming projects. “A lot of additional investment (is) needed to reach the target of (3 billion)“, estimated an analyst from the Wood Mackenzie firm.

In the United States, jet fuel currently sells for about $2.85 per gallon, while SAF costs $6.69 per gallon, according to data from commodity pricing agency Argus Media. and energy. Major airlines, including Delta Air Lines and Southwest Airlines, have said they want to replace 10% of kerosene with sustainable fuels by 2030. However, SAF currently represents only 0.1% of the entire airline fleet. United States jet fuels.

Rising costs and supply issues are among the biggest hurdles and the U.S. aviation industry needs more support to reach net-zero emissions by 2050, according to a survey by the engine manufacturer GE. U.S. SAF producers are currently eligible for a tax credit of up to $1.75 per gallon under the Inflation Reduction Act (IRA), but this may not be enough to offset the low margins. “At present, it may be difficult for producers to invest additional capital in the production of SAF rather than renewable diesel“, according to the analyst at Wood Mackenzie.

In Europe, the European Parliament passed legislation ReFuel EU Aviation aiming to ensure that SAF constitutes 2% of the fuel available at European Union (EU) airports by 2025, then 6% in 2030, 20% in 2035 and progressively up to 70% in 2050. Taking example the EU, some experts believe that the Biden administration should adopt such a measure to force American manufacturers to produce more SAF.

John Walker Avatar