SAF demand on the rise but feedstock availability a concern: industry experts

The use of Sustainable Aviation Fuel is gaining momentum in 2022 thanks to a recovery in aviation fuel demand, a new blending mandate in France and corporate demand for more environmentally friendly travel, according to market participants at the S&P Global Commodity Insights Middle Distillates conference in Amsterdam on April 1.

However, more investments need to be made in production facilities while the availability of feedstocks to produce SAF in Europe remains a concern amid lingering doubts about the types of sources the EU would allow in the future, experts at the conference said.

"SAF targets are achievable but we need to look at what type of feedstock we use, what reductions in greenhouse gas emissions one can achieve... overall one should incentivize the most sustainable option, the one available sooner and more efficient in reducing emissions," Jacobus Barnhoorn, senior coordinator government affairs at Renewable Energy Group, told the audience.

According to him, around 1.1 million mt of used cooking oil -- UCO, the main feedstock used in Europe to produce SAF -- was collected in Europe in 2019 and 1.3 million mt of UCO had to be imported. The estimates of regional production amount to only 1.5 million mt in 2025 and 2.5-3 million mt in 2030. "There is not enough feedstocks in Europe," Barnhoorn said.

According to "Fit for 55" and the ReFuelEU Aviation initiative -- which aims to make the aviation industry in Europe carbon-neutral by 2050, a target now shared by the International Air Transport Association -- the share of sustainable Aviation Fuel in aviation fuel should rise from around 0.05% in 2021 to 2% in 2025, 5% in 2030 and 65% in 2050.

The UK government announced SAF targets of 10% by 2030 and up to 75% by 2050.

"Government policies are clearly helping [the development of SAF use]. There are now mandates in France, Sweden and Norway, incentives in Europe and the US and there is also an increase in voluntary demand from corporate users," said Jonathan Wood, Neste's VP for Europe Renewable Aviation. "We are really at a tipping point right now in the jet fuel market but the regulation needs to be framed [to be] as flexible as possible," he said, adding that it was essential to keep the list of feedstocks as wide as possible.

"The overall recovery of the aviation sector and aviation demand will obviously help in the pick-up of SAF use," Neste's Wood told attendees at the conference.

According to him, supply tightness in the UCO market was also due to the pandemic. "On the feedstocks side, we saw a lot of disruption due to COVID-19 in the last two years... COVID-19-[related] supply disruptions have been one of the reasons for the rise in feedstocks costs," he said, adding that the pricing dynamic of SAF was correlated with jet fuel prices but also with the feedstock price and the hydrogen price.

According to S&P Global Commodity Insights, the price of SAF ex-works Northwest Europe rose during the pandemic to $2,984.99/mt March 31 from around $1,579.97/mt March 3, 2020. In the meantime, the price of CIF NWE jet fuel cargoes rose to $1,135.75/mt March 31 from $473/mt March 3, 2020.

"There is currently less than 0.1% of SAF going into planes globally," said Bryan Stonehouse, head of aviation and sustainability and risk, Shell Aviation.

According to him, the question of what feedstock one chooses to make SAF is very important. "Transparency is what customers of these feedstocks are looking for... we need demand certainty to build new production facilities for biofuels," he added.