November 21, 2022
November 21, 2022
Did you ever stop and wonder what happens to the gallons of cooking oil at your local burger joint or chip shop? Probably not, but you really should have. Chances are they’ll be on a plane before you know it. Or to be more precise, they may very well be powering that transatlantic flight you’ve been waiting to finally take after more than two years of travel restrictions.
By now, the aviation industry has been looking into many different alternatives to conventional fuels in its drive to reduce carbon emissions. Electric planes are obviously a good idea – but the technology is still in its very early stages and will predominantly be used for short to medium distance flights.
Compensating for carbon emissions, which many passengers choose to do voluntarily when they buy a flight ticket, is another way. But it doesn’t solve the actual problem. So, is there another way to make flying just a little more environmentally friendly?
Enter Sustainable Aviation Fuels. Surprising to some, sustainable fuels have been around for a while. In fact, the first test flight using SAF was in 2008. Shortly afterwards, the International Air Transport Association (IATA), national governments and airlines lined up to promote the use of SAF as a key lever in lowering aviation-related CO2 emissions. This coincides with an ever-increasing awareness of travelers – both leisure and business – of the environmental impact of flying and the will to pay more for sustainable solutions.
Essentially, SAF are aviation fuels that are made from sustainable feedstocks – such as used cooking oil – or municipal waste. Their use results in a direct reduction of carbon emissions over the lifecycle of the fuel of up to 80% when compared to conventional jet fuel.
SAF offer a ready-to-use solution for the aviation industry that could play a key role in drastically improving the carbon footprint of its global fleet. Their drop-in-capability allows for an immediate use in existing jet engines. This means that no costly alterations to aircraft propulsion systems and no additional infrastructure at airports are required.
Highly effective in reducing carbon emissions and ready-to-use in existing jet engines – the question on everyone’s mind is: Why aren’t we all flying on SAF, all the time?
The answer: availability and cost – two factors that unfortunately happen to be related. For the moment, SAF remains the vastly more expensive option for airlines compared to its fossil fuel alternative. Limited production facilities are one of the root causes for costs that are between two to five times those of traditional fuels at today’s oil prices. As it stands, even if SAF production would dramatically go up by 2025, reaching 7.9 billion liters as IATA estimates, this would still only cover about 2 per cent of overall jet fuel demand by then. However, it’s the production end of the equation that needs to change for airlines to increase its SAF percentage at reasonable costs.
In a previous blog post, I have argued that a new generation of climate-conscious travelers are willing to pay a premium for sustainable travel. Nonetheless, even the most eco-friendly passenger will take notice if their flight is much more expensive than last year.
Let me give you an example to illustrate the impact on ticket prices. On a $100 ticket about 30% – or $30 in our example – is fuel cost. If this cost increases by 2-5x, this would bring the ticket price to $130-220 if 100% SAF would be used. But in reality, the difference won’t be that big as the industry is looking to move to 10% SAF in a first step. That would only translate to a 3-12% price premium – something that many customers, who seek to reduce the environmental impact of flying, will be much more willing to pay. This premium will often not be much higher than the price paid by each traveler for offsetting the carbon emissions for their flight .
Accepting the fact that the aviation industry will continue to grow in the coming decades, any option that offers the immediate benefits of SAF needs to be scrutinized and exploited to its fullest potential.
Earlier this year, we at Accenture, together with our partners at Shell and American Express Global Business Travel, did just that. In June we announced the launch of Avelia, one of the world’s first blockchain-powered digital SAF book-and-claim solutions for business travel.
The fundamental idea is that of a platform that brings together airlines, corporates, cargo players, and SAF suppliers within a trusted eco-system that no individual company could build or access on its own. It is the largest SAF book-and-claim pilot at launch, offering around 1 million gallons of SAF—enough to power almost 15,000 individual business traveler flights from London to New York.
Bridging the gap between the cost of traditional jet fuel and SAF has to be a top priority. One that can be achieved through targeted capital investments and continued technological development. An increasingly volatile oil price further tips the balance in favor of SAF.
This, however, is only part of the solution: governments, regulators and the aviation industry will need to join forces in a global effort towards sustainable air travel. In the US, incentives such as the Renewable Fuel Standard (RFS) or, more recently, Sustainable Aviation Fuel tax credits under the Biden administration’s Inflation Reduction Act, already provide support for technology and production development. In Europe, the so-called “Refuel EU Aviation” initiative includes obligations for a minimum share of SAF on commercial flights by 2025.
Meanwhile, on the consumer side, some airlines have begun offering voluntary premium payment options for passengers that wish to directly pay “their” share of the additional SAF cost. The question is if voluntary payments are going to cover the bill in the long run.
First broad-scale commercial pilots, such as the Green Fare introduced by Lufthansa Group for its flights from and to Scandinavia this August, will certainly allow us to draw first conclusions.
Yet, with a looming energy crisis and a rebound in air traffic towards pre-pandemic levels in some markets, which also means much higher aviation-related carbon emissions, the case for SAF has become more pressing.