The sustainable aviation fuel industry is awaiting clear evidence that the market for the lower-carbon, nonpetroleum jet fuel is stabilizing through long-term policies and incentives.
Through June of this year, the U.S. produced about 13 million gallons of SAF domestically, on a pace to surpass the approximately 14 million gallons produced in 2023, according to the Department of Energy’s SAF Grand Challenge dashboard.
Estimates for domestic SAF production through August are at 20 million gallons, according to Kevin Welsh, vice president of environment and chief sustainability officer at Airlines for America. This is up from 5 million gallons produced and imported in 2021.
While there has been significant progress since the challenge began in 2021, domestic production is still far from reaching the goal of 3 billion gallons by 2030.
DOE has projected optimism that this goal is still achievable, citing the number of projects expected to come online. Still, at a recent conference on SAF in Houston, representatives from big oil companies and clean fuel groups were skeptical about the timeline.
To truly spur innovation and investment both at home and across the world, representatives pushed for stable and consistent policies, with defined and transparent environmental tracking.
John Kuruvilla, director of aviation and renewables origination at Phillips 66, said it is challenging to reach SAF goals, citing his company’s long journey to reach its current capacity of about 150 million gallons a year. He said it took about four years to move the initiative along, and the company spent a lot of time in the permitting, engineering, procurement, construction and design phases.
“This is hard,” Kuruvilla said. “If it was easy, everybody would have done it already.”
Even with its current capacity, Kuruvilla said the company is going to ease in to understand the market demand as they go. Producing SAF is an expensive process and so far it’s unclear what the demand curve looks like, he said, which could be a factor delaying investment.
One way of addressing the problem, he suggested, i to make SAF more cost effective and palatable to airlines through regulatory policy or environmental attributes.
A shortage of supply is also an impediment to growth in the SAF supply chain, said Bruce Fleming, CEO of Montana Renewables. This goes back to uncertainty in the market, which sidelines the necessary capital to establish new production plants.
Bruce Fleming, Montana Renewable Fuels“We're applying a compliance mentality and a kind of auditing approach to an industry that doesn't really exist,” Fleming said. “Stable policy goes to level playing field goes to faster adoption, circles back to people willing to make that multibillion-dollar bet to create supply.”
William Hohenstein, director of the Office of Energy and Environmental Policy at USDA, cited the expansion of ethanol production in the U.S. as proof the country can scale up renewable fuels. The primary challenge is to ramp up production in a sustainable way and reduce the carbon intensity of the fuel. While there are ways of doing it, he highlighted how producers can cut emissions through climate-smart practices and incentives for feedstocks.
Recently, the agency issued a request for information on what counts as climate-smart practices and crops to use for feedstocks. Such information could be helpful in shaping SAF policies like the upcoming 45Z tax credit.
Hohenstein said the agency received a lot of feedback ranging from excitement to skepticism.
Tracking and documenting environmental attributes of SAF can spur more confidence and investment, several speakers emphasized during the three-day conference.
To build a market that accounts for these benefits, many advocated for book and claim accounting.
But creating this system is a work in progress, Welsh said.
Book and claim accounting and registries that track these transactions will be particularly important for more remote areas like Alaska where it is difficult to get fuel into certain airports to claim emission reductions, said Courtney Unruh, SAF and sustainability engagement director for Alaska Airlines. These factors will be important in building transparency and public trust.
“You can actually see publicly where the fuel is and the emission reductions that come from SAF,” Unruh said.
Without proper accounting and tracking of SAF throughout the entire supply chain, it could be difficult to stimulate more investment, said Madison Carroll, executive director of the Council on Sustainable Aviation Fuels Accountability, or CoSAFA.
On the farm level, a producer could verify and account for emissions reductions through climate-smart practices and sell emissions separately from the feedstock itself. This could allow biofuel producers to source feedstock in the most efficient way for their operation or proximity. In the USDA’s RFI, several renewable fuels groups advocated book and claim adoption for feedstocks.
The main question on the producer-feedstock side is how to credit carbon reductions in production. Dan Lashof, director of World Resources Institute, United States, said the crediting needs to center on measurement rather than just implementation of a practice because a practice can have varying results depending on location, timing and field conditions.
That is one area Lashof said current guidelines are not getting it right.
The timeline for tax credits also contributes uncertainty. The 40B tax credit sunsets at the end of 2024 and the guidance for 45Z is expected to take effect Jan. 1, 2025. However, it’s unclear exactly what that credit will look like, a challenge for the market. Additionally, the credit is expected to have a lower value for SAF and will only be in place for three years, Welsh said.
He said the industry needs a longer credit and then can have conversations about how to fix some of the substantive elements.
However, Chris Cassidy, USDA national business renewable energy adviser, suggested the industry prove SAF can be successful to Congress before securing those long term policies.
“What we're trying to do is incentivize the whole industry and be able to send a signal to Congress that, hey, we need to continue to invest in these projects,” Cassidy said. “And the only way we're going to do that is … to have long-term, stable policy for these tax credits, but they listen when you can show them examples.”
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