Economy and Production
Fuel costs account with 25% to 30% of the total costs for the largest share of an airline’s operating costs. If the fossil raw material crude oil is replaced by renewable raw materials, large parts of the production plants have to be built from scratch. Companies will only invest in these production facilities under positive basic economic conditions. For this reason, aireg is looking into the economics and production of sustainable aviation fuels.
Although various pathways to produce SAF are already approved by ASTM, their broad market implementation is so far still missing (globally and regionally) and their market share lays beyond 1%. This is the case although various SAF options have been technically tested and their operational readiness demonstrated in multiple projects. Yet, the production of SAF is limited to very few producers and extremely small quantities. In 2022 the share of SAF in the EU was only about 0.8% and only 0.075% on a global scale. Overall, SAF has barely existed in the global aviation fuel markets so far. A global market ramp-up of SAF is hampered by various technical, economic, operational and acceptance-related factors. This virtually non-existent market scale-up is primarily based on a combination of two fundamental factors. These factors being a lack of economic viability of SAF options due to high production costs compared to fossil kerosene and (in combination) with a lacking target-oriented regulatory framework.
(Bullerdiek et al., 2020)
High SAF Production Costs
The production costs of SAF are significantly higher compared to fossil kerosene, although they have near identical technical (usage) properties. SAF, at present, are about 2 to 5 times more expensive (in some cases considerably greater) than fossil fuels (Fig. 8). While HEFA based SAF are currently still at least twice as expensive as fossil kerosene – but in some cases already available on the market in larger amounts – the price range for other SAF options is even higher.
Therefore, aireg is investigating how the marketability of sustainable aviation fuels can be secured in the long term. The design of an infrastructure for the supply of sustainable fuels and the financing production facilities are also discussed. Due to the variety of funding and incentive mechanisms for SAF production, aireg also intensively monitors and discusses current regulatory developments at the global, European, and national levels. The position of aireg on the European “Fit-for-55” initiative and the implications for aviation can be found here. Worldwide, some countries have already set not only climate targets, but some also specific quotas for SAF or similar targets. The following figure shows a selection of these countries and their targets.
(own illustration, 2023)