US sustainable aviation fuel production target faces cost, margin challenges

The United States' goal of rapidly ramping up production of sustainable aviation fuel (SAF) may encounter strong headwinds as producers balk at the low margins for the biofuel and some airlines flag concerns over the costly switch, experts said. President Joe Biden, who has made tackling climate change a central pillar of his administration, launched a challenge in 2021 to supply at least 3b gallons of SAF annually by 2030, a steep jump from the current 15.8m gallons as per U.S. government data. U.S. production of SAF will be 2.1b gallons by 2030, S&P Global Commodity Insights has estimated, based on upcoming projects. "A lot of additional investment (is) needed to hit that (3b) target," said Wood Mackenzie analyst Gordon McManus. A lot is riding on SAF as the US Energy Department has said alternative sources, such as battery technologies and hydrogen, are not expected to contribute to substantially reducing aviation emissions until after 2050. Corey Lavinsky of S&P Global Commodity Insights said the goals were for domestic production and not consumption. "As things stand now, an airline may choose not to use SAF because it believes it's too expensive compared to traditional jet fuel. Mandating the use of SAF would eliminate that option," Lavinsky said. US jet fuel currently retails at around $2.85 per gallon while SAF prices are at $6.69 per gallon, as per data from commodities and energy pricing agency Argus Media.<br/>