FocusAviation biofuel take-up lags despite more competitiveness

21 February 2012 15:48  [Source: ICIS news]

(recasts, amending fifth paragraph)

LONDON (ICIS)--Costs of some aviation biofuels could be close to that of conventional jet fuel by 2018, but take-up will happen only if there is forced compliance by governments, a jet fuel buyer said on Tuesday.

However, a study by clean energy and carbon markets analyst Bloomberg New Energy Finance (BNEF) showed that while fuels based on non-food vegetable oils – such as jatropha – look promising, long-established types based on edible vegetable oils – such as soybean and rapeseed – may never be competitive.

Biofuels produced via the gasification of wood are unlikely to be economical for airlines until well into the 2020s, but another wood-conversion process, pyrolysis, might be certified for aviation use by 2014, and is more promising, the report said.

The analysis showed that if production is scaled up, jatropha could produce jet fuel at $0.86/litre by 2018. Pyrolysing wood may be able to produce jet fuel at $0.90/litre by 2018.

Current jet fuel prices are approaching those mentioned in the report, at $1,075.25–1,078.25/tonne CIF (cost, insurance & freight) NWE (northwest Europe).

The analysis concludes that airlines may end up using only a small proportion of biofuels (2% or less) in their fuel mix in the next few years. 

Harry Boyle, lead bio-energy analyst at BNEF, said: “The problem is that for the foreseeable future, even when the economics make sense, there will simply be limited availability of certified and relatively low-cost biofuel. Airlines will have to compete with the road transport industry for the output of the biofuels industry.

“The US government has mandated that 18bn gallons (68bn litres) of road transport fuel will have to come from next-generation, or cellulosic, biofuel by 2022. Western governments could do the same for next-generation aviation biofuels, starting any time from 2018, as a way of stimulating a potentially significant industry and reducing air transport emissions.”

Some airlines have recently shown strong interest in the idea of using biofuels as a way of reducing their carbon emissions and improving environmental credentials, but for the time being the economics makes it unviable on a large scale.

A source at one airline said: “We will only buy them [biofuels] if it is a requirement to have them in the jet.”

However, the International Air Transport Association (IATA) has said that it wants some 6% of jet fuel, or 8bn litres, to be biofuels by 2020.

It had stated that the use of biofuels could cut the carbon footprint of the aviation industry by 80%.

It is hoped that this aim will be aided by the EU extending its Emmissions Trading System (ETS) to the airline industry this year, forcing carriers using EU airspace to buy allowances to offset their CO2 emissions.

However, the Bloomberg report shows that the cost of this will be relatively minor compared with the additional price airlines would have to pay to use biofuels rather than conventional jet fuel in the next few years.

“We will use the biofuels to offset a minor part of our emissions, but they are still too expensive. It is cheaper to just buy the carbon credits,” said the airline source.

Michael Liebreich, CEO of BNEF, hopes the EUs ETS will force airlines to focus on reducing emissions.

“While European carbon credits at the moment are so cheap they have negligible effects on ticket prices, biofuels will be competitive within a decade. However, available volume is going to be limited and airlines will be in competition for it, so those airlines which move now are likely to have an advantage later,” he said.

($1 = €0.76)

For more on jet fuel visit ICIS chemical intelligence

By: Amandeep Parmar
+44 208 652 3214

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