(photo: Alaska Airlines)
Fri 21 July 2017 – Although the premium has come down considerably since their introduction in 2008, the current cost of sustainable aviation fuels is still around three times higher than conventional fossil-based jet fuels and has been an important factor in their slow take-up and large-scale production. Airports such as Seattle-Tacoma International, however, are keen to supply their airline customers with a reliable and regular supply of sustainable advanced fuels as they could provide important environmental and economic benefits far into the future. Airports are at the supply-chain intersection of airlines, fuel suppliers, governments and communities, and can leverage their position in supporting scale-up. To bridge the price premium gap, the Carbon War Room and SkyNRG have worked with the Port of Seattle to produce a report to assess and recommend potential long-term funding mechanisms that could supply all airlines at the airport.
The Port believes catalysing large-scale uptake of sustainable aviation fuel (SAF) can contribute to its Century Agenda Goals to reduce carbon emissions and also the development of clean energy jobs in the state of Washington. Blending just 1 per cent of SAF into the Sea-Tac jet fuel supply would reduce CO2 emissions by around 23,300 to 31,000 tonnes annually on a life-cycle basis. Operating on low-profit margins and with fuel as their largest expense, the airlines themselves are faced with a limited ability to absorb the SAF price premium so advancing SAF usage and creating a regional supply chain requires an innovative approach.
Another challenge in the United States is the constraint imposed by state and federal regulations on the use of airport funds. Public dollars cannot cover a commodity used by a for-profit private firm. However, says the report, SAF produces direct air quality benefits, reduces greenhouse gas emissions and supports regional economic development – characteristics it refers to as ‘co-benefits’. While a US airport cannot pay for aircraft fuel, it could pay directly for SAF co-benefits.
The study assessed and ranked 14 co-benefit funding mechanisms based on their revenue potential and feasibility: legal considerations, ease of implementation, airline factors and other stakeholder impacts. Of the four recommended mechanisms, two would require FAA approval as they are not currently considered an acceptable use of airport revenue. One of those would use general non-aeronautical revenue such as parking or landside fees (raising $1 million to $4 million per year) and the other would implement a fund via the airline operating agreement that is not subject to revenue sharing, or create a new fee ($380,000 to $2.3 million per year).
The other two mechanisms would involve corporations contributing to offset their flight emissions ($1 million to $2.5 million per year) and through the Port Taxing Authority using variable funds, dependent on Port Commission priorities, that support air quality benefits, similar to the Port’s Clean Truck Program.
The report concludes that infrastructure investment could jump-start regional SAF production and the most promising approach is indirect via the procurement of SAF co-benefits. A longer-term contract from Sea-Tac to procure SAF co-benefits is favourable, it says, over one from airlines, which are subject to greater market risks and exposure. The Port should continue to explore and develop the most viable co-benefit funding mechanisms, it recommends, and actively promote policy and regulatory support at the state and regional levels along with advancing the airport leadership model with national and international policymakers.
“We congratulate Sea-Tac on its leadership in showing that airport authorities are critical to the success of the aviation biofuel industry,” said Adam Klauber, Director of Carbon War Room’s Sustainable Aviation programme. “We’ve proven that there are viable funding mechanisms for the widespread uptake of sustainable aviation fuel at Sea-Tac, and we hope that the study provides tools and ideas for other ambitious airports to consider in their sustainability initiatives.”
CWR was founded by Richard Branson in 2009 to accelerate the adoption of business solutions to “transform global energy use to create a clean, prosperous and secure low-carbon future”, and now operates as part of Rocky Mountain Institute.
Added Theye Veen, CFO of global aviation biofuel supplier SkyNRG: “Until we reach fossil-price parity, we need co-funding mechanisms to close the price gap between conventional jet fuel and sustainable aviation biofuels. Sea-Tac demonstrates that airports can play a key role in helping to find the right partners to cover the premium and accelerate the transition to secure a sustainable future for the aviation industry.”
In other news, the European Climate Foundation has been added to SkyNRG’s Sustainability Board, which also consists of representatives from WWF International, University of Groningen and Solidaridad Network. The ECF is a philanthropic initiative “to help Europe foster the development of a low-carbon society and play an even stronger international leadership role to mitigate climate change.”
Report: ‘Innovative funding options for sustainable aviation fuel at US airports’
Simplified breakdown and reduction potential of sustainable aviation fuel price (source: CWR and SkyNRG):
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