Can alternative jet fuels crowd out demand from the road sector?
In the aviation industry’s vision of the future, neatly laid out by the International Civil Aviation Organization, airlines can meet all of their obligations under the Paris Agreement through simple fuel-switching without having to make substantive changes to their practices or operations. Proponents of alternative jet fuels often ignore the reality that many other sectors have laid claims to limited bio-resources as part of their own decarbonization strategies; assuming that the aviation industry has priority of this resource to make all the low-carbon fuels needed to meet their targets may be unrealistic. Even if the aviation sector could lay claim to all the world’s sustainable bioenergy potential, is it even possible to turn it all into jet fuel?
A conventional oil refinery typically produces a range of products from “light ends”, lower-value products such as propane and naphtha with shorter carbon chain lengths to heavy distillates made up of long carbon chains, which include heavy fuel oils and waxes. It’s the middle range of products that hits the sweet spot—“middle distillates” are suitable for upgrading to either jet or diesel production and generally command the highest prices on the market. Some refineries optimize for gasoline production, a light distillate, as it is more valuable than diesel in some markets. Though there is some variation in feedstock and exact production process, biorefineries generally optimize the production of middle distillates, which typically account for over 80% of their production. The remainder of their output generally consists of lower-value light ends such as naphtha and propane.
Once a refinery has maximized its output of middle distillates, that’s not the end of the story. Refineries can tailor their processes to vary the share of diesel or jet fuel—a typical jet fuel yield at a renewable diesel biorefinery is about 15% to 25% of its liquid fuel production. To maximize the share of jet fuel production, biorefineries would need to implement additional hydrocracking—driving up production costs and increasing the relative yield of lower-value light ends at the expense of liquid fuels, as shown in the figure below. Some research estimates that maximizing the yield of jet fuel can add as much as 30 cents to the cost of a gallon of fuel—a difficult proposition when jet fuel sells for a few cents per gallon less than diesel. Given the added production expense in conjunction with the lower values of light ends and jet fuel on the market relative to diesel fuels, maximizing the output of jet fuel could decrease the value of the combined product output by as much as 10%.
It’s no surprise then that fuel producers opt to maximize the value of their outputs at the expense of jet fuel; in a risky market, it makes sense to follow the money. As shown in the figure below, all but one of the ASTM International-certified pathways for alternative jet fuel production produce road fuel. Furthermore, the two pathways closest to commercialization, HEFA and Fischer-Tropsch synthetic kerosene (i.e., FT-SPK and FT-SKA), tend to produce higher volumes of road fuel than jet fuel. For that reason, producers have started to explore the use of HEFA+, an aviation fuel similar to renewable diesel that is usable at sub-10% blend levels. Other pathways such as alcohol-to-jet (ATJ) and synthetic iso-paraffin (SIP) produce higher shares of aviation fuel but are likely more expensive and further away from commercialization than either HEFA or FT fuels. In addition, the SIP pathway, which uses fermentation to produce a molecule similar in chain length to fossil kerosene, is limited to a 10% blend limit in its ASTM certification. Currently at least, SIP and HEFA+ don’t appear to be the solutions for getting to high penetration of alternative fuels in jet fuel consumption.
Demand for alternative fuels doesn’t always have to be a zero-sum game between sectors—in some cases, demand can be complementary and increase the overall value of a given project. Sector-agnostic incentives for low-carbon fuels can increase the overall value of second-generation fuel projects and help them to overcome their steep economic barriers. Soon, policies in the U.S., UK, and California will allow alternative fuels to qualify for the same incentives as road fuels, but without a mandate for aviation to transition to alternative fuels. This approach would lift the industry overall. For example, AltAir Fuels, a renewable diesel producer in California, would benefit from the inclusion of jet fuel in the LCFS, increasing the value of the HEFA jet fuel co-product their project generates.
While aviation has a good case for alternative fuel use in the distant future, that shouldn’t influence policymakers today—especially if the aviation industry is unwilling to pay a significant price premium for alternative fuels over conventional jet fuel. The structure of most alternative jet fuel production pathways makes it difficult to envision producing 100% alternative jet fuel. Because most pathways generate substantial volumes of road fuels, choosing between aviation and the road sector is in most cases a false dichotomy. As long as there is substantial demand for liquid fuels for cars and trucks, those road fuels could be used productively to generate emissions reductions. By contrast, maximizing jet fuel production at refineries would not only be expensive and impractical, but could also prove counterproductive to the long-term goal of curbing emissions. In the near-future, policymakers shouldn’t prioritize aviation over other sectors. Instead, they should focus on providing sector-agnostic incentives that support the advanced biofuel production more generally without promoting one sector over another.