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Biofuels could be competitive as aviation fuel by 2020

Some aviation biofuels could be competitive by 2020, but the take-up of biofuels by airlines is likely to be modest in the near term unless governments introduce mandates requiring their use, according to Bloomberg New Energy Finance.

By Kari Williamson

The cost of some biofuels – such as those based on non-food vegetable oils – could be close to that of conventional jet fuel by 2018, if production efficiency continues to improve.

Biofuels based on edible vegetable oils such as soybean, rapeseed and palm, may never become fully competitive, and the third type of bio-based jet fuel covered in the study is those based on any type of woody feedstock using gasification or the Fische Tropsch process, but Bloomberg New Energy Finances finds that these are unlikely to be economical for airlines until well into the 2020s.

Another wood-conversion process, pyrolysis, that might be certified by 2014, may be more promising for producing cost-competitive aviation biofuel before the end of this decade.

The analyst says airlines may end up using only a modest proportion of biofuels (2% or less) in their fuel mix in the next few years. What they do use will most likely be conventional biofuel based on edible vegetable oil despite the higher cost.

By 2018 or so, biofuels made from the hydro-treatment of non-food vegetable oils like jatropha or camelina, or from pyrolysis of cellulosic feedstocks, should be the first types to become properly competitive with the cost of fossil-based jet fuel (assuming that these include the cost of carbon) – after they move to large-scale production.

Limited availability

Harry Boyle, Lead Bioenergy Analyst at Bloomberg New Energy Finance, says: “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.

“If governments want airlines to burn a significant proportion of non-fossil fuel before 2020, they will have either to subsidise advanced-but-not-yet-economic biofuels or, more likely, introduce mandates requiring carriers to use a certain percentage of sustainable biofuels in their mix, and put up with complaints that this is driving up ticket prices.”

Airlines have recently shown strong interest in the idea of using biofuels as a way of reducing their carbon emissions and improving their environmental credentials. The International Air Transport Association has said that it wants some 6% of jet fuel, or 8 billion litres, to be met by biofuels by 2020.

The European Union has extended its Emission Trading Scheme to the airline industry this year, forcing carriers using EU airspace to buy allowances to offset their CO2 emissions. However the report shows that the cost of this will be relatively minor compared to the additional price airlines would have to pay to burn biofuels rather than conventional jet fuel in the next few years.

Getting below the Dollar

Bloomberg New Energy Finance’s report says that producers based on edible feedstocks have the potential to produce aviation fuel at US$1.20/litre if they move to large-scale production, on the basis of current vegetable oil prices. This is well above current jet fuel prices, which are around US$0.85 in early 2012.

A better result should be possible using jatropha. If production scales up, it could produce jet fuel at US$0.86-a-litre by 2018. Pyrolysing wood may be able to produce jet fuel at US$0.90/litre by 2018.

However, even with rapid efficiency improvements in the next few years, next-generation biofuels, using the Fischer Tropsch process to convert woody biomass, will still be producing fuel no cheaper than US$2.60-a-litre in 2018. Aviation biofuel from algae is the pathway furthest from cost parity with fossil jet fuel, as we predict that large-scale, biofuel producing algae farms will not appear this decade.

Boyle comments: “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.”

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