Assymetric opportunities in aviation, the case for bio[few]ls

Originally posted June, 2024

6 years to achieve a 100x increase.

Opportunity: We often talk about the daunting challenges of the energy transition but there is scant mention of the asymmetric opportunities it also presents. In aviation for instance, <0.1% of aviation fuel demand was derived from biojet fuel, we need that to hit 10% by 2030[1]. 6 years to achieve a 100x increase. So why the re-emergence? Biofuels offers an up to 80% decrease in jet fuel emisisons, and in many models, is the single largest measure to reduce emissions for aviation ~30-35%.

Balance: The advent of modern, advanced biofuels has been spurred by the need for rapid, sector-wide decarbonisation. High-density fuels, remain critical for a number of use-cases – most prominently in transportation – but without the pollutants emitted by fossil fuels. The opportunity is immense because you have a captive market and latent demand. The catch, demand is at the behest of procurement costs – it has to be cheaper or on par, relative to fossil fuels.  Fuel is a key operating expense for aviation (~30%) and shipping (~50%) – both are high volume, low margin businesses that focus incessantly on their capital base. So, you need affordable, accessible energy that doesn’t require the complete renewal of an owner/lessor’s fleet, oh and it must burn clean.

Evolution: Biofuels, a generic class of fuels derived from organic matter, were the dominant energy source until the mid-19th century – think, wood, charcoal, and crop waste. Coal emerged as the dominant fuel source during the second Industrial Revolution but biofuels remained a key energy source throughout. From here, biofuel consumption remained flat but energy demand increased exponentially. This demand was met by other; more energy dense fuel sources mainly coal and oil, and to a lesser extent natural gas. Over time these fuels have evolved from solid organic feedstocks (corn, sugarcane, soy, beets etc) to non-organic, advanced biofuels. E-fuels, a type of synthetic fuel, are also an emerging fuel source. Biojet fuel (or sustainable aviation fuel; “SAF”) is one type of biofuel.

Commitment: Producers stand to benefit by accessing supportive policy measures that will bring fuels closer to parity with conventional fuels – for many producers this will mean extending or refitting brownfield sites. The benefit for aircraft carriers will be incremental, allowing for more efficient aircraft and in time, adopting fuel sources with lower cost and supply volatility. The introduction of a global price on carbon, which will happen soon enough, will naturally incentivise feedstocks that have lower lifecycle carbon intensities.