New analysis by sustainable aviation fuel supplier SkyNRG estimates blending mandates worldwide and SAF production goals could deliver up to 12.8 million tonnes (Mt), or 4.5 billion gallons, of the fuel by 2030, and by 2050, Europe and the US collectively could produce 120 Mt, or 42 billion gallons, of SAF. But the company says that to do so, 400 new refineries will be needed in the US and Europe – at a total cost of $650 billion – and warns competition for fuel feedstocks will be strong, particularly from producers of renewable diesel, potentially forcing up ingredient prices. In addition to catalysing SAF production, SkyNRG CEO Philippe Lacamp says surging demand will also create opportunities for “sustainability-oriented investors” to support development of production plants and supply chains.
The forecasts are contained in SkyNRG’s 2023 Sustainable Aviation Fuel Market Outlook, which assesses the current state and trends of the SAF market in the EU, UK and US, and coincides with Europe’s impending ReFuelEU legislative adoption (currently held up amid political wrangling), tax credits for SAF projects in the US, and UK consideration of its own SAF blending mandate, all intended to spur demand and supply.
Netherlands-based SkyNRG says 2030 mandates in Europe are likely to be met and estimates 3.3 Mt (1.2 billion gallons) of SAF will be in use commercially by then. But the company is more tentative about 2050 mandates, which it estimates will require the deployment of over 150 SAF refineries across Europe at a cost of $250 billion, or an annual average of $10 billion between 2025 and 2050.
As well, says the report: “A key sensitivity for European SAF supply is feedstock availability. But more important is the share of that feedstock pool that can be used for SAF production.” With many SAF commitments already exceeding mandated requirements, “demand in Europe could significantly outgrow supply,” says SkyNRG, “leading to greater dependency on imports, and/or greater pressure on feedstock to produce more SAF – and thus higher feedstock prices.”
The company estimates that by 2050, SAF capacity in Europe could grow to 40 Mt (14 billion gallons) if multiple production pathways are used to make new fuels, including the conversion of cellulosic materials or municipal solid waste through processes such as alcohol-to-jet, gasification and Fischer-Tropsch, and green hydrogen production of electro-fuels, or e-SAF. Currently, the dominant feedstocks for SAF production are hydro-processed esters and fatty acids (HEFA), which are largely waste oils, greases and fats.
In the US, where the Biden Administration has brought in the Inflation Reduction Act that will stimulate SAF production through tax credits, plus some states introducing added incentives, SkyNRG predicts 5.8 Mt (2 billion gallons) of the fuel could be in commercial use by 2030. But it says more production will be needed, and through SAF processes other than HEFA, which is in strong demand. Alternatives include using corn ethanol and materials like agricultural waste, waste biogas or household waste.
“A wave of announcements in renewable diesel projects, mainly from the US, will further increase pressure on global waste and vegetable oil markets. If all renewable diesel announcements became operational, this could prove to strain available feedstock supply for HEFA and the feasibility of reaching 2030 goals in the US and Europe, or risk significantly impacting agricultural commodity markets globally,” warns SkyNRG.
To reach a domestic SAF production capacity of 77 Mt (27 billion gallons) – equal to 2019 jet fuel demand – the US would have to deploy around 250 SAF refineries by 2050, representing a cumulative investment of $400 billion, finds the report.
Beyond building SAF capacity, SkyNRG CEO Philippe Lecamp says the increasing demand for SAF presents a significant opportunity for sustainability-focused investors to support aviation’s transition to net zero emissions. “With hundreds of additional SAF factories needed, Europe and the United States alone offer ESG investment opportunities of $650 billion by 2050, and even more if we include upstream supply chains and related businesses. This is a very significant market that sustainability-oriented investors will want to play a part in.”
In his foreword to the report, Lecamp notes SAF projects increasingly are being announced not just to meet existing and new demand driven by blending mandates and voluntary SAF offtake deals, but also to meet growing demand from corporate and individual travellers seeking to compensate for their own air travel emissions by contributing to the cost of SAF used by their airline of choice.
“Our analysis reveals that Europe and the United States can reach their 2030 goals if sufficient new capacity is announced and materialises. But there is still much to do,” says Lecamp.
“The industry now needs solid partnerships to realise the increase in production capacity required to reach net zero. These include partners who commit to meaningful SAF offtakes, investors that recognise the importance of SAF in their portfolio, and are willing to fund projects, and visionary leaders and governments who recognise and can address the investment hurdles that remain.”