More targeted and faster measures needed to overcome barriers and unlock SAF’s full potential, finds PA study

Research by PA Consulting, drawing on responses and insights from around 600 leaders across the sustainable aviation fuel value chain, finds near unanimity that SAF is crucial to the aviation sector’s decarbonisation efforts. Yet almost 20 years after the first non-conventional fuels were tested on commercial aircraft, “the gap between ambition and achievement is striking,” says the report, finding patchy progress on SAF adoption and falling short of industry objectives. The SAF system, from the value chain through to its regulatory and policy frameworks, isn’t interconnected or collaborative enough at present to respond to the challenge, and the prohibitively high cost of SAF remains the key barrier to scaling, says PA. While there is low confidence within the industry of widespread SAF adoption by 2030, the report sees positive signs emerging on policymaking and recommends key actions to successfully scale SAF.

The survey carried out by PA found that 86% of industry respondents believe SAF is the best option to achieve their decarbonisation ambitions. At least partly because of the projected high cost of SAF, however, airlines remain reluctant to commit. Over one third (36%) of those airlines surveyed said they are not using SAF and of these, 37% have no plans in place to adopt SAF. Only 11% of airlines see SAF as the primary focus of their decarbonisation strategy and 66% of airports don’t have a SAF strategy in place.

Those airlines using or planning to use SAF expect it to make up an average of 9% of total fuel consumption by 2035, so falling short of global targets. Only just over a half (54%) of investors monitoring the market with interest are yet to actively invest in SAF. Almost all respondents expect SAF to cost more than conventional jet fuel in 2030, on average 115% more.

Other specific blockers to progress cited by respondents include a misalignment between government policy and regulation and industry realities. Government and regulators are seen as the leading stakeholders to accelerate SAF adoption.

Initiatives are now underway to address this, says the report, including the EU’s ReFuelEU Aviation and the US SAF Grand Challenge, the former using mandates and blending targets, with the US employing a collaborative model to scale up production-ready technologies on a voluntary basis to achieve an initial target of 3 billion gallons of domestic SAF annually by 2030.

The UK, as well as implementing a mandate, is planning to introduce a Revenue Certainty Mechanism (RCM) that offers producers a guaranteed strike price per litre of SAF through long-term contracts, funded by a levy on fuel suppliers, that aims to give developers the price stability needed to reach Final Investment Decision and secure private financing. PA Consulting’s market analysis indicates the RCM could unlock more than $10 billion in investment by 2030.

The PA survey showed UK respondents are more likely than any other region to view government as the key stakeholder to unlocking SAF scale-up.

“The UK has a huge opportunity at its fingertips to become a leader in sustainable aviation fuels,” said Kata Cserep, Global Aviation Lead at PA Consulting and co-author of the ‘Cacophony to symphony: Successfully scaling sustainable aviation fuel’ report. “While the introduction of a RCM is a welcome move, it needs to be rolled out as soon as possible and ideally be paired with other policy measures which organisations included in the SAF ecosystem have said they are looking for.

“Just as governments once mobilised to accelerate investment in wind and solar in the early 2000s, and more recently electric vehicles, it’s time to bring that same focus and ambition to SAF – with industry playing its part in making it a reality.”

A different model is gaining momentum elsewhere in Europe, that of double-sided auctions, which is already used in Germany’s H2Global initiative for green hydrogen and now advocated for e-SAF in the EU under Project SkyPower. Under the model, a government-backed market intermediary can provide revenue certainty to producers by entering long-term SAF supply contracts and then selling SAF to address short-term demand from buyers that don’t want to enter long-term supply contracts. By acting as an intermediary that bridges both sides of the market, governments can reduce risk, crowd-in capital and accelerate adoption, explains the report.

“The main benefit of the mandates in the UK and the EU (and increasingly elsewhere in the world) is the demand certainty it brings, but that isn’t the same as market creation,” it cautions. “Interviewees agree: mandates matter, but it’s smart policy design that turns commitment into confidence.

“As with any developing market, SAF scale-up needs to be the right balance of incentive and accountability. Investors told us that the most important policy levers are SAF production subsidies or tax incentives (72%), carbon pricing mechanisms to incentivise SAF (61%) and financial support for SAF infrastructure development (55%).

“The challenge lies in regional variation. In the US, the focus is primarily on market-driven incentives. For instance, the 45Z Clean Fuel Production Credit directly rewards SAF producers and will now be in effect through to the end of 2029, with a maximum credit value of $1/gallon.”

Despite PA’s findings that show only 19% of US stakeholders are actively using or investing in SAF – 4% below the global average – US respondents are among the most confident in SAF’s potential to decarbonise aviation and drive job creation. However, they cited lack of infrastructure for SAF distribution and storage as a major barrier, significantly higher than global peers.

However, said Cserep: “There’s a quiet confidence building across the US aviation industry that SAF is more than just a climate solution – it’s an economic opportunity. This optimism is well-founded as SAF has the potential to transform aviation and unlock regional economic growth.

“But belief must be matched by bold, coordinated action. Unlocking the full potential of SAF demands greater collaboration and investment across the entire ecosystem – from policymakers, investors and producers through to airlines, airports and regulators.”

Image (KLM): In June 2011, KLM operated the world’s first commercial passenger flight to use SAF

Christopher Surgenor
Editor