UK SAF policies put uptake targets at risk: aviation leaders

Measures announced by the UK government to support production of sustainable aviation fuel may not be enough to meet the government's demand targets, according to aviation industry leaders.

In 2025, the SAF target is 2% of the total fossil jet fuel supplied. The government said this is approximately equal to 230,000 mt of SAF. This will increase annually to 10% in 2030 and 22% in 2040. One leg of UK policy is a SAF price certainty mechanism, to ensure the price does not fall below a certain threshold and thereby undermine investment plans.

By some calculations this will not come soon enough. "I think the frustrating element of that piece of the jigsaw is that it's going to come by 2026 and if [it came] earlier I think we would get plants built in the UK sooner," Sean Doyle, CEO of British Airways said at the Sustainable Skies 2024 conference May 15-16.

A guaranteed strike price will ensure a pre-agreed price of SAF supplied to the UK market, giving producers the confidence that they will receive a certain price for the SAF they make, the government said in April. However, the time at which it kicks in may leave too tight a timeframe to deliver for the uptake 2030 target, Julie Kitcher, chief sustainability officer at Airbus said.

"From the time a SAF plant begins producing meaningful SAF we're talking three-five years. So... if you've got a revenue mechanism that doesn't come in until after the target dates for the SAF plants that we are after it is potentially not soon enough to attract investors," she said.

The government has announced a GBP165 million ($210 million) advanced Fuel Fund, which it has said is already helping to deliver on its targets of at least five commercial SAF plants under construction in the country by 2025.

Yet while the mandates ensure demand, supply still looks short and the five plants won't be ready, Shai Weiss, CEO of Virgin Atlantic, said.

"The evidence is we are not doing a great job in this country of indigenous [production]," Weiss said.

Falling short

"The revenue certainty mechanism is welcome news for UK SAF producers and should help in pushing some speculative SAF projects into fruition by securing investment with fewer uncertainties," George Duke, a consultant at S&P Global Commodity Insights said.

Prospective UK SAF total production capacity, including speculative projects at an 80% plant utilization rate, implies the UK would have a total SAF production capacity of 702,000 mt in 2030, according to figures from Commodity Insights.

However, Commodity Insights expects UK jet fuel demand to be close to 13.43 million mt in 2030, meaning that under the terms of the 10% target UK SAF demand will be 1.34 million mt. "Ultimately, this would mean the UK market would be short of SAF by 2030," Duke said.

Prices and feedstock

Demand for SAF does not look like a problem. "Every drop of SAF that was produced last year was consumed... If we've got SAF at an affordable price we will put it in the tank," Kitcher said, adding that the problem is availability.

Platts, part of Commodity Insights, assessed SAF on a CIF basis at Amsterdam-Rotterdam-Antwerp at a $1,600/mt premium to jet CIF cargoes in Northwest Europe May 20, down from $1,996/mt at the start of the year.

Feedstock makes up the lion's share of SAF's costs, with an increasing pool of competitors across industries scrambling to secure volumes in order to meet their own decarbonization goals.

The UK's mandate includes a cap on SAF derived from hydro-processed esters and fatty acids (HEFA). As a process that converts waste and vegetable oils into aviation fuel, HEFA is the main commercially available SAF technology pathway as higher-cost, power-to-liquid, hydrogen-based SAF fuels are developed. HEFA accounts for more than 90% of European production.

The UK has warned that finite feedstocks mean the sector cannot rely on HEFA technology alone and has capped its use for SAF production from 2030.

HEFA will be capped at a 71% contribution to SAF demand in 2030 and 35% by 2040, allowing some 1 million mt of SAF to be supplied from HEFA annually from 2035, the government has said.

In order to drive innovation and diversification, the government said a separate obligation on power-to-liquid fuels would be introduced from 2028 and would reach 3.5% of total jet fuel demand in 2040.