Challenges and Opportunities in the Scale-up of SAF Production
Brought to you by King & Spalding
Brendan Hundt
Partner, Dubai
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King & Spalding
Anne-Eva Antonenko
Associate, Paris
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King & Spalding
There is universal agreement that the use of SAF by the aviation sector will be the single biggest contributor to the achievement of the ambitious global goal set by IATA and ICAO of net-zero carbon emissions for air transport by 2050. For this reason, significant quantities of SAF will need to be produced over the coming years and decades and the scale-up of SAF production needs to begin immediately.
There are currently 11 ASTM-approved “pathways” for SAF production and there are many more currently under evaluation. The pathways used are often jurisdiction and region-specific, with the cost and availability of feedstock and the prevailing regulatory framework (e.g., availability of incentives and restrictions on certain feedstocks) being major determinants of the pathway selected by SAF producers. SAF is also still at an early stage of development and technology; preferred feedstocks, as well as regulatory frameworks, are expected to evolve significantly over the coming years, particularly as the focus on producing SAF at scale, across the globe, intensifies. Some of the biggest challenges and opportunities in the scale-up of global SAF production include:
Different international definitions support different production pathways
In the EU, where the regulatory framework is one of the world’s most developed, current SAF production is mainly “aviation biofuels” (as defined in “ReFuelEU Aviation”), which comprises “biofuels” and “advanced biofuels,” which are all produced from types of biomass with some exclusions (e.g. biofuels produced from “food and feed crops,” which are not considered sustainable sources of feedstock). “Synthetic aviation fuels” (as defined in ReFuelEU Aviation), or “e-fuels,” are building momentum in the EU, with at least 25 industrial projects awaiting financial investment decision. These types of projects tend to use “biogenic” CO2 synthesized with low carbon hydrogen.
In the U.S., SAF production uses predominantly an “alcohol-to-jet” pathway, which involves converting cellulosic waste into ethanol and, further, into jet fuel. This pathway is logically driven by the availability of cheap ethanol feedstock in the region. If U.S.-produced SAF is biomass-based, it does not necessarily meet the biofuels definition under ReFuelEU Aviation. Additionally, the Inflation Reduction Act (or “IRA”) criteria for qualifying as “clean fuels” eligible for credits are different to the “RFNBO” definition set out in the EU’s Renewable Energy Directives. These differences are an example of how the global nature of SAF production creates complexity for SAF producers and it highlights why global harmonization of eligible SAF standards and definitions is so critical. There is an expectation that ICAO, which oversees the CORSIA, will be at the centre of these global harmonization efforts.
Harnessing the potential of PtL SAF
Many observers believe that future SAF production, at scale, will be dominated by “power-to-liquids” (or “PtL”) SAF, because, as a synthetic fuel, it does not rely upon the availability of waste, alcohols or CO2 from sources that are not plentiful in all regions of the world. We are already aware that many jurisdictions are planning PtL SAF production programs (e.g. development of a PtL roadmap in the UAE; see also the March Edition of the SAF Newsletter regarding ReFuelEU Aviation) and it should also be noted that regulators are looking to promote the development of synthetic fuel production capacity: the EU has made mandatory, from 2030 onwards and until 2050, for fuel suppliers at EU airports to make available a minimum, progressively increasing, share of synthetic aviation fuels. As it is a geographically “agnostic” SAF production pathway, it could be argued that PtL SAF has the most potential to be seen as a globally-recognized type of SAF, and the most capable of being regulated using a universal regulatory framework.
However, producing PtL SAF at scale faces some potential hurdles:
The availability of competitively-priced green hydrogen (which relies itself on the availability of fresh water and renewable energy).
The availability of competitively-priced carbon feedstocks that meet applicable regulatory requirements.
The first hurdle is well understood by the aviation sector – current estimates are that PtL SAF is anywhere up to eight times more expensive to produce than conventional jet fuel and much of this premium is attributable to the high cost of green hydrogen. The expectation is that as global green hydrogen production scales up over the coming years, the cost of green hydrogen (and the premium compared to conventional jet fuel) will reduce. The second hurdle is particularly important; for PtL SAF to fulfil its potential, there needs to be sufficient availability of eligible carbon feedstock. Carbon has multiple sources – e.g. biogenic, carbon captured from the air (i.e. “direct air capture” (or “DAC”)) and non-biogenic (e.g. carbon captured from industrial sources) – and while biogenic or carbon from DAC would be the ideal carbon types to use in PtL SAF production given their sustainability credentials, they each, presently, have limitations – biogenic carbon is not readily available across the globe and carbon from DAC is extremely expensive and would make PtL SAF uneconomic. Of course, carbon from DAC may become less expensive in the future as the technology matures but this will take some time. Non-biogenic carbon therefore has an important role to play in supporting the scale-up of PtL SAF production – but the regulatory concern with its lack of sustainability will need to be addressed by global regulators before SAF producers can confidently produce PtL SAF using carbon from non-biogenic sources. One potential solution is to ensure that carbon-pricing is applied to any carbon from non-biogenic sources used in PtL SAF production.
Pricing relative to conventional jet fuel
SAF is three to five times more expensive to produce than conventional jet fuel and as already noted, PtL SAF is up to eight times more expensive. In the short-term, governments’ support, in the form of research funding, tax credits and other financial support, will play a key role in supporting the scale-up of SAF production and helping to bridge this price premium, something we are already seeing in many jurisdictions. In the medium and long-term, however, these costs will need to be passed through to customers or benefit from other cost recovery mechanisms. We anticipate that the next generation of SAF production facilities will not just produce SAF but try to diversify their production base, as the petrochemicals industry has done. This would give SAF producers a natural hedge, improving bankability and economic viability and enabling them to pivot towards production of certain fuels when market demand fluctuates.
Uneven global distribution of SAF production
The World Bank notes that SAF production is currently dominated by developed countries and estimates that non-OECD countries will represent between 2-8% of SAF production facilities by 2025 (divided between Asia and South America). Observers also note that very few airports in developing countries are distributing SAF, while significant potential for feedstock is available in these regions. There is a real risk that emerging markets will be left behind in the scale-up of SAF production unless they introduce regulatory frameworks that support it (e.g. Chile introduced its “2050 SAF Roadmap” in April 2024) and there is a coordinated effort led by ICAO (and member governments) to support global scale-up of SAF production. For example, “book-and-claim” systems have significant value in the right circumstances (e.g. as a temporary measure to relieve the pressure on fuel suppliers and airlines in the EU when not all EU airports will have the infrastructure necessary in 2025 to support the compliance of fuel suppliers and airlines with their obligations under ReFuelEU Aviation) but, if misused, could result in a distorted global SAF market with an uneven global distribution where the lowest-priced SAF (which is likely to be in the most developed markets) dominates.
For SAF production to be scaled-up to the extent necessary to help realise the aviation sector’s net zero target by 2050 and for the major challenges to the achievement of this target to be overcome, the global nature of the aviation industry must be recognized through a globally coordinated effort to support SAF production scale-up (and the decarbonization of the sector). We expect this to include harmonized global standards and definitions for SAF, as well as avoidance of policies and regulatory frameworks within developed economies that potentially prejudice the scale-up of SAF production in less developed economies
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