Sustainable aviation fuel demand projected to soar by 2030
Global demand for sustainable aviation fuel (SAF) is expected to reach 17.1 Mt/a (million tons per annum) by the end of the decade, according to a report from Kearney and the WEF. That means investment from $19 billion to up to $45 billion will be needed.
Despite this projected increase in production, current production of SAF is still seriously lagging. In order to meet the expected demand in 2030, an additional 5.8 Mt of capacity will be needed. For that to be possible, final investment decisions would need to be made by as soon as next year.
If global production does meet the supply projected by the report, it could well mean that the goal set by the International Civil Aviation Organization (ICAO) for a 5% reduction in the carbon footprint of international aviation by 2030 may well be achievable.
The estimated future demand for SAF was calculated by looking at mandates and targets for SAF set by countries around the world. For example, the European Union, the United Kingdom, Brazil, and Korea have all announced mandates that will be ramped up towards 2030.
It was all of these mandates and targets together that add up to 17.1 Mt/a of SAF in 2030. But with global production still at a very low level, reaching that estimated demand would mean an increase of SAF production capacity equal to around 5.8 Mt/a.
Different feedstocks, different outlooks
There are several different feedstocks that are used to manufacture SAF, each of which requires different amounts of investment in order to be successful. One of the most promising paths to viable SAF supply is what is known as the Hydrotreated Esters and Fatty Acids (HEFA) method, which uses waste oils and fats.
HEFA SAF production capacity has been quickly increasing and could be the aviation industry’s best bet to meet increasing demand. That is mainly because the HEFA method is currently the least expensive, due to its efficiency and the maturity of the technology involved, meaning less capital expenditure is necessary.
“To expand existing pathways further, research is being done to overcome feedstock constraints,” reads the report.
“Examples include Brazilian energy company Acelen Renewables looking into macauba palm oil and GAFT, a Dutch company specializing in green air fuel technology, converting feedstocks using electrolysis and fermentation.”
Another method used to manufacture SAF is the alcohol-to-jet method, which uses ethanol and could be an option for countries with high ethanol production. This method is still an attractive pathway despite requiring more investment than HEFA.
There are other, more novel methods for producing SAF that still require more development, like transforming sewage waste through a process of hydrothermal liquefaction. The most expensive pathway is currently the power-to-liquid method, which can be up to eight times as expensive as conventional jet fuel.
More investment needed
The total estimated investment required to meet the expected demand for SAF by 2030 ranges between $19 billion and $45 billion, according to the report. That wide range in estimates is due to the different costs of developing different pathways.
For example, developing 99% of SAF from HEFA (the cheapest option) would only require around $19 billion in investments, but if the industry shifts towards developing other feedstocks that are more expensive, more investment would be needed.
“Attracting capital for SAF refineries is a challenging process that requires engaging with a wide range of stakeholders and exploring a myriad of financial instruments and mechanisms,” reads the report.
Some of the levers for attracting finance to these projects include pursuing research grants, tapping into funding from multilateral development banks, and issuing green bonds to attract impact investors, among other levers.
“SAF represents a crucial pillar in the decarbonization journey of the aviation industry, offering one of the most viable options to achieve the global vision for 2030,” the report concludes.
“The capital landscape for SAF investment is complex, with significant financial requirements across different project stages, from conceptualization and pre-feasibility to construction and commissioning. For SAF to reach scalable production, a shift in financing mechanisms is necessary, leveraging both private and public capital in innovative ways.”
There have been some significant advancements in the production of SAF in recent years, especially in Europe, where there has been considerable investment. For example, a €1.5 billion project to build the world’s largest SAF plant in the Netherlands will be able to produce over 250,000 tons of SAF annually – enough for 7,000 cross-Atlantic flights.
