As I checked in online for my flight to Paris for a trip with the family to watch the Olympics this summer, Air France offered the option to make a contribution to the purchase of Sustainable Aviation Fuel (SAF) for the flight. A first for me!
A real coincidence, as I had just finished a deep dive into the SAF market that provided some great insights into this emerging space.
Emissions from aviation currently represents 2-3% of global emissions. However, according to IATA projections, air travel is expected to double by 2040 and so aviation emissions will continue to rise. Whilst airlines are innovating to reduce emissions, in order to transition along a Net Zero pathway, through the development of lighter and more energy-efficient aircraft and operational efficiencies, innovation in fuel remains a key part of the equation. International Aviation Group’s (IAG – including, British Airways, Iberia, Aer Lingus), United Airlines, Air France-KLM and other major airline groups are committed to this transition, as illustrated below.
To date, the SAF market has relied upon the reprocessing of waste vegetable oils and animal fats (HEFA), but the supply of these is limited and expected to reach capacity within the next few years. This is referred to as 1st Generation SAF (1G).
The focus now is on developing technology solutions to convert other biogenic waste streams and CO2 emissions into alcohol and then refine these into SAF, as 2nd Generation SAF (2G). The key technologies are then:
- Power to Liquids (PtL) – capturing CO2 from the air, typically emissions from energy and/or industrial plants and mixing this with hydrogen produced through hydrolysis
- Pyrolysis and gasification of biomass or municipal solid waste (MSW), although, like HEFA, there are limits on the availability of these resources
- Alcohol to Jet (AtJ) – refining of alcohols (primarily ethanol) produced from the processes above, to create a drop in substitute for traditional kerosene
The challenge is then one of economics and technology demonstration. 2G SAF is currently 5-6 times more expensive to produce than traditional kerosene.
The market is, and will continue to be for some time, heavily reliant on subsidies and grants to support the development of alternative technology solutions. The UK Government is expected to introduce a SAF Mandate that sets a buy-out price of £4.70/l (USD6.15/l) and a target for SAF to represent 10% of aviation fuel by 2030, rising to 22% by 2040, with a cap on the contribution of HEFA and additional support for lower carbon 2G solutions. In the EU, the ReFuelEU Aviation Initiative has a requirement for the percentage of SAF to rise from 2% in 2025 to 6% in 2030 and to 70% by 2050. In the US, the Inflation Reduction Act is also supporting the development of SAF, but this does not differentiate between 1G and 2G, at present.
Therefore, the SAF market is expected to grow from its current level of around 2 million tonnes per annum (MT/y) to 17 MT/y by 2030, valuing the market at cUSD33 billion in 2030.
As with all emerging technologies, there have been a number of technological breakthroughs and some casualties along the way. Many of the developers of 2G SAF or the ethanol feedstock are proving up their technology solutions through First of a Kind (FOAK) plants. These include Velocys, Nova Pangea Technologies, OXCCU, Alder Renewables, Air Company, LanzaJet/LanzaTech and others, with the backing of IAG, United and leading impact investors – Carbon Direct Capital, Lightrock, Microsoft Climate Innovation Fund, alongside the corporate venture arms of traditional oil companies. Those companies pursuing solutions based on MSW feedstocks have not performed as expected and faced financial pressures. Fulcrum Bioenergy is a recent example here.
In the period 2025-2028, many of these FOAK plants will demonstrate their operational and commercial performance. Given the market size, there is plenty of space for alternative solutions, and early investors can be well positioned for a rapid growth in demand for SAF.
