European eSAF developers urge EU action to support production

Aviation industry coalition Project SkyPower has urged the European Union to support domestic production of e-sustainable aviation fuel (eSAF).

“eSAF is important in the transition away from fossil fuels in aviation. Through Project SkyPower, representatives all over the industry have thoroughly modelled the conditions required to overcome the barriers to scale this innovative fuel. As aviation industry leaders, we collectively agree that an enabling policy and funding framework is urgently required to kick-start production at scale. We call on EU policymakers to adopt these recommendations to support the aviation sector to reach its climate ambitions,” said Marjan Rintel, CEO KLM and co-chair of Project SkyPower on behalf of Air France-KLM.

In a letter addressed to the EU policymakers, the developers have outlined five key strategic areas to unlock domestic eSAF production.

Project SkyPower, with 15 high-profile CEO members, called on EU policy leaders to facilitate a more enabling policy environment to catalyse a wave of corporate action on eSAF.

So far, the EU-based developers have announced 2m tonnes of eSAF production capacity. Meanwhile, nearly 300,000 tonnes of capacity is on track to be operational by 2030 – only half of what is required to meet the sub-mandate under ReFuelEU (and even these face challenges).

“eSAF has huge potential to decarbonize aviation as well as enable the scaling of technologies required for green transition in other industries like maritime shipping and road transportation. The window of opportunity is here and now for the EU to take leadership in the global eSAF market. Accelerating this critical technology towards commercial operation by 2030 requires the right policy framework and incentives, right now. We need this to be a strategic priority for the EU, and for our legislators to provide the regulatory certainty and de-risking required to unlock FIDs for first-of-a-kind eSAF plants,” said Amy Hebert, CEO of Arcadia e-Fuels and co-chair of Project SkyPower.

However, none of the projects have achieved final investment decisions (FIDs). The project developers, who have collectively announced 30 eSAF projects in EU, in their letter have listed down five strategic interventions needed to help them achieve FID.

These include:

• Strategic priority in the Clean Industrial Deal and the Sustainable Transport Investment Plan (STIP): The European Commission should include eSAF as a strategic priority in the Clean Industrial Deal and as a critical part of the Sustainable Transport Investment Plan, helping drive the scale-up from innovation to commercialisation.
• Recycle ETS revenues from aviation to capitalise a market intermediary that enters auctioned, 10- 15-year contracts with eSAF producers and 3-5 year contracts with off-takers: Recycling ETS revenues via SAF Allowances is critical for the continued competitiveness of airlines, but doesn’t benefit eSAF projects which require long-term offtake contracts to make first-of-a-kind eSAF plants bankable. ETS revenues from aviation could be used to capitalise a market intermediary to provide the minimum level of public support required for revenue certainty.
• Establish a bridging mechanism in 2025 until a capitalised market intermediary comes online, to give first movers priority access to the new funding instrument: Only the first pioneering large-scale eSAF projects will reach FID by 2025-27 – a requirement to be operational by 2030/31 and have a realistic chance of contributing to the EU’s initial eSAF sub-mandates. To avoid delaying action while a capitalised market intermediary is being operationalised (1-2 years), the European Commission should guarantee priority access to this market intermediary for these pioneering projects.
• Provide long-term certainty over mandates, production criteria and penalties: The EU should use proactive communications to remove uncertainty around continued enforcement of eSAF mandates post-ReFuelEU Aviation review in 2027, as well as continued enforcement of current eSAF production criteria. Member States should also publish harmonised penalty guidance as soon as possible.
• Mitigate project-on-project risk via government-backed backstop mechanism: To mitigate the challenges eSAF project developers face in financing dedicated production facilities for renewable electricity and CO2, the European Commission should establish a financial backstop ensuring debt service payments can be made until such facilities become operational.