Why eSAF is in line for an EU boost

Off the coast of Peru’s capital Lima lie islands famous for mountains of bird poop or guano. Classified as natural reserves by the Peruvian government, millions of tourists circle the islands every year in water taxis, drawn by the unique ecosystem. 

But before it became a tourist attraction, farmers, in the late 1800s, discovered that guano made for excellent fertiliser. Estimates show nearly 11.5-12m tonnes of guano was sent to Europe and North America between 1840 to 1880. 

Because of its nitrogen, phosphorus and potassium rich contents, farmers using guano saw yields grow exponentially. By the 1900s demand for fertiliser had skyrocketed. Guano could not keep up with this demand. Buyers around the world sought a cheaper and more scalable alternative. 

The solution came when German chemist Fritz Haber developed the process to synthesise ammonia. By 1913, a German plant was mass-producing synthetic ammonia providing an unlimited supply of nitrogen fertiliser. 

SAF today is where fertiliser was in the late 1800s. Biofuels make up nearly all of the supply in the market but feedstock is limited. Synthetic sustainable aviation fuel (eSAF) needs to scale to meet the demand.  

Currently, the EU and UK are the only regions with an announced eSAF mandate which kicks in at the end of this decade. But while the demand has already been created, eSAF supply is facing multiple roadblocks. So far, none of the announced eSAF projects have achieved financial investment decision. The only operating eSAF facility, ran by Ineratech, produces just 2,000 litres of eSAF per annum. This is only 0.5% of what will be required in 2030. But that’s about to change. 

To solve this problem, the European Commission announced this week its Sustainable Transport Investment Plan (STIP) to effectively subsidise eSAF production. The policy portfolio promises significant support for project developers. 

The lynchpin of this plan is to mobilise €2.9bn to lift eSAF projects off the ground until the end of 2027. According to the European Commission, the funding will “rapidly remove key investment barriers and bridge the financial gap in the short-term”. 

European project developers say this is a major step forward. “A focused deployment of the funds provided under the plan will support the scale-up of sustainable fuels production in Europe, reinforcing the region’s leadership in the global clean energy transition,” Carlos Barrasa, Moeve’s executive vice president for Commercial and Clean Energies tells SAF Investor. 

Moeve is one of the leading energy players in Europe and already supplies SAF to major Spanish airports. The company, in partnership with Zaffra (a joint venture between Sasol and Topose), is assessing the feasibility of developing e-SAF facilities in southern Spain. The STIP provides a significant boost to accelerate this project. 

The commission has allocated €153m allocated under the Innovation Fund specifically for eSAF projects. Additionally, €300m has been allocated for hydrogen for SAF through the European Hydrogen Bank. 

Barrasa says the “STIP aims to de-risk early-stage production and catalyse investment to meet binding ReFuelEU Aviation mandates by 2035. These measures directly address key barriers such as high upfront investment and price uncertainty.” 

In addition to the €2.9bn, the commission is also setting up an eSAF Early Movers Coalition by end of this year to mobilise another €500m for eSAF projects. 

The funding will solve the short-term investment challenge. But in the medium term, the commission is working on an intermediary mechanism connecting producers and buyers to provide revenue certainty and de-risk investments. A task force with EU member states will announce the conceptual framework for this intermediary by end of 2025. 

“The objective will be to mobilise at least €500m in 2026 to finance several large-scale projects through the organisation of the first pooled double-auction for eSAF. This could be implemented using existing mechanisms such as the H2 Global Foundation,” says the commission in its STIP document. 

This has been a long-standing demand from the EU’s eSAF project developers who have struggled to find buyers for their eSAF. Buyers have argued that purchasing eSAF at current high prices exposes them to price risk. 

“The commission deserves credit for taking concrete steps to finance and de-risk e-fuel production – especially through the creation of a double-sided auctioning system that can finally bridge the price and contract gaps between fossil and e-fuels, which marks a real stride forward,” Aurelia Leeuw, director of EU Policy at the SASHA Coalition tells SAF Investor. The SASHA Coalition is advocacy group for hydrogen projects in EU and UK. 

The commission will launch preparations in early 2026 for setting up an EU-wide mechanism for double-sided auction for SAF. 

All of these measures, including the funding and revenue certainty mechanism will, deliver the boost eSAF projects need to scale and help SAF in Europe move beyond bio-based feedstocks. 

Just as guano powered agriculture before synthetic fertilisers took over, today biofuels are lighting the path to decarbonising aviation – but it’s eSAFs that will ultimately carry the industry skyward.