Risk is the real bottleneck in scaling SAF
In a capital-intensive sector such as SAF, confidence in the technology pathway is a fundamental requirement for reaching FID.
By Paul Ticehurst, Johnson Matthey
Sustainable aviation fuel (SAF) is widely recognised as one of the most important tools available to the aviation industry as it works to decarbonise. While improvements in aircraft efficiency, operational measures and emerging propulsion technologies will all play a role, SAF is expected to deliver most emissions reductions in the coming decades.
Yet despite strong demand signals and growing policy support, SAF production remains far below the levels required to meet aviation’s climate targets. Dozens of projects have been announced around the world, but far fewer are progressing to construction. The gap between ambition and delivery is becoming increasingly clear.
The fundamental challenge is not a lack of interest, nor a lack of technological innovation. Rather, it is the complexity of risk across the SAF value chain. Moving a project from concept to final investment decision (FID) requires developers to identify, understand and manage a wide range of risks spanning technology, feedstocks, markets, policy and financing. Until these risks are addressed, many projects will struggle to progress.
Understanding how these risks interact, and how they can be allocated across the ecosystem, is therefore essential to unlocking the next phase of SAF scale up.
Why reaching FID is the defining milestone
FID is the moment when a project transitions from planning into execution. It represents the point at which investors commit capital, construction begins and a facility moves from concept to reality.
To reach this stage, a SAF project must be fully defined. Developers must have clarity on the capital expenditure required to build the facility and the operating costs involved in producing fuel. Production volumes and timelines must be clearly established, along with realistic projections for revenues.
At the same time, the project must demonstrate that it understands the full range of risks it faces. These include the availability and cost of feedstocks, the reliability of the selected technology pathway, the security of long-term customers and the broader policy environment that will shape the market.
If these elements are not sufficiently clear, investors are unlikely to commit the significant capital required. As a result, many SAF projects remain stuck in the development phase for longer than anticipated.
In essence, FID readiness is not simply about technical feasibility. It is about demonstrating that the entire project ecosystem has been carefully structured to manage risk.
Technology risk: proving the pathway
Technology is one of the most visible areas of uncertainty in the SAF sector. While several production pathways are already established, many others are still emerging.
Today, much of the SAF produced globally relies on hydroprocessed esters and fatty acids (HEFA), which converts waste oils and fats into jet fuel. While HEFA is proven and commercially available, the global supply of suitable feedstocks is limited. As SAF production expands, the industry will increasingly rely on other pathways, including alcohol-to-jet, gasification followed by Fischer-Tropsch (FT) synthesis and power-to-liquid routes that convert renewable electricity, hydrogen and captured carbon dioxide into fuel.
These advanced pathways offer the potential for much greater scale, which will be essential if SAF production is to meet future aviation demand. However, not all pathways carry the same level of technological maturity. Some technologies are still progressing through demonstration and early commercial deployment, while others are built on industrial processes with decades of operational experience.
Among these technologies, FT synthesis is particularly notable because it combines technological maturity with significant feedstock flexibility. The FT process has been used in industrial fuel production for more than a century, providing a well-understood and proven route for converting synthesis gas into liquid hydrocarbons.
Importantly for the SAF sector, the pathway can utilise a wide range of feedstocks. When paired with gasification, FT synthesis can process materials such as municipal solid waste, agricultural residues or forestry byproducts. When integrated with low carbon hydrogen and captured carbon dioxide, the same synthesis route can also be used for power-to-liquid fuel production.
This flexibility can be a significant advantage for project developers, as it allows facilities to adapt to regional feedstock availability while still producing fuels that meet aviation specifications. As the SAF market expands, technology pathways that combine proven performance with feedstock versatility are likely to play an important role in enabling large scale production.
Regardless of the pathway selected, however, projects must demonstrate that the technology can operate reliably at commercial scale, maintain consistent performance over time and integrate effectively with large industrial facilities.
Technology providers therefore play a critical role in supporting project development. Robust process design, extensive research and development and clear performance guarantees help build confidence among investors, lenders and insurers. Developers and their partners must also ensure that engineering, procurement and construction contractors fully understand the technology being deployed and can deliver the facility as designed.
In a capital-intensive sector such as SAF, confidence in the technology pathway is a fundamental requirement for reaching FID.
Feedstock risk: securing the supply chain
Even with a proven technology pathway, SAF projects cannot succeed without reliable access to feedstocks. The availability, quality and cost of feedstocks are key determinants of project economics.
Different production pathways rely on different inputs. HEFA plants depend on waste oils and fats, which can be constrained by limited supply and competition from other sectors. Gasification pathways may rely on municipal solid waste or biomass residues. Power-to-liquid technologies require large volumes of renewable electricity as well as sustainable sources of hydrogen and carbon dioxide.
Each of these feedstocks presents its own set of challenges. Supply chains may be geographically concentrated, subject to price volatility or dependent on regulatory frameworks governing waste management and sustainability. Pathways such as gasification followed by FT synthesis can be particularly valuable in this context, as they allow a wide range of waste and biomass feedstocks to be converted into aviation fuels.
For developers, securing long-term feedstock agreements is therefore critical. Facilities must also be located strategically, with access to reliable supply and infrastructure. Flexibility to process multiple feedstock types may help mitigate supply risks.
Ultimately, the success of a SAF project depends not only on the technology used to produce fuel but also on the stability of the supply chains that support it.
Market risk: securing long-term offtake
On the revenue side, predictable demand is essential. SAF projects require significant capital investment, and lenders need confidence that the fuel produced will be sold at a price that supports sustainable operations.
Long-term offtake agreements have therefore become a key feature of the SAF market. Airlines, which are under increasing pressure to decarbonise, are beginning to enter into multi-year contracts with producers to secure future supply. These agreements can help demonstrate revenue stability and improve the bankability of projects.
However, these arrangements also introduce complexity. SAF prices remain higher than those of conventional jet fuel, and both producers and buyers must manage uncertainties around energy costs, feedstock prices and policy incentives.
Contract structures often include mechanisms designed to address these challenges, such as price indexing or adjustments linked to energy markets. These approaches can help balance risk between producers and offtakers while providing the long-term certainty needed to support investment.
Financing risk: making projects bankable
SAF facilities are large scale industrial assets, often requiring hundreds of millions or even billions of dollars in investment. Financing such projects requires careful structuring.
Project finance is a common model for large infrastructure developments, but it introduces strict requirements. Lenders must be confident that the project will generate predictable cash flows and that risks have been allocated to the parties best positioned to manage them.
For SAF projects, this means demonstrating that feedstock supply is secure, technology risks are manageable and long-term customers are in place. Construction risks must also be addressed through robust engineering and contracting strategies.
Insurance can also play an important role in transferring certain risks away from project sponsors. Technology performance insurance, political risk insurance and other specialised products can help improve confidence among lenders and investors.
By carefully distributing risk across developers, technology providers, contractors, insurers and financiers, SAF projects can achieve the level of stability required to attract capital.
Policy risk: the importance of stable regulation
Policy frameworks are a major driver of SAF demand. Many governments have introduced mandates requiring airlines to use increasing proportions of sustainable fuel over time. These policies help create a guaranteed market for SAF and signal a long-term commitment to decarbonisation.
However, mandates alone are often not enough to stimulate investment. SAF production remains more expensive than conventional jet fuel, and additional incentives may be required to bridge the gap between production costs and market prices.
Equally important is the stability of the policy environment. Investors need confidence that regulatory frameworks will remain consistent over the lifetime of a project. Sudden changes in mandates, incentives or sustainability criteria can undermine project economics and deter investment.
Predictable, long term policy signals are therefore essential. Governments that provide clear regulatory frameworks and supportive incentives will be better positioned to attract SAF investment and accelerate the development of domestic production capacity.
Why collaboration across the ecosystem is critical
One of the defining characteristics of SAF projects is the number of stakeholders involved. Developers must work closely with technology licensors, engineering contractors, airlines, financial institutions, insurers and policymakers.
Each participant brings expertise and resources but also introduces its own perspective on risk. Aligning these interests requires collaboration from the earliest stages of project development.
Engaging stakeholders early allows potential challenges to be identified and addressed before they become obstacles. It also enables projects to be structured in ways that meet the requirements of investors, regulators and customers.
In many cases, the difference between projects that reach FID and those that stall lies in how effectively these partnerships are formed and managed.
Scaling SAF requires mastering risk
The aviation industry is increasingly aligned on the importance of sustainable aviation fuel. SAF offers a practical and scalable pathway to reduce emissions while maintaining global connectivity.
Yet turning ambition into reality requires more than technological innovation. It requires a deep understanding of risk and a coordinated effort across the entire value chain to manage it effectively.
Developers that can demonstrate robust technology pathways, secure feedstock supply, stable offtake agreements, bankable project structures and alignment with policy frameworks will be best positioned to move projects from concept to FID.
As the SAF industry continues to evolve, mastering this complex risk landscape will be the key to unlocking the scale required to support aviation’s transition to a lower carbon future.