Perfect policy makes funding SAF easier

A lot has been said about whether the carrot (incentives) or stick (mandates) policy approach is right to increase sustainable aviation fuel (SAF) adoption. But an analysis of investments in SAF by Innovate UK Business Connect claims it does not matter which countries choose – provided they pick one.
“The provision of robust government policies creates a positive investment signal to investors and is backed by the data in this analysis,” says Michelle Carter, head of transport and SAF innovation programme lead at Innovate UK Business Connect while discussing the findings with SAF Investor.
Its analysis found that so far, the global SAF industry has received £14.7bn ($18bn) in investments. The bulk of it – nearly $8.3bn or 46% – has gone to projects in the US with France ($3.4bn), Finland ($1.6bn) and Canada ($1.3bn) following behind.
The ranking shows investors like regions with clearly laid out SAF policies, mandates and incentives in place.
“The analysis highlights a correlation between nations with strong national policies or instruments and the total private investment into SAF projects. For example, the USA receives a significant amount of private investment which is stimulated in part by the introduction of the SAF Tax Credit,” Carter says. The UK and EU have benefited from the policies that create demand and the market for SAF by setting incremental blending targets on jet fuel.
While the $18bn investment received so far has helped developers to set up SAF projects, a lot needs to be done to ensure that number ramps up significantly. According to the International Air Transport Association, the capex needed to build SAF facilities to meet the net zero targets by 2050 is $7.1bn for their best-case scenario and $17.2bn for their worst-case scenario.
The US is clearly the favourite among investors. “Both the UK and EU are working on policies to move the dial and help reduce the perceived investment risk. The UK’s Revenue Certainty Mechanism will reduce financial risk to developers and provide investors confidence through predictable revenue streams,” Carter tells us.
“While ReFuelEU Aviation offers a suite of measures to support the development and deployment of SAF through funding instruments to de-risk SAF technology, direct financial support for the uptake of SAF by narrowing the price gap with fossil kerosene among others.”
Surprisingly, the analysis found power-to-liquid (PtL) and alcohol-to-jet (AtJ) pathways being the most favoured among investors. Of the 250 plus investors, nearly 70% invested in projects that were pursuing the PtL and AtJ pathways.
“Nascent technologies such as PtL and AtJ have also benefited from a large number or investments as these pathways involve novel application to existing technology. These innovations often require demonstration-scale projects to prove their feasibility and reliability, but are necessary to reach Net Zero, as seen in the policies with the PtL sub-targets,” Carter adds.
Whether it is the carrot or the stick, one thing is certain: the SAF industry needs more cash quickly.
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