Project SkyPower backs market intermediary for EU’s eSAF

opinion

by Fayaz Hussain

March 24, 2025

Everyone knows that electro sustainable aviation fuel (eSAF) adoption is tomorrow’s technology. But in the words of the philosopher Ronan Keating, what “if tomorrow never comes.”

Despite ambitious targets and regulatory mandates for eSAF, a troubling implementation gap has emerged in the EU. The continent’s planned e-SAF production infrastructure is facing significant hurdles in moving from concept to reality.

Of the approximately 30 eSAF projects announced across Europe – which collectively represent 2m tonnes of annual production capacity – not one has reached final investment decision (FID). This is a key stage before construction can even begin.

A coalition of nearly 75 industry members, financial institutions and NGOs has issued a warning letter to the European Commission asking for help.

“We are in a situation where we have a mandated market but no projects that have yet reached FID,” explains Max Held, Aviation Lead at Systemiq and key figure behind Project SkyPower, in a recent interview with SAF Investor. “Projects need to fulfil a range of prerequisites to be considered bankable. Without that, you’re never able to construct it because you don’t have the money.”

What lies at the centre of this stalemate is the gap between what the airlines are willing and able to offer and what the producers need to take the next steps towards achieving the financial close they need to set up the projects. “Producers need long-term revenue certainty in order to get to bankability, to get to FID,” Held tells us.

“And on the other side, airlines, or in general, offtakers, are not really in a position to enter 10-plus-year off-take agreements because they need to manage the price risk that future plants could be able to produce at lower costs.”

Project SkyPower says it has a solution. A market intermediary (such as the H2Global mechanism for ramping up hydrogen, operated by Hintco) to bridge this gap. This intermediary, which would be government backed, would theoretically enter into a long-term purchase agreement with eSAF producers while offering short-term contracts to airlines.

“The market intermediary would sign an offtake agreement at 10 years with the producer,” Held explains. “It would be government-backed, so it would be highly credit-worthy. And on the demand side, the intermediary would then sell the eSAF off on short-term contracts, let’s say three-year contracts, to the offtakers.”

But the question remains: who would fund the price gap? Project SkyPower says the EU Emissions Trading Scheme (ETS) revenues from aviation could offer the solution to this problem. According to its estimates, a funding volume of approximately €3bn ($3.3bn) could support 100-300 kilotonnes per annum of eSAF production capacity. This would be enough to fulfil up to half of the mandated SAF volumes required by 2030/31.

In addition to the government-backed intermediary, the coalition has asked the EU for several other policy interventions. One of these includes regulatory certainty by grandfathering principles for production criteria and establishing a financial backstop mechanism to mitigate project-on-project risks.

“Another element is to de-risk the financial side of things,” says Held. “An eSAF project requires lots of individual inputs, foremost renewable electricity, hydrogen production, CO2 capture, and all of those feedstock components need to line up at the same point in time.”

When asked about whether things were any different for eSAF producers in North America, Held highlighted several key differences. “First of all, the requirement in terms of the eSAF production criteria. So, for example, additionality, geographical and temporal correlation for the RFNBO production for the eSAF production do not apply in the U.S. obviously.”

He also points to the absence of a mandated market in the US and the impact of the Inflation Reduction Act tax credits, which have provided significant subsidies to make products more price competitive.

While the EU does have support mechanisms in place, including the EU Innovation Fund, SAF allowances, EU Hydrogen Bank and Important Projects of Common European Interest (IPCEI), these have proven insufficient to drive projects to FID. As Held puts it: “There are a couple of European-level support mechanisms… but to date they have not been successful in actually getting a project to FID.”

As the deadline for the EU’s eSAF sub-mandate gets closer, policy interventions proposed by Project SkyPower may represent the last chance for Europe to build a domestic eSAF industry capable of meeting its own regulatory requirements.

eSAF producers need some love from airlines. As Keating said: “Is the love I gave her in the past gonna be enough to last. If tomorrow never comes.”