Adam Morton • 29.04.24 • 4 min read

Last week, the Department for Transport confirmed new Sustainable Aviation Fuel targets with a 10% mandate for flights taking off from the UK. Adam Morton, the ATI’s Head of Technology – Sustainability & Strategy, considers the importance of this initiative for accelerating uptake of low-carbon fuel as part of a wider, joined-up SAF strategy.

Last week the UK Government announced long-awaited binding targets for jet fuel in flights taking off from the UK.  Whilst still subject to parliamentary approval, by 2030 these targets or ‘mandates’ require at least 10% of fuel in departing aircraft to be in the form of Sustainable Aviation Fuel or SAF. The announcement, which follows extensive consultation across the aviation sector, is expected to support the procurement and use of 1.2 million tonnes of SAF per annum by 2030.   As well as permitting more sustainable flying, the announcement also recognises wider UK economic gains in terms of £1.8 bn of extra economic activity and the creation of 10,000 jobs across the country.

To understand why such incentives are so important, it is necessary to recognise the key role of SAF in decarbonising aircraft operations. In the next 10 years the most effective ways to decrease the environmental impact of aircraft are fleet renewal and increasing the use of SAF. While hydrogen and electric propulsion technologies may offer zero carbon short haul solutions by the mid-2030s, using SAF is the only viable and sustainable solution for longer flights in the foreseeable future. Current fuel use is dominated by Jet A fuel with SAF use limited to low, single digit percentages in all regions. SAF mandates are therefore one important way of addressing ‘volume risk’ by providing the necessary demand signals to help support private sector investment in new capacity.

Whilst mandates or other incentives are necessary to signal volume requirements, these are not sufficient alone. As with previous waves of novel environmental technologies such as wind and solar, governments and regulators also need to address near-term uncertainty around price. With a SAF cost-premium likely for years to come, some form of Price Support Mechanism (PSM) has been seen as necessary to allow time for the economics of SAF to become more competitive. The government announcement recognises this need to manage prices and protect passengers from price volatility. To this end, the mandate announcement coincides with the release of consultation on a SAF revenue certainty scheme. A guaranteed strike price (GSP) is offered as the preferred option for protecting both the fuel suppliers and the airline customers.

Incentives such as these recognise production of SAF is an international business with developers and investors able to choose from a variety of markets. The UK has already attracted inward investment for SAF as a result of past public sector investment in technology development. This partly explains why overseas businesses were already exploring opportunities across the UK, even before this week’s announcement. At the same time, UK based businesses such as Velocys, are looking at portfolios of projects here as well as further afield. Investment cases are being developed now with decisions on where to invest expected over the next few years. However, economic SAF production requires large plants and major capital investment. Technology risks have already dramatically fallen but First-of-a-Kind (FOAK) facilities are difficult to finance with conventional project finance. Other support mechanisms beyond mandates and a PSM may therefore need to be considered to further unlock private investment.

This announcement around SAF mandates provides more confidence for key stakeholders to invest in SAF production and procurement. However, this represents only part of the solution with rapid follow-up necessary in other areas including pricing and de-risking these challenging capital projects.  If the UK is to not only accelerate the decarbonisation of the sector but also enjoy the associated country-wide economic benefits and job creation, more will be necessary as part of even bolder ambitions beyond the 2030 timeline.