Construction began on Neste’s Singapore Refinery, one of the world’s largest SAF plants, in Singapore on Wednesday 22 June 2022. The site was chosen because it is already a petrochemical centre, has strong logistical links and has a ready supply of skilled labour.
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The aviation industry still sees so-called “sustainable aviation fuel” (SAF) as the only viable way to achieve decarbonization targets, despite opposition and the possibility of higher costs for passengers posing obstacles to the fast-growing industry.
A number of deals have been concluded in recent months. United Airlines South Korea announced in late August a goal of using about a 1% SAF blend on all departing international flights from 2027 onwards. In response, South Korea has partnered with major supplier Neste to provide SAF at Chicago O’Hare International Airport.
Within a month of coming to power in July this year, the UK’s new Labour government set its own target for SAF to meet 10% of jet fuel demand by 2030, and pledged to support production through measures such as a revenue certainty mechanism for SAF producers looking to invest in new plants in the country.
SAF is a broad term that describes any fuel burned in aircraft engines, but instead of kerosene, it refers to fuel that comes from more sustainable sources, including raw materials such as used cooking oil, feedstock, woody biomass, animal fats, crops and waste.
While SAF still produces emissions, proponents argue that greenhouse gas emissions over the product’s life cycle are significantly lower — up to 94 percent lower, according to one report, depending on the source, manufacturing and transportation route to the aircraft.
Airbus The company announced a range of SAF commitments at this year’s Farnborough Airshow, one of the aviation industry’s biggest trade events, held in the UK in July. It said it would work with producer HIF Global on the development of methanol-based fuels and invest in LanzaJet, which makes jet fuel from alcohol.
There has been growing talk about SAF’s potential to reduce emissions from air travel for over a decade.
This is especially true because the barriers to entry are relatively low, as it can be blended with conventional fuels and used in existing aircraft engines and pipelines, although regulators set varying levels for the percentages at which it can be blended.
But they remain controversial in some quarters, with campaigners and NGOs raising concerns that some SAFs are problematic because they could lead to deforestation and the grabbing of agricultural land, and some arguing that they are an exercise in “greenwashing” that is unrealistic to deploy on a large scale.
Supply challenges
United Airlines The airline sees the transition to greater use of SAF as a core part of its sustainability agenda: It has been using SAF on its existing aircraft since 2016, but “the challenge is, there’s not enough SAF,” Lauren Riley, the airline’s chief sustainability officer, told CNBC at the Farnborough Air Show earlier this year.
Other industry players also said SAF remained the most effective and realistic way for airlines to work towards achieving net-zero carbon emissions from operations by 2050, a target agreed by the International Air Transport Association (IATA) in 2021.
However, IATA’s own forecasts suggest SAF production will triple to 1.9 billion litres in 2024, which would cover just 0.53% of aviation fuel demand that year.


United Airlines alone burns about 4.25 billion gallons of fuel annually, according to Riley.
Longer term, United is looking at projects such as hydrogen fuel and electric aircraft, but SAF is a priority for short- and medium-term goals, she said.
Investor Questions
The main challenges, industry insiders say, are ensuring there is a robust regulatory framework in place for SAFs and securing funding from both state and private sources, with a lack of the former hampering the latter.
Rick Nagel, managing partner at private equity firm Acorn Capital Management, told CNBC that the SAF market has grown rapidly in size from nearly nothing to about $1 billion in the last few years.
But the obstacles range from building the refineries and related infrastructure to getting the biomass to go into them and working with regulators, he said.
“You have demand being driven by industry goals and environmental regulations, you have government incentives that not everyone can necessarily make up for and make it affordable for, and you have this circular reasoning that it will take years to bring all this infrastructure online but where to put it and airlines still have to figure out how to keep prices competitive,” he continued.
“There needs to be a clear path forward for how all of this converges for investors to really buy into this.”


Clara Bowman, chief operating officer at Porsche-backed SAF company HIF Global, told CNBC she is confident money will flow into the sector as long as governments and regulators provide the necessary guarantees.
HIF Golbal calls its product “efuel,” which is produced with renewable energy from recycled CO2 and hydrogen. The company currently has a factory in Chile and plans to develop one in Texas.
“I think the money is there. There’s a lot of liquidity in the world looking to fund green solutions. It’s just a matter of having well-structured projects that can leverage that money,” Bowman said.
While regulatory certainty is slower than she would have liked, measures such as the European Union’s Renewable Energy Directive and Japan’s requirement that 10% of domestic airlines’ jet fuel use come from SAF by 2030, and the associated subsidies, are all encouraging, she said.
In the US, the Curb Inflation Act signed by the Biden administration in 2022 has spurred “tremendous” growth in SAF companies and startups, according to United Airlines’ Lauren Riley. This has led United to set up a $225 million SAF Venture Fund with partners including Boeing, Google, Embraer and other airlines.
Despite this progress, Reilly said banks and investors continue to say the policy needs to be made more “sustainable”, such as by extending the tax credits over a 10-year period, before they feel confident raising capital.
But Reilly is confident SAF’s momentum will hold up even with a change in White House leadership, especially with the presidential election looming in November. Investor Rick Nagel agreed, saying it’s a “misconception” that all of the previous administration’s regulatory actions will be rolled back.
“The rhetoric may be one thing, but if there is a business case for it, then overall they want infrastructure projects in the US,” he added.
High cost
Many involved in the SAF project point out that in the early stages it will be more expensive than traditional jet fuel, and the industry acknowledges that consumers, especially those in wealthier, less price-sensitive markets, will ultimately pick up some of the cost through higher ticket prices.
“The reality is it’s going to be more expensive and there’s no way to fake that,” said Clara Bowman of HIF Global.
“On the one hand, we’re talking about a tiny fraction of the fuel that’s needed to really kickstart this industry and start large-scale production. Once you start producing large-scale plants, you see what’s happened with solar, wind and batteries — that’s the key to bringing down prices,” she continued.


“Manufacturing around the world is scaling up. That’s what’s happening. As you scale up, prices go down, investment goes up, equipment becomes more efficient, because that’s a big part of our cost structure today. So we’re seeing efficiency go up as production scales up.”
With fossil fuels, she noted, there is also the cost of carbon emissions: “When you take that into account, we think that in the short to medium term, when you consider the total costs, (SAF) will be competitive.”