Supply of synthetic aviation fuel (e-SAF) may fall short of EU and UK 2030 mandates as developers struggle to sign binding long-term offtake deals and wait for subsidy schemes to break the deadlock, delegates told the Global Synthetic Fuels Assembly in London this week.
The EU's ReFuelEU Aviation regulation requires e-SAF to make up 1.2pc of jet fuel supplied at EU airports in 2030-31, or around 600,000 t/yr. Supply will be 50,000 t/yr at best by 2030 as few projects will reach final investment decisions (FID) in time, one speaker said, leaving fuel suppliers to pay penalties of €13,000-17,000/t ($15,100-19,700/t) on the shortfall. This would cost airlines around €8bn with no decarbonisation benefit, echoing concerns raised earlier this year.
Obligated fuel suppliers also face having to make up missed volumes in later compliance periods on top of fines. One speaker urged the European Commission to drop this redelivery obligation while the market is short and follow the UK model of buy-out penalties without rollover.
Not all EU member states have set penalty levels and the commission's review of ReFuelEU Aviation is due in early 2027, leaving potential buyers hesitant to sign offtake deals. Mixed signals from Brussels are also cooling investment, one speaker said.
Binding long-term offtake remains the main barrier to debt financing. Lenders want 70-80pc of output contracted for 10-14 years, but airlines and fuel suppliers rarely commit beyond 2-3 years, limiting credible buyers to a few large airlines. Equity investors expect returns of 20-25pc, above what many projects offer, speakers said. Some argued that spot prices will rise towards penalty levels in a short market, but lenders are not yet convinced.
The wait for Europe's double-sided auctions (DSAs) and the UK's revenue certainty mechanism (RCM) is adding to the deadlock, delegates said. The schemes will aid e-SAF price formation but will not be "game changing", as they will support only limited volumes, with most supply still traded bilaterally. Proposed support through EU Emissions Trading System allowances may stimulate some offtake, though there is no reservation specifically for e-SAF. Grant schemes such as the UK's new £93mn low carbon fuels fund may do little to help, a speaker said.
Developers are increasingly eyeing methanol-to-jet (MTJ) over Fischer-Tropsch (FT) technology, citing FT's need for large plants running on baseload power close to renewable hydrogen and biogenic CO2 supply. MTJ allows a "hub-and-spoke" model, with e-methanol made where renewable power is cheaper and converted to e-SAF in Europe. ASTM approval of the pathway has been key, speakers said.
Multiple speakers noted that much of UK and EU e-SAF supply may rely on imported e-methanol. Challenges in securing grid connections, cheap and stable low-carbon electricity and eligible CO2 may push more developers to this model, speakers noted.
Still some speakers were sceptical, as MTJ is "unproven at commercial scales" and harder to run flexibly than many assume, while FT draws on many gas-to-liquids plant references.
Delegates were also split on plant scale. Some developers plan to build modular plants in phases to limit debt needs and ease offtake. Others said small plants cannot produce at competitive costs or service debt at rates preferred by lenders. One speaker warned that 100,000 t/yr plants requiring around $1.5bn-2bn of investment are too risky for most lenders in the "current nascent market".
With offtake deals typically signed 3-4 years before delivery, the next two years will decide whether meaningful volumes reach EU airports by 2030, delegates said. Some buyers may wait for cheaper imports, but inaction risks obligations being met largely through penalties rather than fuel.
