The Sustainable Aviation Fuel (SAF) space is evolving rapidly with many technologies and players, but there are still barriers to overcome. A SAF funding competition comprising mechanisms tailored to the needs of the industry could help attract early stage SAF plants to the UK benefiting both a sustainable aviation industry and the UK economy.
Renewable fuels of biological (i.e. biofuels) and non-biological origin (i.e. e-fuels), as well as recycled carbon fuels, will be an important part of the overall decarbonisation of transport. Sustainable aviation fuel (SAF), in particular, is likely to be essential to decarbonising the aviation industry given that alternatives like electrification may not be able to service medium-long haul flights, and hydrogen-based propulsion is still a couple of decades away. However, the UK currently does not have any operational SAF plants, and those that are planned face significant barriers to deployment.
E4tech and Ricardo were commissioned by the UK Department for Transport to look into the feasibility and benefits of a competition to provide funding support to pave the way for demonstration and first of a kind commercial SAF plants in the UK. The study found that there is a pool of UK and international developers that could build such plants in the UK, but technology risk, high capital costs and uncertainty on the monetary value of policy support mean that this industry needs to overcome a number of key barriers before it can take off.
The study explored a range of scenarios of what could be achieved by different levels of funding and provided recommendations on the type of support that could be provided by a competition to incentivise private sector investment in the UK. The study emphasises the UK government must think big, acknowledging that first-of-a-kind commercial plants could cost between £600m - £700m.
In addition, policy support measures need to provide sufficient revenue certainty to investors to makes projects financially viable, which could mean providing more visibility on the long-term price of development RTFCs, for example by setting a floor price.
E4tech led the work on the assessment of fuel types, possible technology developers and also engaged extensively with potential investors in this sector to understand their needs. Taking these findings into account, we helped to propose the overall structure of the competition and the levels of funding needed. We also analysed the business case for the UK, in terms of the GVA and jobs that could arise from the deployment of these first of a kind plants.
E4tech (alongside Ricardo) has a long-standing relationship with DfT in designing and running competitions to fund the development of advanced biofuel plants in the UK. To find out more about our work, please see this link.
The report can be downloaded here.