Breaking the bottleneck: Scaling SAF from first movers to mass adoption

Post Date: 15 September 2025
Read Time: 9 minutes

Plane in transit on the runway at an airport

The energy transition is facing significant headwinds, especially for those industries operating at the leading edge, like the power to X value chains. Sustainable Aviation Fuel (SAF) has been one of the shining lights of the energy transition, with investment and regulation remaining strong in the geopolitical turmoil. SAFs have more regulatory certainty than any other energy transition technologies. The UK has emerged as a SAF leader, with a strong SAF mandate in effect since January 2025, and a revenue certainty mechanism which is expected to be in place by the end of 2026. The EU also put into force its SAF mandate (ReFuelEU Aviation), and we would expect a revenue certainty mechanism to follow. Positive signals are also coming from other countries, including Japan, with a 10% blending target proposed by 2030,[1] and India with a proposed blending target of 1% for international flights from 2027.[2]

Recently, SLR sponsored the Global SAF Summit, chairing a panel with cross-representation from feedstock suppliers, SAF developers, and airlines representing the Middle East, Europe, and North America, covering flag carriers, the low-cost model, and cargo.

What was very clear from the discussions is that even with the regulatory certainty, the industry is facing significant bottlenecks and is wrestling with how to get the risk-reward balance right across the end-to-end value chain.

Here we discuss the overarching three lessons we learned about how risk-reward can be rebalanced, bottlenecks can be broken, and SAF developers today can turn their first mover risk into a first mover advantage.

The risk-reward balance

We know from across the energy transition that the markets which can accept the most expensive solutions are those with the most price elasticity. Aviation is one of these sectors.

Air travel is a luxury. Only ~11% of the world’s population take a flight annually with less than 4% taking international flights and even fewer flying more than once a year.[3] Air cargo transports circa 33% of the value of world trade, while only transporting less than 1% of its volume.[4] It is primarily used for transporting high-value, perishable or time sensitive goods. Therefore, the cost of decarbonisation passed down to end-consumers is very palatable politically. This is why SAFs have seen more regulatory stability than anywhere else in the energy transition, and why aviation will remain a key target industry to decarbonise.

The challenge, however, is that airlines, where this price elasticity sits, are notorious for going out of business. In 2023, 17 airlines filed for bankruptcy,[5] and just last month Spirit Airlines filed for bankruptcy just months after emerging out of Chapter 11 after declaring bankruptcy in 2024. [6],[7]

Airlines are highly capital-intensive businesses that are laser-focused on maximising operational efficiencies, given their very tight margins (IATA’s Airline Profitability Outlook for 2025 assumed an average net profit margin of 3.7%).[8] The largest variable cost by far is fuel. Therefore, airlines themselves are as much about optimising fuel costs as about optimising capital assets: Airlines tend to change their fuel contracting every year at each airport, if possible, and have whole teams dedicated to buying and hedging fuels. Their whole system is built around not taking risk.

As a result, the current market for aviation fuels has been optimised so that airlines can always buy the fuel at the cheapest commodity price possible. The pricing is based on large fuel volumes sold at the Platts market price plus a very small differential.

The SAF industry is currently asking the market to operate drastically differently, with long-term offtake agreements of 10 - 15 years, often on a take-or-pay or cost-plus model. This is driven by their investors’ need for long-term certainty, essentially leading to airlines being asked to underpin the bankability of SAF developers’ debt.

This current risk-reward balance is clearly misaligned, especially given the two to five times cost differential between SAF and conventional fuels. This is why SAF is still struggling to take off. Finding ways to unlock project debt financing and reducing the cost of capital is key to addressing the imbalance and accelerating SAF deployment. This means lenders’ perception of ‘first of a kind’ (FOAK) SAF project risks will have to change.

One of the biggest perceived project risks is revenue uncertainty. The upcoming UK revenue certainty mechanism and similar future measures in the EU can address this, but they must be designed to support decarbonisation without crippling the aviation industry or SAF developers. Compliance has to be cheaper than paying penalties for inaction.

The FOAK nature of many SAF plants and perceived and real associated risks is a further challenge to lenders, blocking debt financing and driving up cost of capital. More work is needed to manage risk and the lender’s understanding and perception of them.

One way to tackle the real development risks typically associated with any FOAK project, is to share them more equitably across stakeholders. This could take the form of direct investments from a broader group of stakeholders, or joint cross-industry ventures, particularly involving those organisations whose business success is closely tied to the aviation industry and who face the greatest exposure if the sector fails to decarbonise.

Bottlenecks in the route to market

Driven by the clear demand signal set by the mandates, the number of new producers is growing rapidly. In the UK alone, 26 unique SAF projects have been awarded funding under the Advanced Fuels Fund Scheme since 2022.[9] The project developers are predominantly start-ups who are new to this space, but oil and gas majors and conglomerates are also represented (e.g. Equinor and Essar). Projects cover a rage of pathways, including gasification, power-to-liquids (PtL), pyrolysis, ethanol-to-jet, and methanol-to-jet. In the EU, SAF is currently dominated by HEFA SAF (produced from oils and fats, such as used cooking oils, animal fats or vegetable oils), but policy and industry plans are explicitly pushing for more diverse pathways (e.g. e-fuels sub-mandate), and therefore this picture is changing fast.

While the technologies, conversion pathways, and developers are highly diverse, the infrastructure they are relying on to get their fuel to market is constricted and often operated by only a handful of large players. Blending points, fuel terminals, pipelines, and the airport fuel infrastructure, are managed and locked down by the existing fuel industry (e.g. single suppliers or small consortia). All routes to market for new SAF currently have to pass through this bottleneck. This creates high entry barriers for SAF producers through restricted access, complex permitting, or inflated fees.

This is why the mandates have been designed to target the companies that own the bottleneck. But there also has to be further disruption to release the stranglehold and break the bottleneck. Joint ventures could allow for new entrants to develop onsite and shared fuel infrastructures to ease restrictions and capture a growing market. This will require both additional investment and a different approach to how fuel farms and other airport infrastructures are operated. Book and claim will also play an important role as it can help bypass the physical infrastructure bottlenecks by allowing SAF to be credited to end users without requiring direct delivery.

First mover advantage

As we have seen, first movers in SAF face a unique set of challenges. They must navigate infrastructure bottlenecks, operate within evolving policy frameworks, and often sit at the higher end of the cost curve. With few operational plants to serve as benchmarks, perceived technology risk remains high. This makes financing more difficult, increasing the cost of capital and likely driving up insurance premiums.

However, there are also significant first mover opportunities that go beyond building brand recognition, getting an early share of the market, and developing know-how and intellectual property. First movers can also turn their challenges into opportunities by controlling key steps in the value chain: strategic locations, feedstocks, and distribution infrastructure.

First movers in SAF have a unique opportunity to secure limited strategic locations with access to low-cost feedstocks, existing jet fuel and export infrastructure, and nearby offtakers. Since feedstock and logistics costs heavily influence the levelised cost of SAF (especially for e-SAF which depends on scarce biogenic CO₂ and affordable renewable electricity) early access to these resources is a major advantage. With infrastructure bottlenecks still a challenge, proximity to fuel infrastructure and demand centres positions early developers to scale more efficiently as the market matures.

Securing and managing the flow of feedstocks is a key opportunity on its own. Building strong relationships with feedstock suppliers through innovative contract development, joint ventures, or direct investment could secure first movers’ market position. This is where oil and gas majors can have an edge over new entrants, as they have decades of experience in managing the flow of molecules. To take advantage of this opportunity, new entrants must learn how to operate as a fuels business, not only as technology developers or plant operators. Developing the right partnerships to unlock and build the relevant know-how will be key.

As discussed in the previous section, fuels infrastructure represents a significant bottleneck restricting access to offtakers for new entrants. First movers can turn this situation into an advantage, forming joint ventures to co-develop onsite or shared infrastructure that break existing bottlenecks and provides some control of the supply chain.

If you need support with your SAF project, get in touch with our team.

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References

Authors

Kim McCann

Global Head of Energy Advisory

Caren Lacy

Associate Director - Energy Advisory