The UK government vowed to create a “revenue certainty” mechanism to support the production of sustainable aviation fuel (SAF).
The aviation industry has been calling for the government to create this kind of mechanism to give investors more confidence to build SAF production facilities in the UK.
Transport secretary Mark Harper said the government would come up with options for how such a mechanism could be created and hopes to implement it by the end of 2026. He added that the government intended that this mechanism would be funded by the industry.
“The government recognises the strategic importance of a UK SAF industry and wants to see the UK capture its share of the global SAF market by playing a leading role in the development, production and use of SAF,” said Harper in a written statement to the House of Commons.
“Building domestic SAF production capacity represents not only a significant economic opportunity, including by creating thousands of highly skilled jobs but also a way to strengthen our energy security as we decarbonise aviation.”
Demand for sustainable fuel from airlines will be driven by the UK’s planned SAF mandate, which will require at least 10 per cent of aviation fuel to be made from sustainable feedstocks by 2030.
Tim Alderslade, CEO of Airlines UK, which represents UK-registered carriers, said: “Industry has long been calling for a policy that directly incentivises investment in the initial UK SAF plants.
“We need the right mechanism though – with government acting as the underwriter – and UK airlines look forward to engaging in the consultation and agreeing the details of a scheme as quickly as possible, to ensure we meet the government commitment of having five plants under construction by 2025.”
Alderslade added that any revenue mechanism needed to ensure “more and cheaper SAF” without leading to “spiralling price increases for passengers”.
Sustainable fuels technology company Velocys, which is developing a SAF plant at Immingham in the UK, said the government’s announcement would provide a “positive long-term signal to investors” and be “highly beneficial” to the Altalto Immingham project.
Henrik Wareborn, CEO of Velocys, added: “Altalto is leading the way as the furthest developed within the group of projects supported under the Advanced Fuels Fund. It stands to benefit from the revenue certainty scheme as well as from the SAF mandate.”
Industry consultation
The government plans to introduce an amendment to its forthcoming energy bill on SAF. This will require it to publish a consultation on the options for designing and implementing a revenue certainty scheme for SAF within six months of the legislation becoming law, which is currently expected by the end of October.
The consultation with the industry on potential SAF mechanisms is expected to last two to three months and is likely to be launched in 2024.
“The scheme will provide an incentive for the production of SAF via price support from tradable certificates with a monetary value,” added Harper. “The UK SAF mandate has strong sustainability requirements for the feedstocks and SAF pathways that can receive support.”
Globally SAF production is growing quickly but remains at very low levels compared with traditional jet fuel. SAF mandates are seen as a major lever to increase demand and investment in more production facilities. SAF is currently two to four times more expensive than traditional jet fuel, although prices vary.
The EU agreed its own SAF mandate in April which starts at 2 per cent in 2025 and goes up to 6 per cent by 2030 before gradually increasing to 70 per cent by 2050.
The development of SAF was featured as one of the industry’s major developments in BTN Europe’s 2023 Hotlist.