As I think about our clients developing sustainable aviation fuel projects (and that my family of 5 really should be getting the train to Italy this summer!) it was great that the King’s Speech earlier this month included reference to the Sustainable Aviation Fuel (Revenue Support Mechanism) Bill. The Bill signals a very welcome confirmation from the new UK Government of its support for the UK’s developing SAF industry - it will implement the Government’s chosen revenue support mechanism for sustainable aviation fuel (SAF) projects, which is still to be announced following a consultation which closed on 20th June.
This will be a crucial component in the development of an investible UK SAF industry, which is being challenged to contribute towards the UK Government’s commitment to decarbonise the aviation sector. The Jet Zero Strategy has targeted net-zero UK aviation emissions by 2050. With the potential to achieve material reductions in greenhouse gas emissions compared to fossil fuels, it is expected that SAF will play a large role in this.
The previous administration had published details of the new SAF Mandate (including a draft of the Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024) before the general election was called. Earlier this week, Louise Haigh, the Secretary of State for Transport also confirmed that subject to Parliamentary approval (of these regulations) the SAF Mandate will commence from 1 January 2025.
The SAF Mandate will impose a binding obligation on aviation fuel suppliers to supply a proportion of SAF (or pay a “buy-out” price if they don't). Starting initially at 2% of total UK jet fuel demand, the mandate will increase on a linear basis to 10% in 2030 and then to 22% in 2040 and beyond, where it will remain until there is greater certainty regarding SAF supply.
The SAF Mandate recognises the scale and characteristics of the existing global SAF market (which is currently dominated by SAF produced from hydroprocessed esters and fatty acids (HEFA)) but seeks to encourage new technologies, generate greater emission reductions and ensure a use of a diverse range of feedstocks to reduce dependencies on scarcer resources. As such, the mandate also includes:
- a cap on HEFA SAF, but not until other types of SAF are also commercially viable. There will be no cap for the first 2 years but then over time the amount of HEFA SAF that can be count towards compliance with the SAF Mandate will be reduced (to 71% of SAF in 2030 and 35% in 2040).
- A separate sub-obligation to incentivise production of power to liquid SAF from 2028, that will apply to 3.5% of total jet fuel demand in 2040.
It has also been confirmed that the SAF Mandate’s buy-out price for the main obligation and power to liquid obligation will be set at £4.70 and £5.00 per litre of fuel, respectively.
We will be providing further updates on SAF Mandate and the Revenue Support Mechanism as they develop. If you’re interested in SAF or other aviation sector decarbonisation opportunities, including hydrogen and behind the meter generation and storage, please do get in touch.
the Bill signals a very welcome confirmation from the new UK Government of its support for the UK’s developing SAF industry.
![Group of white airplanes with green leader on blue background - green energy travel concept](https://images.passle.net/fit-in/860x860/Passle/5d9604688cb6230bac62c2d0/SearchServiceImages/2024-07-26-07-45-49-049-66a3542dbc2e322e7f48e60f.jpg)