Adopting sustainable aviation fuel technology: trends and insights

SAF adoption benefits from growing commercial air travel and the open global economic environment, with the private and commercial players pushing forward development.

“Open environment” would be a relatively liberalized and globalized operating environment with lower geopolitical tensions. Low levels of geopolitical tensions create a more stable and predictable global operating environment for companies. Ideological blocs fade in significance as trade-driven partnerships become more important.

Policy: US and EU policy efforts to support SAF production and adoption continue to expand and grow to support industry trends, but market forces and competition are the major driver for pushing SAF forward.

Capacity: Greater demand for commercial air travel, and decrease in fuel and operation costs encourages SAF consumption through sustainable aviation and airline alliances. Feedstock required for SAF production is readily available and supply continues to accelerate due to better access to capital and market demand.

Price: Investor appetite for emerging growth sectors in commercial aviation such as SAF increases in a high-growth, peacetime economy. Market forces, production efficiency and scale continue to drive SAF price down to reach parity with conventional jet fuel since policy intervention is minimal in this scenario.

SAF development continues along a positive trajectory. However, cooperation is limited to friendly blocs and alliances.

“Status quo” would also be characterized by strong  geopolitical alliances, but trade and capital flow relatively freely among allies, leading to companies “friendshoring,” a practice of relocating production and supply chain to countries where political risk is low. Despite these divisions, geopolitical tensions are at manageable levels as governments focus on supporting domestic economic growth.

Policy: In this environment, SAF production and adoption is still reliant on collaboration and market forces and less dependent on policies and mandates set by governments. SAF collaboration and partnerships are limited to friendly nations, and potential operational constraints for SAF usage emerge on non-allied country travel routes.

Capacity: Domestic sources are relied upon for feedstock required for SAF, and a network is established with allied blocs to cultivate critical feedstock. Still, while customer awareness of SAF usage and initiatives continues to improve, it has yet to become a priority.

Price: Favorable policies, like those being implemented in the US, may lead to price parity in some blocs, but price parity will be highly dependent on economies of scale due to increased international collaboration and operational efficiency.

SAF is deprioritized, but may benefit from a greater focus on defense and energy security, which could mitigate weaker investment momentum due to market uncertainty.

“Cold War II”, in contrast, would arise from a hardening of alliances and ideological competition combined with nationalist and statist economic policies. The hardening of alliances and ideological competition creates a world order defined by two distinct blocs. But in this scenario, based on current trends, one bloc is likely to be comprised of the US, the EU and their allies, and the other led by China and its allies. There is also a third, volatile bloc of largely non-aligned countries that are under pressure to choose a side.

Policy: Strategic industries expand dramatically, guaranteeing the defense sector access to critical production inputs, but imposing greater cost and scarcity risk on sectors not directly supporting national security programs, including commercial aerospace players, particularly airlines. Military adoption of SAF and energy independence as a national security priority, would be a game-changer and a major driver for SAF adoption in an unfavorable and risk-averse economic environment.

Capacity: Ecosystem formation is dampened, though certain sectors (e.g., defense) may see greater government-backed collaboration. In commercial aviation, diminished capital flows benefit mature firms with greater resiliency and liquidity, hampering startups and commercial innovation, more broadly. In this scenario, capacity growth will be moderate and highly dependent on domestic production and usage.

Price: The increased support for SAF under energy independence initiatives likely leads to price parity within allied blocs. There is less opportunity to reduce production cost by scaling up operations since the demand will be dampened, which will need to be offset by government incentives and tax credits.

SAF development becomes isolated to domestic markets, and fragmentation in infrastructure and policy reigns.

“Isolationism” would result from decaying alliances and weak economic growth pushing countries to promote domestic production and seek greater self-sufficiency. Policymakers are motivated by achieving domestic self-sufficiency and economic security, despite the high costs involved. Isolationist policies result in increased trade volatility, creating a subdued and unstable economic growth outlook. Nationalist policies, including trade barriers, price controls and other restrictive measures, further fuel inflation. Isolationism, weaker technological progress and increased conflict risks limit business investment and productivity growth.

Policy: Energy independence becomes a national strategic priority leading to ramp-up in SAF production through government incentives and awards. SAF also gets an extra boost from defense programs adopting SAF as their fuel choice.

Capacity: Technological collaboration and trade flow are low, and investment required by the A&D sector is huge. Large diversified SAF producers benefit, while small specialized SAF producers struggle to compete. A lack of cross-border mobility for workers in strategic industries such, as commercial aerospace and defense, as well as weak economic growth, partially offsets upward wage pressures.

Price: In general, fuel prices would rise, and price parity would become a more realistic goal due to the fact that there would be a lower supply of traditional energy sources, which would drive up prices in that sector. Price parity will ultimately be achieved by traditional fuel price going up rather than the price of SAF going down.