SAF Industry at a Glance
December 16, 2024
The key SAF market developments in December 2024 include:
In the US, November SAF market prices have shown some expected weakening in the face of significant new SAF capacity starting up in the US in Q1 2025, which has resulted in some slight SAF margin erosion.
In November we have seen CI-related SAF pricing becoming more widespread. The reduction in CO2 emissions for a unit of SAF versus a unit of conventional aviation fuel is increasingly being used to price SAF molecules despite the fact that most US SAF markets still operate primarily on the basis of prices for a 70/30 JET/SAF blend.
SAF pricing based on carbon intensity already exists in Europe where additional incentives are necessary to encourage high cost eSAF production which will be mandated by the EU from 2030 and by the UK from 2028 under current plans.
SAF imports into the US have continued to grow dramatically this year and have already more than doubled 2023 volumes in the first 10 months of 2024.
We expect these imports to be impacted by the switch from the Blenders Tax Credit to the Clean Fuel Production Credit (45Z) which is due to replace it on January 1, 2025, as SAF imports will not be eligible for the CFPC.
Another impact of the switch from the BTC to the CFPC is that all SAF producers will be worse off unless their material has negative carbon intensity. This is likely to put upward pressure on pricing.
The Illinois Sustainable Aviation Fuel Purchase Credit (SAFPC) is successfully promoting sales of SAF at Chicago O’Hare import, as this credit is available to airlines directly rather than to SAF producers.
There have been various announcements this month of new SAF capacity around the world, but nevertheless our analysis still shows that by 2030 over 85% of global SAF capacity will be HEFA-based. For this reason, HEFA feedstock availability is critically important, and HEFA costs of production will play an outsized role in influencing SAF market prices until the end of the decade.
Our analysis shows that HEFA feedstock availability is increasing and the frequently repeated concerns over HEFA feedstock availability have been overstated. We do not expect any significant feedstock availability issues for at least the next 5-10 years.
Prices for Soybean Oil, Tallow, UCO and DCO all remain relatively depressed, especially relative to summer highs.
There is a huge amount of activity in DOE Loan Program Office to end the year, which we expect will continue right up until the change in administration on 20 January 2025. The new US administration, which also now has full control of Congress, may make sweeping changes to the IRA and existing incentive structures, while still needing to accommodate powerful agricultural and energy interests committed to the existing infrastructure.
As the Green Star BCS position has been for some time, in our view the success of the SAF industry will ultimately come down to low cost, reliable, scalable SAF production technologies, and realistic, commercial frameworks for feedstocks and SAF sales, rather than a reliance on a global network of government mandates and incentives.