Long-term demand for SAF could run into supply constraints

The number of countries that have proposed or adopted long-term blending targets for sustainable aviation fuel, or SAF, continues to increase. But with supply limitations potentially constraining growth to 2050, many countries may fall short of their blending targets.

Based on current and announced commercial commitments, S&P Global Commodity Insights projects that SAF demand by 2050 could climb to 5.8% of global jet fuel demand, with country-level demands concentrated in Europe and the US.

If all countries were to meet their 2050 SAF blending targets, S&P Global has calculated that this would imply an annual supply requirement of 17.5 billion gallons equivalent (1.14 million boe/d) across all types of sustainable aviation fuels, including biofuels and synfuels.

Majority of the countries that have already proposed or have adopted blending targets for SAF are EU member states, which will be expected to comply with the EU's yet-to-be-finalized "Fit for 55" package that proposes a 2% SAF blending mandate by 2025, which goes up to 5% by 2030, and 63% by 2050.

Three European countries already have SAF blending mandates in place: Norway, Sweden and France. Norway introduced a 0.5% SAF blending mandate in 2020 while Sweden's SAF mandate was increased to 1.7% in 2022. Sweden's mandate is part of its broader greenhouse gas emissions reduction requirements for air travel. Meanwhile, France introduced a 1% blending mandate for SAF this year, which will double to 2% by 2025.

These policy measures are considered essential steps to reduce greenhouse gas emissions in aviation, which is viewed as a "hard-to-decarbonize" sector. S&P Global projects that fuel demand from the aviation sector will grow by an average of 2.6% annually, returning to pre-COVID levels by 2027.

Ranked by implied blending volumes, OECD member states account for 19 of the top 20 long-term SAF targets, collectively amounting to 16.4 billion gallons of required SAF in 2050 should national targets be met. Joining these countries is Indonesia, which has a 5% long-term blending target. Based on the S&P Global's view of total global aviation fuel demand by 2050, the national SAF blending targets would imply an 11.4% worldwide blending rate. This figure is likely to increase in the coming months as several other countries are expected to introduce mandates including Japan, where the government is considering a 10% SAF target by 2030, as well as New Zealand and Brazil.

Supply limitations

With current delivered SAF supply volumes estimated at just over 200 million gallons, achieving a minimum 17.5 billion delivered volumes by 2050 would require an astonishing 17.3% growth. Given the potential for more countries to announce targets or for blending to occur even in countries without targets in place, this growth requirement could actually be conservative.

To assess the likelihood of these supply requirements being met, S&P Global is tracking nearly 120 production facilities either currently in operation or in the planning stage. These amount to an aggregate nameplate capacity of around 11.5 billion gallons. But commercial realities drive the majority of these facilities to maximize production of renewable diesel rather than SAF.

This trend, coupled with limited availability of various biomass-based feedstocks for SAF production, is likely to constrain supply growth over the long-term.

Near-term capacity additions could provide a boost to available SAF volumes, and over the long run – as road transport increasingly becomes electrified and the diesel blending pool shrinks – producers may shift from RD to SAF, but feedstock availability is likely to be the key signpost driving total supply growth out to 2050.

Considering feedstocks specifically, the American Society for Testing Materials has approved seven production pathways for SAF. The maximum blending ratio for five of the seven processes is currently 50% of conventional jet fuel, with some production pathways restricted to a maximum of only 10% and a maximum 5% for any co-processing approach, representing a de facto feedstocks supply cap.

Used cooking oil is one feedstock that has shown substantial growth particularly in Europe and the US, although there are potential challenges related to scalability. A similar dynamic is expected for tallow and fats as potential feedstocks.

The feedstock projected to see the greatest relative growth over the medium term is vegetable oil, with production expected to rise 7% by 2025. But this growth is primarily driven by soy oil and canola oil. But with soy oil and palm oil being associated with deforestation and competition with the food chain, restrictions are already in place for these as feedstock for SAF in Europe.

Commercial commitments

S&P Global does expect supply to increase by nearly eight-fold by the middle of this decade – a remarkable growth and more than sufficient to meet all medium-term blending targets. But from 2030-2050 the picture reverses itself: expected supply availability falls considerably short of combined national blending targets.

Against the backdrop of this supply constraint, S&P Global has developed a database of commercial-level off-take commitments for SAF, tracking the more than 46 airports that have received regular SAF distribution (plus 36 that have received batch deliveries) as well as numerous airlines and industry consortia that have either already signed offtake agreements or set aspirational blending targets.

As of this writing, committed 2025 off-take at the airport level is estimated at just over 350 million gallons and over 400 million gallons at the airline level. This is far short of the over 1.5 billion gallons that should by available on the market at that time.

By 2030, S&P Global projects that committed commercial off-take of SAF at the airline level will exceed 4 billion gallons (while climbing to 0.9 billion gallons at the airport level). These figures have two direct implications: should all airline off-take commitments be met at a global level, this would imply that all global blending targets are met. At the same time, though, it would require the S&P Global SAF supply forecast to nearly double, as only 2.17 billion gallons of SAF are expected to be available in 2030.

Clearly, private sector commitments serve as a key driver for demand across the entire industry, including via industry consortia. The most prominent of these consortia is the "Clean Skies for Tomorrow" initiative, encompassing more than 60 corporate participants in the World Economic Forum which seeks to achieve 10% market penetration for SAF by 2030. In February, the Canadian Council for Sustainable Aviation Fuels was launched where 60 domestic members develop a strategy for a competitive SAF market in Canada. In March, the Act For Sky was also established – consortium of 16 Asian market participants targeting the promotion and expansion of the use of domestic SAF. The latter is particularly important for the global market as the number of commercial commitments outside Europe and North America is much smaller.

Balancing supply and demand

S&P Global projects that there will be 8.7 billion gallons of SAF supply available by 2050 due to feedstock limitations. There is upside to this forecast as market drivers could shift RD production into SAF and as policy support measures continue to be developed that could improve the commercial case for SAF.

From the demand perspective, the upside potential is substantial as countries that are considered major growth markets for jet fuel demand – such as China and India – could begin to introduce some supportive policy framework for SAF penetration or as technological improvements increase the blending wall limit for SAF in commercial aviation.

Related feature: SAF garnering Asian support as key aviation decarbonization pillar

Balancing current projections of supply against the combination of country-level targets, airline off-take agreements, and known distribution at airport, S&P Global currently forecasts the EU-27, the UK, and the US to collectively account for 87% of long-term SAF demand, representing an implied blending of 14.4% in those countries.

With analysis from Mark Mozur, Bea Pupo, Loren Puette, Monika Rajoria