S&P Global expects sustainable aviation fuel production to rise through 2028

Global production of sustainable aviation fuel (SAF) is expected to reach 60,000 barrels per day in 2026, 72,000 barrels per day in 2027 and 97,000 barrels per day in 2028.

According to Report, the forecast was presented by analytical company S&P Global Energy Horizons.

Despite the expected increase in production, SAF remains significantly more expensive than conventional aviation fuel.

According to an assessment by Platts, part of S&P Global Energy, SAF produced using the hydroprocessed esters and fatty acids (HEFA) pathway was priced at $2,498.75 per metric ton on a CIF Northwest Europe basis on October 19.

That was 52% higher than the cost of an equivalent volume of conventional jet fuel.

However, the price gap has been gradually narrowing. On February 27, before the start of the Iran-Israel conflict, SAF was 176% more expensive than conventional aviation fuel, while by October 19 the difference had narrowed to 52%.

One factor behind the convergence has been the rise in conventional jet fuel prices amid higher oil prices.

Against the backdrop of the persistent price gap, the aviation industry faces the question of how to achieve large-scale SAF adoption without significantly increasing airlines' costs.

Dubai Airports CEO Paul Griffiths told Platts that SAF currently accounts for only about 1% of global aviation fuel consumption, which stands at 7-8 million barrels per day.

According to him, the economics of scaling up production remain extremely challenging for airlines operating on low profit margins while simultaneously facing higher fuel costs due to the war involving the United States and Israel against Iran.

Griffiths said the solution should focus first on increasing SAF supply rather than stimulating demand.

"The only way forward is to incentivize the supply of SAF. Don't start with demand, start with supply. The biggest problem you have to solve is that there is not enough SAF supply to come anywhere close to meeting global aviation fuel demand," he said.

His position reflects growing frustration among airport representatives and advocates of sustainable aviation over the pace of alternative fuel adoption.

Fragmented government policies, constraints on feedstock supplies and the high cost of SAF are preventing its widespread use in the global market despite regulatory requirements in Europe and other regions.

Griffiths believes SAF costs can be brought down to the level of conventional aviation fuel only through economies of scale.

In his view, this requires additional investment in production infrastructure, including through the creation of a financial consortium of investors.

At the same time, the industry faces a vicious circle: producers are reluctant to invest in expanding capacity without guaranteed demand, while airlines are unwilling to significantly increase purchases because of the high cost of the fuel.

"We will not be able to do this until we start producing SAF at scale, and the investment in producing SAF at scale will not come until there is corresponding demand. If demand depends on achieving price parity with Jet A-1, then investment in production is needed to bring the cost down to the level of Jet A-1," Griffiths said.

He cited blending SAF with conventional aviation fuel directly at airports as one possible way of narrowing the price gap.

In such a scenario, the additional cost of the more expensive fuel could be distributed among all participants in the supply system through a small surcharge on each unit of fuel.

As an example, he described a scenario in which SAF makes up 10% of the fuel blend and costs twice as much as conventional aviation fuel.

Under such a model, the additional cost of SAF would be spread across the remaining 90% of supplies, reducing the extra burden on each unit of fuel purchased by airlines.

As the share of SAF in the blend increases and production expands, unit costs are expected to decline.

However, implementing such a scheme would require agreement among all fuel suppliers operating at a particular airport. SAF would need to be integrated into the common refueling system rather than delivered separately for each aircraft.

According to Griffiths, securing such an agreement would be difficult in a market where fuel costs directly affect airline competitiveness.

He cited Singapore, London Heathrow and Amsterdam Schiphol as examples of airports that have made the most progress in integrating SAF into their supply chains.

These airports use various support mechanisms, including surcharges on passenger tickets, government-set fuel blending targets and sustainability requirements.

At the same time, Griffiths expressed doubt that passengers' willingness to choose more environmentally friendly airlines would, by itself, ensure large-scale SAF adoption.

With fuel prices high and airline margins limited, consumer demand for greener travel alone is not sufficient to solve the problem.

Griffiths identified the lack of a coordinated approach among governments to regulating the market as another major obstacle to expanding SAF production.

According to him, the policies of the United States and the European Union differ significantly: the US stimulates production on the supply side without introducing mandatory consumption requirements, while the EU has established mandatory SAF usage rules but has yet to ensure their full implementation.

"Unless more governments introduce this as a mandatory requirement, there will be virtually no incentive to invest in sustainable aviation fuel production," he said.

The lack of regulatory predictability is already affecting market participants' plans.

According to Griffiths, some airlines that had previously announced SAF purchasing programs and carbon-offset initiatives have effectively abandoned those commitments after concluding that such initiatives were economically unviable.

A further increase in the share of alternative fuel could prove even more costly.

Griffiths warned that with SAF accounting for 30% of the fuel mix, the additional fuel cost could become so high that airlines assuming such expenses would lose competitiveness.

The prospects for large-scale SAF adoption will therefore depend not only on the pace of production growth but also on the industry's ability to reduce costs, attract long-term investment and agree on mechanisms for distributing additional expenses.

A prolonged period of high oil prices remains an additional risk.

According to Griffiths, it could increase the cost of air travel and, as a result, negatively affect demand.