The 16th of February saw the sustainable aviation fuel (SAF) industry breathe a sigh of relief after the DOE approved the release of $782 million for Montana Renewables‘ biofuel refinery in Great Falls.
The loan comes from the DOE’s Loan Programs Office (LPO) and will enable the Calumet subsidiary to increase production capacity to 315 million gallons per year which will provide roughly half of SAF in North America.
Together with Gevo‘s Net-Zero 1 facility in South Dakota—set to become the first large-scale corn-starch-to-jet-fuel plant in the U.S.—the Montana plant was approved for a total of $3 billion in funding. The pair are part of a larger drive towards getting SAF to become widely available, achieving economies of scale and cost reductions that would make it commercially viable.
Uncertainty’s immediate impact
The lack of clarity has already had an impact – CVR Energy Inc said that it has stopped production of SAF while waiting for confirmation on whether federal tax credits will be available. The 45Z Clean Fuel Production Credit – perhaps the most crucial mechanism that was created with Biden’s Inflation Reduction Act – is now in limbo.
As it stands SAF is the only scalable option for carbon abatement of ~75% of jet fuel emissions. Its production methods include feedstocks such as crops (soybeans, corn), fats, oils, greases, and even synthetic sources like captured carbon and clean hydrogen. To be considered as reducing emissions SAF must meet stringent reduction standards, requiring at least 50% lower emissions than conventional jet fuel across its lifecycle.
The U.S. was on track to produce 30 million gallons of SAF in 2024, double the previous year’s output and projections estimate production reaching nearly two billion gallons annually by 2030.
Gevo shared they are in discussion with the DOE for their second tranche and Montana Renewables has stated it expects its funds to arrive later this year.
But the mood in the department might be shifting.
In a recent objection to an International Civil Aviation Organization (ICAO) recommendation the DOE said it would hurt U.S. farmers and used brackets for the word sustainable when mentioning SAF. Combined with the twists and turns of U.S. tariffs on Canadian agriculture, we are seeing more uncertainty added to what was already a complicated runway.
The (current) best-case scenario for sustainable aviation fuel
The road to making SAF work was already a challenging one. In a recent report the DOE, called “Pathways to Commercial Liftoff” provided a blueprint for how things might work after engaging with hundreds of industry stakeholders.
Speaking with Carbon Herald in December 2024, Dr. Vanessa Chan, the now former DOE Chief Commercialization Officer, said that “for every $1 invested by the DOE, the private sector contributes an additional $6,” showing how a government-enabled, private-sector-led model can work.
But to reach this ratio a critical threshold of 8 to 12 active commercial-scale facilities was needed by 2030. Currently there are only several.
The other necessary component is long-term offtake agreements. Most SAF contracts currently span one to two years, but the industry needs more 10+-year agreements to provide demand certainty and attract investment.
Dr. Chan emphasised on this. “If you don’t have the offtake agreements, then you can’t do it because no one’s buying it. It’s really, really critical. If there’s a way to get over 10-year offtake agreements, then there’s a way to get supply chains standing up.”
There are already successful examples of this with Brookfield’s investment in Infinium contingent on securing offtake agreements from American Airlines and Citi and facilitated by Breakthrough Energy.
Similarly, Twelve secured a long-term order book by brokering a three-way agreement with Alaska Airlines and Microsoft.
The final piece of the puzzle outlined in the report are policy networks – federal, state, and international policies that offer long-term incentives and both supply- and demand-side support.
In the U.S. the level of uncertainty for this has increased and even though several states like California, Illinois and Washington have clean fuel incentives, it remains unclear whether it will be enough to bolster efforts in the next four years.
One final thing Dr. Chan pointed out is an overlooked connection between SAF and carbon markets. “People often talk about SAF from a per gallon basis. We would love if people refer to it on a per metric ton of carbon dioxide emissions basis. If we do that, it actually enables the carbon markets. And if you do that, then you can actually have SAF be cost competitive with direct air capture (DAC) and other high quality offsets.”
Boston Consulting Sees Demand Surge (with caveats)
A February report from the Boston Consulting Group (BCG) describes the current state of affairs by saying “…rapid SAF capacity expansion has led to an overcapacity slump in 2024, suppressing prices and margins. We anticipate that demand will surpass capacity toward the end of the decade, restoring margins to reinvestment levels.”
But when it comes to the short and mid-term things are looking much better with the consultancy seeing SAF demand outstripping supply. Its 2030 forecast sets expected demand at 10 MTPA while the supply expected to be provided by already operational and projects that have broken ground at 9 MTPA.
The report continues by seeing increased demand in the long-term with a projected figure of 12% of global aviation energy demand by 2050. To put this in context, SAF provided only 0.3% of fuel production in 2023.
But even in the report itself BCG says the variables are too uncertain after 2030. Partially echoing the DOE report the consultancy identifies political uncertainty in both the U.S. and Asia as factors creating uncertainty but does point towards EU mandates that will begin in 2025 as the pillar of long-term demand growth.
EU rules to accelerate sustainable aviation fuel use
Those mandates constitute perhaps the strongest demand signal and political will. Even though the block has weakened some of its environmental momentum in the face of political opposition and accusations of deindustralization to the point of losing competitive advantage, the EU can’t be blamed for not following through.
Through its RefuelEU Aviation Regulation the block has set a 2% SAF target for airport fuel suppliers in 2025 and 6% in 2030. That year marks a substantial jump with the target increasing to 20% and gradually reaching its next milestone – 40% in 2040 and 70% by 2050.
To support this a 2023 revision of the EU ETS Directive set aside 20 million allowances with an estimated value of $1.73 billion (€1.6 billion) between 2024 and 2030.
Maintaining momentum in early February the EU Comission drafted rules and submitted them to the Parliament and Council of the block for review and formal adoption.
This backdrop has fueled progress in SAF production in Europe with the largest plant in the world being constructed in Rotterdam. The facility has a $1.63 billion (€1.5 billion) budget and is set to have a a production capacity of more than 250,000 of fuel annually.
ICAO efforts experiencing turbulence
Recently the The International Civil Aviation Organization (ICAO) launched a platform to connect SAF developers with potential investors. Dubbed the ICAO Finvest Hub, it will also have a focus on LCAF and other aviation cleaner energy sources.
Though officially announced the initiative seems in a pre-launch phase, with only a presentation available, as well as an email (finvest@icao.int) for those interested in participating. Despite this state-level efforts seem to have generated the initial momentum needed for liftoff.
The United States is still seen as a driving force in the effort to increase SAF production but in statement from early March the DOE objected to an ICAO recommendation for mutli-cropping for sustainable fuels.
According to the DOE this would harm U.S. farmers while giving an automatic advantage to Brazil where over the rest of the world.
ICAO’s Committee on Aviation Environmental Protecction (CAEP) did adopt the recommendation but some in the industry are left wondering whether it will be fully applied in the U.S. Though not a parting of ways this could signal a significant shift in Washington’s policy under the new administration which is reviewing every international effort the country is involved in.
What’s next for sustainable aviation fuel
Sustainable aviation fuel stands at a critical juncture. In the U.S., projects like Montana Renewables and Gevo’s Net-Zero 1 signal strong federal and private investment, yet uncertainty around tax credits and policy shifts could hinder momentum.
Confidence and certainty is currently provided by Europe and the UK, both leading with ambitious mandates and reinforcing demand through regulations. ICAO’s recent financing initiative underscores a growing recognition of SAF’s role on the global level but if the U.S. doesn’t provide its usual level of involvement, and/or decides to act in a protectionist way, then international efforts could falter.
Ultimately, SAF’s future depends on stable policy frameworks and investment confidence. If these align, the industry could scale rapidly—potentially supplying 12% of global aviation fuel by 2050. If not, growth may stall, delaying or even derailing aviation’s decarbonization.
Read more: New Report Forecasts Sustainable Aviation Fuel Market To Exceed $25B By 2030
