Developing contracts-for-difference for accelerating production of sustainable aviation fuels in UK

Sustainable aviation fuels (SAF) are a vital solution to reduce aviation carbon emissions since they can be blended with conventional jet fuel without changes to existing infrastructure. The UK’s Jet Zero Strategy aims for SAF to make up 50% of aviation fuel by 2050, backed by a mandate from 2025 to boost SAF demand. However, non-HEFA SAF production in the UK faces a significant obstacle - the uncertainty of future revenues. This is attributed to their first-of-a-kind technologies, high production costs (at least 2-5 times kerosene), and lack of selling price benchmarks.
Producers have underscored the need for revenue confidence mechanisms akin to contracts-for-difference (CfD) to bolster the UK SAF industry. Airlines are seeking long-term support that can narrow the cost gap between SAF and kerosene, making SAF more accessible and affordable. CfD has successfully supported the UK offshore wind electricity capacity and cost reduction, while also providing a cornerstone for business models in low-carbon hydrogen production and CCUS technologies. This context inspires the investigation into crafting a CfD-style model tailored for SAF.
This presentation discusses the main research findings: (i) an optimal CfD-type approach for the UK SAF industry by comparing two SAF CfD proposals, and (ii) the design of three key components of a SAF CfD-type model, including government or industry underwriting, funding options, and strike price establishment. These insights result from (i) interviews with 17 SAF industry experts, (ii) a CfD cost model projecting maximum government spending, and (iii) contextual data from the literature, including aviation regulations and commercial factors, and cross-sector CfD comparisons. The goal is to support SAF production, ensure cost-effectiveness for the government, and potentially improve SAF’s availability and affordability for society.
Biography:
Thien Tran is concluding an MSc in Environmental Technology at Imperial College London. She previously worked for seven years as a lawyer within the Energy and Infrastructure team at Allens - Linklaters law firm. Her expertise was centred on providing legal advice to international banks and investors engaged in financing energy projects, spanning offshore wind, solar, waste-to-energy, and oil and gas sectors. Building on her legal and project finance background, Thien’s studies at Imperial have broadened her understanding of sustainable transitions. She hopes to incorporate this interdisciplinary knowledge into her research thesis and put it into practical application to support sustainable energy.
Dr Gbemi Oluleye is an assistant professor at the Centre for Environmental Policy, and a member of the Sargent Centre for Process Systems Engineering Imperial College London. She leads a research group on Modelling for the Adoption of Alternative Technological Systems (MAATS Lab). ATS are alternative fuels and technologies required to decarbonise manufacturing and contruction. Gbemi’ s research and practise synthesises cost-effective adoption pathways for ATS from interventions driven by innovations in technologies, business models and policy. She has a multidisciplinary research experience and expertise at the interface of Technology, Policy, and Economics, and over 10 years combined experience in industry (design, manufacturing, and consulting), and academia.