The SAF Podcast

The SAF Podcast: The now annual SkyNRG and ICF SAF Market Outlook review

• SAF Investor • Season 3 • Episode 17

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This week's SAF Podcast is our now annual deep dive into the global SAF Market Outlook from SkyNRG and ICF. This year we were joined by Anna Liznerova, SkyNRG and Mark Kelly, ICF. After weeks of late nights and weekends on this extra curricular project they share key insights and methodologies from the report.

The conversation kicks off with the key takeaways from the report notably, Europe's role as the backbone of SAF demand with strong mandates requiring over one million tonnes in 2025, rising to four million tonnes by 2030. Despite Europe driving demand, it represents only 18% of global jet fuel uplift, highlighting the critical need for policy development beyond European borders.

Another major takeaway is Asia's remarkable growth, now accounting for nearly 30% of announced SAF capacity by 2030, overtaking Europe and trailing only the United States. The rise raising important questions about feedstock diversion, sustainability concerns, and potential fraud in waste oil supplies from the region.

The discussion delves into demand modeling challenges, examining three scenarios ranging from pessimistic, realistic and optimistic outlooks through 2050. Mark explains the methodology behind forecasting policy-driven versus voluntary corporate demand, while Anna details SkyNRG's production mapping approach across nearly 400 global projects.

The final and new section of the report, Mark and Anna give an overview of the "HEFA tipping point" – when demand for HEFA based SAF will exceed available sustainable feedstocks, likely around 2030-2031. This timeline creates urgency for advancing alternative pathways like e-fuels, which face their own regulatory and economic challenges. The experts navigate the complex interplay between policy design, investor confidence, technical feasibility, and sustainability imperatives that will determine SAF's future.

What emerges is a nuanced picture: despite delays and setbacks, the industry continues moving forward, though perhaps not as rapidly as hoped. The coming years will be critical for project development, particularly for facilities using advanced technologies beyond conventional HEFA. 

With the amount of developments globally in SAF, is 30 pages enough to cover the ground or does it need extending to a 200 page thesis?

Check out the full report here, it is well worth a read: https://skynrg.com/safmo25/

If you enjoyed this check out our previous discussion with Jim Stonecipher, EdyMac about the lessons industry can learn from failed projects like Fulcrum BioEnergy: https://www.buzzsprout.com/2202964/episodes/17395177



Speaker 1:

Hello and welcome to another episode of the SAF podcast. This week I'm delighted to be joined by Mark Kelly, as the Senior Sustainable Aviation Consultant from ICF, and Anna Lisner-Rover, who's a senior analyst from Sky Energy and I'm sure many people who are listening to this will have seen and read the recent report that came out from Sky Energy and ICF and we're going to do our what's Now annual podcast where we have an in-depth discussion about various aspects of the report, the key takeaways, the key learnings for those that prefer to have their reports audibly described to them rather than reading them themselves. Last year we had Tom Berg speak. This year we've got Anna and Mark, who are going to take us through the key aspects of the report. So, mark, anna, how are you Doing?

Speaker 2:

great Thanks, so much for having us.

Speaker 3:

Thanks for having me.

Speaker 1:

No, it's great to have you both. So before we get into the report and all the good stuff, I will also say I'm going to put a link to the online version of the report in the description, so if anyone is prompted to read it after this discussion, feel free to go check it out there. Do we just want to quickly go over both of your backgrounds and your current roles at ICF and Sky Energy? So, Mark, do you want to kick us off and give us a brief overview of your background background?

Speaker 3:

I can kick us off. So hi everyone, my name is mark kelly, as oscar said. Yeah, I'm a senior sustainable aviation officer in icf. So my background I'm a physicist. So I did an undergraduate and a phd in physics in trinidad college, dublin and I joined icf one year ago it's coming up to my one year birthday. Um, I joined, uh, from trinidad college, dublin where I was working as a postdoctoral researcher on SAF. So while I was in Trinity College Dublin I was working on a range of SAF related topics, ranging from carbon intensity calculations to calculation and prediction of physical and chemical properties of SAF. And at ICF we work kind of right along that value chain of the SAF value chain. So we work with SAF producers on their facilities, negotiating offtakes. We then also help on the other side of the table airlines and investors on performing due diligence on SAF producers and identifying some offtake possibilities, and that kind of goes the whole way out to governments where we help in the identification and implementation of SAF policy. So it's really nice to be here, oscar.

Speaker 1:

It's great to have you, martin, and I do just want to. I'm sure lots of people are familiar with Sky Energy. You're the third person from Sky Energy we've had on this podcast now, so I'm sure people will have heard other episodes with Oscar or Tom. But give a brief introduction to yourself and what you do within Sky Energy and then maybe a very short reminder for anyone who's picking it up now and hasn't had a chance to listen to the other ones.

Speaker 2:

Yeah, happy to Happy to continue on the Sky Energy legacy here. So I have a. I've been at Sky for three years now. My background is in business and strategy with a focus on sustainability. Prior to this, I was actually in Unilever and then, three years ago, made the jump to Sky Energy and I'm a senior analyst in the commercial team, so very focused on business development, working with producers and suppliers on a global scale. And the second hat that I wear within Sky is, of course, on the developments of this yearly market outlook. It's our fifth edition. What makes this one particularly special is working even closer with ICF. So Mark and his fantastic team, and at Sky Energy we actually celebrated our 15-year anniversary last week. So 15 years of history in the SAF industry. We are developing our own projects in the Netherlands, in the US and Sweden and also servicing customers today. So we have over 60 airlines and corporates that we service. We have teams dedicated to policy and technology, so really covering all the pillars of SAF.

Speaker 1:

You said this is the fifth market report, but isn't this the fourth public one and the fifth internal one? So this is actually the fourth one that everyone's been able to see, because it started off very much as an internal mapping project exactly, yeah, yeah.

Speaker 2:

So our first edition was more for a strategic internal exercise and, and when we did it, we really saw the value of it and saw, you know what, maybe this is something the industry could get a lot of out of. So we started publishing it a year later and we've been doing it ever since, so hoping to continue that on in the years to come.

Speaker 1:

So give us the cliff notes. What are the key takeaways from this? What seems every year to get a thicker and thicker document? I've got the physical copy here. Every year it seems to weigh more, it seems to have more pages in it and it seems to have many different things. So, mark, what are your sort of the key takeaways that people need to take from reading, that people should take from reading this report?

Speaker 3:

Yeah, you've kind of hit the nail on the head there. When you're a bit of a SAF nerd and you're sitting down, there's so many kind of cool bits of analysis we want to do and it so many kind of cool bits of analysis we want to do, and it comes to a point of, okay, what can we actually include here to kind of capture the details. So I guess there was kind of four main points that kind of stood out to me when, when we performed this report. And the first one is, you know, the, the notion or the identification that europe and I'm including uk here for for our uk colleagues uh, is kind of the backbone of SAF demand, with kind of strong mandates and that's quite mapped out on a long period. So in 2025, that equates to roughly about one, just over 1 million ton of SAF that's needed and that goes up to just over 4 million tons in 2030. But that sounds good. However, europe only accounts for about 18% of the global jet fuel uplift. So you know, if we're aiming for net zero, we need policy development to generate that demand outside of Europe.

Speaker 3:

I'll leave some of the capacity, kind of interesting points to Anna, but kind of the big one that I can't not mention is the rise of Asia. So Asia now accounts for just under 30% of the announced capacity in 2030. That's overtaken Europe, which is just over 20%, and it's just behind the US, which is 31% or 32%, and that has really serious implications if that capacity comes on board. I'm sure we're going to dive into it later on in the podcast, but that can range from the diversion of feedstocks at source to lower and overall costs, and then you can possibly come into issues with feedstock frauds and sustainability concerns. And then the kind of last point I might touch upon is the new section in the report to be included this year, and that was the HEFA tip and point analysis.

Speaker 3:

So we heard much, you know, um discussions going on that if we're to continue in europe at a waste-based approach, that there just isn't enough feedstock to decarbonize aviation globally using waste-based only. And we also noticed that, you know, hefa has kind of dominated, um, dominated the scene, and that's because it has the lowest cost of compliance to create those facilities. In Europe we're quite good at retrofitting facilities, coprocessing, which is a lower capital cost. So the idea is OK, how much HEFA feedstock is there out there for aviation to reasonably convert into SAF. And that was kind of a nice piece of analysis. And you know that sliding scale of when exactly we'll hit that tipping point that there isn't enough feedstock, that can vary, but you know ballpark figure, using some assumptions you're looking at the year 2030, 2031.

Speaker 1:

And that has quite significant effects Because you know, as we all know, to advance other technologies we need to start now we're going to come back to, to asia and the heifer tipping point, because, as you said, this is the big sort of change from from previous reports. Anna, is there anything you want to add in terms of key takeaways? Yeah, I think definitely.

Speaker 2:

Mark covered very much the most important key takeaways, I will say. I think what's encouraging to see is that we still see an overall growth of that 1 million tonne compared to last year, and that's despite seeing some slowdowns in regions like EU and US. And what's worth noting, though, is a lot of these projects have are still yet to reach FID, so these next few years are going to be very critical to make sure that they reach those milestones and we can achieve these targets so overall I would say.

Speaker 2:

The message of this outlook, at least for me, is we're heading in the right direction, but we're not there just yet on the size of the report and the fact that they seem to get bigger.

Speaker 1:

Is that, you know, making the report the outlooks harder to write because you've got so much more data, or does it make it easier because you're not having to? There were challenges in the early stages of getting accurate data, sifting through the data and managing it all. So is it becoming easier or is it just becoming an absolute monstrous task to get all these data points and all these critical aspects of scaling the market together in an engaging and informative way? Yeah it's a really good question.

Speaker 2:

Oscar and being part of it now for two years. Getting that data collection is becoming, yeah, significantly significant, more time consuming. There's so much happening in the market, everything from delays, maybe some project cancellations, but, even more abundantly this year's project announcements, like we touched on in Latin America, also in India, so there's a lot to keep on top of. But it is, I will say, a challenge that we welcome, right? It means that the industry is growing and scaling, and that's what we want to be seeing, and it also allows us to add a lot more nuances to our outlooks, which I think is nice. This data availability this year, for example, we have data on how much SAF was supplied last year, so we can add some commentary on SAF supply versus capacity and build that out over the next years. But the challenge is, of course, 100% keeping that to 30 pages. I think if it was up to some of us, we would be looking at a 200 plus page report. So let's see how it looks next year.

Speaker 1:

So let's see how it looks next year and, mark, you guys have taken a much more central role in it than previous years. You think you know, when you look at a project like this, is it what you expected? Is there sort of does it just open a whole new world of detail? I know you guys love getting fixed into the detail as it is, or is it sort of just you know just something you do in the everyday and you're sort of right in your wheelhouse.

Speaker 3:

It's a bit of both You're kind of using. It's somewhat similar to what you're doing day to day, but it's much more exciting. So this is you know Anna can probably testify this is evening and weekend works for us. We have our regular work during the day and it's a good job. It's exciting because we actually we can't sit down after dinner and and do this work, um, but it's really exciting to, you know, merge the two kind of specialties and knowledge houses within icf and merge that with with the, the, the extreme expertise we have in sky energy, and it's exciting so that we had these calls. They're supposed to be one hour long. Some of them went much longer because we were just talking all the details, the piece of analysis we could do, the pros and cons of each. It's a real exciting project to be working on.

Speaker 2:

Yeah, even within Sky. I would say what's nice about it is we're coming at it from so many angles. We have on the Sky Energy side the team, we have people from policy, but also from future fuels and technical and myself coming in from a commercial, so we really look at it from all angles.

Speaker 1:

I wanna break, try and break it down and sort of follow the format of the outlook as close as we can. So, mark, you were very involved in the first section, which is all about demand modeling, looking at voluntary demand and where you can see the demand trajectory going through to through 2030, 2035 yeah so what?

Speaker 1:

maybe you explain the challenges about you know assessing that and how you went about looking at that, and then also you know how you map that onto making accurate forecasts for everyone to be able to understand sort of and digest them, because you know there's so many variables at play.

Speaker 3:

So I'll try and take an attempt at trying to explain it. So when we look at demand, so demand for SAF, we can kind of largely categorize it into two main buckets. The first bucket is demand that's been driven by policy and regulation, and the second bucket, which is kind of inside the first bucket but we try to separate it, is voluntary corporate demand, so that'd be from airlines or from corporate customers who are looking for their SAF certificates. So what we try to do is model the first, the farmer, so that is the SAF demand from policy and regulation. So within that then there's two further buckets One, we have mandates, and secondly we have regions that don't have mandates. They might have policies or other things that kind of stimulate demand for SAF. So within mandates it's quite easy to forecast how much SAF is being demanded in each region, because there's a mandated volume that has to be uplifted. So for example, in the EU, uk, etc. Where there's mandates, that's quite easy to do. So it all comes down to the basis of a jet fuel forecast model that we have. So this is a country by country level forecast that looks at historic passenger and cargo movements and it forecasts that out to 2050, accounting for changes, some factors such as changes in GDP and other things such as fuel efficiency improvements in aircraft and also alternative propulsion, aircraft penetration into the market. And so what we have then is a country by country level jet fuel forecast demand out to 2050. What we do then is we layer on top a SAF percentage demand from each country, and so for mandates that's quite easy.

Speaker 3:

Where it gets tricky is from other regions, such as the US, for example, if we take that as an example. So we know that under the Biden administration there was the US grand challenge. We know there will be uplift there because there is policies at state levels. That is driving that demand. So then it's a factor of OK, how do we accurately incorporate this uncertainty to give us a good picture of what is the SAF demand in that region?

Speaker 3:

And so we did this using kind of three scenario approach. We did a low basis, central scenario and high scenario, central scenario and high scenario, and so when we combine that together across all countries, we then were given or we result in this SAF quantity that's demanded in each year across the globe, and so that's how we model SAF demand. The second bucket I didn't mention and we didn't explicitly cover. It is the voluntary, so that's the corporate demand that is kind of covered within the the policy driven demands because, for example, um demand from airlines. They are flying out of either mandated regions or regions that have um staff policies on them or other, and so that's covered within our, our demand forecast and when we're looking at demand, what's the overall sort of demand story?

Speaker 1:

when you sort of have broken it down looking like that, when we're talking about sort of absolute in absolute terms and then in terms of sort of the blend percentage growth, how is that forecast looking through 2035, 2050? How is that forecast?

Speaker 3:

looking through 2035, 2050? Yep, so again, if we just think of the three scenarios, I'll talk firstly about our central scenario, because that's what we think will probably be most accurate In the near term. We would say that by 2050, in the central scenario, there's about 4.5% of the average global uplift of fuel will be SAF and that equates to about 15.5 million tons of SAF. So that's a 4.5 percent that increases out to 2050, and by 2050 in the central scenario it's 45 percent, which is about 180, 190 million tons of SAF. So that's in the central scenario, and in that scenario we assume that all current mandates achieve the amount of SAF that is mandated there. And we also look at regions that have targets or they have mandates under discussion. They haven't actually come in yet, but we look at them and we say, okay, they're likely to come in and therefore they will generate a SAF demand. And so that's our central scenario.

Speaker 3:

In the very low case we say, ok, no other policies other than the ones that are currently in place will come into effect. So that's our that's our kind of pessimistic scenario. And then that's that equates to about 7.5 million tons by 2030. So that's under half of the central, and when you go out to 2050, it casts quite a bleak story of 16% of the jet fuel uplift will be SAF and that equates to about 70, 80 million tons of SAF. Now we don't think that is likely, but that sets the lower bounds. And now, if we look at the kind of the optimistic scenario, so that is in the central scenario, but then we also think outside of the regions that currently have SAF policy, other policies will start to come on in the years to come and there'll be extra policies coming online to help aviation strive towards the net zero targets. And in that upper scenario, by 2030, it's a 9% blend, so that's just under 31 million tonnes of SAF, and by 2050, it's 64%, which is over 250 million tonnes.

Speaker 1:

Impressive. You can do that all from the top of your head.

Speaker 3:

I have very sparse notes here and it's not really helping much. I hope there's a caveat there.

Speaker 1:

Read the report you meant to say that was just from the top of your head and you've got it all.

Speaker 3:

I have to save myself. Everyone read the report.

Speaker 1:

But on those three sort of outlooks that you've got in terms of mapping demand and you've but on those three sort of, you know, outlooks that you've got in terms of mapping demand and you've got the realistic middle of the road where you think the amount of assumptions that you kind of have to make. Presumably there's a lot of wiggle room either way of that, because you make so many assumptions in terms of things that could happen when they could happen. We've seen the industry plagued by delays recently. So in terms of policy being put in place and policy applied, and then policy impacting market behaviors, there's there's a load of different variables at play there. So you know, this is a very you can't be overly specific in what, if what this suggests exactly and what the way to think about it is.

Speaker 3:

In the near term it's more likely to trend towards the central scenario, but when you go past the five-year basis, it's the the level of uncertainty rises and that's kind of reflected within our range. So you know we're going from maybe a 70 million ton by 2050 up to a 270 million ton. You know the range is huge and you have to make some informed assumptions. But a lot of this we just don't know. We don't know in 10 years time if there will be a big push in some other countries to improve their decarbonisation policies and to implement SAF mandates. We're not sure.

Speaker 1:

So, anna, turning to you and Sky Energy, one of the founding sort of sections of the report was the production side of things, mapping global production, and this is something that Sky Energy are sort of integral to working this out. So you guys have also got your methodology of how you include, rule out different producers, and I don't want to dwell too much on that because I don't think it's too much. It's changed too much from last year in terms of the structure that you use to include or exclude projects. It's largely the same as before, isn't it?

Speaker 2:

Yeah, exactly. So we start off with looking at the whole SAF market this year that was about 390 projects and then exclude on various criteria that I believe was probably dived into in the past, but essentially anything that's considered a feasibility stage, anything that's characterized by a high degree of risk or we haven't seen much movement or development in the project. So that really cuts out quite a big chunk of the projects that aren't considered into our final outlook.

Speaker 1:

Do you have a complaints page for people to go to if you've excluded their projects?

Speaker 2:

No, that's why we keep it all very um a global view and not calling out any projects um. But yeah, we do have quite a strict method.

Speaker 1:

If anyone's got any complaints um, we'll put anna's email in the in the description below.

Speaker 1:

You can go straight to her please do um, but we started earlier with talking about the boom, that the boom of the age has had, the amount that production's grown, and this kind of to my mind, brings up two interesting points.

Speaker 1:

One you know the impact this could have, both on sort of read, the regional asian market, but also with the amount that's exported to europe, the effects it could have on Europe. And also the way it reflects on mandates, because a lot of people talk about mandates in the way that they stimulate demand and they stimulate production, but Asia doesn't. China, for example, the big one of the big growers within Asia, doesn't have a mandate yet. There might be one coming with the next five-year plan. It doesn't have a mandate yet. There might be one coming with the next five-year plan. It doesn't have one yet. So there's an interesting dichotomy around the integrity of mandates, because we're in the UK and in Europe and mandates are great and we think they're really good demand signalers, but it's not the only way of doing it. So how do you reflect on the growth in Asia and how that reflects on regional and global market dynamics?

Speaker 2:

Yeah, we indeed saw such a massive growth in Asia this year. I think we added over 22 facilities in that region alone and what's interesting about Asia in particular is that these facilities come online incredibly quickly, so the lead time between announced and operational is very short compared to other regions. I will say we saw a lot of HVO producers this year who have HVO focused in the past look at SAF because of anti-dumping duties introduced in the EU, so a lot of capacity opening up there as well and expecting majority of this production to be, of course, export focused because of those lack of demand signals internally. And again, that could change very dramatically if we see something like the China mandate kick in and that could leave other regions who are maybe reliant on this product more vulnerable if they can't rely on that, if that product is getting uplifted domestically and on the exportation of sort of chinese asian staff.

Speaker 1:

There are big question marks around the integrity of the feedstock and you know the way this stuff is is produced and the criteria that it meets, whether there is, whether it meets, sort of european standards. What are your thoughts around sort of the regionality of, you know, compliance, the levels of compliance? We've seen the us and their recent policy update sort of change, the indirect land use change um sort of stipulations in that. So there it's. It is a moving and dynamic world in which we're living in, in this policy landscape. So you just want to reflect on, you know how that sort of impacts across the globe yeah, and it's a very important point.

Speaker 3:

So, as asana said, we're now seeing huge announced capacities within china. Um, a lot of these facilities are red eligible. Um, there has been some excellent reports that have come out, for example by T&E on used cooking oil exports from Asia, hinting at the unlikeliness that this used cooking oil is genuine, and that is a problem. It comes back to what we're kind of hinting at here is the different sustainability criteria in different regions. If we kind of zoom out and you put you know, zoom out to the macro level. The reason we're doing this is for decarbonisation. We're paying extra for the guarantee that whatever we're using has an emission saving. So there's no point in us doing this if we can't guarantee that feedstock is what it says it is. So that kind of highlights the need for these strong safeguards in place, such as what we have in Europe. But yes, in terms of Asia, if we think this could go two ways number one it's a traditional exporter of waste oils to europe if they get diverted at source. So if these production, this production capacity, comes online, that will mean limited um or a reduction in the availability of waste based heffa feedstocks in Europe. That can do two things. Number one, it'll increase price. Or, number two, it increases the potential for some perverse actions. So, anecdotally, there has been talk that some facilities are having higher wastes effluent than usual so they're not running at their usual yield. That's, you know, having a waste that costs more than the virgin oil creates these sort of perverse incentives. So that's something we just we need to continually keep an eye on and keep on top of.

Speaker 3:

The second one is if that production capacity then comes online, where will that staff end up? So you mentioned that there, oscar, that you know there hasn't been. There's talk of this um announced mandate. It's coming online, I believe, next year, uh, in the next five year plan, and the range of that and what that will look like varies massively, from 3% in 2030 all the way up to 15%, and the size of China like that's a lot of capacity. So then that'll dictate what happens. What happens to the, to the product, does it be used internally or does it get exported?

Speaker 3:

Another interesting kind of maybe I'll try and crowbar it in is if the new policy changes happen in the 45Z, where there's a restriction on imported feedstocks to qualify Technically, that could cause a redirection of feedstocks. So US imports sizable amount of feedstock waste-based feedstocks from Asia. That could open that pool of waste-based feedstocks from Asia. That could open that pool of waste-based feedstocks to Europe. So the kind of the hard thing about this is it's such a dynamic thing. It's like you're juggling 10 balls with two hands. I'm not a juggler, but I try my best to keep up to date. But it's a really interesting area to be trying to keep an eye on.

Speaker 1:

Anna, how's your juggling?

Speaker 2:

Let's find out.

Speaker 1:

So this I mean the whole conversation around the growth of Asia and the fact that they have such big impacts. It kind of also weighs into the final bit of the report and the heifer, the heifer cat, like the, the tipping point that we could reach to, because predominantly the SAF that's produced in China is heifer and there are a few projects looking at, you know, e-saf, but they're very much in the minority. So you know, if you see 15 Chinese mandates, it's it also that changes the perception on. You know how you can actually deal with the urgency that if Europe wants to domestically produce SAF, that it needs to look at these other, these other pathways and eventually look at power to liquid production as well. So it all comes into the sort of tipping point which is, I imagine, sort of a large part of the thinking behind that section of the report.

Speaker 2:

At the end, yeah, definitely, definitely I think the hefa tipping point is something that we see discussed constantly and the questions being asked and when do we run out of these waste oils? What does that future look like? At what point, um does HEFA kind of reach that max potential? So it was something we really wanted to dive into this year, and reason we were also able to do it this year is thanks to the great work by ICF on incorporating that demand portion, because you can't really look at a HEFA tipping point without having a view on demand. So being able to have that and have those country by country breakdowns was a really important lever in allowing that to happen.

Speaker 1:

Mark, how did you guys see that sort of the demand side mapping onto that tipping point? You know how did. Is it sort of a you know? Do you see it as a global tipping point? Can you boil it down to looking at different regions having different tipping points at different times? Potentially can you get that that specific? Or you know how do you sort of go about sort of working this out from the the demand mapping that you've done?

Speaker 3:

yeah, great question. Uh, if this, if I got my way, the, the report wouldn't be 30 pages, it'd be 200, and we could run through all these different scenarios.

Speaker 1:

You've already written your PhD. You've had your time for a PhD.

Speaker 3:

And I just loved it so much.

Speaker 1:

No one ever says that. No one says they enjoyed their PhD so much they want to do it again.

Speaker 3:

No one who doesn't have their fingers crossed when they say it anyway. No, but you're completely right, it's quite an interesting. It goes back again to the sustainability criteria. So if we kind of zoom out a bit and we look, the feedstock that we use will always follow the least cost of compliance. Within Europe that is a waste-based HEFA Within Europe. That is a waste-based HEFA Within outside of Europe and when I say Europe again I mean UK. Outside of Europe, where you have regions such as America, it'll follow the sustainable criteria of the 45Z largely and therefore it'll also be waste. But if it's, for example, we're seeing a lot of soybean, some crop oils, because they're eligible, so it'll follow that merit order of cost versus reward they get. And that opens up some interesting angles. So we can then do a region by region basis of, ok, how much of these different types of SAF are being demanded across the world. We can then kind of overlay that with what is the production capacity through these certain routes and we can then also take a look at okay, what is the feedstock potential in these different regions? That sounds great in theory.

Speaker 3:

There's a lot of moving pieces, a lot of the feedstocks. You have to make assumptions of where they get diverted, et cetera. So you can see why we didn't go into the 200 page. We had to make those simplifications and look at it on a global basis. But then, touching just to touch kind of a bit more on something you highlighted, and it's quite an interesting well, interesting to me at least, is that in China you mentioned about ESAF, the potential ESAF. What we're seeing there, yes, a lot of HEFA. You're seeing a lot of the oil majors within Europe partnering with either feedstock collectors or with SAF producers in China, and that is because if your feedstock is coming from there, that's where you're minimizing your cost base by locating to those areas. Esaf it's a bit different. I'm just gonna make an approximation 40, 50% of your costs of production is coming from electricity. That would then, if you say at the high level, you say okay, then therefore ESAF will tend towards the lowest cost of electricity. That is true.

Speaker 3:

However, there is only a for ESAF within the EU and UK. Thereforeeligibility comes in for ESAF. So within the delegated DACs I won't go too deep into this, but within the delegated there's two delegated DACs that are of importance and they basically outline what type of feedstocks ie inputs, ie electricity and CO2, are eligible to make ESAF and to use it under the Refuel EU Aviation Regulation. Within those are some kind of strict criteria.

Speaker 3:

I'll just mention two which will limit a lot of the ESAF announced production capacity outside of Europe.

Speaker 3:

Number one is that the CO2 has to originate fossil CO2 from installations that are within an effective carbon pricing market. That's called an ETS. That doesn't exist in many regions outside Europe. Therefore, if the CO2 comes from that, if you produce your ESAF in, just make up a country, let's say Chile, where there's abundant renewable electricity, but if it doesn't have an effective carbon pricing system, it won't be eligible under refueling aviation. The second one, then, is in terms of electricity, and that says that the renewable electricity installation that you're sourcing it from can't have received any state aid, ie operating aid or investment aid. Now, there's a lot of caveats there and I know I'm kind of broad brushing it, but that kind of puts that caveat on it that, yes, china, for example, might be quite an attractive place because of the low cost base, their abundant solar capacity. However, there are some of these restrictions that kind of come in that might limit it, whereas in Hefa that doesn't really exist, as long as it meets the REDS criteria, it's eligible for import and use into the EU.

Speaker 1:

I just can't believe you made up Chile as a country. I want to apologise for the Chilean listeners. We acknowledge you as a country. I want to apologise for the Chilean listeners. We acknowledge you as a country, we're not just making you up. Anna, what from your perspective? At Sky Energy and you know you guys have got three projects across different feedstocks, different geographies yeah, what are your thoughts on? You know you're actively working on the tipping point and trying to be in front of the curve on getting these projects online, so you can sort of be leaders. So what's your take on how this tipping point and what needs to be done to avoid it becoming a serious problem?

Speaker 1:

Yeah no, I mean great question.

Speaker 2:

I think very happy that we are diversifying that technology within Sky. So we really are looking at all three main technologies and looking at locally what are the most advantageous positions within these regions from a feedstock perspective and taking advantage of those. So that's definitely things to consider when you're building out these technologies. In terms of scaling these advanced pathways, obviously policy plays an important role and how we take advantage of those, both in the EU and in the US, incredibly valuable in driving these advancements forward. And we see that also with how that's reflected within production right. So within the sub mandates, you see all the esaf production there with the hefa cap in the uk, we see a lot of bio ft production there, so so the role of policy is really important when when we're looking at this topic on the on the policy point, what's the balance?

Speaker 1:

because policy is great but if you put too much policy in place it can become restrictive in the flexibility that business has. You talked about sort of the esaf sub-mandate that europe and uk have got, yet the big esaf projects are in the us, where there's no esaf you think of infinium, you think of of 12. They're sort of the leaders in this space, particularly infinium who you know recently closed another round of funding and you know they're really driving this. So where's the balance? But how do you look at that balance and working out what's what encourages and inculcates sort of business to get involved in the market, to grow, versus sort of harming it, preventing it to grow naturally not necessarily stimulating it as it is designed to do?

Speaker 3:

Oh, maybe I can take a first stab at this. This is like the golden question. I think this is what everyone is searching for, but I think kind of.

Speaker 1:

Great, we can come up with a definitive answer now. Yeah, here we go.

Speaker 3:

Do you want to join me on a PhD thesis? Buckle up. No, if you kind of take it back to the basics, this is an artificial market that is created by policy. Anyway, this market wouldn't exist without regulation. You can't guarantee that the product of these facilities will be bought in a market's competitive environment if the regulation didn't exist.

Speaker 3:

So you know what this is kind of coming down to. More so is the balance, you know, between the ambition versus how fast the technology can scale and how fast you can get those cost reductions. So the kind of the overlying problem here is that you know, an energy transition which can take 50, 60 years. We're trying to get this in 25 years. So the pace at which we want the industry to scale, we're trying to match that with regulation. And there's going to be these friction points where we need to iron things out.

Speaker 3:

And it comes down to that is you know, how do we put the weight on these different pieces of the puzzle? How high should you set the ambition to trigger the demand signal versus what is realistic for technology to come online? So you know, there's no point us asking, or it would be unwise for us to ask, for a 10 esaf plans by 2030, when we know it'll take a facility three, four years to construct a year for, at least for for their, their feed studies, for to reach financial clothes, etc. So again, I don't have the answer, but it's just the acknowledgement that this is a completely artificial Market, that's, you know, created by regulation. And it's a the acknowledgement that this is a completely artificial market, that's you know, created by regulation. And it's a matter of how do we change these little bits of regulation such that the direction of flow that costs so like the economic direction of flow, is pointed in the right direction getting those levels right isn't easy because you know mandates started here and you're not seeing.

Speaker 1:

You know SAF prices are sort of decreasing. There's sort of deflationary effects on those that people are seeing. There's not a big sort of stimulated level of demand. You've got this the ESAF sub mandates in 2030 but you've, on the flip side of that, you've got everyone involved in project sky power screaming for more policy in order to meet that policy. So you know, just because you set policy in place and you try to scale, it doesn't necessarily map onto having an immediate positive effect. It might take, you know, for the levels that are required to go up a bit more before you actually see tangible improvements on that. So that's that's also a challenge where you've placed them in the length of time it takes to actually see the market react. You can't necessarily predict. And what are your sort of yeah, your thoughts on that being the es? The one working on ESAP isn't Skynergy.

Speaker 2:

No, no, unfortunately not, but I do think it also brings to light the role that it's not just on policy rights and there's a lot of front runners within the industry. For example, within airlines alone I mean KLM, iag they really understand the need to act not just as an offtake but to help get these projects off the ground. So it really goes to show that it is something that all stakeholders within the industry and we hear that all the time, but it is very important points that it does require all of us to work together on this.

Speaker 1:

You say that I'm going to take a quote from the end of the report. I'm going to quote from the outlook now it's the end of the report I'm going to. I'm going to quote from the. The outlook now it's the end of the outlook says governments, corporates, investors and regulators each have distinct roles to play, but the actions must be aligned and simultaneous, which you know is very much in agreement with what you just said.

Speaker 2:

Sounds easy right.

Speaker 1:

The reality of getting all those stakeholders with their different agendas on the same page, working simultaneously. Is that realistic, Getting everyone on the same page doing the same thing, when you know, if you're thinking decarbonisation, there are loads of ways investors can look at that. Yes, airlines maybe are slightly down the one road and you know policymakers have got a wide range of decarbonization policy. So getting them.

Speaker 2:

The simultaneous bit is the probably the bit that seems the biggest challenge yeah I mean definitely, definitely, and it's easier said, harder done right but it is a necessity and and you know efforts like, for example, skypowered is an example of these industry stakeholders coming together. So we are seeing it and I think, as long as we all understand that it is a necessity, that is step one, and again, it's an uphill battle, but we all need to work on it together to make it happen, and we have these high targets, and so that's the only way we can really achieve them.

Speaker 3:

So that's the only way we can really achieve them, Mark what are your thoughts on the simultaneous nature of all this stakeholder buy-in and the challenges around that? Yeah, like you know. Come back to the points. This is a multi-decade challenge that we're trying to do within 25 years. You know, in the ideal world, you know you'd wait for the regulators would create the markets. The first projects will be helped through those stages to de-risk, to make future investments more attractive and cheaper for the ultimate cost of production, and then you would be able to crowd in private investments that's able to help scale the industry.

Speaker 3:

The challenge is we're trying to. We don't have time to do all that. In this case, we're trying to do everything all at once and what we can say, you know and it's touched upon there a lot of the stakeholders do have the best intentions at heart. You know that we do want to decarbonize. They're in it for the right reasons. It's just trying to develop that business case that won't get them fired, that they can make this business case to their C-suite and it can make economic sense as well as the moral and ethical sense. And so it is largely, then down to regulation to create that market, to allow those business cases to be appealing, to make the most economic choice, the choice that's also best for the planet.

Speaker 1:

So I want to end on overall tones, the overall tone of the report and I reread the 2024 report in preparation for this and the tone of that is very much there's a, there's an optimism. It's very sort of mobilizing and it's quite sort of forward thinking and and optimistic in its outlook, whereas this year, with, you know, projects being cancelled and you know um things like fulcrum, bioenergy, who, you, who went to bankruptcy over the last year, there's a bit more of sort of a measured, realistic, okay, acknowledging the size of the mountain that is needed to be overcome in order to get this market ongoing. Anna, would you agree with that?

Speaker 2:

Yeah, I think that's fair to say. I would say, in last year's market outlook we did try to, or we started to, dive into some of those challenges. So I we talked quite a bit about the trend of delays and that's something that's continued on into this year and, as you mentioned, project cancellations, specifically in eu and us. We saw that quite um strongly this year, um, but I think that that challenge is also probably felt with the fact that we expanded that scope from 2030 to 2035. Last year we very much focused on 2030. And when you see that balance between demand and supply, it's not as jarring as then when you jump a few years ahead and that gap is quite big. So the inclusion of that I think we really tried to drive that message home of these next few years are very critical and we need to make sure that we can't keep that SAF momentum going now and in the years to come.

Speaker 1:

So, mark, looking forward to next year and you know if ICF and Skynergy are going to be involved in both doing this together next year, um, I don't know, but assuming this that is the case, um, and you enjoyed spending your evenings with each other and weekends with each other so much that you want to do it all again. Um, what do you, what do you think the tone of next year's report will be and is? Is that any different from what you? What would you like it to be?

Speaker 3:

and I'm going to ask you the same questions, but you've got some time to think about it that's an excellent question, um, kind of reflecting I'll tie this in kind of, with your, your previous question, I think last year there was a tone of optimism hype almost Hype might be the wrong word, but there was a wave of optimism. This year, the first year of the mandates, we're seeing some teething problems which I believe will be resolved, but that optimism or that hype has kind of died away. But that's not bad, because the overall pace of the river is still going in the right direction. It's still an optimistic report. We're saying that we have enough capacity to meet our demand. The caveat there is if that capacity reaches production.

Speaker 3:

Um, so then, looking forward to next year, uh, what I would like? I'd like us to say that we have uh esa facilities who have reached financial close and are undergoing construction due to to uh to operate and reach commissioning before 2030. That's what I hope, and I hope that we have uh less delays and cancellations relative to what we've seen in the past year. Um, that is what I hope for. Uh, being a bit more realistic, it's hard to say we're still seeing these positive signs. You know it's hard to say we're still seeing these positive signs. You know, with all the delays, the problems we're still seeing. The industry is going in the right direction. It's maybe a bit slower than what we expected, but again, if we zoom out, we're creating this industry within a matter of years and what we've seen so far has been a success.

Speaker 1:

It's just a matter of keeping this sustainable first and second successful anna, would you have a different, different perspective, or is it broadly the same?

Speaker 2:

yeah, broadly the same I think next year really hoping that we see more projects reach fid. I think this year in the eu we're at 30%, so hopefully we see more projects reach those milestones and also get some more clarity from a policy standpoint In EU45Z. Curious to see the development of that and the implication of that and seeing policy continue to shape up in the rest of the world as well.

Speaker 1:

And we'll wait and see if it's still going to be 30 pages or whether it's going to be marked Going for 200.

Speaker 2:

You heard it here first.

Speaker 1:

Everyone look forward to the Market Outlook 2026, 200 pages long. You're going to need a massive suitcase to carry it around with you or to read it online. It's great.

Speaker 3:

You've suggested to do the audiobook version. So that's great, oscar. You've suggested to do the audiobook version.

Speaker 1:

so that's great. Thank you yeah. I'll happily sit through and read through that for everyone's benefit. That is no problem at all. Anna Mark, thanks so much for joining us. That's been so insightful and really a very enjoyable conversation. So thank you, thanks so much. So thank you, thanks so much, oscar, for having us on.