The SAF Podcast
Welcome to The SAF Podcast, the only podcast on the internet that exclusively covers sustainable aviation fuel (SAF). So if you want to find out the real issues and challenges are for commercialising and scaling SAF production, look no further.
Every week we will be hearing from senior industry leaders who are actively shaping the future of SAF and aviation.
Hosted by Oscar Henderson and brought to you by the team at SAF Investor. Connect with us at www.safinvestor.com
The SAF Podcast
Kenneth Hill, BioCarbon Strategies: Deciphering SAF's Alphabetti Spaghetti
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Kenneth Hill, BioCarbon Strategies joins us for this episode of The SAF Podcast as we knee deep in the alphabet soup of North American tax policy.
Ken brings unique insight as a former U.S. Department of Energy financing official who worked on projects like Montana Renewables and Gevo, combined with current experience vetting SAF projects and advising investors on bankability across the US, Canada, and emerging markets.
Key Topics Covered:
🇺🇸 US SAF Market Grade: From B+ (one year ago) to C+/B- today—a setback driven by policy uncertainty, funding challenges, and administration headwinds. Ken explains why the trajectory is shifting back toward optimism in 2026.
📋 The SAF Act (Securing America's Fuel Bill): A bipartisan proposal restoring the $1.75/gallon bonus credit, extending availability retroactively, and creating crucial market certainty. Why passage by November 2024 matters for stability and investment confidence.
🌾 Farm Bill SAF Support: How the 5-year agriculture bill (currently 3 years overdue) addresses feedstock supply chain enablement and USDA loan guarantees up to $250 million. The critical difference between supply-side support and direct financing.
💰 45-Z Clean Fuel Production Tax Credit: The shift from blender's credits to production credits—and why guidance from the U.S. Treasury expected by summer 2026 is critical to project financing.
🏛️ Investment Tax Credits vs. Production Tax Credits: Ken explains the investor preference for investment credits ($600M upfront on a $2B project) over production credits (ongoing incentives that risk expiration). Why the structure matters enormously for capital deployment.
🇨🇦 CANADIAN POLICY DEEP DIVE: The Biofuels Production Incentive as a bridge to help producers survive the shift from the US blenders credit to production credit. The $15 billion CAD Canada Growth Fund for green projects. Also, Ken explains the expected amendments for the Clean Fuel Regulations (CFR).
🔑 Permitting as the Bottleneck: The often-overlooked critical issue in both US and Canadian project development. Why streamlined permitting is essential for scaling—and how power generation permit timelines (6 years) exceed solar build times (24 months).
💼 Bankability Requirements in 2026: Why projects today need multiple stacks working simultaneously—price stack (credits + subsidies), offtake stack (airlines + carbon buyers), and feedstock stack.
🌍 Global Demand & Carbon Markets: Why voluntary corporate buyers are as critical as policy mandates. The mix needed: government incentives, mandates, voluntary carbon markets, and offtake diversity to derisk projects.
🚀 North American Momentum: Why 2026 is the pivotal year—with clarity on SAF Act, Farm Bill, 45-Z guidance, and Canadian CFR amendments all expected. The potential bounce-back from 2025's lull to accelerated deployment post-2027.
Oil Price Note And Welcome
SPEAKER_02During the episode, there is some discussion around the price of oil, and the price referenced is around 70 US dollars. We recorded this podcast a few weeks ago, and obviously, since then there has been a lot more fluctuation in the price of oil, and it is now considerably higher than that, and considerably more volatile. Hope you all enjoy the episode with the brilliant Ken Hill. Hello and welcome back to yet another episode of the Staff Podcast. And this week we have an over. I think we're gonna call him a long overdue guest, but better late than never. Delighted to be joined by Kenneth Hill from Biocarbon Strategies. Ken has been, he's a regular on the biofuel staff conference circuit. So I'm sure many of you have uh heard Ken speak and heard his expertise. And today we are going to be talking all about SAF in North America, something that comes up a lot in passing, but we haven't covered in great detail recently. So very excited for this chat. Ken, thanks so much for joining me.
SPEAKER_00Hi, Oscar. It's great to be here. Uh great to join the SAF Investor Podcast finally and uh talk about sustainable aviation fuel, one of my passions. Exactly that.
SPEAKER_02So before we get into all things sustainable aviation fuel, give everyone a sense of your background. How do you end up where you are today? What's your career trajectory and how you really became passionate about SAF?
SPEAKER_00Yeah, so um currently I I am uh what I consider a finance and strategy consultant. Um and I work with a lot of either investment firms uh or or technology or project developing companies to try to deploy technology for generally renewable fuels and chemicals, not just SAF, but uh marine fuels, uh biofuels, SAF, and various other things. Um I'm based in the US and soon to be in Amsterdam, uh kind of splitting my time. My background, um, I'm initially a chemical engineer with a business degree, and uh spent a lot of my early career in the chemicals and oil refining industry. And so I really came from industry and um then moved about 15 plus years ago into renewable fuels and uh things like ethanol and biodiesel back when they were starting to take off in the early 20 teens. And a lot of the work I did was in commercializing new technology and doing the commercial activities around that, uh licensing of technology and various other things, and for some big companies, and then um uh went to work for a couple of startups trying to raise capital and debt and equity capital, and uh did that for a number of years trying to commercialize and build plants. And then the last couple of years, um I spent about three plus years working for the U.S. Department of Energy in their essentially is a green bank uh or financing bank, energy bank, if you want to call it that now, um, financing projects for uh renewable fuels and chemicals and debt financing. And and the uh some of the listeners may know of Montana Renewables, that was one of my projects. Givo is one of my projects. Um and I work on a lot of other projects in methanol, ammonia, um, SAF, diesel, various other things. Uh currently I also do do have some projects outside the U.S. I don't focus just in North America. I've got a project in Brazil I'm working on, some in Southeast Asia, Europe. Um Canada is kind of uh really kind of uh floating to the top these days. So a lot of things going on in the industry, and I'm involved in.
SPEAKER_02I would be a mildly less poor man if I got a pound for every time someone on this podcast said they were from a camp, they were a chemical engineer with a business degree. It's a very common, common route.
SPEAKER_00Well, that's what we do. I mean, there are a lot of chemical engineers that end up uh doing business. That's one of the reasons you kind of go into that.
SPEAKER_02Yeah. So what sort of what you mentioned you do, you do a lot of sort of financing work, you work with tech sort of on the technology side. Um, what's been sort of keeping you most busy recently?
SPEAKER_00Um well, probably the biggest things uh I'm working on a number of projects. Um, a lot of things happening in North America in particular have been trying to figure out what's the lay of the land is. And so um I'm working with a couple of projects that are not so much fuel related, trying to get financing. Um I've worked um what so that's kind of keeping me pretty busy. And this is things like minerals and um kind of uh power, power generation, uh, because that's kind of a hot thing right now. Um, but using kind of the same kind of materials and fuels and inputs. But the um the other thing that's uh there are a lot of investors trying to figure out what's going on here and who they should be investing in. And uh so I've done some work with some investors trying to vet projects uh and try to determine are they investable or not. And and what or should they wait or should they um are they ready to invest now? And so that's that's a lot of what I've been doing lately. Um and then some some projects are you know, they're looking more on the long-term view and uh trying to help them get things continue moving and developing the projects and structuring them so they can be financed uh somewhere down the road. That's keeping me pretty busy.
SPEAKER_02That's just a couple of things keep you busy. Not much on your plate then.
SPEAKER_00Uh yeah, it kind of comes and goes. Some of the some of these are longer term and some are kind of shorter term. Um so uh I try to keep a lot of things going at the same time. Yeah.
Grading US SAF Progress
SPEAKER_02A lot of spinning plates. So we're gonna primarily focus on the lay of the land aspects of what you do. And we're gonna have a discussion around what's going on in the US and Canada and mainly in North America, because there's quite a lot of things going on. We haven't actually had an in-depth conversation about Canada on the podcast before, so I think listeners will appreciate that. But before we get on to Canada, I want to start with the US. So how would you grade if you were going to give it a grade US SAF market progress over the past few years?
SPEAKER_00Uh that's that's pretty um we're starting easy. This is an easy question. Yeah, I I would probably I would, you know, I I guess I would probably give it something like a C plus, uh B minus kind of um scenario. A year ago that was probably a solid B or B plus. Um, but uh you know there's there there's been a lot of kind of uncertainty in the last year, as everybody who who follows this market in the US knows. Um and so that's that's made it much tougher. And I think there are a number of projects in the last year that uh have probably just died and just dried up because of funding and and the uncertainty and not being able to continue. And or they're having to pivot to other things while they try to slow burn work on staff. So I think that, yeah, something like a C is probably how I would look at it. Um now that I think that what's kind of evolving and developing could change that to something more positive. So we'll have to wait and see.
SPEAKER_02Is how how would you say that compares to the rest of the world? If you're gonna give the world a global SAF grade, and to put just sort of give it a bit of comparison to where the US is globally, what would you say it's roughly around the same spot or slightly more or slightly less?
SPEAKER_00Well, I mean, I think this is the thing that I am is very optimistic about where generally the SAF industry is headed. Um because you know these things are not always you know linear and and it's kind of more up and down and two steps forward, one step back kind of thing. Um but yeah, I think that you know we're probably globally more in a solid B, uh probably a little bit better than the US right now. I think that um just because of the a lot of the like in a lot of things, chaos happening in the US, um, that makes it maybe a little bit worse. Um and and the administration is just very antithetical to biofuels in general, to be honest with you. Um and or anything that can be considered green. And so consequently, I think it gets a little bit lower grade. Uh, I think that that we're probably at a lower point uh in the US right now than it will be because there's kind of this bounce back or uh or pushback that you're gonna start you're starting to see. And um so it could come, it will come back up, I think. But I think globally we're probably something like a solid B. And there's I think there's a lot of problems um that we gotta kind of work out, and whether that's in Europe and when you look at sub-targets and various other things under the mandate structure, um, and the ability to actually meet those, financing. Um, so there's a lot of issues. Asia is catching up quickly, I think, and and we'll move quickly. Brazil is is trying to move forward quickly. So I think there's a lot of positive things. Um, it's just kind of slow, it's a slow grind, right? And uh we'll decide how how long it takes us to get there.
The SAF Act Explained
SPEAKER_02So I want to uh get into the weeds of US policy alphabet soup for a bit. So there's a few things that are sort of murmuring sort of beneath the surface that are kind of sort of starting to come to a simmer. There's the most notably what some people be aware of, some people won't be aware of, is the securing America's fuel bill, the SAF conveniently named SAF bill, which is currently in the House, just past the House. Where's that at at the moment?
SPEAKER_00No, so so the there is so you have to understand how the US Congress works. It's it's a little bit strange for people to get away. Policy strategy, you know, right now. Well, the the weirdness of American government, maybe. Um the so there is a Senate bill um that has been proposed, um, and there's a corresponding House bill that's essentially identical, um, that's been proposed uh to uh as as the SAF Act, uh proposed to the SAF Act. And these these kind of bills are tend to be very simple. If actually, if you look at the text of this bill, it's it's a page, just about. And um it's about changing the existing IRS rules to to increase or re-restore the SAF bonus credit uh to a dollar seventy-five a gallon, extend the time frame that that credit will be available, and importantly, it also makes it retroactive to December 31st, 2025. I think I think. Uh no, I guess maybe not. Uh yeah, that's right. So it basically makes it retroactive to the end of last year. So there's bipartisan. The good thing, good news on this is that it is both Republican and Democrat supported on both sides. And so oftentimes when this kind of bill gets proposed, it doesn't get an up or down vote in the Congress. What oftentimes they they do that and see how much support they can get. And oftentimes it gets folded into another bill. And if it's supported generally, then they can fold it in and do it all under one big bill, you know, not to be confused with the big bill from Nash. And um, so the but the good news is that it is uh out there, I think that does have a lot of support. I think that the constituents, in especially the agricultural reasons, are very supportive and the politics are very strong. So my hope is that it actually gets passed before the elections that we have in November. Um, because if that happens, then that means both sides are essentially in agreement that we want this. And it makes it a bipartisan um agreement that make gives it stability going forward, which I think is a big deal.
SPEAKER_02You say give it stability, but I've said it before, and one of my favorite quotes that I've heard on US policy was by Gene Jubolis from World Energy, and he said certainty comes in four-year cycles, um, if that long. So you say this the bipartisan support gives it uh sort of solidity potentially if it gets passed by November. But you know, uh in practice, is that do we see it being more stable than previously existing US policy on this?
SPEAKER_00I think that you have to look at this, um it really all depends. And it really depends on how strongly it is supported by the public. And the I I've been around long enough in this industry to know, you know, in the early days of the renewable fuel standard, um, which was passed in 2007, there was a lot of debate on getting repealing and changing and blah, blah, blah, blah, blah. And eventually that went on for a couple of years, and eventually it became settled policy, and now nobody talks about really repealing the renewable fuel standard.
SPEAKER_01Yeah.
SPEAKER_00And so they tweak it and they modify it, you know, as far as the way it's implemented, but the the law doesn't really change. And so I think that because generally it is well supported, okay, by the public and industry, even the even the refining industry has kind of kind of come around to that. The which was they were the biggest pushback. Um, I think that this this kind of SAF support for SAF development um has broad support. Um, and in particular, the agricultural sector, because the agriculture industry, somewhat because of a lot of the policies of this administration, have are in what they consider a crisis mode. And so they they see the writing on the wall about EVs eventually, right? There's gonna be less gasoline consumption over time. They see that, and that means correspondingly, less ethanol consumption. And they see this as one of the routes of getting products, expanding their markets. So I think that if the Republicans in the Republican-controlled House, Senate, and White House sign that extension, that's a very positive. It doesn't mean it can't change, but it's a very positive thing and makes it somewhat pretty pretty bipartisan. And I think it's it becomes at that point less of an issue to or a or a big target to to repeal. So I think that's what makes it give it some more stability.
Farm Bill Feedstocks And USDA Support
SPEAKER_02Yeah. You mentioned previously about the the farm bill, and I'm assuming that's the food, farm, and national security bill. All bills at the moment seem to have some sort of national security or securing America. Some there's always sort of an American first lilt to them at the moment. But how will that impact sustainable aviation fuel? Sort of you mentioned how it's sort of neat the the SAF bill might be rolled into that and they sort of cut mildly align. So what's what's that doing for SAF?
SPEAKER_00So the and you're right, there's a proposal in the and the farm bill is something that's been around. Uh, it's one of those bills that is essentially supposed to be a five-year bill, and they've been doing that since like the 1930s or something. It's been a long time. And and they have to, it has to be um, for whatever reason, it has to be renewed every five years. And so this one is actually three years overdue. Um, it's been kind of extended, and so they kind of have this gets into some around farm subsidies and lots of other different things. And um so it really gets down to agriculture and supporting the agriculture industry. And so uh again, part of that agricultural crisis response, I think you're seeing that the Congress is responding to what they're hearing from their farmers and the industry that, hey, we got a problem, we need to do something. And so they're trying to, in the farm bill, include language that supports SAF. And when you look at the bill, though, it's not about fine, well, it can partially be about finance, but we'll get that in a second. It's mostly about enabling the supply chain, right? And so think about fats, oils, and greases, so you think about grains to go into ethanol, or you know, the how do you enable the supply chain to supply saf production? And you know, there's uh always, especially now that they we've kind of gotten to this North American-centric supply of uh feedstocks um and trying to cut out um Asian imports of Yucco and Brazilian ethanol and all that sort of thing. So, how do we kind of use this as a mechanism to increase that supply chain? So I think that's a big part of this. But there is a financing piece as well because the U.S. Department of Agriculture can provide loan guarantees, kind of small loan guarantees when it comes to SAF projects, but 250 million is their, they can do a$250 million loan guarantee. And I've got one of my clients actually applying for that. And um so that's if that kind of depends on how this full unfolds, but if that becomes kind of a at the very least, it it specifically calls out we want USDA to support SAF. And that um then it depends on then what structure they put around it, but it's very positive from that perspective. Doesn't it's not a you know panacea um that that makes everything happen, but it is supportive uh on the feedstock side in particular, which is a big deal.
SPEAKER_02And is that you've mentioned it's been around and extended, and this is sort of a long ongoing process. What's the anticipated timeline for this? Is it similar to the the SAF bill where you think it might get done but before November in the midterms, or is this slightly longer, pushing into 27?
SPEAKER_00Well, the current bill is yeah, as I said, it's already been extended a couple of times. I think it expired, uh, it was supposed to be renewed in 2023. Um and so now it's been extended two or three times. And so it goes through the end of September of this year. And if I mean there's a whole lot of things that are involved in that bill that um if it doesn't get passed by that time or get extended, I mean they could just you know kick the can down the road. But um I think that there's enough momentum now to not just continue on uh and to that there'll probably be a new bill and it will get approved before the end of September. And so I think that's likely. Um and so that could mean that could mean that by the end of the summer, we I mean 2026 is going to be a pivotal year for SAF, I think, in the U.S. and Canada, as we talked about that. But there's the Farm Bill, there's the SAF Act. If all that kind of comes together by the end of September, and the guidance from the U.S. Treasury on the 45Z tax credit, the clean fuel production tax credit, is likely to be done by the end of the summer. So suddenly. By September, there could be a lot of clarity around support for SAF. And if so, that could be really strong messages to the market.
State Incentives And Plant Siting
SPEAKER_02And what about state-level incentives? We've spoken a lot about the federal side of things, but the state side in this sort of uncertainty that the federal sort of policy has had over the last few years has become really critical to a lot of staff producers in locate in the states where there are actually incentives or tax policies in place.
SPEAKER_00Yeah. So the one thing about that's interesting about SAF in particular, um, but I think a lot of these kind of fuels in general is that like if you think go back to ethanol and biodiesel, that started out as an agricultural support kind of mechanism. Yeah. Um and it morphed into kind of uh renewable, green kind of thing. And then it became more about jobs and economics and economic development. Because the state of Iowa uh in particular in the coming out of the last century was struggling. And now they're uh you know, arguably a um an agricultural powerhouse, partly because of all the biofuels and things that and policy that come along with that. So I think that what you're starting to see at the state level is that they realize that the the mindset around SAF and other kinds of fuels like this is not so much about green. Okay, that's nice, but it's more about, hey, they've suddenly realized this is jobs, it's investment, and it is jobs that are harder to outsource or to eliminate because you have global markets, and and there are a lot of areas in the economy that need that, especially in rural areas, whether it is the pulp and paper mill town where the mill closed two years ago, and there's a lot of wood and uh available, but there's no jobs and nothing, no real use for it. Nobody's using paper anymore much. And so, or the agricultural area where they're worried about soybeans uh supply uh sales or this or that. So I think that states are looking at this more as an economic development kind of point of view, and therefore they're stepping up on both both Republican states and Democratic states. Democratic states in particular are trying to do some of this from a green perspective and try to counter the federal government. So uh, you know, they if you're not gonna have uh federal policy around um curbing climate uh warming gases, uh which they just repealed last week, um the uh then we'll do it at state level. And so how do we do that by greening our grid and uh incentivizing uh green fuels and things like that? So you've got Washington, California, Oregon, you know, uh Illinois, blue states that tend to do that, um, and Minnesota and others. Uh but do you also now are seeing some um Republican states like Nebraska, Arkansas, Kentucky, um, you know, various others that say, oh, you know, uh, we want a piece of this pie also. And we need investment. And so if this is a if SAF is a way for us to get jobs and investment, then let's figure out how to make this work. So I think that you're starting to see even more of that. And that's a critical piece when you look at SAF projects. I mean, it's unfortunately compared to other places where you have mandates and things like that, which we'll never have, I don't think. Um the you have to kind of cobble the pieces together in what I call the Goldilocks scenario. Where's the Goldilocks site and location for your facility, feedstock, incentives, uh infrastructure, um, and all these kinds of things that, hey, this is a great place to site a plant and create, put my investment. So states are trying to then states tend to be very competitive from that perspective. And so the more you see here, the more competitive they'll be.
SPEAKER_02Where is the Goldilocks place right now?
SPEAKER_00Uh depending on what you're trying to do. Um, I mean, if you're looking at let's say Fisher tropes gasification, um, that's that's probably going to be either Washington or Minnesota. Um if you're looking at um alcohol to jet, you know, that was going to be in the Gulf Coast with Brazilian ethanol. Probably not now. So that likely maybe moves back to the Midwest. Um for HEFA, um that's hard to say. Um the yeah, I don't know about HEFA. Um HEFA needs less support than the others, but uh um yeah, I mean yeah, that could be in the Midwest too, but uh because they get those tax credits. I mean, Illinois or Iowa, you've got lots of feedstock, and you can just you know send it to Chicago or Hare and get$1.50 a gallon on it. So um I think that's a big, big draw, but um a little bit less of a Goldilocks situation than the others.
SPEAKER_02So I want to conclude our US specific portion of this podcast, and then we're gonna move north, we're gonna move up over the border, um seamlessly for the first time ever, over the border into Canada. And I wanna I want to get into their alphabet soup because they're also uh symptomatic of having a lot of letters relating to policy. So give everyone an idea about where Canadian staff is from a policy perspective, and then maybe once you've given an overview, we can dive into the nuances and specifics about some of the things that are going on there.
SPEAKER_00So in Canada, there this is an evolving situation as well. Um the and of course, the the Canadians also have a new government. Uh Prime Minister Mark Carney has been in less than a year now, I think.
SPEAKER_02We know him well in the UK.
SPEAKER_00Yeah, yeah, yeah, yeah. Uh ran your bank for a while. Uh yeah. Um, so I think that and you know, he has taken partly, I mean, he I mean he's kind of world famous, I think, generally, around some of the things he's doing uh to try to respond to you know changing things in the world. And so, but that actually, if you look at biofuels and SAF, that was already happening before he came in. Um, or the the the issue was beginning to come to a head in Canada, I think, before that, because with the Inflation Reduction Act and the changing policy in the US from what was called the Blender's Tax Credit and to the kind of the shift from that to the 45C clean production tax credit uh tax credit. They went from a blenders tax credit to a production tax credit. And the Canadians were participating a lot in biodiesel and diesel production with the blenders tax credit. When that changed, suddenly the US was making a lot more diesel, and kind of a lot of it was ending up in Canada. So suddenly Canadian producers were struggling, and so um they have had to respond to that. And one of the things that you see that they recently done uh not too long ago, what they call the Biofuels Production Incentive, uh, which is kind of a bridge, I think it's a bridge policy to provide support for producers of biofuels, particularly diesel, um, which kind of correlation, you know, kind of in effect affects SAF, um, to get them across this bridge over the next couple of years while they adjust policy in Canada. And so the that's kind of probably one of the big things. The other thing that they have is that they've had for a while is something similar to the renewable fuel standard in the US called the Clean Fuels Regulations, the CFR. And the CFR is essentially a biofuels policy. And what they have decided is that, hey, we need to be stronger on this. And so they're now going through the process of amending the clean fuels regulations, and it's anticipated that they will include SAF in that. In fact, what they actually do in that is still up in the air. But I've had a lot of uh discussions with the Canadians in the government, and there's talk of putting a mandate in place. There's there's talk about incentives, like 40 cents a liter. Um, so where they land on this is gonna, you know, we don't know yet. But either way, it looks like there's gonna be some big incentives for SAF production. And the amendments to the CFR, they're anticipating trying to get those done before the end of the year. So again, 2026, even in North America, is gonna be pivotal in Canada as well, because whatever comes out of that CFR amendment is gonna be big when it comes to SAF, it sounds like. Yeah, they're big. And they're also trying to provide financing structures through the uh Canada Growth Fund, which is about 15 billion uh Canadian uh to lend. And uh, you know, it's not a huge amount, but it's a pretty good chunk of change, and other in investment incentives. So they've they've tried to set then this would be a pro uh a nationwide kind of approach. Then you've got um British Columbia, of course, has been kind of the leader in this space, and uh they have their own uh low-carbon fuel standard, and in effect, they've got SAF mandate volumes uh starting in 2028, uh going from 22 million liters up to 66 million liters in 2030. So so there's you that you can see this starting to come together in Canada, um, partly because they want to uh be more self-sufficient and not be as tied to the US market. Um, but also that I think they see this as an opportunity for investment, jobs, and export potential.
SPEAKER_02Yeah.
SPEAKER_00So it's a lot happening there.
CFR Reforms Mandate Or Multiplier
SPEAKER_02A lot happening there. I want to go back to the proposed changes to the CFR, the clean fuel regulations, and the debate that sort of or sort of discussion that's ongoing around whether you uh implement this sort of credit multiplier, which is the incentive version, or you go, they go more slightly more European with the domestic production production requirement effectively a mandate on domestic production. What what's your uh uh sort of instinct on where this lands? Because we've seen with the production tax credits in the US and we've seen with mandates in Europe, if you don't necessarily get it right or have full consideration of the implications of these policies, there are road bumps ahead. So they've got the benefit of having these two great examples of these things having come through already to sort of use as potentially as models, but where do you see it sort of ending up and landing?
SPEAKER_00So I think they will learn from both the European, UK, and the US model. Um my sense is they won't be as stringent as the EU for sure. No way. Um because what do they what do they see as the opportunity and the uh here and so one like the US, um Fisher tropes when it comes to SAF, Fisher tropes is going to be one of the big ones for them. Um they have a ton of pulp mills that have closed in in regions, lost jobs. They want to see that happen. Um they also have, I think they they could have a fair amount of support for e-fuels because the grid in Canada is so green already. Um, you know, I've had discussions of uh with with them around, you know, they export a lot of their green power to the United States. I mean, like, Ben, that is I you know I I wonder do they just take all that back and incentivize e-fuel production? Um, I would, you know. Um, I mean, they've I know there's one project I know of already that's relocated from the US. There's an e-fuels project that was going to be built in the US, and it's relocated to Canada. And so it's not SAF, but it's uh another e-fuels. And um, and because they're basically all you gotta do is plug into the grid, and now they have zero carbon power. Yeah, and so I think that you'll see you the Canadians will take it a look at this and see how can I take advantage of my natural uh resources, whether that's green power, carbon capture and storage, woody biomass, and a fair amount of agriculture, not as much as you know the U.S., of course, but uh um if you look at the southern uh provinces, there's a fair amount of corn and and wheat grown in Canada. So, and canola, of course, uh rapeseed, rapeseed for European uh um listeners. And so, yeah, I think that they will be looking at how do we take advantage of our industries and grow this market. I would not be surprised if they have a mandate but is much more flexible than what you see in Europe.
SPEAKER_02Could you have both? A bit a bit of sort of blending of the two, a bit of mandate and bit of incentives on the side?
SPEAKER_00I think you could, especially when because their incentives that they tend to do are not production tax credits, they tend to be investment tax credits.
SPEAKER_02So, you know, I can see can you explain the difference between a production tax credit and an investment one for people like me that don't know the difference?
SPEAKER_00Yeah, so an investment tax credit is okay, let's suppose you're gonna build a SAF plant and it's gonna cost you two billion dollars. Um if you can get, and let's see here, the clean technology manufacturing tax credit um is up to 30%. Because let's let's assume you get a 30% tax credit. That means you get for your$2 billion project, you get a$600 million tax credit. Essentially, they're offsetting. Now you've got to be able to monetize that, okay? You got to take it off your taxes some way. But and and depending on how flexible they make those tax credits, you can actually sell that and or use it as tax equity. Um, so that's an but that's an upfront credit, right? Yeah. Whereas a production tax credit, let's say the 45Z we're talking about in the US, that's a as you produce it kind of tax credit. So if I produce a million gallons this year and I get a dollar per gallon tax credit, then I get a million dollars in a tax credit, a tax credit, you know, uh a write-off essentially off my taxes. Or I can monetize that in another way. So it is as you produce it over time. And that's where production tax credits, you know, there's always a debate on when they expire. And so if you're an investor, if you're a uh a fund that's looking to invest, I'd actually probably prefer if it's if it's kind of cash neutral, an investment tax credit because I get it up front, and I don't have to worry about it expiring or some politician manipulating it and saying, Oh, we're going to instead of it change uh expiring in 2033, we're gonna make it expire in 2027. Yeah, and suddenly I just lost my expected uh benefit. So which kind of what happened is what happened with the big bill in the US. So um that's what tax credits are pretty good from that perspective.
SPEAKER_02And what about permitting? It's certainly the case in the UK. If you construct anything, it takes 15 years, and 12 of those are just filling in forms and paperwork. I exaggerate mildly, but some people will absolutely understand the pain of that. So, what about permitting permitting in in Canada and issues around that?
SPEAKER_00So that is probably one of the biggest issues in Canada, uh, from what I'm told. And so part of that is because of the way the Canadian government is structured between the provinces in Canada and the and the federal government. So there is uh it can be very, very complicated from that perspective. You've got to kind of have rules at the province, provincial level, and different rules at the federal level. And so, and how do you kind of get them to work together? And so consequently, it tends to be very painful. Um, but the Kearney government has recognized this and they're trying to come through with a way to streamline that. I think if they want to see this really take off, they that is gonna be probably the number one thing they need to do is to streamline permitting to make this workable across all the provinces and the First Nations to be able to make this work. Um, and so that's probably the most critical item they have. That's not uncommon with a lot of other development. The US has a lot of problems in permitting. Europe has a lot of problems in permitting. The UK, as you mentioned, has a lot of problems in permitting. I think there's a general feeling on the entire political spectrum now, starting to be. Whether you're on the right or whether you're on the left, that we've if you want to build things, and I think the Chinese are showing this and maybe in something of an extreme, but um the if you want to build things and move along with technology as fast as technology is moving today, you've got to streamline permitting in some way and make it more effective. And um I think the Canadians have that problem just like anybody else.
SPEAKER_02But running into permitting roadblocks can have so many consequences down the line in terms of you know time frame you've got to produce, the amount of capital you've got, the amount you need to raise, whether you actually need a funding round because you've just burnt through your cash just waiting for permits and things, things like that. So the consequences of not actually having permitting, not having that in order from both the producer standpoint and getting all your forms filled in, and both the government perspective in terms of actually incentivizing and getting staff domestic production in whatever country they are up to scale is it is critical. And it's something that actually isn't really talked about so much, or as much as other issues.
SPEAKER_00Well, I know that um it's being talked about in the US and Canada a lot.
SPEAKER_02Um maybe I'm just not asking it enough to people then.
SPEAKER_00The the but I think that the big thing, well, the big thing that has made that rise to the you know to the fore in the US, I think has been power generation permitting. And because you know, all this stuff about AI and data centers and and various other things, you know, the the increasing load on the grid, and the and the the time to be able to get a permit to connect to the grid is like six years or something. And it's crazy. And so you might build a solar farm in 24 months, but you can't get a permit to connect in five years.
SPEAKER_01Yeah.
SPEAKER_00And that's the same for a gas plant or a nuclear plant or whatever. So I think that the that's part of the um the record that's kind of driven in the US at least this question to um to in front of people's minds. And um And I think everything else kind of comes along for the ride.
SPEAKER_01Yeah.
SPEAKER_00Um and it's not, and it's really not even just, you know, factories, you think about it, but it's also roads and rail lines and various other things that take a long time to get permitted. And and you know, you don't want to go kind of um, I mean, I say that the China does it kind of to the extremes like they do whatever they want. You know, you they want to put a rail line through a neighborhood that'll just do it. Um I mean, in in the rest of the world, you know, you have to get uh community input and various different things. You might get lawsuits. That's that's okay, not a bad thing necessarily. You want it don't want to have unbridled development, but you need to have some sort of middle ground. And I think that there is this kind of general uh consensus starting to build in North America at least, that we need to kind of seek a middle ground there.
SPEAKER_02Yeah. It's it's very much and China is led by engineers and engineers in the government. Xi Jinping's got uh half of his government cabinet are engineers by training, whereas the Western cultures are led by lawyers have a lot more prominence than engineers, which means permitting becomes an issue, as opposed to engineers saying we will build there because it's the Goldilocks site, which you can do in China, which is the big sort of divide that you've got between the two, currently, which is partly why Chinese production is scaling at the rate it is versus other places. It's not the only reason, but it's certainly a major contributing factor.
SPEAKER_00Yeah, and and um I think Xi is also a chemical engineer, by the way.
SPEAKER_02He is, he is he is absolutely a chemical engineer. Not that you want him designing your staff project, though.
SPEAKER_00No, no, but hey, hey, hey, hey, uh I'm sure he's a smart guy. He's a smart guy.
SPEAKER_02And then he'd then he'd be perfect.
SPEAKER_00Yeah, well, we'll see. So no, but I I think that that's uh that's a big deal, and I think hopefully there's momentum on that as well, because one of the things that's happening in the US is this uh on the left, which is kind of interesting, is this the thing they're calling the abundance agenda. And um essentially there's this recognition that you know environmental issues are important, but we can't let it stop all progress.
SPEAKER_01Yeah.
SPEAKER_00And if we want to build and build big, we have to be able to do this in a in a more even keel. So we'll see what happens.
Bankability Policy And Offtake Stack
SPEAKER_02Yeah. I want to sort of end and sort of combine Canada and US, because as we mentioned, there are themes between the two of them. So is it sort of possible? There was sort of a lot of conversation a few years ago that in order for TAF projects in the US to be bankable, to seek investment, they have to have take advantage of the tax credits, federal and state. There was this big narrative, and then it sort of died off a bit, and other sort of fundamentals have sort of become more important. But do projects need tax credits in order to be sort of bankable and to sort of receive investment and to be attractive to investors still? Is that something that's sort of high on the priority list list if you're an investor looking at investing in a project, whether it's in Canada or the US, or are other fundamentals, the whole sort of ecosystem around the project, the whole sort of the technology alignment feedstock, the those different sort of aspects that we we talk a lot about on this podcast?
SPEAKER_00Are they more important than I think it's all of the above, actually? Um I think that the tax, the way, the way the US market is structured, in order to get projects financed and built, you need those tax credits that incentivize SaaF production. The current big bill adjusted 45Z does not incentivize SAF. It incentivizes renewable diesel, right? Um, and which is cheaper to make than SAF. So, and you get the same tax credit. So you're gonna make more renewable diesel. And uh I think that the the this the SAF tax credit is important if you want to actually see it uh deploy. Um and I think that all these other things are important too. Feed stock, so this USDA work to enable the feedstock supply chain, that's important. Yeah, um, the tax credit, the state tax credits, all are important. And we didn't talk about the proposal from the renewable from the EPA on the renewable fuel standard renewable volume obligations, which are as if they come out as proposed, will be supportive for SAF, uh, because you have the renewable fuel standard uh renewable identification number credits. Um so in order to get your project built, you have to piece all of this together, I think. The one thing that that I do not see coming back, at least in the in the near term. So if the SAF Act gets passed, the US the farm bill incentive gets there. Um now suddenly you've got more calm and certainty around the the financial incentives, that's great. Um the thing that's not uh probably coming back anytime soon is the government financing at large scale that the Trump administration is essentially for renewable fuels has essentially dot killed it. Um and so that's not coming back. So developers have to figure out how to create a different capital stack than they used to. So what does that mean? That means off-take contracts are even more important than they used to be if they want to get finance. I don't think it's so much a technology issue anymore. And I, you know, the the the government has kind of scrambled the feedstock uh supply thing with Brazilian ethanol and imported Yuco and tallow and things, but I think at least you know what it is now and you figure it out. But the um I think that the big thing is going to be able to get these things financed because they're just so big and it's like so expensive. This the certain the policy certainty is is a huge help. So I think if you think of North America, 2026 is could be a pivotal year, both in Canada with the Clean Fuels Regulation, US with 45Z Farm Bill and um and um and and the RFS that that starts to see kind of maybe 2025 was a lull, yeah, and 2026 is kind of the bounce back, and then 2027 you start to see a lot more activity. I think that's possible.
Corporate Demand Book And Claim Limits
SPEAKER_02I'd love to to end it there by I've got another question to ask you because I think that was that was actually a very good summary, impromptu summary of what we discussed, but I am going to ask one more question. And there is a discussion, not just in the US, but in the sort of staff globally, around whether market-based measures, we're talking book and claim and corporate customers and um aggregated demand and off-take agreements and things like that on the demand side are going are enough regardless of policy to actually to stimulate and scale this market. And I wanted to get your your thoughts on that because we've spent a lot of time talking about the different policy structures and the way they're sort of built to incentivize. But so where do you sit on the this the demand market based sort of building versus the requirement policy to stimulate?
SPEAKER_00So yeah, you so you mean book and claim as far as the way the supply chain works or more on the voluntary carbon market?
SPEAKER_02More on the demand side, the voluntary, the corporate customers scope three by scope threes, and on sort of on the demand side actually being the stimulator as opposed to policy. Do you think that's feasible?
SPEAKER_00No, I think that's that's very critical, honestly, because um I think and then we I didn't say this in my the kind of impromptu summaries you called it, but the the the that's another piece of the of the pie that needs to be there. Um and you know, I'm hoping that more corporate customers than Microsoft, which is by far the largest, yeah um start to come in in a big way because that's that's an important piece of the of the stack to be able to get these things financed. Because if I can get uh and I I know that big there were big customers that were lined up and and have in negotiation for a lot of these a year ago, right? And I think a lot of them have kind of paused because of all the uncertainty. Um but if they come back in uh once there's more certainty in the market, um I I think that's critical, that needs to be there. It's a way in with the lack of financing, I think that is a way to make a project more bankable. And so I think those are important.
SPEAKER_02Would you take it to the extent that it could be a market stimulator in the place if you had just got rid of policy that actually if you actually stimulated this market side demand that it could actually replace the policy? Go that far or not that far?
SPEAKER_00No, I don't think it goes that far. I think you need both. The um because if you think about it, if you look at the voluntary carbon market, what is that value? Um, if without policy, I mean, I mean, depending on what you're doing, you might get anywhere from$30,$40,$50 a ton carbon value up to two or three hundred, depending on how how high quality your carbon removal numbers are. If without policy, I mean that number skyrockets to a thousand or something, and now you're in DAC kind of territory, which nobody wants to really be in. So I no, I think you need them all, need them all.
SPEAKER_02Need them all.
SPEAKER_00Either them either you have the mandates, you have mandates, the penalties, okay, and and the voluntary carbon market, or you have the incentives, the carrots that that they have in the in the US and a few other places um with the voluntary carbon market. Because these things are just too big, too hard to finance without some. It's a way to de-risk the airline.
SPEAKER_01Yeah.
SPEAKER_00Okay. You think about it, I just we pick on Microsoft since they're the biggest uh buyer of these credits. But if I got a 10-year contract with Microsoft to sell their my carbon credits, that is certainly more bankable than um a 10-year contract with XYZ airline, which may or may not may be profitable from year to year.
SPEAKER_02Yeah. So that's that's together. There's that's going into the credit ratings of the agent of the airline that you're signing off take agreements with. Like that is something that's taken into consideration as well. So if you're if they've got a great credit rating, presumably, you know, that is less risky than so it depends on the airline.
SPEAKER_00It does depend on the airline, but you know, airlines is a very air airlines are very cyclical, passenger airlines. Now, I've always been an advocate of you know a mix, right? If you can do freight airlines, passenger airlines, uh some fuel suppliers, and then having a voluntary carbon market buyer. Now you've got kind of a uh a mix of off-take contracts that make it much more bankable, in my mind.
SPEAKER_02You've you're almost building sort of an off-take stack, as it were. Yeah, yeah. Exactly like you're building the capital stack of the on the finance side, you're building the off-take stack and the feed stock stack. So you're basically making loads of columns. That's effectively what we're boiling a SAF facility down to.
SPEAKER_00Yeah, you've got a and you've got a in the in the US, you've got a price stack. You've got all the different credits and and and all that technology stack. Yeah, so it's you have a lot, there's there's a lot of parts here to make these things work. They're huge. And and I do not see for for small companies, developers to do this, they need all of that certainty. Yeah, now if you were Total or Exxon Mobil or BP or you know what XYZ oil company, could you do this on your own? Sure. You don't need all that. No, but I don't see them, they're not gonna they're never first movers in this kind of thing.
SPEAKER_02No, no.
SPEAKER_00Now, 20 10 years from now, will they be building these kind of things? Maybe.
SPEAKER_02Probably. Um I'd I'd wager they probably will.
Why Ken Still Feels Optimistic
SPEAKER_00Probably will be, yeah. Um, but of course, they've come down the cost curve by that time, hopefully, and and other things, and they can see it as being more profitable. But today, you need all those incentives to get there.
SPEAKER_02Yeah, in my mind, a SAF project looks a bit like a Greek temple now, just with lots of columns on the outside and then a roof on top.
SPEAKER_00I don't know, it's a giant puzzle in my mind.
SPEAKER_02Yeah, I might have just massively oversimplified a SAF project, but that that's gonna be my diagram of a SAF project now. Lots of columns and then a roof on top, and then out at the end is gonna come SAF. And that's basically my mind what a SAF project's gonna be like forget all the complicated technology stuff. Yeah. That could be SAF theory, and then practicality could be totally different.
SPEAKER_00Yeah, no, I I tend to think of it more like a puzzle, but uh, but yeah, I can see that.
SPEAKER_02I'm gonna draw it and then I'll um I'm gonna show it to people. With all these columns and all these stacks, and that that's actually what it's what it what it comes down to stacking all these things up and making a nice column.
SPEAKER_00Hey, you know, like I said, I've been doing uh in the renewable fuel sector for 15 years, and you know what I was doing 10, 12 years ago, I thought was complicated, but uh man, compared to the SAF, uh uh that was easy compared to SAF.
SPEAKER_02Because it's just SAF's easy.
SPEAKER_00No, no, SAF is SAF is is that what I was doing 10-15 years ago uh on steroids, because you you've just got so many different pieces, and it's in order to do it, you have to do it at reasonable scale, and you're talking billions to do that, and so that's just really hard.
SPEAKER_02Yeah. No, I I think everyone is in agreement that it's very difficult to construct and build and finance a staff project. So anyone that's done it successfully is deserves massive respect, and it's not individuals, it's massive teams, massive collaborative efforts, big ecosystems, lots of different companies, lots of different stakeholders all pulling together. So it's it's massively complicated.
SPEAKER_00Well, and but on the flip side of that, I'm still optimistic about it because even as complicated as it is, I think that when you look at all the benefits, um, it really hits a lot of the benefits that we as a society need. You know, it gets down to rural development, economic development, job security, energy security, um in addition to climate change, uh addressing climate change. And I think that's one reason you see the World Bank and the uh IFC uh looking at this. They see this because by its very nature, it's going to be a decentralized model.
SPEAKER_01Yeah.
SPEAKER_00And so you can build these things almost anywhere with the right Goldilocks scenario. And they're different, you know, depending on where you are. Uh, you know, Kenya has a different Goldilocks scenario than Malaysia, than than British Columbia. Uh so exactly. Or so yeah, that but there are multiple scenarios, and you can do them, see them everywhere. So I think that I'm optimistic, uh, hopefully we get some level of calm, yeah, you know, in in the markets that allows people to have some certainty and start to move forward.
SPEAKER_02Yeah. I think one of the best things is that that I've heard is that the potential for SAF in Africa to be produced cheaper than jet fuel, just because it's so there are some airports that are so remote, it's so hard to get to. So there is potential literally everywhere for SAF. It's about putting the right columns in place.
SPEAKER_00Yeah, that's right. And the and the innovation is happening too. I mean, I've already seen, you know, everybody, you know, everybody on the on the podcast, HEFA is by far the you know, most mature. Um, maybe not, maybe not 100% mature, but it is the most mature. Yeah. And and I'm already seeing innovation in that. You know, we're looking at lower energy cost and lower hydrogen use, and and if we can start to see cost reduction and efficiency uh this early in, you know, imagine where it goes later on. And so you're you're going to go down that cost curve. It's going to become more competitive. Um I struggle to see it becoming on par with jet A for a long time, though.
Jet A Parity And The Green Premium
SPEAKER_02Yeah.
SPEAKER_00A long time.
SPEAKER_02How how long is a long time? Ten years?
SPEAKER_00Well, see, the problem the so the problem with parity on Jet A is okay, Jet A price is not a static thing. Right?
SPEAKER_02And so, it's not price though.
SPEAKER_00Comparatively, it's a good but but jet A, I mean, look, I mean, today, you know, Brent is probably something like$70 a barrel.
SPEAKER_01Yeah.
SPEAKER_00Um, if you the energy transition really kicks in, and I think you're starting to start to see a lot of that in the next 10 years in the global south as well as in the developing countries. And less gasoline consumption, less diesel consumption, all these things start to happen. That means less demand on oil. That means the price of oil goes down. So the price of Jet A at$70 a barrel is much higher than it would be at$40 a barrel. So the more, I mean, and California is a great example of this. The low carbon fuel standard was so successful and incentivizing consumption of renewable fuels that it drove down the carbon price. And so the a successful SAF, uh, EV, diesel, whatever deployment is going to drive down oil price and make you the SAF is chasing a declining Jet A price.
SPEAKER_02Yeah.
SPEAKER_00That's that's gonna be hard.
SPEAKER_02So the concept of a green premium is a bit of a slight misnomer. Well, it's not a misnomer. There is a green premium, there always will be, but it's just not related to necessarily the expense of SAF or green fuel. It's more related to the the how Jet A or Jet Fuel and SAF are related to each other as opposed to the price of the individuals.
SPEAKER_00See, I reject the idea of a green premium. The because to me, SAF is two products. Yeah, it is fuel, it is energy, and it is carbon reduction.
SPEAKER_02Yeah.
SPEAKER_00And it's so it's really two products, whereas Jet A does not include the price of carbon reduction. Yeah. And so, or the the cost of adaptation or whatever you need to do because of the consumption of that fuel. So it's really you're really kind of talking apples and oranges here.
SPEAKER_01Yeah.
SPEAKER_00Um, but when it comes to pure cost of production, yeah, I don't think you're gonna get parody for some time.
Final Takeaways And Thanks
SPEAKER_02Awesome. Ken, we we've wandered over an hour. So it's uh I mean we could go on for for hours more. Um, but I think we'll we'll call it a day here, and we can um absolutely have you back at a at a later date to continue this discussion. It's been a fantastic conversation. I think hopefully lots of listeners will one be more slightly more familiar with US alphabet soup and will be definitely more familiar with Canadian alphabet soup and what's going on up in Canada. So thanks so much for being so generous with your time.
SPEAKER_00Thanks, Latin. Great, great chatting with you.