Book a Discovery Call
Book a Discovery Call
Sustainable aviation fuel needs $200B+ of new capital this decade. The structures that will get it deployed look nothing like conventional project finance.
The sustainable aviation fuel (SAF) sector has a capital problem that is distinct from the problems facing most renewable energy sectors. It's not that the economics are poor — mature HEFA-based SAF at scale is competitive with Jet A at $90+ oil. It's that the technologies are heterogeneous, the feedstocks are complex, and the offtake market — while growing rapidly under regulatory mandates — is structured in ways that conventional project finance lenders find difficult to underwrite.
SAF is not a single technology. The major production pathways currently at various stages of commercial deployment include:
Each pathway has a different risk profile, different feedstock exposure, and different lender comfort level. HEFA projects close with conventional project finance. FT gasification projects require TPI. PtL projects are currently equity-only at meaningful scale.
Airlines — the primary SAF offtakers — have signed hundreds of offtake agreements in the past three years. Many of these are not bankable in their current form. The typical airline SAF offtake contains:
Lenders who have financed gas-fired power plants with 20-year PPAs from investment-grade utilities look at these terms and see Swiss cheese. The sustainability conditionality, the commodity price linkage, and the counterparty credit quality gaps combine to make the offtake far weaker than its face value suggests.
SAF projects are, at their core, feedstock conversion businesses. The project's economics depend not just on the technology performing and the offtake paying — they depend on feedstock being available at modeled prices and volumes for the life of the senior debt. Feedstock supply agreements for waste-based SAF (FOG, MSW, agricultural residues) are rarely 20-year bankable contracts; they are often 3–5 year rolling arrangements with municipalities, waste processors, or agricultural cooperatives.
Feedstock supply insurance — a niche but growing product written by specialist carriers — covers the gap between modeled feedstock supply and actual availability. It is not a substitute for long-term supply contracts, but it can extend the effective lender-creditworthy supply horizon from 3 to 7–10 years, which is often enough to satisfy senior debt requirements for the initial debt period.
A commercially viable SAF project at 100+ million gallons per year capacity typically requires $400–800 million in capital. The stack we see most commonly for projects that close: 55–65% senior debt (project bonds or term loan B), 15–25% tax equity (§48E or §45Z clean fuel production credits), 5–10% mezzanine or subordinated debt, and 10–20% sponsor equity. The tax credit layer — particularly §45Z, which provides a per-gallon production credit calibrated to lifecycle GHG intensity — is often the swing factor between IRR that attracts institutional equity and IRR that doesn't.