Europe Has Mandated SAF Demand. Why eSAF Still Struggles to Reach FID

By Gaurav Shah, Managing Partner, Trident Renewables

Europe’s aviation fuel problem has become more paradoxical. From the energy shock after Russia’s invasion of Ukraine to the 2026 disruption around the Strait of Hormuz, jet-fuel markets have repeatedly reminded Europe of the cost of hydrocarbon dependence. At the same time, ReFuelEU Aviation has created a legally binding demand trajectory for sustainable aviation fuel.

Yet the projects expected to supply Europe’s most scalable synthetic SAF pathway are still struggling to reach final investment decision.

That is the tension in Europe’s eSAF market: demand visibility has improved far faster than project bankability.

A mandate creates demand, not bankable revenue

ReFuelEU requires SAF to account for 2% of fuel supplied at EU airports from 2025, rising to 6% in 2030 and 70% by 2050. A synthetic aviation fuel requirement begins at 1.2% in 2030 and rises to 35% by 2050.

Those numbers remove one traditional uncertainty around emerging fuels: whether a market will exist.

But a mandate does not tell a lender which buyer will purchase a specific project’s output, for how long, at what price, or with what indexation. That distinction between policy-created demand and contracted revenue is central to what actually makes a SAF project bankable.

The contract mismatch

An eSAF developer financing a first commercial plant needs long-duration revenue visibility. Project lenders and infrastructure investors want a creditworthy counterparty and enough contracted cash flow to underwrite debt service.

Airlines face the opposite incentive.

Today’s eSAF is expensive. If renewable power, electrolysers, process integration and plant utilisation improve, later projects should produce at lower cost. An airline signing a long-term contract at a first-generation price therefore risks locking itself into an uneconomic position.

The result is structural: the contract duration that makes the plant financeable can make the fuel unattractive to the buyer.

The first-mover penalty

This becomes more acute because eSAF has a steep expected cost curve.

Early projects absorb first-of-a-kind engineering, expensive equipment, immature supply chains, commissioning risk and limited operating history. Later plants may benefit from scale, operating learning and lower renewable-power and electrolyser costs.

That creates timing risk for the first wave of investors. A project competes not only against fossil jet fuel and HEFA SAF, but against the expectation that the next eSAF plant may be cheaper.

Falling future costs are good for the industry. Paradoxically, they can make today’s projects harder to finance.

High oil prices improve relativity, not bankability

Oil shocks help relative economics. When conventional jet-fuel prices rise, the SAF premium narrows and the energy-security case for domestic low-carbon fuel strengthens.

But higher oil does not lower capex, secure low-cost renewable power, guarantee compliant CO₂ supply, resolve technology integration or create a long-term offtake contract.

A high oil price can improve eSAF economics without making a first-of-a-kind plant financeable.

HEFA buys Europe time, not enough runway

Europe’s early SAF market remains overwhelmingly bio-based. EASA reported that synthetic fuels were absent from the EU fuel mix in 2024; 81% of SAF feedstock was used cooking oil and another 17% was waste animal fat.

That is rational. HEFA is mature and commercially available. But lipid feedstocks are constrained, so larger future mandates require a broader pathway mix.

Europe’s cheapest near-term SAF pathway is constrained by feedstock. Its most scalable pathway, PtL, is constrained by economics.

That is why feedstock optionality across HEFA, AtJ and PtL matters increasingly as mandated volumes rise.

Europe could meet the mandate and still lose the industry

If European eSAF projects remain difficult to finance while the mandate survives, compliant molecules may increasingly come from projects built outside Europe.

The regulation may still achieve its blending objective, but part of the intended industrial benefit, including investment, engineering capability, equipment supply chains and project know-how, could migrate elsewhere.

For Europe, eSAF is therefore becoming an industrial-policy question as much as an aviation decarbonisation question.

The answer is risk allocation, not another mandate

The European Commission appears to recognise the problem. Its eSAF Early Movers Coalition is preparing double-sided auctions designed to give producers longer-term revenue certainty while allowing buyers to contract on shorter terms. More than 40 EU eSAF projects are awaiting FID, and the coalition aims to mobilise at least €500 million for large-scale projects.

That structure attacks the real bottleneck: who carries which risk.

Price and duration risk need a market mechanism. Technology and execution risk belong primarily with developers and equity. Power and CO₂ supply risk need to be contracted. Policy risk requires durable regulation.

Europe has created the demand signal. The next task is to create a market architecture investors can finance.

The most useful SAF metric over the next several years will not be announced capacity, airline MoUs or pipeline size. It will be how much commercial eSAF capacity has actually crossed FID.

Until that number moves, Europe’s eSAF market will remain much larger on paper than on the ground.