Sustainable Aviation Fuel (SAF) has moved rapidly from policy ambition to commercial reality, but the path forward remains complex. While demand is increasingly well-defined, underpinned by mandates and decarbonization commitments, the supply side continues to raise fundamental questions around scalability, economics, and long-term viability.
In this conversation, Ruella Menezes, Director of New Energies at Kline, sits down with Peter Gastriech, Managing Director- Energy and Sustainable Investing at Water Tower Research, as part of their Circular Economy Symposium to unpack the real dynamics shaping the SAF market.
Drawing direct exposure to projects, feedstock strategies, and policy developments, the discussion moves beyond headline narratives to examine what is driving progress and where constraints remain.
The conversation explores the outlook to 2030 and beyond, what differentiates successful SAF projects, the implications of geopolitical disruption, and how evolving policy frameworks, particularly in the US, are influencing global market dynamics.
Note: This conversation has been edited for clarity.
Peter Gastriech
Let’s start with the high-level macro-overview. How would you characterize the supply and demand outlook for sustainable aviation fuel in 2030 and in the longer term?
Ruella Menezes
Thanks, Peter. I feel you know this is a very interesting question because the question is very simple, but can be so complicated.
In simple terms, if I had to answer your question, I’d characterize the 2030 outlook as demand-led and supply constrained, while the longer-term outlook is structurally bullish but highly pathway-dependent.
Now, if you look at the demand from 2030 onwards, this will be much clearer because policy is no longer going to be hypothetical.
What I mean by this is that the industry has already been through a cycle where they have understood what the EU and UK SAF mandates really mean, and the industry has already understood the implications and the future needs.
So from a demand perspective, I really feel that we understand what the market needs today.
However, supply is going to really be the weaker leg of the story today.
If we look at SAF output, it’s nearly close to 2 million tonnes in 2025 and represents roughly 0.7% of the airline’s total fuel consumption.
What this number really tells you is that we’re starting at a tiny base, and it’s going to take a long time to reach the 2030 demand.
So, if I look at my base case to 2030, demand will grow faster than a credible supply. This means SAF remains a premium, compliance-driven market rather than a fully commoditized one, and in the near term, we are going to see a SAF-dependent pathway.
Beyond 2030, I’d like to shift the characterization from a tight to a transformational market.
If policy and technology still hold true in the long term, SAF will be the centerpiece of aviation decarbonization, but the longer-term supply story will not be HEFA-led anymore.
We will see a switch toward different pathways, which will be led by alcohol-to-jet, Fischer-Tropsch, as well as power-to-liquid.
So in summary, up to 2030, SAF is going to look like a limited policy-driven market, but beyond 2030, it looks like a very strategic market—one whose success will depend on moving beyond HEFA into scalable next-generation pathways.
Peter Gastriech
It looks like, from what you’ve outlined there, that there is some risk on the supply side in terms of things looking a bit constrained over time. On that note, what would you say are some of the key factors of success for SAF producers? What types of projects have the best prospects for reaching commercial scale and meeting that demand?
Ruella Menezes
If I had to start with the most important key success factor today, one that I feel is important for SAF producers to know about, that would be feedstock and specifically locally produced feedstock, because this is the foundation of everything.
SAF projects today don’t succeed because they chose a particular technology pathway.
The reason they are able to scale is because the pathway matches what’s available in their region. This is where I believe a lot of developers really struggle, as they get this wrong.
They often tend to first select the technology pathway and then try to secure the inputs around it. But in reality, sequencing should be the other way around.
You should start by mapping regional feedstock depth, understanding the cost, stability, logistics, and sustainability compliance, and only then decide what your technology pathway really means for you.
And the reason why I feel feedstock is so important is because it drives more than half the cost of SAT production today. It determines your carbon score, your eligibility for incentives, and your overall margin structure.
So, if you mismatch technology in feedstock, the project can be economically challenged even before it starts.
The second important factor that I feel is very important is policy alignment.
And here it’s very important for producers to understand which market they really want to play in. Today, most of the projects that scale are often the ones that are built in the regions where incentives or government support are the strongest because that’s what makes your business case strong and your projects bankable.
The last and most important key success factor is off-take agreements, which I feel is something that the industry already knows about. But what’s important to keep in mind is that you need to try to differentiate the signals from the noise here. It’s important to understand whether these are solid offtake agreements, or are they just pure noise?
And now, in terms of your second question, which is trying to understand which projects have the best prospects for reaching a commercial scale, I believe it depends on three factors. Firstly, the time frame, and ultimately this again ties back to feedstocks. In the near term, I believe that HEFA-based facilities will have better prospects for commercial scale because the technology is proven and the feedstock exists.
Secondly, we will be seeing alcohol-to-jet projects, which are linked to the ethanol industry, having a lot of promises because they tap into a large, established, and scalable feedstock base.
Lastly, I think in the long term, we will be seeing projects with the biggest potential being those that move beyond feedstock constraints altogether, like the ESAF.
Peter Gastriech
So we’ve seen a lot of disruption coming out of the Middle East with the war in Iran, the closure of the Strait of Hormuz, and there have been big impacts on energy. People are talking about impacts on agricultural markets down the road, and jet fuel prices have gone up. What do you think this means for the SAF market in the short- and long-term?
Ruella Menezes
If I break this down, there’s one word that your question is focusing on, which is implications, right?
The real story here isn’t that oil and jet fuel prices are up.
Most of us here have been following the news and could foresee or predict that this would really happen, which means we could foresee that the unrest in the Middle East would result in higher crude oil prices or higher crude prices. But what we couldn’t really foresee is what this really means for SAF.
If we look at what happened during this unrest, we see that crude oil prices went about $90.00 per barrel. We’ve also seen SAF and renewable diesel prices at multi-month highs.
What this really tells you is that the SAF and jet fuel spread is narrowing, and this is not because SAF is getting cheaper, but because fossil fuel is getting more expensive.
The signal we are essentially seeing here is that SAF is now trapped between two forces. The first one being rising relevance, and the second one being rising fragility.
Then there’s the agricultural angle, which actually feeds the SAF story here, because it’s not just an oil story anymore. Higher oil prices have ripple effects which feed into vegetable oils, used cooking oils, which are the feedstocks for SAF-dependent HEFA-based pathways today.
So, what happens when you see these prices go up, you see your input prices go up, you see your energy costs go up, which suddenly results in the whole system becoming volatile — and volatile is something that project finances do not really like.
When you start putting all these pieces together, we’ll see a completely different story coming out of this. Today, you are living in a world where you have energy majors shifting capital back to oil and gas, while they still want to participate in the SAF supply chain. They’re doing so today through their trading teams, which procure SAF from across the world.
Because the reality is that your demand centers today are Europe and the UK, which have almost 50% of the demand, but essentially produce only 20% locally.
What this means is that we are looking at a lot of trading happening from across the world. The unrest in the Middle East raised a very important critical question, which is, can we secure SAF reliably in a stressed world?
What we’ve understood this time is that shipping routes matter for SAF, feedstock origins matter for SAF, policy alignments also matter for SAF.
So, if I have to summarize, what I’m trying to say here is that the Middle East unrest is actually doing something deeper to the SAF market.
It’s helping producers rethink what resilience looks like in an uncertain world, and rethink how producers, airlines, and investors need to create a resilient base model in the future.
Peter Gastriech
So, there’s been a lot of regulatory tailwinds recently for SAF and renewable fuels, and I’d like to get your thoughts on this. For example, this year we have the Trump administration’s record-high RBO mandates, and that looks like it could be a significant boost for the biomass-based diesel production, but are there implications for the SAF markets in this?
Ruella Menezes
That’s a great question Peter, and I’m glad you covered this because it’s encouraging to see some positive momentum in the industry this quarter.
Now, when we talk about higher RBO mandates, what this means is that we’re talking about a clear win.
And it’s not just a clear win for the biomass-based diesel industry. It’s also a clear win for SAF, because it’s now included within the D4 RIN category, which increased significantly from 3.35 million in 2025 to roughly 9.7 million RINs by 2026.
This high RBO mandate sends a strong demand signal for SAF in the US, which will help the industry scale up.
So, there is a strong promise here, but while we look at the promise, it’s also very important to understand the associated caveats that come along with it.
If you look at the SAF market today, it’s predominantly HEFA driven, and it’s competing with the exact same pool of feedstocks as renewable diesel and biodiesel.
Today, unfortunately, the reality is that renewable diesel is still the larger, more mature market with greater stability and predictable policy support.
So, when RBOs increase and drive greater demand for biomass-based diesel, what you’re effectively doing is tightening that shared feedstock pool.
In practical terms, this would lead to higher feedstock prices, which would create margin pressure for SAF producers.
But the good news is that refiners typically have operational flexibility, and what I mean by this is they have the option to choose which market is more attractive to them. Is it renewable diesel or is it SAF?
When the renewable diesel market starts getting more attractive, refiners often tend to choose renewable diesel over SAF simply because the yields and economics here are much better.
So, it’s very important for us as an industry to keep a watchful eye on how this market is really shaping up.
In short, I believe this news is good news, and the SAF industry will scale, but there will be a likelihood of higher feedstock prices.
We will also need to keep a watchful eye on what higher US obligations will really do to the export market, either for renewable diesel or for SAF. If we are unable to export, what’s going to happen is the tightening of supply and lifting of premiums in other regions, especially that of Europe.
This conversation is an excerpt from Water Tower Research’s CIRCULAR ECONOMY: Investing in SAF, CCUS and Waste-to-Value (PART 1 – SAF).
