Building better SAF projects: Start with smarter siting

As SAF production starts to take flight in the US, producers and investors have a host of factors to consider when it comes to project location and finding a route to market.

While producers and investors are rightly focused on feedstocks, incentives, and offtake, selecting the optimal location and managing the logistics and costs of delivering SAF to the appropriate airport are perhaps equally critical to ensuring project viability and profitability. The extent to which producers and investors must consider downstream factors varies based on when and where they sell SAF along the supply chain. However, for those aiming to deliver SAF to airport-adjacent terminals or directly to airports, a comprehensive understanding of the entire value chain is essential.

Locational and CI considerations

Selecting the right location for the SAF project itself is likely the first critical step due to its impact on carbon intensity (CI) score, transportation costs, state-specific incentives, and market routes.

A project’s location can impact CI score in two ways. First, feedstock transportation to the SAF project and then its delivery to a blending site and eventually the airport. Certain feedstocks, like hydrogen used in power-to-liquids processes is more difficult to transport than HEFA feedstocks and often requires co-located production. While hydrogen pipelines exist, they are limited to regions like the Texas-Louisiana Gulf Coast.

Both CORSIA and GREET CI accounting methods consider the full lifecycle of fuel, and the transportation methods (truck, rail, ship, or pipeline) significantly affect both CI score and costs (“well-to-wheel”). Trucking, rail, seaborne transport, and pipelines all have a different impact on CI score, with pipeline representing the least carbon-intensive method of transportation and trucking being the most carbon-intensive. Access to low-CI transportation and nearby offtake locations is key to minimising CI and keeping transportation expenses low. For these reasons, it is critical to find the right balance of project location relative to feedstock, low-CI transportation options, and offtake.

Regulatory and incentive considerations

It worth noting here that neat SAF cannot currently be transported via pipeline. Neat SAF transportation via pipeline would require a regulatory change from FERC to allow its interstate transportation. Thus, at this time, only blended SAF can be transported via pipeline. Producers looking to utilise pipeline transportation, then, to lower shipping cost and CI score, must seek to blend SAF as far upstream as possible, close to the site of production. This requires considering project location in relation to fuel blending terminals, particularly those with product pipeline connections and access.

The CI and cost of transportation must also be balanced with the availability of state specific incentives. In order to be claimed or maximised, some state-specific incentives require the SAF to be produced within the state. For example, Montana and Georgia offer a property tax abatement for SAF facilities within the state. Kentucky has proposed a bill that offers a $2/gallon tax credit for SAF sold and used in the state, with the value of the credit increasing to $2.50/gallon if the SAF is produced in Kentucky. Other states, such as Washington, Illinois, and Minnesota, provide tax incentives for SAF produced in or sold to and used by airlines within the state. To be eligible for credit generation under California’s LCFS program, SAF must be sold to an offtaker for use within California.

Airport specific considerations

Finally, in addition to optimising for project location, logistics, and CI score, there are several airport-specific considerations that are often overlooked in SAF delivery and offtake. Among these, PA has identified two key considerations that producers need to be mindful of when thinking of which airports to target. This is not to say that these are the only considerations, but as a starting point for evaluating airports, they cannot be overlooked.

First is the ease of fuel deliverability to airports. Some airport-adjacent terminals have the flexibility to receive fuel via multiple methods – pipeline, barge, ship, truck, or rail – while others may be limited to just rail or truck. Access to rail or pipeline capacity can be challenging, depending on the route, and securing tank capacity at fuel terminals is essential, particularly for unblended SAF. Given these challenges, producers may benefit from partnerships with fuel companies or terminal operators to streamline delivery and operations.

Second, airport fuel operations are typically managed by fuel consortia in which airlines participate to varying degrees. The structure of these consortia, and the participation of certain airlines or alliances, can make some airports more attractive for SAF delivery due to infrastructure, offtake preferences, and willingness to pay. Understanding these consortiums is critical for optimising opportunities and streamlining offtake operations. The SAF value chain is long and complex. From feedstock procurement to fuel delivery into the wing, there are many factors that impact cost, incentives, logistics, CI score, and offtake opportunities. Producers must have a solid understanding of the value chain from start to finish if they want to maximise their chances for success and return on investment.

PA Consulting, the global innovation and transformation consultancy, has the expertise to provide advisory services tailored to your needs in this space, across policy, economics, and technology involved to produce next generation fuels. Register to receive PA's upcoming report, which explores how stakeholders across the SAF ecosystem can rethink roles, align incentives, and develop new strategies to overcome current challenges.

This article was originally published on Sustainable Aviation Futures.