e-SAF Project Finance: Why the Sub-Mandate Is Not Enough

10 min read · Oct 23, 2026 · By Alex

By comparison, e-SAF project finance is harder than SAF finance from biomass. A sub-mandate does not change that on its own. In addition, ReFuelEU Aviation requires synthetic aviation fuels to take a growing share of the fuel mix, reaching 35 % by 2050. Certainly, that is a clear demand signal. However, a lender looks at the cost stack, the technology risk and the contract. In e-SAF, each of those is harder than in the biomass routes.

In short

In short, the synthetic sub-obligation creates regulated demand for e-SAF. The average share starts at 1.2 % in 2030 and 2031 and reaches 35 % in 2050.
However, the rule sets no price. The European Union Aviation Safety Agency put e-fuel production cost at EUR 7,695 per tonne in 2024.
In addition, lenders stack three risks: renewable electricity, synthesis technology and CO2 supply.
Offtake first, then equity, then debt is the order I see work.

What the synthetic sub-obligation says

In essence, producers make synthetic aviation fuels from green hydrogen and captured CO2. As a result, their share of the SAF mix grows on a timetable written into Annex I of Regulation (EU) 2023/2405. For example, the average synthetic share over 2030 and 2031 is 1.2 %. The annual floor in those two years is 0.7 %. Moreover, the average rises to 2.0 % over 2032 to 2034. In that window the floor is 1.2 % in 2032 and 2033, then 2.0 % in 2034.

From 2035 the floor becomes annual. The rule asks for 5 % synthetic inside a 20 % SAF blend, then 10 % in 2040, 15 % in 2045 and 35 % inside a 70 % blend in 2050. Therefore, the first real test of the mandate is not 2050. It is the five years from 2030 to 2034, when the average and the annual minimum both bind.

The supply consequence is easy to understate. According to the IEA Global Hydrogen Review 2025, the 2030 quotas imply demand for more than 600 ktpa of synthetic kerosene in Europe. That could require up to 170 ktpa of low-emissions hydrogen.

One detail matters for competition. Article 4(1) lets a supplier meet the obligation with renewable hydrogen for aviation or with low-carbon aviation fuels. In practice, a fuel supplier can comply without buying a single tonne from your plant. See What Is an RFNBO? for why the definition still decides eligibility.

Why a sub-mandate is not revenue in e-SAF project finance

In effect, a sub-mandate tells a lender that demand will exist. However, it does not tell the lender who pays the gap between e-SAF and fossil jet fuel. Nor does it say that your plant will be the one to supply it. The obliged party is the aviation fuel supplier at each Union airport, not the airline. Its duty is a share in the fuel it makes available, not a volume from a named project.

Two provisions sharpen demand without creating a contract. Article 5 requires an aircraft operator to uplift at least 90 % of the fuel it needs at a Union airport. That rule limits tankering and keeps the physical market at the airport. In addition, Article 12(5) makes a shortfall expensive. The fine must reach at least twice the gap between the average e-SAF price and the conventional price, multiplied by the volume that did not comply. Consequently, a supplier has a strong reason to buy e-SAF. It also has every reason to buy the cheapest eligible tonne.

That is where the market stands. The IEA found that firm offtakes covered less than a quarter of mandated synthetic demand for 2030. More than 40 announced projects add up to 2,800 ktpa. Therefore, the constraint is not ambition in the pipeline. It is the number of signed contracts. The same gap at portfolio level is in ReFuelEU Bankability.

What e-SAF project finance costs, and why the gap drives the structure

Cost is the reason the contract has to carry the project. The European Union Aviation Safety Agency put average production cost at EUR 1,461 per tonne for biofuels in 2024. For e-fuels the figure was EUR 7,695 per tonne. The ICCT turns that into a premium of 2.1 to 10.6 times fossil jet. In December 2025, IATA put the e-SAF cost base at up to 12 times conventional jet fuel.

Moreover, the premium is not a temporary spread that a lender can underwrite out. IATA reported SAF output of 1.9 Mt in 2025, only 0.6 % of jet fuel consumption. It expects 2.4 Mt in 2026. As a result, scarcity sits on the supply side for most of this decade. A single plant’s revenue depends on the price it can lock, not on the mandate.

In practice, three payers can close the gap. One is an airline that buys voluntarily. Another is a government scheme that collects a levy. The third is a fuel supplier that absorbs the cost to avoid a fine. Only the last two behave like a credit, and only where the contract runs for a term that matches the debt.

The three risks lenders stack on e-SAF project finance

Each risk has a different owner, and that is why due diligence in e-SAF project finance runs long. A lender wants renewable power that stays firm and affordable for fifteen years. In practice, that turns the power purchase agreement into a project document rather than a utility bill. A lender also wants proof that electrolysis and synthesis work at the scale of the debt. The IEA notes that a plant takes three to four years to build. That leaves little room for a late start against a 2030 quota.

CO2 is the third item, and the one developers underestimate. The source must be biogenic or captured from the air. It must arrive under contract, and it must qualify for the delegated act on greenhouse gas savings. In addition, the blend wall matters commercially. The IEA reports that the industry has limited e-SAF blending to 50 % to date. Certification for 100 % should arrive within this decade. Therefore, the volume your offtaker can absorb depends on airport infrastructure as much as on its own targets.

Risk	Question	What reassures
Electricity	Is the renewable supply firm and eligible?	Power purchase agreement, price and volume
Technology	Does electrolysis plus synthesis work at this scale?	Reference plants, performance guarantees
CO2	Is there a secure, eligible source?	Contracted CO2 supply

The Southeast Asia angle for e-SAF project finance

Above all, renewable electricity cost, grid access and a nearby CO2 source decide the case. Southeast Asia had 380 GW of generation capacity in 2024. More than two thirds of it was fossil, split almost equally between coal and gas. Solar PV accounted for 36 GW. Viet Nam alone held 19 GW of solar, yet drew only 9 % of its generation from it. Indonesia, the region’s largest electricity consumer, took less than 0.2 % of generation from solar.

Cost of capital compounds the problem. The IEA reports a real after-tax WACC of 6.6 % for solar PV in Thailand in 2023, against 4.3 % in Australia. Shipping ammonia 5,000 km from Australia adds about USD 25 per tonne, or 0.35 percentage points of WACC. Consequently, a Southeast Asian plant can pay more for power and capital than its Australian rival. It still faces the same European price.

CO2 is the second constraint. IRENA puts captured biogenic CO2 at USD 10 to 50 per tonne. Direct air capture costs USD 300 to 600 per tonne. That gap moves e-methanol from USD 800 to 1,600 per tonne to USD 1,200 to 2,400 per tonne. In addition, the EU counts captured CO2 only where a plant incorporates it before 2036. A late source therefore loses part of its value.

Regional demand is real but narrow. Singapore applies its SAF levy to tickets sold from 1 October 2026, for flights from 1 January 2027. The scheme targets 1 % of SAF uplift from 2027, and SAFCo buys centrally. A first tender is due at the end of 2026, with a first batch expected in mid-2027. However, that is a levy-funded purchase programme. It is not a fifteen-year offtake for a first-of-a-kind plant. For hydrogen economics, read Green Hydrogen Plant Economics.

Structuring e-SAF project finance: offtake, equity, debt

To begin with, secure a long-term offtake that covers the premium, with a floor price and a volume commitment that survives a slow ramp.
Then, bring in equity investors who accept technology risk and can wait for the first reference plant. See Power-to-Liquid Investing.
Finally, approach lenders with contracts and technology guarantees in place, and with a CO2 price fixed for the whole debt tenor.

The contract terms that get tested first are tenor, index and change of law. A ten-year offtake does not cover a fifteen-year loan. Most structures I see therefore need a second buyer or a public backstop. An index linked to fossil jet fuel also leaves the plant exposed to the very gap it was built to capture. The fix is a fixed premium or an index tied to the cost stack. A change of law clause matters more here than in biomass, because the synthetic quota is young. I set out how I test that exposure in SAF Policy Risk. It has already been reshaped once through the average-share mechanism.

Equity carries the rest. Strategic investors with an airline, an engineering firm or a fuel distributor behind them bring more than money. They bring the reference plant and the certification path. Therefore, I treat the equity story as part of the technical due diligence, not as a separate conversation.

What I would fix before a lender sees the file

One named offtaker, not a memorandum of understanding, with a volume schedule that starts below nameplate.
A power contract that states the renewable attribute, the delivery point and the price for the full tenor.
A CO2 source with a cost per tonne, a delivery obligation and a confirmation that it qualifies before 2036.
A certification route to an RFNBO proof that the buyer’s Member State will accept.
A technology package with performance guarantees and a spare parts plan, not a licence alone.

In my experience, e-SAF project finance files rarely fail on the mandate. They fail because one of the five items above is still a conversation rather than a document. Consequently, the cheapest way to improve the file is usually to shrink the first phase. Every item in that smaller phase can then sit in a contract.

Sources

Sources

Regulation (EU) 2023/2405 on ensuring a level playing field for sustainable air transport, Articles 4, 5, 12 and Annex I: eur-lex.europa.eu/eli/reg/2023/2405/oj
European Commission, ReFuelEU Aviation: transport.ec.europa.eu
European Parliamentary Research Service, “ReFuelEU Aviation initiative”, PE 698.900, November 2023: EPRS briefing (PDF)
IEA, Global Hydrogen Review 2025, aviation and Southeast Asia chapters: iea.org
ICCT, “Why and how to bring down the cost of SAF”, 6 October 2025, citing EASA 2024 aviation fuel reference prices: theicct.org
IATA, “SAF Production Growth Rate is Slowing Down”, press release 57, 9 December 2025: iata.org
IRENA, Renewable Methanol: Innovation Outlook, 2021, cost ranges for e-methanol and CO2: IRENA report (PDF)
CAAS, airline domain sustainability initiatives and SAF levy, page updated 20 October 2026: caas.gov.sg

FAQ

What is e-SAF?

Synthetic aviation fuel that producers make from green hydrogen and captured CO2. It is the route that counts as an RFNBO under the EU rules.

How big is the e-SAF mandate?

Indeed, synthetic fuels must reach 35 % of the mix by 2050. The average is 1.2 % in 2030 and 2031, 2.0 % over 2032 to 2034 and 5 % in 2035.

Can e-SAF project finance close today?

Only with strong contracts and risk cover. Otherwise, pure mandate dependence is not enough, because the obligation sits on the fuel supplier and not on your plant.

What is the biggest risk?

It varies: cost of power, technology scale-up or the offtake gap. In practice, the CO2 source is the one developers underestimate most.

Why does the CO2 source matter so much?

Because its cost runs from USD 10 to 50 per tonne for captured biogenic CO2 to USD 300 to 600 per tonne for direct air capture. In addition, the EU counts it only if a plant incorporates it before 2036.