UK SAF support: The right mechanism, but will it arrive too late?

The Right Mechanism for a Difficult Market

The RCM itself is well conceived. Building on structures used successfully in offshore wind, it would provide eligible producers with a guaranteed strike price, funded through a levy on aviation fuel suppliers rather than general taxation. In doing so, the government is seeking to solve the “chicken and egg” uncertainty that currently prevents first-of-a-kind (FOAK) projects from reaching Final Investment Decision (FID). 

The first allocation round, SAF AR1, will combine a competitive tender with bilateral negotiations, which presents a pragmatic approach in a market where technologies, feedstocks and individual project economics remain highly differentiated. 

Bridging the Gap Between Policy and Project Delivery

However, the proposed timetable of the RCM will present significant challenges for developers. Applications are expected to open in Q1 2027, with projects shortlisted in Q4 2027 and contract awards starting in Q4 2028. For projects that depend on an RCM contract to secure financing, the process could defer FID by at least a year against current development plans. 

The newly announced Low Carbon Fuels Fund, the successor to the Advanced Fuels Fund, should help bridge part of this development gap. The government has committed £219 million between 2026/27 and 2029/30, including an initial £93 million over the first two years, with support focused particularly on projects approaching production.

While this is a material and welcome intervention, grant funding for eligible development and capital costs cannot fully substitute for long-term revenue certainty. Projects may still need to sustain engineering, technology qualification, permitting and offtake activity before knowing whether, or to what extent, their output will receive RCM support. 

The interaction between the LCFF and RCM timelines will therefore be critical. Unless the two mechanisms are closely sequenced, projects could still face a funding and confidence gap as development expenditure and investor exposure increase. The value of the LCFF will depend not only on how much funding is awarded, but also on whether grant profiles and eligible expenditure align with the practical development needs of projects awaiting an RCM decision. 

The technology-specific allocations in the RCM may create further disruption as projects whose preferred pathways receive less support than anticipated, forcing them to revisit configurations developed during pre-FEED. This could result in additional DEVEX without a corresponding increase in confidence that the project will ultimately secure support. The government has understandably capped the round at 230,000 tonnes per annum of SAF to protect consumers and avoid committing too much policy support to immature technologies. However, this may lead to delayed or deferred investment for investors looking to deploy their capital in markets offering faster or more predictable routes to returns.

Can AR1 Maintain Momentum for UK SAF Investment?

The affordability question cannot be avoided. The government’s analysis indicates an abatement cost of approximately £1,900 per tonne of CO₂e for FOAK projects supported through AR1. That is more than 30 times the current UK carbon allowance price of approximately £60/tCO₂. Although the two measures are not directly equivalent, the comparison illustrates the scale of the early-market premium associated with establishing a domestic SAF industry. 

There is also a wider strategic risk. If UK production develops more slowly than the SAF Mandate, an increasing proportion of mandated demand may need to be met through imports during the 2030s. This means that the UK could succeed in creating demand for SAF while failing to capture the full domestic investment, employment and energy security benefits used to justify the policy. 

The government is right to control the scale of AR1. SAF remains an expensive decarbonisation option, and it would be difficult to justify committing consumers to unlimited support for technologies that have yet to be demonstrated at scale. But this restraint must be balanced against investability. 

From Genesis Advisory's perspective, the RCM provides the right policy framework, but the timing and scale of implementation will be critical to maintaining investor confidence and project momentum. 

As currently proposed, the timing and limited scale of AR1 do not align comfortably with private development cycles. Rather than immediately stimulating capital deployment, the process may leave developers spending more money revisiting project concepts while investors weigh UK opportunities against competing priorities elsewhere. 

Ultimately, the success of the RCM will depend on its ability to control costs and provide sufficient certainty, early enough, to unlock private capital and accelerate deployment. It appears to be the right mechanism. The question is whether it will arrive in time to maintain momentum across the UK's SAF project pipeline. 

Read more on the SAF RCM Strategy here: https://www.gov.uk/government/publications/sustainable-aviation-fuel-saf-revenue-certainty-mechanism-contract-allocation-strategy