Advancing Market Commitments for Sustainable Aviation Fuel: A Real-Life Case Study

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Introduction

The sustainable aviation fuel (SAF) industry is at a pivotal moment. With aviation contributing roughly 2-3% of global greenhouse gas (GHG) emissions, there's an urgent need to decarbonize this challenging sector. During a recent panel discussion, industry leaders—including Courtney Unruh, SAF and Sustainability Engagement Director at Alaska Airlines, Dr. Etosha Cave, CTO at Twelve, and Lara Pierpoint, Managing Director at Trellis Climate—shared their experiences in driving SAF adoption through market commitments and strategic partnerships.

This blog highlights the key takeaways from the panel, focusing on the critical role of partnerships, offtake agreements, and buyer alliances in scaling sustainable aviation fuel.

Why Sustainable Aviation Fuel (SAF)?

Sustainable aviation fuel represents one of the most promising opportunities to significantly reduce aviation emissions. According to the International Air Transport Association (IATA), SAF has the potential to cut lifecycle emissions by up to 80% compared to conventional jet fuel.

Currently, the most viable SAF feedstock is corn ethanol, but scaling a SAF project requires substantial investment—often exceeding $100 million to reach commercial viability. As Dr. Etosha Cave, CTO of Twelve, explained:

“We initially focused on CO₂ conversion technologies, but the Inflation Reduction Act (IRA) opened new doors. The 45V credit was a game-changer, enabling us to pivot into SAF and accelerate our market entry.”

Alaska Airlines' Approach: Embracing Power-to-Liquid Fuels

Alaska Airlines aims for net-zero emissions by 2040, with a strong emphasis on adopting power-to-liquid (PtL) fuels. These innovative fuels are produced using renewable electricity and captured CO₂, aligning with the airline's decarbonization strategy.

Courtney Unruh noted:

“With 98% of our GHG impact tied to aviation fuels, PtL fuels are critical for our long-haul routes. Electric planes may work for shorter flights, but for most of our operations, power-to-liquid fuels are the future.”

Understanding the Value Chain: Collaboration Is Key

In the SAF ecosystem, there are three primary stakeholders:

1. SAF Producers (e.g., Twelve)
2. SAF Users (e.g., Alaska Airlines)
3. Incentive Purchasers (e.g., Microsoft)

Collaboration across these players is essential for transforming emissions in aviation. In this case study, Microsoft demonstrated strong commitment by offering to pay a green premium—3-5 times the cost of conventional jet fuel—to advance SAF technology.

According to Dr. Cave, building trust and securing long-term agreements are crucial:

“Engaging reputable partners and securing 10-15 year offtake agreements are vital steps towards achieving bankability and de-risking our projects.”

The Role of Corporate Partnerships in Scaling SAF

A standout theme from the panel discussion was the importance of corporate partnerships in scaling SAF projects. Twelve’s collaboration with Microsoft was instrumental in driving market commitments and securing offtake agreements, which in turn attracted other airlines to join.

Dr. Etosha Cave shared:

“Securing offtake agreements was critical for our Series B funding. Having a committed partner like Microsoft helped us secure additional long-term commitments, including a 14-year agreement with a UK-based airline.”

Creating FOMO: How Buyer Alliances Are Driving Demand

The emergence of buyer alliances has been a game-changer in the SAF market. The Sustainable Aviation Buyers Alliance (SABA) is a key initiative, bringing together tech companies, consulting firms, and corporate customers to create joint proposals and conduct due diligence. This collective purchasing power sends a strong demand signal to airlines, incentivizing the adoption of SAF.

Courtney Unruh highlighted the impact of corporate customers:

“Tech companies and consulting firms are leading the push for SAF adoption as part of their Scope 3 emissions reduction strategies. Their influence is crucial in pressuring airlines to make sustainable choices.”

Scaling Up: The Path to Commercialization

Looking ahead, Twelve is planning the next phase of its SAF facilities. The company is focused on securing optimal sites with access to electricity, steam, water, and rail infrastructure to ensure competitive unit economics.

Dr. Cave explained:

“We’re evaluating locations for our next ten facilities, considering key factors like energy access and logistics. Standardizing offtake agreements and creating flexible pricing structures is a full-time endeavor.”

SAF pricing strategies must account for production costs, delivery schedules, and leverage available incentives to remain competitive. Microsoft’s involvement has been critical in these negotiations, helping Twelve secure the necessary green premium to scale the technology effectively.

The Importance of Long-Term Corporate Engagement

A recurring insight from the panel was the significance of ongoing corporate support throughout contract negotiations. The process of negotiating and formalizing an offtake agreement can take 6-12 months, with the relationship-building phase extending even longer—sometimes over two years.

Courtney Unruh emphasized:

“Corporate backing throughout the negotiation process is key. It’s not just about signing a contract; it’s about providing sustained support to navigate the complexities of the SAF market.”

My Major Insights

1. Strategic Partnerships Are Essential: Collaborations with major corporate players like Microsoft can de-risk SAF projects and attract additional investment.
2. Buyer Alliances Drive Demand: Initiatives like SABA are crucial in creating demand signals and encouraging airlines to commit to sustainable fuels.
3. Flexible Pricing Strategies Are Necessary: SAF pricing must be adaptable, factoring in production costs, delivery timelines, and market incentives.
4. Long-Term Corporate Engagement Is Vital: Continued support from partners throughout contract negotiations is critical for successful project implementation.

Final Thoughts: Can Buyer Alliances Transform the Industrial Chemicals Sector?

Coming from the industrial chemicals sector, I’ve often pondered how alliances like the Sustainable Aviation Buyers Alliance (SABA) might translate to our industry. Historically, commodity chemical players have been hesitant to form buyer alliances, citing concerns over competitive advantage and the inherent challenge of reinventing their business models—a process they’ve undergone repeatedly over the past century.

However, it’s becoming increasingly clear that offtake agreements are not just beneficial—they are vital for achieving bankability, especially for startups with competitive unit economics aiming to scale. What remains uncertain is how voluntary market incentives can effectively drive this shift. In Europe, we’re already seeing traction, partly due to carbon taxes that enable green banks to mobilize capital for industrial decarbonization. This raises an intriguing question: Could European markets lead the way in establishing strong buyer alliances for chemicals, outpacing the U.S. industry?

Moreover, what role might top-down policy drivers play in catalyzing this transformation, particularly in conservative markets? Would a corporate-led alliance in the U.S. follow the example set by the SAF sector, driving change from within despite economic headwinds? The path forward remains uncertain, but the opportunity for the industrial chemicals sector to reimagine itself through collective action has never been clearer.