Flight path to net zero: Assessing Spain’s SAF capacity

Iberia wanted to understand Spain’s potential to produce sustainable aviation fuel, to enable the airline to meet net zero commitments - and what the overall economic benefit would be.

The international aviation industry has committed to reach net zero carbon emissions by 2050.¹ To achieve this, it will be critical to replace kerosene with sustainable aviation fuels (SAF), according to the International Energy Agency (IEA). SAF, which is currently made from organic sources such as used cooking oil, farm or forestry waste, is a proven technology and 600 million litres were produced in 2023, figures from the aviation transport association IATA show.²

However, that makes up just 0.2% of global jet fuel use. To spur progress, the ReFuelEU Aviation regulation (part of the European Union’s Fit for 55 package of climate change initiatives), requires aviation fuel suppliers to blend a minimum of 2% SAF with kerosene in 2025, rising to 70% by 2050.³ Yet planned production capacity worldwide will provide only 1 to 2% of SAF demand by 2027, according to the IEA.⁴ As a result, governments and airlines worldwide face the challenge of how to rapidly increase production.

Spanish airline Iberia engaged PwC Spain in 2023 to assess the regulatory and technical requirements of building SAF production capability in Spain, as well as the potential economic benefits as part of a just energy transition in its home market.

Both Iberia and its sister airline Vueling (also part of the International Airlines Group) have committed to use 10% SAF by 2030, and to reach net zero by 2050. Iberia wanted to understand whether Spain could become a large enough producer of SAF to supply the volumes it will need to meet these commitments. The airline engaged PwC to analyse the potential to make enough SAF for Spain’s own needs, and for export, and to create an impactful report for its stakeholders, including fuel producers, policymakers and investors.

There are two types of SAF: one made from biowaste which is already in use by airlines, and the second made from synthetic fuel created from green hydrogen (generated using renewable energy), which is at a far earlier stage of development. PwC expects synthetic SAF to play a significant role from 2035 onwards. By that date, the ReFuelEU regulation requires that airlines use 20% SAF, of which 5% should be synthetic fuel.

Iberia’s sustainability team asked PwC to look at both the availability in Spain of biowaste for generating SAF in the shorter term, and at the potential for creating synthetic fuel in the future, given Spain’s strong track record on renewable power (the country generated 50.7% of its electricity from renewable sources in 2023).⁵

The airline also wanted to understand the size of the investment needed to build up production capacity in Spain, and how carbon pricing would affect the future cost of SAF, which is three to five times more expensive than kerosene. The final part of the project was an economic impact assessment of the potential to create good quality jobs in a new SAF industry.

The first strand of the project was carried out by PwC Spain’s legal team based in Madrid, who analysed the regulatory issues governing SAF production, including the requirements the fuel must meet to be classed as sustainable, such as the types of biowaste it can be made from. The team also assessed carbon market regulations to understand how current and future carbon pricing will incentivise the use of SAF over conventional fuel. Aviation activities within Europe are subject to the EU’s Emissions Trading System (ETS), while flights within non-EU countries are covered by the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) CORSIA, the International Civil Aviation Organization (ICAO)’s carbon offsetting system.

Next came a technical assessment by PwC Spain’s energy and utilities specialists looking at the potential for the two types of SAF (biowaste-derived and synthetic), and considering whether Spain has enough agricultural and other biowaste to create the amount of SAF needed. Based on the assessment, PwC Strategy& economists carried out an economic impact assessment of potential SAF production in Spain.

The group was also able to draw on the expertise of other sustainability teams across the PwC network, including the SAF team, which last year published its own assessment of how SAF production can be increased in a financially sustainable way in the coming decades.

Iberia published the findings of the SAF assessment in June 2023, and the report showed that Spain has the potential to more than meet its national demand for SAF by 2050, and to become an exporter. This is dependent on the availability of agricultural waste and the potential to expand renewable energy production.

Some 30 to 40 production plants would be needed to make the 5 million tonnes of SAF needed in Spain each year by 2050, the report showed. Building and running the plants would generate €56 billion for the Spanish economy by the same year, and create 270,000 jobs. An added social impact would be that many of the sites, and therefore jobs, would be created in more sparsely populated rural areas where there is access to bio-waste from farming and food production. Iberia is now working with fuel producers on ways to accelerate the development of SAF, in order to increase production and bring down the price.