Germany’s transport ministry launches market consultation on support for eSAF

Germany’s Federal Ministry of Transport launched a public market consultation May 19 on the planned support of electricity-based sustainable aviation fuel (eSAF).

Its aim is to accelerate the market ramp-up of climate-friendly aviation fuels and eliminate investment barriers.

To achieve this, the transport ministry will provide funding of up to 2-billion euros (USD$2.32 billion).

Renewable aviation fuel produced from green hydrogen and sustainable carbon is considered an important element in the aviation industry’s transition to climate neutrality.

At the same time, production in Europe makes a key structural contribution to greater independence in the long-term supply of aviation fuel.

eSAF, also known as power-to-liquid (PtL) kerosene, is produced from hydrogen and carbon.

Hydrogen is produced by electrolysis while the carbon is captured from sustainable sources, for example through biogenic processes.

If renewable electricity is used for production, the fuel obtained can be almost climate-neutral throughout its entire lifecycle.

The aviation sector in particular will continue to need liquid energy sources for the foreseeable future, especially for long-haul flights.

Electricity-based fuels are a vital option for decarbonization.

In addition, existing transport, storage and use infrastructure can continue to be utilized.

The ministry’s eSAF scheme is the first project under the European eSAF Early Movers Coalition and aims to serve as a blueprint for further support programs in other member states.

“By launching this market consultation, we are taking a major step to promote the market ramp-up of electricity-based aviation fuels,” said Patrick Schnieder, Germany’s transport minister. “We are sending a clear message that Germany is assuming responsibility for climate-neutral air transport. Promoting eSAF at an early phase of its market development creates planning certainty and price transparency for the stakeholders. We are also enhancing European resilience to the increasing scarcity of raw materials in the long term. In this way, Germany will continue to play its pioneering role in the aviation industry’s energy transformation.”

Innovative funding mechanism for more planning certainty

The production of eSAF at industrial scale requires massive investment.

At the same time, there are still uncertainties on the demand side, for example due to a lack of long-term supply contracts.

That is exactly where the transport ministry’s funding program comes into play.

It is designed as a double-sided auction mechanism based on the H2Global instrument, which combines long-term supply contracts with eSAF producers and short-term sales agreements with fuel distributors.

An intermediary balances the difference between the supply and demand prices determined by competition.

Germany is taking a pioneering role in the eSAF Early Movers Coalition, which was launched by the Sustainable Transport Investment Plan.

The possible participation of other countries in the scheme is currently being examined.

Market consultation as basis for next steps

As part of the consultation that has now started, companies and other stakeholders are invited to share their views and experiences regarding the proposed funding design.

All findings will inform the future design of the funding scheme as well as the notification procedure under state-aid law with the European Commission.

A detailed description of the funding scheme and a questionnaire are available online in English.

The deadline for submitting comments is June 30.