Sustainable Aviation Fuel Bill (Second sitting)

Julie Minns Excerpts

Committee stage
Tuesday 15th July 2025 Public Bill Committees

[The Chair]

Time is pressing; we have only four minutes left.

[Ms Julie Minns (Carlisle) (Lab)]

Q I should have said this morning that I previously met with Alfanar prior to the publication of the Bill. Mr McKiernan, it is quite clear that you are very proud of your company, and very ambitious for its future. Do you think the SAF mandate is challenging enough, or could it go further?

Doug McKiernan: That is a good question. I am not a particularly good judge of financial investment—I am a technical person—but I looked at the quotas for the e-fuels, and if they went further, I believe they would drive the development of the technology harder, because it would bring more investment into that particular area. To me, 3.5% by 2040 seems quite low—I think that we could probably scale up and do blends where that would be significantly higher.

[Chris Vince (Harlow) (Lab/Co-op)]

Q Partly because you are based in Oxfordshire, my mind goes to universities. I wondered—based on what was said by a previous contributor—where we are with this technology compared with other countries. I do not know whether you are working with universities, but I am sure you are working with young people to develop skills. Is there is a risk, if the Bill is not passed and we did not get the RCM, that some of the skills that you are developing will be lost to other countries?

Doug McKiernan: There is no question about it. The people who we have recruited have been researching, and have done not only doctorates but post-docs in this area. They have been working in it for nine or 10 years, hoping that there was a company out there that would recruit them and turn their R&D into a reality. These people are very passionate about their career and what they want to do. They are not going to work for the money; they come to make a difference. We have recruited a lot of those people. They will go wherever the company is that will make what they want to do happen.

--- Later in debate ---

[Amanda Hack]

Q Obviously, when you are looking at green investment, there is a huge element of risk in new technologies. Are there other levers of Government that would de-risk them from an infrastructure point of view, or are there other things that we could do on top of the Bill to de-risk it?

Josh Garton: Yes, I think there are. As I said, the revenue certainty mechanism seeks to address price risk primarily. The mandate deals with volume, and it provides that volume certainty in the market. When we think of the second and third-generation fuels that we need to develop to meet the aviation decarbonisation targets, these are somewhat novel technologies—in fact, they are novel technologies—and there is no market for the fuel at the moment. That means the technologies themselves are not commercially mature yet, so even with a revenue certainty mechanism in place, there is still a level of technology risk that some investors are not willing to tolerate at this point in time.

We need further support to help the first-of-a-kind projects get through FID, even with the revenue certainty mechanism in place. That can include deploying things like first-loss guarantees, or other forms of Government involvement, such as being the first lender through something like the NWF taking a slightly more risk-on approach to the financing of these first-of-a-kind projects. That way we can prove that the technologies are commercially viable, and then help scale the sector.

[Ms Minns]

Q This is a similar question to Mr Reed’s. Would you say that UK SAF developers find it harder, easier or the same as their international counterparts to access finance?

Josh Garton: The UK compared with Europe?

[Ms Minns]

Any international comparator.

Josh Garton: In green finance, we will all have observed that the geopolitical narrative is changing. In the UK and the EU there is a more favourable environment for green finance than over the other side of the Atlantic. There is still a great appetite here, albeit within those risk tolerances that the different types of investors require.

--- Later in debate ---

[Greg Smith]

Q That is very helpful. As you raised, for example, the black bin waste stream, it strikes me that looking across the differing technologies to produce SAF, the waste-derived ones could end up being the most costly, not least because the bulk of waste goes through local authorities. Many of those—including my own in Buckinghamshire—are tied up in very long-term finance arrangements on incinerators, so they cannot simply take their waste somewhere else because they are locked in a contract. Buckinghamshire is by no means unique in that. Do you see waste-derived SAF hitting an even bigger buffer when the practicalities come, and it either requiring some significant state subsidy to buy out those incinerator contracts or simply not having the waste in the first place?

Philip New: When I first engaged with this, I had exactly the same thought. However, a few things are starting to emerge that sit on the more optimistic side of the balance of risk here.

First of all, over time there will be more and more pressure for the energy from waste manufacturers to access carbon capture and storage. It is not at all the cleanest way of generating an electron in this day and age. It would be reasonable to expect that over the next 15 years, we will see a number of those assets get to a point where the contracts are expiring. They will then need to contemplate refinancing, and if they do, whether or not they have access to carbon capture and storage will become important. Not all of them will be able to either afford or justify it, because they are too distant from where the carbon sinks are. There is a probability that enough capacity will start to come off stream for it to be picked up.

On top of that, the imposition of the emissions trading tax will start to free up some of the very difficult to recycle plastics, which could be used to make SAF. There is also an interesting stream of waste wood that will become available, particularly as some of the rocks start to fall away, which will start to happen in a couple of years’ time—and assets that at the moment are making renewable electricity out of waste wood will lose their rocks. We also need to remember that it is the local authority that is paying the energy from waste company to move it away.

I have recently been involved with some economic analysis. We assumed that for the first wave of sites there would be a 100% discount. In other words, rather than the local authority paying, it would get rid of the waste for free. The developer would not pay for it themselves, but the local authority would still save the money. We thought that would be necessary to give local authorities the comfort to take on the exposure. Later on, there might be scope for it to become a little more competitive, because people will get more comfortable and there will be more confidence in the technology.

I do not think that we simply have to bail them out. I think there might be something around a guarantee of some description that simply says to a local authority, “Look, if you give a contract to one of these companies and it fails—if it can’t live up to that contract—and you have to put it into landfill and pay the landfill tax, there could be some kind of keep-whole mechanism,” just to encourage them over the line.

The other thing that you could consider is looking at the waste hierarchy. Simply moving this from being recovery to recovery-plus would send a very strong signal to local authorities that putting it into SAF is a better use of their waste than simply incinerating it and turning it into electrons.

[Ms Minns]

Q Building on that, we heard from a couple of witnesses earlier today about the waste hierarchy, but in your view, is there a point at which local authorities should be looking at their local plans for waste and minerals? My local authority is already receiving applications for gasification plants, and it is not alone in this. If they come on stream, they could deprive the SAF producers of the materials that they would want to acquire. At what point do local authorities need to be thinking ahead when looking at their waste and mineral plans?

Philip New: This is quite a challenging conundrum. Right now, the safe place to put your waste is into an incinerator to make electrons. Is that the best place for the journey to net zero or for the local authority’s long-term economics? That is less obvious. It is difficult to put all the obligation on the local authorities to make the right, wise, long-term choice, when they are dealing with some very short-term pressures. This is where I think some extra signals—whether through some kind of mechanism that gives them comfort that they will be kept whole if things do not work out as planned, or some adjustment to the waste hierarchy—could play a helpful role.