The SAF Podcast
The SAF Podcast is the only podcast on the internet that exclusively covers sustainable aviation fuel (SAF). So if you want to find out the real issues and challenges are for commercialising and scaling SAF production, look no further.
Every week we will be hearing from senior industry leaders who are actively shaping the future of SAF and aviation.
The SAF Podcast
The SAF Podcast: Supporting production through Revenue Certainty Mechanisms
This week on The SAF Podcast, Gaynor Hartnell and Tom Reid from the Renewable Transport Fuel Association (RTFA) discuss the UK Sustainable Aviation Fuel policy landscape with Oscar Henderson. They bring to the table a wealth of knowledge, leading us through the intricate world of renewable fuel revenue certainty mechanisms. With imminent announcement on the UK Sustainable Aviation Fuel (SAF) mandate, these two experts dissect how these policies are critical to fuel supply and market dynamics.
We dive into how revenue certainty mechanisms work, the importance of providing stability without infringing on natural market dynamics and how Contracts for Difference (CFDs) in the renewable energy markets have set the platform for long standing certainty and longevity when CFDs are enacted in the Sustainable Aviation Fuel sector.
As the industry stands on the precipice of significant government decisions, our guests unravel the complexities of the SAF market, examining the challenges and opportunities that lie ahead. They break down the urgency of transitional support, emphasizing the need for adaptable and forward-thinking policies.
This is a fascinating conversation with two long standing industry experts, so if you enjoyed this conversation. We are going to be having Gaynor and Tom back on the Podcast when the UK government have have made their policy announcement, breaking down all the details and getting some great insight how domestic SAF production can be accelerated.
So make sure you keep and eye out for the follow up episode coming soon.
If you like this episode, you should try our discussion with Natasha Mann, Future Energy Global here: https://www.buzzsprout.com/2202964/14508344
Host & Producer: Oscar Henderson, SAF Investor
Hello and welcome to the latest episode of the SAF podcast. This week we're delighted to be joined by Gaynor Hartnell and Tom Reid from the Renewable Transport Fuel Association here in the UK, and this episode we're going to spend a lot of it looking at revenue certainty mechanisms and how they can work to help producers, customers and investors look more favourably on SAF production. Gainor Tom, how are you?
Speaker 2:Yeah, well, thanks, oscar. How are you?
Speaker 1:Yes, very good, thank you. So to get going then, I just thought we'd start by looking at each of your backgrounds and how you got to the RTFA and sort of what that path looked like. So, gaynor, maybe we start with you and your background.
Speaker 2:Yeah, ok, well gosh, it was some decades ago now that I did a degree in environmental science. It's actually so long ago that global warming was never in the news. At the time it was acid rain that was the main environmental problem. But yeah, I did it in environmental science and subsequent to that, pretty much my whole career has been spent in renewable energy trade associations of one form or another. That all kicked off in 1995 when I joined the British Wind Energy Association, and then there's been others. There's been landfill gas, biogas. A pan-technology trade association, initially called the Renewable Power Association, became the Renewable Power Association, became the Renewable Energy Association, and it was um, and it was from that that I suppose the uh, the founder members of the, the Renewable Transport Fuel Association, um kind of uh, emerged. Let's put it that way.
Speaker 1:Right, perfect. And Tom, what about you? What? What brought you to the RCFA?
Speaker 3:Hi Oscar. Um, so I joined the RCFA about 18 months ago. Prior to that, I worked for the Department for Transport in their low carbon fuels team and I was there for well over a decade, similar to.
Speaker 2:Gaynor.
Speaker 3:I have various qualifications in environmental science and at one point I was an organic farmer as well, so I've taken a convoluted route to get to where I am now, but hopefully it's all useful experience.
Speaker 1:Excellent. I mean, how do you go from farming to you know the depth of the department for transport?
Speaker 3:I did both at the same time. I was part-time at both.
Speaker 1:Farming is just something I'd always wanted to do, so I ran a small organic farm alongside being a civil servant Amazing so, gaynor, do you just want to explain what the Renewable Transport Fuel Association is, what it does and looking at SAF particularly?
Speaker 2:Yeah, yeah, right. So the RTFA formed in the autumn of 2020 and it started with 12 founder members and they had been in a different trade association which had a far wider remit, but they felt that they needed a narrower focus and so they started. The Renewable Transport Fuel Association invited me to head that up and its focus has always been on the kind of UK renewable fuel producer. So we have and this is not going to be a comprehensive list, but we have all of the UK's bioethanol producers, all the biodiesel producers, all of the companies that dispense biomethane to transport. We've got companies looking to do development fuels, quite a lot of people interested in tyre pyrolysis oil, for example, and then pretty much all the UK SAF project developers Phillips 66, the only current SAF producer in the UK and I said it wasn't comprehensive. There's others as well, quite a few overseas companies, but it's the UK producer that's really at the core of what we're. You know who we're seeking to represent.
Speaker 3:And our membership is growing. I think it's important to say we're well over 50 members now, I think.
Speaker 2:We are. Yeah, that's right's right. No, it's been. It's been a great success since it started. Thanks, tom, for that very important uh um lead there. Yeah, we started with 12. We've now got over over 55 members, um, and a lot of them are staff project developers. In fact, 17 I counted them just before the podcast 17 companies looking to develop SAF projects are members of the RTFA.
Speaker 1:And, I'm guessing, looking for more, always looking for more.
Speaker 2:Yeah, we're happy we don't put too much effort into recruitment. I'd like to think that's because we are kind of the natural come to place. But you know, our expertise is really in in the DFT's renewable fuel mandate policies. I mean, as Tom said, he used to work for the DFT in the RTFO unit in fact, and and the SAF mandate will be based on the RTFO. So it's really you know we've got a decade. You know. You know we've got decades, you know people, decades of experience in these policies.
Speaker 1:And that's really helpful to us. Tom, can you just explain what the RTFO is to? Maybe the people not in the UK maybe not familiar with what it is.
Speaker 3:Certainly so. The RTFO is the Renewable Transport Fuel Obligation Order, so it's a piece of legislation that requires suppliers of road transport fuels to supply a portion of that fuel from renewables, and they've got various ways of doing it. They can either supply it themselves or they can buy certificates from other people who supplied it, and the idea is well. First of all it decarbonises the road transport side of things, but also it helps build up an industry that wasn't there before by providing an incentive for people to supply this fuel.
Speaker 1:So that's, as Gaynor mentioned, it's very much what the SAF mandate will be based upon problem Fantastic and, as I mentioned at the beginning, we're going to be spending a lot of time today talking about revenue certainty mechanisms and how they work. Genia, do you just want to explain what a revenue certainty mechanism is, what they aim to achieve and sort of how they work?
Speaker 2:Yeah, I mean, I think there's all sorts of risks in developing a big project, infrastructure project of any sort, but kind of one that's based on producing fuel in response to a policy for decarbonisation and one of the. I suppose you could say that the price risk is the real showstopper here. You know, the first question that a project developer will need to know is what will I be paid for the SAF I produce and then shortly after that, and will that cover the debt repayments I need to make to the bank? So that's really important. And a price, you know, price certainty, revenue certainty mechanism is something which stabilizes that price and so it can lower the cost of capital for the development of the project.
Speaker 2:But it just it places the risk of, of the that price certainty, in the place it can be best be managed, which is with, you know, with the government, as it's a government policy. The government sets the rules. By definition, the government could change the rules. So um it, it, you know, enables that risk to be dealt with, enabling the project developer to go along and look at all the other risks involved and kind of address them and, you know, place them where they can best be managed. So that's, that's what it does. It stabilizes the price and then and the project, can you know? Then take a much, have a much, much better prospect of raising finance.
Speaker 1:I mean. So when you look at them, there's lots of, you know, there's lots of relatively technical language revolving around price certainty mechanisms. You've got strike prices or buy of last resort, different sort of versions of it. First of all, what's what's the strike price? What's a buyer of last resort? What's the difference? Why? Why did why did that? Why does that difference matter as well?
Speaker 2:okay. So we've got. We've got two basic contenders for a revenue certainty mechanism. There's there's a contract for difference kind of approach which everyone's heard of. It's got a long history. We might talk about that in a moment.
Speaker 2:But under the CFD kind of model or a GSP, a guaranteed SAF price model, the project developer will get paid a price for the SAF they produce or the greenhouse gas savings they generate, because the SAF mandate is actually a greenhouse gas-based policy, not a volume-based policy, although people can be forgiven for thinking it is, because a lot of the language which describes it is in volume terms. So they know the price they're going to get paid for the SAF they produce, pure and simple, the price they're going to get paid for the stuff they produce, pure and simple, and the buyer of last resort is a mechanism where the market will operate. There's a contract underlying things, stabilizing things in the context of the market going long. In the context of the market going long and there being so much non-heifer kind of stuff around the stuff that the UK is particularly looking to incentivise that the market is long and the price drops away and under the buyer of last resort, the project developer has the comfort in knowing that they can go to the government in this scenario, this unlikely and unforeseen scenario. Go to the government in this scenario, this unlikely and unforeseen scenario. Go to the government and say buy my greenhouse gas certificates off me because I'm not getting a decent price in the market. And so they will get the buyer of last resort price paid to them by the government or an agency of the government, to them by the government or an agency of the government, and that buyer of last resort price will cover the debt payments and it will cover the cost of keeping the project going, the running costs of the project.
Speaker 2:And if it ever came into play, we wouldn't expect it to last very long because we would expect the government to then adjust the SAF mandate upwards so that there's always demand created and basically that is the way that they intend to run the mandate in the first place, keeping that shortfall, just as they do with the RTFO. So that's a very basic kind of overview of it. I haven't gone into. You asked about what the, what the reference price was, um in the context of the cfd kind of approach. Well, the reference price is is what the um, basically what the market price would be, um with a cfd for electricity, that's. That's fairly clear, because you know that the electricity market is very transparent and you can see indices um you know available, everyone can see them. Um, but with uh, with the SAF market, obviously there isn't a price that's known uh and reported in advance. But you would need that to bring a CFD model into play.
Speaker 1:Um, you don't need a reference price with the buyer of last resort approach is that what it seems to be a very sort of fine line between sort of letting markets take their natural courses and having enough, adding enough impetus to sort of stimulate production? Is that? Is that a tricky balance?
Speaker 2:um, I suppose. I suppose this might help answer that question. When we started the RTFA, we were only really a couple of months into running when we started to say to the government look, you need to have CFDs, we need to have something to enable project developers to stand a chance of financing projects. Initially, that was the only thing we were calling for. The idea of the buyer of last resort approach came to us kind of fairly late on in the day and we just saw this as a much more lighter administrative sort of touch.
Speaker 2:You really let the market play out with the buyer of last resort and the SAF mandate is the main policy. With a CFD or GSP kind of approach, really, that contract the contract for difference itself kind of eclipses almost the SAF mandate. It kind of becomes the main policy and we felt that it might be more. It took a long time to convince the government of the need for a revenue certainty mechanism, but we thought that the buyer of last resort approach might possibly be more attractive because it is lighter touch and it lets the mandate play out and the market play out as was originally intended. Does that help? Kind of answer that question?
Speaker 3:tom, you've probably got, you can probably add to that I I can add a little bit, um, I don't know how much extra it helps, but, um, I mean, the thing to remember with the buyer of last resort is is the clue really is in the name and that it it shouldn't be required. It really is only there as a last resort and it provides comfort to investors that there's a minimum price for the product, um, the product in the form of the certificates, um, should it ever be required? The way the mandate is being designed means that it shouldn't ever be required. But that that's on its own isn't enough for banks. They need that reassurance. So that's it's, it's the. The design of the buyer of last resort is literally just there to provide that comfort. A cfd, as gainer said, is another whole piece of work that would sit alongside the mandate and and eclipse it slightly. So it would be more work. It probably would provide even more reassurance to banks. So it comes down to which the banks prefer and which is enough for the banks so how?
Speaker 1:obviously you said the buyer of last resort is less intrusive and it's obviously the last resort, so it's going to be the last port of call. How would you go about setting that price? Because obviously SAF is such a nascent market? How do you see that sort of working out? Because obviously you've got with a guaranteed strike price. That's a bit more difficult to gauge because you don't have the longevity of the market say that you have an electricity, so that's going to be a bit harder. But how do you look at setting those prices?
Speaker 2:Well, actually, that price discovery element is going to be required whether you have a buyer of last resort or you have a CFD or guaranteed strike price or SAF price contract. Either way, you know there's different ways of doing it. You could have a bilateral negotiation between the project developer and the government or its agent. You could have an auction. You can have different kinds of auctions. You can start at kind of like the government proposing a price. Who will come forward and produce SAF or greenhouse gas savings at this price? If that doesn't yield enough interest, increasing it slightly. Or just ask the project developers to bid in in sealed bids what they would propose to um, to what they would require in order to um, encourage them to build a project. Um, so it's that that kind of question is the same under both. We expect that. Um. Well, we know that that will be part of the consultation when that revenue certainty mechanism needed to be consulted upon. So these questions will come out. Tom, do you want to add anything to that?
Speaker 3:Another thing to add is that the way the SAF mandate is structured and this is based upon the RTFO as well, which we mentioned earlier is that the price of the certificates, or the value of the certificates, is meant to cover what's known as the stretch between the price of fossil fuel and the renewable fuel. It's a market-based system so obviously different people will have different production costs. People will make different prices for their certificates at different times, but the structure of the system is meant to mean that the certificates cover that difference. The ceiling, effectively of certificate prices is the buyout price. We don't yet know as of today, on the 3rd of April, what the ceiling price will be. That's another piece of news we're waiting for to appear in the next few days, hopefully with the government response to the last consultation. But the ceiling price is the buyout price, so we know that the buyer of last resort price will be somewhere below that, but still enough to allow the plants to operate and keep the lights on effectively.
Speaker 1:Perfect. I will just add that we are, as you said, days away from an imminent announcement from the government, so we're actually going to get you both back after the announcements have come through, once we've had a time to sort of sit through them and then maybe discuss what they have announced and what that means going forward, because obviously, with that being said, this is slightly projected, slightly hypothetical, what we're sort of expecting rather than what we have. So something said today might, upon review, be less relevant, but we're obviously going to go back and respond to that at a later date. So, um, stay tuned for that one. Um. So we mentioned the energy markets earlier, just just going back to our discussion, and they've had CFDs in place for a lot longer period of time. There's a lot more clarity around that market. I'm just curious about what you think we can learn from that and take it through to working when we're working on SAF Gaynor. What can we learn from the renewable energy markets in terms of revenue certainty mechanisms?
Speaker 2:Well, I mean, I think you can start by saying that they've been around for a very, very long time. I mean the first renewable electricity projects. I'm not talking about the large scale hydro, which has been around since the 50s, but the renewable electricity industry in the UK really kicked off during the 1990s as a consequence of a policy which to all intents and purpose is a contract for difference kind of policy. It was called the non-fossil fuel obligation, when people pronounce it NOFO. So very, very many of the projects that are in operation today actually got commissioned with the benefit of price certainty delivered by a NOFO contract. So that policy ran from 1990 onwards. The last round was in 1998. But still projects today are generating under a NOFO contract and the very last ones will kind of tail off in 2027. So that policy started and it was very successful in bringing forward capacity. And then the Renewable Electricity Obligation, the Renewables Obligation or RO, came along in 2022. And I mean in a way it didn't run for very long just on its own. In 2010, we had the feed-in tariff, which was a form of stabilizing the price, and in 2014, we had the first electricity contracts for difference. We sort of know today.
Speaker 2:So pretty much most of the time really, the expansion of renewables have been kind of underpinned by renewable electricity projects have been underpinned by some sort of price stability thing, most latterly known as the contract for difference. I mean, I think that shows how much it's needed. I mean, I think for many people, just the term contract for difference, they just equate that with a stable price. I mean, in fact there's an awful lot of kind of policy architecture that goes alongside it. You say, what can we learn from that? We can learn that you know you need to have a significant enough industry to run a meaningful auction.
Speaker 2:The NOFO rounds were auctions. The early CFD or the first CFD rounds wasn't actually an auction. It was a sort of administered price, a negotiated price, effectively, a fact which has not gone unnoticed by the SAF project developers actually, who who favor that kind of approach for any early rounds of um, of uh, the revenue certainty mechanism that we'll have um in the future. So uh, yeah, I think that kind of puts the context there. They really are something that's required to assist in rolling out expensive infrastructure on the energy side.
Speaker 1:But what you said there was actually really interesting. There was very clear sort of there was a progression. It wasn't just sort of you know, a CFD was created and it hasn't changed. That actual sort of structure has evolved as sort of the industry's evolved, with revolting in what CFDs are today. Is that something we can look at, sort of at Safa going? What's going to be set in place isn't necessarily going to be there forever. It's going to have to be developed and tinkered with as the industry develops.
Speaker 2:No, I wouldn't say no, I I wouldn't say that. I wouldn't say that I mean some people, I mean quite a few people in the energy industry or renewables industry, weren't around during the days of the nofo contracts. I've been around a long time, so um, but but the the cfd, as a consequence of electricity market reform, you know, started in 2014. You know, that's what you know has become established and I suppose it's that kind of model that you look at SAF and think will it fit into that CFD kind of approach?
Speaker 2:Now, phil New wrote a couple of really helpful reports for the DFT and it was his work that kind of was helpful in convincing the government that some sort of intervention was required to actually get the SAF industry going in the UK and he proposed he very deliberately didn't hasn't called the proposal that will be consulted upon the GSP. He didn't call it a CFD because it doesn't need quite so much intervention. It's not quite so appropriate to have all of that structure in place for the SAF industry. So his idea is a sort of somewhat simplified version of a contract for difference, but that guaranteed strike price contract aims at delivering a price that the developer knows for certain they will get paid for a period of time, and it's just that there's far fewer project developers and you know to start that whole kind of ongoing round of auctions I think we'd also would rather not predict lots of changes to the policy over the future.
Speaker 3:I mean, what we really want is policy certainty, so that people know that what we've got now is what it's going to stay like, rather than thinking or that they'll hang on and wait for something else in the future. Um, we absolutely need policy certainty in order to get these plants built.
Speaker 2:Yeah, well said Tom.
Speaker 1:That's a big benefit of having the renewable energy stuff going on, policy going on for such a long time. It's sort of enabled all that troubleshooting to get to a point where you can set something pretty firm up now that can last, that can run into the future, having already had that understanding of how it works. Definitely. And then the rtfo has been like.
Speaker 3:The rtfo has been around since 2008. Um, whilst it has been changed over that time, um it's generally it's been changed to to widen its remit and bring more fuels in and more sectors in, rather than narrowing it or changing the rules that then, you know, hurt people's business. So we would much prefer you know any, any SAF mandate that um comes along. We want them to to stick by it and possibly, yes, it might widen its remit in some way in the future.
Speaker 1:But we really don't want any sort of abrupt changes or differences coming along that create uncertainty so glad you just bring up the mandate then, because it's an excellent segue to my next question, where you look at sort of revenue, price certainty mechanisms and bar of last resort and mandates, and there's also the advanced fuel funds, sort of giving public investment into producers. How, how important is that those three things work in unison and harmony together rather than having conflict against each other? Because you mentioned the guaranteed strike price but could potentially not work against but sort of superimpose upon a mandate. So is it creating?
Speaker 3:a policy environment. It's just it might duplicate it needlessly so that that's why we, the buyer of last resort is, is a simpler option in that it just sits alongside the SAF mandate. It uses the same framework and the same sort of reference points, essentially, so it can sit nicely alongside the existing DFT policy which they've already committed to. The guaranteed strike price sorry, saf price is more complex and you know, whatever they come up with, it would need to be designed such that it still complemented the south mandate. It couldn't possibly be set up such that it worked against it. Um, that would be a quite a known goal on the part of the government if they did that. So I really hope they don't do that. Um, the advance there's been a few uh rounds of funding over time. In the earlier rounds of funding, when it was the advanced biofuel demonstration competitions, that was more about paying for the development of small pilot or demo style demo scale plants. Um, over time the focus went more towards paying for uh development costs, things like feed, uh studies and that sort of stage of development, because that's the valley of death, essentially trying to develop a project. It's very hard to borrow money to do that kind of work. So those grants have a very specific purpose of helping get plants built in the UK.
Speaker 3:The SAF mandate is there to decarbonise aviation and it creates demand. But that demand doesn't necessarily come from the UK. If you look at the RTFO, 90-ish percent of the fuel being supplied under the RTFO is imported from elsewhere, so still 10% produced here. We'd like to see that go up and same with the staff mandate. We really want to see a uk industry producing this stuff so that the, the mandate, creates the demand. The uh competition funding rounds help people build the plants. The, the final piece of the jigsaw jigsaw, sorry, um really is the um, the, the revenue certainty mechanism which helps plants operate in the uk. Would you agree with that gainer?
Speaker 2:yeah, absolutely would.
Speaker 1:Yeah, yeah, so much when you saw, I mean no, no, that's fine. You mentioned the sort of looking at driving demand and increasing production. When you so, when you get sort of you've got customers and producers and investors, what are they going to see when they look at a price certainty mechanism and the mandates together is, is it a package, as it were, that's going to entice them to what invest in domestic product projects or uk-based projects or, you know, purchase uk built staff? How are they? How are they going to look at it? Because they obviously have a very important role to play in terms of financing things, projects and actually buying the SAF themselves.
Speaker 2:Yeah, well, I think, as Tom was saying, with the buy of last resort mechanism, I think once they know it's there, they can get on with everything else. I think with a guaranteed SAF price contract, you kind of really it all hinges on the price. So you're really focusing on that. The market kind of takes a bit of slightly a backstage. Obviously they'll need to have fuel offtake agreements because that will deal with the volume risk. You've got to have someone buying the stuff. But really the focus then becomes on what is my guaranteed SAF price actually going to be? So I think the two are different there. But yeah, as you say, there are a lot of players in the the market and there are a lot of. There are a lot of other considerations other than other than price risk, um, and you know, people will obviously need to know exactly what the mandate, uh, what demand that the mandate creates, what's eligible, you know, um. So there'll be a lot of documents to study in the near future on that and quite a lot of clarity will emerge.
Speaker 1:Maybe we can revisit that one in a few weeks then.
Speaker 2:Yeah, absolutely, yeah, absolutely.
Speaker 1:Just in terms of timelines, because the mandate set to come into place in 2025. Mandate set to come into place in 2025 and with the current projection of a revenue certainty mechanism, that looks like it might be more later 2026. Is that correct? Yeah, that is so. Is there a worry that there's that sort of gap between the mandate being set and then a price certainty mechanism being put in place?
Speaker 2:Yeah, there certainly is, absolutely.
Speaker 2:I mean this is had the revenue certainty kind of the need for the revenue certainty mechanism being recognised sooner, we would be in a much better place than we are now. The projects that have made progress, you know, benefiting from the AFF grant funding, you know we're working to a timetable under which they'd have reached their investment decision far sooner than they're going to be able to, given that the revenue certainty mechanism comes so late. It's a concern that's been developing, that's been focusing the minds of our project developer members quite significantly. We've come along to CFD making alternative proposals because they will need to be supported in some way to kind of tide them over that another kind of type of valley of death but between the mandate starting or then starting having brought their projects ready to the point when they want to make the investment decision and then just not being able to do that um until hopefully the end of um 2026 or, you know, possibly sooner, but you know, possibly a bit later. That's only an indicative timetable we've been given so yeah it is well.
Speaker 2:I mean, I think everyone's pulling out the stops to do it as fast as they can, but these things do take time, so in an ideal world it would have started a lot sooner.
Speaker 3:Tom, have you got anything? Only to add to what Gaynor has already explained. Really, I mean, we would have obviously liked these things to have aligned. Unfortunately they haven't and it has created, you know, further problems for us to solve, but we think we've got some solutions. Um, the reality is that we do live in a democracy. We can't just dictate to the government what they should do. They need to go through proper process. So they've done that and and we're waiting for their consultation on what to do about it, hopefully coming out in the next few days.
Speaker 1:I was going to ask this later, but I think I'll jump it up the order and ask it now Are governments and policymakers moving fast enough? Are they receptive to sort of people like yourselves, the RTFA, sort of having conversations with them about what you think should be put in place?
Speaker 2:I think we've sort of already answered it, me sort of expressing some frustration that things weren't that we weren't listened to sooner, and Tom pointing out that these things do take time. Yeah.
Speaker 3:Never hurry a craftsman, that's what I say. But we I mean we have a good working relationship with the department for transport. They, they know that we are the voice of the industry, as it were, so we talk to them a lot. They understand our concerns, but they do have to follow due process. So I think some of them are as frustrated at the slow progress as we are. Obviously we'd like things to move more quickly, but we also recognize that they in many cases can't move that much more quickly.
Speaker 1:So when I mean in the SAF industry in general, there's a lot of comparison between Europe and the US and the UK and all the different policy landscapes that are being developed, and I just wanted to hear your thoughts about CFDs aren't so much of a thing in the US. It's not sort of something they're looking at so actively as they are here. I just wanted to know your thoughts about why this is a good thing to happen here and why it's not something being looked at there as there's.
Speaker 2:They're being sort of the industry drivers in terms of production currently yeah well, um, I mean, you've got, you've got a different kind of, you've got a different approach, fundamentally a different kind of approach. You've got a different approach, fundamentally a different kind of approach in the States.
Speaker 2:I'm not an expert on this, but they're very much on the production incentive side of things. Tax incentives, you know, powerful incentives under the IRA. In the UK we focused on creating the demand In the UK. We focused on creating the demand In Europe as well. The EU refuel aviation regulation will create the demand and so it's a different kind of you know, different dynamic there. I mean what I would say about. I mean that's one of the differences you pointed out.
Speaker 2:Of course, the other big difference between the approaches is what kind of fuels are eligible or feedstocks are eligible to make fuels. And I think the UK has got an interesting and I think, quite much admired approach to that where it's creating a particular incentive for the types of feedstocks we know we're going to incentive for the for the types of feedstocks we know we're going to need to bring on, which are, you know, more more challenging to make saff out of than than the oily, you know, used cooking oil and heifer type feedstocks. Um, but before we need to really kind of really bring forward the, the e-fuel power to liquid kind of range of things. Um, I know that's not what you asked, oscar, but I wanted to kind of get that in. And you know our approach to sustainability is always, you know, much kind of admired elsewhere.
Speaker 1:Maybe the comparison is slightly more appropriate with Europe then, because they're also looking on the demand side rather than the production incentive side. Are Europe looking at CFDs like we are here, or is that not so much on the agenda?
Speaker 2:Well, I've heard that, I've heard kind of rumours of that. Actually, at your conference, which was very good, I must say I heard talk of well, I think Europe's going to need to do this. So, yeah, let's see, I'm not kind of, um, you know, okay with those, any discussions on that, um, but you know it's, it's a sensible way of bringing down the cost of capital for a project. So, um, you know, if you want to have, you know we're looking at the you know, not the cheapest source of staff. We you, the UK's focusing on this, on the wastes and later the PTL. So you know, it may well be something which possibly could be emulated, but, you know, refuel aviation, it's encompassing all those member states. That's the overriding regulation, you know. I don't know whether they would move individually on.
Speaker 1:On revenue certainty, um, yeah, I really can't say I mean, if it's complicated to happen here with a sort of our democratic system, it probably will take even longer to get through in europe with all the member states and however they've got to work that out. But hopefully, looking at a rumor mill sort of started here that it is being out. But hopefully we can get a rumour mill started here that it is being looked at and eventually we'll get some momentum in Europe to get it put in place.
Speaker 3:They may wait and see what we do and then draw their own conclusions or inspiration from that. And when you say it's complicated here, oscar just another word is you know it's?
Speaker 2:yeah, the bar of ours is less complex. That's why we came up with it. We thought it would kind on that. They just want something to enable them to deal with the price, risk and agnostic to which it is. Whichever gets brought forward we're happy with. We just need it soon.
Speaker 1:That's the main thing, you just want something rather than nothing. We need something rather than nothing. So I suppose my final question is we've been sort of discussing the upcoming announcements from the government and I just wanted you know, to get your understanding of what you're expecting them to announce, what you hope they announce, and I mean with the view that this, when announcements do come, might be um, some change.
Speaker 3:But yeah, just sort of what you're hoping for at this stage when the the second mandate consultation response comes out, which, as you say, is hopefully imminently. I mean, there's a few things it absolutely must confirm, one of which will be the buyout price um. The other would be where the heifer cap is going to sit when the power to liquid um sub target begins and what the overall trajectory will be over time. All of these things, you know. Anyone looking to build a plant or finance a plant needs to know these things um. And at the moment you can't um do a full projection because there's so many uncertainties amongst those variables. So we absolutely need some clarity on what they all are. Obviously we've got our own views on where those things should be.
Speaker 2:Whether we get what we want, I can't say at the moment we'll be happy to come back and let you know, oscar, what we think of the consultation, as you invited earlier.
Speaker 1:So you'll let me know if you got what you wanted, rather than let me know what you want now, as it were.
Speaker 2:Well, I mean, clearly, the buyout price has to be sufficient so that either the buy of last resort or, more importantly, the GSP works. Otherwise, if that's not high enough, then a GSP would always be paying out and there would have to be a levy, possibly, you know, fairly substantial, to cover that additional cost. And under a buy of last resort scenario, if the buyout price isn't, isn't high enough, then there's there's nothing in it for the market to want to build the projects in the first place, so it all becomes kind of fairly irrelevant. So we certainly need that. Um, I mean, once we'd like an ambitious trajectory, uh, um, yeah, otherwise, yeah, happy to come back and tell you what we think of it when it's, when we've seen it perfect, and I will look forward to that greatly.
Speaker 1:Tom gainer, thank you so much for your time thank you very much.