LOGIC: Logistics Sector Update - Summer 2026
Cleared for Take-Off: The Logistics Behind the Growing Demand for Sustainable Aviation Fuel
By Antony Vundi
The growing demand for sustainable aviation fuel (“SAF”) in the UK is creating significant opportunities for the logistics sector to build production facilities, storage depots, and distribution infrastructure at scale. For developers, investors, and logistic operators this represents an opportunity across site acquisition, planning, construction, and long-term asset management.
Understanding the SAF Mandate
The UK SAF Mandate, which came into force on 1 January 2025, creates a legally binding demand floor for SAF. The mandate requires aviation fuel suppliers delivering at least 15.9 terajoules (approximately 468,000 litres) per calendar year to ensure that a specified percentage of their fuel comprises SAF-beginning at 2% in 2025, rising to 10% by 2030, and reaching 22% by 2040. The Government estimates that domestic production of up to 5 megatonnes annually may be required to achieve the UK’s 2050 net zero target, representing 40% of pre-pandemic aviation fuel consumption. This demand signal provides the long-term visibility that investors require to commit capital to production infrastructure.
Critically, England’s current SAF production capacity is extremely limited. In 2025, used cooking oil was the feedstock for all SAF used, with over 70% imported from Asia. Notwithstanding government co-funding through the Advanced Fuels Fund (£198 million allocated across three funding windows to 17 projects), the gap between mandated demand and domestic supply capacity presents a compelling development opportunity.
The Government estimates that domestic production of up to 5 megatonnes annually may be required to achieve the UK’s 2050 net zero target...
The Government estimates that domestic production of up to 5 megatonnes annually may be required to achieve the UK’s 2050 net zero target...
Site Selection and Development
SAF production facilities raise familiar but technically demanding issues for logistics sector operators, including site selection, planning consent, and environmental permitting. Facilities typically require large industrial sites; often on brownfield land with complex contamination histories, capable of accommodating process infrastructure, feedstock storage, and distribution connectivity. Government estimates suggest that production facility costs range from £600 million to £2 billion to achieve economies of scale.
Key site selection criteria for SAF production facilities include proximity to feedstock sources (waste processing facilities, agricultural residue supplies, or for power-to-liquid facilities, renewable electricity and hydrogen infrastructure); access to airport distribution networks; adequate utility connections; and sufficient site area for phased expansion. Developers must also consider long-term feedstock eligibility risk; the SAF Mandate imposes sustainability criteria that may evolve, and lenders and investors require assurance that feedstocks will remain eligible throughout financing periods extending to 15 years or more.
Site Selection and Development
SAF production facilities raise familiar but technically demanding issues for logistics sector operators, including site selection, planning consent, and environmental permitting. Facilities typically require large industrial sites; often on brownfield land with complex contamination histories, capable of accommodating process infrastructure, feedstock storage, and distribution connectivity. Government estimates suggest that production facility costs range from £600 million to £2 billion to achieve economies of scale.
Key site selection criteria for SAF production facilities include proximity to feedstock sources (waste processing facilities, agricultural residue supplies, or for power-to-liquid facilities, renewable electricity and hydrogen infrastructure); access to airport distribution networks; adequate utility connections; and sufficient site area for phased expansion. Developers must also consider long-term feedstock eligibility risk; the SAF Mandate imposes sustainability criteria that may evolve, and lenders and investors require assurance that feedstocks will remain eligible throughout financing periods extending to 15 years or more.
Airport Infrastructure and Fuel Distribution
The logistics chain for SAF extends beyond production to storage and distribution at airports. Airports face varying challenges in SAF deployment: some rely on road tanker delivery rather than pipeline, face limited local supply, or serve airline mixes dominated by low-cost carriers with heightened price sensitivity. For logistics operators, these constraints translate into opportunities to upgrade fuel storage facilities, expand tank farm capacity, and develop dedicated SAF blending and distribution infrastructure.
Major airports are moving beyond minimum compliance. Heathrow has announced a target of 5.6% SAF use in 2026 (exceeding the 3.6% mandate), equating to approximately 350,000 tonnes of SAF supported by an £80 million airline incentive scheme funded via aeronautical charges. If delivered, this programme could reduce lifecycle carbon emissions by around 600,000 tonnes in 2026. Bristol Airport has also demonstrated early leadership, completing its first SAF delivery, whilst Jet2 announced SAF use at Bristol almost a year ahead of the mandate.
Heathrow has announced a target of 5.6% SAF use in 2026 (exceeding the 3.6% mandate), equating to approximately 350,000 tonnes of SAF supported by an £80 million airline incentive scheme funded via aeronautical charges.
Heathrow has announced a target of 5.6% SAF use in 2026 (exceeding the 3.6% mandate), equating to approximately 350,000 tonnes of SAF supported by an £80 million airline incentive scheme funded via aeronautical charges.
Investment and Financing Structures
The investment case for SAF infrastructure is underpinned by the Revenue Certainty Mechanism (“RCM”) currently being developed by the Government. Modelled on the contracts for difference scheme used in the renewable electricity sector, the RCM will operate on a “guaranteed strike price” basis, with SAF producers remunerated at a predetermined price per litre through 15-year private contracts with a government counterparty-expected to be the Low Carbon Contracts Company. The first tranche of contracts will be limited to non-hydroprocessed esters and fatty acids SAF production. The mechanism is industry-funded through a variable levy on aviation fuel suppliers based on market share, meaning no taxpayer exposure. For developers and investors, this framework offers long-term revenue certainty comparable to renewables projects, enhancing project bankability and enabling access to institutional capital.
Notwithstanding this support framework, barriers persist. High capital costs, combined with SAF’s price premium (currently two to five times conventional jet fuel), mean that regulatory and revenue uncertainty is a consideration, particularly when coupled with intense competition for capital from other low-carbon technologies. Accordingly, logistics operators considering SAF projects must understand the interplay between planning, offtake agreements, and revenue support structures.
Future Opportunities
SAF is an emerging asset class with a clear regulatory trajectory. For landowners, binding demand and substantial government funding create opportunities to bring forward industrial sites for SAF production; particularly brownfield sites with existing utility connections and distribution access. For developers and infrastructure investors, the RCM offers long-term revenue visibility comparable to established renewables projects. Those who engage early, whether through site identification, infrastructure investment, or commercial structuring, will be best placed to capture the opportunities created by aviation’s transition to lower-carbon fuel.
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