Lot 3: eSAF
This lot covers the purchase side (HPA) of eSAF in the €900m pilot tender.
Electricity-based synthetic aviation fuel (eSAF) is produced from hydrogen and CO2 using proven methods like Fischer-Tropsch synthesis. This process significantly reduces CO2 emissions compared to conventional kerosene, as it contains no harmful sulfur and is nearly climate neutral. International aviation is projected to require increasing amounts of synthetic fuels by 2040. To make this happen, eSAF must be distributed so it can be used at various locations, including major airports worldwide, both directly from production sites and via existing infrastructure. However, the eSAF market remains at a very early stage of development.
€300 million were offered by Hintco to purchase eSAF in its pilot tender launched in 2022. Over 300 interested parties from 43 countries across five continents downloaded the tender documents on Hintco’s auction platform.
The tender for eSAF ended without a contract being awarded but it provided valuable insights about eSAF market conditions and regulatory readiness in Europe. The main obstacles to awarding a contract in the eSAF tender were uncertainties regarding the EU regulatory requirements and volume constraints.
Product specifications for electricity-based Sustainable Aviation Fuel
Additional product specifications
In addition to the above-mentioned technical specifications, the product must comply with additional product specifications pertaining to the renewable and emissions savings characteristics of the product. They are based on the RED II and the Delegated Acts (2023/1184 and 2023/1185) and fulfil the requirements set in the grant decision and additional instructions given by the provider of funds, BMWK.
They include the following criteria:
- All hydrogen atoms must be derived from water electrolysis
- The electricity used in the production process must derive from renewable sources
- The GHG emissions savings (including transportation) must be at least 73 per cent in comparison to the fossil fuel comparator as set out in the Delegated Regulation (EU) 2023/1185 at 94 gCO2eq/MJ
Environmental and social sustainability
Find out here about the range of tools we use in our pilot tender to ensure that climate protection goes hand in hand with environmental and social sustainability.
Frequently asked questions
Why were ammonia, methanol, and e-sustainable aviation fuels chosen for the first tender?
The hydrogen derivatives in the pilot tender – renewable ammonia, renewable methanol, and eSAF – were selected by BMWK, based on a market analysis and a market consultation carried out in 2021.
The products auctioned in future tenders may vary according to the individual objectives of the respective funding bodies.
Who determines how the H2Global instrument is being applied, e.g. hydrogen criteria, geography, etc.?
The provider of the funds determines the conditions under which Hintco receives financial support to offset the expected cost difference arising from its trading activities. These conditions are outlined in a grant agreement, specifying key parameters such as the hydrogen's "color" classification (or other criteria for defining clean hydrogen), the geographic focus, and any potential additional requirements.
The H2Global mechanism, along with Hintco, is designed to be highly flexible and adaptable - remaining "color-agnostic" in its approach. However, all terms and conditions must align with H2Global’s overarching commitment to promoting environmental and social sustainability while contributing to global climate action.
Does Hintco only auction one-year contracts on the demand side?
Short-term contracts on the demand side play a key role in ensuring the efficient use of concessional (governmental) funding, while fostering price transparency and market liquidity. For this reason, many lots in the current H2Global auctions will feature one-year Hydrogen Sales Agreements (HSAs). These short-term agreements are essential to establish H2Global reference prices and indexes, laying the groundwork for a more mature hydrogen market.
At the same time, some off-takers, particularly in certain sectors, may require volume security over a longer horizon but struggle with fixed-price exposures. To address these needs, the H2Global mechanism is exploring models that allow Hintco to enter into longer-term sales agreements by adding additional layers to the existing structure. Detailed concepts for such models are already being developed and foreseen for upcoming tender designs.