Spain
Spain is emerging as a significant player in the SAF market, driven by its commitment to reducing carbon emissions in the aviation sector and aligning with the European Union’s Green Deal objectives. The country’s strategic focus on renewable energy sources and its robust infrastructure make it an attractive hub for SAF investments. In collaboration with aviation stakeholders, prominent energy companies have already made important investments in the sector. These collaborations are crucial for scaling and integrating SAF production into the existing aviation fuel supply chain. Spain’s commitment to SAF is evident through its increasing investment activity and a robust pipeline of SAF projects that are expected to be developed, constructed, and operated over the next 5-10 years.
Decarbonizing the Spanish aviation sector is expected to require around 5 million tons of SAF annually by 2050. To achieve this, Spain would need to establish between 30 and 40 production plants nationwide, which would be sufficient to cover its entire national demand. A report by Iberia Airlines suggests Spain’s production capacity could significantly exceed local needs by 2050, and building additional plants could enable the country to export substantial volumes of SAF to the international market (PwC, 2024) (Iberia, 2023).
GDP (Current Prices) USD (2023) | 1,581 Bn |
Real GDP Growth Forecast (2023-2027) | 1.81% |
10-year Govt Bond Yield (12-month rolling average) | 3.45 |
Country Credit Rating | A |
Average Daily Flights | 4616 |
Existing Fuel Consumption | 7.48 million metric tons |
Usage Mandate | |
Projected SAF Capacity Under Development (MT/Year) | 272,860 by 2026 |
Policy Support | Aims to construct 30 to 40 SAF
production plants and inject €56
billion into the country’s GDP by 2050 |
Aviation Industry Backdrop
Spain’s aviation industry has grown to become the top air passenger market in Europe, with passenger traffic hitting record highs in 2023 (Eurostat, 2023) (Statista, 2024). Additionally, the airports saw a surge in the daily number of flights in 2023, with an average of 4,616 flights, which was 9.0% higher in comparison to 2022 (Eurocontrol, 2024). The revenue of the flight market in Spain is projected to reach $14.0 billion in 2029, growing at a CAGR of 3.7% from $11.3 billion in 2023 (Statista, 2024).
The expansion of the aviation industry is having notable environmental repercussions resulting from higher fuel consumption and CO2 emissions. Spain’s jet fuel consumption was at the level of 7.5 million metric tons of oil equivalent in 2023, up 13.1% from the previous year (Knoema, n.d.).
This rising trend in fuel consumption has corresponded with a rise in CO2 emissions, which reached 20.0 million tons in 2023, representing 12.0% of the share of total aviation emissions in Europe (Murcia Today, 2024) (Breaking Travel News, 2024). This trend underscores the urgent need for the aviation sector in Spain to address its environmental impact, making decarbonization imperative to curb rising emissions. Among the various strategies to achieve this, biofuels—particularly biodiesel, Hydrotreated Vegetable Oil (HVO), and bioethanol—have emerged as a promising solution in Spain’s pursuit of cleaner aviation fuels. In 2023, the volume of biodiesel and bioethanol consumed across Spain totalled 4,400.0 metric tons and 85.0 metric tons, respectively (Statista, 2024) (statista, 2024).
Additionally, Spain stands out in Europe for its innovative approach to producing renewable diesel. The country leads in co-processing vegetable oil with fossil diesel at oil refineries to produce renewable diesel, offering a lucrative opportunity to produce SAF.
Source: OECD.Stat, 2024
Note: Thousand tonnes of CO2-equivalent
Policy Regulation
Decarbonisation and SAF targets: The Spanish government’s SAF target aligns with ReFuelEU’s goal of achieving 2% SAF usage in all aviation fuel by 2025 (ICAO, 2022) (Ecologistas en Acción, 2021). Further, the National Integrated Energy and Climate Plan 2021- 2030 sets a target of 5.0% biofuels, of which 0.7% are synthetic fuels, in line with ReFuel Aviation (Transport & Environment, 2023).
The Spanish Climate Change Law enables the government to establish annual renewable energy targets in the aviation sector, focusing on advanced biofuels and other renewable fuels of – non-biological origin (ICAO, 2022) (Ecologistas en Acción, 2021). The regulations mandate biofuel targets reaching 12.0% by 2026. Also, advanced biofuel targets were set to reach 3.5% by 2030 (IEA, n.d.).
Multiple government funding programs have been introduced to support nationwide SAF initiatives:
Earmarked Investments and Funding for SAF: The Spanish government has allocated €250.0 million for the development of a dedicated large-scale renewable diesel and SAF production facility in Cartagena (SAF Investor, n.d.). The National Integrated Energy and Climate Plan 2021-2030 also suggests using carbon market revenues to fund public investments in green hydrogen and eFuel production, allocating 25% of the revenues generated from the ETS to aviation and shipping (Transport & Environment, 2023).
Deployed Investments and Projects: In June 2024, the Ecological Transition and Demographic Challenge Commission approved a legislative proposal outlining key points for the policy-led growth in SAF, including SAF production incentives, R&D funding, and public- private partnerships to enable adoption of SAF technologies and facilitating feedstock sourcing strategies (Travel And Tour World, 2024).
Financing Mechanisms: The National Integrated Energy and Climate Plan 2021-2030 recommends adopting Carbon Contract for Difference schemes, financed via revenues raised from the application of the polluter-pays principle. The plan also suggests promoting and facilitating private investments in the development of clean fuels and zero-emission technologies (Transport & Environment, 2023).
In addition to government support, financial assistance is also available from the EU in terms of funding support for SAF projects through Horizon Europe and the European Green Deal. These funds are aimed at research, development, and scaling up production capacities, ensuring that Spain remains competitive in the global SAF market.
Market Opportunity
The SAF project pipeline in Spain is expanding due to several initiatives being put in place. Investments are directed towards the development of infrastructure necessary for the production and distribution of SAF. The combined efforts of Repsol, Cepsa, and Solarig signal a robust future for the SAF industry, and government bodies are collaborating with private companies to capitalize on expertise and investment to scale up SAF production and distribution efficiently.
Airline Initiatives: Major airlines, such as Iberia and Vueling, have voluntarily committed to individual emission-reduction targets, surpassing regulatory requirements by vowing to employ 10.0% SAF by 2030 —a higher percentage than the 2.0% mandated in Europe (Iberia, n.d.) (Vueling, n.d.). These airlines are actively participating in SAF projects, forming alliances with fuel producers to secure SAF supplies and reduce their carbon footprint.
SAF Initiative: Significant investments have fuelled the shift to large-scale production, with Repsol planning to invest over €120.0 million to retrofit a diesel plant into a biofuel refinery (Reuters, 2023), and a €780.0 million venture announced by Solarig and the regional government of Castilla y León for a new facility in Soria (ChemAnalyst, 2024). Additionally, the Cepsa, in a JV agreement with Bio-Oils, is constructing the largest second-generation biofuels plant in southern Europe, aiming to produce 500,000 tonnes of HEFA SAF & renewable diesel annually (Biobased Diesel Daily®, 2023).
Outlook
Overall, Spain is emerging as a key player in the European SAF market, with the potential to become a significant global contributor. With a combination of regulatory support, strategic funding, and investment in new technologies, Spain’s SAF market is well- positioned to grow rapidly.
Future SAF production facilities in Spain will be able to leverage the country’s well-established renewable diesel industry, which includes several refineries already producing substantial amounts of hydro- processed renewable diesel. This capacity could potentially be reoriented to produce hydro-processed esters and fatty acids (HEFAs) jet fuel. However, the current reliance on palm oil as a feedstock poses sustainability challenges. To meet the sustainability requirements proposed in the ReFuelEU regulation, the industry needs to transition from food-oils to waste oils. This shift may impact the production capacity of diesel and renewable diesel if the relevant units are reoriented to jet fuel production. As a result, it is more likely that new dedicated facilities producing a high share of HEFA jet output will be required and that existing co-processing capacity will continue to produce renewable diesel (ECODES, n.d.) (Ecologistas en Acción, 2021). For example, Cepsa has plans to produce HEFA SAF & renewable diesel in its second- generation biofuels production facility in Huelva (Energy Intelligence, 2024).
In the future, the focus is expected to shift towards more advanced biofuels, such as those derived from a combination of CO2 and green hydrogen. Companies like Solarig are currently developing these technologies. Notably, Spain is projected to be one of the most competitive and cost-efficient locations in Europe for green hydrogen production (Financial Times, n.d.).