Executives across energy, transport, and industrial value chains have quietly moved past the first question – should we invest in renewable fuels? The more urgent debate now is when, where, and how to invest without getting trapped by today’s volatility. That shift reflects a market with two truths at once: the near term is uneven, but the long-term demand signal is strengthening and increasingly hard to ignore.
The long-term signal is clear: a big market forms in almost any transition scenario
Most credible transition pathways converge on a common view: sectors like aviation and maritime will need scalable, liquid-fuel solutions for years because substitutes won’t be able to replace hydrocarbons fast enough at the required scale. That’s why sustainable aviation fuel (SAF) is widely expected to be the fastest-growing renewable fuel over the coming decades – and why drop-in renewable diesel and related fuels remain attractive for heavy-duty road transport where existing engines and logistics infrastructure can be used with limited modification.
Market sizing work in this space often lands in the same neighbourhood: renewable fuels could represent roughly 10%–15% of total transportation fuels by 2050, with an associated profit pool on the order of $100B–$150B as the market tightens and value shifts toward scarce, compliant, low-carbon molecules. Those numbers should be treated as directional rather than precise, but they underscore the point: this is not a niche adjacency – it is a meaningful arena of future competition.
The near-term noise is also real: economics, policy, and timing are colliding
If the long-term story looks attractive, the short-term operating environment can look punishing. Many producers are dealing with a supply-demand imbalance in parts of the biofuels complex, uncertainty around incentives and mandates, and higher capital costs that squeeze project returns. The result is a market where some players slow investment while others continue to advance – but with a sharper focus on disciplined, flexible moves.
Policy design is a major driver of this volatility. Different jurisdictions are using different tools – some rely heavily on subsidies and credits, while others lean on mandates and penalties. Even within a single country, carbon-intensity methodologies and compliance mechanics may vary across programs, which creates “basis risk” for projects and complicates the monetization of environmental attributes.
The practical takeaway is that renewable fuels cannot be managed like a conventional commodity business. In many cases, the product being sold is carbon abatement and compliance value as much as it is energy content – so commercial strategy, contracting, certification, and credit management become central to the economics.
The structural bottleneck: tomorrow’s demand needs tomorrow’s feedstocks and pathways
A common misconception is that scaling renewable fuels is primarily a “build more capacity” problem. In practice, the harder constraint is often advantaged inputs – and the ability to reliably turn those inputs into a verifiable, compliant fuel at scale.
Mature pathways (such as HEFA-based routes using waste oils and fats) can grow for a time, but many scenarios show they won’t be sufficient alone to meet long-term demand. As a result, the market will increasingly need a broader set of feedstocks (including novel oil crops) and additional technologies (including synthetic fuel pathways and other conversion routes). Developing and scaling these options is not just a technical challenge; it’s a multi-party coordination problem across agriculture, collection and logistics, refining, and end-customer offtake.
This is also where investment risk starts to look less like traditional refining and more like venture-style portfolio management. Some feedstocks and technologies require long development cycles and uncertain cost curves, so a single “big bet” approach can expose firms to painful timing risk.
A practical playbook: five moves that improve odds of winning (without overextending)
The organizations making progress tend to combine strategic ambition with operational realism. They don’t assume a straight-line growth story – and they don’t confuse activity with advantage. Five approaches show up repeatedly among early leaders:
1) Treat the downturn as a competitiveness window, not a reason to retreat
In cyclical markets, the best operators use weaker pricing periods to improve controllables: input optimization, reliability, maintenance practices, throughput discipline, and digital process controls. In renewable fuels, those levers can quickly separate plants that survive volatility from plants that become hostage to it – especially when feedstock spreads move and credit values fluctuate.
What this looks like in practice
- Rebuilding unit economics through supply-chain redesign and tighter feedstock quality management
- Reducing sustaining capital and improving uptime through better planning and analytics
- Using advanced process controls to extend catalyst life and stabilize yields
2) Become relentlessly customer-led – because you’re not selling a commodity
Renewable fuels markets reward commercial sophistication. Customer segments vary widely in what they value (compliance coverage, emissions reduction, brand narrative, cost certainty), and that shapes pricing and contract design. Leaders invest in understanding where demand is strongest and how it evolves across regions and regulatory regimes.
A key structural difference is timing: offtake often needs to be secured early – sometimes before a final investment decision – because buyers want supply certainty and producers need bankable demand. Airlines, for example, have increasingly moved toward long-term agreements to lock in SAF supply and manage future compliance exposure, and some have explored investment-oriented approaches to help scale supply.
3) Build a “living strategy” with signposts – because the winning pathway is not universal
Renewable fuels will likely have multiple winning pathways depending on regional conditions, incentives, asset bases, and feedstock availability. Some regions may push advanced feedstocks; others may have different economics for conversion routes such as alcohol-to-jet as legacy fuel demand shifts. That diversity is an advantage if you can manage it – and a trap if you can’t.
The practical answer is dynamic scenario planning with clear triggers:
- policy changes, carbon-intensity methodology shifts, and credit price bands
- technology milestones and cost-curve movement
- feedstock availability signals and logistics constraints
4) Partner across the value chain to solve the chicken-and-egg problem
In nascent markets, producers hesitate to build without demand; buyers hesitate to commit without supply. Partnerships reduce that coordination risk and can accelerate speed to market while sharing capital burden. This is why joint ventures, cross-sector alliances, and selective M&A have become common tools – especially where one party brings feedstock access and the other brings refining, logistics, or market channels.
Where partnerships tend to matter most
- feedstock aggregation, certification, and logistics
- co-development of novel crops and new supply chains
- integrated offtake structures with major end users
5) Innovate in financing and capability-building to manage risk – and earn the right to scale
Capital discipline is now part of the strategy, not just a finance constraint. Leaders look for nontraditional structures: staged investments, capital-light positions that create optionality, investor partnerships that share risk, and early moves that build commercial capability (such as trading and credit management) before full-scale production ramps.
One recurring pattern is building “market muscle” early – learning how attributes trade, how compliance works, and how customer preferences shape value – so that when scale comes, the organization is not learning on the fly.
What to do next: an executive agenda for the next 6–12 months
Even in uncertainty, waiting can be costly because early advantage often comes from scarce assets – advantaged feedstocks, credible partners, and bankable offtake relationships. A pragmatic leadership agenda typically includes:
- Clarify strategic intent. Decide whether renewable fuels is primarily defensive (compliance) or offensive (growth platform), and which segments/geographies matter most.
- Define your “right to win.” Be honest about which advantages you can truly build – feedstock access, customer relationships, logistics, refining assets, or technology capabilities.
- Design optionality. Create a portfolio of moves – some near-term performance improvements, some partnership-led expansions, and some longer-term pathway bets – so you can pivot as signposts shift.
- Invest in the backbone. Put measurement, traceability, contracting, and credit management on the same strategic footing as engineering and capex.
Renewable fuels will likely remain choppy in the near term. But the firms that emerge as leaders won’t be the ones that simply built the most capacity. They’ll be the ones that built the most advantage: advantaged inputs, bankable demand, regulatory fluency, and flexible pathways – positioned to scale when the signal strengthens and the window narrows.
