Economic Risk Analysis of a Sustainable Aviation Fuel Project: A Monte Carlo Simulation Approach

Details

Supervisors

Willems, Bert ; António Manuel da Nave Quintino

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

enSustainable Aviation Fuel (SAF) is a promising pathway for decarbonising the aviation sector; however, its large-scale deployment remains constrained by several challenges. This dissertation evaluates the economic viability of a large-scale SAF production project in Brazil, using Hydroprocessed Esters and Fatty Acids (HEFA) technology, leveraging the country’s abundant lipid-based feedstocks and evolving regulatory support. To capture the uncertainty surrounding the SAF market, a risk analysis framework combining Discounted Cash Flow (DCF) modelling with Monte Carlo Simulation (MCS) is applied, enabling a probabilistic assessment of financial performance, thereby offering a more nuanced and comprehensive understanding than traditional deterministic methods. Moreover, it can be used to support decision-making from a risk-adjusted perspective. Sensitivity, break-even, certainty equivalent and scenario analyses are conducted. The findings indicate that, although the project shows potential for economic feasibility, it is highly exposed to various sources of risk. Particularly, regarding SAF market premiums, primarily driven by regulatory frameworks, and feedstock prices, influenced by availability and demand from the global biofuels market. The future evolution of these factors remains highly uncertain, reflecting a complex interplay between the evolving regulatory landscape, supply-demand dynamics and market maturity. As a result, the project’s viability depends on broader market developments, sustained market prices and the progression of supportive policy frameworks. Furthermore, the results highlight that financial support mechanisms, particularly capital grants, play an important role in improving the economic attractiveness of such capital-intensive projects. This dissertation provides insights for investors and policymakers, emphasising the need for a balance between robust risk mitigation strategies and supportive regulatory efforts to facilitate the commercial-scale deployment of SAF. It contributes to a deeper comprehension of the economic viability and main risk drivers shaping the future of the SAF market.