E-fuels offer cleaner alternative to fossil fuels, but production cost a key challenge — report

This means e-fuels can offer a solution to power critical segments of transportation such as ships, long-haul aircraft and heavy-duty commercial vehicles, it states.

E-fuels — also known as power-to-fuels, Power-to-X (PtX or P2X), synthetic fuels or electro fuels — are produced by combining electrolytic (green) hydrogen, made by electrolyzing water using renewable electricity, with captured carbon or nitrogen. An e-fuel can be considered carbon neutral if the emissions released into the atmosphere during its combustion are equal to (or less than) the captured CO₂ used to produce it.

“E-fuels offer companies an intriguing prospect at the intersection of electrons and molecules and the potential to capitalize on existing technical, commercial and marketing capabilities makes it an appealing, if challenging, opportunity for many,” said Murray Douglas, VP of hydrogen research at Wood Mackenzie.

Key challenges

While e-fuels present a tantalizing pathway to decarbonization, the WoodMac report also notes that commercial viability is the key challenge in scaling up its production with green hydrogen production and CO₂ capture costs both high.

The subsequent conversion process to the final e-fuel product is both energy and capital intensive – and delivery costs must also be considered, it states.

“There is no shortage of offtakers seeking low-carbon fuels, but the gap between cost of production and willingness to pay is sizeable,” Douglas says. “Each e-fuel has an incumbent fuel it aims to displace, all of which are much cheaper and this means their success will be dictated by policy to mandate volumes, place a cost on emissions and lower production costs.”

Douglas added that current conversion technologies differ depending on the final e-fuel desired, but the key challenge for all of them is in integrating green hydrogen, carbon or nitrogen, and their subsequent conversion in a large-scale commercial e-fuel production facility.

Early-mover advantage

The report states that most e-fuel proposals today aim to source CO₂ from a variety of feedstocks with biogenic sources with a low cost of capture, such as biogas and ethanol plants, dominating. But as the production of e-fuels grows the available molecules from such facilities will become scarcer and more dispersed. Costs will rise as e-fuel producers scour for feedstock while looking to scale, WoodMac noted.

This means that in the long-term global policymakers will have to set the standards for where e-fuel producers source CO₂. In Europe, point-source CO₂ capture from fossil-fuel power generation will only be permitted until 2036 and from other fossil-fuel industries until 2041.

Consequently, large volumes from net carbon dioxide removal (CDR) technologies – direct air capture (DAC) and bioenergy with carbon capture (BECC) – will be required, the report said.

“Globally, governments are going to have to take a holistic approach where incentives and penalties are introduced to ensure e-fuel production will be able to ramp up to a scale that will be required,” Douglas said.   

The report concluded that producers who can pair low-cost renewables and biogenic CO₂ sources will have first mover advantage. However, putting this type of complex and technology-heavy production model in place is a lengthy process that must start now for large-scale production to be in place by the mid-2030s.

“E-fuels are undoubtedly one of the longer-term plays in the energy transition,” Douglas noted. “However, companies that set a strategic direction quickest can position themselves to capture the most attractive elements of the value chain and take those learnings forward.” 

Read the full report here.