Electro or e-fuels (or power to liquid/gas) are electricity-based gaseous or liquid fuels which can be used in internal combustion engines. According to a new report by Cerulogy for T&E, e-fuels only have meaningful climate benefits if strict sustainability criteria are observed throughout the production process. The key factors determining the sustainability of e-fuels are the source of electricity (it must be renewable), the source of CO2 (ideally air capture) as well as impacts on land and water.
What role is there for electrofuel technologies in European transport’s low carbon future?
Creating an EU electrofuels industry will not happen without significant government intervention. Based on our understanding of the costs of electrofuel production, it is impossible to imagine liquid electrofuels beating fossil fuels on carbon-unadjusted price in the period to 2050, and difficult to see them competing directly with advanced biofuels in the next decade. As things stand at the time of writing, we would be surprised to see electrofuels make a significant contribution to 2030 targets for renewable energy in transport, although this could in principle change as the proposed RED II is amended before its final adoption.
The primary policy support mechanism that is on the table for electrofuels is the Renewable Energy Directive, through the mandate for renewable advanced fuels in transport. Mandates of this sort have a history of being effective in supporting and expanding the supply of fuels that have already been commercialised and have a low technology risk and a clearly understood cost profile. The record of mandates in promoting the development of unproven technologies that require high capital expenditure is rather more questionable. As noted by Miller et al.
(2013), no attempt to date to expand advanced biofuel production through support under an energy mandate has come close to delivering the levels of supply hoped for when the mandate was introduced. There is a strong case to be made that mandates of this sort are not effective policy tools for developing new technologies, due to the value uncertainty built into mandates by design. From the point of view of minimising the cost to taxpayers and consumers of renewable energy policy, it is appealing to create a market system under which the value of the incentive is intended to be minimised through competition. When considering a twenty-year investment in a first-of-a-kind facility, this same value uncertainty is potentially insurmountable. European policymakers and regulatory officials would be well advised to consider seriously the options to introduce additional long-term value certainty into renewable fuel policy for specific cases in which new technology development is prioritised. This could include finding ways to set caps and ceilings on the value of policy support, setting defined long-term tax incentives instead of or as well as mandates, or offering long-term guarantees on subsidised renewable electricity to electrofuel facilities.
With the right investment support and production incentives, an electrofuel industry could undoubtedly be developed. Perhaps the most important question for policymakers at this time is how serious they are about electrofuels as a significant contributor to EU decarbonisation, what the price they are willing to pay for that contribution, what time frame they expect electrofuels to become important within and why (if at all) electrofuels should be prioritised for development above other less costly decarbonisation options. In undertaking this review, we have not found evidence to clearly convince us that policymakers yet have an adequate understanding of the costs and benefits of electrofuels to make these decisions in an informed way. As we have reiterated ad nauseam in the body of this report, the biggest element of the cost equation for electrofuels is the cost of electricity. It may be that it is premature to make the significant investment in electrofuel production until business models can be more clearly presented that would deliver renewable electricity at 3 €/kWh or less to electrofuel producers. This would require confidence that the lower end of cost projections for the levelised cost of renewable electricity production could be delivered, or else a much clearer and more fully the explored vision for the valorisation of grid balancing services by electrofuels producers. At the point where there is a clearly understood pathway in place to 3 €cent/kWh renewable electricity supply, the case to invest heavily in electrofuels will be profoundly more compelling.
Even if the costs of electrofuel production are considered proportionate to the benefit, policymakers must also be realistic about the strain that a largescale electrofuel industry could place on the decarbonised electricity supply. To supply 50% of EU aviation fuel from electrofuels in 2050 would require a quarter as much electricity as is currently generated in the whole of the EU. This is a very large expansion to deliver decarbonisation of half of the energy supply for one mode of one economic sector. At this level of electricity demand, the grid that electrofuels could help balance would have to be significantly larger than it would be otherwise. This said it remains true that it is unclear what other options there are to reduce the greenhouse gas intensity of aviation fuel use, except to reduce fuel burn entirely by reducing rates of demand growth. Notwithstanding the challenges, drop-in electrojet may be the best technological option available to deliver deeper decarbonisation of EU transport than is possible through efficiency improvements, operational measures and advanced biofuels alone.
For the foreseeable future, electrofuels are likely to be a more expensive climate solution than efficiency standards, electrification or advanced biofuels from sustainably available waste and residues. To reiterate the point made by Bünger et al. (2014), electrofuels might best be seen as the weapon of last resort to decarbonise activities for which there are truly no less costly alternatives, and “it is therefore vital to explore all available options for the reduction of energy demand and increase of vehicle efficiencies.”
Source: transportenvironment.org