Car manufacturers and NGOs are bullish about the potential of electric vehicles to replace combustion engine cars, but decarbonising heavy trucks and planes is trickier. E-fuels, where renewable power is turned into fuel, are gaining attention as a potential solution, but their adoption could slow the green electrification of other sectors with greater carbon emissions

DEFINITION
E-fuels, or fuel from electricity, are also known as powerfuels or power-to-liquids. Wind or solar installations power an electrolyser, which splits water into hydrogen (and oxygen). The hydrogen is then combined with carbon to create a new, green fuel

STUMBLING BLOCKS
In Europe, industry is concerned that legislation could stymie progress by stopping electrolysis installations accessing renewable power from the grid and by not allowing them to source carbon from industrial sources

KEY QUOTE
If the EU wants to be climate neutral by 2050 — and the world wants to live up to the Paris climate agreement — low-carbon liquid fuels are a necessary part of the picture

The oil and gas industry does not believe the internal combustion engine is history just yet. In its Vision 2050, unveiled in 2018, FuelsEurope, a Brussels-based trade association representing EU refiners, plots a future for “low-carbon liquid fuels”. These are drop-in replacements for diesel and petrol that offer an alternative to going fully electric. Traditionally, this has meant biofuels from plant matter and organic waste, but policy makers, fuel suppliers and NGOs in Brussels now see greater potential in so-called e-fuels. E-fuels, also called powerfuels or power-to-liquids, are renewable power turned into fuel. The idea is that wind or solar energy powers an electrolyser, which splits water into hydrogen (and oxygen). The hydrogen is subsequently combined with carbon to create a new, green fuel. E-fuels are likely to have most potential to help decarbonise hard-to-electrify sectors, such as aviation. “Global demand for liquids is growing. If you look in particular at aviation, shipping and petrochemicals, they are all growing out to 2040,” said John Cooper, director general for FuelsEurope, at the launch of its Vision 2050 plan. He highlighted that while electrification can be a solution for half the oil currently used in Europe, green solutions for the other half are still to be found. If the EU wants to be climate neutral by 2050 — and the world wants to live up to the Paris climate agreement — “low-carbon liquid fuels” are a necessary part of the picture, says Cooper.

MAKE OR BREAK Nils Aldag, co-founder of German e-fuel start-up Sunfire, believes, however, that the EU’s new renewable energy directive (REDII), agreed as part of the Clean Energy Package and which entered into force in December 2018, could thwart the growth of e-fuels. The directive is the only political framework that recognises e-fuels, Aldag told an event focused on aviation organised by the German Environment Agency (UBA) and German Aviation Association (BDL) in Brussels on October 8, 2019. But it leaves two important questions unresolved. One is whether electrolysis installations can access renewable power from the grid, as opposed to being restricted to additional, dedicated renewables installations. The second is whether they can source their carbon from industrial sources, rather than being limited to direct air capture. For Aldag, the answer to both questions must be yes. If not, the EU risks “closing the door” to the emerging e-fuel sector for “ten years at least”. Both questions are due to be settled by secondary legislation — so-called delegated acts — within the next two years. Discussions are “not promising”, Aldag said.

SOURCING CHALLENGE The biggest challenge for e-fuels enthusiasts is explaining where the renewable power for their products will come from. It will be tough for Europe to build enough renewables generating capacity to decarbonise its direct power demand by 2050, never mind channelling some of that green electricity into hydrogen. For this reason, the European Commission is wary of giving e-fuel producers access to the grid. It could divert renewable power away from direct and therefore more efficient use of the resource, according to Commission climate official Laura Lonza. Turning electricity into hydrogen adds cost compared with using it directly to power an electric vehicle or drive a heat pump. Hydrogen and its derivative fuels are not the only way to store power, Lonza added at the Brussels event. Aldag countered that Norway alone has sufficient wind and hydro resources to provide a fifth of European fuel demand by 2050. Member states, not e-fuel producers, should have to prove that the green power used is from additional renewables capacity, he added — e-fuel producers would pay the full price for the power they use. “Energy efficiency is not necessarily the most important [goal],” added Harry Lehmann of the German Environment Agency. One, wind and solar open up the possibility of limitless energy supplies and two, although hydrogen production as such is not very efficient, it is efficient for the energy system as a whole because it can mop up any renewable power currently lost to curtailment. Germany spent a record high of €1.5 billion on grid and system stability measures in 2017, of which 40%, was compensation for curtailment. Lehmann did not quantify the limited curtailment of renewables that occurs in Europe as a whole. “Yes, we need to ramp up renewables,” says Jorgo Chatzimarkakis, secretary general of Hydrogen Europe, representing the European hydrogen and fuel cell industry. “But we want the possibility to digest that renewable energy through molecules. Otherwise how can we help balance the system?” The E-fuels debate is not likely to be a Europe-only story. The grand plan is to create a new global trade network similar to today’s international oil markets with e-fuels imported from North Africa, the Middle East or even Chile and Australia where there is plenty of sun, wind and space. As well as being grandiose, these dreams would necessitate a complete rethink of Europe’s ambitions to reduce its reliance on energy imports. Aldag’s second concern, the source of carbon for e-fuels, is also making EU policymakers nervous. In an ideal world, carbon would be absorbed from the air by direct air capture, a technology being developed by companies like Swiss start-up Climeworks. But for now, this is “the most expensive source of carbon”, Aldag said. “If CO2 is emitted [from industry], we should use it.” That does not mean those emitters should be freed from their obligations to reduce emissions, but direct air capture should be developed in parallel and “honoured” with a bonus, he suggested. The bottom line is that if policymakers impose a damaging carbon footprint on e-fuels today, they will kill the business case, he said.

AVIATION A TEST CASE The Brussels e-fuels event took place just days after environmentalists and industry clashed over how to define sustainable fuels for aircraft at the latest meeting of the UN’s International Civil Aviation Organisation (ICAO) in Montreal, Canada. The definition is crucial because sustainable fuels are “the only technological approach” to make flying carbon neutral, Matthias von Randow, executive director of the German Aviation Association, said in Brussels. Efficiency improvements — a new Airbus A320 (A320neo ) emits 20-25% less CO2 than its predecessor — will not be able to keep up with the growth in air traffic demand worldwide, he said. For him, ICAO’s controversial carbon offset scheme, CORSIA, which will force airlines to pay for their emissions, is a gap-filler until sustainable fuels become commercially viable. This will need “an enormous amount of public funding” for industrial-scale production and market roll-out. Germany has pledged to use the €1.2 billion a year it gets from taxing aviation for its railways, rather than funding sustainable aviation fuels, he added. Biofuels hardly got a mention in the debate in Brussels, although they were the main point of controversy in Montreal, especially whether they are and should be produced from palm oil. In Brussels, Lehmann argued that jet e-fuels are better than biofuels, full stop. They require less water and land than even biofuels considered as relatively sustainable, such as those made from algae, sugar beets and jatropha. Germany’s environment agency calculates that an A320neo can fly 4000-9000 miles per hectare of land with e-fuels versus less than 2000 miles per hectare of land with biofuels. The agency sees a very limited role for bioenergy going forward, even if made from waste. In contrast, Von Randow is open to all “sustainable” fuels. “We will take everything we can get,” he says. Torsten Schwab, who manages the German-Brazilian climate neutral alternative fuels project ProQR, described e-fuels as “a logical evolution” from biofuels in bioethanol-dominated Brazil. The project is exploring niche locally-produced e-fuels for remote airstrips in the Amazon. It is the perfect business case, he says. Since the airstrips are so isolated, there are few real alternatives for getting fuel to them, and so the customer will pay the required price. In virtually every other potential use case, however, price is an issue. At costs of up to €4.50 a litre, e-fuels for aircraft currently cost ten times more than conventional jet fuel. Two-thirds of that e-fuel cost comes from the price of electricity used in its production.

AUTO-FUEL MARRIAGE Nobody expects ICAO to offer the mandate or incentives to get sustainable jet fuels off the ground. Both industry and NGOs are looking to European lawmakers. Lehmann suggested a mandate of 3-5% e-fuels for German aviation for 2030. This percentage is possible, he said, even though meeting the Paris climate agreement would require a mandate for 10%. The aviation industry’s von Randow responded that any kind of German-only mandate would bankrupt German airlines within a few days. In an international industry such as aviation, where margins are under intense pressure, an alternative fuel mandate must be European at the very least, he said. Lonza said the Commission was “not sure” about a mandate but “giving it thought”. The big prize for fuel suppliers — including Aldag — would be to let low-carbon fuels count towards the EU’s CO2 emission standards for vehicles. Unlike aviation, vehicles are already subject to carbon constraints, with high penalties for exceeding them. Truck makers face the equivalent of a carbon price of €280 a tonne, a penalty that creates a potential business case for e-fuels. Until now, vehicle makers have cut CO2 by improving engines and fuel suppliers have achieved cuts by mixing in biofuels. In future, the fuel industry wants EU lawmakers to adopt a “well-to-wheel” or life cycle approach that would let vehicle makers use clean fuels as another way of meeting their emission reduction targets. FuelsEurope presented the idea at its annual conference in Brussels on June 5, 2019, which focused on trucks. The European Commission appeared open to it and NGO Transport & Environment did not reject it entirely either. Its executive director, William Todts, told the truck fuels conference that the fuel sector “has to play a role” and that he liked seeing refineries take action, but added that he worried about taking pressure off engine efficiency improvements and direct electrification. Some vehicle manufacturers also dislike the notion of bankrolling the oil industry’s decarbonisation process. Nonetheless, the idea of giving a bigger role to clean fuels in emissions reduction targets is likely to be a significant part of the debate when truck and car emission standards are next reviewed in 2022 and 2023, respectively. By then, REDII will have set the tone for e-fuels.

TEXT Sonja van Renssen