The Future of Diesel in the EU: Electrofuels — Opportunities and Challenges

05.30.19 | Member Reports | By:

This is the fifth in a series of reports and posts that will be completed this year and will attempt to provide insights for members into the question of what the future of diesel will be in the EU (and what that might portend globally). This project will be a series of posts and reports over 2019, with a final report to culminate the work, draw conclusions, present insights and provide a comparative analysis of the fuel options covered. The goal is to finish the series by the end of the summer, capping with the final report and a webinar to discuss the results. To refresh members, the fuel types that will be covered include the following: Battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs); biodiesel and HVO; CNG, LNG and biomethane; gasoline; methanol and dimethyl Ether (DME); hydrogen; LPG; oxymethylene ethers (OME); Power-to-X or electrofuels.

This report focuses on electrofuels. In summary, electrofuels have great potential to both meet the EU’s carbon reduction goals and provide carbon-neutral fuels across transport modes, particularly in difficult sectors such as aviation, marine and heavy-duty trucking. These fuels can be used in legacy fleets and are compatible with the existing fueling infrastructure. In my view, electrofuels could be a huge opportunity for the EU policymakers to lead the development of a new industry that could revive the refining industry. In other words, as China tries to capture EV technology/manufacturing, this could be an opportunity for the EU to do the same with electrofuels. Perhaps in time (2040-2050), these fuels could even be exported.

However, it will not come cheaply. The reality is that no transport decarbonization option is going to be cheap. So, the question is where does the EU want to spend its money? A major challenge of electrofuels is the concomitant need to expand renewable power, which it has to do anyway to meet its carbon reduction goals. According to Eurostat, as of 2017 renewable energy represented 17.5% of energy consumed in the EU, and it will meet its 20% target set for 2020. Scaling up electrofuels will require a long-term vision, a stable policy that can be relied upon by investors and producers (and my bet would be that many of those investors/producers would end up being the refining industry).

Key Points

  • Electrofuels have great potential to both meet the EU’s carbon reduction goals and provide carbon-neutral fuels across transport modes, particularly in difficult sectors such as aviation, marine and heavy-duty trucking.
  • A major challenge of electrofuels is the concomitant need to expand renewable power, which it has to do anyway to meet its carbon reduction goals.
  • Nevertheless, stakeholders in the EU, particularly OEMs, are excited about the prospect of electrofuels because of their potential GHG benefit, low to no land use issues (unlike some biofuels), no air pollution issues (e.g. NOx and  PM), compatibility with the fueling infrastructure and existing legacy vehicles. Meantime, HDV, shipping and aviation advocates have said that electrofuels could be a viable solution for their respective sectors and, in fact, could be the most viable alternative long-term to fuel and decarbonize these sectors.
  • Concerns have been raised about “double-counting” of electrofuels under REDII, but I believe the Commission will act before this becomes a problem.
  • The Commission will need to develop a policy framework that includes long-term support if it wants to support the scale up of electrofuels.
  • Different analyses have different conclusions about the volumes of electrofuels that can be scaled up, but the timeframe seems to be 2030-2050.
  • There is no commercial production yet; the first plant is planned for 2020-2021 in Norway.
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