E-fuel production could offer valuable deployment opportunities for electrolysers as green hydrogen faces scaling challenges, according to a new study by Aurora Energy Research.
Focused on ammonia, methanol, e-kerosene and e-methane production in Sweden, Spain and Germany, the study says Europe’s regulatory landscape is set to accelerate the uptake and production of the e-fuels.
And for green hydrogen producers that are facing increasing challenges due to high renewable energy costs and electrolyser CAPEX, e-fuels could support near-term installations.
That’s despite hydrogen accounting for over 85% of the costs of e-fuels – which Aurora says highlights the importance of efficient power procurement strategies and integrated hydrogen and e-fuel production setups.
“In the current challenging climate for hydrogen producers in Europe, selected e-fuel production can offer promising value pockets for electrolysers,” said Frederik Beelitz, Advisory Principal at Aurora Energy Research.
The study said the EU’s ambitious targets for aviation and maritime, as well as the mandates of the Renewable Energy Directive (RED) III, make e-fuels attractive to investors.
While aviation and maritime end-users will face penalties for non-compliance, Aurora says penalties alone will not be enough to support e-fuels other than e-kerosene and methanol.
“A mixture of demand-side measures will be needed, pushing the willingness to pay of offtakers up- and supply-side measures and pulling the cost of production down,” it reads. “These include CCFDs for offtakers, grid fee exemptions for power procured by electrolyser, and adequate regulatory frameworks for carbon capture.”
David Olley, Advisory Senior Associate at Aurora Energy Research, explained although Spain and Sweden – which boast low renewable energy costs – could act as e-fuel frontrunners in Europe, Germany, with the right support could succeed.
“With optimised power procurement strategies and continued supply- and demand-side support programmes, the gap between the cost of e-fuel production and the willingness to pay for e-fuel offtakers can be closed,” Olley said.
Aurora’s study follows the IEA’s Energy Perspectives 2024 report said that by 2050, almost 40% of global electrolyser capacity could be dedicated to green hydrogen-based sustainable aviation fuels (SAFs).
Read more:Nearly 40% of 2050 global electrolyser capacity could be dedicated to SAF, says IEA
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