German study: ‘e-fuel could cost €1 per liter in the long run’

According to German Potsdam Institute for Climate Impact Research, electric fuels have the potential to reach cost parity with actual oil-based fuels. Today’s price of 50 euros per liter could fall to 1 euro as industrialization and cheaper CO2 capture reap benefits. But uncertainties remain to be resolved.

As the EU approved electric or synthetic fuels as a lifeline for combustion engines after the 2035 deadline, institutions and stakeholders are looking into the business case around it. A new study by the Potsdam Institute for Climate Impact Research, funded by the same government that negotiated the compromise, reveals that the current wholesale price for electric gasoline or diesel is 50 euros per liter.

Uncertainty about timing

That’s the retail price for production in Haru Oni, the pilot plant in Chile co-owned by HIF Global and Porsche, with the latter buying up the complete output for use in racing cars and oldtimers. This is the only factory currently manufacturing e-fuels for use in passenger cars. It started operations in December last year.

To make synthetic fuel a hundred times cheaper, the institute stipulates that production must reach an industrial scale. From there, the cost can rapidly dive toward 2 euros and sink further to 1 euro in the long run. However, the study reveals there’s great uncertainty about the timing as it depends on the speed of a global ramp-up.

Low efficiency

Another important bottleneck is the cost of direct air capture, which is a necessary production component as e-fuels are made by combining captured CO2 and green hydrogen. Exactly this CO2 capture makes them climate-neutral. But, currently, this makes for a very costly procedure.

Apart from cost, e-fuels also face the disadvantage of low efficiency. Only 13% of the green electricity used to make the fuel results in on-road energy. For a hydrogen car, that efficiency is 30%, while battery-powered vehicles reach 70%, as illustrated by data from the lobby group Transport & Environment.

Next stop: Texas

Nonetheless, e-fuel production will become an industry as several countries have adopted quotas necessary to create enough demand. However, this is for use in aviation where e-kerosine serves as a more suitable alternative to battery power. Germany decided that 2% of aviation fuel should be synthetic by 2030; the European Commission aims for 5% by 2035.

Finland, a country with strong ambitions of becoming a hub in the hydrogen transition, has uttered the ambition of 3% e-fuels for all of its transport by the end of the decade. E-kerosine is made along the same lines as e-gasoline.

Last month, HIF Global received a permit from the Texan authorities to construct a second e-fuel factory in Matagorda, near Houston. The ambition is to construct the largest e-fuel facility to date, capable of decarbonizing the equivalent of 400 000 cars. That’s enough for about 6,5% of today’s Belgian car fleet.