eFuels: Too expensive for everyday use?
eFuels: Too expensive for everyday use?
From high initial costs to competitive prices
eFuels are considered a promising solution for climate-friendly mobility. However, it is often said: “eFuels are too expensive, uneconomical and therefore not a realistic alternative.” However, if we not only look at the price level of today’s pilot plants, but also extend the perspective to a possible industrial volume ramp-up of eFuels, it becomes clear that eFuels are an affordable climate protection option.
Here you can find out how the prices of eFuels are made up, which factors influence them and why, despite all the criticism of synthetic fuels, they can become an affordable and competitive alternative to fossil gasoline and diesel in the long term.
Table of contents
Current costs: What are the production costs of eFuels made up of?
Costs for eFuels today
The production costs for eDiesel and ePetrol are currently between €1.86 and €2.80 per liter(Frontier Economics, 2024). These include production and transportation. Important cost drivers are:
Main cost drivers
Electricity costs
The price of renewable electricity can account for up to 50 % of the total production costs. Electricity from renewable sources is therefore the biggest cost factor. However, production sites with ideal solar radiation or strong winds can significantly reduce electricity costs.
CO2 production
The costs vary greatly depending on the method.
While CO2 from point sources is currently cheaper, DAC (Direct Air Capture: capturing CO2 directly from the air) offers greater potential in the long term and technological advances could soon reduce these costs.
Electrolysis
Splitting water into hydrogen and oxygen is currently still expensive. However, thanks to new developments and more efficient processes long-term cost reductionsn expected.
Technological advances and economies of scale can significantly reduce costs.
Power generation costs
The price of renewable electricity is one of the biggest cost factors in the production of eFuels. As the production of synthetic fuels is extremely energy-intensive, the cost and availability of renewable electricity have a decisive influence on the overall costs. Locations with high levels of solar radiation or strong winds enable lower electricity generation costs . Länder wie Chile, Marokko, Australien oder Regionen im Nahen Osten bieten aufgrund ihrer klimatischen Bedingungen ideale Voraussetzungen für die kostengünstige Erzeugung von Solar- und Windenergie.
CO2 production
The type of CO2 source plays a decisive role in the production costs of eFuels. CO2 is needed to produce synthetic fuels together with hydrogen.
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Point sources: Industrial waste gas streams with high CO2 concentrations or CO2 from biogas plants.
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Direct Air Capture (DAC): Technology for the direct capture of CO2 from the ambient air is This is of crucial importance in the long term and has great potential, as industrial point sources will decline as defossilization progresses. This process also offers an almost unlimited source of CO2.
Electrolysis
Electrolysis is the process in which water (Hâ‚‚O) is split into hydrogen (Hâ‚‚) and oxygen (Oâ‚‚) using an electric current. The hydrogen produced is a key starting material for the synthesis of eFuels. Current investment costs for electrolyzers are still very high. Die hohen Kosten sind auf die noch geringe Produktionsmenge und den Entwicklungsstand der Technologie zurĂĽckzufĂĽhren.
With increasing production and a larger plant scale, the specific costs fall and the development of new electrolysis processes The development of new electrolysis processes such as solid oxide electrolysis (SOEC) promises higher efficiencies and lower costs.
Future prospects: How will the costs of eFuels develop?
Economies of scale and technological advances: How does mass production reduce costs?
A key driver for reducing the cost of eFuels is industrial mass production, which leads to economies of scale and learning curves. An illustrative example of this is the photovoltaic industry. The prices of solar modules have fallen significantly in recent decades. This continuous fall in prices is due to improvements in production technology, efficiency gains and competition in the industry.
Similar effects are expected for eFuels technologies. As with photovoltaics, cost reductions are also expected in the production of eFuels due to positive economies of scale and technological progress. According to the study “Scenarios for the market ramp-up of e-fuels in road transport” (18.09.2024), costs could fall to between €1.22 and €1.80 per liter by 2050 as a result of the expansion of production and technological optimizations in electrolysis and CO2 extraction.
Integrated processes as a cost-cutting factor
The use of integrated processes will not only improve the efficiency of eFuel systems, but will also play a decisive role in reducing costs in the long term.
Influence on the future of costs:
- Reduction of energy consumption: Integrated processes minimize energy requirements by reusing heat and optimizing chemical reactions.
- Simplifying the infrastructure: Setting up systems with integrated processes reduces complexity and saves costs in operation and maintenance.
- Technological learning curve: With the further development and standardization of integrated systems, production costs will continue to fall due to economies of scale.
Price development and competitiveness: when will eFuels become affordable?
Influence of CO2 pricing
In 2025, the CO2 price in the European Emissions Trading System (EU ETS) for the transport sector is expected to be around €55 per tonne of CO2. By 2050, this could rise to over €200. This price will increase the cost of fossil fuels.
This increases the attractiveness of climate-friendly alternatives such as eFuels, which would be less affected by such levies.
Price parity: When will eFuels become competitive?
As soon as the production costs for eFuels continue to fall and fossil fuels become more expensive due to CO2 pricing, price parity can be expected – possibly between 2035 and 2040(Frontier Economics, 2024). This development could enable cost-efficient, climate-friendly mobility.
Political leverage: energy tax and tax relief for eFuels
Current tax burden
Currently, eFuels are taxed in the same way as fossil fuels. This taxation hinders their competitiveness
When eFuels will become competitive
A reform of the energy tax could reduce the tax burden for eFuels from around 47 ct/l (diesel) or 65 ct/l (petrol) to less than 1 ct/l. Such relief would significantly reduce costs and make access to eFuels more attractive for consumers.
The study “Scenarios for the market ramp-up of e-fuels in road transport” (18.09.2024) shows that an environmentally friendly tax policy could promote the use of climate-friendly fuels.
Conclusion: eFuels as an economical and climate-friendly alternative
eFuels have the potential to become an economically attractive alternative to fossil fuels in the near future. Economies of scale, technological innovations and suitable political measures can significantly reduce costs. An energy tax reform would accelerate this process and make it easier for consumers to access climate-friendly fuels.
Further explanation can be found here.
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