eFuels costs: Too expensive for everyday use?
eFuels costs: Too expensive for everyday use?
From high initial costs to competitive prices
eFuels are regarded as a possible solution for future-ready mobility. Yet a common assertion is: “eFuels are too expensive, uneconomic and therefore not a realistic alternative.” However, looking beyond the prices achieved by today’s pilot plants to a possible industrial-scale ramp-up in eFuels production shows that eFuels are an affordable option.
Here you can find out how the price of eFuels is made up, which factors influence it and why, despite the criticism of synthetic fuels, eFuels can become an affordable and competitive alternative to fossil petrol and diesel in the long term.
Contents
- Current eFuels costs: what makes up their production costs?
- Future outlook: how will eFuels costs develop?
- eFuels prices and competitiveness: when will eFuels become affordable?
- A policy lever: energy tax and tax relief for eFuels
- Current tax burden
- When eFuels will become competitive
- Conclusion: eFuels as an economic, future-ready alternative
Current eFuels costs: What are the eFuels production costs made up of?
eFuels costs today
The costs for the production of eDiesel and ePetrol are currently between €1.58 and €2.29 per liter(Frontier Economics, 2025. These include production and transport. 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 eFuels production. 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 . Countries such as Chile, Morocco and Australia, or regions in the Middle East, offer ideal conditions for low-cost solar and wind power generation because of their climate.
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 (H₂O) is split into hydrogen (H₂) and oxygen (O₂) 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. The high costs are due to the still-low production volumes and the technology’s stage of development.
As production and plant scale increase, specific costs fall, and the development of new electrolysis processes such as solid oxide electrolysis (SOEC) promises higher efficiencies and lower costs.
Future prospects: How will eFuels costs develop?
Economies of scale and technological advances: How does mass production bring down the price of eFuels?
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” (January 2025), costs per liter could fall to between €0.99 and €1.09 (incl. transport) from 2045 as a result of the expansion of production and technological optimizations in electrolysis and CO2 extraction. This corresponds to an end consumer price of:
- eBenzine: 1,37 € / liter
- eDiesel: 1.59 € / liter
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, the costs of eFuels production will continue to fall.
eFuels price 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, it could already exceed €200. This price increases the cost of fossil fuels.
This makes forward-looking alternatives such as eFuels more attractive, as they would be less affected by such charges.
Price parity: When will eFuels become competitive?
Once eFuels production costs fall further and CO2 pricing makes fossil fuels more expensive, price parity can be expected, possibly from the mid-2030s (Frontier Economics, 2025). This development could enable cost-efficient modern 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
Reforming energy tax could reduce the tax burden on eFuels from around 47 cents per litre for diesel or 65 cents per litre for petrol to less than 1 cent per litre. Such relief would significantly lower costs and make access to eFuels more attractive to consumers.
The study “Scenarios for the market ramp-up of eFuels in road transport” (January 2025) shows that a tax policy aligned with climate targets could promote the use of modern fuels.
Conclusion: eFuels as an economic and modern alternative
eFuels have the potential to become an economically attractive alternative to fossil fuels in the near future. Economies of scale, technological innovation and suitable policy measures can significantly reduce costs. Energy tax reform would accelerate this process and make modern fuels more accessible to consumers.
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