Study:
"Scenarios for the market ramp-up of e-fuels in road transport"
The present study “Scenarios for the market ramp-up of e-fuels in road transport“ by Frontier Economics, commissioned by UNITI Bundesverband Energie Mittelstand e.V., examines the central question of whether synthetic fuels such as e-fuels can be an affordable climate protection option in the future.
Currently, eFuels are often confronted with prejudices in the public debate: they are considered too expensive to produce, inefficient and difficult to obtain in sufficient quantities. Based on current third-party studies, the study analyzes a possible volume ramp-up and the associated cost developments for the end consumer.
Table of contents
Source: Figure 3, page 15 Key cost components of e-fuels from the study “Scenarios for the market ramp-up of e-fuels in road transport” (frontier economics, 18.09.2024)
Cost components of eFuels
eFuels are the result of a multi-stage production process in which several factors influence the price. The largest share is accounted for by electricity costs (or electricity production costs), as green hydrogen is required for production, which is obtained by electrolysis using renewable energy. Technological advances in electrolysis technology and economies of scale could reduce electrolysis costs in the future.
Another important cost factor is CO2 extraction, which is often carried out using direct air capture (DAC). This process, in which CO2 is captured directly from the air, is currently still expensive. However, the study shows that the costs of direct air capture could be significantly reduced in the medium term as technical development progresses and scaling increases.
Electrolysis, in which water is split into hydrogen and oxygen, is another significant cost factor in eFuel production. As the market for electrolysis plants is still relatively young and massive investments are currently being made, the study expects significant cost savings in the medium term – especially by scaling up production capacities into the gigawatt range.
In comparison, synthesis, which combines hydrogen and CO2 to create liquid fuels, is more cost-effective. In addition, the use of existing infrastructure such as pipelines and filling stations enables efficient distribution without additional investment.
Current and future production costs
Based on the question of how the production costs of eFuels could develop, the study shows that costs could fall from the current €2.06 to €2.80 per liter of eDiesel to between €1.22 and €1.80 in the long term as technological improvements and learning curve effects take effect.
The development of production locations also plays a decisive role: regions such as Patagonia or the MENA region offer great potential for cost-efficient eFuels production due to their favorable natural resources.
The price of eFuels can also be reduced by the political framework, such as tax incentives.
Blending paths for eFuels
The introduction of eFuels could initially take place via blending in conventional fuels. The study shows that a low proportion of eFuels in the fuel mix would initially have only a minor impact on prices, which would facilitate gradual integration. Policy measures such as mandatory blending quotas could increase the share of eFuels over time and thus stabilize consumer prices. In the long term, this approach could enable a complete switch to climate-friendly fuels and create an affordable solution for private transport.
Future price trends at the pump
When analyzing end consumer prices under various assumptions and scenarios, the study comes to the conclusion that the introduction of eFuels could lead to a stable price development in the long term. An initially low blending level ensures a very low impact on the consumer price.
With increasing technological progress and economies of scale, the cost of eFuels will continue to fall, meaning that blending can be increased further without any significant impact on consumer prices.
Assuming tax concessions for eFuels and higher CO2 pricing for fossil fuels, prices at the pump could be at a competitive level in the medium term and facilitate the transition to climate-friendly fuels. This offers consumers planning security and the opportunity to gradually switch to sustainable alternatives without having to fear drastic price jumps.
Recommendations for action
To support the introduction of eFuels and enable affordable prices in the long term, the study recommends targeted political measures.
Tax relief for eFuels could make end consumer prices for eFuels significantly more attractive compared to fossil fuels. Investments in infrastructure, such as electrolysis plants and CO2 capture, are also crucial in order to reduce production costs and increase availability. The introduction of binding blending quotas would make the market ramp-up predictable and give the industry the necessary security. A gradual increase in the CO2 price on fossil fuels could also strengthen the competitiveness of eFuels.
The study also emphasizes the importance of research funding to drive technological innovation and make production more efficient. Trade agreements could also help to import eFuels from regions with favorable production conditions to Europe and thus improve availability. A coordinated interplay of these measures could help to create a climate-friendly and economically sustainable fuel supply for private transport.
To summarize:
This study shows that eFuels can be an economically viable alternative for sustainable mobility. Technological advances, production scaling and targeted tax relief cankeep prices stable and competitive in the long term. A gradual introduction via blending creates a cost-efficient transition without the need for immediate investment in new vehicle technologies.
With clear recommendations for action such as tax concessions and binding blending quotas, the study offers a way to quickly make eFuels marketable and to make road traffic climate-friendly.
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