If you were to take all of the used cooking oil from all of the McDonald’s restaurants in the UK, you would still not have enough to fuel one ship, according to Lara Naqushbandi, CEO of ETFuels, an e-methanol producer.

She used this example to highlight the feedstock challenge facing conventional biofuels, the use of which has been supported relentlessly by the EU over the last 20 years. “If you look at the supply growth of biofuels over the last 15–20 years, it has been less than 5% every year. And why is that? It is because, fundamentally, biofuels are feedstock constrained,” she told the IE Week conference in London.

Naqushbandi makes a valid point, and the debate over the ethics of biofuel feedstocks versus food supplies also continues to intensify.

However, the nascent synthetic—or e-fuels—sector, which aims to partially displace biofuels over the long-term, has challenges of its own.

Last year’s decision by Danish renewable energy company Orsted to halt construction of Europe’s largest synthetic methanol production project—FlagshipONE, in northern Sweden—more than a year into construction, highlighted the challenges faced by developers. Orsted cited the slower-than-expected emergence of Europe’s green fuels markets—in other words, a lack of willing buyers at current prices.

Many e-fuels are produced by combining electrolytic hydrogen with biogenic CO₂, which means they face the cost challenges that continue to hold back the wider green hydrogen sector. The spread between green and grey hydrogen and ammonia remains too wide to be bridged by subsidies, deterring buyers.

Shipping news

In the shipping fuel market—a key target for e-fuels—competition from LNG has also heightened in some regions.

However, a meeting in April of the International Maritime Organization (IMO) could be a gamechanger for the economics of green fuels in that market. The IMO, which has an ambition to hit net zero for international shipping by 2050, is due to decide on two key policy measures aimed at helping to meet this goal—a marine fuel standard to mandate a reduction in greenhouse gas intensity, and a mechanism to price ships’ emissions.

Options on the table include a levy on emissions, potentially of around $100/t, which would be paid into a central pot and redistributed to support green production and mitigate the impact of higher shipping costs. Alternatively, the industry could go for a cap-and-trade–type mechanism, where ships using clean fuels would get tradeable credits that could be bought by those using dirtier fuels. A hybrid of the two approaches is also under discussion. The Green Hydrogen Organisation, an industry group, has warned against this third “bridging” option. It says the mechanism would not raise sufficient funds and could undermine investor confidence.

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Author: Stuart Penson