Al Bedwell, Director, Global Powertrain
21 March 2023
E-fuels may now be allowed to form part of the powertrain mix for new LVs in Europe beyond 2035, but many headwinds to deployment remain
21 March 2023
Following intense lobbying from some of Germany’s premium vehicle makers and the prospect of the EU’s flagship 2035 zero CO2 vehicle policy being scuppered at the final hurdle by abstention from Germany and pushback from Italy, it seems that e-fuels will be allowed to form part of the powertrain mix for new Light Vehicles (LVs) in the EU and EU+ markets beyond 2035.
Surely this is win-win for both regulators and the industry: new ICE cars will be net-zero CO2 in use, OEMs can have greater control over the disruptive phase-out of combustion cars and the existing ICE fleet can decarbonise at a stroke.
Then again, vehicles operating on e-fuels do have tailpipe emissions, which impact local air quality, if not net CO2 emissions. At the very least, this is at odds with the spirit of the EU zero CO2 mandate and clearly not something that regulators envisaged when the 2035 proposal was drawn up (hence the recent stand-off over e-fuels). However, pragmatism rules the day and better to get the legislation through, albeit with a few unpalatable concessions, than for it to stall and throw the industry into confusion and even paralysis.
But how likely is it that e-fuels could form a significant part of the powertrain mix in Europe in 2035? Despite their prima facie attractiveness, there remain many headwinds to their widespread deployment:
But it’s not all doom and gloom for e-fuels. The production outlook could be far rosier if the carbon capture industry blossoms. E-fuels can be made by combining hydrogen produced using renewable electricity with carbon captured from industrial emissions or, more beneficially, direct from air (DAC). This has the benefit of reducing CO2 intensity in the atmosphere while at the same time producing a net zero carbon fuel.
A more positive scenario for e-fuel supply could emerge if/when:
However, such a scenario depends on a radical global agreement to tackle CO2 by means of a huge investment in its removal from the air. This would be hard to achieve and combined with the time required to achieve global renewable electricity generation means that even if this scenario played out, it would take at least a decade to accomplish and could be discounted in the 2035-time horizon.
And let’s not forget, most e-fuel will go to the aviation sector which faces a crisis if an alternative to kerosene cannot be found. Annual aviation fuel use is about seven times less than gasoline use for cars (90 bn gallons versus 600 bn). But a quick look at e-fuel plants that will be producing e-kerosene by 2026 gives an annual production figure of less than 2 bn gallons by that time – way below what the aviation sector uses each year. So, the aviation sector’s hunger for e-fuel would not be satisfied for a very long time – there won’t be lots of spare e-fuel looking for a home in the LV sector. Total e-fuel production (e-diesel + e-kerosene + e-methanol) is likely to be sub-5 bn gallons by mid-decade. Even if all 2026 e-fuel production was allocated to e-methanol for road vehicles (it won’t be), it might only be sufficient for less than 1% of the annual 600 bn gallons required.
To sum up: Yes, e-fuels might be a player in the LV sector in Europe in 2035 and beyond. But they won’t be a big one. ICE fleet decarbonisation via e-fuel sounds enticing but it will occur naturally as BEVs replace ICE vehicles – the 2035 ZEV target was chosen so that by 2050 this process will have been completed. Right now, e-fuels are a hot topic, offering a way for an industry undergoing enormous change to get some politically useful concessions from regulators. But the evidence today points to e-fuels in Europe’s Light Vehicle sector being backed into a very small corner, or not getting off the ground at all.