- IEA anticipates a surge in renewable electricity capacity, potentially lowering prices.
- The transition faces challenges in vessel adaptations.
- IEA’s insights into the evolving landscape of e-fuels, emphasizing their potential impact on transportation sectors.
The International Energy Agency (IEA) anticipates a surge in renewable electricity capacity, potentially lowering prices for sustainable ‘e-fuels’ in transportation. This could alleviate price impacts on end-consumers, especially in aviation and maritime sectors where e-fuels offer scalable solutions, reports SP global.
E-Fuels Landscape: Project Focus and Regulatory Importance
Currently, 90% of announced e-fuel projects emphasize e-ammonia, leaving e-kerosene and e-methanol lagging. Regulatory support becomes crucial to ensure demand certainty for the 200 e-fuels projects in development, potentially mitigating end-consumer price shocks as e-fuel adoption scales up.
E-Kerosene: A Key Player in Aviation’s Decarbonization
With a 35% EU target for low-emission e-fuels by 2050, the aviation sector focuses on e-kerosene. IEA suggests that by the decade’s end, e-kerosene costs could rival those of biomass-based Sustainable Aviation Fuel (SAF), potentially reducing costs to USD 50/GJ, below current SAF levels.
Implications for Aviation and Consumer Impact
Even though e-kerosene might remain 2-3 times costlier than fossil jet fuel, blending it at a 10% ratio would only increase airline ticket prices by 5%. This increase in ticket prices is estimated to marginally reduce travel demand, with higher fuel costs potentially affecting premium segments more.
E-Fuels in Shipping: Challenges and Cost Assessment
In shipping, e-ammonia and e-methanol gain focus. IEA suggests a potential 75% increase in container shipping costs due to low-emission e-fuels, but this might equate to less than 1% of cargo value for consumers. For instance, the cost impact on goods like avocados, iPhones, or solar panels remains minimal.
Factors Shaping Future Fuel Markets
While e-ammonia is cheaper to produce than e-methanol, higher adoption costs for ammonia might balance the price environment. The transition faces challenges in vessel adaptations, with the first ammonia newbuilds expected later in 2024.
Green Hydrogen Requirements: Scaling for E-Fuel Production
The IEA underscores the need for significant renewable electricity and electrolyzer capacity to meet e-fuel production demands. Approximately 2,000 TWh/year of renewable electricity and over 400 GW of electrolyzer capacity would be required by 2030 to achieve a 10% share of e-fuels in aviation and shipping.
Policy Influence and Future Directions
Government policies, like tax credits and initiatives promoting low-carbon hydrogen and renewable energy production, are pivotal in driving new capacity. Initiatives such as the US Inflation Reduction Act (IRA) and similar moves in the EU and Australia are expected to bolster momentum in this transition.
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Source: S&P Global
