Germany dropped a bomb powered by e-fuels at the European summit this week. Those synthetic fuels should keep the German automotive industry afloat. What exactly are these e-fuels and what do they mean for the energy transition?
What are Synthetic Fuels?
Simply put, e-fuels or synthetic fuels consist of the combination of hydrogen and CO2. Their advantage is that they can perfectly serve the classic combustion engine of a car and still CO2– be neutral. The CO2 that they emit is compensated in the production process.
This can be done by using hydrogen that comes from green energy from the wind or the sun. Electrolysis breaks the water molecule and extracts hydrogen from it. After that, carbon can be added, through technology that converts CO2 catches from the air or in factories.
The Fischer-Tropsch process for converting a gas mixture of carbon and hydrogen into a liquid fuel was already developed in the first half of the twentieth century, but e-fuels for the automotive industry are still in the research phase a hundred years later. The first factory will open in Chile in 2021, with support from German automaker Porsche. A synthetic fuels factory will open in Norway next year, but it would focus on aviation.
Why is Germany coming up with this now?
Europe committed to ban the sale of new cars that contain CO from 20352 expel. In practice, this amounts to a ban on the combustion engine: the European consumer would then only be able to buy an electric car. Germany now wants guarantees that there will be an exception for cars on e-fuels. Seven other EU member states support that German initiative, all countries with an automotive industry.
German brands such as BMW do make electric vehicles, but that is not their strength compared to other brands, says Dalia Marin, professor of international economics at the Technical University of Munich. “The transition to green energy hits the German car industry at the heart of its comparative advantage,” says Professor Marin. “The electric car is a disruptive technology about which we have no historical knowledge. In other words: the Chinese are better at it and are too far ahead.”
2022 was a tipping year by the way. Last year, China for the first time overtook Germany as the second largest car exporter, just behind Japan. The reason for this is the electric car. In the German press this evolution is seen as the vanguard of a threatening de-industrialization in Germany.
The largest import country of electric and hybrid cars from China is Belgium. In fact, the European car industry is already fighting a rearguard action. Marin: “The hope is that if you can convert the combustion engine into green technology, you can keep it alive longer.”
Yet Germany’s reluctance to transition may be driven not only by protectionism, but also by a sense of realism. “I think they just think that the horizon of 2035 is too short,” says economist Geert Noels (Econopolis), himself a fan of electric cars. “The charging infrastructure is not following suit and there will never be enough batteries. Moreover, it makes you very dependent on China.”
Are e-fuels a good alternative to electric driving?
Francesco Contino, energy professor at UC Louvain, also shares Germany’s idea that 2035 is too early for a full electrification of the vehicle fleet. But e-fuels will not offer the miracle solution, he thinks. First, because quantity is an issue. The industry will already need a lot of hydrogen. “With what Europe now provides for hydrogen in the Green Deal, twice 40 gigawatts, we will not get there,” says Contino.
The green research agency Transport & Environment calculated that by 2035 there will only be enough e-fuels to power 2 percent of the cars and therefore calls them a Trojan horse. “It derails the greening of the new fleet and at the same time allows the existing fleet to still use conventional oil after 2035: Big Oil wins twice,” says Alex Keynes of Transport & Environment.
Another problem is that e-fuels use much more energy in their production than regular fuel. According to Transport & Environment, e-fuels at the pump would therefore be half the price. Alex Keynes: “Ultimately, e-fuels will be nothing more than a niche solution for Porsche owners.”
Yet that also deserves nuance, says Professor Contino. Yes, e-fuels will be more expensive, but electric cars will not escape that completely either. “What they are hiding is that in a country like Belgium, which has to import its electricity from abroad, part of the solution lies in introducing hydrogen. If you then electrify your fleet, it will also come from hydrogen.”
According to Contino, the solution is fewer cars. While Europe is focusing on the transition to electric cars and perhaps, under the impulse of Germany and Italy, also on e-fuels, it is forgetting to stimulate alternatives, such as car sharing.
“I think that would even be good news for German carmakers, who are known for larger premium cars, while China is flooding our market with small models,” says Contino. “There are six million cars on the road in Belgium. That must be divided by two or three.”
