Industry Insights with Ralf Diemer, eFuel Alliance - Scaling eFuels in Europe and Beyond
Ralf Diemer
Managing Director
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eFuel Alliance
In this interview Ralf Diemer, eFuel Alliance and a member of the Sustainable Aviation Futures EU Congress Advisory Board, shares his insights into how interest eFuels has rapidly grown over the last 3 years, challenges to scaling eFuels to an economically viable point, and the importance of a collaborative, global approach.
Could you start by explaining what eFuels and eSAF are in a couple of sentences please?
So eFuels are liquid and gaseous fuels, synthetic fuels, based on renewable energy. So basically, with eFuels we can replace fossil fuels for any combustion engine technology use case. And eSAF is the particular eFuel for aviation.
That was fantastic as an introduction for anybody out there who's still wondering about eFuels. Next, could you share a brief background about eFuel Alliance and what they do?
So eFuel Alliance is a platform founded in summer 2020 containing now over 180 members, companies and organisations along the value chain for eFuels. So basically, we are a cross-sectoral organisation containing any player who has an interest in boosting, producing or using eFuel in the future.
Cross-sectoral means literally any sector who has an interest there. So in terms of use cases, it's on road, off-road, aviation of course, maritime, but also industry applications, for example, when you think about chemistry.
So we are basically a lobby platform if you will. We try to enable the regulatory framework in Europe, and also around the globe since we have members from the United States, for example, or Japan, to make large investments into industrialised production of renewable fuels and particularly eFuels possible.
We are still growing, and we are growing especially outside Europe nowadays, which is a very interesting point because we always said that eFuels and the production of eFuels is a global subject. We have to go to places where renewable energies are much more available and cheaper than, for example, in Central Europe. And since we want to give global answers, it is of course, very good to be globally represented.
I'm always really fascinated every time I visit your website as well, there's a really good graphic which shows the different eFuels projects that are being planned or being developed around the world. And every time I come back to your website, there's more. So it's really great to see how quickly you've grown in such a short space of time. It'd be great to understand, from your perspective, what is the current landscape for eFuels projects and what needs to happen to see more progress on eFuels for SAF?
I remember when we started the eFuel Alliance, there were no real projects in the pipeline. There were some of course laboratory projects, some hydrogen projects as well. But there was basically no effort to really industrialise production of eFuels.
This changed a lot over the last three years. You can see that for example, on our home page as you mentioned. But of course, you also see it in the political landscape: a country like Japan having a dedicated eFuel strategy nowadays, or the Inflation Reduction Act (IRA) in the United States, which includes all kinds of eFuels into this scheme of tax incentives.
This all basically happened the last three years.
And of course, I have talked about the developments in Europe and that's a another very important indicator: money is in play now. I remember very well most of our members, especially the new ones, the star- ups, they had basically no investment. No private capital available. But that changed completely. So now we have private investors who are investing in addition of course to public incentive schemes as well.
So, you see a starting industry. Of course, we are not in the business of industrialised production yet. We are starting to do so, but we really see investments actually happening. You don't see only PowerPoint slides anymore.
And I think that's very exciting, because of course everybody needs those eFuels, all over the globe. There are many use cases where we don't have alternatives. Aviation is a very prominent example for that.
I think we are on quite a good path.
But to your second part of the question, of course we need more of everything and especially the support of governments has to be maintained. It's not sufficient to think about the next three years. We talk about long term perspectives because these investments, we talk billions for investments, they need a long-term perspective. Those fuels will be more expensive in the first place compared to their fossil brothers and sisters, so to speak.
And for that [long term perspective], we need regulatory schemes which go far further than the Renewable Energy Directive in Europe, which goes until 2030. That is a major point we make towards decision makers.
And then of course, at the end, we have to create a market. I mean, it's very nice to have kick-off investment but at the end, if there is no market demanding those fuels on a long-term basis, then of course we won't be succeeding.
I just wanted to sort of touch on your point there in terms of moving from PowerPoint slides to reality. I was really pleased to hear when we interviewed Amy Hebert who's the CEO of Arcadia eFuels, and she mentioned that she met an investor at our 2022 edition of the Congress which has directly led to the development of some one of their first projects.
I do want to talk about RefuelEU Aviation, and the minimum share of synthetic fuels or eFuels from 2030. This begins at around 1.2%, but the goal is to rise to 35% by 2050. Now, these are quite ambitious figures, and what I want to ask you is the industry ready to meet them?
Good question. Give me the silver bullet to answer this question.
So, in general I would say if a demand is created either by regulation or by market driven forces, there will be production. There will be companies or people investing into production of these eFuels because simply it's a future orientated business, right?
We need to get rid of fossil fuels and, therefore, I think it's clear that there will be a need for these eFuels. And of course, RefuelEU Aviation helps because with these quotas, a demand is created at least in the aviation sector in Europe.
So, I would simply say any quota which is put out, maybe also with additional supportive schemes such as the IRA, those fuels will be produced.
Now, the very the big problem with the aviation sector is that is of course it is one of the sectors which has the lowest ability to pay for more expensive fuels since all the airlines are in a global competition or most of them are in a global competition. And of course, they have a competitive disadvantage when you have, as a European airline, to fulfil a quota which leads to higher fuel bills for you and other competitors in other parts of the world don't have to fulfil because simply there is no regulation in place for them.
That is why we think it is important to support and to have this aviation regulation in place. I think one of the aims we have to go after as Europeans is that we need global solutions there. We have to bring other big markets into the boat.
And secondly, I think, and this is the philosophy of the eFuel Alliance as well, Aviation is maybe not the sector which is the best one to start those investments. Simply because airlines cannot pay for that sufficiently. That's the very big difference, for example, to road transport. In road transport you have a high ability to pay. That’s very important for us, we should not exclude any sector if we want to really kick off investments into eFuel production.
So the debate we have in Europe, basically to decide use cases before the investments are done, it's just backwards. We have to decide about the use cases when the production is in place and when the investments are fulfilled.
And we think it is, for even for the aviation sector at the end, better if road transport would be included. Because when you produce diesel or when you produce on the Fischer–Tropsch route, which is at the moment the only production route to produce kerosene fuel, then of course, you have by-product. And you need other sectors to step in to make your production facility as efficient and as price efficient as possible.
So basically RefuelEU Aviation is necessary because we need quota here and we need a supporting scheme for the aviation sector. But it's the wrong idea to think we can that we can do that only with the aviation sector.
And if we do that, and that's a little bit of a tendency in Europe right now, then we will have the problem that investments were not sufficient. You can see that already in other parts of the world. The Japanese, for example, are also after eSAF, but from the very beginning they said for us it doesn't matter which use case these fuels are used for in the first place.
At the end of the day, it is important that these fuels are produced to the best prices.