First e-fuel plant opens its doors

The first commercial plant making synthetic fuel from renewable electricity and captured carbon opened in southern Germany on 1 June, and the occasion was marked with the usual ribbon-cutting and the unusual honesty of its own numbers. The plant’s capacity, announced without prompting, would fuel about a thousand cars for a year, which is a rounding error in the fuel market and a genuine event in the e-fuels industry, which until now has existed almost entirely in laboratories and pilot programmes. The opening is small, symbolic and exactly the right size to test the question that the whole field is circling: whether e-fuels can ever escape the demonstration project and become a business.

The chemistry of the plant is straightforward and the economics are not. The process takes water, splits it into hydrogen with electrolysis, combines the hydrogen with carbon dioxide captured from a cement plant down the road, and runs the mixture through a reactor that produces a liquid fuel chemically identical to the petroleum product that the engines were designed for. The fuel burns like diesel, which is the point: it needs no new engines, no new pipelines, no new habits, and it can be blended into the existing supply in any proportion. The cost is the catch, and the cost is roughly four times the price of the fossil fuel it replaces, and the gap is the entire history of the industry in one number.

The case for e-fuels rests on the things that batteries cannot do, and the case is real. The aviation sector, the shipping lines, the long-haul trucking routes, the winter heating systems, all the places where electricity is heavy to store and hard to deliver, are the markets that the e-fuel industry describes with a missionary glow. The airline trials that have run on synthetic kerosene have proved the technical case, and the fuel’s defenders argue, correctly, that the infrastructure of the fossil economy, the tanks, the pumps, the engines, the trained mechanics, is an asset that e-fuels can inherit rather than replace. The industry’s weakness is the same list read backwards: every one of those arguments assumes that the price can be brought down, and the price is the thing that no demonstration project has ever controlled.

I am, on balance, more convinced by the e-fuel argument than I was five years ago, and the reason is the electricity price curve. The cost of the fuel is dominated by the cost of the renewable electricity that makes it, and the renewable electricity that this decade has been building in the wind and solar belt is the cheapest energy the industrial world has ever produced. The plant in southern Germany is paying a market price for its power; the plants that will follow, sited in the deserts and the wind corridors where the electricity is occasionally almost free, will pay a different price, and the arithmetic changes with the location. The industry’s future, if it has one, will be decided in those deserts rather than in the ribbon cuttings.

The honest assessment is that the first plant is a proof of will rather than a proof of economics, and the proof is still worth having. The technology works, the scale problem is now a supply-chain problem rather than a chemistry problem, and the industry has its first facility that a regulator can inspect and an insurer can price. The thousand cars that the plant can fuel this year will burn a fuel that no country’s politics can embargo and no geology can exhaust, and that property, the property that the oil industry spent a century proving the value of, is the e-fuel industry’s whole argument. The plant’s output will be counted in tonnes; the argument it represents will be counted in decades.