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Manuel Fritsch / Thomas Puls / Thilo Schaefer Expertise 25. March 2021 Synthetic Fuels: Potential for Europe: Climate Protection Impact and Value-Added Effects of Ramping Up the Production of Electricity-Based Liquid Energy Carriers

Synthetic fuels produced from green electricity can make a major contribution to reducing greenhouse gas emissions around the world. Liquid energy carriers produced from renewably generated electricity can be used in combustion engines without impacting the climate.

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Climate Protection Impact and Value-Added Effects of Ramping Up the Production of Electricity-Based Liquid Energy Carriers
Manuel Fritsch / Thomas Puls / Thilo Schaefer Expertise 25. March 2021

Synthetic Fuels: Potential for Europe: Climate Protection Impact and Value-Added Effects of Ramping Up the Production of Electricity-Based Liquid Energy Carriers

Expertise commissioned by the IWO Instituts für Wärme und Mobilität e. V., MEW Mittelständische Energiewirtschaft Deutschland e.V and UNITI Bundesverband mittelständischer Mineralölunternehmen e. V.

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German Economic Institute (IW) German Economic Institute (IW)

Synthetic fuels produced from green electricity can make a major contribution to reducing greenhouse gas emissions around the world. Liquid energy carriers produced from renewably generated electricity can be used in combustion engines without impacting the climate.

In air and sea transport, electricity-based liquid fuels represent the only option for a climate-neutral energy supply from today’s perspective.

In road and rail transport, synthetic fuels can complement direct electrification due to their high energy density, and their use can reduce CO2 emissions where vehicles with combustion engines continue to be used.

The use of electricity-based synthetic fuels is primarily suited for purposes dominated by long-distance mobility. In many regions of the world, therefore, the combustion engine will continue to be used in the medium term. This is due to the mobility requirements, for example, in rural regions, insufficiently developed electricity grids, as well as the lack of purchasing power to buy new electrical vehicles, which are usually more expensive than non-electric ones. It is also necessary to remember the great economic importance of vehicle production in many Central and Eastern European countries.

In the transport sector, the use of synthetic fuels can reduce greenhouse gas emissions immediately and effectively for the existing vehicle fleet through the delivery and transport infrastructures already in place. Especially in this sector, the targets of European climate policy, which the Green Deal recently adopted by the European Commission should raise, are still far from being reached.

The goal of complete climate neutrality can only be achieved, from today’s perspective, with increased use of synthetic fuels.

The production of synthetic fuels requires extensive investments in plants to generate renewable electricity and convert it to liquid energy carriers. Especially economically competitive locations for the generation of electricity include places with large amounts of sun and wind and a lot of available space, mostly situated outside of Europe. The enormous need for renewable energy to defossilise not only the current electricity demand, but also the sectors of industry, building heating and transport, where other energy sources have largely been used to date, means that Member States of the European Union will also be dependent on imports in addition to the expansion of their own capacities for generating renewable electricity.

Conceivable production locations are, for example, situated in North Africa and in the Middle East, Australia or Patagonia. By investing in electrolysers and conversion plants for the generation of synthetic energy carriers from renewable electricity, both European plant manufacturers and the economic regions where synthetic energy carriers are produced can benefit.

Ramping up the production of electricity-based energy carriers offers enormous potential both for the European economy and the production locations:

  • EUR 80 billion in additional annual added value are created for the European economy as a result of the production and export of PtX equipment and plants to non-European potential regions.
  • 1.2 million new jobs can be created in Europe through the production and export of PtX equipment and plants. These jobs will result from Europe’s own production of machines, equipment and plants, the demand for intermediate consumption and the rise in income for employees there due to the additional demand for consumer goods (Figure 1).
  • More than 340,000 new, highly productive jobs can be created at a PtX production site that serves one fiftieth of the global PtX demand potential.

The EU now has the opportunity to position itself as a leading supplier of sustainable PtX technologies. Although the global market for electrolysers to produce hydrogen has already doubled in the last 20 years, the majority of this growth has taken place outside of Europe. To change this, it is necessary to make appropriate investments as soon as possible.

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Climate Protection Impact and Value-Added Effects of Ramping Up the Production of Electricity-Based Liquid Energy Carriers
Manuel Fritsch / Thomas Puls / Thilo Schaefer Expertise 25. March 2021

Manuel Fritsch / Thomas Puls / Thilo Schaefer: Synthetic fuels: potential for Europe – Climate protection impact and value-added effects of ramping up the production of electrici-ty-based liquid energy carriers

Expertise commissioned by the IWO Instituts für Wärme und Mobilität e. V., MEW Mittelständische Energiewirtschaft Deutschland e.V and UNITI Bundesverband mittelständischer Mineralölunternehmen e. V.

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German Economic Institute (IW) German Economic Institute (IW)

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