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German industry’s position paper on the development of framework conditions for e-fuels technologies “E-fuels – act now and seize opportunities”

Federation of German Industries e.V.

Date: 06.07.2018

e-fuels – Jetzt handeln und Chancen nutzen

Why act now?

Against the background of stricter CO 2 regulation for vehicles, the decisive political framework conditions for rolling out e-fuels need to be set now.

The policy course for a range of climate technologies which will have a major influence on the future of industry is currently being put in place. With the ongoing political deliberations at EU level on the Renewable Energy Directive (RED) and CO2 fleet regulation (passenger vehicles and in future also heavy goods vehicles (HGV)) as well as in air transport with the CORSIA1 climate protection instrument, important decisions are being taken for industrial policy and also for sustainable mobility. This position paper argues in favour of a technology-neutral and marketoriented approach to reach the Paris climate targets.2 Sustainable mobility calls for a wide range of measures for all transport modes and infrastructures as well as for better connectivity and digitalisation. To this end, further renewable energy sources (e-fuels) are urgently needed alongside the necessary and intensively subsidised roll-out of electrification (electric batteries and hydrogen alike). Policy-makers must act now to realise macro-economic benefits, ensure that business opportunities can be exploited as well as to safeguard competitiveness and technological leadership. 1. What are e-fuels?

E-fuels are fuels which are virtually climate-neutral produced from renewable energies, water and CO 2 and residual materials.

With e-fuels technology, a CO 2 reduction of at least 70% is possible as compared with fossil fuels together with an important contribution to defossilisation in the petrochemical industry, in all areas of transport (passenger vehicles, utility vehicles, air transport, shipping) and in the existing fleet.

E-fuels are synthetic fuels which absorb exactly the volume of CO2 in production that they once more emit in the usage phase. They are produced from renewable energies, water and CO2. In addition, biological or industrial residual materials can also be considered. Hydrogen and various hydrocarbons can be produced using Power-to-X (PtX) technology. Moreover, a number of studies show that e-fuels are indispensable for reaching climate targets in a renewable energy system.3,4,5,6 For instance, e-fuels serve for storage of electric power and use in areas where electrification has economic, ecological or societal disadvantages, for example in long-distance and road freight

e-fuels – Jetzt handeln und Chancen nutzen

transport as well as in shipping or air transport. Furthermore, e-fuels are compatible with the existing fleet and can deliver immediate demonstrable climate effects as additives. In the area of passenger vehicles, e-fuels are not in competition with battery-driven electromobility, rather they complement and advance the overall defossilisation of the energy system effectively and cost-efficiently. 2. What are the strengths and weaknesses of e-fuels?

Without e-fuels, the Paris climate targets cannot be reached.

Use of existing infrastructure and defined fuel standards.

Foundation for roll-out of a sustainable hydrogen economy.

Long-term storage of renewable energy on a large scale in the natural gas network or liquid fuel depots with possible decentralised feedback into CHP installations.

Increased flexibility in the roll-out of electrification and possible protection against risks through diversification linked to development of the electricity network/charging infrastructure, resource availability, customer acceptance, battery price movements or battery recycling.

A complete renewable supply also possible through imports, hence overcoming acceptance limits.

Greater flexibility in expansion of the electricity network and renewable production thanks in part to operation of PtX installations which is beneficial to both system and network.

E-fuels enable an identical use pattern analogous to today’s conventional energy sources.

German technological leadership in electrolysis and transformation technologies (export potential) and long-term diversification of energy imports thanks to e-fuels from regions with renewable surpluses or low electricity costs for renewables.

Safeguarding know-how and jobs (including purchasing power and tax flows) in Europe’s core industrial technologies such as motors and transmissions as well as in the energy and gas sectors.

Increased energy uptake as a result of conversion losses as compared with the use of direct current.

Not currently economic due to political framework conditions which are not technology-neutral.

High start-up investments and long service life require investment certainty.

Ecological effects of e-fuels production should be verified in a regular review.

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e-fuels – Jetzt handeln und Chancen nutzen

3. What level of technological maturity has been reached and how much do e-fuels cost?

The technology for production of e-fuels is broadly developed and available.

There is a technological head-start in e-fuels production.

Production costs at around 1 Euro per litre diesel equivalent are possible in the future.

Hitherto, German industry has invested around 200 million Euro in e-fuels technology for research purposes, construction of pilot installations and financing of start-ups.7 As a result, Germany and Europe are a leader in the development and manufacture of electrolysers and conversion technologies (methanation, methanol synthesis or Fischer-Tropsch reactors). Many technologies have already reached almost full maturity. They need to be continuously further developed, in particular through research and development projects, and their efficiency needs to be improved so that further cost potential can be increased with scale and experience effects. In parallel to these effects, the costs of producing electricity from renewable energies are developing in a positive direction for the economic framework conditions for e-fuels production. Hence, the creation of political framework conditions for upscaling is now of particular importance and should be given priority. A first technological development can start in Germany with the use of regional surpluses and concentrated CO2 sources from unavoidable emissions. A sensible next step would be the export of technology and the import of renewable fuels from regions with low marginal costs, e.g. southern Europe and MENA countries (synergies with development policy). Various studies show a future cost potential of less than 1 Euro per litre of diesel equivalent.8,9 These costs already incorporate efficiency losses in the production of renewable energies. However, such a price development requires planning certainty through long-term, stable and enabling legislation.

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e-fuels – Jetzt handeln und Chancen nutzen

4. How can market roll-out of e-fuels be made a success?

Crediting e-fuels to reach the objectives of passenger and heavy goods vehicle CO2 fleet regulation (technology-pull).

Remove or offset electricity levies for operations beneficial to the network (market incentive programme/real-life laboratories).

Ambitious incentives for progressive and electricity-based fuels in the RED review process (technology-push).

Discount on the energy tax on synthetic fuels, consideration of e-fuels in public vehicle fleet procurement and in a future CO 2-oriented extension of the HGV toll.

E-fuels are currently in a regulatory dead end. Only in combination with a range of legislative changes is a significant market roll-out possible. Given the long service life of PtX installations (more than 20 years) vis-à-vis other comparable installations, the roll-out of these technologies requires investment and planning certainty through long-term and stable framework conditions. A first EU-wide market incentive for renewable fuels was given in 2009 through the introduction of RED. This has made it possible to reach a renewable energy share of currently 5.2% of the fuel market,10 and the aim is that this figure should rise further to 14% by 2030. In this regard, the share of conventional biofuels from energy plants should be limited on the basis of sustainability criteria. However, the current incentives in RED and periods (to 2030) are insufficient for the necessary upscaling of e-fuels because there are many other possibilities for reaching the required greenhouse gas reduction with multiple credits. A simultaneous credit for the green property in several directives (e.g. RED and passenger vehicle fleet regulation) can be avoided simply by registering the fuel volumes brought into circulation by the same certification institutions. The high CO2 avoidance costs in passenger and utility vehicle (N1) fleet regulation can be used as a technology-push for e-fuels. The German Economic Institute in Cologne forecasts automotive industry CO2 avoidance costs of around 350 Euro/t CO2 in 2020.11 A credit for e-fuels in the CO2 fleet regulation for new utility vehicles currently under discussion would be possible simply, workably and non-bureaucratically.12 A similar system has already been put in train by both chambers of parliament in Switzerland.13 Due to the marked efficiency advantages of electric traction, this clearly remains the first choice among the alternative drive systems. By analogy with the eco-innovations in CO2 fleet regulation (passenger vehicles and N1), an upper limit on eligibility for credits can prevent wrong incentives. The upper limit can be adjusted or scrapped at a later point in the framework of an impact assessment if e-mobility has been established and sustainable pathways to large-scale production of e-fuels have been developed.

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e-fuels – Jetzt handeln und Chancen nutzen

A further area for political action currently under discussion is CO2 regulation for road freight transport. Much efficiency potential has already been exhausted due to fierce international competition and the economic significance of fuel costs for overall operating costs. The possibility of credits for passenger and HGVs enables roll-out and also makes time to create incentives for defossilisation in areas which cannot today be electrified on a large scale. At the same time, new markets will be added such as defossilisation of the chemical industry and feedback of synthetic gas during so-called dark doldrums (low wind or solar electricity production). How the fuels brought into circulation are taxed plays an important role. If energy taxes on fuels are related to the CO2 emissions they cause, taxes of around 230 Euro per tonne of CO2 are currently collected on petrol in Germany. The comparable value for diesel (with comparably higher vehicles taxes) is around 145 Euro per tonne of CO2, whereas the tax on electricity used as a fuel is around just 39 Euro per tonne of CO2 with the present electricity mix. As a further market incentive for the use of synthetic fuels, there should therefore be tax relief during the market introduction phase – by analogy with financial support for natural gas as a fuel, for instance. Further market incentives would encourage the consideration of e-fuels for public vehicle fleet procurement (passenger vehicles) and for a CO2-oriented extension of the HGV toll which also comprise the use of e-fuels. Alongside the creation of attractive target markets, PtX technology requires market incentives to reduce operating costs through electricity levies. Due to the current static levy system, economic operation by demand-oriented industrial consumers in Germany is not currently possible. BDI therefore recommends a market introduction programme for PtX technologies in addition to the regulatory measures set out above. By way of example, this could be supported through the introduction of „Reallabore“ (German for living labs)14 enshrined in the German Federal Government’s coalition agreement, which would enable initial tests and introduction of PtX-technology in a mo-dified regulatory environment. The German Government is planning to introduce the “Reallabore” as a new instrument of energy research by the end of 2018. The structural framework could be designed nationally, but also potentially internationally, for instance in conjunction with existing energy partnerships and bank loans by German KfW (Reconstruction Loan Corporation). Moreover, a subsequent impact assessment of successful PtX reallife laboratories would help to develop corresponding framework conditions for the energy sector, by analogy with the proposal made by various companies.15

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e-fuels – Jetzt handeln und Chancen nutzen

Only with a targeted market roll-out in combination with attractive target markets and a market support programme can the costs of producing e-fuels be brought down to the level of fossil fuels and a renewable fuel industry be built up. In this way, industrial policy advantages and climate objectives can be achieved realistically, rationally and advantageously for all users, with simultaneous coverage of the risks of electrification.

List of source 1

CORSIA - Carbon Offsetting and Reduction Scheme for International Aviation


With the BDI position paper on synthetic fuels (December 2017) “Synthetische Kraftstoffe – Rahmenbedingungen für Forschung und Markteinführung” (only German version available), German industry called for the course to be set rapidly for large-scale availability of synthetic fuels. The underlying assumptions and recommendations continue to be relevant.


BDI - Federation of German Industries, BCG and Prognos (2018): Study, Climate Pathways for Germany


Deutsche Energie-Agentur (dena) (2018): dena-Pilot Study Integrated Energy Transition


Prognos, Fraunhofer-Institut für Umwelt-, Sicherheits- und Energietechnik UMSICHT and Deutsches Biomassezentrum DBFZ (2018): Status and perspectives of liquid energy fuels in the energy transition


Enervis and VNG (2018): META-Studie Sektorenkopplung, Analyse einer komplexen Diskussion (only German version available)


Internal assessment


Agora Verkehrswende, Agora Energiewende and Frontier Economics (2018): The Future Cost of Electricity-Based Synthetic Fuels


Deutsche Energie-Agentur (dena) and LBST (2017): E-Fuels-Study – The potential of electricitybased fuels for low-emission transport in the EU


Federal Ministry for Economic Affairs and Energy (BMWi) (2018): Zeitreihen zur Entwicklung der erneuerbaren Energien in Deutschland (only German version available)


IW Köln (2015): Für eine bessere CO2-Pkw-Regulierung in Europa (only German version available)


The joint proposal foresees a voluntary, optional credit in article 6 (E85 regulation) on EU CO2 fleet regulation. A CO2 saving in the fleet can be calculated with the volume of e-fuels brought into circulation and the CO2 values defined in RED.


Die Bundesversammlung – Das Schweizer Parlament (2014): Synthetische, CO2-neutrale Treibstoffe. Anrechnung bei der CO2-Flottenemissionsregelung (only German or French version available)


„Reallabore“ (German for living labs) are experimental spaces established for a limited period of time in a geographically determined specific area (e.g. cities, regions) aimed at testing tech nological and regulatory innovations in a result-oriented environment.


PtX-Allianz (2017): Eckpunktepapier für ein Markteinführungsprogramm von Power-to-XTechnologien – Vorschlag für ein Innovationsförderprogramm mit Fokus auf PtX-Anwendungen im Mobilitätssektor (only German version available)

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e-fuels – Jetzt handeln und Chancen nutzen

About BDI The BDI transports the interests of German industry to the political leaders. He supports companies in global competition. He has a wide network in Germany and Europe, in all important markets and in international organizations. The BDI ensures the political flanking of international market development. And it provides information and economic policy advice for all industry-related topics. The BDI is the leading organization of German industry and industry-related service providers. He speaks for 36 industry associations and more than 100,000 companies with around 8 million employees. Membership is voluntary.15 state representations represent the interests of the economy at the regional level.

Imprint Federation of German Industries e.V. (BDI) Breite Straße 29, 10178 Berlin T: +49 30 2028-0

Contact Philipp Nießen Senior Manager Department Energy and Climate Policy T: +49 30 2028-1487 Petra Richter Deputy Head of Department Mobility and Logistics T: +49 30 2028-1514

BDI document number: D 0945

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German industry’s position paper on the development of framework conditions for e-fuels technologies  
German industry’s position paper on the development of framework conditions for e-fuels technologies