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Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Porsche Is Looking Beyond Electric Vehicles

Earlier this month, car giant Porsche announced that it was investing $24 million in the development of e-fuels to use in its sports cars. The news followed the company’s recent release of its first-ever electric vehicle earlier this year, the Taycan. The decision to invest in e-fuels shows that at least one carmaker is not putting all its apples in the EV basket. What are e-fuels? Generally, they are synthetic fuels made from carbon dioxide and hydrogen, to be used in internal combustion engines instead of the oil-derived fuels that are currently in the sights of environmentalists, regulators, and governments as the they attempt to reduce emissions.

E-fuels are called e-fuels because they are made using electricity to produce the hydrogen that is then mixed with the carbon dioxide to make the fuel. Naturally, this electricity needs to be green, generated by wind, solar, or hydro. And this is where the first and potentially big problem of e-fuels lies. Green hydrogen is prohibitively expensive at the moment and, according to some, it will continue to be prohibitively expensive for the observable future.

Be that as it may, Porsche is pursuing its e-fuels plan that should see the first output of e-fuels at a new plant in Chile come as soon as 2022. The facility, according to Porsche, will be the “world’s first integrated, commercial, industrial-scale plant” for e-fuels.

“We would like and love cars like the 911 with high-rev combustion engines or turbocharged engines still as cars you could drive in the future without having the burden of a CO2 footprint, an unnecessary CO2 footprint,” said Porsche’s director of research and development, Michael Steiner, as quoted by CNBC last week.

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For this to happen, however, the cost of producing e-fuels will need to go down, and go down substantially. First, the process of capturing CO2 is itself expensive. This is one big reason why carbon capture and storage has yet to take off, despite all the promise it holds for reducing the earth’s emissions. Second, the process of making green hydrogen is expensive because it is highly inefficient. According to the International Council on Clean Transportation, the process of producing synthetic fuels by combining carbon dioxide and hydrogen only converts “at best half of the energy in the electricity into liquid or gaseous fuels.” Half is not a lot. Half means expensive. In fact, the ICCT has estimated that because of the high production costs, e-fuels would cost somewhere in the vicinity of 3-4 euros ($3.64-$4.85) per liter in 2030.

Yet, according to Bosch, one of the companies working on e-fuels, these could cost just 1.20 euro ($1.46) per liter in 2030 and even less than a euro by 2050.

“It is of course true that synthetic fuels are still expensive,” Bosch’s CEO, Volkmar Denner, wrote in a recent article on e-fuels. “But the greater the production capacity, the lower the cost. By 2030, it will be possible to produce RSF at a liter cost of between 1.20 and 1.40 euros, net of tax, and by 2050 the cost could drop below one euro. That may still be more than we now pay for fossil fuels. But this cost advantage will soon shrink if a value is placed on renewable fuels’ environmental advantage.”

In the same article, Denner also makes an interesting point about comparing EVs and cars running on e-fuels on efficiency. EVs may be more efficient now, he said, but wait until they start running on imported renewable electricity. Then, their efficiency would rise to a level comparable to that of e-fuels.

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It may sound far-fetched, but it is not by accident that Porsche picked Chile for its pilot e-fuels plant. The facility, the company said, will be powered entirely by wind power, which is abundant at that location. Chile is an exporter of electricity, and many other countries are also set to benefit from the renewables boom. But will the importers and their EV drivers benefit as much?

This is the question Bosch’s Denner poses, and while it could be seen as subversive to the EV narrative, it makes a valid point. When the electricity supply chain becomes longer as electricity use surges thanks to EVs, prices will rise for those forced to import the electricity they need. This won’t happen everywhere, and it won’t happen tomorrow, but it might happen at some point. And if it does, it may give e-fuels a fighting chance.

Any discussion of renewable energy and the electrification of transport is fraught with problems. It is becoming increasingly difficult to find unbendable facts among the wishful thinking and vested economic interests. This is why it’s best to take every claim, regardless of its source, with a pinch of salt. Billions have already invested in wind and solar power production that will be used to power EV charging points. These, too, will require a lot of money. 

But e-fuels are so expensive they make no economic sense, for now. Electrolyzers are expensive, and the process of converting hydrogen and carbon dioxide to a liquid fuel is extremely inefficient. But Porsche’s move might indicate that at some point, this could change, boosting the competitiveness of this synthetic gasoline and diesel.

By Irina Slav for Oilprice.com

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