E-Fuels – Electron Hungry in An Electron Deficit World   

E-Fuels – Electron Hungry in An Electron Deficit World   

• Weekly Theme: Blue Is The Color – LA Winning
• Next Week: E-Fuels – Not Yet

Key Points

• There are regular releases about projects to produce E-Fuels. While some may work because of unique locations or extreme subsidies, the projected need for E-Fuels surpasses anything that can be done today.
• The disappointment in the US 45V tax treatment rests on the very limited availability of efficient green power, and Direct Air Capture (DAC) of CO2 is another potential giant green power hog.
• In our view, this is a post-2040 opportunity, which means that decarbonizing transport fuels in other ways will take the lead – shipping markets will exploit low-carbon ammonia and methanol and may never need E-Fuels.
• The most significant opportunity for E-Fuels is likely to be for SAF. While you could also make shipping and other transport fuels, by 2040, efficient alternatives should exist – green ammonia and hydrogen.
• In the meantime, the airlines will need to rely on other sources of low carbon SAF – from grain or beans – which sets up competition with food – or from other gasification/pyrolysis – waste wood, plastics, and other waste.

Exhibit 1: Outside of 45Q, carbon prices have pulled back meaningfully in 2023, impacting any DAC offsets for E-Fuels

Source: Multiple Sources and C-MACC Analysis