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Aurora sets out conditions for competitive e-fuel production in Sweden, Spain, and Germany by 2030

competitive e-fuel production

Aurora sets out conditions for competitive e-fuel production in Sweden, Spain, and Germany by 2030

BERLIN (AURORA ENERGY RESEARCH)—A new analysis by global power analytics provider, Aurora Energy Research, highlights the potential for competitive e-fuel production across Europe, driven by the cost of hydrogen and supportive policy frameworks. The study focuses on ammonia, methanol, e-kerosene, and e-methane, identifying key opportunities particularly in Sweden, Spain, and Germany.

With the implementation of the European Renewable Directive (RED) III—requiring a 42.5% renewable energy target by 2030—and the upcoming European Hydrogen Bank auctions (Round 2) in February 2025, the regulatory landscape is poised to accelerate e-fuel uptake and production in Europe.

The EU’s ambitious targets for the aviation and maritime sectors further make e-kerosene and e-methanol especially attractive for investors. A comparison of the production costs and market dynamics of these fuels in Sweden, Spain, Germany, and Italy against global competitors provide a roadmap for enhancing Europe’s competitive edge. Sweden in particular offers promising conditions showcasing cost parity with imports from the Middle East and Latin America.

With over 85% of the costs of e-fuels made up of hydrogen, the focus on improving the economics of e-fuels in Europe is on optimised electrolyser operations.  Against the backdrop of a generally challenging hydrogen market, Aurora’s analysis underscores the importance of efficient power procurement strategies and integrated e-fuel production setups to unlock cost competitiveness.

For e-methanol and e-kerosene, whose main offtakers are expected to be the maritime and aviation industry respectively, penalties for non-compliance of the targets will drive uptake. For other e-fuels and offtakers, penalties alone are not feasible without compromising the cost competitiveness of European industry. A mixture of demand-side measures will be needed, pushing the willingness to pay of offtakers up- and supply side measures and pulling the cost of production down. These include CCFDs for offtakers, grid fee exemptions for power procured by electrolyser, and adequate regulatory frameworks for carbon capture.

Frederik Beelitz, Advisory Principal at Aurora Energy Research, commented:

In the current challenging climate for hydrogen producers in Europe, selected e-fuel production can offer promising value pockets for electrolysers.

Optimised power procurement strategies, integrated project set ups, and supportive policies that go beyond penalties of non-compliance will act as key enablers.” 

David Olley, Advisory Senior Associate at Aurora Energy Research, added:

Our analysis shows that Sweden and Spain, in particular, can act as frontrunners for e-fuel production in Europe.

In Germany, the current conditions are more challenging. However, with optimised power procurement strategies and continued supply- and demand-side support programmes, the gap between the cost of e-fuel production and the willingness to pay for e-fuel offtakers can be closed.” 

READ the latest news shaping the hydrogen market at Hydrogen Central

Aurora sets out conditions for competitive e-fuel production in Sweden, Spain, and Germany by 2030, source

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