{"id":582989,"date":"2023-03-14T00:00:00","date_gmt":"2023-03-14T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/green-fuels-explained\/"},"modified":"2023-03-14T00:00:00","modified_gmt":"2023-03-14T00:00:00","slug":"green-fuels-explained","status":"publish","type":"goinggreen","link":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/green-fuels-explained\/","title":{"rendered":"Green fuels explained"},"content":{"rendered":"

<\/span>Enterprise Explains: Green Fuels. <\/span>As the global transition to a carbon neutral <\/span>economy gathers pace, we\u2019re hearing a lot more about the rise of so-called green fuels. The idea is that green fuels can replace fossil fuels in industries that are tough to run on renewable energy, from thermal power plants through to heavy transportation. There\u2019s strong potential for green fuels to accelerate the green transition \u2014 but the science is to some extent in its infancy, and a global market for these products is still taking shape. So what exactly are green fuels, where do things stand, and what needs to happen for the industry to take off? <\/span><\/p>\n

What counts as a green fuel? <\/span>Low carbon tech is developing fast \u2014 leading to some<\/span> confusion over terminology as global energy authorities, industry players and researchers coin new terms for new kinds of energy carriers. Green fuels are also referred to as low carbon fuels, e-fuels, or synthetic fuels, while <\/span>biomass-derived fuels<\/a><\/span> like ethanol, biodiesel, and \u201crenewable hydrocarbons\u201d are also sometimes thrown under the green fuels umbrella. For our purposes, green fuels are hydrogen or hydrogen-derived<\/span>liquid or gaseous fuels<\/a><\/span> that are produced using electricity generated from renewable sources. These green fuels can replace fossil fuels in hard-to-decarbonize industries. <\/span><\/p>\n

It all starts with hydrogen: <\/span>Green hydrogen is the OG of green fuels. It <\/span>can be used<\/a><\/span> as a <\/span>high-energy fuel to power electricity plants and for transport, as a heat source for industrial processes and homes, and as a feedstock to produce other key industrial chemicals and products. Green hydrogen is also the key ingredient in the production of secondary green fuels like ammonia, methane (also known as synthetic natural gas) and methanol. <\/span><\/p>\n

A quick science lesson: <\/span>Hydrogen can be produced by passing an electric current through <\/span>water (H20) to split it into hydrogen (H) and oxygen (O). Ammonia is made by <\/span>combining that hydrogen<\/a><\/span> with nitrogen extracted from the air at high pressures and blistering temperatures. Hydrogen is combined with carbon dioxide (CO2) in other high-temperature, high-pressure processes to get <\/span>methane<\/a><\/span> and <\/span>methanol<\/a><\/span>. These synthetic \u201cgreen\u201d compounds are all chemically indistinguishable from their high-emission counterparts \u2014 the difference is that they aren\u2019t derived from fossil fuels and the energy used to produce them comes from renewable sources like wind and solar. <\/span><\/p>\n

ICYMI- Regular readers will know that we\u2019ve been closely tracking the rise of the global green <\/span>hydrogen industry<\/span> and local efforts to establish Egypt as a regional hub for the production of the green fuel. Catch our explainer on green hydrogen <\/span>here<\/a><\/span>; the latest on the USD 83 bn worth of green hydrogen projects that private players are hoping to build in Egypt <\/span>here<\/a><\/span>; expectations for the government\u2019s imminent national hydrogen strategy <\/span>here<\/a><\/span>; and the prospects for exporting Egyptian green hydrogen to Europe <\/span>here<\/a><\/span>. <\/span><\/p>\n

So, what are green fuels good for? <\/span>Green fuels are most promising in their potential to <\/span>substitute fossil fuels in \u201chard-to-decarbonize\u201d industries including steel, petrochemicals, and fertilizers, and in heavy duty <\/span>transport<\/a><\/span> including <\/span>shipping<\/a><\/span>, aviation, and trucking. <\/span>The EU <\/span>wants<\/a><\/span> more of its ammonia and refining plants to run on renewable hydrogen, and is aiming for 30% of its primary steel production to run on green hydrogen by 2030.<\/span><\/p>\n

Methanol has particular promise as a shipping fuel: <\/span>G<\/span>reen hydrogen and ammonia need to <\/span>be kept in subzero, pressurized conditions, making them difficult, expensive, and potentially risky to transport. By contrast, methanol <\/span>can be stored at room temperature<\/span> and doesn\u2019t need to be kept in high pressure tanks, the <\/span>Wall Street Journal<\/a><\/span> notes. Already some 100 ships with methanol burning engines have been ordered by shipping giants including Maersk, Cosco and CMA CGM, according to the WSJ.<\/span><\/p>\n

These industries need to grow fast: <\/span>According to the <\/span>International Energy Agency<\/a><\/span>(IEA), <\/span>nearly 30% of the world\u2019s low-carbon hydrogen stock would be used to produce green transport fuels by 2050 if the world is to meet net-zero emissions targets. Ammonia will need to account for 45% of global energy demand for shipping, while biofuels \u2014 green fuels derived from plant material \u2014 would need to provide 45% of global aviation fuel. <\/span>According to a report by <\/span>Precedence Research<\/a><\/span>, the green ammonia market was worth some USD 36 mn in 2021, but is expected to reach a staggering USD 5.4 bn by 2030 \u2014 representing an annual CAGR of 75% between now and the end of the decade. <\/span><\/p>\n

And companies are investing to get them off the ground: <\/span>Some USD 40-50 bn of total <\/span>investment in sustainable fuels is in the pipeline by 2025, according to <\/span>a Mckinsey report<\/a><\/span>. Another USD 1-1.4 tn is required to meet decarbonization targets and demand by 2040, it adds. By 2050, green fuels could comprise between 7 - 37% of energy consumption in transportation, according to Mckinsey. <\/span><\/p>\n

Among the most eye-catching projects so far:<\/span> Danish shipping giant Maersk has <\/span>said<\/a><\/span>it will <\/span>launch its first ship running on green methanol this year in a bid to signal to producers that the shipping industry needs more green fuel, and fast. Spanish energy company Cespa <\/span>earlier this year<\/a><\/span> said that it will invest EUR 3 bn on green hydrogen projects to supply green ammonia to three companies at the port of Rotterdam. Danish renewable energy developer GreenGo Energy is working on a <\/span>USD 8.8 bn green energy park<\/a><\/span> that could be producing green fuel before 2030. In South Africa, a USD 4.6 bn green ammonia plan geared toward fuel <\/span>is expected to come online in 2026<\/a><\/span>, while Abu Dhabi\u2019s Masdar <\/span>has announced plans<\/a><\/span> to produce sustainable aviation fuel from methanol. <\/span><\/p>\n

For all the potential green fuels hold, there are obstacles standing in the way.<\/span> Almost all of <\/span>these fuels are in the earliest stages of uptake and remain untested at a large scale. Then there\u2019s the problem that green methanol prices can run <\/span>up to twice the cost of bunker oil<\/a><\/span> \u2013 a function <\/span>of limited suppliers<\/a><\/span> and high raw materials costs. \"Similar to ammonia, the international longer haul fleets will benefit most [from green methanol] but the infrastructure and scalability is holding this fuel back,\" analysts at <\/span>S&P Global Commodity Insights said<\/a><\/span>.<\/span><\/p>\n

Policymakers can help kick the transition into gear: <\/span>Government policy that both subsidizes <\/span>green fuel development and disincentives fossil fuel use could be helpful driving forces. Already, the<\/span>Biden administration\u2019s decision<\/a><\/span> to offer US green hydrogen producers a USD 3.00 tax credit per kilo of hydrogen for their first 10 years of operation is expected to push green hydrogen production costs in the US into sub-zero territory in the short term and spur more private investment, according to <\/span>S&P Global.<\/a><\/span> The EU\u2019s decision <\/span>to tax ships coming to the trade block using fossil fuels<\/a><\/span> could also help lower the gap in cost.<\/span><\/p>\n

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