Liquid Electric Fuels

Description

The ‘electrification of everything’ strategy seeks to decarbonize cars, buildings and even factories by powering them with electricity generated from renewable energy and other zero carbon sources. However, there are industries, processes, and applications that are not good candidates for immediate electrification due to energy requirements, technological limitations, or other obstacles. Long-haul transportation, shipping, and aviation, as well as certain industrial processes requiring high heat levels, are among the segments of our economy that are more challenging to electrify. These applications differ buildings, electric vehicles, heat pumps, and certain industrial boilers that can connect to low-carbon electricity for decarbonization. How do we decarbonize the segments of our economy that cannot be immediately electrified?

Key Technologies

Liquid electricity – known as ‘Power-to-X’ – provides an opportunity to decarbonize segments of our economy that cannot be immediately electrified. This method begins with zero carbon electricity that flows through an electrolyzer, which splits water into hydrogen and oxygen. The ‘green’ hydrogen can either be used as gas or converted to synthetic liquid fuels such as methanol. Hydrogen can also be transformed into ammonia to transport hydrogen for use on the global market in regions where these fuels are not economically produced.

Electromechanical

Solar, wind, and other renewable energy technologies enable the low-carbon Power-to-X process. Renewable energy cost improvements and capacity expansion are critical to the widespread adoption of liquid electric fuels. Below are the primary components of solar and wind energy generation. In addition to the solar and wind power technologies, nuclear, hydro, and geothermal power offer zero-emission power sources for Power-to-X.

Beyond the Solar Panel, other key components of a solar energy system include:

An Inverter that converts DC current that the panels produce to AC, which is used by the grid.
Racking Systems to hold the Solar Panels, sometimes including tracking systems that optimize generation by aligning the panel surface with the sun’s location.
Energy Control Systems to manage integration into the grid.
For large solar farms, a substation to manage the interconnect to the distribution system, including transformers to assure proper output voltage and frequency.

Key components of a Wind Turbine include:

The Tower, which supports the wind turbine and blades and average over 300 feet high to reach steadier, less turbulent wind flows.
The Hub and Blades (typically 3), that can range from 50 meters to more than 100 meters in length.
The Hub, Drive Shaft, Gearbox, and Generator, the system which converts the low-speed, high-torque rotation from the wind energy to spin a turbine to generate electricity.
The Nacelle, the cover for the generating components of the turbine.
A Substation to manage the interconnect to the distribution system, including transformers to assure proper output voltage and frequency.

Green Hydrogen and Synthetic Fuel Production

The process of using electricity to split water into hydrogen and oxygen occurs in an electrolyzer. For liquid electric fuels, an additional step of combining the low-carbon hydrogen with captured carbon dioxide from direct air capture or another carbon capture unit is required. Improving the cost, performance, and durability of green hydrogen and synthetic low-carbon fuel production systems is a key objective for green hydrogen market participants and governments.

FIGURE 2. GREEN HYDROGEN PRODUCTION VALUE CHAIN

Technological solutions required include:

Electrolyzer: There are different types of electrolyzers that each have their own methods and heat requirements. Work is under way to improve the energy efficiency of these processes and to enable them to operate under a wide range of operating conditions.
- Polymer Electrolyte Membrane Electrolyzers
- Alkaline Electrolyzers
- Solid Oxide Electrolyzers
Renewable energy: Green hydrogen production requires reliable, zero-emission power to achieve decarbonization potential. Production methods include wind, solar, hydro, and nuclear.
Energy storage: For on-demand, reliable renewable energy, green hydrogen production facilities will require energy storage for periods when renewable energy is not generating power.
Transportation and storage: Green hydrogen production deployment requires a network of pipelines, storage tanks, and transportation vehicles (rail, shipping, aviation).
Synthetic liquid fuel transformation: To produce a synthetic liquid fuel like methanol, the green hydrogen is combined with captured CO2.

FIGURE 3. GREEN HYDROGEN PRODUCTION COSTS ARE PROJECTED TO COMPETE WITH BUSINESS-AS-USUAL PRODUCTION METHODS (SOURCE: HYDROGEN COUNCIL)

Potential Market Size & Timing

Governments globally are betting big on liquid electric fuels to achieve decarbonization. The US government invested $8 billion in regional hydrogen hubs in the Infrastructure Investment and Jobs Act and established incentives for clean hydrogen production and renewable energy generation in the Inflation Reduction Act. Together with the falling cost of renewable energy (which accounts for nearly 70% of hydrogen production), government support aims to achieve technological improvements and widespread adoption globally.

FIGURE 4. HYDROGEN DEMAND PROJECTIONS BY 2050 (SOURCE: PWC)

Future Market Size

Demand for clean hydrogen and low-carbon synthetic fuels is projected to grow rapidly post-2030, as technologies and costs improve, and the infrastructure and applications expand.

IEA estimates that hydrogen demand could reach 115 Mt by 2030, up from 94 Mt in 2021. Nearly 200 Mt would be needed to be on track for net-zero emissions by 2050.¹
Production of low-carbon hydrogen is projected to reach 24 Mt per year in 2030, with approximately half of that production from electrolysis. If all industry announcements are seen through, electrolysis production could reach up to 60 GW per year by 2030.²
Decreasing costs for renewable energy, paired with technological improvements, could lead to green hydrogen production costs falling to below $1/kg by 2050 and at cost parity with other hydrogen production methods by 2030.
The EU estimates that green hydrogen could meet nearly a quarter of global energy demand by 2050.

Barriers

While significant growth is anticipated for the liquid electric fuels market, barriers exist that must be overcome to successfully deploy low-carbon, synthetic fuels globally. Costs, technology gaps, resources, transportation, and end-use applications still require continued progress. Investments in each of these areas are under way but there is more work to be done.

Cost: Although costs have improved in the past decade, hydrogen production via electrolysis remains more expensive than business as usual hydrogen production (or ‘gray’ hydrogen).
Technology gaps: Power-to-X technologies still require scaling up. Improving energy efficiency for converting electricity to hydrogen over a wide range of operating conditions is required. Currently, the majority of cost for green hydrogen production comes from the high energy requirements. Notably, 30-35% of the energy used is lost during the electrolysis process and further conversions to other energy carriers (i.e., ammonia) result in an additional ~20% loss, while transportation and end-use result in further losses.
Renewable energy: Liquid electric fuel production currently requires a significant amount of renewable energy. Building out dedicated capacity that is co-located with power-to-x facilities will be key.
Transportation: Development of a resilient and wide-reaching infrastructure for moving liquid electric fuels is critical to its global deployment. Storage, transportation, and conversion capabilities that maintain safety without compromising the product are key.
End-use applications: Off-takers for power-to-x fuels is currently limited due to costs. Expanding the actual demand for liquid electric fuels is necessary to scale up at scale and to bring costs down. Applications could include power generation, ammonia production, manufacturing, heavy industries like steelmaking and cement production, fuel cell vehicles, and heavy duty transportation.

Accelerators

Significant steps are being taken to address the barriers for deploying liquid electric fuels through government and private sector investments in power-to-x technologies and end-use applications. Importantly, the fall in costs for renewable power is improving the economics of liquid electric fuels substantially.

The Infrastructure Investment and Jobs Act and the Inflation Reduction Act have established a once in a generation sum of support for liquid electric fuel production. The support found in these pieces of legislation primarily provides incentives and funding for production of low-carbon hydrogen. Further policies will be necessary to support transportation and end-use applications.
Renewable energy costs: The cost of renewable energy comprises a substantial portion of the costs associated with power-to-x facilities. As renewable energy costs fall due to technological advancements, economies of scale and support from the Inflation Reduction Act, the cost improvements will benefit liquid electric fuel production costs.
Decarbonization commitments: Governments and the private sector have made strong commitments globally to decarbonizing economies and business operations. For sectors where electrification is not an immediate solution, liquid electric fuels will provide will play an increasingly important role in meeting climate commitments. In turn, demand for their production, transportation, and deployment will be on the rise as we approach mid-century. Meeting governments’ climate pledges would require 34 Mt of low-emission hydrogen production per year by 2030; a path compatible with reaching net zero emissions by 2050 globally would require around 100 Mt by 2030.³