Do E-fuels checkmate EVs?

At a time when fleet operators crave certainty about future strategy, the European Commission’s last-minute decision to allow the sale of new vehicles with internal combustion engines after 2035, so long as they are powered by e-fuels, has raised more questions than answers, potentially triggering a checkmate to the electrification process.

E-fuels are synthetic, created by combining hydrogen with carbon dioxide. They can be used in standard ICE vehicles, distributed via the same supply chain of existing gas stations as petrol and diesel, and stored like fossil fuels in unpressurised tanks (unlike hydrogen).

And, most importantly, e-fuels are classed as carbon neutral; the CO2 generated when they are burned is equal to the CO2 removed from the atmosphere during their production. What’s more, their carbon saving starts from the first kilometre, rather than the extended CO2 payback period of electric vehicles (EVs).

Given all these benefits, why have European and national authorities been so fixed on an electric future, with its higher cost of vehicles and charging complications?

Officially, opposition to the ICE ban, led by Germany, was based on the philosophy that technologies must compete to succeed. Fleets, however leading the path in new electric registrations, had already started to follow the EV route mapped out by authorities, and with 12 years to go many are well on course to be 100% electric before 2035.

Battery electric vehicles certainly have a significant headstart over e-fuels. As early as 2016, Norway announced that it would ban the sale of new ICE vehicles from 2025; the UK followed suit with a ban from 2030; and last year the EU announced it would do the same from 2035.

These commitments have led OEMs to invest heavily in EVs, especially new manufacturers from China (see the article “Chinese ambitions in Europe” on our website), closing the price gap with ICE models. Moreover, new technologies, such as solid-state batteries, hold the prospect of above 600km ranges by 2035, removing operational fleet anxieties.

Above all, it’s important to remember the reason for banning fossil fuels – carbon neutral transport in a sustainable economy. Here, too, EVs have the upper hand over e-fuels.

The production of e-fuels is highly energy intensive, especially the synthesis of hydrogen from water. This means that only 25-30% of the energy used in the process makes it into the vehicle, whereas an EV converts electricity into usable power at a rate of around 70-80%.[1] One study suggests that powering an ICE car with e-fuels requires about five times more electricity than running a BEV.[2] Viewed through this lens, e-fuels are a waste of renewable energy.

They also consume vast amounts of water, an increasingly precious resource, during the electrolysis of hydrogen. It takes nine litres of water to produce one litre of hydrogen, and while the water is not technically lost, it is rarely returned to the original body of water and is therefore considered to be consumed.[3]

Against this, there are serious questions about the environmental impact of battery production for EVs, both in terms of their mining and use of rare raw materials, as well as the carbon footprint of their manufacture.

Faced with these competing technologies, what should fleets do?

1) The first decision is to acknowledge that waiting until 2035 to see the EV vs e-fuel battle play out is not an option. Fleets need to plan their futures today, trialling EVs to ensure they are up to speed both with the technology and with any operational changes they will have to make.

2) The second policy is to persist with helping those employees who can install a home charger to make the switch today. EVs enhance better benefits packages, especially if linked with a home charger grant, at a time when staff recruitment and retention are at the top of corporate agendas amid a war for talent.

3) Finally, committing to electrification brings certainty back to strategic fleet decision making, supports corporate decarbonisation objectives, and gives businesses independence from the turmoil created by policymakers.

[1] https://www.volkswagenag.com/en/news/fleet-customer/2021/08/e-fuels.html

[2] https://www.pik-potsdam.de/en/news/latest-news/hydrogen-instead-of-electrification-potentials-and-risks-for-climate-targets

[3] https://pubs.acs.org/doi/10.1021/acsenergylett.1c01375