NGO Transport and Environment (T&E) suggests that by 2030, 4% of European shipping could transition to e-fuels. However, only a third of these potential projects are currently assured, as fuel suppliers are hesitant due to concerns about insufficient demand.
According to the NGO, T&E’s mapping of green hydrogen projects across Europe shows that nearly 4% of European shipping could run on green e-fuels by 2030. But fuel suppliers appear to be reluctant to commit financially to projects without more guarantees that there will be demand for these fuels in the near future. This means the vast majority of projects may never come online in this decade, putting Europe’s climate ambitions and thousands of jobs at risk, warns T&E.
Hydrogen projects are popping up across Europe. They have the potential to power hard-to-decarbonise sectors like shipping and provide thousands of good jobs. But at the moment there just isn’t enough certainty and we risk missing this golden opportunity.
… said Inesa Ulichina, shipping officer at T&E
There are at least 17 projects across Europe, set up to provide hydrogen-based e-fuels for ships, T&E notes. If all of these projects become operational, they could meet nearly 4% of EU shipping’s total energy demand by 2030. T&E found 44 other hydrogen projects in Europe that could also provide green fuels for ships, but project developers eye other hydrogen-hungry industries, too.
Key recommendations
Stronger long-term demand and supply signals, along with associated policy support, are needed for more projects to overcome existing and future investment risks. To help achieve this, T&E makes the following policy recommendations:
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Implement a marine e-fuels supply target of at least 1.2% in European ports at the national level, as recommended by the Renewable Energy Directive (RED III). This could help mobilize national resources and channel limited initial production volumes to shipping, which has few other sustainable and scalable alternatives to decarbonize. It would also ensure that at least the e-fuel projects that have already received FIDs don’t get delayed, putting shipping’s energy transition at risk. Given that in some member states mapped e-fuel volumes, if realized on time, will deliver a higher market share than the 1.2% RED III target, member states should consider going beyond the minimum RED sub-quota in their national implementation plans.
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Provide financial incentives for e-fuel production using maritime carbon pricing (ETS) revenues. Maritime ETS is expected to generate up to €8 billion in annual revenues by 2030, most of which will be accumulated in national coffers. Part of these revenues can be used to kickstart the production of e-fuels in Europe that has not secured financing, by providing targeted subsidies to reduce the cost gap with fossil fuels. This could ensure that the initial supply meets the demand from the shipping sector in this decade.
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Align the FuelEU Maritime Regulation (FEUM) with the Commission’s 2040 climate target proposal. Although the implementation of the FF55 package may facilitate the deployment of initial green e-fuel volumes within this decade, their mass-market diffusion will necessitate greater regulatory certainty beyond 2030. Aligning FEUM with the Union’s economy-wide climate objectives for 2040 and 2050, as well as introducing stronger e-fuels sub-targets, will help boost the demand for green marine fuels and reduce investment risks for further e-fuel projects over the medium and long term.
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Introduce binding marine e-fuels supply targets through existing EU legal instruments. This could be achieved through the FuelEU Maritime or RED III during the future revision of these laws. The goal is to synchronize the supply and demand requirements and to ensure uniformity in ambition.
The mapped projects would easily meet the European Union’s target of 2% green e-fuels in 2034, however, most projects are yet to receive funding and not a single shipping-dedicated project is operational. Fuel producers cite a lack of buyer certainty and investment security as major obstacles. This puts millions of tonnes of green fuels and thousands of skilled jobs at risk. Globally, it is estimated that green shipping could create 4 million new jobs by 2050.
Denmark alone accounts for more than half of all the planned hydrogen volumes across the 61 projects mapped by T&E. But in terms of fuels earmarked for shipping, Spain leads the way and is home to a third of the potential fuel supplies. Despite its large coastline, the UK has very few projects while T&E found none in Italy and Greece.
In the long run, e-ammonia appears to be the more popular option, making up 77% of potential volumes. To date, however, none of these projects has received a final investment decision.
Shipping has a chicken and egg problem. E-fuels producers are waiting for clearer demand signals from ship operators before making large investments. Shipping operators, on the other hand, are waiting for these fuels to scale up and become cheaper before signing off-take agreements. The EU should ensure more supply and demand of e-fuels through regulation, which will provide fuel producers and shipping companies with investment certainty.
… concluded Inesa Ulichina
