No energy transition without molecule transition
Molecule transition – what exactly does that mean?
For several years, energy transition has been the subject of frequent discussions. However, so far, what’s almost always been meant by that is electricity transition. Yet in the 27 EU countries, electric power covers only between 14.5 and 39.2 percent of the required energy (see chart on page 40). Molecules contribute the rest, for fuel supply for example. Increasing electrification in areas such as transportation and heat will cause the share of electricity to grow but there are other uses in which fossil molecules are hard to replace – or can’t be replaced at all – by electricity, such as in long-haul transportation in the air and on water. In addition, we need carbon-neutral hydrocarbons for substance-bound use, especially in chemistry. To achieve the climate goals, molecules for such uses will need to be produced in climate-neutral ways in the future.
This means that carbon-neutral hydrogen as well as sustainable biogenic and synthetic energy sources and products must increasingly become the focus of the energy transition effort. Such carbon-neutral molecules are not in competition with the expansion of renewable power generation and sensible electrification. Instead, we’re talking about replacing fossil energy sources and raw materials as complements where fully electric drive systems or processes reach their technical limits or are not economically feasible.
Final energy consumption of selected EU countries
Molecules dominate in the total EU with a current average of more than 75 %.
In what areas are carbon-neutral molecules needed?
Aviation and maritime shipping are transportation sectors that are and will continue to be largely predestined for liquid or gaseous energy sources. This is also where the global dimension of the challenges manifests itself. It’s not foreseeable that medium- and long-haul aircraft or large container and passenger ships are going to be operated by battery-electric power. The same applies to farming, firefighting, disaster relief, and the military: Agricultural machines, fire trucks, and rescue vehicles, or emergency power supply units will continue to need flexible and storable energy sources. In addition, high-energy molecules will be needed for the large number of existing vehicles and heating systems. Despite progressing electrification far more than 40 million motor vehicles with internal combustion engines and several million heating systems for liquid or gaseous fuels are expected to continue to exist throughout Germany in or about the year of 2030. That’s where climate protection options are required as well. Moreover, easily transportable, and storable liquid energy sources are immensely important for resilient energy supply with utmost flexibility to avoid shortages and dependencies in situations of crisis. With electrons, for instance, a national energy reserve amounting to 90 consumption days as required today by the German Petroleum Stockpiling Act for crude oil and gasoline, diesel, heating oil, and kerosene cannot be implemented. Moreover, the substance-bound use of molecules – especially hydrocarbons – will continue to be indispensable for the chemical industry and other sectors. They’re required as raw materials for many products or pre-products. Important chemical raw materials, for instance, are naphtha, ethylene, or liquid gas that are necessary to produce plastics, foam, and insulating materials, among other things. High-grade lubricants like those for wind turbines or electric motors all the way to bitumen for road construction or for the sealing of buildings are so far primarily produced from petroleum and must be available in carbon-neutral form in the medium to long run.
109,000
terawatt hours (TWh) of carbon-neutral hydrogen or 87,000 terawatt hours of synthetic fuels (Power-to-Liquid or PtL for short) per year could theoretically be produced in the long run according to the PtX-Atlas 2021 of Fraunhofer Institute for Energy Economics and Energy Systems Technology IEE. However, that total potential could realistically be tapped only to some extent, say the researchers – because of the lack of investment reliability or infrastructure in some places, among other things. Considering those limitations, the researchers still came up with a potential of 69,100 TWh of hydrogen based on green electricity or 57,000 TWh of renewable PtL products per year. To put things in perspective: for global aviation in 2050, a total minimum requirement of 6,700 TWh is expected, for worldwide maritime shipping, 4,500 TWh PtL.
From where are the carbon-neutral molecules for all that supposed to come?
What percentages of the required molecules are produced from biomass or synthetically from alternative hydrogen and carbon, for example, and what percentages are imported, differs from country to country and cannot be predicted precisely at present. Germany, for instance, is currently importing around 70 percent of the energy it uses. That percentage is far from being replaceable by renewable power from domestic wind farms and solar systems, and from domestic biogenic sources. Consequently, Germany will continue to be an energy-importing country – which is another argument in favor of green molecules because there are technical limits to transporting electricity in power lines across long distances. That’s why transporting renewable energy from the Earth’s sun and wind belt requires that energy to be converted into and stored in hydrogen, as well as hydrogen being processed into ammonia, methanol, or synthetic crude oil. Studies show that a global market for green molecules could create a win-win situation. Importing countries like Germany could benefit from engineering and exporting necessary production technologies just like the countries could that produce carbon-neutral molecules. For countries whose national economies have so far been heavily dependent on exporting fossil energy, a market like that would also open up prospects for alternative, climate-friendly value creation.
To achieve a breakthrough, what is still lacking?
Making molecule transition a success calls for enormous investments. We’re still in the early stages in that regard.
Let’s take aviation for example. Policymakers have already recognized the need for carbon-neutral molecules in that area. The EU will make the future use of sustainable aviation fuels, or SAFs for short, from biogenic raw materials and Power-to-Liquid (PtL) fuels mandatory in rapidly rising increments. However, we can currently see that such mandatory addition rates are obviously not sufficient to trigger the necessary investments in the related production. That particularly applies to the establishment of highly complex, innovative production technologies requiring high initial capital expenditures that are typically depreciated over a minimum of 20 years, including PtL plants to produce electricity-based kerosene, or E-SAF for short.
Although the EU’s E-SAF quota will have increased to five percent by 2035 there are currently no indications that the requisite production plants will be available on time. That’s particularly the case because experience has shown that in the scaling process of new technologies the production by the initial plants entails higher costs than that by subsequent projects, which can build on the experience and on the mistakes of the pioneers. Due to the resulting cost degression, the high investment in the initial plants doesn’t pay off. It’s necessary to counteract such a “first-mover disadvantage.” Quotas can generate demand but the market satisfies that demand as favorably priced as possible. A required price level cannot be hedged in that way. Consequently, a long-term purchasing agreement for the products that guarantees both the purchasing quantity and the price is normally a prerequisite for realizing such initial large-scale projects. In addition, it’s very important that policymakers don’t dictate any uses for green molecules but enable broad-based demand for renewable products to minimize investment risks.
Similar challenges arise regarding alternative fuel production. Here, a reliable and ambitious CO₂ pricing system would be particularly important to create incentives for investments in capacity expansion and strong demand for carbon-neutral energy sources and raw materials. For instance, energy taxation aligned with environmental impacts would be a particularly effective and comparatively reliable lever for ramping up renewable fuels because currently every liter of fuel, whether fossil or renewable, is subject to the same taxation. The difference between the tax rate for fossil and for renewable fuels could considerably contribute to reducing or even compensating for the difference in production costs and thus be a clear signal – and one of relevance in terms of magnitude – for investments in renewable molecules.
Policymakers, the business community, and society now want and need to engage in a constructive dialog about all this to achieve the climate goals while not only preserving Germany and Europe as a strong economic location but also providing new impetus for success in the global competition.
