The cost of producing synthetic gasoline from green hydrogen and CO2 captured from the atmosphere could fall from €50 (53.80) per litre today to €1, according to a new report from the Potsdam Institute for Climate Impact Research.

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The institution, which is funded by the German government, says that this e-fuel, now being produced at the pioneering Haru Oni pilot project in southern Chile, costs about €50 per litre to manufacture , which is 100 times more expensive than the “typical wholesale price of fossil gasoline” of around €0.50 per litre.

However, it adds: “As soon as the production of e-fuels on an industrial scale with direct air capture becomes established, production of around €2 per litre can arise.

“In the long term, production costs of less than €1 per litre of e-fuel will probably be possible.”

But it explains that there is “great uncertainty about the timing of these cost reductions, which depend heavily on the speed of the global market ramp-up of e-fuel production”.

One pre-requisite, it says, it “strong cost degressions” in direct air capture technology.

“There is currently a lack of investment security to take the necessary steps towards large-scale systems. Active policies are needed to push the ramp-up of direct air capture and e-fuels.”

E-fuels derived from electricity may play a significant role in the EU’s decarbonisation plans, particularly in aviation.

Germany has already set a quota for 2% of aviation fuel to be e-kerosene by 2030, while the European Commission is planning an e-kerosene quota of 0.7% in 2030 and 5% in 2035.

Such binding e-fuel quotas are a political lever that “can create secure demand”, leading to faster development of e-fuels, the institute says.

Last December, Germany launched a tender for imported e-kerosene as part of its H2Global programme back in December

And the country recently created uproar within the EU by challenging the European Commission’s plans to phase out the internal combustion engine for cars by 2035, arguing that synthetic fuels should remain allowable after the deadline.

German car maker Porsche — which is buying all the synthetic fuel from the Haru Oni project — is keen to ensure that e-fuels can be used in its high-performance cars for the foreseeable future.

However, the use of synthetic gasoline in cars would almost certainly be extremely niche as the e-fuel would be an expensive option compared to batteries or hydrogen.

Energy losses mean that for every 100kWh of renewable energy used to make green hydrogen and both power direct-air capture and the ExxonMobil methanol-to-gasoline process that combines H2 and CO2, only about 13kWh would be available on the road.

That compares to 30kWh for fuel-cell vehicles and 77kWh for battery electric cars, according to figures from Brussels-based non-profit Transport & Environment.

In other words, almost six times more renewable energy would be required to power a car using e-fuels, compared to a battery electric alternative — with all the added expense that would entail.

HIF Global’s $74m Haru Oni demonstration project began producing e-fuel in December 2022, using 3.4MW of wind power and a 1.2MW electrolyser to produce green hydrogen, capture CO2 and power the Fischer-Tropsch process. It expects to ramp up production to 130,000 litres of synthetic gasoline per year.