E-hydrocarbon markets could still emerge in the late 2020s, but volumes will likely not become significant compared with bio-based production until the following decade. In addition, the cost competitiveness of different production pathways continues to be uncertain given the limited adoption and the potential to reduce production costs of some of the pathways over time (Exhibit 4). EU regulators have taken the strongest long-term view on the role of e-fuels, introducing proposals to mandate the use of RFNBOs 4 in the transport sector
with specific quotas for the aviation and marine sectors. 5 These mandates seek to create a market for those products. The business case and location choices for e-fuel production are affected by access to affordable renewables, availability of sustainable carbon (e-ammonia, which doesn’t contain carbon, is an exception), and integrated production costs of hydrogen derivatives (which are affected by rules such as temporal correlation, requiring storage
Exhibit 4 Many emerging advanced aviation fuels could become cost competitive with HEFA in the 2030–40 period.
Unit cost projections for sustainable aviation fuel in European OECD countries, $ per metric ton (t) of kerosene
1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500
E-fuel: Power-to-liquid RWGS-FT1 (CO2 pulp and paper)2 Biofuel: Gasification-FT (forestry residue)3 Biofuel: HEFA-UCO4 Fossil-based kerosene + $100/tCO2 tax Fossil-based kerosene
0 500
2022
2050
2025
2030
2035
2040
2045
1 Reverse water–gas shift via FT process. 2 Hydrogen costs are a range because of high uncertainty in cost-down trajectory and the impacts of regulation (eg, EU correlation on firming costs). 3 Fischer–Tropsch process. 4 Hydroprocessed esters and fatty acids produced from used cooking oil. Source: McKinsey Sustainable Fuels Cost Model, Achieved Commitments scenario, Apr 2023
McKinsey & Company
4 Renewable liquid and gaseous fuels of nonbiological origin, a category defined by the European Union’s Renewable Energy Directive. 5 Proposal for a directive of the European Parliament and of the Council amending Directive (EU) 2018/2001 of the European Parliament and of the Council, Regulation (EU) 2018/1999 of the European Parliament and of the Council and Directive 98/70/EC of the European Parliament and of the Council as regards the promotion of energy from renewable sources, and repealing Council Directive (EU) 2015/652 , Council of the European Union, July 15, 2021.
Accelerating the journey to net zero
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