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Fuelling a net zero economy with synthetic fuels: eight lessons to get it right

Corporate leaders are looking at how synthetic fuels can set their companies on a path to net zero emissions. This is far from easy as they are faced with economic and environmental trade-offs. That’s why we have presented eight insights to help them get it right. Hydrogen's exposure to the energy crisis and the 'greenness' of hydrogen are big challenges

In this article

  • Eight insights for corporate decision-makers

  • Synthetic fuels offer a key pathway to a net zero economy
  • Synthetic fuels provide corporate decision-makers with a tool to go beyond carbon offsetting
  • Hydrogen production has not been immune to the energy crisis
  • At current carbon prices green hydrogen is not cost competitive with grey and blue hydrogen
  • Green hydrogen is currently also more expensive than fossil fuels
  • It is not economical to produce green hydrogen only at times when solar and wind power are in abundance
  • Green hydrogen produced with electrolysers is not necessarily green(er)
  • A future for hydrogen: technological progress helps, but gas and power prices need to come down first
     

Eight insights for corporate decision-makers

Despite all the buzz around synthetic fuels and government support for it (for example in the US and the Netherlands) the economics are far from easy. High gas and power prices have worsened the business case lately, especially in continental Europe. At the same time, synthetic fuels are positioned as a way to replace Europe’s gas and oil dependency in the future and as a means to radically reduce emissions.  

In this article, we analyse the role of synthetic fuels in a net zero economy and unravel the economic value drivers of the hydrogen business case, which is the most promising and best-known fuel. We take a European perspective. In doing so, we present eight key insights for corporate decision-makers in energy-intensive companies that can help them build the case for synthetic fuels. But first things first; what are synthetic fuels?

 

What are synthetic fuels?

Synthetic fuels are liquid fuels that have the same properties as fossil fuels but are produced artificially in a non-fossil way. Synthetic fuels are entirely produced in a factory or chemical plant environment, rather than extracted from the earth and therefore, ideally, do not involve oil, coal or gas mining.

So while hydrogen can be produced from natural gas (which is extracted), it can also be produced by splitting water with an electrical current (which is a chemical process called electrolysis). Both types of hydrogen share the same features and applications, but the one that splits water into hydrogen and oxygen is entirely free of fossil fuels if it is produced fully with renewable power. If so, its use does not create carbon emissions.

Synthetic fuels can also be made from syngas, which is a combination of carbon oxide (CO) and hydrogen (H₂). Reacting these two substances under specific conditions (temperature, pressure and catalyst) results in synthetic fuels such as gasoline, diesel, gas, or even kerosene.

Electrolysis and syngas reactions are both chemical processes that yield synthetically produced fuels instead of fossil fuels that are extracted from the earth.

Read the full article on ING Think