"Strengthen market take-up of renewable fuels needed for sustainable transport solutions"

Transcription

1 EUROPEAN COMMISSION DG RTD - Energy DG RTD Bioeconomy DG RTD - Transport ENER - Renewables, R&I, Energy Efficiency JRC Institute for Energy and Transport DG MOVE - Innovative & Sustainable Mobility SET Plan Secretariat SET-Plan ACTION n 8 ISSUES PAPER "Strengthen market take-up of renewable fuels needed for sustainable transport solutions" Purpose of this document This document 1 is intended to progress the implementation of the actions contained in the SET-Plan Communication 2, and Action 8 to "Strengthen market take-up of renewable fuels needed for sustainable transport solutions" (Renewable Fuels). It is part of a series of Issues Papers jointly prepared by the European Commission and discussed with the representatives of the EU Member States and countries part of the SET-Plan, working together in the SET-Plan Steering Group. The Issues Papers are sent to stakeholders for comments/feed-back. They are meant to propose to stakeholders strategic targets/priorities in different areas of the energy sector. They will frame the discussions of the SET-Plan Steering Group with the stakeholders within Action 3 and will be used to come to an agreement on targets/priorities. Stakeholders are invited to take position on the proposed targets in accordance with the guidelines set out in the paper "The SET Plan actions: implementation process and expected outcomes" and submit their positions to SET-PLAN-SECRETARIAT@ec.europa.eu by May 27 th at the latest. All relevant documents and material are available on the SETIS website 1 This document is a working document of the European Commission services for consultation and does not prejudge the final form of any future decisions by the Commission. 2 "Towards an Integrated Strategic Energy Technology (SET) Plan: Accelerating the European Energy System Transformation" (C(2015)6317)

2 Introduction Biofuels played an important role in early transport systems that were developing around the beginning of the 20 th century. For example, the first 1908 Model T Ford was designed to run on ethanol and early diesel engines were developed for using pure vegetable oils for agriculture in remote areas where petroleum was not available at the time. While fossil fuels dominated in the transport sector since the beginning of the 20 th century, the need to reduce fossil CO 2e emissions resulted in a policy driven move back to renewable fuels early in the 21 st century. First, a 2010 target of 5.75% was established specifically for biofuels in 2003 (2003/30/EC). This was replaced by a more ambitious 2020 target of 10% (directive 2009/28/EC) which included all renewable energy sources for transport, not just biofuels. Within the frame of the SET-Plan, the European Bioenergy Industrial Initiative (EIBI) was set up in 2010 to support development and implementation of Demonstration and eventually Flagship bioenergy and biofuel projects covering 7 advanced technology Value Chains 3 as well as to ensure close links to research and innovation and EERA Bioenergy. For the EIBI, Key Performance Indicators (KPIs) were established to provide a means to measure progress on the path to achieving parity with fossil energy and fossil fuels. Several large scale projects were envisaged with support from Community funds as well as National funds and industry investments. By the end of 2015 two NER300-funded large scale "Flagship" projects were in operation (one for bioethanol and one for biomethane), and there were a few demonstration projects using funds from various sources, including ERANET+ and the 7 th Framework Programme/Horizon In addition, InnovFin - EU finance is a joint initiative for innovators set up by the EIB and the EC to improve access to risk finance for Research and Innovation (R&I) projects. Even with the extensive funding programmes, actual advanced biofuel production is projected to fall well short of the nominal 0.5% target set for 2020 in Directive (EU) 2015/1513(Article 3e). There are other promising technologies under development to produce both liquid and gaseous renewable fuels. For example, renewable electricity can be used to produce renewable hydrogen (H 2 ) which can be used either directly to power fuel cell vehicles or can be reacted with captured carbon dioxide to give either a liquid or gaseous transport fuel (power-to-gas, or power to liquid). Renewable hydrogen to power fuel cell vehicles is currently addressed by the Fuel Cell and Hydrogen 2 Joint Undertaking (FCH 2 JU) 4 at the European level as part of Horizon2020. Use of renewable electricity via storage (batteries) is out of the scope of this Issues Paper. Some modes of transport can accommodate alternative fuels with little need for changes to engines and fuel delivery systems while others have very specific requirements. For example, long distance heavy duty road transport ideally needs fuels with high energy density, while light duty road transport can readily accommodate lower energy density fuels like bioethanol that is already widely available in blended form with gasoline. Blend limits are being steadily extended via developments in engine technologies. There are various 3 European Bioenergy Industrial Initiative (EIBI) Implementation Plan , January 24 th Fuel Cell and Hydrogen Joint Undertaking Multi-Annual Work Plan Adopted by the FCH2 JU Governing Board on 30/06/2014

3 approaches for the substitution of fossil-derived diesel for road transport, for example synthetic drop-in fuel made from lignocellulosic and low-iluc 5 sustainable biomass which does not require any engine modification. Other approaches are possible by developments in engine technologies such as adaptation of self-ignition engines to use renewable fuels including gaseous fuels and new fuel blends containing for example bioethanol. Expansion of the use of ethanol in medium and heavy duty diesel engines, while requiring the development of new standards to environmental acceptability, is yet another option 6. In general, shipping can accept a very wide range of fuels although for both open sea and for inland waterways progressively cleaner fuel standards are being introduced. Renewable drop-in fuels can be a key contributor in mitigating hazardous sulphur emissions in shipping. On the other hand, aviation can only use hydrocarbon fuels in a relatively narrow range of compositions that are approved in a strict manner by ASTM procedures. For aviation, liquid hydrocarbon renewable fuels are seen as the only viable option for the mid-term to long term (30-40 years). Today, a limited quantity of aviation biofuels is available. Electricity supply is gradually being integrated into the broader development of low-carbon and smart grids and train networks widely run on electricity which is increasingly supplied from renewable sources feeding into power grids. Biofuels have therefore an important role to play before electrification can be fully realised and certainly for specific applications such as aviation, shipping, and heavy duty road transport where electrification is not yet possible. There is high interest in "drop-in" fuels that can be mixed without blend limits with fossil fuels and used in all forms of transport since the existing vehicle fleet can be still used. At the moment, commercial drop-in biofuels production represents only a small percentage of total biofuels market, mainly in the form of diesel type HVO/HEFA. There is a need to increase this share by using diesel replacement biofuels (sometimes referred to as green diesel) from lignocellulosic biomass and other biomass that does not result in competition with food or land. In the petrol market there is need to move rapidly to fuel flexible engines that can use ethanol as a drop-in fuel. However, large-scale production of cost-competitive drop-in biofuels will be challenging in the near to midterm future, in the absence of supporting policies. Immediate action is needed to support development of technologies and their exploitation for the production of all advanced renewable fuels at commercial scale in both the diesel and petrol markets. Dedicated action is needed for the uptake of fuel cell technology in transport which is expected to start post-2025 in the European markets. One way or another, many different renewable fuels are already used in transport and there is potential to use others given the diversity of transport systems. Crop based biofuels may grow to a maximum contribution of 7%, as defined in legislation ((EU) 2015/1513). However, production of advanced renewable fuels derived from non-food feedstocks must grow substantially in the coming years in order to meet ambitious climate change targets. The question is how to stimulate market growth. Industry very clearly states that for all types of 5 Annex IX of Directive (EU) 2015/1513 on the promotion of the use of energy from renewable sources 6 Note: As an example SCANIA has been marketing successfully E95 diesel modified bus engines for several years

4 renewable fuel, there are two problems holding back their investments in large scale production: the main problem is lack of long-term and stable policy that would provide the basis for the confidence needed to make key investment decisions for implementing highrisk innovative technologies, secondly, lack of effective financing instruments to facilitate the relatively high investment costs in the absence of off-take agreements with customers and fuel distributors. On this point, InnovFin still has to demonstrate its effectiveness. Furthermore, for new types of gaseous and liquid fuels which require establishment of new capital-intensive distribution infrastructure (E85, B30, renewable hydrogen, biomethane, etc.), targeted risk mitigation instruments underwritten by the public sector could help their market deployment. Why taking action now on renewable fuels? Renewables are targeted to contribute 10% of the energy requirement for fuels for all forms of transport in the EU by 2020 as a way of reducing fossil emissions from the transport sector. In 2015, the Council and Parliament (Directive 2015/1513 Article 3d) set a limit of 7% for the contribution of biofuels produced from food crops (e.g. cereal and other starch-rich crops, sugars and oil crops) and established an indicative target of 0.5 % for advanced renewable fuels in transport by Member States shall set their national targets by April 2017, keeping in mind the reference target. Taking the 7% limit into account, the aim to achieve 0.5 percentage points of the 10% renewables target by 2020 and to make a significant contribution to the 27% target for renewable energy by 2030, there is clearly a need to dramatically increase the production of all alternative renewable transport fuels. These fuels should be based on non-food biomass feedstocks, residues and wastes and of non-biological origin like renewable power to gas and power to liquid fuels (feedstocks listed in Annex IX of Directive 2015/1513). The legislation in force and the voluntary certification systems provide for a stable and well understood sustainability regime in the EU. However, due to the absence of long and stable supportive policies and of a sound coherent framework for financing large scale demonstration projects, first of a kind plants and necessary distribution infrastructure has resulted in investment stagnation. Strong targeted actions are needed to encourage industry to meet the key renewable fuels targets by 2020 and even stronger actions are needed to achieve large volumes of advanced renewable fuels by The support for innovation needs to be intensified until processes are proved commercially. It is also time for the SET Plan to prioritise where potential funding should be invested in order that commercial production can be achieved within the timeframe of the targets. With regard to renewable fuel production costs, it is always necessary to consider other possible uses and products derived from the renewable sources, e.g., renewable electricity and renewable chemicals and materials. There is growing interest in industrial products derived from renewable sources and, as a consequence, bioproducts within the emerging bioeconomy and the growing competition for available biomass can have an impact on biofuels production costs. In the same context, integrated biorefineries that convert

5 biomass into advanced biofuels and other products such as biochemicals can improve the cost-competitiveness of the overall biomass conversion process. In any case, advanced biofuels should only be produced from environmentally sustainable biomass and must comply with sustainability criteria and constraints laid out in the RED and ILUC directives aiming at replacing fossil based fuels that nevertheless continue to be incentivized today. Given the positive contribution to both energy security and climate mitigation goals, advanced renewable fuels can strongly justify the short-term additional economic cost that their production implies, with the perspective that they can prove to become viable and cost effective in the longer-term, thus compensating for the initial investments. Targets 1. Total renewable transport fuel produced by EU projects (TWh/year) 1.1. Advanced Biofuels 2020, 25 TWh advanced biofuels (this corresponds to 0.5% of the approximately 5000 TWh total transport fuel consumption and to 3 GW installed production capacity). 2030, 200 TWh advanced biofuels (this is not a regulatory target but a projection based on estimates made by leading companies involved in advanced biofuels and equates to a 4% contribution to total transport fuels consumption and assumes no growth of total energy consumption by transport) Other renewable liquid and gaseous fuels 2020, 5 TWh renewable liquid and gaseous fuels (for example using renewable electricity to produce gaseous or liquid fuels, including the capture and reuse of CO2, as well as synthetic fuels made by other innovative processes). 2030, 25 TWh renewable liquid and gaseous fuels (ibid.). 2. Estimated GHG savings Total GHG savings through use of advanced biofuels and renewable fuels will be at least that required in Directive (EU) 2015/1513 where Article 7b (amended) states that greenhouse gas emission saving from the use of biofuels shall be at least 60%. The greenhouse gas emission saving from the use of biofuels shall be calculated in accordance with Article 7d(1) of the same directive Cost or price targets are not foreseen. This Issues Paper is focussed on stimulating production through cost-effective energy output targets. Given the potential competing uses for all renewable energy sources, it is considered that technology diversification is necessary to achieve cost-effective production of ready to

6 market advanced biofuels and other renewable fuels. A market up-take approach for relevant identified value chains with a broad underlying technology basis is proposed for such drop-in fuels and in particular, advanced biofuels via thermochemical and biochemical pathways, and alternative renewable fuels (e.g. biofuels from algae/micro-organisms, hydrogen and renewable fuels from other carbon sources and renewable energy). Input from industry stakeholders and Member States is needed to propose the mix of technologies and fuels to be supported in order that a viable advanced biofuel and renewable fuel market can be established. It is recognised that the EIBI uses defined Value Chains and target prices to the customer as a way to monitor key performance indicators; this should be continued. A similar approach exists within the FCH2 JU, which has defined a number of high-level KPIs in its Multi-Annual- Work-Plan to monitor technology progress. It is interesting to note that the EIBI gives a target price for biomethane simply to be equal or lower than that of natural gas. It follows that other fuels will eventually have to compete in a similar manner and that support schemes will have to take into account projected costs and the prevailing price of oil. Furthermore, projected costs in the time horizon of 2020 and 2030 of other renewable sources, in particular wind, should be taken into account for establishing the cost effectiveness of advanced renewable fuels in transport compared to electrification. In conclusion, the target price in 2020 and 2030 for advanced biofuels and renewable fuels should be at least comparable to the target price of the other competing transport options including renewable electricity from wind and solar and within a reasonable margin from parity with the fossil based fuels. This will require in particular improvements in process efficiency and energy balance through the application of innovative practices. To determine the price margin, input from stakeholders and Member States is needed. Proposed actions Annex II below summarises actions which were identified in the document "Towards an Integrated Roadmap: Research & Innovation Challenges and Needs of the EU Energy System" ( These actions can be used in the preparation of the Implementation Plan but are in no way restricted to these suggestions.

7 Annex I : Complementary information on some of the targets Target 1.1 Timeline 2020 The Council and Parliament agree on an reference value for a target of 0.5% of the total energy used in transport by 2020 to be derived from advanced biofuels (produced from feedstocks listed in part A of Annex IX of Directive (EU) 2015/1513 (amendment to Article 3(e) of Directive 2009/28/EC) with Member States required to set national targets by 6 April 2017). With an estimated total of 5000 TWh of energy used each year in the EU for all forms of transport, this 0.5% equates to 25 TWh of advanced biofuels. The original 2020 target of 10% of the energy needs derived from renewable sources is still valid, but the contribution of food-based 1st generation biofuels is capped at 7%, with the remaining 3% coming from other renewable sources. Timeline 2030 PRIMES projections will be used to support target for Target 1.2 There are no clear projections for renewable power to liquid, power to gaseous fuels or other alternative renewable fuels that are not defined as biofuels. There are currently no specific policy instruments for these fuels. There has been rapid progress over the last five years and already there are claimed to be market-ready examples waiting to be exploited (L. Mennicken, SETIS magazine, January 2016). For these reasons it is important to have a separate target for this category of fuels. PRIMES (2016) projected contributions for H2 and other renewable fuels will be inserted when available, later in Target 2 There is no defined methodology to determine greenhouse gas saving for renewable fuels, for example power to gas or power to liquid that do not use biomass as feedstock.

8 Annex II: Relevant actions of the 'Towards an Integrated Roadmap' document of the SET Plan Part II Competitive, Efficient, Secure, Sustainable and Flexible Energy System HEADING 3: Developing Sustainable Biofuels and Alternative Fuels for the European Transport Fuel Mix Challenge 1: Advanced (Second and Third Generation) Biofuels The overarching goal of this challenge is to develop technologies and to create market access to enable commercial availability of advanced biofuels technologies to cover at least 0.5% (1.8 Mtoe) of EU transportation energy needs by This target supports the EU objective to promote the deployment of advanced biofuels within the proposed revision of the RED/FQD. Biofuels are playing a significant role in reducing greenhouse gases. Beyond 2020, an IEA roadmap estimates that by 2050, biofuels will provide 27% of total world transport fuel and avoid around 2.1 Gt CO2 emissions per year (accounting for 20% of total emissions in transport) when produced sustainably18. Estimating a share of only 8 % in the EU transport energy demand 2030 and , advanced biofuels could avoid around 54 MT CO2 per year. This is only 2.5 % of the EU target to reduce GHG emissions by 40 % until 2030 or 1.25 % of the 2050 target of 80 % (in comparison to 1990), but a significant reduction to the GHG emission of the transport sector, increasing from 778 MT in 1990 to 926 MT in The IEA scenario applied to the EU, would lead to 185 MT avoided CO2 emissions per year. In order to reach the 0.5 % target by 2020, around 20 new production plants for advanced biofuels will have to be built in the next few years. Apart from a stable, long-term policy framework for biofuels to increase investor confidence, which includes binding targets for 2020 and beyond, the deployment of advanced biofuels will require further substantial research, development and demonstration activities with accompanying funding measures. Process optimisation, valorisation of sidestreams into higher value products and new financing mechanisms for large biofuels projects are key elements to reach this goal by 2020 and thereby effectively contribute to the de-carbonization of the transport sector and increase energy security. ADVANCED RESEARCH PROGRAMME Action 1: Develop low-cost integrated process concepts to reduce the investment needed for the production of biofuels and bioproducts Action 2: Develop innovative biological, chemical and thermochemical routes for biomass conversion to obtain biofuels and bioproducts from all fractions of biomass

9 INDUSTRIAL RESEARCH AND DEMONSTRATION PROGRAMME Action 1: Demonstrate processes at TRL6-7 that decrease Capex and/or Opex and increase the overall sustainability of advanced biofuels processes to various enduse applications (road transport, aviation, etc.) Action 2: Evaluate feedstock chain and process flexibility for relevant biomass sources at demonstration scale (TRL=6-7) INNOVATION AND MARKET-UPTAKE PROGRAMME Action 1: Implement advanced conversion technologies at large scale energy-driven biorefineries and implement sustainable, reliable and efficient value chains at large scale (TRL=8) Action 2: Improve large scale logistics and storage of feedstock to provide a continuous supply (TRL=8) Challenge 2: Hydrogen and Fuel Cells Improve performance and reduce costs of the next generation of Fuel Cells Electric vehicles by a factor of 10 (compared to cost of small fleet FCEVs in 2010), whilst increasing lifetime towards 6,000 operational hours. Improve modularity, refuelling time, reliability, safety and availability of hydrogen refuelling infrastructure, while reducing investment intensity and operational cost. Demonstrate competitive Fuel Cell Electric Vehicle (FCEV) and infrastructure solutions, by targeting around 100,000 FCEVs and around 1000 publically accessible hydrogen refuelling stations to transition the transport sector to sustainable renewable fuels. Contribute to the integration of intermittent renewable energies (wind, solar) by providing Multi-MW cumulative hydrogen conversion capacity for use in transport and stationary applications, including chemical feedstock or injection into the natural gas grid. Develop a portfolio of cost-competitive, energy efficient and sustainable hydrogen production, storage and distribution processes, with 50% of hydrogen used for H2 energy applications produced from renewable sources or from near zero-co2 - emission sources. Develop and demonstrate APU applications for road, aircraft, rail and maritime applications by Assure development and production of competitive hydrogen and fuel cell technologies in Europe. ADVANCED RESEARCH PROGRAMME Action 1: Novel materials and components for Fuel Cell and Hydrogen technologies INDUSTRIAL RESEARCH AND DEMONSTRATION PROGRAMME Action 1: Develop the capabilities necessary to initiate a European-wide refuelling infrastructure and FCEV deployment including road and non-road vehicles and APUs (Auxiliary power units) Action 2: Produce and distribute hydrogen with a low carbon foot print at a competitive cost for transportation and other applications

10 INNOVATION AND MARKET-UPTAKE PROGRAMME Action 1: Facilitate the transition to the market of Fuel Cell and Hydrogen technologies in transport and other applications Challenge 3: Alternative Fuels Liquid hydrocarbons, and to a lesser extent liquefied or compressed gaseous hydrocarbons, are expected to continue playing a key role in the medium term for a number of transport applications (e.g. long haul road freight, shipping, aviation) requiring energy carriers with high energy density per unit volume and mass to enable a large driving range. The infrastructure for distribution and storage of such fuels is already available. Most production routes yield high quality / high purity fuels. Diesel, kerosene and gasoline from power-to-liquid routes can be used in existing engines. The premium fuel qualities of synthetic fuels may be utilised for improved efficiency and emission performance in advanced engine concepts. There is no clear vision on the energetic, ecologic and economic feasibility of this option, nor on the role that power-to-liquid technology can play in the transition to sustainable mobility. Key issues include: In terms of energetic efficiency the multi-step production processes need to be simplified by new catalytic routes. New reactor concepts need to be developed enabling better heat and mass transfer and higher yield. Processes need to be analysed in terms of adjusting the dynamics of fluctuating renewable power supply to the chemical conversion by integration of storage or increased dynamic operation of the various process steps. Thermal integration and utilization of all material streams are inevitable for increasing the overall efficiency of the process. Focusing on the later use as transportation fuel for heavy transport, shipping or aviation, the processes need to be adjusted for production of a specifically tailored hydrocarbon product range. Process development and techno-economic evaluation of innovative process concepts needs to provide a basis for technological development. ADVANCED RESEARCH PROGRAMME Action 1: Development of sustainable catalysts and process technologies for CO2 to methanol and fuels Action 2: Development of electrodes and membranes for direct selective conversion of CO2 to methanol, ethanol, or other fuel molecules using renewable energy Action 3: Development of gasoline and Diesel from CO2 Action 4: Process Development and Techno-Economic Evaluation Action 5: Sustainable production of required process heat

11 INDUSTRIAL RESEARCH AND DEMONSTRATION PROGRAMME Action1: Pilot plants for CO2-based fuels. Action 2: Demonstration of selective conversion of CO2 to methanol, ethanol, or other fuel molecules using renewable energy INNOVATION AND MARKET-UPTAKE PROGRAMME Action 1: CO2 based fuels should be recognized as renewable fuels and benefit from appropriate regulation (e.g. Renewable Energy Directive) Action 2: Adaptation of current systems (e.g. vehicles) to integrate CO2-based fuels