The Trends with Marine and Aviation Fuel
This fifth article in our “The Energy Transition – Post-COVID 19” series explores some of the developments in renewable fuels for the land transport sector following the COVID-19 crisis.
The state of renewable road transport fuel
There are currently four general options in the market for renewable road transport fuel: (1) gas or liquid biofuels (e.g. ethanol and biodiesel); (2) power-to-X (PtX) synthetic hydrocarbons; (3) PtX hydrogen; and (4) directly applied renewable electricity.
The leading fully renewable fuel source for land transport is that of biofuels, of which the current main product in the market is still first-generation ethanol and biodiesel that is commonly blended with fossil fuel petrol and diesel. Advanced diesel substitute fuels such as HVO (hydrotreated vegetable oils) and HEFA (hydroprocessed esters and fatty acids) are however, seeing increased production. As most biofuels are not yet cost competitive with fossil fuel petrol and diesel, current demand is largely supported by government policies such as blending mandates that require a fixed percentage of biofuels to be blended with fossil fuels.
There are further alternatives such as novel advanced biofuels currently being developed, with potentially higher energy content and more efficient production processes. PtX processes for electrofuels like synthetic hydrocarbons and hydrogen are also being improved amidst increasing investments into the sector. These however, still have some way to go before commercial viability, due to production processes requiring further development to scale and reduce costs, and the limited availability of feedstock for biofuels.
Recent technological advancements with fully electric and hybrid electric vehicles have seen manufacturers’ market share grow substantially, although fully electric vehicles only accounted for 2.6% of global car sales and 1% of global car stock in 2019 according to the International Energy Agency (IEA). But large-scale shifts to electric vehicles would still require major investments for charging and re-fuelling infrastructure, although supportive policy incentives have been contributing to steady growth. Widespread adoption of electric vehicles however, does not offer a complete solution as the source of electricity may not always be renewable.
Impacts of COVID-19
The COVID-19 pandemic has plainly had an impact on the land transport sector, particularly affecting passenger transport more so than commercial transport like that of for goods. Lower overall demand for transport fuel due to the pandemic has reduced biofuel consumption in most countries. The IEA anticipates an almost 13% drop in biofuel production levels for 2020 which would be the first drop in annual production in 20 years.
Further, the fall in global demand for petrol and diesel also dragged down biofuel consumption in countries that implement blending mandates – one of the main factors supporting biofuel demand. Although it has since seen somewhat of a recovery, the fall in oil prices in 2020 also reduced the competitiveness of biofuel as against fossil fuels, challenging economics of production for an already testing biofuel sector.
Going forward, a post-COVID 19 recovery for transport fuel demand is expected. Assuming continuing policy support in key markets, and policy progression in emerging markets like ASEAN and Latin America in order to, among other things, elevate demand for their agricultural commodities, the IEA expects biofuel production to return to 2019 levels in 2021 and beyond that, to increase 4% year-on-year into 2022.
The demand for greener land transport
Based on a report commissioned by the FIA Foundation, road transport is estimated to eventually comprise over 70% of greenhouse gas emissions from the entire transportation sector by 2050, if no further measures are taken to reduce reliance on fossil fuels.
Compared to developments in the power generation sector – discussed in previous articles in our series – as well as other end-use sectors, transport still relies heavily on fossil fuels and lags far behind with the lowest share of renewables. According to the IEA, in 2018, transport accounted for 29% of all energy consumed globally, with only 3.7% of that met by biofuel and renewable electricity.
Transport fuel consumption as a whole is poised for a rebound in 2021 to pre-pandemic levels, assuming that the COVID-19 crisis is brought under control with the rollout of vaccinations. With more governments and businesses setting carbon neutrality goals, the numbers show that, in order to meet those goals, renewable energy will need to play a much bigger role in the road transport sector.
The recent commitment of large auto players such as Toyota to drive R&D into solid-state batteries, and the increasing number of pilot EV charging schemes in countries like France and China, demonstrates a realisation as well as determination that change will come to the road transport sector sooner rather than later.
 PtX refers to the conversion of renewable electricity to other forms of energy such as gaseous and liquid fuels.