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Fuel sector faces challenges as alternative fuels take hold

TSLFuel sector faces challenges as alternative fuels take hold

“The development of alternative fuels presents challenges for the entire fuel sector,” says Halina Pupacz, President of the Polish Chamber of Liquid Fuels. As she points out, the coming years will see, among other things, intensive development of the biofuels sector. As the European Court of Auditors’ December report showed, despite massive investments in this segment in the EU to date, it is developing more slowly than expected, due to a lack of long-term strategy and high costs. Hydrogen, which EU policy strongly emphasizes as an energy carrier, presents the most promising future.

“The entire global economy is currently looking for alternative fuels, pondering the direction of transportation development and which green fuels it should use,”Pupacz informs Newseria Biznes. “The EU has recognized that hydrogen will be the main fuel to replace traditional ones, so the promotion of hydrogen strategies is currently at a very high level and these strategies are strongly developed in the Union. At this moment, it seems – although some experts do not agree – that it will be hydrogen that will be most developed as non-biological fuel.”

In mid-2020, the European Commission published the Union’s Hydrogen Strategy, setting this energy carrier as a priority for the European Green Deal and the EU’s energy transformation. The document anticipates incentives for both increasing production and demand for hydrogen in the EU economy. It also assumes that cumulative investments in green hydrogen in Europe could be from 180 to 470 billion euros by 2050, with the support for implementing the strategy and planned investments coming from the dedicated Hydrogen Alliance – the European Clean Hydrogen Alliance.

Transportation is to be one of the first areas of the economy to undergo a hydrogen revolution. The first hydrogen buses are already running on the streets of Polish cities, some of which have been co-financed in NFOŚiGW calls. The fund also supported the construction of a hydrogen fuel cell bus factory, PAK-PCE, in Świdnik, which is set to produce about a hundred such vehicles per year. The Orlen Group invests in hydrogen refueling stations – by 2030, there should be 57 in Poland, even more than the target set in the Polish “Hydrogen Strategy until 2030 with a perspective until 2040” (PSW), which envisions a broader use of hydrogen as an alternative fuel in transportation. The document stipulates that by 2025 there should be 100-250 hydrogen buses on Polish roads and by the end of the decade, 800-1000.

“We also have electromobility and the necessity has been identified to adapt the network to chargers so that electric vehicles can be used. Globally, around 15% of cars are already being produced with electric engines, so the network is also being prepared. Poland is also preparing for this,” says the president of the Polish Chamber of Liquid Fuels. “Many solutions and technologies will likely soon be chosen as the main ones and implemented into driving systems.”

This year in Poland and other EU countries, the EU AFIR regulation regarding electric vehicle charging infrastructure and hydrogen refueling will take effect. It introduces ambitious, detailed guidelines on the power and distribution of chargers, including the obligation to expand the charging infrastructure alongside TEN-T road networks. By 2025, public charging zones with a power of at least 400 kW, intended for passenger and freight vehicles, should be dispersed every 60 km in each direction along the main EU transportation corridors. By 2027, the power of such zones will have to increase to at least 600 kW. Similar requirements apply to the comprehensive TEN-T network (with deadlines set for 2027, 2030, and 2035).

A second key obligation foreseen in the AFIR regulation pertains to the increase of the total capacity of public charging stations for each registered fully electric car (to at least 1.3 kW) and each registered plug-in hybrid (to at least 0.8 kW). In Poland, considering the forecasted rapid development of the electromobility market, this means that in less than three years, the power of the charging infrastructure will have to increase almost five times compared to 2022.

The basic objective of the AFIR regulation is to introduce rules that will ensure the rapid development of charging infrastructure for electric and hydrogen vehicles within the EU. The idea is to ensure that the state of this infrastructure is not an obstacle slowing down the decarbonisation of the transport sector.

However, the “Green Transport. Current State and Prospects” report, prepared under the initiative of the Polish Oil Industry and Trade Organization, shows that the CO2 emission reduction achieved thanks to the introduction of electric and fuel cell vehicles will not be enough to meet the EU’s climate goals. The solution is expected to be biofuels, which by 2050 could completely satisfy the remaining demand for fuels in transportation.

“Biofuels will certainly function in the transport sector, and their development is expected to be quite intense in the coming years,” evaluates the expert.

Biofuels, being an alternative to fossil fuels that can contribute to reducing the EU’s transport sector’s emissions, are sparking great interest. This is especially true since the outbreak of the war in Ukraine demonstrated the importance of energy independence and the interconnected food and fuel production issues in the EU.

In recent years, enormous capital has been invested in the biofuels production industry. According to the December report by the European Court of Auditors, about 430 million euros were allocated to biofuel research and promotion projects in the EU from 2014 to 2020. Despite this, the development of advanced biofuels in the EU is slower than expected, due to a lack of long-term strategy (recent changes in EU biofuels policy, laws, and priorities have affected investors’ decision and made the sector less attractive), high costs, and problems with biomass availability. The European Commission expected the use of biofuels to strengthen the EU’s energy independence, yet in reality, its dependence on third countries has grown as demand for biomass (such as used cooking oil imported from China, the United Kingdom, Malaysia, and Indonesia) increases year by year. The biofuels industry competes for available resources with other industries, primarily the food industry but also the cosmetics and pharmaceuticals industries.

Another problem pointed out by the European Court of Auditors is the lack of a clear plan in the aviation segment, which is difficult to electrify, so using biofuels could be a good way to reduce its emissions. Under the adopted 2023 rules for the ReFuelEU Aviation initiative, it is specified that by 2030 the level of used Sustainable Aviation Fuel (SAF) – including biofuels – is to be 6%, or roughly 2.76 million tons of oil equivalent. But so far, the EU’s production capacity reaches only a tenth of this amount. Unlike in the United States, there is still no plan on the European level on how to expedite the production of SAF. According to the ETO, the future of biofuels is also uncertain in road transport.

“Synthetic fuels may also have a future, as many research projects are being conducted, and they seem to also replace traditional fuels. This is probably a matter of several more years for them to become available to the consumer,” says Halina Pupacz. “The development of alternative fuels presents challenges for the entire fuel sector, which many fuel market entrepreneurs treat as a niche. These are the challenges we all face, and we must prepare for them. They are related to financial expenses, infrastructure adjustment, and adaptation of station facilities. I believe they will still be fuel stations. Although they may have different names in the future, they will still be places where we can fuel our vehicles.”

Transportation is a sector in which greenhouse gas emissions have significantly increased over the past several decades. In 2021, 93% of the energy used in road and rail transport in the EU came from fossil fuels. According to the European Commission, achieving climate neutrality requires a 90% reduction in transport emissions compared to 1990 levels by 2050.

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