Biofuels should bridge Europe’s decarbonisation gap while green hydrogen scales, according to a report commissioned by Spanish energy company Moeve. It argued that biomass-based fuels should be prioritised for immediate emissions cuts while hydrogen-derived fuels mature over the coming decades.
The report, produced with consultancy PWC, said biofuels were currently “ahead of the pack” and were expected to remain there in the short to medium term.
It said second-generation biofuels could achieve cost parity with fossil fuels in the 2030s, with hydrogen-derived fuels expected to follow in the 2040s as renewable electricity costs fall and carbon prices rise.
“EU regulations incentivising green molecules need to focus on actions with high emissions reduction potential, prioritising biomass-based fuels for immediate decarbonisation, supplemented by hydrogen solutions in the medium to long-term,” the report states.
That’s despite Moeve taking final investment decision on a 300MW green hydrogen project in southern Spain earlier this year.
It noted the slow pace of hydrogen deployment. Citing studies by Hydrogen Europe and the Hydrogen Council, the Moeve report said that despite an announced EU project pipeline of 12.7 million tonnes per year (mtpa) of green hydrogen production by 2030, only 5% of the announced pipeline is currently in development.
In the longer term, it expects green hydrogen to play a larger role in decarbonising industry and transport, including refining, ammonia and methanol production, fertilisers, shipping, aviation, and heavy-duty trucking.
By 2050, the report estimates green hydrogen, derived fuels and feedstocks could replace up to 50% of the EU’s fossil fuel demand, accounting for up to 33% of the bloc’s final energy demand.
The report argued that Spain and Portugal could emerge as major hydrogen production hubs thanks to abundant renewable resources and comparatively low electricity costs.
“In Iberia (Spain and Portugal), renewable hydrogen production of 0.39 mtpa is forecast for 2030,” it states. It acknowledged that the forecast falls short of Spain’s original 12-GW electrolysis ambition, but said the long-term outlook for hydrogen deployment remained unchanged.
However, it also sought to downplay concerns over the so-called “green premium” associated with low-carbon fuels.
According to the analysis, the so-called green premium diminishes as costs are passed through the value chain. It estimated that shipping a €100 ($116) pair of shoes from Asia to Europe using green fuels would add around €0.50 ($0.58) to the final retail price, while the use of green fertilisers could increase wheat production costs by between 1% and 5%.
The report called for stronger policy support to accelerate deployment, including measures to create demand for green molecules, financial mechanisms to narrow the cost gap with fossil fuels, and investment in production, transport and storage infrastructure.
