Image Credit: Scientific Frontline
Scientific Frontline: Extended "At a Glance" Summary: Low-Carbon Fuel Competitiveness"
The Core Concept: Low-carbon fuels, including biomass-derived biofuels and synthetic power-to-X fuels, are sustainable alternatives to fossil fuels that generate significantly fewer greenhouse gas emissions. Their global economic viability is not universal but depends heavily on specific regional resources and local financing conditions.
Key Distinction/Mechanism: Unlike traditional fossil fuels that rely on the extraction of localized finite reserves for global export, the cost-effectiveness of low-carbon fuels is dictated by a combination of geospatial factors (such as local renewable electricity or natural gas availability) and the cost of capital, which varies based on a country's economic stability and the maturity of the technology being utilized.
Major Frameworks/Components:
- Techno-Economic Assessment: A harmonized evaluation of twenty-one low-carbon fuel production technologies across different countries and timeframes (from 2024 to 2050).
- Geospatial Resource Allocation: The reliance on local energy sources to dictate production methods (e.g., green hydrogen in renewable-rich Canada or Australia; blue/turquoise hydrogen in gas-rich regions like the US or the Middle East).
- Financing and Operational Conditions: The integration of capital expenditures, operational expenses, localized labor costs, and country-specific risk premiums into total production costs.
- Infrastructure Impact: The calculation of transportation logistics, highlighting how future infrastructure (such as a European pipeline network) could drastically alter the economic viability of regional fuel imports.
Branch of Science: Energy Systems Analysis, Environmental Science, and Energy Economics.
Future Application: The data and regional rankings generated by this research will guide international investments and policymaking. It provides a blueprint for developing optimized energy supply chains, such as utilizing North Africa or Spain for green hydrogen production and constructing targeted pipeline infrastructure to supply central European industrial hubs.
Why It Matters: Low-carbon fuels are critical for decarbonizing "hard-to-abate" sectors—such as aviation, maritime shipping, and heavy industry—where direct electrification is technically unfeasible due to high energy density or process temperature requirements. Understanding exactly where and how these fuels can be produced most cost-effectively ensures that global investments are strategically deployed to meet international climate targets.
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| Zipeng Liu analysed the production costs of twenty-one low-carbon fuel technologies. The results highlight the decisive role of location and financing conditions. Photo Credit: © Paul Scherrer Institute PSI/Mahir Dzambegovic |
In a new study, researchers at the Paul Scherrer Institute PSI compare the production costs of 21 different low-carbon fuel technologies across the globe. Their analysis shows that location-specific factors including both resource availability and financing conditions will be decisive for the future success of a given technology.
Low-carbon fuels — such as biofuels derived from biomass or synthetic fuels produced using power-to-X technologies based on renewable electricity — generate significantly fewer greenhouse gas emissions than fossil alternatives.
These fuels are considered essential for reaching climate targets, particularly in so-called “hard-to-abate” sectors, including aviation, maritime shipping, and specific industrial processes. In these areas, direct electrification often reaches technical limits due to the high energy density required or the very high process temperatures involved.
Where and under which conditions these fuels can be produced most cost-effectively, has remained unclear. Previous studies typically focused on individual technologies or regions, making global comparisons difficult. In a new study, Zipeng Liu and colleagues at the PSI Laboratory for Energy Systems Analysis have now addressed this question.
The team presents a comprehensive techno-economic assessment of twenty-one low-carbon fuel production technologies. Using a harmonized and globally consistent framework, they compare costs across countries and over time — from 2024 to 2050 — under multiple scenarios.
The analysis confirms that no single technology will dominate globally. Instead, costs vary significantly between regions, depending on local resources and financing conditions. The findings are published in the journal Energy and Environmental Science.
Geospatial factors and financing conditions impact costs
For their analysis, the researchers calculated the average production costs of various fuels over their entire lifetime. “We accounted for capital expenditure for each technology, operation costs, country-specific labor costs, and the cost of capital,” explains Liu. “The cost of capital depends both on country risk — such as political and economic stability — and on the maturity of the technology.”
Liu continues, “Geospatial factors play a crucial role. For example, the availability of local energy sources, as well as the country-specific cost of capital, have a large impact on overall fuel production costs.”
One result of the study is a country ranking that shows which countries would be the best for producing fuels in certain ways, as well as which countries could serve as importers to Europe. For instance, blue hydrogen — produced from natural gas with carbon capture — and turquoise hydrogen, produced via methane pyrolysis, are currently most economically attractive in gas-rich regions such as the United States, the Middle East and Central Asia. In contrast, green hydrogen produced from renewable electricity becomes increasingly competitive by 2050 in renewable-rich countries such as Canada, Spain and Australia.
However, a higher degree of granularity is sometimes needed, Liu explains: “We used national-level resolution, but there could be sub-national level characteristics. For example, in big countries like China or the US, the sub-national resolution can be very different.”
New infrastructure could boost European production
The cost of transporting low-carbon fuels also contributes to their viability. For Europe, Liu first calculated a global transport by ship to Antwerp, followed by inland transport to Basel, Switzerland. Basel was chosen because it is in the center of Europe and it can be used as an example for different transport pathways, such as rail, truck, or pipeline.
The analysis shows that having a European pipeline system would strongly contribute to the economic viability of European low-carbon fuels — for example in Spain, with its strong solar resources, or in the wind-rich North Sea region. Also, regions like North Africa could connect via pipeline, undercutting faraway producers in Australia or Chile.
Location matters
“We found that there is no single technology winner globally,” says Liu. “Which solution makes economic sense depends strongly on regional resources and financing conditions.”
While green hydrogen benefits from falling renewable energy costs and is therefore likely to become cheaper in the long term, turquoise hydrogen may hold short-term advantages in regions with low-cost natural gas. Biofuels, too, are particularly competitive where sustainable biomass is abundant. “This is why policymakers need to consider local factors,” Liu added.
The PSI study aims to assess the future technological and economic feasibility of low-carbon fuels. Right now, many of these technologies have relatively low technology-readiness levels. The analysis helps estimate when and for which production pathways these technologies could become economically feasible, providing guidance on where investment may be most effective. Market dynamics, tariffs, and detailed environmental impacts were not part of this assessment and remain subjects for further research.
Funding: The work was performed within the research project “SHELTERED”, funded by the Swiss Federal Office of Energy (SFOE), and the reFuel.ch consortium, which is sponsored by the Swiss SFOE ’s SWEET program. The Laboratory for Energy Systems Analysis is part of both the PSI Center for Energy and Environmental Sciences and the Center for Nuclear Engineering and Sciences.
Published in journal: Energy and Environmental Science
Authors: Zipeng Liu, Tom Terlouw, Patrick Frey, Christian Bauer, and Russell McKenna
Source/Credit: Paul Scherrer Institute | Carolyn Kerchof
Reference Number: env030926_01
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