We believe in energy transition at hyperscale. We believe we have the solution to achieve this.
Here we explain why, what and how we got here…
The world emits 40bn tonnes of CO2. Effectively - stripping out agriculture, forestry, and land use - this is due to emissions from fossil fuels. For us to achieve Paris-aligned targets and limit to well below 2 degrees celsius we need to cut emissions from 40 billion tonnes to 0 in the next 30 years. To do this requires $100 trillion in investment. The energy transition will totally eclipse anything that has come before it, including the digital age, in terms of investment opportunity.
To achieve Paris targets, broadly speaking, we need to do two things:
Develop a phenomenal amount of renewable energy to displace these fossil fuels.
Get a lot smarter on business models, to turn the energy transition into a commercially viable and attractive opportunity.
Stepping back, we can break this 40 billion tonnes of CO2 into two discrete categories by energy end-use:
‘Entry level decarbonisation’: this category includes our homes, offices and cars…we know how to decarbonise these sectors... and the business models to do so are apparent and commercially viable. The shorthand solution here is to ‘electrify everything’.
However, to achieve net zero, we still have to tackle the 55% of all energy demand that comes from hard-to-abate sectors - cement being one, steel, chemicals etc. This we term the ‘next frontier of decarbonisation’.
For this category, we simply cannot get the renewables to the organisations that need it, at the scale or timing that is required… and crucially the deep decarbonisation technologies that they need are too often currently being developed in a completely uncommercial manner.
This is where ETFuels plays.
Let’s bring it back to what is required to achieve net zero, and break down the problems to achieving this that currently exist.
Our team have spent our entire careers evaluating the systemic challenges of decarbonisation from the perspective of investors, corporates, energy companies and governments and have drawn two clear conclusions as to the inherent problems to solve if we are to achieve net zero… let’s dive into each.
1. Renewables at scale
As mentioned, the mainstream view on how to decarbonise has to date been one of ‘electrify everything’, with a grid powered exclusively by renewables. However, what that means in practice longer-term is attempting to put entire economies through electricity grids which were all built decades ago and designed to carry a fraction of energy-end use.
It simply won’t work.
To demonstrate the challenge that is already clear, we take a few case studies from countries supposedly leading the energy transition. On average, just over 20% of energy is going through the grid and already warning signs are flashing everywhere.
In 2020, Germany pumped Eur 1.4bn worth of electricity into the ground as the grid couldn’t balance energy demand and supply.
Spain has over 400GW of solar projects just waiting for a grid connection. To put that number into perspective, that’s the equivalent of 400 nuclear power plants queuing for the grid.
For the multitude of sectors hard to electrify which represent 55% of total energy demand … the grid is a massive constraint. We need an alternative approach.
2. Commercially viable business models
Now let’s turn towards the problem with commercially viable business models. Historically, companies and individuals have had a choice… either ‘better for me’ - profit, or another personal gain - or better for the planet. Decarbonisation to date has been a personal sacrifice.
This has meant that historically there was very limited overlap between decarbonisation and business as usual - between regulatorily driven and commercially viable. But is there an opportunity to approach this differently?
Let’s touch upon green premium thinking, and how this can hyperscale decarbonisation.
The green premium is effectively the cost to switch from fossil to decarbonisation technologies. Let’s illustrate how this works with a simplified example.
Cars require a multitude of materials in their production process. To become a fully green car, each of these materials needs to be manufactured from renewable energy. A key component in cars is of course steel, which is notoriously hard and expensive to decarbonise. Steel needs to deploy either hydrogen or CCS.
If you were to try to persuade a steel plant to fully decarbonise by switching to either hydrogen or CCS, that conversion is incredibly expensive… often equating to a 300% increase in their production price. They would only do it if their direct customer were willing to pay. This is the commodity pricing mindset, razor focused on cost…
As you move down the chain getting nearer to the ultimate end-consumers, margins are higher and the mindset is totally different. Retailers think with a value-based mindset, not cost. The cost of decarbonisation - the green premium - when spread across the entire chain drops to a mere 1%.
To use all that green steel in creating the first green car equates to less than 1% in terms of cost increase. Tesla is a great example of a company that has understood this dynamic - pricing their greener cars significantly over cost and even at a significant premium compared with cars made with old fashioned regular steel.
Imagine if we could align incentives across these value chains and commercially structure viable propositions to decarbonise, helping companies to shift their mindset from cost towards value-based… and sharing the risk and reward fairly.
In sum… the two major problems to achieving net zero for the next frontier are mass scale renewables, and commercially viable business models.
This is where ETFuels enters.
Our vision and mission are derived from, and enveloped by, these two core problem statements.
We will deliver the energy transition at hyperscale through unlocking the potential of renewables, while in parallel aligning interests around decarbonisation.
To deliver this we will pioneer by forging a path for producing green fuels without needing to use the electricity grid - or, what we refer to as using “off-grid” power… this will enable us to become the largest and lowest cost producer of green fuels through a series of microgrids. This means we don’t need a grid connection and can develop our projects in the middle of nowhere on land for which today there may well be no other commercial use. We can unlock true scale without the grid acting as the bottleneck.
We will also make this a commercially viable proposition. We start with the end-customer and align interests on decarbonisation regardless of regulatory outcomes.
Where do we start?
We have designed a platform to decarbonise a myriad of hard-to-abate sectors from steel through to aviation, but we needed to prioritise to a starting point.
To do so, we looked at fundamental drivers, willingness to pay a price premium, and ability to scale as a starting point.
For us this means shipping and green e-methanol which is where ETFuels will begin to deliver decarbonisation at hyperscale.
What has changed?
Ships are the lifeblood of the modern economy with 90% of the world’s goods crossing the oceans and 5% of global emissions. Shipping is firmly within the ‘next frontier of decarbonisation’ but a critical lynchpin in almost all supply chains.
In the last 12 months everything has changed…
Customers: multiple consumer-facing customers recognise they need to do more. This means a proactive approach to decarbonising not only their operations, but also their supply chain. Many customers announced a desire for 0 carbon shipping by 2040 as a stake in the ground for shipping companies to deliver 0 carbon transportation solutions to help these organisations comply with their own targets… and more excitingly, for the world to start to produce, transport and consume the world’s first green products. Ever.
Shipping will be regulated by the EU ETS (European carbon trading system) which means pressure is on to either decarbonise or pay the carbon price. Note carbon prices have gone from 15 to 100 EUR in the last 18 months. It is expected that prices will surpass 150 before 2030.
Bold leadership: Maersk recognised the ‘chicken and egg’ problem of zero green fuels supply and almost limitless demand - namely, who would place an order for a green fuels ship without green fuel supply and vice versa. They decided to solve this by placing an order for 13 green e-methanol dual fuel ships in August 2021 which has kick-started orders. As of July 2022, 80 such ships have been ordered
What options do shipping companies have to decarbonise?
Very simply ships have two options to decarbonise. They start to consume green e-methanol, or green ammonia. Today ammonia is fraught with regulatory hurdles because it is very challenging (and explosive) to store and transport. E-methanol is therefore the only real fully green shipping fuel opportunity for the next 10 years but we do believe in a multi-fuel future. It’s in our name.
Let’s briefly explain how we enable this to accelerate.
We are creating a world-beating set of consortia to produce and distribute green e-methanol at industrial scale… all of it offgrid.
Green e-methanol production process
We start with our customers which for us are both shipping - where we facilitate the displacement of fuel oil - but also the business-to-consumer companies who have set themselves net zero targets and whose own end-customers care about decarbonisation - retailers and brands like Amazon, Ikea, Apple, Unilever, Nike but also for example car manufacturers like Tesla. These customers will drive this willingness to pay as they accelerate towards their own supply chain decarbonisation goals. Some of them have already demonstrated their leadership by announcing their need for 0 carbon shipping by 2040. There is after all, no point touting the green benefits of an electric vehicle, if the parts to make that car were shipped across the world using heavily polluting fuel oil.
Follow that green premium.
Tying back to our vision, we will develop enormous offgrid solar farms powering our methanol plants… and align interests around decarbonisation.
In terms of volumes, we will develop 10M tonnes of annual green fuel production within 10 years. The resulting CO2 reduction will equate to 5% of the UK’s CO2 emissions every year.
However, to put that number into context when it comes to shipping, each ship we intend to fuel consumes about 40,000 tonnes of fuel per year. There are over 5,000 of these ships. Our 2030 target would serve only 250, so a mere 5% of the market. Plenty of room for our ambition to go into hyperscale.
But it isn’t just us.
We operate as a lean partnership-based organisation, bringing together the key players across the value chain.
Within our consortium, we have key OEMs (technology manufacturers), CO2 providers, renewable energy developers, municipal governments, and fuel offtakers.
We ensure our incentives are aligned and value proposition is clear to each.
For OEMs we deliver scale;
For renewable energy players we monetize assets out of the money waiting for grid connection;
For Governments and local communities we create green industrial hubs, billions in investment and next generation jobs;
For our customers we bring the green fuel supply they need to decarbonise, and crucially to offer a differentiated decarbonised product which their own customers are demanding.
We are also backed by some leading experts to bring their experience to help further differentiate ETFuels. Leading professors, thought leaders and large scale renewable energy developers.
Where we operate
Our starting ambition was to produce the lowest cost product and find the best off-grid projects in Europe. To achieve this we evaluated the whole of Europe to identify the most attractive places to begin, based on renewable energy costs, CO2 availability and bunkering feasibility.
Spain, Finland, Portugal and Greece came out on top so that’s where we went.
Where we go from here
The world will undergo a transformational change in everything we know today - energy, mobility, communication - at a pace never seen before.
We want to be ready for the opportunities through carefully fomenting building blocks to deliver energy transition at hyperscale. This will include but by no means be limited to:
Execution engine: codifying our approach, we are delivering a vast portfolio of green fuel production plants across multiple countries, in Europe and beyond
Go to market innovation: through our scale and customer-centric approach, we will optimise across our portfolio of green fuels, with trading optionality in multiple product and geographical end-markets. Resulting emission reductions will be enabled and tracked through our digital customer platform.
Multi-supply chain decarbonisation: we will replicate and scale across multiple end-products
Our ambitions are immense, and our model is scalable. We can build our energy production facilities off-grid, anywhere, and we can do so in a commercially viable manner, independent of subsidies or regulation.
Our model will decarbonise entire economies and supply chains - this is how you deliver net zero, in a way that benefits everyone.