Renewable Fuels: A Powerful Ally in Decarbonisation, Yet Challenges Remain

The global transition to renewable energy is no longer limited to the rapid deployment of solar and wind power. As the world advances toward a low-carbon future, renewable fuels such as bioenergy, hydrogen, and e-fuels are also playing a critical role in decarbonising sectors that are harder to electrify, such as transport, industry, and heating. 

According to the Renewables 2024 report by the International Energy Agency (IEA), the demand for renewable fuels is expected to grow significantly by 2030, but it faces unique challenges that must be addressed to unlock its full potential. This blog explores the rise of these renewable fuels, their impact on various sectors, and the hurdles that must be overcome to achieve their deployment goals by the end of the decade.

Understanding the Role of Renewable Fuels

Renewable fuels come from a range of energy sources. This includes bioenergy (liquid biofuels, biogases, and solid bioenergy), hydrogen produced using renewable electricity, and e-fuels like e-ammonia and e-methanol. These fuels offer a pathway to decarbonise sectors where direct electrification is either technically difficult or economically unviable. 

The latest IEA report projects that renewable fuels will contribute nearly 15 percent of the growth in global renewable energy demand between 2023 and 2030, fulfilling energy needs for sectors such as aviation, shipping, and heavy industries.

Bioenergy: Leading the Charge in Renewable Fuels

Bioenergy remains the most widely used form of renewable fuel, making up almost all the expected growth in renewable fuel demand through 2030. This category includes various forms of biomass-based energy, such as solid bioenergy, biogases like biomethane, and liquid biofuels. The IEA report highlights that bioenergy is particularly important for industries with readily available biomass resources, such as the sugar, ethanol, and pulp and paper industries.

Solid Bioenergy

This is primarily used for heating in industrial processes and residential applications. In regions like sub-Saharan Africa, India, and China, improved biomass cookstoves and heating stoves are replacing traditional methods, enhancing energy access and reducing carbon emissions.

Liquid Biofuels

Liquid biofuels, including bioethanol and biodiesel, have become essential in decarbonising road transport, especially in regions with strong agricultural sectors like Brazil, the United States, and Europe. 

In the aviation sector, biofuels are emerging as a critical solution, with policies in the European Union and the United States encouraging their use. By 2030, biofuels are expected to account for nearly 2 percent of the total aviation fuel supply, up from almost zero in 2023.

Biogas

The demand for biogases, particularly biomethane, is forecast to grow by 30 percent by 2030. The United States and the European Union are leading this expansion, with India and China building the necessary infrastructure for future growth. Biogases are particularly valuable for decarbonising transportation and industrial processes that require low-carbon gas inputs.

Despite these growth prospects, bioenergy faces several challenges. High production costs, the need for sustainable feedstock supply chains, and competition with food production are some of the critical barriers. Additionally, the scalability of bioenergy solutions in regions without established biomass resources is a major limiting factor.

Hydrogen: The Green Promise with a Steep Road Ahead

Hydrogen is popularly known as the fuel of the future, capable of providing clean energy across various sectors, from transportation to heavy industry. The IEA’s Renewables 2024 report further underscores the important role of hydrogen, particularly when produced using renewable electricity (green hydrogen), in the global energy transition. 

However, the pace of hydrogen adoption remains slower than anticipated, and its share in global energy demand is projected to remain modest through 2030.

Current Status and Forecast

The report projects that renewable hydrogen will account for only 4 percent of total hydrogen production by 2030. While this represents a significant increase from current levels, it falls short of the ambitious goals set in many national strategies. 

The global installed capacity for electrolysers, which convert water into hydrogen using electricity, is expected to grow fifty-fold by the end of the decade, but only a portion of this capacity will be powered by new renewable energy plants.

Industrial Applications

Most renewable hydrogen demand by 2030 will come from industries seeking to decarbonise their existing hydrogen uses, such as refineries and fertiliser production. There is also potential for renewable hydrogen to support low-emission steel production, offering a cleaner alternative to traditional methods.

Transport Sector

The transport sector is another area where hydrogen could play a significant role. By 2030, nearly 40 percent of renewable hydrogen demand is expected to come from the transport sector. This is poised to be driven by policies in the United States, Europe, and China. Hydrogen fuel cells are particularly well-suited for long-haul trucks and buses, where battery electric solutions may be less practical due to weight and range considerations.

The key challenge for hydrogen is the high cost of production, which remains significantly higher than conventional fossil fuel-based hydrogen. To make green hydrogen cost-competitive, continued policy support, investment in infrastructure, and technological advancements in electrolysers are essential, the report notes.

E-Fuels: A Complementary Solution for Niche Applications

E-fuels, or electrofuels, are synthetic fuels produced using hydrogen and carbon dioxide, with the entire process powered by renewable electricity. E-fuels like e-methanol and e-ammonia offer a promising solution for sectors that require high energy density fuels, such as aviation and maritime shipping. 

The IEA report notes that e-fuels remain a relatively small part of the renewable fuel landscape through 2030. On the brighter side, the sector has the potential to grow if supported by appropriate policies and technological advancements.

Aviation and Maritime Applications

E-fuels are particularly valuable for decarbonising aviation and maritime sectors, where battery solutions are less feasible. By 2030, biofuels and e-fuels are expected to account for around 10 percent of the new renewable energy demand in these sectors. This is driven by new policies and incentives in the European Union and the United States, which aim to reduce the carbon footprint of international flights and shipping.

Challenges in Scaling Up

The production of e-fuels is energy-intensive and requires a reliable supply of green hydrogen and captured CO2. Currently, high production costs and limited infrastructure make e-fuels less competitive than traditional fuels and even some biofuels. As such, e-fuels are likely to be used in niche applications where other renewable solutions are not viable.

Barriers to Growth and the Path Forward

Renewable fuels hold a great promise. However, several bottlenecks need to be addressed for their seamless adoption and accelerated growth. 

High Production Costs: Notably, renewable fuels like hydrogen and e-fuels remain more expensive than their fossil-based counterparts. This is particularly true for green hydrogen and e-fuels, which require substantial amounts of renewable electricity for production.

Policy Support: The IEA report emphasises that policy frameworks are crucial for driving demand for renewable fuels. While regions like the European Union, the United States, and China have introduced incentives and mandates, broader international collabor ation is needed to create stable markets and reduce production costs.

Infrastructure Development: Building the necessary infrastructure, such as pipelines for hydrogen transport and refuelling stations for hydrogen vehicles, is a major challenge. For biogases, developing a reliable supply chain and feedstock logistics is essential for scalability.

Sustainability Concerns: For bioenergy, ensuring that feedstock is sourced sustainably is critical to avoid negative impacts on food security and biodiversity. Certification schemes and stricter sustainability criteria can help address these concerns.

Conclusion: A Critical Decade for Renewable Fuels

The rise of renewable fuels like bioenergy, hydrogen, and e-fuels represents a crucial component of the global energy transition. While each of these fuels has distinct advantages and applications, they all share common challenges that need to be addressed for them to realise their full potential. As the Renewables 2024 report highlights, achieving significant growth in renewable fuel demand by 2030 will require strong policy support, technological advancements, and coordinated global efforts.

In the coming years, these fuels can play a transformative role in reducing emissions from some of the most challenging sectors. With the right investments and policy frameworks, bioenergy, hydrogen, and e-fuels could help pave the way towards a sustainable, low-carbon future, bringing the world closer to meeting its climate goals.