Global Energy Perspective 2023: Sustainable fuels outlook

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The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar “About the Global Energy Perspective 2023”). These wide-ranging scenarios sketch a range of outcomes based on varying underlying assumptions—for example, about the pace of technological progress and the level of policy enforcement. They are shaped by more than 400 drivers across sectors, technologies, policies, costs, and fuels, and serve as a fact base to inform decision makers on the challenges to be overcome to enable the energy transition. In this article, we dive into the role that sustainable fuels are projected to play in decarbonizing energy systems and what is needed to harness this solution.

Achieving decarbonization targets will require a combination of decarbonization measures. One such measure—sustainable fuels—could help reach those decarbonization targets. Sustainable fuels include conventional biofuels like ethanol or fatty acid methyl ester (FAME) that can be blended until a blend-wall is reached, or more advanced drop-in fuels like hydrotreated vegetable oil (HVO) or synthetic fuels (synfuels) like e-kerosene (see sidebar “Know your sustainable fuels” at the end of the article). These fuels can be used particularly for the hard-to-abate transportation sectors, and could support faster decarbonization of existing fleets in the near term. Sustainable fuels are projected to see significant growth across sectors, and as demand increases, so may the need for investment in capacity projects. Expanding sustainable fuels may require both support for capital recovery and solutions to overcome the potential feedstock bottleneck.

Sustainable fuels are projected to play a role in decarbonization

Sustainable fuels are expected to fill gaps in decarbonization and complement electrification.

Demand for sustainable fuels is projected to increase across scenarios

Sustainable fuels demand could quadruple by 2050 in the most ambitious scenario.

Across scenarios, the sustainable fuels mix is projected to change with the uptake of drop-in fuels

Across scenarios, the sustainable fuel mix changes with uptake of drop-in fuels.

Meeting the projected demand for sustainable fuels would see more than $50 billion in investments per annum

The growing demand could require investments of more than $50 billion per year post 2030.

Over $150 billion of sustainable fuel production capacity investments have been announced

$150 billion of capacity investments have already been planned.

Achieving decarbonization targets could create significant value in sustainable fuels

Value at stake in the sustainable fuels space could reach $35 billion to $75 billion EBITDA in 2030.

Overcoming the feedstock bottleneck could be crucial to the expansion of sustainable fuels

Feedstock for sustainable fuels is likely to continue to be a bottleneck.

Sustainable fuels have the potential to play a significant role in decarbonizing the energy sector. They offer a versatile solution that can be used across a wide range of applications, from transportation to industry. However, the landscape of sustainable fuels is complex, with multiple fuel types, technology pathways, and feedstocks to consider. This complexity can make it challenging for customers, governments, and suppliers to fully understand the benefits and challenges of sustainable fuels.

Unlocking future demand, investment, and supply of sustainable fuels will require collaboration between stakeholders. In particular, given the long-term payback periods typical for sustainable fuels projects, clarity in regulation could help to enable investment decisions. Through collaborative efforts, a low-carbon future could be established that benefits both the environment and the economy as the demand for sustainable transportation continues to increase.

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