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Review of the workshop ‘From fossil to green’
On October 10, the workshop "From Fossil to Green - How a reFuels market opens up new business models" took place in Rüsselsheim. RheinMain University of Applied Sciences organized the event, which for the first time focused on developing concrete recommendations for action. Bruno Nemec, member of the Market & Regulation team, was involved in the organization and provides an insight into the process and results of the workshop here.
At the beginning of the workshop, three specialist presentations introduced the topic. The focus was on the establishment of a reFuels industry in Germany, detailed insights into the value chain and an analysis of the political framework conditions.
How helpful were these three specialist presentations for the start of the workshop?
The workshop groups had the task of outlining possible business models in a reFuels economy - from the perspective of a stakeholder. Market analysis is an essential part of such a process. As a well-founded market analysis would go beyond the timeframe of a workshop, it was essential to provide the groups with this information. The three presentations therefore outlined the framework in which the players in a reFuels economy are currently operating. They thus provided important impetus for the workshop part of the event.
After the presentations, the actual workshop phase began, in which three working groups were formed: What were the key findings here, starting with the fuel working group?
The group started from the assumption that today's customers of fossil fuels will also be customers of reFuels in the future - but to varying degrees over time. The first customers (in innovation research, this refers to the groups of innovators and early adopters) will be confronted with high prices, which restricts the circle to those who have hardly any alternatives to reFuels. This is primarily the case in aviation. Another driver for the market ramp-up of reFuels is seen in the fleet operators. This also includes the state, which as a guaranteed customer can ensure a secure supply.
Among the key partners, the participants see suppliers of cheap H2 in countries such as Namibia on the upstream supply side. From the participants' point of view, it would be beneficial for the market ramp-up if the requirements for the import of H2 were made easier in terms of its conditions, as countries such as Chile, for example, cannot prove climate neutrality across the entire H2 value chain. From a market ramp-up perspective, this is not absolutely necessary and can be made up for if the market is functioning. There is agreement among the participants that it would be desirable to keep the value-added part of the supply chain, namely the refinery process, in Germany.
With regard to market prices, the participants called for flexible models such as the swap model developed by CENA in order to reduce the spread between fossil and non-fossil fuel prices. Furthermore, country-specific regulations such as the aviation tax should be replaced by European regulations such as a 15 cent levy for investments in PtL fuels. Duplicate regulations should also be eliminated.
What findings was the hydrogen working group able to present?
Important contributions were made in all seven areas of the canvas. The complexity and interconnectedness of the topic became clear once again during the discussions and exchanges. Important tasks for the necessary and successful expansion of the use of hydrogen still include creating acceptance for the necessary CO2 reduction and the necessary measures in society, the systemic consideration of sector coupling and the development of know-how as well as the medium-term training of a sufficient number of specialists.
What was the outcome of the carbon working group?
The following scenario was developed: The model actor described in the group would focus on carbon distribution and logistics. Emitters such as cement plants would take care of the capture. The distributors would take it, process it to the desired degree of purity and sell it on to customers, such as reFuels producers. In addition to physical trading, CO2 balancing would also be necessary.
On the one hand, those involved see the current ETS regime as a regulatory obstacle to such a model. Here, the purchase of certificates is only waived if the captured CO2 is stored. Secondly, there is a lack of (technical) standards for capture and transportation. The development of such a business model also requires high initial investments, both for the CO2 producer and the distributor. As industries with unavoidable emissions (in particular the cement and lime industries) will have to install the necessary capture systems anyway, it is foreseeable that another source can be tapped in addition to biomass utilization.
What is your first preliminary conclusion from this workshop?
The workshop has shown that the basic technical, organizational and regulatory requirements for the establishment of a reFuels industry in Germany are lacking. Potential partner countries outside the EU have set out to export hydrogen in large quantities, but important infrastructural requirements are still lacking here too. Finally, there is also a lack of incentives to tap into promising CO2 sources.
Nevertheless, all participants see starting points for the development of a reFuels industry. Potential players repeatedly identified the lack of business models as a key challenge. However, the workshop showed that there are ideas for business models that have a chance, provided that commitment is created at all stages of the value chain. Reliable customers are needed that reFuels producers can rely on in the long term. Only once production has been established can both hydrogen and carbon distributors adapt the necessary infrastructure. One advantage with regard to primary resources is that use cases outside of reFuels production are already emerging.