Q&A - Elyse Energy: Navigating the e-fuels sector in Europe

E-methanol and hydrogen have a crucial role to play in decarbonising hard-to-abate sectors.

E-methanol, produced from CO2 and renewable hydrogen, has the potential to cut emissions in transportation and chemical manufacturing by utilising captured carbon.

inspiratia speaks to Benoit Decourt, partner at Elyse Energy, to explore the opportunities and challenges the company faces. From electrolyser technologies to the regulatory landscape. 

Can you tell us about how Elyse Energy was formed? 

Elyse Energy was founded in 2020 with investments from Vol-V and Falkor. From the outset, our core belief has been that low-carbon molecules are crucial for combating climate change. Energy efficiency, electrification, and the development of renewable and low-carbon power sources are pivotal. We recognised the advancements in Northern Europe, predominantly based on hydro and wind, and saw the potential to replicate these successes in other regions like France, leveraging a mix of nuclear and renewable energy, and in Spain and Portugal, focusing on solar and wind. This vision drove the establishment of Elyse as an independent SME based in France, actively expanding into Spain and Portugal early on. 

How has your approach to the hydrogen sector changed since Elyse Energy started?

When we began, there were relatively few active players in the e-fuel sectors, such as Liquid Wind and a few others. Much of the attention was focused on hydrogen's use in mobility, including cars and trucks, and its industrial applications in refineries and ammonia production. 

Since our inception, there has been significant hype surrounding hydrogen, which is now beginning to confront some realities. Challenges remain in securing offtake agreements to pass final investment decisions. 

There has been growing interest in e-fuels, which reflects an increasing recognition of the need for low-carbon fuels to decarbonise hard-to-abate energy sectors: aviation, shipping and industry. They can be sourced from biomass, electricity in fuel form, or hybrid solutions like e-biofuels. 

Moving forward, our focus is on securing offtake agreements and meeting the necessary conditions to advance projects to the construction phase. This will demonstrate that hydrogen is more than just hype; these projects are essential to addressing the climate challenge. It is crucial that we act promptly, given the ongoing industrial activities across Europe, the US, Canada, China, and other regions like Australia. 

What is your broader strategy in using renewables to create hydrogen and its derivatives? 

Our strategy at Elyse Energy centres exclusively on synthetic derivatives that require low-carbon hydrogen and CO2. While we recognise the importance of ammonia and hydrogen for refineries, our focus remains on sectors where our expertise can have the greatest impact—specifically methanol and Sustainable Aviation Fuel (SAF). These sectors share common requirements, such as electricity and CO2, which allow us to leverage in-house engineering capabilities, particularly in electrical engineering and carbon capture. 

Our strategy diverges slightly between France and Spain/Portugal. In France, we utilise the electricity mix driven by nuclear power, with project connected to the grid and located in large chemical integrated platforms. This helps us to tap into existing chemical clusters with ample grid capacity and access to biogenic or unavoidable CO2. 

Conversely, in Spain and Portugal, our strategy leans heavily on renewable energy sources. 

Looking ahead, regulatory clarity is essential, particularly concerning non-biological low-carbon fuels, which are vital for sectors like aviation and maritime. 

What technology do you favour for hydrogen production — alkaline or Proton Exchange Membrane (PEM) electrolysers? 

We produce hydrogen through water electrolysis, which is a critical component of our business and cost structure. This allows us to maintain control and proficiency in this aspect of our operations. 

Regarding electrolyser technology, we are technology-neutral between Proton Exchange Membrane (PEM) and alkaline systems. Our choice depends on project-specific factors such as flexibility requirements, land availability (given that PEM systems have a smaller footprint), and other operational needs. For example, our eM-Rhone project in France is likely to utilise PEM technology, while other projects may employ alkaline electrolysers. 

On the cost side, on the surface, PEM electrolysers are currently more expensive than alkaline systems. However, when conducting a comprehensive cost assessment that considers factors like grid services, maintenance, and projected learning curves, both technologies can become competitive. Currently, alkaline electrolysers have a lower base in terms of CapEx, making them relatively more affordable in initial investment. 

Who are your primary end users? 

In the maritime sector, we focus on several segments, including shipping, cruise liners, and ferries, which are pivotal for adopting low-carbon methanol and reducing air pollution around ports—a critical factor for public acceptance. Over the past few years, methanol engines and dual-fuel engines have seen rapid development, with more than 200 vessels in the order book in 2023. This emerging market relies on sourcing low-carbon methanol, whether from biomethanol or e-methanol, rather than grey methanol. 

In the industrial sector, particularly in France, we operate near large existing methanol customers. Additionally, the use of methanol for producing SAF holds promise. 

What makes the markets in France, Spain, and Portugal promising? 

These markets hold promise due to several key factors. Firstly, they operate under similar regulatory frameworks, which provide a stable environment for our operations. Additionally, all three countries benefit from abundant sources of low-carbon electricity. France relies on nuclear power, while Spain and Portugal leverage a mix of solar and wind energy. 

Secondly, these regions possess biogenic CO2 resources necessary for our production processes. 

Lastly, there is a strong commitment from end-users in these markets to decarbonise their activities. 

What regulatory factors are impacting your operations in these markets?  

The regulatory landscape at the European level is pivotal for countries within the EU. We have seen significant progress with regulations like RED III, the delegated acts of RED II, FuelEU Maritime and ReFuelEU Aviation since 2023, which are crucial for sectors like aviation. 

However, there is still a need to define the regulatory regime for non-biological hydrogen, particularly concerning nuclear applications. Moving forward, our focus is on transposing these European regulations into national laws for France, Portugal, and Spain to ensure stability and regulatory clarity for our initial projects. This entails mobilising substantial financial resources, both through equity and debt, necessitating robust participation from project finance banks. A stable and transparent regulatory framework is essential at this stage, building upon the foundational European directives to foster industry growth and sustainability. 

How does the supply chain for hydrogen derivatives differ from that of hydrogen itself?

For hydrogen derivatives, there is a significant advantage over hydrogen itself in that existing infrastructure can be utilised. Similarly, methanol is produced differently but enjoys the benefit of utilising current logistics, bunkering facilities, and other infrastructure already in place. Methanol is widely accepted, with 88 of the world's top 100 ports equipped for methanol bunkering. This sets it apart from hydrogen, which typically requires specific facilities for transport via pipes or liquefaction. 

What trends are you keeping an eye on in the hydrogen and e-methanol markets? 

The hydrogen and e-methanol markets are experiencing significant regulatory advancements both in Europe and at varying rates in the US, including initiatives like the Inflation Reduction Act and specific UK regulations. Industry stakeholders are increasingly optimistic about the potential of these markets.  

However, the critical challenge now is to demonstrate the ability of announced projects to secure final investment decision (FID), commence construction, and begin operations by the end of this decade. This expectation is pervasive across sectors, evident from discussions at recent sustainable aviation fuel conferences in France and Amsterdam. 

Clients across these industries are not only expecting products but are obligated to decarbonise and, in many cases, are willing to surpass regulatory requirements. The focus now is on how many of the approximately 50 sustainable aviation fuel projects in Europe will successfully progress to FID and secure the necessary permitting, engineering contracts, and project financing to initiate construction on schedule and within budget. Overcoming these challenges will pave the way for demonstrating operational reliability, cost efficiency, and production scalability, marking the next phase of market evolution.