Industry Insights: Martin Nielsen from Arcadia eFuels
In our new Industry Insights blogpost series, we are sitting down with each SASHA member to find out what drives them in their work and what challenges they face.
In this first interview, we speak to Martin Nielsen, Plant Manager at Arcadia eFuels, a company using renewable electricity to produce e-fuels, crucial for decarbonising hard-to-electrify sectors like aviation and shipping. Martin oversees the company’s landmark first e-fuel plant will be constructed in Vordingborg, Denmark.
Martin Nielsen, Arcadia eFuels Plant Manager
Of the companies paving the way for green hydrogen-based fuel production, SASHA member Arcadia eFuels is amongst the biggest. Already with plans for one plant to be constructed in Vordingborg Denmark, and others in the works for Teesside, UK, as well as in the USA, Arcadia is also one of the most ambitious.
“Electric or hydrogen planes won’t power long-haul aviation,” explains Martin Nielson, manager at the Vordingborg plant. E-fuels, however, “are 100% green, made using water, biogenic CO2 and renewable power.” Arcadia’s product, e-kerosene, would work as a drop-in replacement for fossil kerosene, meaning it could be used in planes leaving, say, Heathrow, even today.
While primarily aimed at driving the green transition, Martin notes that Arcadia’s work also contributes to European energy autonomy. “We currently rely on energy imports, often from countries we would rather not associate with. Russia was of course the prime example,” he says. “Producing eSAF in the EU is therefore also a way to gain greater control of our energy supply and production, with key geopolitical ramifications.”
eSAF or bio-SAF?
E-fuels fall under the umbrella of sustainable aviation fuels (SAF) but are just one variety. “The main other SAF is bio-SAF, made, for example, from used cooking oils,” Martin explains. “This has a greenhouse gas reduction of only about 60-70%, whereas eSAF (e-fuel) is 100%.” E-fuels have an edge over bio-SAF not just in their ability to reduce emissions but also in the sustainability of their long-term availability: “bio-SAFs have a very limited feedstock.”
Despite its environmental shortcomings, bio-SAF is cost competitive. “It will always be cheaper than eSAF because you can modify existing refineries to produce it,” says Martin. Indeed bio-SAF can easily be produced with palm oil, or readily available crops in the USA. “But using food for humans to make fuel for planes is not sustainable,” Martin continues. “At best it’s a temporary solution. It may be better than nothing, but it will not solve the problem. Arcadia produces 100% sustainable fuels.” According to Martin, bio-SAF will have some role in reducing emissions in the short term, though “only until we have enough renewable power in Europe to replace a greater portion of the fuel mix with eSAF.”
Challenges in e-fuel production
Producing e-fuels doesn’t come without its hurdles. First and foremost is the matter of getting enough renewable energy and carbon. The second issue concerns sales. “Our buyers lack certainty. It's not so much the airlines but the fuel distributors, that should make offtake agreements with us, because they are subject to both the UK and EU mandates.” As with all nascent markets, high risk can deter prospective investors. “If we sign fewer offtake agreements, we don’t get the financial closure, and therefore we lack the funds to build the plant.” The ramifications go beyond companies’ business interests but jeopardise the fulfilment of the EU and UK SAF mandates: when investment lags, production stalls. “Without revenue certainty offtake assistance from governments,” Martin says, “that is a serious risk.”
Martin speaking at Folkemøde Møn public assembly.
What government policy can help?
This is where governments can step in. “We need renewable energy, and in countries like Denmark, Sweden, and Norway, it takes a long time to get the approvals to build a new wind farm because of objections from local residents.” For Arcadia, speeding up this process to accelerate the renewables scale-up is just one way in which governments can lend a hand.
“The second thing they can do is to help us secure the carbon instead of storing it.” Martin says, “We’re currently competing with the State over carbon, but there should be a support scheme to help us access this key feedstock.”
Thirdly, governments can work to offset the risk investors and producers face in this still novel market. “We need revenue support mechanisms. Of course, we have the Emissions Trading System (ETS) SAF allowances scheme in Europe but this lasts only until 2030,” Martin says. “To make a compelling business case to investors we need to show that we have off takers for the next 10-12 years.” Support schemes must go beyond 2030 to give buyers some guarantee that they will be able to buy e-fuels in the long run.
This could even be done through temporary measures, Martin suggests. “Plants could be given tax exemptions for the first 12 years. That's not money out of the pocket for the State, but it will massively aid our ability to make a business case to lenders.”
Closing the price gap
When it comes to cost, e-fuels are dramatically out-competed by cheaper fossil fuels. “It will be difficult to totally close the gap between e-fuels and fossil fuel costs, simply because we need so much renewable energy. It makes up maybe 60-70% of the operation expenditure.” It’s here again that scaling up renewable sources of energy becomes so important, since a greater supply of green energy will drive down the price.
Once again, support mechanisms could be a key solution. “Revenue certainty mechanisms could aid renewables producers, giving them offtake certainty at a fixed price, but one that is lower than today,” says Martin. “Doing this would automatically lower the price of eSAF. Across sectors, revenue support mechanisms really are the key to unlocking the whole green transition.”
Find out more about Arcadia eFuels here. The views expressed here do not necessarily reflect those of the wider SASHA Coalition.
