Hydrogen Production Dominates E-fuel Costs, OGCI Report Finds

Ever wondered why e-fuels still cost three to ten times more than diesel? It all boils down to the hefty price tag on hydrogen production. The latest study from the OGCI Climate Research Consortium lays out the cold, hard numbers: high-octane green hydrogen, produced through power-hungry electrolysis, drives most of the cost, while the CO₂ input plays a distant second fiddle.

Historical Context

After the Paris Agreement shook things up, synthetic fuels started grabbing attention. Fast-forward to the early 2020s and pilot plants were already churning out e-kerosene and e-diesel using Fischer-Tropsch and similar tricks. Sure, wind and solar got cheaper, but the sticker shock from big electrolyzer price tags and tricky grid hookups kept green hydrogen out of reach for most budgets. The OGCI’s December 2025 executive summary builds on studies dating back to 2020, confirming that these electrolyzer costs are the real budget-busters in the world of e-fuels.

Key Findings

• Hydrogen production gobbles up roughly 50–70% of total e-fuel costs.
• Even though CO₂ isn’t dirt cheap, it only makes a small dent compared to hydrogen.
• E-fuel retail prices now sit between €1.4 and €6.8 per liter—about 3–10× pricier than fossil fuels.
• Building a full-scale facility? Plan on at least €500 million just to get started.
• Electricity price swings can nudge total e-fuel costs by around 25%.

(Source: OGCI CRC executive summary)

Tech Under the Microscope

At the heart of this is electrolysis, where water splits into hydrogen and oxygen. Today’s electrolyzers—whether alkaline or PEM—are getting more efficient, but they still guzzle electricity. Most of the time, that power comes from solar or wind farms to keep it truly green hydrogen. The catch? Even as renewables slide downward in price, you’re still stuck with steep electrolyzer capital costs and balance-of-plant gear.

Environmental & Collateral Effects

E-fuels promise almost zero lifecycle emissions—some pathways clock in at just 11.7 gCO₂ eq/MJ, well under the EU’s RED II limit. Plus, they slip into existing pipelines, storage tanks, and engines with zero drama. But there are trade-offs:

• Energy inefficiency: only 10–20% of the renewable power you feed in ends up as usable fuel after electrolysis, synthesis, and refining.
• CO₂ capture scale-up: you need cheap, ultra-pure CO₂—ideally from biogenic sources or direct air capture—to keep emissions low.
• Competing biofuels: advanced biofuels could drop to €0.30–1.10 per liter by 2050, undercutting some e-fuel pathways.
• Infrastructure risks: if policy support wavers, today’s big bets could turn into stranded assets.

Market & Policy Implications

Since you can’t exactly plug a plane or a container ship into the grid, e-fuels are frontrunners for decarbonizing these “hard-to-abate” sectors. But at 3–10× the cost of kerosene or marine diesel, they need a boost:

• Subsidies or off-take guarantees to bridge early price gaps
• Carbon pricing or border adjustments that force fossil fuels to pay for their pollution
• Investment in hydrogen pipelines and port facilities, plus streamlined permitting
• R&D funding for next-gen electrolyzers and better CO₂ capture methods

For the oil majors in the Oil and Gas Climate Initiative, these levers are essential to turn industrial decarbonization with e-fuels from niche pilots into mainstream reality.

Looking Ahead

Optimistic forecasts paint a hopeful picture: e-fuel costs could plunge 30–50% between 2030 and 2050, thanks to mass-market electrolyzer production and ever-cheaper solar and wind. That might push prices down to about €1–2 per liter—nearly matching fossil fuels in regions with low-cost renewables.

If policy support and private capital align, the global e-fuel market could leap from roughly $22.5 billion in 2025 to nearly $196 billion by 2035. The bottom line? Cut the cost of green hydrogen, and you unlock a competitive, scalable e-fuel industry. Everything else—CO₂ sourcing, plant sizing, financing—falls into place once that central challenge is tackled.

About the OGCI

The Oil and Gas Climate Initiative (OGCI) is a CEO-led coalition of major oil and gas firms, launched in 2014 to accelerate greenhouse gas reductions. Its Climate Research Consortium teams up on studies around carbon capture, hydrogen production, and e-fuels to guide the industry toward net-zero and a truly sustainable energy future.