European LPG distributors UGI International and SHV Energy have announced plans to invest up to $1bn in advancing the production of renewable dimethyl ether (rDME), a fuel with similar molecular properties to LPG. They aim to develop up to six plants that can produce 300,000 t/yr combined by 2027, with first investment in the UK in early 2022 and the US the next target market. UGI International's business development vice-president Neil Murphy and SHV Energy's sustainable fuels director Rebecca Groen spoke with Argus' Aidan Lea about the duo's landmark agreement.
What role will UGI and SHV, as distributors, take in developing rDME production?
Groen: We feel that we need to take a step back in the [supply] chain to really support [production] projects. We do not know how much of it we will do ourselves and how much will be with other people, but we want to stimulate production of rDME for the LPG industry.
Murphy: We will be the guardian of production. We are certainly going back up the supply chain to the production area to work with other parties — it is not a procurement exercise, it is an investment and production exercise.
Which rDME production methods are you investigating?
Groen: All routes are interesting. The standard route through renewable methanol is proven, and methanol is widely available, so this could be a short time to market. The route where you gasify wastes and residues is also interesting, as it makes use of feedstocks that [can be acquired] at negative cost. In the future, the power-to-X opportunity [combining CO2 from the atmosphere with H2 from water to make fuels] is also something we will explore. It will depend on timing, where you are in the world, what feedstocks are available. We are keeping options as broad as possible.
Murphy: The construct of the JV [joint venture] allows us to work with multiple technologies. We are not straightjacketed to one.
Groen: One of the reasons for doing this is to encourage technology players to start thinking about how they can make rDME for the LPG industry.
Will there be enough feedstock available to achieve 300,000 t/yr of rDME?
Groen: There is more than enough, but we have to look at what is available and where. We are keen to understand how you scale up a production method [based on] local feedstock availability because it does not always make sense to ship feedstock overseas. Around the world, a lot of wastes and residues cause problems, such as municipal solid waste in the UK — a lot of which is shipped abroad. A solution we have been looking at is gasification of this waste in the UK, where the overall regulatory framework for renewable fuels is pretty good.
Murphy: The technology and type of plant we are looking at is mobile and does not depend on other co-products or partners producing gasoline, diesel or jet [fuel]. We are looking to build plants that exclusively make rDME, which could be modest in size and relatively mobile. We could follow feedstocks, pockets of abundance, and the decision would be 100pc ours and the technology providers.
Does legislative support for rDME as a fuel exist anywhere yet?
Groen: Legislative support for the off-grid heating industry is lacking everywhere. We need to get the right collaborative frameworks in place. RDME is listed as a fuel in the EU's renewable energy directive (RED) [but] there are still things [to be done to secure] support for the use of wastes, residues, and captured carbon. We need a wider association-level approach with the [World LPG Association] and others.
Murphy: The molecule and its properties are already understood — it is used in products such as aerosols. All we are doing is making it from renewable sources, so it should not be a surprise to policymakers. And blends such as adblue in diesel and E10 and E5 in gasoline are already an accepted concept in the fuel area.
Groen: The International DME Association has met with various EU representatives over RED and the green new deal. But [rDME] is a bit of an unknown. Part of the reason for the JV is to make a statement about our joint belief in this product. In the US, it is further on in certain states, such as California. The low carbon fuel standard gives strong support to renewable fuels and is now being implemented in three more states. In the UK, we are having conversations with the Department of Transport and some ministers in the government. There is general excitement about the possibility of producing a molecule from local waste to make a renewable fuel.
Can rDME be used in existing LPG infrastructure?
Groen: The blend of 20pc of rDME with propane does not require any infrastructure modification — 20pc is an accepted norm in some parts of the world. Tests show this ratio could be increased but, as an industry, we prefer to be conservative and prioritise safety. But 100pc rDME will also be available, and this requires some minor modifications to the elastomers and seals. Customers will optimise their systems for one or the other. SHV is working on two transport projects, one for a 20pc blend in California, and one for 100pc rDME in Germany.
Murphy: In some jurisdictions, carbon accreditation schemes may allow distributors to take a tonne of rDME, for example, and blend it virtually across their LPG business. Meaning end users get credit for lower emissions without each user physically taking delivery of rDME. But where this is not possible, small modifications may be needed to enable customers to take physical deliveries. Legislation around accrediting carbon intensity to an end use will determine the logistics.
How much can carbon emissions be lowered by using rDME?
Groen: There is an 85pc greenhouse gas reduction compared with diesel and gasoline based on calculations by a European Commission-funded well-to-wheel study. This figure can be higher or lower depending on which feedstock and production process is used. This means cuts of around 75pc compared with propane.
How big an impact can rDME have on the LPG industry?
Murphy: The JV targets defossilisation of the industry. In the right volumes, rDME would enable the industry to meet its 2030 defossilisation targets in the US and EU.
Groen: Customers are looking for an immediate and affordable solution. Some of the infrastructure changes required to decarbonise the off-grid industry are too expensive. It is important to offer incremental improvements to meet decarbonisation targets, which people can afford.
Does rDME have any advantages over bio-LPG? Which will play a bigger role?
Murphy: Both are valuable arrows in our communal quiver. RDME is less established than bio-LPG but it can have a higher negative [carbon] index, and so has a more powerful impact on defossilisation. But it is clear the industry is heading down the path of both, where it will become a portfolio of molecules from different sources, of which rDME will be a very important one.
What is the biggest challenge to grow the rDME market?
Groen: We need to make the projects happen, update the legislation, and support customers to understand implications for them. We feel this JV can drive those activities from a broader perspective than either organisation could alone. Murphy: The biggest challenge is for policy makers and the industry is to embrace this. We want to bring critical mass to this, because the industry has to adapt.
