Ambitious plans for e-methanol plants worldwide are losing traction as high feedstock costs and an uncertain investment climate are turning developers away, writes Emmeline Willey
The project pipeline for production of hydrogen and derivatives is growing steadily — and e-methanol plants are no exception. But only a few of the global e-methanol projects Argus is tracking are set to meet their ambitious start-up targets and some developers have hit pause, leaving the outlook uncertain.
Argus is currently tracking 66 production sites globally that could together produce more than 9.3mn t/yr of e-methanol by combining electrolytic hydrogen and CO2, with most due to come on line before the end of the decade. But less than 4pc of this capacity can be considered firm, where projects would have at least reached a final investment decision. Only two of 13 projects slated for start-up in 2025 are considered firm, suggesting that the bulk of facilities due to begin operations next year are increasingly unlikely to meet this deadline.
China has the largest market for fossil fuel-based methanol today and — as with renewable hydrogen projects more generally — has emerged as a clear frontrunner for e-methanol plants. If its planned projects come to fruition, China could have as much as 1.69mn t/yr of e-methanol production on line by the end of the decade, Argus data show. Currently, three projects in the country are up and running, with a combined capacity of 211,000 t/yr — equivalent to nearly 98pc of the global capacity that is currently operational.
European countries lag behind, but also have big ambitions. In Denmark, eight projects are planned that would produce upwards of 1.4mn t/yr by 2030, with two already under construction. Spain follows, with six planned projects that could provide 1.5mn t/yr by the late 2020s. Although the bulk of the world's e-methanol projects are planned across Europe, no other countries are on course to exceed 1mn t/yr of production, based on announced projects.
Around the world, several projects have been cancelled, halted indefinitely or downsized, while many developers have fallen silent as start-up dates approach.
Chemical manufacturer Dow says it halted its 200,000 t/yr e-methanol project in Stade, Germany, because of "near-term global volatility, the current investment climate in Germany" and a need to remain competitive. And UK-based Hydrogen Ventures says its planned facility in Iceland is "under consideration" as the firm evaluates the risk of earthquakes and volcanic activity. Several others did not reply to an Argus request for comment.
In Canada, Nauticol Energy had planned to produce 3.2mn t/yr of ‘blue' methanol using natural gas-based hydrogen with CO2 capture rather than electrolytic hydrogen. But plans for the site have been scrapped, although the developer has left open the possibility of building a smaller plant at the location.
That said, some momentum continues behind the scenes — even outside China. Carbon Recycling International tells Argus that early engineering and design studies and permitting activity is under way at its 100,000 t/yr Finnfjord project in Norway, with a 2025 start date targeted. Grid capacity needed for the project has been reserved and conversations with offtakers continue, the firm says.
Sea double
Fossil methanol today is used in the chemicals sector and sometimes as a direct fuel. Production nearly doubled in the decade to 2019, reaching 98mn t/yr. Overall methanol demand is set to reach 120mn t/yr in 2025, and 500mn t/yr in 2050, according to shipping registry Lloyd's Register. That increased demand will be met by a mix of fossil methanol, e-methanol and biomethanol, according to Paris-based energy watchdog the IEA.
The maritime sector is likely to account for a substantial chunk of demand growth, as it turns to alternative fuels to meet decarbonisation targets set by the International Maritime Organisation, which expects a 50pc reduction in emissions by 2050 against a 2008 baseline. To put the numbers into perspective, Danish shipping giant Maersk could decarbonise its entire fleet with 2mn t/yr of e-methanol, according to Lloyd's Register, and as of summer last year, there were 29 methanol-capable vessels in operation and 112 on order. That number continues to grow, although many fleet owners are also looking to renewable ammonia to decarbonise shipping operations. E-methanol and ammonia have an edge over hydrogen in terms of energy content and storage benefits, although neither can match conventional fuels in terms of energy density or cost.
New fuel, old problems
E-methanol comes with the same problems as other low-carbon fuels of the future. Its feedstock is expensive and in low supply — and is likely to be so for quite some time. E-methanol, renewable ammonia and other derivatives, such as e-fuels, will compete for access to low-cost supplies of electrolytic hydrogen. Producing the envisaged 9.3mn t/yr of e-methanol based on announced projects would require nearly 1.9mn t/yr of renewable hydrogen.
E-methanol production costs are between $800/t and $1,600/t, according to 2021 data from renewables agency Irena, compared with about $465/t for fuel oil or about $600/t for very low-sulphur fuel oil. Accounting for differences in energy density — a ship would need 2.4 times as much e-methanol as diesel — e-methanol clearly leaves its mark on operating costs. E-methanol will also have to compete with biomethanol, which Lloyd's Register says could be significantly cheaper, although global biomass supplies are also tight.
The CO2 feedstock used for e-methanol production also needs to be factored in. Low-cost carbon used to produce e-methanol is typically captured at fossil fuel-fired plants, leaving questions around its sustainability. Biogenic carbon can be used, but comes at a higher cost and is scarce in some regions, while direct air capture technology is still in its infancy.
