WORKING PAPER 2022-14

© 2022 INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION

MARCH 2022

Current and future cost of

e-kerosene in the United States
and Europe
Authors: Yuanrong Zhou, Stephanie Searle, Nikita Pavlenko
Keywords: e-kerosene, power-to-liquids

Introduction
Power-to-liquids (PtL), also known as e-fuels, are getting increased attention, especially
in the aviation sector, due to their potential to decarbonize the sector without
investments in new fueling infrastructure and engines. PtL are produced by combining
carbon dioxide (CO2) and hydrogen derived from water electrolysis, through chemical
reactions, such as Fischer-Tropsch (FT) synthesis. The product of FT synthesis is a
mixture of hydrocarbons that can be used in transportation. Outputs include diesel
(noted as FT-diesel), jet fuel (noted as e-kerosene), and other hydrocarbons such
as propane and naphtha. An overview of the PtL production scheme and product
distribution is shown in Figure 1.

Propane 10%

Naphtha 10%

Water
Renewable electrolysis Renewable
electricity conversion hydrogen Fischer-Tropsch e-kerosene
efficiency~70% synthesis 40%
Carbon Power-to-liquids
conversion
dioxide efficiency~73%
(CO2)

FT-diesel
40%

www.theicct.org

Figure 1. An overview of a power-to-liquids production scheme and product distribution by energy [email protected]
percentage
twitter @theicct

Acknowledgments: This work was generously supported by the Aspen Institute. Responsibility for the information
and views set out in this report lies with the authors. The Aspen Institute cannot be held responsible for any use
which may be made of the information contained or expressed herein. We are grateful to Jayant Mukhopadhaya
and Dan Rutherford for their helpful reviews of this paper.
As alternative fuels, one main advantage of PtL is that the fuel conversion process
generates drop-in fuels compatible with conventional fueling infrastructure and
combustion engines. When renewable electricity is used to electrolyze water, PtL could
have close-to-zero greenhouse gas (GHG) emissions (Argonne National Laboratory,
2020). However, low GHG emissions can only be reached if the renewable electricity
was generated additionally, rather than displacing existing uses. Otherwise, any leakage
of fossil electricity for PtL production would not fulfill the decarbonization purpose as
intended (Searle & Zhou, 2021). Moreover, given the fact that PtL is a very inefficient
process, indicated by the conversion efficiency in Figure 1, displacement of renewable
energy in PtL production would lead to significant adverse climate impacts. Previous
studies have suggested robust regulations are required to ensure the additionality of
renewable electricity; for example, combining renewable electricity certificates and long-
term electricity purchase contracts with certificates showing that the renewable electricity
used for PtL is not incentivized by other policies (Timpe et al., 2017; Malins, 2019).

CO2 used in PtL production can be supplied from two types of sources. One is a point
source, usually from an industrial plant that emits a large quantity of concentrated CO2
emissions, such as a steel plant. An alternative source is atmospheric CO2, which can be
sequestered using an emerging technology known as direct air capture (DAC). From
either source, the same technique is used to capture the CO2; the main difference is the
starting concentration of the CO2.

E-kerosene, part of the PtL product slate, is a type of sustainable aviation fuel (SAF).
In addition to e-kerosene, biofuels such as hydroprocessed esters and fatty acids
(HEFA) produced from waste oils, also count as SAFs. The International Civil Aviation
Organization (ICAO) has proposed SAFs as a key measure to achieve GHG emission
reduction in aviation (International Civil Aviation Organization, 2021). Echoing this
position, several government bodies have provided support for SAFs, especially
e-kerosene, in recent years. The European Commission has recently proposed a 5% SAF
mandate (as a share of aviation fuels), with a sub-target of 0.7% e-kerosene, for aviation
fuel consumed in the EU, by 2030. The proposed SAF target increases to 63%, with a
minimum of 28% e-kerosene by 2050 (European Commission, 2021).

Germany took a step in this direction in 2021 when it set an e-kerosene target of 0.5%
of fuel used in aviation by 2026, increasing to 2% by 2030 (Appunn, 2021; Federal
Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer
Protection, 2021). To facilitate meeting the target, the German federal and state
government and industry agreed on a roadmap to scale up e-kerosene production
(Federal Ministry for Digital and Transport, 2021). Unlike the EU, which mostly supports
e-kerosene with volumetric mandates, the United States (U.S.) has provided financial
support for its production. In California, e-kerosene producers are eligible to receive
credits under the state’s Low Carbon Fuel Standard (LCFS) program (California Air
Resources Board, 2020).

Not only are policies being developed to support e-kerosene, the aviation industry has
also included e-kerosene in its decarbonization roadmaps and has begun to produce
e-kerosene. The Waypoint 2050 report, published by the Air Transport Action Group,
an industry trade group, asserts that SAFs will account for 65% of aviation carbon
reductions by 2050, with e-kerosene providing half of all SAF by volume by mid-century
(Air Transport Action Group, 2021). According to the Destination 2050 report put
out by five European air industry associations, in Europe SAF will be responsible for
approximately one-third of carbon reductions by 2050, with 60% of drop-in alternative
fuel supply being e-kerosene (Royal Netherlands Aerospace Centre & SEO Amsterdam
Economics, 2021). Moreover, in 2021, Germany opened the world’s first e-kerosene
production plant powered by wind electricity (Muller & King, 2021). In the same year, the
German airline Lufthansa announced that it plans to purchase at least 25 thousand liters
of e-kerosene annually in the next five years (Lufthansa Group, 2021). Boom Supersonic,

2 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
a U.S.-based company that builds supersonic airliners, plans to use e-kerosene produced
from renewable electricity combined with DAC (Boom Supersonic, 2019). And Airbus
is partnering with a Canadian SAF company aiming for commercial-scale e-kerosene in
North America by 2025 (Airbus, 2021).

Nevertheless, unlike other SAFs that are relatively mature, PtL is an emerging market
and scaling e-kerosene faces multiple challenges. First, as indicated in Figure 1, turning
electricity into hydrogen, then into e-kerosene, is highly inefficient—about half of the
energy is lost, which raises the question of whether to use these valuable resources
(electricity and hydrogen) directly as fuels rather than wasting the energy in fuel
conversion losses (Searle, 2020). Second, cost is a major barrier. Previous studies have
shown a huge variation in the estimated cost of e-kerosene production due to different
assumptions regarding electricity and CO2 sources and prices (Agora Verkehrswende
et al., 2018; Schmidt et al., 2018; Terwel & Kerkhoven, 2018; Lehmann, 2019; Raab &
Dietrich, 2019; Siegemund, 2019; Ash et al., 2020; Becattini et al., 2021; ETH Zurich, 2021;
Isaacs et al., 2021). Nevertheless, electrolysis hydrogen itself is expensive (Christensen,
2020); taking the extra step to make PtL will add extra costs. Mukhopadhaya &
Rutherford (2022) concluded that, due to the additional costs of converting green
hydrogen to e-kerosene, fuel costs for hydrogen-powered aircraft could be lower than
for conventional aircraft operated on PtL-fueled conventional aircraft starting in 2035.
In addition, Rutherford et al. (2022) concluded that the high cost of e-kerosene makes it
unlikely to be viable as a fuel for supersonic aircraft.

The purpose of this study is to understand, from an economic perspective, the potential
role of e-kerosene in decarbonizing the aviation sector. We estimate the cost of
producing e-kerosene in the United States and the EU from 2020 to 2050. We consider
renewable electricity as the energy source for e-kerosene production and assume CO2 is
provided from a point source. We then discuss the cost competitiveness of e-kerosene
compared to other aviation fuels as well as the amount of policy support needed.

Methodology
In this study, we estimate the production cost of PtL using a discounted cash flow (DCF)
model, following the methodology in previous ICCT studies (Christensen & Petrenko,
2017; Christensen, 2020). This DCF model calculates the levelized cost for an investment
to be economically viable and to reach a target rate of return. The main components
of a DCF model include the upfront capital investment, the annual operational costs,
and revenues from product sales. In addition to these cost components, financial
assumptions regarding debt and equity are also crucial in a DCF model as they
determine the return required for the process to be economically viable. We estimate the
levelized PtL production costs in 356 regions in the United States and the 27 countries
of the EU. The lower geographic resolution applied in the case of the EU is due to lack
of information. Because of uncertainty regarding where PtL will be produced, we take
the arithmetic average of estimated cost across regions or countries to represent the
United States or the EU. The timeframe for cost estimates is between 2020 and 2050. As
shown in Figure 1, PtL produced through FT synthesis consists of a mixture of fuels and
chemicals; we allocate the modeled PtL cost to each product, including e-kerosene. All
cost figures in this study are given in 2020 units of the appropriate currency.

Levelized production cost

Estimating the cost of PtL requires analysis of three key processes: renewable electricity
generation, water electrolysis, and FT synthesis. In this study, we combine two
sets of DCF analyses, one to estimate the levelized cost of renewable electricity (REcost)
and the other for PtL (PtLcost) that covers water electrolysis and FT synthesis. The results
from REcost serve as inputs to the PtLcost. CO2 price is also an important input to the
PtLcost; however, we do not make our own estimate of CO2 price in this study, but collect
it from previous studies.

3 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
Renewable electricity cost
The capacity factor—the fraction of a year a power plant can operate—is a key
parameter in calculating REcost. In the case of renewable power plant, the capacity factor
is largely dependent on local solar and wind resources, i.e., how often it is windy or
sunny enough to generate electricity. Following the methodology in Christensen (2020)
and Zhou and Searle (2022), we collect solar and wind capacity factors of 356 U.S.
regions from NREL (2021) and 27 European countries from Joint Research Centre (2018),
amended by personal communication (2020). Plant capacity is another input that
has a significant impact on renewable electricity cost—larger capacity leads to lower
levelized costs due to economies of scale. In this study, we assume the installed capacity
of renewable electricity plant to be 100 megawatts (MW), which is representative of a
utility-scale power plant, in contrast to the 1MW figure assumed in Christensen (2020).

We use the  capital and  operational costs  of solar and wind power plants from NREL
(2021) and assume the same costs across all regions and countries. To project future
renewable electricity prices, we follow the cost reduction rate and capacity factor
improvement rate from NREL (2021). While we model both solar and wind electricity
costs, we expect the cheaper technology to be used. Therefore, the renewable electricity
cost of each modeled region or country that feeds into PtLcost is the minimum between
solar and wind electricity for that region or country.

The PtL facility could connect directly to a renewable electricity generator, or it could
utilize renewable electricity delivered over the electricity grid. In this study, we consider
both options. In the former case, the levelized cost of renewable electricity (LCOE)
calculated from the REcost serves as the electricity cost for PtL production. However,
in the case of grid connection, we need to add the grid and associated taxes and fees
to our modeled LCOE to account for electricity transmission and distribution (T&D)
cost. We collect U.S. and EU T&D costs from the Energy Information Administration
(EIA, 2020) and Searle & Christensen (2018), respectively. We assume that in the case
of grid-connection, the PtL facility financially supports a new, additional renewable
electricity generator, for example through a Power Purchase Agreement, but does not
temporally match its production to that of the renewable electricity generator. While
lack of temporal matching will likely cause an indirect increase in use of other electricity
generators (i.e., when the contracted renewable electricity generator is not operating),
we have previously found this effect to be small (Christensen & Petrenko, 2017).
Importantly, the capacity factor of the PtL facility depends on the scenario; if directly
connected to a renewable electricity generation, the PtL facility capacity factor matches
the renewable electricity generator; however, if using grid electricity, the PtL facility
capacity factor could run almost full time. Thus, the benefit of direct connection is
lower renewable electricity costs, while the benefit of grid connection is a higher facility
capacity factor, which reduces the levelized cost of capital expenses per unit of PtL
produced. Which option is cheaper depends on the specific renewable capacity factor
and grid fees in each region or country. While we model both direct connection and grid
connection, we assume the cheaper option in each region or country would be used.

PtL production cost

In PtLcost, we consider capital and operational costs of both water electrolysis and
FT synthesis units. We present key assumptions for PtLcost in Table 1. In this study, we
assume use of a big, central PtL production plant with an annual installed capacity of
400 MWinput power.1 The actual production output is determined by the capacity factor. As
mentioned above, in the case of direct connection, the PtL capacity factor would be
restricted by the capacity factor of the power generator. In the case of grid connection,

1 In our economic model, the assumed PtL plant capacity in PtLcost is irrelevant to the assumed renewable
electricity capacity in REcost. The RE capacity assumption is simply used to estimate the levelized cost of
renewable electricity (LCOE) in each modeled region or country. This estimated LCOE represents the market
price of RE that the PtL producers need to pay for.

4 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
we assume a capacity factor of 95% to account for potential electricity distribution
losses and facility downtime. 

Table 1. Assumptions of power-to-liquids production parameters

Input parameter Data assumption

Installed capacity 400 MWinput power
Direct connection: same as
Capacity factor Grid connection: 95%
renewable generator
Contingency factor 1.2

Alkaline Proton exchange Solid oxide

electrolyzer membrane electrolyzer
Electrolyzer system capital cost
988 1,182 1,346
in 2020 (2020 USD/kWinput power)
Electrolyzer system capital cost
2% annually
reduction in the future
Electrolyzer efficiency in 2020 70% 60% 81%
Electrolyzer efficiency in 2050 80% 74% 90%
Electrolyzer lifetime in 2020
75,000 60,000 20,000
(hours)
Electrolyzer lifetime in 2050
125,000 125,000 87,500
(hours)

Fischer-Tropsch capital cost 450 USD per kWfuel

Fischer-Tropsch efficiency 73%
Fixed annual operational cost 4% of system capital cost
Renewable electricity price Own model—see Appendix
Water price Country-specific
Carbon dioxide price 40 USD per tonne CO2
Oxygen wholesale price 0.15 USD per m3 oxygen

The capital cost of a PtL plant includes upfront investment in equipment for both
electrolysis and FT synthesis. In addition, we apply a contingency factor of 1.2 to the
total capital cost to account for other unforeseeable upfront expenses, such as project
design (Christensen, 2020). For water electrolysis, we use the same assumptions
of capital costs and cost reduction projection, electrolyzer efficiency and efficiency
improvement projection, and electrolyzer lifetime and lifetime improvement projection
in Christensen (2020). Electrolyzer lifetime determines the frequency, and thus the cost,
of electrolyzer replacement. While that study provides three scenarios regarding how
electrolysis cost changes in the future—pessimistic, mid-level, or optimistic—we use
only the mid-level scenario in this study. We model three types of electrolyzers, but we
expect the cheapest technology to be used.

FT synthesis capital cost is subject to economies of scale and thus impacted by plant
capacity (Brynolf et al., 2018). We collect the FT capital costs of similarly sized plants of
400 MWinput power as well as fuel conversion efficiencies from Brynolf et al. (2018). Unlike
water electrolysis, we assume that future FT cost and efficiency remain at current levels
since this technology is relatively mature. We assume the same electrolysis and FT
synthesis costs across U.S. regions and EU countries.

Annual operational cost (OPEX) is usually divided into two subcategories: fixed OPEX
and variable OPEX. Fixed OPEX includes plant maintenance costs and labor costs. We
assume the annual fixed OPEX to be 4% of the total capital cost, including both water
electrolysis and FT synthesis. Variable OPEX is a function of the actual PtL production
amount each year. The costs of input feedstock and materials of electricity, water, and

5 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
CO2 all contribute to variable OPEX. Oxygen is a by-product of the water electrolysis
used to produce hydrogen for PtL production and can be sold for revenue. Therefore,
we assume the PtL plants sell oxygen along with PtL hydrocarbons to bring in additional
revenue. We use the same country-specific water price and oxygen wholesale price from
(Christensen, 2020 and Zhou and Searle, 2022).

As mentioned in the Introduction, CO2 could be supplied from a point source or using
DAC. DAC is more expensive than point-source capture, and has large uncertainties
regarding costs. DAC also requires more energy than capturing CO2 from a point source
because the latter provides a much more concentrated source of CO2. Therefore, in this
study, we estimate PtL costs using only point source CO2 at a price of $40 per tonne
(Christensen & Petrenko, 2017; Terwel & Kerkhoven, 2018), compared to estimates of
$100 to $700 per tonne CO2 using DAC (Keith et al., 2018; Becattini et al., 2021). This
approach may underestimate the cost of PtL under deep decarbonization scenarios
where point sources of CO2 become scarce in 2050; on the other hand, it is very unclear
what level of cost reductions we may expect for DAC within that timeframe.

In sum, the modeled PtL cost is an optimistic one, taking into account the cheapest
renewable electricity source between solar and wind in region and year, the cheapest
water electrolysis among three electrolyzer types, and the cheaper electricity connection
mode. The regional variation of PtL cost is a combined result of the modeled region/
country-specific renewable electricity price, the capacity factor if directly connected,
and country-specific water price. The projected reductions in future PtL costs are a
combined result of mid-level forecasts in renewable electricity price reduction, capacity
factor improvement in the case of direct connection, and ongoing cost reductions,
efficiency improvements, and increases in the lifespan (i.e., reduced cost of electrolyzer
replacement) of water electrolysis equipment.

PtL cost allocation

The modeled cost of PtL production reflects the sum of four products: FT-diesel,
e-kerosene, naphtha, and propane, as shown in Figure 1. To estimate e-kerosene cost,
we allocate the result from PtLcost to each of the four products on an energy basis. The
calculated e-kerosene production cost in this study can be treated as the wholesale
price that excludes delivery and fueling costs, and taxes. We also do not consider any
external financial incentives or policies in this estimated production cost.

During FT synthesis, the PtL plant can adjust the chemical reaction conditions, such
as temperature, to optimize the production of certain products. For this analysis,
we assume that the bio-refinery will attempt to maximize the quantity of jet fuel in
the product slate. To develop a realistic assumption regarding product distribution,
we take the average of product slates that maximize e-kerosene production from
previous studies (Swanson et al., 2010; (S&T) 2 Consultants Inc., 2018; Argonne National
Laboratory, 2020; Prussi et al., 2020). The production distribution assumed in this study
is thus 40% each of e-kerosene and FT-diesel, and 10% each of naphtha and propane, on
an energy basis, shown in Figure 1.

We collect the wholesale prices of naphtha and propane in 2020 from (Trading
Economics, 2021; U.S. Energy Information Administration, 2021a), which could represent
the production cost of naphtha and propane. We expect the prices of naphtha and
propane to increase and assume both prices in 2050 to be 1.5 times their 2020 values;
we assume a linear increase for the years in between. We convert the collected and
projected naphtha and propane prices into 2020 USD per megajoule (MJ), based on
their lower heating values. We then subtract naphtha and propane wholesale prices
from the modeled PtL production cost, weighted by the corresponding production
distribution, to estimate the production cost of e-kerosene and FT-diesel. Since
we assume the same share of e-kerosene and FT-diesel, they would have the same

6 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
 production cost on an energy basis. However, given that FT-diesel is more energy dense,
it has a higher value than e-kerosene on a weight or volume basis.

Results and Discussion

In this section, we present our modeled average e-kerosene production cost (i.e., the
wholesale price) in the United States and the EU and discuss the implications of these
results. Specifically, we compare our cost estimates with previous studies to understand
the consistency and variations among studies. We also compare the cost of e-kerosene
with other aviation fuels to understand the cost competitiveness of e-kerosene. While in
this section we only present the average cost estimates in the United States or EU, we
present the minimum and maximum costs among all modeled regions in the Appendix.
Intermediate modeling results include renewable electricity, hydrogen, and FT-diesel
costs, but we show these estimated costs in the Appendix. We also present the cost
implications from grid connection and direct connection modes in the Appendix.

In Figure 2, we present the estimated e-kerosene production cost from our DCF model
and how these results compare to other studies. We estimate the average e-kerosene
production cost in the United States to be $8.80 per gallon (€2 per liter) in 2020 and
we project it to decrease by half to $4 per gallon (€0.9 per liter) in 2050.2 The average
e-kerosene price in the EU is higher than in the United States by about 45%, as a result
of a higher renewable electricity price in the EU, indicated by Table A1 in the Appendix.

We collect e-kerosene production cost estimates for the years of 2020, 2030, and 2050
from 10 U.S.- or EU-based studies and summarize the maximum and minimum costs
for each corresponding year from those studies in Figure 2. As shown, there is a huge
variation in e-kerosene cost among studies; the highest cost estimate can be triple the
lowest one.

25
e-kerosene production cost (USD per gallon)

Previous studies
Average e-kerosene cost in US
Average e-kerosene cost in EU
20

15

10

0
2020 2025 2030 2035 2040 2045 2050

Figure 2. Estimated average e-kerosene production cost in the United States and the EU, compared
to previous studies
Sources: (Agora Verkehrswende et al., 2018; Schmidt et al., 2018; Terwel & Kerkhoven, 2018; Lehmann, 2019; Raab
& Dietrich, 2019; Siegemund, 2019; Ash et al., 2020; Becattini et al., 2021; ETH Zurich, 2021; Isaacs et al., 2021)

Any differences in underlying model assumptions would contribute to the varying

results. Here, we highlight two main contributing parameters, electricity price and CO2
price. In terms of electricity, some studies considered the use of grid electricity, while
others considered just LCOE of renewable electricity–the former being more expensive

2 We assume an exchange rate of 0.85 Euro to 1 USD in this study.

7 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
 due to T&D costs. As mentioned in the Methodology section, CO2 captured from a point
source is significantly cheaper than DAC. However, even among the studies that fully
assume DAC, there is a huge variation in CO2 price.

Taking the year 2020 as an example (Figure 2), the lowest e-kerosene production cost
of $8.30 per gallon from previous studies is taken from an analysis that assumed a
relatively low renewable electricity price of $46 per MWh (Ash et al., 2020), compared
to the high electricity price of $72 per MWh for the highest e-kerosene price of $22.30
per gallon (Becattini et al., 2021). Moreover, while both studies considered DAC as the
source of CO2, the former assumed $260 per tonne CO2, whereas the latter assumed
$690 per tonne CO2. The combined impact of high electricity and CO2 prices resulted
in the significantly higher e-kerosene production cost. While it is hard to make apple-
to-apple comparisons due to the different model assumptions across studies, our
e-kerosene cost estimates are within the study range. Particularly, the U.S. costs are
toward the lower end of the ranges because of relatively low renewable electricity prices
in the United States and point source CO2. Our estimated EU costs are in the middle of
the ranges.

Comparing the cost of e-kerosene with conventional jet fuel and other SAFs can help
policymakers and the industry better understand the potential role of e-kerosene. In
Figure 3, we show our estimated average e-kerosene production cost on an energy basis
in the United States and EU as blue bars and orange bars respectively (detailed numbers
can be found in Table A5 in the Appendix). For comparison, we show the wholesale
prices of HEFA as green bars and Jet A fuel, i.e., fossil kerosene, as grey bars. We
collect the Jet A price of all years from U.S. Energy Information Administration (2021b).
A previous ICCT study estimated the production cost of HEFA produced from four
different feedstocks of vegetable oil or waste oil (Pavlenko et al., 2019). We choose used
cooking oil as the feedstock to represent HEFA price in Figure 3, because of its better
climate performance and lower feedstock cost compared to vegetable oils. The 2050
HEFA price reflects an assumption of lower capital costs based on Pavlenko et al. (2019)
and we assume a linear decrease of HEFA price for the years between 2020 and 2050.
Neither Jet A nor HEFA price differentiates between the United States and EU.

0.12
e-kerosene in US e-kerosene in EU HEFA Jet A
Production cost (2020USD per MJ)

0.1

0.08

0.06

0.04

0.02

0
2020 2025 2030 2035 2040 2045 2050

Figure 3. Estimated e-kerosene production cost in the United States and the EU, compared to
hydroprocessed esters and fatty acids (HEFA) and fossil Jet A fuel

We find that e-kerosene is currently 7–10 times more expensive than Jet A fuel and 2–3
times more expensive than HEFA due to the great amount of investment needed to
produce e-kerosene. While U.S. Energy Information Administration (2021b) projects Jet
A price in 2050 to double, SAF prices, including both e-kerosene and HEFA, are likely to

8 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
 decrease as the market gets mature and technology improves. In particular, e-kerosene
production costs are projected to drop substantially as the cost of renewable electricity
continues to decline. However, even with this opposite price trend, e-kerosene still will not
be cost competitive with Jet A or HEFA by 2050. Specifically, the U.S. average e-kerosene
production cost will be 45% or 37% higher than Jet A or HEFA respectively, in 2050. The
price discrepancy is even larger for e-kerosene produced in the EU. Moreover, if CO2 from
DAC were used, the price gap between e-kerosene and Jet A could grow, as the CO2 price
from DAC can be almost 20x the CO2 price from a point source. On the other hand, while
HEFA has the potential to be cost competitive in the future, its production is limited due to
low levels of feedstock availability (Pavlenko et al., 2019).

Results from this study indicate that without policy support, especially financial
incentives, it is unlikely that airlines will use e-kerosene now or in the future, from an
economic perspective. Our results show that policy support of about $4.60 per gallon
(€1 per liter) in the United States or $7 per gallon (€1.6 per liter) in the EU would be
necessary in 2030 for airlines to use e-kerosene. This is equivalent to a carbon price of
$400 per tonne of carbon dioxide equivalent (CO2e) (United States) or $630 per tonne
CO2e (EU), using carbon intensities of 89 g CO2e per MJ for Jet A and 0.44 CO2e per MJ
for renewable e-kerosene (Mukhopadhaya & Rutherford, 2022). Currently, the maximum
credit of California’s LCFS program is $218 per per tonne CO2e (in 2020 dollars)
(California Air Resources Board, 2022). If we assume e-kerosene producers in the United
States will receive this maximum LCFS credit now and in the future, e-kerosene will be
cost-competitive with Jet A fuel by around 2042, as indicated by Figure 4. Over time,
the size of the needed incentive can shrink substantively. By 2050, the estimated cost
differential between e-kerosene and Jet A narrows considerably, requiring a much lower
subsidy of $110 per tonne CO2e (United States) or $350 per tonne CO2e (EU). In addition,
high incentives provided in the early years can help establish an e-kerosene market and
narrow the price gap even further in the long term.

10
Estimated e-kerosene production cost in US
9 e-kerosene cost with LCFS credit
Jet A wholesale price
8

7
2020USD per gallon

0
2020 2025 2030 2035 2040 2045 2050

Figure 4. The impact of California’s LCFS credit on the cost of e-kerosene production in the
United States

Conclusions
Interest in e-kerosene as a mitigation measure to decarbonize the aviation sector is on
the rise. If produced from additional renewable electricity, e-kerosene has close to zero

9 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
well-to-wake greenhouse gas emissions. Another advantage of e-kerosene is that it is a
drop-in fuel that is compatible with existing fuel systems and combustion engines. This
means that using e-kerosene does not require investing in new fueling infrastructure or
aircraft, in contrast to electricity or hydrogen.

This study evaluates the potential of e-kerosene from an economic perspective. We

estimate the average e-kerosene production cost in the United States to be $8.80 per
gallon (€2 per liter) in 2020, decreasing to $4 per gallon (€0.9 per liter) in 2050. We
estimate the average e-kerosene production cost in the EU to be $12.40 per gallon (€2.8
per liter) in 2020, decreasing to $6.70 per gallon (€1.5 per liter) in 2050. The EU has
higher e-kerosene costs due to more expensive renewable electricity.

Another parameter with a significant impact on e-kerosene cost is the source of CO2. In
general, CO2 could be sourced in either of two ways: from a concentrated point source
such as an industrial plant, or captured from the atmosphere directly (i.e., DAC). In this
study, we assume CO2 is captured from a point source, which is currently much cheaper
than DAC.

Even though we are considering low CO2 costs and the combination of technologies that
gives the lowest e-kerosene cost (i.e., renewable source, electrolyzer type, and grid or
direct connection mode), and despite assuming mid-level cost reductions in the future,
e-kerosene cannot be cost-competitive with fossil kerosene as far out as 2050. Based
on our estimates, the 2020 production cost of e-kerosene is 7x (U.S.) or 10x (EU) fossil
kerosene. This price gap decreases substantively to 1.5x (U.S.) or 2.5x (EU) in 2050.
Results from this study indicate that financial incentives are necessary for e-kerosene to
be adopted on a large scale if it is to play a role in aviation decarbonization, especially
in the near term. We estimate that a carbon price of $400 per tonne CO2e in the United
States or $630 per tonne CO2e in the EU can make e-kerosene cost competitive in
2030, decreasing to $110 per tonne CO2e (United States) or $350 per tonne CO2e (EU)
in 2050. High incentives in the early years can help pave the way for more and cheaper
e-kerosene in the long term.

10 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
Appendix
Table A1 shows the estimated renewable electricity price in the United States and the
EU. We model solar and wind price in 356 regions in the United States and 27 countries
in the EU. For each region or country, we choose the lower price between solar and
wind. We then take the arithmetic average across regions or countries to represent the
United States or the EU, shown as the numbers in Table A1. In this study, we model both
grid connection and direct connection to a renewable generator as the two possible
electricity connection modes for a PtL plant. LCOE is the estimated levelized production
cost of renewable electricity, which is the electricity price used in the direct connection
scenario. LCOE+T&D is the electricity price used in the gird connection scenario where
grid and associated electricity taxes are included.

Table A1. Estimated average renewable electricity price in the United States and the EU. LCOE is
the levelized cost of electricity, used in the direct connection mode. LCOE+T&D considers electricity
grid and tax fee and is used in the grid connection mode. Unit: 2020 USD per MWh.

United States European Union

Year LCOE LCOE+T&D LCOE LCOE+T&D

2020 36 80 72 117

2030 28 77 51 97

2040 24 76 46 92

2050 21 72 41 88

While we model two electricity connection modes in this study, we assume that
whichever enables a lower PtL cost will be used. The cost result is a trade-off between
electricity price and plant capacity factor. As shown in Table A1, if the PtL is connected
to the grid, it would have to pay a higher electricity price that includes a grid fee and
tax. On the other hand, a grid-connected plant can benefit from running the plant for
longer periods, which reduces the levelized PtL production cost. Which mode enables
the lower cost is dependent on the abundance of local renewable sources and T&D cost.

Table A2 shows the percentage of 356 modeled U.S. regions and 27 EU countries that
enables lower PtL production cost if grid connected. Direct connection would be more
promising in the United States due to better renewable sources. In both regions, direct
connection would become more and more favorable due to increasing renewable
capacity factors and increasing T&D fees. Nonetheless, grid connection seems to be
the only way to enable lower PtL price in most locations in the EU, especially in the
near-term.

Table A2. Number and percentage of regions or countries that have lower PtL cost if
grid-connected, among 356 regions in the United States and 27 EU countries

United States European Union

2020 158 (44%) 27 (100%)

2025 123 (35%) 26 (96%)

2030 94 (26%) 26 (96%)

2035 59 (17%) 26 (96%)

2040 47 (13%) 26 (96%)

2045 37 (10%) 25 (93%)

2050 32 (9%) 24 (89%)

11 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
Table A3 shows the estimated hydrogen production cost in the United States and Europe
with a mid-level cost reduction projection. For each of the 356 regions in the United
States and 27 countries in Europe, we choose the lowest hydrogen production cost from
the combination of renewable source, electrolyzer type, and electricity connection type.
We then take the average across the regions and countries. This cost is for hydrogen
production only and does not include costs for liquefaction or compression needed for
hydrogen fuels to be used in aircraft or road vehicles, respectively. Among the three
types of electrolyzers, alkaline electrolyzer results in the cheapest hydrogen production
cost in the short term due to its low capital cost. However, in the long term, the solid
oxide electrolyzer technology will provide lower hydrogen and PtL costs due to its
significantly improved conversion efficiency and lifetime.

Table A3. Estimated average hydrogen production cost in the United States and the EU. Unit: 2020
USD per kg hydrogen

Year United States European Union

2020 4.3 6.4
2030 3.1 4.7
2035 2.7 4.3
2040 2.3 3.9
2050 1.6 3.2

FT-diesel, as one of the PtL products, is also drop-in and can be used in internal
combustion engines. Table A4 shows the FT-diesel production cost in the United States
and the EU. As with e-kerosene, this cost is allocated from the modeled PtL cost based
on product distribution. We show the estimated e-kerosene production cost in Table
A5. Since we assume the same percentage distribution for FT-diesel and e-kerosene in
the PtL product slate, they have the same production cost on an energy basis, indicated
in Table A4 and Table A5. However, the two fuels would have different costs on a
volumetric basis due to differences in their lower heating values.

Table A4. Estimated average FT-diesel production cost in United States and the EU

United States European Union

2020 USD 2020 USD
Year 2020 USD per MJ per gallon 2020 USD per MJ per gallon
2020 0.069 9.061 0.098 12.840
2025 0.061 8.006 0.086 11.168
2030 0.054 6.999 0.073 9.585
2035 0.047 6.187 0.067 8.802
2040 0.042 5.438 0.062 8.133
2045 0.037 4.763 0.057 7.499
2050 0.032 4.155 0.053 6.939

12 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
Table A5. Estimated minimum, average, and maximum e-kerosene production costs across 356 modeled regions in the
United States and 27 countries in the EU. All numbers are in 2020 dollars.

United States European Union

Year U.S. average U.S. average U.S. min U.S. max EU average EU average EU max
(USD per (USD per (USD per (USD per (USD per (USD per EU min (USD (USD per
MJ) gallon) gallon) gallon) MJ) gallon) per gallon) gallon)
2020 0.069 8.776 6.53 11.91 0.098 12.437 8.73 16.98
2025 0.061 7.754 5.52 10.67 0.086 10.817 7.71 14.47
2030 0.054 6.779 4.70 9.39 0.073 9.284 6.23 12.87
2035 0.047 5.993 4.04 8.70 0.067 8.525 5.56 12.06
2040 0.042 5.267 3.46 8.04 0.062 7.878 4.96 11.37
2045 0.037 4.614 2.95 7.41 0.057 7.264 4.37 10.34
2050 0.032 4.025 2.50 6.78 0.053 6.721 3.85 9.33

13 ICCT WORKING PAPER 2022-14 | CURRENT AND FUTURE COST OF E-KEROSENE IN THE UNITED STATES AND EUROPE
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