Business & Environment


January 30, 2023

Why the Pilot Factory for German E-fuels is Being Built in Patagonia

While critics still doubt the future of e-fuels, the German industry around Porsche and Siemens Energy is creating facts in Patagonia. This is shown by exclusive satellite images. The first real production facility could start work before the end of the year.

“Economy from above” is a collaboration between WirtschaftsWoche and LiveEO. This is a translation of the original article written in German by “Thomas Stölzel“. Access the original article here.

Last weekend, Oliver Blume caused a double stir. Not only that, as Herbert Diess’ designated successor, he will probably soon be heading the Volkswagen Group. It was also leaked that the former Porsche boss had apparently boasted at an internal event that he had been regularly informed by FDP leader Christian Lindner about the status of the traffic light coalition negotiations on the subject of synthetic fuels. At the end of June, Linder and the FDP then once again fought bitterly in the coalition to ensure that the sale of new internal combustion cars would remain permitted in the EU after 2035 if they ran on climate-neutral synthetic fuel. With success and fortunately for Blume.

Because now a satellite image – taken last week especially for WirtschaftsWoche – shows that the first major pilot factory for such clean e-fuels, initiated by German industry, is almost complete. Volkwagen subsidiary Porsche, Siemens Energy, ExxonMobile and other partners have formed a consortium to build the plant. It is to produce 130,000 liters of climate-neutral gasoline per year.

But this is just the beginning of the Haru Oni project, which is currently being built near the Chilean city of Punta Arenas in Patagonia. Over the next few years, the partners plan to massively expand it. After the final expansion stage, it is expected to supply around 500 million liters of clean fuel annually from 2026 – enough to power one million cars for a year.

The electricity for the huge production facility will ultimately be supplied by around 400 wind turbines with a total capacity of more than two gigawatts, which the consortium plans to install in the stormy area around Cape Horn. By 2024, 65 of these wind turbines should already be in place.

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Clean Gasoline Cap

Where German industry will soon produce and ship green e-fuels to Europe

Clean Gasoline Cap
Source: Own research Graphic: Patrick Zeh

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Is E-fuel Competitive?

The project is significant above all because critics like to dismiss e-gasoline made from electricity, water and air as a distant fantasy of the future, while battery-powered electric cars are already on the road. They also regularly complain that internal combustion engines are less efficient than electric motors. That is why they are not competitive with e-cars. One of the reasons for this is that a large proportion of the energy in the combustion engine is released into the environment in the form of heat.

However, the green electricity needed for clean e-fuels can be produced much more efficiently in Patagonia than in Germany. While the wind turbines at Cape Horn can run at full load for 6,000 hours a year, according to Siemens Energy, current calculations indicate that only about 3,000 hours are realistic in the North Sea. On the German mainland, it’s much less again. The conditions at Cape Horn, which have been feared by seafarers for centuries, should therefore compensate for the physical disadvantage of an e-fuel powered combustion engine, at least in Germany.

Compared with fossil gasoline, at least, e-fuel can apparently be quite competitive. The consortium calculates that the price per liter of e-fuel in the first expansion stage in 2024 will be 1.30 euros. This includes climate-neutral transport to the filling station in Germany, value-added tax and a profit margin. With the second expansion stage in 2026, the companies are aiming for a price per liter of less than one euro.

This is the State of the Pilot Plant

But in order to come close to this vision, “Haru Oni” first has to start production: In the satellite image now taken, the central components of the $51 million pilot factory are already clearly visible. A single wind turbine will supply the green electricity that will be used, among other things, by an electrolyzer to extract pure hydrogen from water. Meanwhile, a so-called direct air capture system will suck CO2 out of the ambient air.

A methanol synthesis plant turns the two substances into the hydrocarbon compound methanol. The machine for this comes from Volkswagen subsidiary MAN. Methanol can be used, for example, to power the ships that will later bring the e-fuel to Europe. Another on-site plant then converts the methanol into automotive gasoline.

Haru Oni Project
Haru Oni Project, Magellan Region, Chile18.07.2022:1. The electrolyzer turns water into pure hydrogen with the help of green electricity2. Direct air capture plant extracts CO2 from ambient air3. Water tank4. Methanol synthesis turns hydrogen and CO2 into the hydrocarbon compound methanol5. Here methanol finally becomes gasoline6. Gasoline tanks7. The wind turbine supplies the electricity for electrolysis, direct air capture and the other chemical plants.Image: LiveEO/Planet Labs PBC SkySat

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In southern Chile, there has long been a conventional methanol industry, which until now has produced the chemical compound from fossil natural gas in the region. However, the world’s most important producer, Methanex from Canada, relocated part of its production to the US state of Louisiana a few years ago, partly due to the fracking boom in the USA.

The consortium around Porsche and Siemens Energy, which is now practically reviving the traditional business here in a more environmentally friendly way, wants to ship that green gasoline from the pilot plant to Germany via the port of Punta Arenas. The port is located about 40 kilometers south of the plant. Later, in the port of Cabo Negro, just 15 kilometers away, the fuel terminal of the Chilean mineral oil company Enap, which is also involved in the project, is to be used.

Port of Cabo Negro
Port of Cabo Negro, Magellan region, Chile.27.04.2022: The port is currently used primarily by the conventional methane producer Methanex and the Chilean petroleum company Enap. In the future, e-fuel will be shipped here to Europe.Image: LiveEO/Google Earth/Maxar

But the consortium dominated by German companies is not the only one that wants to produce fuel at Cape Horn with the help of wind turbines. The French oil company Total has secured the land for a huge wind farm with up to ten gigawatts of power to produce hydrogen and then ammonia using green electricity. A compound that can be used to power ships in the future, just like methanol. And there are other similar mergers.

By contrast, the first major e-fuel plant in Europe, to be built with German participation in a fjord in northern Norway, has just suffered a setback. The European Commission’s ETS Innovation Fund has rejected funding. This has delayed the project in Mosjøen, says Nils Aldag, whose company Sunfire from Dresden is to contribute the electrolysers. The technology for extracting CO2 from the air is to come from the Swiss company Climeworks.

Mosjøen, Nordland Province, Norway
Mosjøen, Nordland Province, Norway11.07.2022: There is still nothing to be seen at the site where the first large e-fuel factory in Europe is to be built. The start of construction is delayed.Image: LiveEO/Pleiades

Latest satellite images show no progress at the planned site so far. Unlike the plant in Patagonia, the one in Norway focuses on climate-neutral aviation gasoline. This is particularly essential if airlines want to make their long-haul flights largely climate-neutral. Here, electric and hydrogen power are considered technologically impractical.

The delay in the Norwegian project means that Siemens Energy, Porsche and their partners remain the technology leaders for the time being when it comes to new types of climate-neutral e-fuel. At any rate, the new factory in Patagonia should help the FDP and its Porsche-driving leader Christian Lindner to justify their rejection of a complete ban on internal combustion engines.