SYNTHETIC FUEL MARKET ANALYSIS

The global synthetic fuel market size was valued at US$ 5.60 billion in 2023 and is projected to reach US$ 19.82 billion by 2030, growing at a CAGR of 19.8% from 2023 to 2030. The growth of the synthetic fuel market is being driven by the increasing demand for cleaner and more sustainable fuels, the rising cost of crude oil, and the growing focus on energy security.

Synthetic fuels are produced from a variety of feedstocks, including biomass, coal, and natural gas. They are chemically similar to conventional fuels and can be used in existing combustion engines without modification. However, synthetic fuels have a number of advantages over conventional fuels 

Synthetic Fuel Market Regional Insights

• North America is the largest market for synthetic fuels, accounting for over 30% of the global market share in 2022. This is due to the high demand for synthetic fuels in the transportation sector, as well as the availability of raw materials and infrastructure for production. The United States is the largest market for synthetic fuels in North America, followed by Canada and Mexico.
• Europe is the second largest market for synthetic fuels, accounting for over 25% of the global market share in 2022. The demand for synthetic fuels in Europe is driven by the need to reduce greenhouse gas emissions and the availability of government subsidies for the production of synthetic fuels. Germany, France, and the United Kingdom are the largest markets for synthetic fuels in Europe.
• Asia Pacific is the fastest growing market for synthetic fuels, with a CAGR of over 25% from 2022 to 2030. The demand for synthetic fuels in Asia Pacific is driven by the growing economies of China and India, as well as the increasing air pollution levels in the region. China is the largest market for synthetic fuels in Asia Pacific, followed by India and Japan.

Figure 1. Global Synthetic Fuel Market Share (%), by Region, 2023

Synthetic Fuel Market Drivers

• Carbon Emission Reduction Goals: Governments and organizations around the world are setting ambitious targets to reduce carbon emissions and combat climate change. Synthetic fuels offer a way to decarbonize sectors that are challenging to electrify directly, such as aviation, heavy industry, and long-haul shipping.
• Energy Security: As the world seeks to diversify its energy sources and reduce reliance on fossil fuels, synthetic fuels can provide an alternative energy carrier that can be produced from a variety of renewable resources, reducing dependence on imported fossil fuels.
• Compatibility with Existing Infrastructure: Synthetic fuels can be blended with conventional fuels or used in existing internal combustion engine technologies without significant modifications to infrastructure. This compatibility makes them a more feasible option for transitioning away from fossil fuels.
• Intermittent Renewable Energy: Renewables like solar and wind energy are intermittent in nature, often producing excess energy during certain periods. Synthetic fuel production can serve as a way to store this excess energy in chemical form, making it available when renewable generation is low.

Synthetic Fuel Market Opportunities

• Carbon Emission Reduction: The primary opportunity for synthetic fuels lies in their potential to significantly reduce carbon emissions from sectors that are challenging to electrify, such as aviation, shipping, and heavy industry. As countries and industries strive to meet their climate targets, synthetic fuels can play a crucial role in achieving carbon reduction goals.
• Energy Storage and Grid Balancing: Synthetic fuels can serve as a form of energy storage, allowing excess renewable energy to be stored in the form of chemical bonds. During periods of low renewable energy production, these fuels can be converted back into electricity or used directly, thus contributing to grid stability and balancing intermittent energy sources.
• Technology Innovation: Continued research and development in electrolysis, catalysis, and other conversion technologies are likely to lead to more efficient and cost-effective methods for producing synthetic fuels. Advancements in materials science and process optimization can drive down production costs and improve overall energy efficiency.
• Circular Carbon Economy: The concept of a circular carbon economy, which involves capturing and recycling carbon emissions, can be realized through the production of synthetic fuels using captured CO2. This approach not only reduces emissions but also helps utilize waste carbon from industrial processes.

Synthetic Fuel Market Trends

• Advancements in Production Technologies: There was a growing focus on improving the efficiency and cost-effectiveness of production technologies for synthetic fuels. Innovations in electrolysis, catalysis, and reactor design were being pursued to enhance the overall production process.
• Partnerships and Collaborations: Industry players, governments, and research institutions were forming partnerships and collaborations to accelerate the development and deployment of synthetic fuel technologies. These collaborations aimed to leverage expertise and resources to address technical challenges and bring about commercial-scale production.
• Growing Investment and Funding: The synthetic fuel sector was attracting increased investment from both private and public sources. Investors were recognizing the potential of synthetic fuels as a means to decarbonize sectors like aviation and shipping, leading to funding for research, pilot projects, and commercialization efforts.
• Policy Support and Regulations: Governments in various regions were considering or implementing policies to support the adoption of synthetic fuels. This included incentives, subsidies, and emissions reduction targets that encouraged the growth of the market.

Synthetic Fuel Market Restraints

• High Production Costs: The production of synthetic fuels, especially through processes like electrolysis, can be energy-intensive and expensive. The cost of producing synthetic fuels was often higher compared to conventional fossil fuels, which could limit their economic competitiveness.
• Energy Efficiency Concerns: Some synthetic fuel production methods, such as the conversion of renewable electricity into hydrogen for further fuel synthesis, could involve energy losses at various stages. The overall energy efficiency of the process was a concern, particularly when considering the net energy gain relative to the energy invested.
• Competing Technologies: The synthetic fuel market faced competition from other renewable technologies, such as battery electric vehicles (BEVs) and hydrogen fuel cells. These technologies were gaining traction in sectors like transportation and could divert attention and resources away from synthetic fuels.
• Infrastructure Challenges: The distribution and storage infrastructure for synthetic fuels were limited compared to the well-established infrastructure for fossil fuels. Retrofitting or building new infrastructure to accommodate synthetic fuels could be a time-consuming and expensive process.

 Recent Developments

New product launches

• In 2021, ExxonMobil launched its EcoSynthesis Fuel™, a synthetic fuel made from renewable biomass. EcoSynthesis Fuel™ is said to be carbon neutral and can be used in existing vehicles without any modifications.
• In 2022, Sasol launched its Synfuels™, a range of synthetic fuels made from coal and gas. Synfuels™ are said to be cleaner-burning than traditional fossil fuels and can be used in a variety of applications, including transportation, power generation, and industrial processes.
• In 2023, Reliance Industries Ltd. launched its Green Ammonia-to-Liquids (GAL) technology, which can be used to produce synthetic fuels from renewable energy sources. GAL technology is said to be more efficient and cost-effective than other methods of producing synthetic fuels.

Acquisition and partnerships

• In 2022, ExxonMobil acquired Clean Energy Fuels, a leading provider of natural gas and hydrogen refueling infrastructure. This acquisition will help ExxonMobil to expand its presence in the renewable fuels market.
• In 2021, Shell acquired Velocys, a company that develops and licenses technology for converting biomass into synthetic fuels. This acquisition will help Shell to develop its own synthetic fuel production capacity.
• In 2020, Air Liquide and TotalEnergies formed a joint venture to develop and commercialise synthetic fuels. This joint venture will combine the expertise of two leading energy companies to accelerate the development of this promising technology.

Figure 2. Global Synthetic Fuel Market Share (%), by Application, 2023

Top companies in Synthetic Fuel Market

• Sasol
• Shell
• Chevron
• ExxonMobil
• BP (British Petroleum)
• Synfuels China
• Rentech, Inc.
• Fischer-Tropsch Technology
• Linc Energy
• DKRW Advanced Fuels

*Definition: The Synthetic Fuel market refers to the industry focused on the production and distribution of fuels that are manufactured from feedstocks other than traditional fossil fuels, typically using chemical processes, gasification, and other technologies. These fuels are designed to substitute conventional fuels like gasoline, diesel, and jet fuel in transportation and other applications.