Synthetic Diesel (e-Diesel) 2026: Drop-in Compatibility & Production Cost

Executive Summary

Synthetic diesel (e-diesel) produced via power-to-liquid (PtL) routes using green hydrogen and captured CO₂ offers the promise of a drop-in, low-carbon replacement for fossil diesel. It can run in existing engines, pipelines, and storage tanks, avoiding costly fleet and infrastructure turnover. The catch is cost: mid-2020s PtL diesel sits far above fossil fuel prices, even at high carbon prices. At Energy Solutions, we benchmark e-diesel production pathways, costs, and abatement potential across heavy-duty road, aviation, and maritime segments.

• Typical PtL diesel plants use green hydrogen from electrolysis and CO₂ from biogenic, industrial, or DAC sources to produce synthetic hydrocarbons via Fischer–Tropsch or similar routes.
• Indicative 2026 levelised production costs for e-diesel are in the 2.5–4.0 EUR/litre range (depending on power price and utilisation), compared with 0.8–1.5 EUR/litre for fossil diesel in many markets.
• On a well-to-wheel basis, e-diesel can deliver 70–95% GHG reductions versus fossil diesel when powered by additional renewables and supplied with sustainable CO₂, but can be far less beneficial if CO₂ is sourced from unabated fossil point sources.
• Drop-in compatibility makes e-diesel particularly interesting for aviation, shipping, and remote or legacy fleets where electrification or hydrogen are challenging.
• Even by 2035, e-diesel is likely to remain a premium, limited-volume fuel targeting high-value applications unless power prices and electrolyser costs fall substantially.

What You'll Learn

• e-Diesel Basics: Power-to-Liquid Pathways and Chemistry
• Benchmarks: Energy Use, Cost, and Emissions vs Fossil Diesel and SAF
• Drop-in Compatibility: Engines, Blending, and Infrastructure
• Case Studies: Early PtL Diesel and E-Fuel Projects
• Economic Analysis: Abatement Cost and Sector Prioritisation
• Devil's Advocate: Scarce Renewables and CO₂ Sourcing Risks
• Outlook to 2030/2035: Where e-Diesel Could Realistically Compete
• FAQ: e-Diesel Production, Use Cases, and Policy Support

e-Diesel Basics: Power-to-Liquid Pathways and Chemistry

e-Diesel is typically produced via power-to-liquid (PtL) routes. Renewable electricity powers electrolysers to produce hydrogen, which is combined with CO₂ to form a synthesis gas and then processed into liquid hydrocarbons. Common process variants include:

• Co-electrolysis + Fischer–Tropsch: Solid oxide or low-temperature co-electrolysis yields syngas (H₂ + CO), which feeds an FT reactor to produce a range of hydrocarbons later upgraded to diesel-range fuels.
• Reverse water–gas shift (RWGS) + FT: Separate electrolysis produces H₂; CO₂ is converted to CO via RWGS, and the resulting syngas enters an FT step.
• Alternative synthesis routes: Methanol-to-jet/diesel and other PtL schemes that yield diesel fractions as co-products to aviation fuels.

Benchmarks: Energy Use, Cost, and Emissions vs Fossil Diesel and SAF

PtL diesel is energy intensive. Converting renewable electricity into liquid fuels involves multiple steps—electrolysis, CO₂ conversion, synthesis, and upgrading—each with losses. The following table summarises stylised benchmarks.

Drop-in Compatibility: Engines, Blending, and Infrastructure

One of e-diesel’s strongest selling points is its drop-in compatibility. When produced to appropriate specifications, synthetic diesel can be blended with or fully replace fossil diesel in existing internal combustion engines, storage tanks, and pipelines.

Case Studies: Early PtL Diesel and E-Fuel Projects

Case Studies: From Pilot Plants to Commercial E-Fuels

Case Study 1 – Integrated PtL E-Fuels Plant with Diesel Co-Products

Context

• Scale: Tens of thousands of tonnes per year of synthetic fuels.
• Products: Mix of e-kerosene and e-diesel fractions.
• Customers: Aviation alliances, logistics companies, and industrial users.

Insights

• Co-producing e-kerosene and e-diesel improves economies of scope, but allocation of costs and emissions is non-trivial.
• Long-term offtake agreements and policy instruments (e.g. mandates, contracts-for-difference) are crucial to close the cost gap versus fossil fuels.

Case Study 2 – Pilot e-Diesel for Specialty and Remote Applications

Context

• Use case: Supplying synthetic diesel to remote mines or island grids where fuel delivery is costly and decarbonisation options are limited.

Insights

• In high-cost diesel markets, e-diesel's premium narrows, especially when paired with on-site renewables.
• Drop-in compatibility minimises disruption to existing engine fleets and maintenance practices.

Economic Analysis: Abatement Cost and Sector Prioritisation

Given its high production cost, e-diesel should be directed to sectors where alternatives are least practical and where drop-in compatibility has the highest value. Aviation, long-haul shipping, and certain defence or remote applications are prime candidates; mainstream urban road transport may be better served by electrification.

Devil's Advocate: Scarce Renewables and CO₂ Sourcing Risks

From a system perspective, critics argue that using large amounts of renewable electricity to make e-diesel is an inefficient way to decarbonise when direct electrification or hydrogen can often deliver more emissions reductions per kWh of renewables. In grids that are not yet fully decarbonised, diverting clean power to PtL may even prolong fossil generation elsewhere.

CO₂ sourcing is another concern. If the carbon comes from unabated fossil point sources such as cement or steel plants, the climate benefit depends on how quickly these sources themselves are decarbonised. Over the long term, sustainable e-diesel pathways will likely depend on biogenic CO₂ or direct air capture, both of which add cost and complexity.

Outlook to 2030/2035: Where e-Diesel Could Realistically Compete

Through 2030, e-diesel volumes are likely to remain modest, concentrated in pilot projects and high-value segments. By 2035, under ambitious decarbonisation policies and falling power and electrolyser costs, e-diesel could supply a meaningful share of aviation and shipping fuel demand, with more limited roles in heavy road transport.

FAQ: e-Diesel Production, Use Cases, and Policy Support

How is e-diesel different from conventional biodiesel or HVO?

e-Diesel is produced from electricity-derived hydrogen and captured CO₂, rather than from biological oils or fats. It is a synthetic hydrocarbon fuel, often similar to fossil diesel at the molecular level, whereas biodiesel (FAME) and HVO originate from biomass lipids. This difference has implications for feedstock availability, sustainability criteria, and cost structure.

Can e-diesel be used in existing diesel engines without modification?

In many cases, yes. When produced to meet diesel fuel standards, e-diesel can be used as a drop-in fuel in existing engines. However, engine OEM approval, fuel standard compliance, and field testing are important, especially at high or 100% blend ratios.

Why is e-diesel so expensive compared with fossil diesel?

The main cost drivers are the electricity needed for electrolysis, the capital cost of electrolysers and PtL plants, and CO₂ sourcing and conditioning. Until power prices fall and electrolysers scale massively, e-diesel will remain significantly more expensive than fossil diesel in most markets, even with carbon pricing.

Which sectors should be prioritised for e-diesel use?

Given limited volumes and high costs, e-diesel should be prioritised where alternatives are least practical: aviation, some shipping routes, and potentially specific remote or defence applications. Road transport generally has cheaper and more efficient options in electrification and, in some cases, hydrogen.