1、Electric Power&Natural Gas PracticeHow traders can capture value in sustainable fuels The sustainable-fuel market is nascent,complex,and growing fast.Traders that develop an in-depth understanding across different fuels,feedstocks,and regions can gain a competitive advantage.October 2023by Tapio Mel

2、gin,Agata Mucha-Geppert,Xavier Veillard,and Andrew WarrellAs countries around the world seek to limit their carbon emissions,sustainable fuels will play an important role.This category consists of a broad range of low-carbon fuels,including biofuels,e-fuels,and chemical by-products(see sidebar,“Know

3、 your sustainable fuels”).Because sustainable fuels can fill gaps in decarbonization and complement electrification,demand is expected to triple over the next 20 years,reaching approximately 600 million metric tons(Mt)by 2050(Exhibit 1).1 To date,completed advanced-biofuels 1 Based on the Achieved C

4、ommitments scenario from the McKinsey Global Energy Perspective 2023(forthcoming).For more on the market outlook,see Nathan Lash,Tapio Melgin,Agata Mucha-Geppert,and Ole Rolser,“Charting the global energy landscape to 2050:Sustainable fuels,”McKinsey,July 7,2022.2 McKinsey Sustainable Fuels capacity

5、 tracker,May 2023.projects and announced investment pipeline in sustainable-fuel capacity have reached$100 billion.2The sustainable-fuel market is still mostly nascent,characterized by complex regulations and interdependencies across sectors.Physical and regulatory constraints on feedstocks have res

6、ulted in price volatility;supply chain and infrastructure bottlenecks,variations in pricing across regions,and import and export rulings have added to this volatility.The mix of fuel types will evolve through 2050:road fuels have represented most of the Exhibit 12019 2025 2030 2035 2040 2045 2050128