9 September 2026
Market Uncertainty Slows Investment in Sustainable Fuels
Meeting climate targets will require large volumes of sustainable liquid and gaseous fuels, particularly in sectors such as aviation, shipping and heavy industry, where electrification is difficult. Despite this, the expansion of new biorefineries remains slow.
“Our study shows that uncertainty surrounding future markets and policy decisions is at least as important as technological development. To stimulate investment, we need to reduce uncertainty, not just costs,” says Elisabeth Wetterlund, Professor in Energy Engineering at Luleå University of Technology, referring to a report commissioned by the Swedish Energy Agency.
Investments in Large-Scale Facilities
In this project, the researchers examined the risks companies face when investing in large-scale biofuel production facilities and explored strategies that could make such investments more attractive.
The results show that investors do not only assess whether a facility can be profitable, but also whether the timing is right for investment. If energy prices, market conditions or future regulations are uncertain, many choose to wait, even when the investment appears promising.
The study also shows that flexibility can reduce risk. This may involve facilities that can operate using both biomass and electricity, or expanding production gradually as the market develops. Particularly promising are solutions where production is partially electrified, often providing a good balance between economic viability, resource efficiency and reduced climate impact
Gradual Construction Means Lower Risk
The researchers further demonstrate that some facilities can be converted in stages to eventually produce e-fuels and other renewable fuels based on fossil-free electricity. This reduces the need for large upfront investments and makes risks easier to manage.
The findings can be used both by companies planning investments and by policymakers designing future support schemes and regulatory frameworks.
“By reducing uncertainty surrounding future markets and revenue streams, more investments can be realised and the transition to a competitive Swedish bioeconomy can gain momentum,” says Elisabeth Wetterlund.
Contributors to the report A flexible bioeconomy – key factor to enabling investments in large-scale biorefineries Organisation, also include Jonas Zetterholm of RISE, Anna Krook-Riekkola, Professor of Energy Engineering, Jonas Forsberg, Researcher in Energy Engineering, and Mahsa Mehrara, Researcher in Energy Engineering at Luleå University of Technology.
Contact
Elisabeth Wetterlund
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