A simple reactor that mimics plants by turning sunlight into fuel has been demonstrated in the laboratory, boosting hopes for a large-scale renewable source of liquid fuel.

"We have a big energy problem and we have to think big," said Prof Sossina Haile, at the California Institute of Technology, who led the research.

Haile estimates that a rooftop reactor could produce about three gallons of fuel a day. She thinks transport fuels would be the first application of the reactor, if it goes on to commercial use. But she said an equally important use for the renewable fuels would be to store solar energy so it is available at times of peak demand, and overnight. She says the first improvements that will be made to the existing reactor will be to improve the insulation to help stop heat loss, a simple move that she expects to treble the current efficiency.

The key component is made from the metal cerium, which is almost as abundant as copper, unlike other rare and expensive metals frequently used as catalysts, such as platinum. Therefore, said Haile, availability would not limit the use of the device. "There is nothing cost prohibitive in our set-up," she said. "And there is plenty of cerium for this technology to make a major contribution to global gasoline supplies."

The fossil fuels used by vehicles, ships and aeroplanes pose the biggest challenge in the search for low-carbon energy, as they are highly energy-dense and portable, unlike alternatives such as batteries or nuclear reactors. An efficient, large-scale way of converting solar energy into a renewable liquid fuel could play a major role in reducing greenhouse gas emissions and tackling climate change.

The device, reported in the journal Science, uses a standard parabolic mirror to focus the sun's rays into a reaction chamber where the cerium oxide catalyst breaks down water and carbon dioxide. It does this because heating cerium oxide drives oxygen atoms out of its crystal lattice. When cooled the lattice strips oxygen from surrounding chemicals, including water and CO2 in the reactor. That produces hydrogen and carbon monoxide, which can be converted to a liquid fuel.

In the experiments the reactor cycled up to 1,600C then down to 800C over 500 times, without damaging the catalyst. "The trick here is the cerium oxide – it's very refractory, it's a rock," said Haile. "But it still has this incredible ability to release oxygen. It can lose one in eight of its oxygen molecules." Caltech has filed patents on this use of cerium oxide.

The use of sunlight to make fuel is being explored by groups around the world, such as that lead by Daniel Nocera at Massachussetts Institute of Technology. His group's technology works at room temperature but is more complex chemically. At the Lawrence Berkeley National Laboratory last year researchers found cobalt oxide could help sunlight create fuels, but only as nano-sized crystals. Imperial College in London is also exploring different catalysts.

Other groups are exploring the use of CO2 from power station flues to create liquid fuels, while a related research effort is testing how algae grown in sunlight can be used to create fuels.