Should shipping bid for existing alternative fuels, or wait for technologies to mature?

There is mounting pressure on the shipping industry to switch to alternative fuels such as hydrogen and ammonia as soon as possible as time is running out for the sector to act on its emissions.

Indeed, over the past few years, the sector has come up with designs of ships that would be ready to burn fuels such as ammonia or even hydrogen. However, the technology development to make these a reality is still in a nascent stage with ammonia-ready and hydrogen-ready engines moving into demonstration and pilot projects.

Signals are there that the sector needs to be ready to switch once alternative fuels become more readily available and their production is scaled. Overall, there is this sense of urgency to act now, while at the same time actions are hindered by uncertainty regarding regulations and policies that are crucial to providing confidence to investors to accelerate the necessary investments in infrastructure.

However, there may be some ‘ugly truths’ the sector needs to look at before continuing the debate around the uptake of alternative fuels.

And the key element revolves around the current state of affairs with regard to the production of hydrogen, ammonia, and methanol.

Namely, the existing production of alternative fuels today could barely cover what the shipping industry needs if shipping were to get the first ‘crack’ at that supply before other sectors. What is more, the fact is that the very production of these fuels, such as hydrogen, for example, is far from being green and needs to be decarbonized first.

“Before we talk about expanding and increasing the supply of low carbon fuels, we need to acknowledge the challenges we have with the current supply of those future fuels, mainly ammonia, methanol, and hydrogen,” Kenneth Tveter – Head of Green Transition Group, Clarksons, said while speaking on the sustainability path of the low-carbon fuels during last week’s 2nd IMO Symposium on Alternative Fuels.

This year’s topic of the symposium was “Ensuring a just and inclusive transition towards low-carbon shipping”, as the IMO points to the need to support the shipping sector to pursue zero-emission goals while leaving no one behind. 

“If we take hydrogen for example as being a sort of a feedstock for the various derivatives, some 94 million tons are currently being produced globally. However, hydrogen has an emission profile that equals that of shipping; about 900 million tonnes of CO2 per year. Therefore, we need to decarbonize this before we can start talking about increasing the supply of it,” he stressed.

As the fuel industry moves from fossil-based fuels towards electricity-based fuels, the common starting point is that there needs to be enough renewable energy to produce sufficient amounts of green hydrogen and various other fuels.

“When it comes to this pathway for shipping there are some challenges. We are arguing that the technology is not mature at its current stage and we need to allow it to further mature before we can adopt electricity-based fuels at a larger scale,” Tveter said.

“If you have 100 units of energy today and you want to convert this to any type of e-fuel and you want to use it as fuel for shipping, the fact is that due to conversion inefficiencies you’re likely to lose about half of what you started with just in the conversion process. Then you take the remaining 50% and apply it to your ship, and because of the low thermal efficiency of internal combustion engines, you lose another 50%.”

Hence, in an environment where there is a scarcity of renewable fuels, the question arises whether it is a sustainable pathway for shipping to take a limited amount of renewable energy and apply it to an industry where you only get 25% utilization of what you’re starting with, Tveter pointed out.

He further explained that in decarbonizing shipping with ammonia, the sector would need about 2,000 Gigawatts of energy to replace all of the fossil fuels currently being used in the industry, resulting in a 3% reduction in global GHG emissions.

However, if those 2,000 Gigawatts would be used to decarbonize parts of steel production, the resulting reduction of global GHG emissions would be 7%, or even 12% if you were to use this energy to replace 60% of coal power energy.

Having this in mind, Tveter questioned if shipping should bid for these very limited supplies of renewable energy to decarbonize 3% of global GHG emissions or if the sector should wait and allow the technology to mature to use renewable energy more efficiently.

“If the sector decided to follow the e-fuels pathway, the shipping sector would require access to a large amount of renewable energy. In order to decarbonize the global supply of hydrogen, methanol, and ammonia today, we would need about 2/3 of the globally installed renewable capacity.“

“If you want to add the 2000 Gigatonnes of renewable energy required to decarbonize shipping, we would exceed the global supply of renewable installed capacity. This is not something that can be done overnight, and we need to understand how practical it would be to try to just completely switch our fleets towards renewable fuels in the short term.”

Tveter said that in Clarksons’ view there would be multiple solutions to decarbonize shipping, adding that technology is likely to play a very important role.

“We believe that technology would have a higher impact in the short to the medium term where you can improve energy efficiencies of ships, while we allow the development of alternative fuels to develop,” he noted.

While the industry waits for the technology to mature, Clarksons supports the use of LNG as an option for shipowners to achieve certain emission cuts right now. Combined with energy efficiency technologies, and, potentially, carbon capture in the future, considerable savings can be made.

In conclusion, Tveter believes that zero-carbon fuels are definitely a solution for the future, but not in the shorter transition window for this and probably far into the following decade.