Last year the International Maritime Organization, recognising the slow progress the sector had made, set ambitious targets to reduce shipping emissions by at least 50% by 2050 compared to 2008. Companies started lining up to face the challenge. But the shipping sector is very energy intensive. Bunker fuel costs can account for 24 – 41% of total shipping costs, so any clean fuel transition must be competitively priced. The fact that alternatives are double to five times the cost of heavy fuel oil explains why low carbon options have barely made an impact so far. Dolf Gielen and Roland Roesch of IRENA explain how the cost gap can narrow in the medium to long term as technology improves, costs fall, and regulations become more favourable – all assisted by the rapid progress in clean technology adoption in other sectors. The favourites under review are biofuels, methanol, ammonia and hydrogen. They conclude Europe can play a leading role in this transition. The region already has a substantial number of proven technology providers in the shipping space, and the institutions to drive energy and climate policies forward.
The shipping sector is responsible for 3% of annual global CO2 emissions, 677 Mt in 2017. International shipping bunker fuel use accounts for around 9% of global emissions associated with the transport sector. Despite efficiency gains these emissions continue to rise as trade volumes grow. The sector is currently experiencing a fuel transition because of stricter local air pollution policies. This is augmented by the need for the shipping sector to shift to carbon-free propulsion alternatives, as part of the global drive to decarbonise energy supply and use in the coming decades.
In 2018 the International Maritime Organization (IMO) adopted a strategy to reduce greenhouse gas (GHG) emissions from shipping by at least 50 percent by 2050 as compared to 2008 shipping emissions, whilst pursuing efforts towards phasing them out, set an ambitious target for the maritime industry that can be expected to ultimately align GHG emissions from shipping with the Paris Agreement. Maersk, the world’s biggest container shipper, aims to be carbon neutral by 2050. The company aims to have carbon neutral vessels commercially viable by 2030.
Getting to Zero Coalition
The ambition of the Getting to Zero Coalition that was launched at the recent climate summit in New York is to have commercially viable zero emission vessels (ZEVs) operating along deep sea trade routes by 2030, supported by the necessary infrastructure for scalable zero-carbon energy supply.
IRENA has joined the Coalition and is preparing a report Navigating the way to a renewable future: Solutions to decarbonize shipping.
By the end of 2018, the global shipping fleet had a capacity of nearly 2 Gt and transported 8.9 Gt of freight. In 2017, the port container traffic equated to 753 million twenty-foot equivalent units (MTEUs) of containers. Global international bunkering for shipping amounted to 8.9 exajoules (EJ) in 2017 (around 215 Mt fuel), with 82% being heavy fuel oil (HFO) and the remaining 18% marine gas and diesel oil. Container ships, bulk carriers and oil tankers together make up more than half of total fuel use.
A closer look reveals that a limited number of interventions can have a significant emissions impact in this sector. A total of 17,822 large (25 – 60 thousand gross tonnes) and very large (>60 thousand gross tonnes) vessels represent 82% of gross tonnage. Seven countries account for 57% of global bunkering; Singapore alone accounts for 22% of global bunkering and the Netherlands is the largest bunkering country in Europe with a 6% global share.
Clean energy costs are far too high, but the gap will close
The shipping sector is one of the most difficult to decarbonise because today’s bunker fuels are cheap refining residues. Moreover international shipping is outside the national greenhouse gas emissions accounting framework.
Biofuels, renewable hydrogen and other hydrogen-derived fuels such as ammonia are being considered. Whereas electric battery systems are being introduced for short range ferries these are not an option for long range ocean going vessels.
The shipping sector is an energy intensive sector. Bunker fuel costs can account for 24 – 41% of total shipping costs therefore competitive fuel prices are key. Low carbon fuel options are currently not competitive, with supply cost double to five times those of heavy fuel oil. However, this gap will narrow in the medium to long term as the adoption of clean technologies grows across sectors, technology improves, costs fall and regulations become more favourable. Other key decisive factors will include fuel availability and competition for scarce biomass, infrastructure adaptation costs, technological maturity, toxicity and sustainability issues.
From a technological point of view, biofuels are mature, require few adjustments to the existing engines of ships and port infrastructure, and can have a considerable emissions reduction benefits, even as blends. Cleaned biogas holds potential as a transitional fuel which could gradually replace fossil LNG that is currently being introduced in the sector. Yet there are three main barriers that limit the biofuel potential in the shipping sector: economics, availability and sustainability concerns. Advanced biofuels from residues and lignocellulosic crops can minimise sustainability issues but these require further development.
Methanol, ammonia, hydrogen
Other synthetic fuels being considered include methanol and ammonia. These fuels can effectively decrease and even eliminate emissions if they are produced from green hydrogen produced through electrolysis using renewable power. This hydrogen is combined with CO2 or nitrogen to yield liquid and gaseous energy commodities. A new IRENA study Hydrogen – a renewable energy perspective shows rapid scaleup and falling cost of green hydrogen production worldwide, driven by falling renewable power generation cost. Hydrogen can be used directly as a shipping fuel but its storage poses challenges. Liquids derived from hydrogen (so-called e-fuels or power fuels) do not face such problems but their production incurs additional cost and efficiency losses.
Early stage case studies
In Port Lincoln, Australia, a small-scale industrial plant combines 38 MW electrolysis with a 60 tpd ammonia plant. The project integrates wind and solar resources through a transmission-level virtual power plant, with an overall capacity factor in excess of 70%. The hydrogen plant will produce 5,000 tonnes of hydrogen per year. Most will be used on site to generate up to 18,000 tonnes of ammonia. The bulk of the ammonia is for industrial purposes. The project is planned for commissioning in Q42020. Thyssenkrupp is one of the key technology providers for this project. Europe has several other electrolyser suppliers including Hydrogenics, ITM Power, NEL and Siemens. Fierce competition also from non-European suppliers results in downward pressure on equipment prices and rapid innovation. So far ammonia is not deployed for shipping but a design study for such vessel was recently published by the Technical University Delft.
There is a small number of methanol-powered commercial vessels in operation, using commercially available marine engine technologies. By 2016, seven cargo ships of 50 thousand tonnes each were operating on methanol through a dual-fuel engine produced by MAN SE, with a growth foreseen to 11 vessels by the end of 2019. Vessels can also be retrofitted with methanol engines; the Stena Germanica ferry, for example, was retrofitted to operate with methanol in about four months at a cost of roughly USD 27 million. Today BioMCN in the Netherlands produces 15% of its methanol from biogas (equivalent to 67 kt/yr capacity); plans exist for upscaling based on green hydrogen. Both ammonia and methanol are more toxic than conventional bunker fuels.
In conclusion the shipping sector may see significant change in the coming years though the direction is still unclear. This poses a risk and an opportunity, depending on that direction and the magnitude of that change. Europe seems well placed to play an important role in this transition given the quality and number of its proven technology providers and its attention to energy and climate policies.
Dolf Gielen is the Director, IRENA Innovation and Technology Center
Roland Roesch is the Deputy Director, IRENA Innovation and Technology Center