Play your cards right
“There will be no cheap fuel in future” is a phrase that should arguably be repeated mantra-like at the start of every discussion about decarbonization of shipping. This statement should probably be followed with the addition of “it won’t be quick or easy either”.
Despite its operational challenges, susceptibility to fraud and calamitous side-effects on human health, fuel oil has served the industry pretty well since the oil majors decided that shipping was as good a place as any to dispose of its waste product.
Crude-linked price spikes aside, it is ubiquitous and easy to buy, with an installed infrastructure that makes it easy enough to pull up to a barge or terminal and fill up. Such ease and familiarity makes change difficult and the process painful.
Witness the bruhaha of IMO’s 2020 regulations limiting the amount of permissible sulphur or Tier III NOx emissions restrictions. Both were cast as a heresy; how could a regulator seek to punish the industry for supporting the global economy by insisting that the harmful output of the stack be limited.
Let’s not forget it took more than a decade of negotiation, lobbying and research, including some that concluded that in densely populated port cities, ship source pollution was contributing to childhood asthma and excess deaths that could not be ascribed to other sources.
But IMO2020 simply set the scene for what was to come. In order to meet the commitments set out in the Paris Accords, shipping must move to low and potentially zero carbon fuels, reducing emissions dramatically in less than a decade and cutting them further by 2050.
Perhaps chastened by the experience of IMO2020 – prices rose, some technical problems ensued but the world continued to turn – the industry is taking a more positive approach to decarbonization, though this arguably is because it has not yet fully understood the scale of the challenge.
Partly, this reflects the fact that fuel oil will be in use for some years, if one assumes that a large percentage of the fleet will continue to be allowed to sail in a lower emissions environment. It also reflects the fact that in LNG as fuel it has a safe and compliant solution which suits the energy majors who increasingly have lots of it to sell. It has also been subject to enthusiastic cheerleading from those whose interests are for more ships to be built regardless of their long term prospects.
The challenge the industry has yet to fully embrace is that LNG is only a transition solution, since like its closest competitor Methanol, it is a fossil fuel in conventional form and while it reduces carbon emissions in operation emits other greenhouses gases thought more dangerous than carbon.
Methanol too has challenges not least that it contains a carbon molecule. But it also offers lower carbon emissions when used as fuel and unlike LNG does not require cryogenic storage.
What both require is a policy framework and investment strategy that enables the large scale production of renewables. While this is happening already for Methanol, the regulatory tide appears to be retreating for LNG with the European Union, some US states and nations announcing a shift away from gas as power.
What excites policy-makers more is the prospects for Hydrogen and shipowners are interested too, though they appear to prefer ammonia as a long term, carbon-free option.
Hydrogen lies at the end of the ‘light gas’ pathway, light, small molecule fuels with high energy content, but more demanding, mainly cryogenic fuel supply systems and storage. Building the hydrogen economy will necessitate significant technical advances, taking a decade or more until it becomes a practical solution. The prize is an energy content almost three times that of LNG and HFO; the drawback: the vast majority current production is derived from fossil fuels so not sustainable on a lifecycle basis.
The LPG/Methanol pathway leads ultimately to ammonia. Perhaps because, like methanol, it has track record as a cargo, the industry seems ready to embrace its potential as fuel. It has a zero-carbon tank-to-wake emissions profile, regardless of the production source. While it shows considerable promise as a fuel, the technology for storage and application as fuel is still in development while new regulations must account for its specific safety considerations.
The final option has also attracted attention though like the others, it faces challenges too. This hinges on bio/synthetic fuels that are derived from renewable sources and can produce liquid fuels. These fuels have similar properties to diesel oil and thus are much less demanding in terms of new infrastructure and technologies onboard and can be utilized with minimal changes to current ship designs.
While first generation, plant-derived biofuels face competition with food crops and have high carbon intensity during production, second generation biofuels may overcome these challenges while offering similar energy content to MGO. A third generation such as lignocellulosic or algae-based fuels could potentially provide the industry with almost 500 million tons of fuels annually if it can be done so with attractive economics.
Which brings us back to cost, and technology and availability. Some bets have already been placed but so far the choice is limited. What we must bear in mind is that it’s not going to be quick, or cheap, or easy. Other than that? Full steam ahead.