Decarbonisation – solving the commercial problem

May 13 2021


The challenge of decarbonising shipping is more about figuring out who will pay for it, or how it will be made fair on companies which spend money on zero carbon fuels – one of the conclusions from an ABB webinar on decarbonisation.

The biggest question in maritime decarbonisation is probably who will pay for it, or how companies will be able to justify the expense financially, not how we do it, said Lars Robert Pedersen, Deputy Secretary General, BIMCO, speaking at a webinar organised by ABB.

 

“That’s probably the real question we have to answer, how will we make this possible from a commercial standpoint.”

 

Ships operating with decarbonised fuels will have “a very different cost basis”.

 

Since requirements to decarbonise are unlikely to apply to all ships at the same time, there will be a time where some ships are using zero carbon fuels and some are not – and so the ones using zero carbon fuels will be at a commercial disadvantage. In a competitive market, this will make zero carbon fuels very hard to commit to.

 

“There has to be some measure that can somehow equalize this [commercially] between operators, such as from regulators imposing a cost on emissions. We don’t know how to do this yet. That’s a big question we have to answer.”

 

IMO’s goal is to reduce total emissions from shipping by half, but that does not mean every ship will halve its emissions. “Of course it entails that some ships do more than others.”

 

“I’m quite sure we need regulations to assist this, the market itself will not solve it.”

 

It would help push things in the right direction if the costs of running a low emitting ship could be equalised with a normal ship,

 

“We often hear shipowners have deep pockets, but they do actually have a bottom. There’s no way the industry can fund this.”

 

The webinar was organised as part of the “ABB Industry Expert Day” on October 21, 2020. ABB Turbocharging is a leader in the manufacture and maintenance of turbochargers for 500 kW to 80+ MW diesel and gas engines.

 

Audience opinion

The audience was asked twice, at the beginning and at the end of the webinar, “do you believe it is possible for an ambitious deep sea shipowner to decarbonize completely before 2050?”

 

At the beginning, 49% said yes, 29% no, and 22% not sure.

 

At the end, 56% said yes, 26%  no, 18% not sure.

 

So the webinar managed to change the minds of 7% of the audience.

 

Commenting on these results, BIMCO’s Mr Pedersen said it came down to the word ‘possible’.

 

“Because it is possible doesn’t mean that it gets done. We can definitely not say it is impossible.”

 

AVL

Kang-Ki (KK) Lee, senior vice president of engine testing company AVL List GmbH, said that with a mixture of regulation, public attention, technology and research, “I’m confident [decarbonisation] can be done at the end of the decade.”

 

“Fuel suppliers are very well understanding that the solution needs to be found. The pressure from the regulator is now bigger than ever.”

 

AVL says it is the world’s largest independent company for development, simulation and testing of all types of powertrain systems (combustion engine, transmission, electric drive, batteries, fuel cell and control technology) with over 11,500 employees. Mr Lee is responsible for “High Power Systems” at AVL.

 

“From my perspective [I see] a few high profile owners who are really concerned about [their] public image will be first to attempt this goal.”

 

Shipping is still a very fragmented business, he noted. In some areas, “it’s a big challenge for regulation to be enforced.”

 

“Incentives in the way of subsidies may help a little bit, but usually they are not in the order of magnitude [needed] to make the fundamental change.”

 

There is “a large group of conservative owners in the maritime industry” who will delay investing in zero carbon ships “until there are no other ways to avoid.”

 

So we’ll need rules. “The rules should apply for everyone. No exemptions, no last minute uncertainties. Be quick, be clear, be consistent.”

 

It may be very difficult to make it worthwhile to make a business case for converting an existing vessel to dual fuel, since it has less operational years left to payback the investment than a new vessel, he said.

 

In terms of the type of propulsion system we might expect, Mr Lee believes the internal combustion engine is likely to remain the major power source for ships. Other solutions (such as batteries) will be only for near sea and coastal shipping due to limitations in the range, he believes.

 

BIMCO perspective

“We need to have ships probably by the end of this decade, on the surface of the oceans, with zero emissions,” said BIMCO’s Lars Robert Pederson.

 

The shipping industry carries a wide range of products, from raw mineral cargo to very expensive product cargoes, and correspondingly there is a diversity between companies in the desire to decarbonise, he said.

 

Mr Pederson noted that in the decades leading up to 2009, the amount of trade carried by ships, and the emissions from ships, went up at the same rate. But after 2009, emissions and trade decoupled, with trade continuing to grow, but emissions not. The emissions for 2018 are actually slightly below 2008, although not a big enough drop to achieve the desired carbon ambitions.

 

For further decarbonisation, “the framework is there, the world is tuned into doing this,” he said. “[but] it is not something which will come about tomorrow. We are looking at a very long haul effort.”

 

Mr Pedersen is not an enthusiast of the European Union’s plans to include shipping in the European emissions trading scheme. “We need to address this at the IMO,” he said. “we think the EU actions are something which might have a negative effect. It might derail what goes on at IMO.”

 

Mr Pedersen is pleased to see charterers getting involved in driving lower emission shipping. “[For them to] take upon themselves the responsibility for decarbonizing the ships they operate is hugely welcome for the shipping industry. Charterers are an integral part of the solution – they are in charge of the operational emissions from the ship.”

 

DNV GL

Christos Chryssakis, business development manager maritime with DNV GL agreed that it is possible to decarbonise shipping from a technical point of view, but commercially there is much more to be done “developing the right conditions and right regulations to encourage and incentivize.”

 

“It is possible to decarbonize your fleet, but it is going to be a very expensive exercise if you do it by yourself.”

 

For today, “We have LPG and LNG available. We know this is not going to be the final solution, they are still fossil fuels, but we should take a pragmatic approach and use what is available today.

 

“If we look further into the future, we need carbon neutral fuels. The technology is there, we know how it works.”

 

If we are agreed that we will stick with internal combustion engines for shipping, it means that the “energy transition” can only happen in the fuel supplied to the engine.

 

“Hydrogen as a zero carbon footprint fuel is a good starting point. But it is still practically hard,” he said.

 

The remaining options are “blue LNG” (made from hydrogen and re-used CO2), biofuels and ammonia, all of which can be burned in a combustion engine. The combustion engine will need continued development for fuel flexibility.

 

We can make natural gas or diesel using CO2 which has been claimed from being emitted elsewhere, so overall the maritime usage of the fuel is carbon neutral, he said.

 

“The main challenge is that these fuels will be much more expensive than their fossil equivalents. This makes them very unattractive,” he said.

 

The same with biofuels. “You cannot use them in large amounts because you will not be able to compete.”

 

Also, the infrastructure to create the fuels is needed. “This is something shipping cannot do by itself.”

 

Mr Chryssakis was asked why shipowners should invest in LNG fuelled ships now, if the greenhouse gas benefits are “marginal” and they might be able to just use “clean fuel” in their existing engines later when it becomes available. He replied that LNG is something we can start using today, and we do not yet know what we will be using in decades to come.

 

LNG and LPG can offer 15 to 20 per cent reduction in carbon emissions today. “We think that this is an urgent problem, so we need to start doing something today.”

 

All the other low carbon options might be a decade or more away. “Any low carbon solutions we know of today – biofuels, synthetic fuels, hydrogen, ammonia – are [either] not available in large volumes or technology is not mature yet. We think we cannot wait until 2030 or whenever these fuels start becoming available.”

 

“If and when new low carbon fuels become available, we can start gradually replacing fossil fuels with low carbon equivalent. LNG / LPG  will help us to do something in the meantime.”

 

ABB Turbocharging

Christoph Rofka, Vice President – Head of Technology at ABB Turbocharging, believes it is important that the industry decides now what options to go for, and “gets a lot more vocal” in pushing for synthetic fuels “at the right amount and right places at acceptable cost.”

 

“There is an increasing understanding that these fuels will mostly be derived from hydrogen, blue [from fossil fuel with carbon capture and storage) or green [produced from renewable electricity)” he said.

 

“I think there’s a broad consensus that the piston engine will stay but it has to burn fuels with a very low net carbon footprint.

 

There are a number of pathways starting from hydrogen. “Some are very easy to take for shipping,” he said.

 

Recycled carbon can be combined with hydrogen to make liquid fuels, which would be interchangeable with the fuels currently being used.

 

For using pure hydrogen or ammonia, “the industry still has to make some efforts to get confidence these are alternative fuels we can cope with. There’s no winning solution yet,” he said.

 

We will need to use decarbonised fuel based on fossil fuels rather than renewables, because there won’t be enough renewable energy available, he said. EU’s “Green Deal” ambition is for 40GW of renewable power in the EU, and a further 40 GW imported. But that would only provide 10 per cent of what global shipping needs, even if shipping was given all of the 80GW – and the Green Deal does not consider global shipping. Industries which operate entirely within a country, such as chemical and steel, would have a higher priority.

 

“It will be a challenge for shipping to have access to fuel [from renewables].”

 

“It will require private investors to invest in specific countries.”

 

Mr Rofka was asked where else shipping companies should be seeking to improve their technology. He replied that overall energy efficiency will be very high on the agenda, including optimising the voyage and the port calls. “It will be increasingly supported by data,” he said.

 

In terms of the oil and gas companies which would need to provide the decarbonised fuels, Mr Rofka said, “I see them or perceive them more in [saying] ‘tell us what you need, and we will make it’. I would like them to be more pushy and say, ‘we do this’. They are too passive for me at the moment.”

 



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