While biofuels are attractive as drop-in fuels of the future, availability, production and cost remain concerns for their wider adoption in shipping
To meet IMO’s decarbonisation targets of reducing greenhouse gases from shipping by 40% by 2030 and 50% by 2050 compared to 2008, carbon-neutral ships will need to begin entering the fleet. This will require a massive scale-up of alternative fuels, including synthetic and biofuels, to meet shipping’s needs. This ramp up of production will need to be underpinned by government policy and financial support.
Additionally, charterers are looking to vessel owners to comply with their own sustainable visions by using biofuels.
These are some of the key takeaways from Riviera Maritime Media’s When will biofuels move beyond the trial phase and scale? webinar, produced as part of Marine Propulsion’s Marine Fuels Webinar Week held in March.
“The biomass is available,” panellist Damien Valdenaire, scientist executive refining at European environmental research organisation Concawe, told the audience in one of three insightful contributions. Citing the latest estimates that show availability could increase by between 70M and 140M tonnes a year by 2050, with demand growing by 2.2% a year, he said: “Demand follows availability.”
However, another panellist, Prashanth Athipar, principal of the maritime supply chain for excellence and sustainability at BHP, cited some of the hurdles lying ahead of the wider use of biofuels, especially from a charterer’s perspective. “We need to understand the business side and the technicalities,” he said, while also pointing out the advantages of biofuels over rivals, such as their suitability for existing engines, ease of blending with current fuels, and the ready-made infrastructure in place. “These are big ticks,” he said.
Yet technical challenges remained, such as the tendency of some biofuels to oxidise and degrade if stored more than six months.
And, as Mr Athipar also pointed out, there is not yet a level playing field for biofuels. Without government subsidies and other forms of support in most of the Asia-Pacific, the cost makes their use commercially unviable.
For instance, in the absence of strong government incentives in China, most of the biodiesel produced there is exported. Similarly, Singapore does not provide incentives either; and the palm oil industry in Indonesia, another potential source of feedstock, lacks an international focus.
For the adoption of biofuels to progress, charterers need to see three main aligned elements, said Mr Athipar, citing a secure source of feedstock, adequate volumes of biofuels, and government incentives. With strong competition for available biofuels coming from the global automotive and aviation sectors, notably Europe and the United States, there is a major challenge for shipping.
But in the Netherlands, biofuels are making rapid progress from a standing start, said GoodFuels and GoodShipping chief executive Dirk Kronemeijer, highlighting the significance of their drop-in characteristics. Having supplied the world’s first bio-fuelled ship in 2015, GoodFuels’ product is now used by more than 100 vessels in a fast-growing market, despite early scepticism from a conservative industry. “[We were often asked] whether it was expensive, does it work, is it legal?” he said.
Now however biofuels are broadly accepted, with record usage at the Port of Rotterdam. “Last July, 11% of all sales in Rotterdam were renewables,” said Mr Kronemeijer. Additionally, GoodFuels’ biofuel oil, released in 2018, has turned out to be a game-changer because of its stability and extended shelf life among other qualities, according to Mr Kronemeijer.
Government support plays a big role in the acceptance of biofuels, he said. The Netherlands has a unique system that provides the same incentives for road, aviation and shipping in the form of mandates, rather than subsidies, under a system known as ‘opt-in’. But Mr Kronemeijer believes biofuels should be reserved mainly for the aviation and shipping sectors, rather than for automotive, where electrical propulsion will probably dominate. Although aviation had a head start in the uptake of biofuels because of the industry’s high profile, they are highly suitable for shipping.
“Government support plays a big role in the acceptance of biofuels”
Mr Kronemeijer agreed that one of the biggest obstacles to overcome is the lack of a level playing field in competition for low-carbon fuels around the world. In the long run though, the shipping industry’s clients will insist that vessels are powered by biofuels. Clients such as BMW, Ikea and other global brands are willing to absorb the pricing premium – which in the Netherlands stands at between 10% and 20% more than conventional fuels – as part of their sustainable vision.
“This has been a tremendous accelerator in the uptake of biofuels”, Mr Kronemeijer explained. “Biofuels will become the largest alternative fuel in the world, at least for the next 10 years.”
Responding to questions from delegates, the panellists provided other valuable insights regarding regulations, technical standards, usage and pricing.
According to Mr Kronemeijer: “Some IMO legislation doesn’t make sense and is counterproductive.” However, class societies such as DNV have been helpful in developing standards, and IMO needs to take a lead on the technical aspects of biofuels.
In the race to reduce CO2 emissions, biofuels stand out as one of the best of the existing options, although when stored in a tank, biofuels should be used as soon as possible as they are stable for about one year only.
With nearly all of the technical problems with biofuels having now been solved, the overriding challenge remains the availability of feedstock, so that production can be scaled up to meet the predicted demand. The creation of biofuels depends on blending different feedstocks because one source, such as biomass, will not be sufficient to provide the required volume.
Biofuels can be costly – between 1.5 to 3.5 times more expensive than HFO – presenting a high hurdle for charterers. Government-provided incentives are therefore essential in bringing down costs. However, Mr Kronemeijer believes it will be possible to produce biofuels in, for instance, Singapore, at acceptable price levels. And Mr Valdemaire made a point that the higher price of biofuel-powered shipping could quite easily be passed on to the consumer. “An increase in the fuel price will not reduce trade because of the extra cost of the goods,” he said.