Fossil fuels have become a dead-end for deep-sea shipping, but how can operators decide on an alternatives?
Ship operators are entering their most challenging decade since the end of the steam power era and easily the biggest headache they have is what kind of propulsion to choose from a growing array of possibilities. It is a decision they must live with for the next 20-40 years.
As Lloyds Register’s marine director Tom Boardley presciently argued in its latest Global Marine Fuel Trends, the lessons of history may not tell operators what they need to know. If the decision were founded on a past based on single-engine combusting fossil fuel, it would be reasonable to expect ships built in 2030 not to be dramatically different from the ships of today.
“If however this steady technological progress was to be somehow accelerated or overturned, then some amazing technology could be around the corner,” he ventures. “How long will it take for a new technology or fuel to be assimilated and to become business as usual – or even to replace the current mainstream options?”
In the next few years industry must weather a perfect storm of environmental obligations, regulations, fuels and technology. “There is a whole new layer of complexity in the decision-making process for shipowners, a whole new set of signals to watch for,” Mr Boardley says, albeit while highlighting new opportunities.
The president and managing director of the Grimaldi Group, Emanuele Grimaldi, sums up the dilemma. “As we look to 2050, we are faced with a journey where there are no maps and we only see a myriad of paths with significant consequences,” he told the International Chamber of Shipping conference in London in September. “Without a clearer understanding of what the future fuel mix might look like, how can we as shipowners make the right investment decisions?”
Compared with the upheavals the industry faces between now and 2050, he describes the 2020 sulphur regulations as merely a “mini-transition”.
Reinforcing the predictions of these pundits, recent months have seen a number of potentially game-changing initiatives occur that will surely influence operators’ decisions.
For starters, the new and powerful ginger group, Getting to Zero Coalition, has set itself a goal of putting entirely non-polluting vessels on the water by 2030, which in maritime terms is just around the corner. A global alliance numbering 80 companies drawn from across finance and energy as well as maritime, the coalition clearly means business. Getting to Zero has its eyes on the elimination of greenhouse gases, rather than just the reduction of carbon in the atmosphere.
One of the latest companies to join the coalition, MAN Energy Solutions, sees this as a mission as well as a practical, commercial decision. “We don’t want to be part of the problem, we want to be part of the solution,” explains the group’s senior vice president Bjarne Foldager. “It is the right thing to do to make sure our business is sustainable in the long term.”
Following the launch of Getting to Zero, in late December 2019 heavyweight associations within the shipping industry floated the radical idea of a supranational, self-financed research and development board (IMRB). Backed by a US$5Bn fund that would be accumulated over 10 years, IMRB would start with the recognition that fossil fuels have become the problem.
Pointing out that IMO’s targets of a minimum 50% cut in greenhouse gas emissions by 2050 – irrespective of a substantial increase in shipping activity – requires an improvement of up to 90% in carbon efficiency, the prime movers warn bluntly: “[This] is incompatible with a continued long-term use of fossil fuels by commercial shipping.”
According to the chairman of the International Chamber of Shipping (ICS), Esben Pulsson, the replacements for fossil fuels will come from a variety of alternatives – green hydrogen and ammonia, fuel cells, batteries and synthetic fuels produced from renewable sources. Although there is a lot of activity in all of these forms of energy, none of them are as yet available in anything like sufficient volumes to power the transoceanic fleet.
Fourth propulsion revolution
Although the IMRB is just a proposal at this stage, the ICS means business. It is possible the concept could get the green light as early as March 2020 following the next meeting of IMO’s marine environment protection committee in London. As Mr Poulsson explains, the industry is on the eve of the “fourth propulsion revolution” and the idea of an umbrella R&D organisation was “simple, accountable and deliverable”.
With influential associations representing the bunker, cruise, cargo, ferry, tanker and other elements of global shipping, it would be hard for IMO to ignore the proposal.
If IMRB gets off the ground, the fourth propulsion revolution will probably happen faster than is commonly thought. First though, there is the small matter of the industry agreeing to a compulsory contribution of US$2 per tonne of (low-sulphur) fuel that would in time generate the required US$5Bn in backing to fund all that research. Currently the global fleet consumes about 250M tonnes of fuel a year, so the numbers add up.
In a vote of confidence, the World Shipping Council strongly backs the idea. “One of the reasons that it is so critical that we create an institutional structure for this kind of research and development work is that it is simply not feasible for any one company or any one country to provide the resources and focus that are necessary to get the R&D done on a scale and on a schedule that would allow the industry to meet the IMO’s greenhouse gas emissions reductions for 2050 and beyond,” said president and chief executive John Butler in September last year.
No operator can ignore the intent behind these organisations. Having crunched the numbers, the deputy secretary-general of the ICS, Simon Bennett, insists the targeted CO2 reductions by 2050 are impossible without a 90% improvement in the global fleet’s carbon efficiency. Logically, that depends on the ready availability of commercially viable zero-carbon fuels.
“In practice, if the 50% target is achieved, with a large proportion of the fleet using zero-carbon fuels by 2050, the entire world fleet would also be using these fuels very shortly after,” he explains. “[This would make] 100% decarbonisation possible, which is the industry’s goal.”
Combined, these movements aim to make shipping one of the most – perhaps the most – virtuous forms of transport. Currently, emissions from aviation, for example, are much higher. As Mr Grimaldi pointed out, containerships emit about three grams of CO2 per tonne of product for each kilometre travelled, which compares favourably with aircraft that emit about 435 grams per kilometre. “That represents a 140-fold increase in CO2 emissions from planes over ships doing the same job,” he says, adding, “That to me is a staggering statistic. Can you image the carbon emissions if we had to transport everything by plane?”
As WCS research shows, the shipping industry has made giant strides in the last few years. The majority of new ships built by its members since 2013 are 30-40% more efficient than the ones they replaced. Yet this is clearly not enough.
The path to commercially viable, environmentally virtuous energy is still clouded. As speakers at a variety of conferences have pointed out, there are many options available and none of them are yet viable in the long term. Meantime compliance is obligatory and challenging. As the ICS’s Mr Butler explained in late 2019, IMO 2020 is different from previous regulations because they require much more than the installation of a piece of equipment or a periodic inspection. “Instead, the rules govern operational behaviour every hour of the day, everywhere on the globe including on the high seas,” he said.
Looking ahead to 2050, the ICS sees IMO 2020 as a kind of dummy run – a “very valuable baseline for tackling an even more difficult task,” in Mr Butler’s words. In this, the IMRB may prove to be the trump card for operators. As an industry body, it would be guided by owners in the urgent pursuit of technologies that have the greatest potential for powering long ocean voyages.
Once these have been identified, the laboratory’s job would be to get them to the point of commercial viability, but this remains a gigantic task. Still, the clear implication of all this activity is that fossil fuels just won’t cut it for much longer. And their demise may be closer than operators think.
Teething problems predicted with IMO 2020
Cut us some slack! That is more or less the plea that Guy Platten, secretary general of the ICS, made to port authorities on the eve of this year’s emissions cuts. Pointing out that the obligatory use of low-sulphur fuel amounts to “a change of magnitude never attempted before on a global basis,” he warned of “teething problems” when IMO 2020 bites. He noted authorities should be consistent and use common sense in the opening weeks of implementation “provided shipowners can demonstrate they have done everything in their power to comply.”
Nor was it fair to put all the onus on ship operators, he said: “[They] rely on many other stakeholders in the marine fuel supply chain, particularly bunker suppliers and oil refiners, to ensure we are all able to fully comply with the new regulations. We need the supply side to fully contribute to a smooth changeover so that we do not have any incidents due to incompatible fuels and we can ensure safe operations for our seafarers.”
Has the supply side done its job? It is too early to say definitively, but the World Shipping Council (WSC) president and chief executive John Butler has promised his organisation would make sure the regulations “are implemented and enforced in such a way that they do not distort competition and they do not penalise responsible companies for complying.”
However, the WSC boss fired a warning shot. It was essential, he said, that national governments ensured that vessels flying their flags and calling at their ports obey the law. Reading between the lines, there are concerns within IMO and other global bodies that the authorities of some countries may try and achieve what is known in financial circles as ‘regulatory arbitrage,’ whereby port regulators turn a blind eye to offences in the hope of winning more trade.
And with seaborne trade rising steadily, there are clear incentives for this to happen. As the United Nations Conference on Trade and Development confirmed in its latest Review of Maritime Transport, volumes of seaborne trade hit 10.7Bn tonnes in 2018, up by a whopping 411M tonnes over 2017.