Risk and regulation mean industry faces alternative-fuel paralysis

The maritime industry finds itself locked in "the world’s most expensive game of chicken," where vessel operators, fuel suppliers and port developers each wait for others to make the first commitment to alternative fuel infrastructure.

Participants from the worlds of vessel chartering, ownership, ports, engine manufacturing, marine fuels and lubricants, and industry associations, gave this assessment during a roundtable discussion sponsored by Caterpillar Motoren at Riviera’s Maritime Decarbonisation Conference Europe. The discussion, held under the Chatham House Rule, brought together senior figures to share frank views on the industry’s decarbonisation challenges.

Market deadlock deepens

The current standstill extends well beyond simple commercial caution. According to one fuel developer present at the meeting, the industry faces a fundamental timing mismatch: maritime operators are content to rely on biofuels until 2035 before considering e-fuels, yet without investment today, there will be minimal e-fuel supply available when that timeline arrives.

"The big problem is that if we don’t invest today, there will be very limited supply of e-fuels in 2035," noted one participant representing the e-fuel sector. This creates a circular dependency, where fuel producers need committed demand to justify investment, while ship operators require guaranteed supply before committing to vessel modifications.

Several attendees highlighted that formal business cases for alternative fuel investment remain rare. When asked who had approved budgets for alternative fuel adoption, only a handful of participants indicated their organisations had moved beyond the planning stage. One lubricant additives specialist confirmed their company had allocated research budgets, but primarily to understand failure modes and engine issues rather than for direct fuel adoption.

Regulatory uncertainty compounds commercial risk

The challenge extends beyond pure economics. Participants expressed significant concern about building business cases with 20-year payback periods when political cycles run just four years and recent elections globally have raised questions about the permanence of environmental regulations.

"How do you build a business case with a 20-year payback when the political cycle is four years?" posed one industry observer, capturing a sentiment that resonated throughout the discussion.

The International Maritime Organization’s evolving framework adds another layer of complexity. As one participant explained, IMO faces unique constraints, "It only has one lever, and that is the ship. It can’t tell the countries what to do." This limitation means the organisation must attempt to regulate an entire supply chain through pressure on just one element: the vessel itself.

European regulations presented their own challenges. The EU’s approach to emissions regulation, which applies similar philosophies across all sectors from automotive to shipping, may not align well with maritime’s specific characteristics. One e-fuels advocate reflected that while stakeholders initially supported regulation on the principle that "regulation is better than no regulation", four years later the sector has seen minimal final investment decisions, with regulatory uncertainty still cited as the primary barrier.

Infrastructure investment dilemma

Port authorities find themselves in a particularly challenging position. As one major European port representative explained, the ecosystem requires facilitation through major infrastructure projects such as hydrogen backbones and carbon capture facilities. Yet these investments require co-ordination across multiple stakeholders, none of whom want to move first.

"If a port authority doesn’t take the lead to bring parties together and also wants to take a risk, then nothing starts moving," the port representative observed. However, timing such investments proves crucial; move too early and the infrastructure sits idle; move too late and the port loses competitive advantage.

The comparison with LNG adoption proved instructive. Several participants noted that LNG benefited from decades of operational experience on gas carriers before transitioning to fuel use, plus the crucial backing of major oil companies. "When LNG was being introduced, fossil LNG had backup from Shell to bootstrap this new fuel supply chain into existence," one attendee recalled. "That is something we don’t have in our industry today."

Technology pathways remain contested

The discussion revealed deep uncertainty about which technological pathway will prevail. Orderbooks show that while operators are investing in new tonnage, approximately 95% of newbuilds are specified as dual-fuel vessels, essentially a hedge against uncertainty. "They’re not sure what’s going to be coming along, but they do know, well, at least I can burn VLSFO," explained one participant.

This hedging strategy has implications for future flexibility. As one attendee noted, VLSFO-capable engines can only be retrofitted to burn certain alternative fuels, limiting future options. The infrastructure requirements for converting from liquid fuels to gases present challenges around tankage and storage.

Methanol emerged as a relatively uncontroversial option from a technical perspective, with participants noting minimal concerns about the technology itself. However, challenges around density, production costs and molecule availability persist. Meanwhile, ammonia faces more significant technical hurdles, though the existence of trained crews from ammonia carriers provides some foundation for adoption.

One solid hydrogen carrier developer expressed urgency about market timing, "We have a safe carrier and one of the densest carriers on the market. We can store double the amounts of other fuels, but if we’re not fast enough, no one will be interested."