SMM 2024: will scarcity and competition hinder a cost-effective route to cut maritime emissions?

LNG, blending and EU-based cost considerations

In its own recent report, Oslo, Norway-based research firm Rystad Energy cautioned shipowners operating vessels in the EU that, if they decide to use and can access biofuels, they must take into account the total lifecycle emissions of biofuels and "select the optimal blend to strike a balance between the emissions target and fuel costs".

For ships with LNG dual-fuel engines, Rystad Energy head of clean tech research, Artem Abramov, does see a role for HVO but thinks “LNG blending will remain the dominant decarbonisation tool until at least the mid-2030s due to its economic attractiveness.” LNG will retain a price advantage in the EU up until 2040 when it will fail to comply, requiring a ramp-up of biomethane blending.

The energy analyst says “the substantial price premium associated with biofuels, coupled with allowances under the EU Emissions Trading System (ETS), underscores the importance for shipowners of carefully considering both emissions levels and fuel quality when selecting biofuels for use in the EU.” It says under certain scenarios, “when the blended percentage is insufficient or the emissions reduction rate of the biofuel is inadequate, it may prove more advantageous for owners to use cheaper conventional fuel oil and pay associated penalties.”

Based on recent ordering, LNG is proving popular as a fuel and technology choice, with biofuel-based systems making up well under 1% of the shipbuilding contracts signed in H1 2024. Some 35.7% of tonnage on order or under construction at shipyards – just over 900 vessels – will be capable of using LNG, making it the clear fuel of choice for owners. With 242 newbuilds, methanol represents 9.0% of the orderbook, followed by LPG (111 newbuilds, 2.0%) and about 2.9% for other alternative fuels (419 vessels), including hydrogen (29), ethane (45), ammonia (26), biofuels (24) and battery/hybrid propulsion (about 395).

Biofuel’s economic challenges and the lack of biofuel-specific systems on order does not make the fuel itslef any less popular, according to Lloyd’s Register principal specialist, fuels lubes and emissions, Tim Wilson. 

“Biofuels are unique among the future fuels for shipping as the vast majority of the world fleet is equipped with engines that can use them. As a drop-in replacement for fossil fuels, biofuels are an available and affordable method of reducing carbon emissions in the short term without large capital investment. The range of biofuel trials across ship segments and biofuel types reflect a strong level of interest from shipowners in their use on board.”

Rystad Energy research shows some 60 shipowners have conducted pilot projects in recent years using blends of FAME, referred to as biodiesel, or HVO, known as renewable diesel.

Riviera’s Maritime Decarbonisation Conference, Europe 2024 will be held in Amsterdam, 24 September 2024. Click here for more information on this industry-leading event.