A mere six months before the start of the global sulphur cap, shipping is undergoing a bout of introspection that surprises even seasoned market watchers
If the cap itself is cause for concern, then the unwillingness of some owners to take a proactive view on the necessary changes is surely a louder alarm bell.
The need to future-proof investments in clean technology is understandable; it is for this reason that waiting until the 11th hour before complying proves so tempting and why for a few it is worth taking the risk of non-compliance.
But when the cost of non-compliance by a polluting ship is higher than the costs of switching to a clean alternative it goes against financial logic, as well as negating the benefits to the environment of IMO 2020.
Reports from the EU’s Environment Commissioner state that low-sulphur non-compliance in the Baltic SECA averages 5% and 8.5% in the North Sea; broadly in line with the IMO’s official 6% estimate.
With total ‘at risk’ non-compliant fuel of approximately 4.5M tonnes annually, based on a conservative 1.5% non-compliance rate, it suggests that total global fines in 2020 could amount to almost US$1.5Bn or higher.
This sizeable amount could be put to better use by operators working towards compliance and long-term sustainability. The record fine recently issued to a cruise ship operator which violated ECA regulations in Norway would certainly be enough to retrofit the vessel to both bunker and burn methanol, a fuel that is already compliant with IMO 2020.
Alternatives move mainstream
It seems unthinkable that some shipowners should prefer paying fines for violations rather than making strategic investments that will secure the next 10 to 20 years of their business. Of course, plenty will comply; in the OSV sector this will mostly be by burning higher cost, low sulphur fuel oil.
Despite their limited availability until comparatively recently, alternative fuels should be taken seriously; they present an opportunity for owners to emit less SOx and NOx after 2020 and create a pathway to a low carbon shipping environment.
Ignoring alternatives also fails to take into account the trend towards green finance, which is growing just as traditional liquidity decreases. Oil refiners have already responded as government policy increasingly swings behind clean fuels; the next stage is greater use of renewables, funded by investors focused on sustainability.
Methanol as a marine fuel has already taken its place in the roster of practical solutions that the industry can employ both for short-term emissions reductions and long-term greenhouse gas mitigation. Modern methanol plants have been designed with carbon capture/re-injection technology which reduces carbon emissions of the final product by approximately 20% for several years. Innovative chemical players such as BASF have already developed CO2-neutral processes to produce methanol. Production of zero-emissions methanol with electrolysis powered by affordable solar or wind energy is now a reality.
Fuel cell future?
It can also play a critical role in providing sustainable power to OSVs fitted with fuel cells.
Methanol is an extremely efficient carrier of hydrogen atoms, with the highest hydrogen-to-carbon ratio of any liquid fuel. Liquid methanol at ambient temperature and pressure packs 40% more H2 by volume than hydrogen in a liquid state and can be re-formed onboard ship and consumed as hydrogen in fuel cells or internal combustion engines.
Using methanol-powered fuel cells means fewer moving parts in the propulsion system and the potential to quickly make this combination a mainstream choice for particular types of vessel.
Using increasing volumes of lower carbon, renewable methanol in fuel cells or internal combustion engines would effectively start to drive the shipping industry towards zero ‘in sector’ carbon emissions as well as zero sulphur and negligible nitrogen oxide and PM emissions.
Clearly fuel cells won’t suit every vessel type, but the intersection of methanol and fuel cells occurs exactly where the biggest improvements need to be made; in the offshore, coastal and shortsea sectors, as well as for ferries and inland waterway vessels.
Until recently alternative fuels have been expensive, not just in upfront investment terms but also because without huge subsidies they cannot be competitive. Some lack the necessary infrastructure and a regulatory pathway for their use within a timescale that permits the design, construction and operation of ships before 2030 and well ahead of 2050.
Methanol’s suitability as a marine fuel – liquid, non-polluting, non-cryogenic, available worldwide at scale and competitive over the cycle compared to MGO – means it could be easily adopted as the primary combustion fuel or to power fuel cells.
It is clear that post-2020 and 2030 the cost of doing business will continue to rise – in the process making alternatives and renewables cost effective. In a number of countries today – including many states in the US – renewable energy such as wind and solar is already competitive with gas for electricity production. This trend will continue until not just compliance, but a sustainability mindset becomes second nature.
We believe the industry should already be taking steps to define its long-term transition to clean, sustainable fuel. It could be that ability to continue operating in the long term will depend on it, as social and political pressures on shipping continue to grow.
Based in Singapore, Mr Chatterton joined The Methanol Institute in February 2015 as its chief operating officer, overseeing the association’s Asia Pacific and Middle East operations. Over the past 20 years, he has held executive level positions in the power, oil and gas, biofuel and chemical sectors.
A global trade organisation, The Methanol Institute represents the interests of methanol producers, distributors and technology companies.