Zero-emission vessels – how do we get there?
With the first milestone in the IMO Greenhouse Roadmap approaching, the world is watching to see if an ambitious strategy can be delivered in line with the Paris Agreement. To achieve this, zero-emission vessels will need to be entering the fleet in 2030 and form a significant proportion of new builds from then on. But the question is how will the industry achieve this in practice?
Global Sustainability Manager, Marine & Offshore, Lloyd’s Register
"The world is watching to see if an ambitious strategy can be delivered in line with the Paris Agreement."
April 09 2018
Fossil fuels provide society in general, with a high density and low-cost energy source that is comparatively easy to store, handle and transport. We have had decades to optimise the design, maintenance and operation of the shipping system to suit the fossil paradigm. But the world is changing, therefore it is unsurprising that when looking for a non-fossil zero-emission and sustainable energy source, as we must urgently now do, it’s difficult to see an obvious silver bullet.
Lloyd’s Register (LR), in collaboration with academic partner UMAS, recently carried out a study titled ‘Zero-Emission Vessels 2030’, with the aim of demonstrating the viability of zero-emission vessels by identifying the drivers that need to be in place to make them a competitive solution for decarbonisation.
The IMO Third GHG Study shows that shipping accounted for 2.33% of global CO2 emissions between 2007 and 2012, and forecast that this will grow between 50% and 250% under a business-as-usual scenario. As demand for shipping continues to grow, another way of looking at this is the reduction in carbon intensity. Under the 2°C scenario, this is a reduction of between 60% and 90%, depending on ship type.
This paradigm shift, similar to one already occurring in the automotive and energy sectors, is away from technologies that aim to increase efficiency and optimise conditions for conventional engines, and instead, to an overarching global aim of ending all use of fossil fuels which needs to be targeted through the adoption of zero-emission vessels which can truly emulate the logistics provided by current fleets, but with no operational emissions.
LR engaged with industry stakeholders to define a number of key considerations. These were identified as; viability at a low carbon price around $50/tonne and without too great an increase to the capital cost. While there is no doubt that the shipping industry is accountable for reducing its own emissions, what is less clear is how the shipping sector can decarbonise without causing increased CO2 emissions in fuel production and simply moving the GHG problem upstream.
To test these requirements, the study examines seven technology options applied to five different case study ship types, and across three different future scenarios. These options consist of various combinations of battery, synthetic fuels and biofuel for the onboard storage of energy, coupled with either a fuel cell, motor or internal combustion engine.
These technology options are evolving rapidly and it is reasonable to anticipate that the costs could all reduce significantly, especially if they become important components in another sector’s decarbonisation, or if action taken during shipping’s transition assists with their development. They could also feasibly replace a conventional ship’s propulsion requirements without major alterations to voyage times, routes or cargo-carrying arrangements and crucially, they can also be considered as genuine zero-emission, since they all produce zero or negligible GHG emissions under continuous operation.
By asking the question of which zero-emissions technologies are most viable to deliver vessels that can match the capabilities of today’s conventional ships, this economic analysis aims to identify whether any technologies show clear benefits over the others.
The study concluded that biofuel is the most profitable zero-emission solution, followed by synthetic fuels with internal combustion machinery. Whereas, hybrid and electric solutions, which require large quantities of batteries at high capital cost, are deemed to be the least competitive. This is because biofuel generally requires no significant extra capital cost when using conventional ship machinery and storage; and the capital costs of the other six options are not sufficiently balanced by higher through-life efficiencies or lower fuel/carbon costs. But when comparing profitability relative to a baseline heavy fuel oil ship this varies significantly and there is no scenario tested where zero-emission vessels are likely to be profitable. This underlines the importance of policy and regulation, as drivers for change since market forces alone appear to prove insufficient.
Further explanation can be obtained by the different cost drivers. The overall cost comprises extra capital costs on main machinery and storage; new technologies may require higher capital cost, or may even be cheaper. Extra voyage costs may arise from fuel price projections or technological developments, such as improved efficiency. And as a result of revenue being lost due to the different volumetric energy densities of the alternative fuel stored on board, extra space may be required, resulting in a loss of cargo capacity, and therefore a loss in revenue for the operators.
LR’s stakeholder engagement showed that there was a desire for no more than a 10% increase in capital costs, some technologies such as ammonia with internal combustion engine or fuel cells were found to be around this threshold.
The capital costs of storage and the associated revenue loss due to reduced cargo space can be important profitability drivers, particularly for batteries and hydrogen. These costs are a function of the assumed range of the ship needing to match the range of current ship designs. Therefore, reducing range would reduce these costs accordingly, however, the ship would also require more frequent bunkering. To understand whether such changes in bunkering might be a way to influence the competitiveness of these options, a sensitivity study on range was undertaken considering reducing range by 20%, 50% and 80%. Even with lower range requirements, biofuel is consistently the most profitable whereas with an 80% reduction in range, electric vessel outcompetes synthetics and becomes more profitable for cruise and ropax ship types.
By applying a carbon price, this increases the voyage cost competitiveness of zero-carbon/emission fuels relative to fossil fuels and importantly, if the price is high enough, it can also improve the competitiveness of those options that incur additional capital costs. Stakeholder engagement revealed a willingness to pay a carbon price of $50/t. At this assumed price none of the options examined in the study are competitive relative to conventional fuel. And the results show that zero-emission options only become competitive with conventional propulsion for carbon prices in the order of $250/t. At this price point, the biofuel would become competitive relative to a conventionally propelled ship, whereas the synthetic fuel options become competitive at approximately $500/t in the low cost of capital scenario defined in the study. This shows that competitiveness with a conventionally propelled ship is dominated by the spread on fuel price.
Understandably there was a desire from the shipping sector to not want to shift the problem upstream in addressing CO2 emissions. Several options can have similar or worse lifecycle CO2 emissions than conventional fossil fuel because of the dependency on fossil fuels for electricity generation and chemical processes. But the results do demonstrate the technical potential of zero-emission vessels to reduce total CO2 to almost zero.
In summary, although advanced biofuels appear to be the most attractive zero-emission vessel solution currently available, there are two key challenges; sustainability and availability – as long as these do not clash with other more basic societal objectives, such as food production for a growing population. This warrants further investigation into the viability of biofuels as an option for the shipping sector.
So, what is the next best option? The ships selected as case studies are primarily operating over medium to long (i.e. trans-oceanic) voyages. Here, battery technology is simply not competitive and still requires significant evolution in terms of performance and cost reduction before it could be preferable to synthetic fuel options, unlike for some smaller ferries travelling very short distances. Therefore the middle ground is occupied by synthetic fuels, combined with two different machinery options, with different findings for capital costs and efficiency, which impacts the revenue costs due to payload reduction.
These effects on competitiveness can be significantly reduced, by shortening the range between bunkering and thus the onboard storage requirement and for many ships, this approach could make the shift to a zero-emission option significantly easier.
But, ultimately, none of the zero-emission options conceived, completely satisfy the criteria of no more than a 10% capital cost increase, competitiveness at a $50/t carbon price and negligible upstream emissions.
Although scenarios were foreseen where both the 10% capital cost increase and negligible upstream emissions requirements could be met by both biofuel and synthetic fuel solutions, the gap remained on voyage costs, which, at least for the fuel/energy price scenarios considered, could only be made competitive with conventional propulsion and oil if a large carbon price (greater than $200/t) was applied.
Even in the timescales covered by the study, there is potential for a significant portion of the competitiveness gap to be closed and gauging this will need to be the focus of further study. But for those in shipping with niche access to a low-cost supply of these fuel/energy sources, or an ability to pass on a voyage cost premium to a supply chain that values zero-emission services, the gap may already be closed.
So, in order to consider how shipping reduces its carbon dependency and to move forward from where the sector is today to where it needs to be, shipping must be considered in the context of the wider energy system and how this is changing and how it will continue to change over the next decade.