by Michael Schaap, commercial director of GoodFuels Marine, first published in Bunkerspot, February 2016.
Biofuels have not previously been the obvious option for ship operators seeking to comply with tougher environmental legislation.
But that is likely to change. There have been advances in biofuel technology and more players are realising that biofuels offer a combination of SOx, NOx and CO2 emission reductions that no other fuel can achieve, at least not without capital-intensive fleet renewal or retrofitting.
The market has moved to the point where sustainable marine biofuels are no longer at an experimental stage – they are already proving a commercially viable solution and increasing numbers of ship owners are open to the idea of exploring their potential.
Netherlands-based GoodFuels Marine is the first marine biofuel company focused on the global commercial fleet. It recently formed a consortium with the power solution provider Wärtsilä and the leading dredging and marine expert Boskalis with the aim of accelerating the development of sustainable and affordable marine biofuels.
The consortium’s two-year pilot programme is focusing on identifying suitable marine biofuels, securing industry certification, and preparing for large-scale production. Alongside the main objective, GoodFuels Marine is initiating a global scalability study involving ship owners, universities, NGOs, ports and biofuel companies.
A key goal for the consortium is to develop various grades of biofuel that can reduce a ship’s carbon footprint by 90%. As part of the process the consortium will be testing several next-generation biofuels made from industrial waste. The plan is for these fuels to undergo ‘sea trials’ using vessels in the Boskalis global fleet.
Shipping has not been at the forefront of the growing biofuel market. Indeed it is the last of the major transport modes to look to biofuels to cut its emissions.
But the team at GoodFuels Marine has experience in promoting biofuels in new markets. Dirk Kronemeijer, CEO of the GoodNRG Group, GoodFuels’ parent group, spearheaded the successful drive to commercialise sustainable biofuel for the aviation industry and is confident that it will make a difference in shipping.
The low cost of fossil fuel has restricted the development of biofuels in the maritime sector, but it is clear that for certain shipping segments and geographies, biofuels could still be a viable solution. Stricter regulations on emissions have forced the shipping industry to look for alternatives to conventional fuel and ship operators are alive to the idea that ‘drop-in’ biofuels can cut emissions while offering operational and financial advantages.
The product can be either delivered by truck or barge as a pre-blended finished grade or alternatively as “drop-in” fuel whereby the biofuel is almost instantly mixed with gasoil onboard, as the compatibility of both products in most locations is high.
‘Drop-in’ biofuels are liquid hydrocarbons that are functionally equivalent to petroleum-derived fuels, meaning that they can be effectively ‘dropped in’ to existing infrastructure onboard vessels. That means biofuels can be used with little or no change to existing infrastructure. They are comparable and compatible with current shipping fuels and can be delivered using existing logistics. Boskalis, for example, operates vessels around the world, sometimes in remote waters and often without fixed port calls. A ‘drop-in’ biofuel gives Boskalis the flexibility to bunker biofuels where they are available and to fall back on fossil fuels where they are not. When burning biofuels, their vessels will have the ability sail into Emissions Control Areas (ECAs) without restriction.
Financially then, one fundamental advantage of using a biofuel is that it doesn’t require costly modifications to ships and bunker facilities. That is in stark contrast to the costs of converting a vessel to burn liquefied natural gas (LNG) and although GoodFuels Marine doesn’t see biofuels as being in competition with LNG, the initial investment outlay for a switch to new fuel types is an important consideration. Indeed, GoodFuels believes that the biofuel proposition can be complimentary to LNG-powered vessels with a dual fuel engine, or will enable those that have not yet decided on LNG to boost their environmental credentials immediately until they are in a position to make a decision on LNG.
Day-to-day price comparisons – in terms of dollars paid per metric tonne – are harder to assess. At the start of 2016 the price for ‘drop-in’ biofuels in the Amsterdam-Rotterdam-Antwerp (ARA) markets was slightly higher than for low sulphur, ECA-compliant, conventional marine gas oil (MGO). But one can only speak in generalities as prices depend on volume and logistics.
Important to remember, though, is that price differentials can quickly change. MGO prices are closely linked to the price of crude oil and few analysts believe that crude will stay close to $30 a barrel for long.
Also the supply chain for biofuels is rapidly maturing, resulting in greater efficiency and leading to more competitive pricing.
The biofuels now being offered to ship operators are fundamentally different from the first-generation fatty methyl esters (FAME) derived products that initially gave biofuels a bad name in maritime circles. Those early fuels often generated high NOx emissions and had a limited storage life.
The second-generation products, however, have a shelf life which is much longer then normal petro-carbons, look like water, have virtually no contaminants and, of course, generate no sulphur emissions.
Unlike their predecessors, they generally emit lower levels of NOx than come from burning conventional fuels and meet Tier II standards, although like traditional fuels, a selective catalytic reduction system (SRC) is needed for Tier III compliance.
GoodFuels Marine believes the potential market for biofuels extends to all types of vessels. In the short-term, the greatly reduced emission profile of biofuels is most likely to appeal to companies with ships operating close to ports and in ECAs.
MGO replacement biofuels are already available in the ARA, which includes two of the biggest ports inside the European ECAs, and supply chains are in place to all north-western European ports.
Environmental considerations are, of course, driving interest in biofuels in the bunker sector and environmental regulations impacting shipping are becoming more complex by the year.
Vessels sailing through waters in the North American and North European ECAs are required to use fuels with a sulphur content of less than 0.1%. That rules out most intermediate fuel oils available, the fuel grade that for a long period now has been the mainstay of the bunker market. China too is anxious to reduce ship-generated emissions and has set a timetable for introducing its own ECAs at 0.5%.
Later this year the International Maritime Organization (IMO) will signal whether a global sulphur limit of 0.5% is to be introduced for bunker fuels in 2020 or 2025.
Some ports, in the meantime, have already sprung into action. Nearly 40 port authorities have adopted the Environmental Ship Index (ESI) so they can reward vessels that cut their NOX and SOx emissions with a reduction in port dues.
It is also clear that momentum is growing to find ways to force shipping to curb its CO2 emissions – and this is where biofuels are particularly well positioned.
On top of regulation, pressure is coming from some of the ship operators’ customers. Shippers want to be able to highlight the environmental credentials of their supply chains and using ships that burn biofuels is becoming a selling point.
Biofuels are clearly in a strong position to provide solutions. They can already offer ship operators a way to reduce a vessel’s CO2 emissions by 80-90%. They eliminate SOx emissions. They cut NOx emissions by 10% and cut particulate matter (PM) expelled in a ship’s exhaust plume by 50%.
All of this explains why GoodFuels Marine has been expanding its global team to promote this real alternative and create a global market where customers can be served in the main shipping hubs.
Boskalis has already described biofuels as ‘ideal’ for its worldwide operations. Wärtsilä is ready to test three biofuels that GoodFuels intends to offer over the next two years, one of them an intermediate fuel oil equivalent.
Ferry and cruise ship operators sailing in environmentally sensitive areas are showing growing interest and in some cases see biofuels as almost the only option for complying with local regulations. As they are also more public facing than other sectors, they see the potential ROI of this proposition and are ready to pay a premium over conventional fuels.
GoodFuels Marine estimates that by 2030 sustainable biofuels could contribute 5-10% of the total global bunker market, supplying some one million metric tonnes (mt) of product by 2020 rising to around 40 million mt ten years later.
Given the fundamentals, we believe a truly sustainable marine biofuel will be a crucial part of the future marine fuel mix.