2020 has been a year of tough choices for everyone in shipping. But one of the most important – the fuel choice that will get us to the IMO’s 2050 decarbonisation goals – just got a lot simpler. While existing fleets will have no choice to make significant efficiency and performance improvements, deepsea vessel owners considering a newbuild have a clear choice. They can start using LNG now, which is proven, delivers immediate GHG emission reductions, and is globally available with a fast-growing bunkering network. Alternatively, they can spend the next decade or more continuing to play for time and run the risk of replacing a vessel’s engine at a significant cost later or losing use of their asset value. In the meantime, they will not be contributing to the environmental improvements that are so badly needed but in fact exacerbating the problem.
Perfect zero-carbon fuel or unicorn?
We know that once emitted, GHGs cannot be easily removed from the atmosphere and will create further warming. Why wait for the perfect fuel – if such a thing exists – when we can start reducing GHGs now by using LNG, and at the same time enjoy the air quality benefits it delivers over other fuels.
It is perhaps counter intuitive to suggest that a fossil fuel like LNG provides a pathway to zero carbon. However, the reality is that it can and we cannot wait for a zero-carbon fuel. Our global economy dictates that ships must keep working.
Long term, various alternative fuels may become plausible and research is warranted. Today, however, we need to pick the fuel that is going to provide benefits now and move us in a positive direction for tomorrow. We must make this decision on a well-to-wake basis, so we can gauge the real consequences. Alternative fuels such as ammonia and hydrogen may emit no GHG when used in propulsion systems, such as internal combustion engines or fuel cells, but their overall, well-to-wake emissions depend on how they are produced. Only if they are produced from renewable energy such as wind and solar can they truly be ‘zero-emissions’ fuels. However, if they are produced from fossil fuels, as is the case now and for the foreseeable future, then their well-to-wake emissions can be far higher than those from fuels such as LNG. As yet, comprehensive analysis of alternatives has not been undertaken. We need this detailed data-based analysis if we are going to be able to truly assess the options on a level playing field and avoid unintended consequences.
LNG’s pathway to zero is significantly shorter and less risky than others. It requires a fraction of the R&D required by alternatives. Moreover, we are already seeing bio-LNG effectively being used as a drop-in fuel. The bio-LNG being sold today is sourced sustainably from waste and agricultural residues and does not compete with food crops or result in deforestation. While bio-LNG production is not yet at a scale where it can power the deep-sea fleet, it is accelerating quickly on a global basis and is closer to being scalable than any other option. The 2020 CE Delft study clearly and factually confirms this important assumption. Synthetic LNG is also under development, but unlikely to be available at scale for at least a decade.
The clear advantage of LNG is that we can have our cake and eat it today. We can reduce emissions now, gradually increase those benefits by using bio-LNG, and then eventually take advantage of synthetic LNG when it does eventually scale. The aggressive IMO goals are in reach with LNG and the bio-LNG pathway. We are already seeing forward thinking operators like CMA-CGM introducing bio LNG into their fuel mix.
Poseidon Principles-compliant finance
As banks increasingly align with green finance principles, LNG offers potential financing benefits for newbuilds. For example, it provides an ‘extended compliance runway’ under the Poseidon Principles. An investor can gain up to eight years of more favourable financing terms compared with vessels fuelled by conventional marine fuels such as HSFO, VLSFO, and MGO. The use of bio-LNG as a drop-in fuel can extend this even further. That means you can start reducing your emissions now and enjoy the benefits of Poseidon Principles-compliant finance for the longer term.
As bio-LNG products become more readily available on a global basis, further reductions in carbon will be the result and IMO targets will be met. LNG and bio-LNG products have the important added advantage of essentially eliminating SOx, dramatically reducing NOx, as well as eliminating black carbon and particulate emissions. These important global health benefits cannot and should not be overlooked.
No fuel is perfect, and there are always obstacles to overcome. Methane slip onboard vessels and within the fuel supply chain does happen. New engine technologies that dramatically reduce this risk are emerging quickly. It is a temporary problem with a technical fix, not a fundamental issue with the fuel. Upstream developments to deal with methane emissions in LNG supply chains are also advancing at pace. Other alternative fuels, like ammonia, have issues with slip in the engine combustion cycle that needs to be addressed given the toxicity of the product. Similarly, there are very practical problems to overcome with the super-cryogenic storage onboard vessels of hydrogen. These matters are being overlooked in the current discussions but need to be addressed with urgency.
Conventional marine fuels also benefit from existing infrastructure. It might be tempting for some to continue a business-as-usual pathway for their newbuild vessel investments based on HFO and Exhaust Gas Cleaning Systems (EGCS). However, the clock is ticking for EGCS’s and neither they nor the use of VLSFO does anything to mitigate GHG’s.
Futureproofing with dual fuel engines
Engine manufacturers are designing and building LNG dual-fuel engines that are or will be capable of using many of the future fuels being discussed, including bio and synthetic LNG. This protects the capital investments made by vessel owners today and reduces future fuel risks, regardless of whether technologies change or not.
For vessel owners looking to invest in new tonnage today, the choice is clear. You can start to reduce emissions now while protecting the future. Waiting for a zero-carbon alternative might seem attractive but the future is still a long way off and the technology required is not proven. Waiting is not an option as it both exacerbates the growing GHG emissions issues and does not provide the essential air quality benefits derived from LNG. The journey of a thousand miles starts with a single step, and the sooner we start the journey the better. Waiting is not an option.
Originally published by Splash 24/7 on January 13, 2021