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Blue Fuels are a Vital Component of the Maritime Energy Transition

In looking beyond fossil fuels, shipping’s regulators should not seek to cut the industry off from the sources it needs to shift towards renewables, writes Matthias Ólafsson from the Methanol Institute.



A regulatory tailwind has put the maritime industry on a trajectory towards the use of sustainable fuels. It is proving a challenging process, not least because the volumes of cleaner fuel the industry needs are emerging only slowly as producers seek demand signals before investing in new production.


At a time like this, buyers and producers – as well as actors in the supply chain – should be planning for the transition and making the investment required to move in volume away from heavy fuel oil.


Unfortunately, some of the regulators who wish to see the industry change are putting the process in doubt and with it, the process of change the industry needs to see.


Assuming no growth in demand, shipping needs to replace 350-400m tonnes of bunker fuel with at least 800m of green fuels in less than 30 years, a mammoth undertaking and one that requires a phased approach.


Today, alternative marine fuels like methanol, ammonia and hydrogen are largely produced from fossil natural gas. The GHG intensity of these fuels can be dramatically reduced by deploying technology solutions to reduce upstream process emissions, such as capturing CO2 to produce so-called “blue” fuels.


The use of blue methanol will provide time for capacity of green methanol to grow. Ideally, the transition would be straight to green fuels, but as the early adopters have discovered, adopting alternative fuels requires securing the supply chain that bears little comparison to current bunkering practice.


Even if more of the fleet was able to able to use the alternative fuels available today, the vast majority would be produced either directly from fossil fuels or indirectly through carbon capture and recycling into blue fuels.


Fully renewable fuels are not available in enough volume to meet the demand already indicated by new vessel orders. As an illustration, MAN Energy Solutions now has more than 100 two-stroke methanol dual-fuel engines in its orderbook. As these methanol capable ships launch over the next two to four years, they could consume up to 4m metric tons of methanol.


Augmenting existing fuel production using carbon capture and storage to produce blue methanol, ammonia and hydrogen is a critical next step forward to deliver the immediate GHG benefits required by legislators.


Without regulatory certainty, a change of this magnitude cannot happen. If policymakers decide that blue fuels will not be permitted in regulations, industrial producers will hesitate on whether to build blue fuel capacity or consider other locations, creating a market distortion that could reduce the chances that the EU meets the targets it has set itself.


Policymakers are at the same time attempting to promote the use of carbon capture and storage (CCS) across industrial processes including shipping, with industrial investment at record levels. For this to continue, private capital must be matched by government policy to unlock its full potential.


Clearly if there is to be only a limited market for this captured carbon then shipping companies will have no incentive to invest in CCS at scale.


Neither are nascent biofuels available in volumes anywhere near enough to make a meaningful contribution. Blending into conventional fuels is only possible up to 30% of the average bunker stem.


If the blue fuel the shipping industry needs is not available then three immediate risks present themselves.


In the absence of available volumes, owners will be more likely to risk non-compliance, arguing that they cannot use fuel which is not available.


There will be no or only a very low reduction in carbon emissions, limited to what can be achieved by efficiency ratings, which are subject to practical limits. Lastly, there will be a real term rise in emissions, because owners will continue to burn the fossil fuels they can buy.


Without the large-scale investment in production of blue fuels, the expected cost reductions will take much longer to crystalise. Green fuels will continue to be expensive and costs passed on, but producers will have no incentive to reduce the prices without competition.


To be clear, we foresee a steadily diminishing role for fossil fuels in shipping future. The transition from dirty, dangerous heavy fuel oil needs to continue and the move towards renewables must accelerate.


Making that change happen requires the application of external policy levers. The Methanol Institute recognises and accepts the need for targets for reduction of GHG emissions, and we have supported the adoption of quotas for the use of renewable fuels of non-biological origin in EU legislation. We just don’t believe this process can happen without the contribution of blue fuels along the way.


Methanol is an industry in transition. Most methanol consumed in international markets is produced from natural gas and the technology exists to capture carbon from the production process, but it comes at a cost and requires a market. The industry – just like ammonia, Hydrogen and natural gas – needs to be given time to change.


Some lawmakers and NGOs appear to view this evolving process as a binary choice of green fuels or nothing. It is anything but. In making the energy transition, we must not let perfect be the enemy of good.


Source: Splash247

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