The Lloyd’s Register (LR) Maritime Decarbonisation Hub has launched ‘First movers in Shipping’s Decarbonisation – a framework for getting started’, a methodology that enables a detailed comparison of different fuel transition pathways regardless of vessel type or trade route.
The framework evaluates the entire supply chain, from fuel production to usage onboard vessels, and can be applied to any fleet, revealing the implications of each transition strategy and offering insights, in support of future fleet investment decisions. In this first study using the framework, LR experts focused on three transition pathways – methanol, ammonia, and hydrogen – and applied these to the containership feeder fleet operating regionally between Singapore, Hong Kong, and other Asian countries nearby.
Key findings from the first analysis have revealed:
- Different transitions might be suitable for this specific fleet. Based on either methanol, ammonia or hydrogen as fuels, which in turn can be produced from natural gas, renewable electricity, or in some instances, sustainable biomass.
- Similar emissions reduction trajectories have different implications for the fuel supply infrastructure. The fleet transitions based on methanol, ammonia or hydrogen can all meet similar emissions reductions; however, this result is achieved using different infrastructure and at different implications.
- The sector must balance early results with long-term planning. This analysis shows a trade-off between early efforts to decarbonise the fleet, which allows for a smoother transition, versus the long-term planning approach, which attempts to find the solution with the lowest overall cost. This balance must be found while providing a growing supply of fuel through different feedstock routes without major price fluctuations.
- Both retrofitting and newbuild will be required to meet net zero by 2050. In all transition pathways, approximately 26% (by number of ships up to 2050) of the transition is achieved through retrofitting. This means that replacing vessels near the end of their lives with newbuilds fuelled by zero-carbon fuels is no longer sufficient to meet a net zero 2050 target. Instead, younger vessels in operation today need to be retrofitted to accelerate the uptake of zero-carbon fuels.
- Fleet costs vary per transition pathway. Fleet total costs up to 2050 are lowest for the ammonia transition ($44.5 bn), followed by methanol ($51.5 bn) and then hydrogen ($69.4 bn). This compares to the fossil fuel baseline of $42.3 bn including carbon cost.
- Voyage costs dominate the fleet’s total costs. Voyage costs represent between 71%-82% of the cumulative fleet total costs depending on the transition. This means improving vessel efficiency and voyage optimisation becomes more and more important to reduce the cost of decarbonisation.
- The fleet fuel transition leads to a specific fuel supply. The production location delivering the cheapest fuel production option typically also benefits from being the location with the lowest feedstock prices, except in instances when the cost of transporting that fuel to the fleet becomes too large (e.g. for the hydrogen transition).
- Co-location of fuels produced with natural gas and fuels produced with renewable electricity could deliver further cost reductions. Saudi Arabia and Australia are likely production locations because the relative lower feedstock prices. There can be key economic advantages in colocation of plants. This would de-risk investments and build long-term security over supply capability and associated costs.
Charles Haskell, Programme Manager, LR Maritime Decarbonisation Hub, said: “Until now, research has either focused on a specific ship and fuel or been too high level and generic to have real relevance for shipping companies. Our First movers in Shipping – a framework for getting started can support the container fleet in Asia by helping to reduce uncertainty and risk by providing an understanding of the transition pathways open to them. This can also inform a strong business case for a potential coalition that will support their route ahead.”
Carlo Raucci, LR Decarbonisation consultant and lead author of the framework, said: “The wider shipping industry can also benefit from LR’s Maritime Decarbonisation Hub’s new report as it can form a framework for further studies that will unlock pathways for other fleets and vessel types in other regions. Risks can also be accurately evaluated, and mitigation plans can be put in place which in turn can support investment decisions today and more importantly, stimulate real action over words.”
The framework, in addition to the case study and its findings, were reviewed by a range of industry stakeholders.
Prof Lynn Loo, CEO Global Centre for Maritime Decarbonisation, said: “Carried out with a level of granularity that allows for meaningful comparison across different fuel type scenarios, the LR first movers study highlights the complexities and points to the trade-offs shipping should consider as it transitions to a lower/zero-carbon future. The specificities of this study can help concretise the scope and accelerate the execution of future pilots, and rally stakeholders together to more cohesively tackle the energy transition.”
Shmulick Yoskovitz, CEO X-Press Feeders, said: “It is now clear that words are not enough, action must be taken to meet our 2030 and 2050 goals. As shown in this report there will probably be more than one “green” fuel during this transition. If partnerships are not formed now to take risks, build vessels, and experiment we will still be debating these issues in five years without being any closer to a solution.”
Martin Humphreys, Lead Transport Economist, Transport Global Practice, World Bank, said: “This report translates international shipping’s global ambition of decarbonising by 2050 into a concrete transition case. It underpins the premise that maritime transport’s energy transition is likely to have both a strong regional and strong fleet specific angle. The World Bank intends to support developing countries in becoming the zero-carbon bunker fuel hubs of the future, and such frameworks can make an important contribution to identifying business and development opportunities, while balancing investment risk.”
Aziz Merchant, Executive Director, Keppel Marine and Deepwater Technology, said: “We are pleased to work with the LR Maritime Decarbonisation Hub in the development of this framework, which we believe will be a valuable resource for the shipping industry as it explores different fuel transition pathways. Leveraging its engineering expertise and extensive experience in dual-fuelled systems, Keppel Offshore & Marine is supporting the decarbonisation of the industry by collaborating with industry partners to develop new build and retrofit solutions for customers to adopt zero-carbon fuels.”
Jesse Fahnestock, Head of Research and Analysis, Global Maritime Forum, said: “Shipping’s transition is complex, and many perspectives need to be brought to bear. So it is heartening that this report’s perspective – looking at the decarbonisation of a specific fleet – confirms many of the conclusions the Global Maritime Forum and Getting to Zero Coalition are drawing in other analyses. The transition to zero-emission shipping is possible, and the tools are near to hand. But keeping costs and risks down will require some flexible thinking, from fleet management to fuel production, and an understanding of the long-term fundamentals of scalable, zero-emission fuels. This report brings the industry one step closer to being able to implement this approach in practice.”
Chris Chatterton, COO The Methanol Institute, said: “The shipping industry understands that achieving low carbon operations and ultimately achieving zero carbon will require a combination of fuels, of which methanol in conventional and renewable form will play an important role. This study helps the industry understand its options for fuel sourcing, technology, the business case for fleet operations and provides timely insight into what ‘green corridors’ might look like in practice.”
Sofia and Conor Furstenberg Stott, Ammonia Energy Association Maritime Directors, said: “The Ammonia Energy Association supports the responsible use of ammonia in a sustainable energy economy, and a perfect example of this is the use of ammonia as a fuel to enable deep decarbonisation across the maritime sector. This new report, First movers in Shipping’s Decarbonisation – a framework for getting started, represents a touchstone for stakeholders seeking opportunity across the entire energy carrier value chains. It breaks new ground by illustrating a case-specific application of fuel scenarios that, rather than presenting generic strategies, provides actionable insight for investors and industry who are ready to implement their decarbonisation plans.”
Building on this fuel agnostic framework, the LR Maritime Decarbonisation Hub aims to steer cross-industry alliances that can unearth and accelerate resilient energy transitions and enable pilot projects this decade.