The following represent some of the major and niche regulatory highlights that will hit the industry by 2020 and beyond:
- All Low Flashpoint fuels under IGF, Fuel Cells, Hydrogen guidelines (IMO MSC 94)
- Global Sulphur Cap 2020, Roadmap to Decarbonisation 2023, EEDI 3 and 4? (IMO MEPC 70)
- EU Emissions Trading Scheme in Shipping
- California’s At- Berth Regulation 2017
- China to apply a nationwide Emissions Trading scheme by 2017
Specifically, regarding the SOx challenge, there is an estimated impact from different sources and studies ranging from 6 to 50 Billion $ per year. That lower limit seems conservative, given by a BIMCO supported study, however many mention that it is quite impossible to witness that figure at least in the first two years. In addition, there is the refineries’ X Factor; the distillates & the LSFO. However, it is obvious that the refineries are companies and they need to make profit. Moreover, the availability of HSFO is not clear yet, even though in the beginning availability is expected and the scrubbers will not seem to be facing a problem. Low sulphur Crude may prove a myth as proved by many studies because the right blend out of this oil is needed to be used in other products. Thus, the bottom line is that for HFO that kind of concentration of Sulphur will not be maintained in the end fuel product. Last but not least, when it comes to GHG, Hydrogen used for Desulphurization and its GHG additional burden should also be considered.
Under the Paris Agreement, it has already been decided to try stabilizing the temperature of the planet well below 2deg C and aiming for 1,5deg C. The figure below shows the new policies scenario – Nationally Determined Contributions under COP21. There is a 66% probability for keeping that 2degC Scenario. It is important to keep in mind what has already been legislated under the Paris Agreement:
- Electricity 95% Low Carbon
- Cars 70% electric
- Buildings 80% of existing stock retrofitted
- Industrial sector CO2 intensity 80% decrease
However, where do we see shipping fitting in the decarbonisation story? The above may affect any discussions about shipping. COP21 target in shipping may be achieved through a pathway moving away from fossil fuels.
A carbon pathways study was published quite recently. Some kind sort of Carbon Premium is expected after 2023 as per the IMO roadmap. LNG is already offering a probability of 20% carbon reduction in comparison with the HFO. A Blend of Offsetting is certainly needed, which means that the shipping requirements will be offloaded to other sectors as well. Moreover, efficiency and Low Carbon Renewables or Bio Fuel will be needed. The latter the GHG policy starting, the greater the rate of decarbonisation has to be. There is further need for careful planning and seismic investment for the infrastructure development for non-fossil fuel switch. Financial schemes to support the shortsea sector will also bring a substantial benefit to the deep-sea sector as the maturity achieved for technology, will ease the costs for deep sea operators.
According to the US Ports Research, more than 90% of the Societal Impact near ports comes from NOx and PMs. Marine Engines NOx Emission limits are 30-40 times greater than EURO VI (Cars). Thus, a differential between deep-sea and coastal shipping is clear here. Subsequently, more and different measures are being applied for those segments of shipping that produce the greater impact.
Regarding the fuel compliance choices for 2020 and beyond, the vast majority of ships will just have to switch HSFO to LSFO, however, there is also the scrubber solution; LNG and methanol are already present while in the next ten years we could see ethane; LPG and other gases; hybrid (being developed right now); other equivalents and biofuels may get in the picture. Other hybrids and hydrogen will perhaps being part of the final fuel mixture until 2050. Three years before the global sulphur cap implementation, only 600 ships have decided or already installed scrubbers; not more than 100 LNG fuelled ships operate and there are not more than 6 methanol installations and around 20 battery installations in vessels. However, there are still reasons to be optimistic such as the driving change of technology.
Technology is improving with a significant pace. If not today, this is anticipated to happen within the next few years when we will have equilibrium in cost between renewable energy and fossil fuel energy. There is a significant substantial decrease in vital equipment needed for LNG, such as Type C Tanks, as well as a substantial decrease in the cost of batteries. All things considered, at the pace that scrubbers will be adopted, it is probably to witness a decrease in their prices as well. A number of cases of ships are being built under this new schemes and new pressure as well; the Viking Grace; the Greenland; the Scandlines’ new ferry; the ColorLine concept and hybrid ships. How can all this be done? There is need to support this kind of change. From the EU Union part there has been quite a contribution as new tools have been already in place with the European Investment Bank (EIB) Green Shipping Scheme; the Connecting Europe Facility (TEN – T) and the EFSI – European Fund for Strategic Investment (Juncker Package). Additionally there is 50 % of debt financing for new vessels applying new technologies and 100% guarantee for green components of retrofitting operations in other ships activating in Europe.
In terms of what we are doing as a region, there have been three major projects in South Europe-the EU Med for LNG as Fuel; the Gainn4Mos; the Core LNGas hive and the Greece, Italy & Cyprus driven project Poseidon Med II. Furthermore, some 125 million euro have already been committed in developing the infrastructure and the framework for LNG in this area.
LR is also participating in the Poseidon Med II project, a sequel of the initial Poseidon Med I with 5-6 million Euro budget which will include the whole roadmap presented below aiming at the finalization of the LNG bunkering operations in East Med.
Finally, there is a new story about shipping electrification in EastMed, the elemed project, which is the first shipping electrification project in the EastMed; the first zero-emission project and practically the first on-shore power connection East Med which we aspire to see in Greece in 2018.
In conclusion, decarbonisation may be the most significant challenge shipping will ever have to face. Societal Impact is likely to drive further measures on NOx, PM and Noise. Although the alternative fuels have not reached their potential, 2020 will speed up this process. However we should not think only about 2020 but also 2023 and beyond. The later we act, the harder the action will be. Therefore, further debate is needed as innovation and action cannot wait!
Above text is an edited article of Panayiotis Mitrou’s presentation during 2017 GREEN4SEA Conference & Awards
You may view his presentation video by clicking here
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The views presented hereabove are only those of the author and not necessarily those of GREEN4SEA and are for information sharing and discussion purposes only.
Panayiotis Mitrou, Marine & Offshore Technology & Innovation Manager, Lloyd’s Register
Panos Mitrou is a Naval Architect and Marine Engineer NTUA, holding an MBA in Shipping from ALBA Business School. He is currently employed as a Technology & Innovation Manager for Lloyd’s Register Marine & Offshore, South Europe. He focuses on uptake of technology, forthcoming legislation, innovation and compliance challenges. During his seven year service with Lloyd’s Register Piraeus Technical Support Office, he had been dealing with series of statutory and other reviews. He has supported and lead the implementation of several pieces of new legislation ranging from Ballast Water management to the latest Energy management related requirements. He has also been deeply involved in MARPOL and the Chemical codes matters. He has represented Lloyd’s Register in a number of international forums, research and other projects developed within the TEN-T and other EU frameworks. He is currently involved in the roll out and materialisation of special projects like Poseidon Med and elemed.