After publishing its Maritime Forecast to 2050, DNV hosted a seminar in early October, presenting the changes that the shipping industry is facing in the decarbonization front. Current and new fuels, decarbonization technologies, and the “green shipping” landscaped, were all presented and discussed in order to provide a picture of shipping’s decarbonization effort.
ccording to DNV, owners must identify their own decarbonization pathway to manage carbon risk. To do that, shipowners must first understand the costs associated with the decarbonization path.
Knowing the technical design implications of decarbonization is crucial to eliminate showstoppers and reduce costs
In fact, George Teriakidis, Area Manager, East Mediterranean & Black sea, Maritime, DNV, mentioned that currently “tectonic shifts transforming the maritime world.” These changes have to do with:
Stakeholders in shipping’s value chain are increasingly demanding fact-based scientific disclosure of companies’ sustainability story
Mr. Teriakidis noted.
Furthermore, increased regulatory requirements and market trends around sustainability and the environment have been impacting shipping companies for many years and new requirements continue to be introduced, such as the IMO 2050 target for the reduction of GHG emissions by 50% compared to 2008 levels.
The recent trends in sustainability, or Environmental, Social and Governance (ESG) performance, are now impacting the decisions of investors in the capital market and the ability of shipping companies to access financing.
Namely, ESG reporting now includes:
- GHG emissions;
- Recycling practices;
- Seafarer and employee wellbeing.
In order for companies to perform successfully against ESG criteria impacts, there are three key points to keep in mind, according to DNV:
A patchwork of regulations and requirements is forming. IMO, regional regulations, financiers, and charterers are requiring transparency on performance
Mr. Teriakidis concluded.
Key drivers for decarbonization in maritime
Currently, the fuel transition is taking place, with shipowners trying to adapt and understand which fuel is best for their fleet. However, there are many aspects, except fuels, that affect the decarbonization pathway. Namely, new regulations and policies, such as the:
- Fit for 55 package and EU’s Green Deal;
- New US administration adding pressure;
- Japan, China, South Korea have declared ambitious plans for carbon neutrality.
…are all affecting shipping’s green journey, and put pressure on the industry to perform better.
Of course, an aspect that always plays a huge role is access to capital. As DNV noted, currently:
Poseidon signatories has reached 24 banks and roughly 50% of all ship finance
...while the value chain requirements change, with charterers looking for more responsible environmental behavior and incentivizing shipping’s decarbonization.
Fuel transition is gaining momentum
Continuing on the webinar, George Dimopoulos, Head of R&D and Advisory Unit, DNV mentioned that:
“In 2020 the use of alternative fuels has doubled in comparison to 2019, as 11% of the ships are using, in comparison with only 6% in 2019, with LNG leading the way.”
However, Mr. Dimopoulos focused mainly on two new alternative fuels, that are trying to move up in the “green hierarchy”, describing the challenges that they currently present:
#1 Ammonia: This fuel has is noxious compound, while it is “highly toxic and corrosive.” Today it is commonly used in the fertilizer industry, with shipping needing more experience in handling onboard and onshore. Another major challenge is the lack of a regulatory framework, immature technology, while green production needs to be scaled up.
#2 Methanol: Methanol is a low toxicity and low CAPEX fuel which has mature technology, while IMO guidelines are also already available. Nevertheless, like ammonia, green and sustainable production needs to be scaled up.
The fuel transition has started, using mix technologies and fuels. Key fuel technologies are facilitating the transition, which will be available in 4-8 years. For this to happen new research is needed
Explained Mr. Dimopoulos, adding that there are three fundamental key drivers that are currently increasing the pressure for decarbonization:
- IMO regulations on carbon intensity are taking place from 2023.
- Commercial pressure may push shipowners to aim for a leading position in decarbonization.
- Poorly performing shipping companies will be less attractive on the charter market and may also struggle to gain access to capital.
Focusing more on the decarbonization technology, Chara Georgopoulou, Senior Research Engineer, DNV, presented three such strategies:
#1 Fuel storage
As Ms. Georgopoulou explains, old ships can have large density in low volumes, which is not a possibility with new fuels. This happens because alternative fuels need more space and more volume. For this reason, shipping must find measures to compensate for these challenges, considering among others:
- Shorter bunkering intervals;
- Increased amount of pilot oil fuel;
- Blend-in of carbon-neutral pilot oil fuel.
#2 Onboard power plant
Shipboard power is generated using a prime mover and an alternator working together. For this an alternating current generator is used on board. The generator works on the principle that when a magnetic field around a conductor varies, a current is induced in the conductor.
However. Ms. Georgopoulou noted that with this technology, there will be:
Consequences of a fuel change for installed energy converters, as well as consequences for any existing fuel preparation and supply system
#3 Integration of the fuel system in the ship design
Finally, in case everything goes according to plan, and the shipowner has decided on which fuel their fleet will use, then it is time to integrate the new fuel system into the ship design. Nonetheless, this is not an easy process, as the installation should consider the following:
- Toxic and hazardous zones, fire safety, safety distances;
- Strength considerations;
- Trim and stability within acceptable boundaries.
Incorporating basic measures at newbuild stage is key to accommodate fuel flexibility
Stamatis Fradelos, Regional Bulk Carriers Segment Director, DNV concluded.