DNV has published its 2024 Energy Transition Outlook report, where it examines the global energy system of various sectors, including maritime, and their transition toward a more sustainable and low-carbon future.
Maritime energy demand forecast
Regarding the maritime industry, DNV forecasts that energy demand will only grow slightly, from 13 EJ/yr in 2023 to 14 EJ/yr by 2050. More extensive and effective energy efficiency measures — for decarbonization purposes, meeting energy efficiency standards, and cutting costs — will temper energy demand growth in the maritime sector.
Although cargo-tonne-miles are projected to increase, the decarbonization of many demand sectors globally will curb and ultimately reverse the growth in seaborne transport of coal, oil, and later natural gas. The forecast of maritime energy demand is first and foremost influenced by expectations of maritime/seaborne trading of goods, as passenger transport is a minor contributor to maritime energy use, setting maritime apart from other transport modes in this respect.
2024 is the year that the global energy transition has begun; it is also the year that emissions are likely to peak.
… said Remi Eriksen, Group President and CEO, DNV
Global cargo shipping dynamics
The regional dynamics of fossil-fuel demand and supply dictate that any imbalances are resolved by transporting excess resources from surplus regions to deficit regions. Moreover, significant maritime transportation of fossil fuels takes place within individual regions. Similarly, the movement of raw materials and finished goods occurs both within and, notably, between regions. In a world where GDP doubles by 2050, the demand for cargo transportation will outweigh efficiency gains. Consequently, DNV projects cargo tonne-miles to rise across most ship categories, with a total growth of 40% from 2023 to 2050.
Growth distribution among ship types
This growth is unevenly distributed among ship and cargo types. Container transport has long been the main growth engine, and this will continue with an expected 80% growth in tonne-miles to 2050. Part of this is due to containerization, where more and more types of cargo are transported in containers.
Certain bulk segments, such as grain and minor bulk, are also growing, as is LNG transport. In other sectors, efficiency improvements and global trade pattern changes will lead to reductions.
The drastic reduction in coal demand, thanks to dwindling coal demand in the power sector in countries such as China, will result in a halving of maritime coal transport.
Similarly, deep electrification of road transport has second-order impacts on both sea-borne crude oil and oil products transport, leading to a 20% reduction by 2050.
Short- and long-term trends in seaborne trade
In addition to the economic drivers, DNV observes several short- and long-term trends influencing the forecast of world seaborne trade:
- In the short term, certain seaborne trading routes are coming under intense pressure from conflict activity — such as the attacks on commercial shipping in the Red Sea — and from climate change-related extreme events — such as the drought affecting the Panama Canal and disrupting water-borne trade between North and South America. All these disruptions serve to increase seaborne trade distances and increase the need for maritime transport.
- In the short to medium term, the world is moving from globalization to more regionalization and multi-polar priorities whereby some regions are increasing their efforts to reduce dependence on raw materials and goods from regions outside their sphere of influence. This implies disruptions in well-established seaborne trading patterns and the establishment of new patterns. For example, when Russia invaded Ukraine, it disrupted piped natural gas to Europe from Russia. While this led to more LNG exports from the US and Canada to Europe, it also resulted in more oil moving from Russia to China and India.
- In the longer term, protectionist policies enacted by some countries and regions to safeguard their industries will also lead to reduced trade.
These factors depend on how geopolitical forces take shape and what the near-term trade equilibrium looks like. They therefore add to the uncertainties of maritime trade. In the coming years, transport on keel will become more expensive due to an increasing share of low-emission fuels in the maritime fuel mix. This might impact established transport routes in cases where domestic production has an advantage over higher-priced transportation.
Challenges in maritime fuel mix decarbonization
The maritime sector is still regarded as a hard-to-abate sector. However, the regulatory push from the International Maritime Organization (IMO) and the EU, as well as demands from leading charterers for lower-emission transport, are rapidly driving the sector’s focus, ability, and enforcement of decarbonization. As electrification options are limited to port stays and short routes, decarbonization alternatives for maritime fuel will all come at a significant cost increase, estimated at about a 70% to 110% increase in total cost of transport.
Expensive fuel alternatives encourage further focus on energy efficiency and might, to a limited extent, influence freight volumes. According to the report, the main result of this will be an increase in freight rates with costs moving to consumers by means of a modest increase in the price of goods.
IMO decarbonization strategy and regulatory field
IMO’s decarbonization strategy is ambitious, aiming for ‘net-zero emissions by or around 2050’, and reductions from 2008 levels of 20% to 30% in 2030 and 70% to 80% in 2040. A lack of enforcement mechanisms makes the full achievement of this strategy unlikely, and neither strict EU regulations nor charterer push are sufficient for a global implementation to achieve these targets. Nevertheless, the industry is rapidly moving towards decarbonization, and this outlook includes a trajectory with a 20% reduction in CO2 emissions to 2040 and a 60% reduction to 2050, compared with 2023 numbers.
Uncertainties in fuel options for decarbonization
Unlike many other demand sectors, there is significant uncertainty in which technology and fuel options will ultimately win the maritime decarbonization race. As all fuel options are expensive, a very interesting alternative is the continued use of oil with onboard CO2 capture.
Despite additional fuel use and assuming a moderate capture rate of around 75%, this option is less expensive than advanced biofuels, methanol, or ammonia.
However, its success is dependent on a global shore-based receiving mechanism with subsequent coupling to a transport and storage network. The latter will be developed in most regions regardless of shipping.
DNV’s maritime fuel mix projections
DNV’s best estimate of the maritime fuel mix includes a gradual phase-in of onboard CCS from 2040, encompassing 15% of all fuel in 2050. A capture amount of 120 MtCO2 from shipping corresponds to about 8% of all CCS globally.
Also new in this year’s fuel mix is the opportunity of nuclear shipping. Small modular reactors (SMR) on board a ship present a potentially attractive no-refuel-through-vessel-lifetime option.
Unlike onshore, onboard nuclear competes with expensive biofuel and e-fuel options rather than cheap power from solar and wind.
Nevertheless, the technological, commercial, and regulatory challenges to onboard nuclear remain considerable. Hence, DNV includes nuclear propulsion only from 2045 in the Outlook, comprising 6% of the maritime fuel mix in 2050.
Shifting away from its predominately oil-based fuel mix today, a significantly decarbonized maritime 2050 fuel mix is dominated by hydrogen-based fuels with 24% ammonia and 12% e-fuel (likely methanol) with an addition of 11% biofuel.
Electrification will be low (4%), although it may dominate the smallest ships sailing short routes. Natural gas will continue its growth towards 2040, but towards 2050 will likely reduce again as its CO2 content is too high for deep decarbonization.
