In response to the pressing need for zero-emission shipping, the Global Maritime Forum has released a two-part insight brief series addressing the crucial role of demand aggregation in accelerating the adoption of green fuels.
The first brief provides an overview of the challenges early movers are experiencing in securing green methanol and ammonia, and how demand aggregation could help overcome them. The second surveys the available approaches to aggregating demand for zero-emission fuels in detail and explores how they can be applied by early movers.
Key Insights:
- The International Maritime Organization (IMO) targets net zero emissions by 2050, with 5-10% of energy from alternative fuels by 2030. However, only a few shipping companies have secured an adequate supply of these fuels.
- This challenge arises because operators must commit to long-term, large-scale, high-cost fuel contracts (10-15 years). Without such agreements, producers cannot raise the capital to begin fuel production, stalling the transition.
- To overcome this, the Global Maritime Forum has identified novel solutions that fuel producers, would-be fuel users, and market enablers can use to scale availability such as:
Demand-led measures:
- Joint procurement – By pooling purchasing power, shipowners, operators and/or charters can exercise collective bargaining power, support the development of key infrastructure, and send strong demand signals to the market
- Joint ventures – For participants in existing green corridor initiatives to share costs and risks, leverage combined financial capacity, and simplify shipping’s complex contracting
Third party-led measures:
- Market making – Having a government or international institution step in to make the commitment with producers and then selling the fuel on to shipping companies on a shorter, smaller, and/or cheaper basis.
- Hydrogen hubs – Increased participation in hydrogen hubs to connect producers, consumers, and connective infrastructure in a specific location.
Supply-led measures:
- Time stacking – Encouraging fuel producers, and their financiers, to accept a package of shorter contracts so no single shipping operator must commit to a full 10 to15-year contract
- Through these measures, sustainable fuels such as green ammonia and methanol can be produced in high enough quantities to hit international sustainable fuel targets, while keeping the burden on shipping manageable.
Next steps for progressing zero-emission fuel demand aggregation across the value chain
Governments
- Include demand aggregation as a component in policies to support commercial implementation of zero-emission shipping, alongside regulation, subsidies, and research, development and demonstration programmes
- Consider differences between shipping segments, how demand aggregation may interact with regulations and subsidies, as well as opportunities to combine shipping and land-side demand, when designing policy interventions
Ports
- Explore the potential to support pre-commercial action through engagement with customers and reflection on likely position in the hydrogen economy; this can help clarify ports’ role in any commercial action NGOs
- Leverage the potential to act as a convenor on demand aggregation, from exploratory discussions through to pre-commercial and even commercial action Shipping companies
- Assess the need for participating in fuel demand aggregation efforts against commercial strategy and transition plans
- Assess the legal and commercial feasibility of demand-led measures
- Seek opportunities to engage in testing real-world feasibility – e.g., through green corridors
Green corridor initiatives
- Evaluate the need and opportunities for fuel demand aggregation as part of the corridor’s feasibility assessments and implementation planning
- Share learnings related to demand aggregation to help roll out effective practices
Finance
- For commercial banks and investors – take a proactive role in supporting supply-led action, including time stacking
- For investment and development banks – explore opportunities to broaden access to zero-emission fuel through credit enhancement and/or market making for shipping
- For philanthropic investors – consider the potential to support convening organisations and/or financially contribute to zero-emission buyers alliances and market making efforts
