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 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.
LR experts focused on three transition pathways:
- Methanol
- Ammonia
- Hydrogen
…and applied these to the containership feeder fleet operating regionally between Singapore, Hong Kong, and other Asian countries nearby.
Commenting on the new framework, 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
#1 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.
#2 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.
#3 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.
#4 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.
#5 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.
#6 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.
#7 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).
#8 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.
Five important factors
#1 Fleet-specific analysis: To develop a small-case commercial trial, we need to drill down into the specifics and better understand the techno-economic dynamics for each fleet. Building on the high-level analysis of the global fleet as well as the single ship analysis, it is possible to design and analyse fleet-specific fuel transition strategies. In particular, work should focus on fleets of potential first movers and assess several transitions that might be suitable for that fleet.
#2 Decarbonisation transition of a fleet and its fuel supply: A single transition may require a combination of fuels and different production methods to achieve the decarbonisation goals over time. Comparing one fuel against another fuel limits the debate to the characteristics of individual fuels. In this analysis, we shift the focus from a debate about what is the fuel of choice for the shipping industry to a debate about what is the fuel transition of choice for a specific fleet and its fuel supply.
#3 A long-term assessment: The analysis shows that comparing the potential short- and long-term implications of different transition strategies helps to identify the trade-offs that are inevitably embedded in each case.
A collective understanding of how these transitions could play out in the long term will generate the needed confidence for all stakeholders involved to commit to an actionable plan today.
#4 Evaluate fleet and fuel supply at the same time: Examining the fuel transition for shipping across the entire supply chain means identifying benefits and managing any unknowns. Investments have the best chance of success if based on a system solution. The system in this case is the entire supply chain from fuel suppliers to end-users. This can be done by assessing how the fuel supply may evolve in conjunction with the fleet evolution.
#5 A focus on collaboration to reduce investment risk: There is a need for different stakeholders to work together within a framework in which decision making is structured. These alliances should not be limited to technology partners, private shipping and energy supply companies, but should also include financiers and governments within an alliance of stakeholders. The value of a fuel transition can be highlighted, risks can be managed and mitigated, and responsibilities and benefits can be shared across the alliances and beyond members.
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
noted Carlo Raucci, LR Decarbonisation consultant and lead author of the framework.
What is more, Professor Lynn Loo, Chief Executive Officer, Global Centre for Maritime Decarbonisation, added that “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.”
In the same wavelength, Martin Humphreys, Lead Transport Economist, Transport Global Practice, World Bank, mentioned that this report “underpins the premise that maritime transport’s energy transition is likely to have both a strong regional and strong fleet specific angle.”
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
Jesse Fahnestock, Head of Research and Analysis, Global Maritime Forum, highlighted.
Building on this fuel agnostic framework, the LR Maritime Decarbonisation Hub aims to steer cross-industry alliances that can accelerate resilient energy transitions and enable pilot projects this decade.
EXPLORE MORE IN LR’S METHODOLOGY FOR FUEL PATHWAYS
