‘The only scalable fuels are e-fuels,’ emphasised Christophe Rofka, President , Medium- and -Low-Speed at Accelleron, as the company launched a report at London International Shipping Week which highlighted the decarbonisation challenges – or ‘deadlocks’ – that shipping and other industry sectors are facing as they wait for green hydrogen production and availability to scale up on a global basis.
In its new report, ‘Deadlock: What’s stopping shipping’s carbon-neutral fuel transition’, the Swiss fuel technology and digital solutions company took soundings from a number of key industry stakeholders to assess the pace of shipping’s energy transition and what might be the barriers to progress.
A critical sticking point is seen as an acute lack of investment in green hydrogen, the building block of e-fuel production, which is holding back production and leading to industry uncertainty over its availability at scale – and thus an unwillingness to commit to offtake agreements.
As noted by the report, only about 38 million tons of green hydrogen are currently in the pipeline, supported by less than $320 billion in committed investment. Furthermore, this lack of green hydrogen availability will only be exacerbated as the number of vessels in the global fleet rises. According to the Accelleron study, a 67% increase in marine fuel consumption is predicted by 2050.
Annual global demand for green hydrogen is projected to be 500 million tons in order to reach net zero, and 105-150 million tons of this volume will be needed by shipping each year in order to produced e-methanol or e-ammonia. The cost of creating a robust green hydrogen supply could be as much as $9 trillion.
The report identified five ‘deadlocks’ which are currently putting the brakes on shipping’s energy transition.
The first is seen as the number of potential fuel pathways which been put on the table which is creating what the report terms as ‘paralysis’. While LNG, biofuels, and e-fuels are all currently in the mix and are being trialled, the study emphasises that only e-fuels based on green hydrogen have the scalability and zero emission credentials required by shipping and other industry sectors.
Carbon neutral fuels are also geographically constrained, given that green hydrogen hubs need to be located in areas of large landmass availably with the necessary supportive climate conditions. The reported pointed to the Western Green Hydrogen Hub in Australia which has a landmass one-tenth of that of the UK, and which will use 70 gigawatts of renewables to produced annual volumes of 28 million tons.
Another block in the road is the provision of finance at sufficient scale. Uncertainty over regulation is making investors cautious, as is shipping’s fragmented ownership base. The report also highlighted the problem of split incentives, where shipowners choose vessel propulsion systems but charterers and cargo owners have to pay the fuel bill.
A long wait for regulatory implementation is also identified as a challenge for the shipping sector.
If the International Maritime Organization’s (IMO) Net Zero Framework (NZF) is voted through at the meeting of the Marine Environment Protection Committee (MEPC) in October, then any incentives to support industry decision-making on energy choices will not come into play until 2028 – and final investment decisions on fuel production sites should really be coming through now to support shipping’s fuel choices.
The fifth ‘deadlock’ put forward by the report is the provision of fit-for-purpose port infrastructure. ‘Ports must connect shipping to grids, pipelines, water and storage networks that also serve aviation, steel, power generation and agriculture,’ said the study.
Having identified the deadlocks, the report suggests that solution lies in cross-sector collaboration and aggregated demand. This multilateral approach to fuel procurement could ‘[transform] thin, fragmented signals into large bankable commitments.’
During a panel discussion at the launch of the report, much of the focus was on the need for regulatory clarity and certainty. In terms of the EU regulations, it was suggested that more information was needed on how shipping might benefit from revenues raised by the emissions trading system (ETS) and the penalties for non-compliance with Fuel EU Maritime. There is perhaps a perceived tendency for the European regulators to focus more on compliance than the goal of decarbonisation.
Turning to next month’s vote on the NZF, Patrick Verhoeven, Managing Director at the International Association of Ports and Harbours (IAPH), said a failure to back the framework ‘would be a disaster – it would put us back, and might encourage more regional measures.’
He also said that if the framework is taken off the table, then ‘an equitable transition is compromised.’
Agreeing that regulatory certainty is imperative, Isabelle Ireland, Head of Corporate Operations at green hydrogen developer InterContinental Energy, emphasised that: ‘It’s easier to accelerate when you know where you are going.’
The full Accelleron report – ‘Deadlock: What’s stopping shipping’s carbon-neutral fuel transition’ – can be accessed here
