Top 5: We Have to Start Decarbonizing Shipping Now

Hello friends! It’s great to be back after a bit of a break. Here’s my monthly take on the five most interesting developments in future fuels and vehicles trends. Items I selected include:

• Zero Emission Vessels (ZEVs): The time is now, Lloyd’s Register and University Maritime Services says to start thinking through and working on pathways toward ZEVs. A study they unveiled this week during a webinar session I attended presented some potential pathways for the industry.
• Fighting Car Bans: The German car industry association, VDA, has vowed to fight the crusaders on car bans. Meantime, Volkswagen announced that its diesel sales increased in 2018.
• A BEV Glut: A new analysis from Deloitte suggest we could see a global BEV glut in the next few years.
• Biojet Feedstocks: There are some promising options out there, and one of the most surprising named by experts at a recent forum was palm oil.
• Congestion Pricing: A joint NRDC-TransForm study points to the necessity for equity when considering congestion pricing policies, something I think we’ll see more of in the U.S. in the coming years.

1. Lloyd’s Register (LR) and University Maritime Advisory Services (UMAS): Zero Emission Vessels: Transition Pathways ―To achieve at least a 50% reduction in CO2 by 2050 and to be on course for a CO2 pathway consistent with the Paris Agreement, zero-emission vessels (ZEVs) need to be entering the fleet around 2030, and a significant portion of new-builds will have to be zero emission to compensate for the non-zero emissions of the existing fleet. This study, launched by LR and UMAS this week in a joint webinar, looks at what needs to happen over the next three decades to make this happen.  While the authors say it’s way too early to settle on any particular pathway, there are some common features in all the pathways explored:

• Timeframes: The 2020-2030 timeframe will be “the most significant decade” when early action will be required.

• Fossil fuels: In all pathways a transition to zero-carbon fuels will be achieved by 2050. This means that fossil fuel-based marine fuels (such as Heavy Fuel Oil (HFO), Low Sulfur Heavy Fuel Oil (LSHFO), Marine Diesel Oil (MDO) and LNG will completely phase out or will take a small share (~10%) of the total fuel mix in 2050, as shown in the Figure 1.

Figure 1: Illustrative Desired Shipping Fuel Mix in 2050

• Energy Efficiency: The authors say energy efficiency technologies have the potential to reduce fuel consumption and therefore emissions. In the short-term (next 10 years) they will contribute to the absolute emissions reduction and will be used in hybrid solutions whilst global coverage of zero-carbon fuels in terms of availability at bunkering ports evolves. It is expected that during the transition period (2020 – 2030) zero-carbon fuels are on average more expensive than conventional fossil-based fuels, and therefore the use of energy efficiency technologies is an important element to stimulate the take-up of ZEVs.

• Safety: In the first half of the 2020s, there will be a need to test the safety aspects for all potential zero-carbon fuels in marine applications through risk assessment, safer designs and implementation cases.

• Price Competitiveness: By 2030, zero-carbon fuels will need to reach a competitive price that, in combination with a carbon price, will make ZEVs as competitive as vessels using conventional fossil-based fuels. The required carbon price may vary by ship type and size. Zero-carbon fuels also mean potential new technologies on board for power conversion such as fuel cells and batteries, which will need to develop further to provide sufficient power. Moreover, as zero-carbon fuels have a lower energy density than conventional fossil-based fuels, it is expected that in all pathways, gradually ships would be designed to store less energy on board and refuel more often; cruise and RoPax, for example, would reduce their capacity by at least 50%, with the other ship types by at least 30%.

Pathways considered included (1) renewable electricity-based marine fuels in the form of hydrogen, ammonia, e-methanol, e-gas oil and electricity for use in batteries; (2) bioenergy; (3) an equal mix of the two which would mean a ramp-up of renewable electricity-based marine fuels and bio-based fuels. However, alongside these fuels, also hydrogen and ammonia produced from natural gas with carbon capture and storage (CCS) gradually enter the fuel mix. Figure 2 shows how this might evolve between 2020-2050.

Figure 2: Energy Source and Marine Fuels Mix Assumed in Equal Mix Pathway

Also interesting were the following comments in the analysis:

• LNG: “LNG assets will need to find ways to be competitive in the emerging landscape. Ships using LNG as fuel will need to consider a transition towards bio-LNG, e-methane or blending LNG with electrofuels like hydrogen to help continuously reduce the fuel’s carbon content. These pathways for decarbonising LNG will likely put shipping users of LNG in competition with other market sectors such as heating for these fuel options, which will be particularly important for fuels with expected constraints on supply such as bio-LNG. The shipping transition to zero-carbon may be more suited to liquid biofuels and liquid electro-fuels as existing oil infrastructure can be re-used.”

• Biofuels v. Electro-fuels: “Biofuels offer the opportunity for the shipping sector to re-use existing infrastructure and main machinery and can enable a gradual transition through increasing blends, allowing a less disruptive route for shipping over the decades. However, reliance on them in the short-term could undermine the further development of the likely more long-term resilient solutions such as electro-fuels. If biofuels play a short-term role, this must not hinder investment into research, development and deployment (RD&D), prototypes and pilots of electro-fuels.”

• Batteries: “Batteries may not be the energy storage solution for deep-sea shipping, but they still have an important role. In all pathways, batteries play a minor role as they are deemed only suitable for small ships and short distances due to limitations with regards to the high cost and relatively low energy volumetric densities when compared to other zero-carbon options. The role that batteries plays in the shorter term (2020s) to enable a transition and gradually phase out the use of fossil fuels should not be underestimated, whilst other technologies for zero-emission vessels are developing. In fact, batteries will be very important during this decade in hybrid solutions and for onshore power connections whilst in port.”

If anyone would like a link to the webinar, please email me at tammy@transportenergystrategies.com and I’d be happy to provide it. Future Fuel Outlook members can read more about the IMO’s Initial Strategy here.

2. Automotive News Europe: German Auto Industry Lobby Vows to Fight ‘Crusade’ Against the Car ― Sure, the German auto industry is leading the way with new investments in EVs (clients can read more about that here), but they’re done sitting back when it comes to the car ban issue that has proliferated across the EU and other parts of the world post Dieselgate. “The VDA will raise its voice in 2019 ‘louder than last year,’ VDA President Bernhard Mattes said. ‘We don’t need a crusade against the car.'” They will have to raise it above a whisper to counter the trend, and frankly, they should have done that a long time ago. Car bans continue. This month Sweden announced that it would ban the sale of gasoline and diesel cars after 2030. Meantime, Germany’s Transport Minister Andreas Scheuer urged the European Commission in a letter to review its stringent limits on nitrogen dioxide pollution, saying some doctors are questioning their health merits. Around the same time, and probably not a coincidence, Volkwagen announced that shares of incoming orders for diesel vehicles rose from 39% in 2017 to 43% in 2018.

3. Quartz: Automakers May Have Completely Overestimated How Many People Want Electric Cars ―This article references a recent analysis from Deloitte which expects 21 million battery electric vehicles (BEVs) to roll off assembly lines over the next decade as EV prices fall below comparable gasoline and diesel models by 2024. “Our projections suggest that supply will vastly outweigh consumer demand by approximately 14 million units over the next decade,” the firm said. Further the article notes a Deloitte comment that the number of auto manufacturers (traditional and new) getting into the space is “not sustainable.” It will be interesting to see whether this comes to pass, and if it looks eminent, if policymakers will step in to shore up the glut.

4. Forbes: The Seven Most Promising Aviation Biofuels ― More accurately, this article is about the seven most promising aviation biofuels feedstocks. According to panelists at the Atlantic Council’s recent Global Energy Forum they include the following: Dwarf Saltwort, energy cane, waste gas (LanzaTech), lumber waste, logging waste, municipal solid waste and sustainably grown palm oil. Palm oil, even if the most sustainably produced will be a challenge for the industry in regions like EU under the strictures of the revised Renewable Energy Directive (REDII) and NGO (and some policymaker) advocacy calling for a complete ban.

5. Natural Resources Defense Council (NRDC): Road Pricing Can Fix Traffic and Inequities ― A new study from NRDC and the firm TransForm, “Pricing Roads, Advancing Equity”, pulls together best practices and case studies to help cities and transportation agencies evaluate the social equity—or in most cases, inequity—of their transportation systems. It also offers guidance on how the use of congestion pricing and reinvesting in mobility can improve social equity in transportation. I believe this will be a growing issue in the U.S. that NRDC and other NGOs will push.

“As worsening traffic congestion, rising climate emissions, and growth in urban areas confound communities across the country, we know city leaders will turn more and more to congestion pricing as a powerful and proven solution. It’s essential that they not only think about equity implications, but make improving equity an explicit project goal and put fairness at the center of program design. With this new resource, we’re confident many more cities can move forward with pricing in their toolkit for unclogging our streets, cleaning our air and enhancing mobility for those who need it most.”

–NRDC and TransForm

Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.