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The Potential of Alternative Fuels in the Shipping Industry: Hydrogen, Ammonia, and Methanol

todayFebruary 20, 2023

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The Potential of Alternative Fuels in the Shipping Industry: Hydrogen, Ammonia, and Methanol

The shipping and maritime industry is a significant contributor to global emissions, accounting for around 2-3% of the world's total carbon footprint, according to the International Maritime Organization (IMO). This has led to increasing pressure from governments, consumers, and industry stakeholders to find sustainable and eco-friendly alternatives to traditional fossil fuels.

Alternative fuels such as hydrogen, ammonia, and methanol have emerged as promising solutions for the shipping and maritime industry. In commodity trading, the adoption of alternative fuels is gaining traction due to the potential for cost savings and reduced environmental impact.

According to a report titled “The Future of Trucks: Implications for energy and the environment,” published by the International Energy Agency (IEA), the shipping industry could potentially reduce its emissions by 50% by 2050 if it transitions to low-carbon and zero-carbon fuels. 

Hydrogen, for instance, is a clean-burning fuel that can be produced using renewable energy sources, such as wind and solar power. The potential for hydrogen as a fuel in the shipping industry was highlighted in the recent partnership between the American Bureau of Shipping (ABS), the global provider of classification and technical advisory services to the marine and offshore industries, and South Korea's Daewoo Shipbuilding & Marine Engineering Co. (DSME), which aims to develop designs for large, ocean-going hydrogen carriers.

Similarly, ammonia is another promising alternative fuel for the shipping industry, particularly for use in large vessels. A recent report from Lloyd's Register (LR) highlighted the potential of ammonia as a viable zero-carbon fuel option for the maritime industry. Lloyd’s Register predicts that ammonia could account for up to 10% of the industry's fuel mix by 2050. 

One more recent example of the potential of ammonia as a zero-carbon fuel in the shipping industry is a joint project between Dutch energy company Engie and Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK Line). The project aims to develop a new ammonia-fueled ship that could be in operation as early as 2025, and could be the first ammonia-fueled ship in the world.

The project is part of a wider initiative to promote the use of ammonia as a marine fuel, with a goal of developing a supply chain for green ammonia, produced using renewable energy sources. This project demonstrates the increasing interest and investment in alternative fuels in the shipping industry, and the potential for ammonia to play a significant role in the transition to more sustainable energy solutions.

Methanol, on the other hand, is a versatile and readily available fuel that can be produced from a range of feedstocks, including natural gas, coal, and biomass. It is already being used in some shipping vessels and has been shown to significantly reduce emissions compared to traditional fossil fuels. 

For example, Stena Line, one of the largest ferry operators in Europe, has been operating a methanol-powered ferry, Stena Germanica, successfully since 2015 on its route from Gothenburg in Sweden to Kiel in Germany. The vessel was converted from traditional marine diesel to methanol fuel by adding new tanks and fuel systems. The conversion to methanol has reduced the ferry's carbon emissions by up to 25%, nitrogen oxide emissions by 80%, and sulfur oxide emissions by 99%, compared to when the ferry was operating on traditional marine diesel.

The success of the Stena Germanica has prompted Stena Line to order two new methanol-powered ferries, one of which, the Stena Scandica, began operating on the Gothenburg-Kiel route in December 2021. The new ferries will have a capacity of 1,000 passengers and 120 cars, and will be the first vessels in the world to be built specifically for methanol fuel. This investment in alternative fuels by Stena Line is a testament to the increasing interest and potential for methanol to play a significant role in the shipping industry's transition to more sustainable and low-carbon fuels.

The adoption of alternative fuels in the shipping and maritime industry poses several challenges. The supply chain management of alternative fuels such as hydrogen, ammonia, and methanol is complex and costly. Additionally, the specialised infrastructure required for the storage, handling, and distribution of these fuels may not be widely available, affecting their availability.

Moreover, safety is a crucial factor that requires careful handling and storage due to their flammability and toxicity. The use of ammonia as a fuel has raised concerns, and new safety guidelines have been developed by the International Maritime Organization (IMO), which are expected to be implemented in 2024.

Alternative fuels may have different properties than traditional fossil fuels, which can impact vessel performance and efficiency. As such, vessels may need to be modified or designed differently to optimise their use of alternative fuels. Adoption can be hindered by the initial cost of up to 50% higher compared to traditional fossil fuels, as found by the International Council on Clean Transportation (ICCT) study titled, “Powering the Future of Marine Shipping: The Case for Renewable LNG and Other Low-Carbon Fuels.”

However, the use of alternative fuels can lead to cost savings over the vessel's life due to lower fuel costs. Real-life examples such as the challenges faced by the MV Wes Amelie demonstrate the importance of addressing these challenges. The MV Wes Amelie is the world's first container ship to be powered by liquified natural gas (LNG). The vessel faced challenges related to supply chain management and availability of LNG fuel, which is not widely available in all ports. As a result, the vessel had to switch back to traditional marine diesel on occasions when it was unable to receive LNG fuel.

This highlights the challenges faced by vessels using alternative fuels, which require a reliable and sustainable supply chain for their widespread adoption. Overcoming these practical considerations is necessary to promote the use of sustainable and low-carbon fuels in the shipping and maritime industry, an area that requires significant investment and innovation to achieve a more sustainable future.

Despite these challenges, the industry is taking a proactive approach to reducing its carbon footprint, and with the right policies, investment, and innovation, alternative fuels could play a significant role in shaping the future of the commodity trading industry.

For instance, in 2021, Trafigura, one of the world's largest commodity traders, announced its plans to develop a green ammonia bunker vessel. The vessel will be used to supply ammonia as a marine fuel to Trafigura's global fleet, as well as other interested third parties. Similarly, Cargill, one of the world's largest food and agriculture companies, has teamed up with the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping to develop a roadmap for decarbonizing the shipping sector.

In conclusion, the shipping and maritime industry is actively shifting towards alternative fuels to meet its emissions reduction targets. Hydrogen, ammonia, and methanol are among the promising solutions that have the potential to deliver cost savings and reduced environmental impact. 

Progress has already been made in the development and adoption of alternative fuels, with LNG-fueled ships set to triple by 2025. Leading companies like Maersk and Compagnie Maritime d'Affrètement (CMA) and Compagnie Générale Maritime (CGM) are leading the way towards carbon neutrality by 2050, and the use of alternative fuels is a key part of their plans. 

The investment in the development and adoption of alternative fuels is increasing, with hydrogen and ammonia expected to see a significant increase in usage. According to BloombergNEF, the use of hydrogen and ammonia is expected to increase from 0.1% in 2021 to 2% and 2.2% respectively by 2030. 

With continued efforts to develop and adopt alternative fuels, the shipping industry can play a vital role in reducing global greenhouse gas emissions and promoting a more sustainable future.

To hear more about alternative fuels in the shipping industry, make sure you register for Commodities Trading Week London, where we will have a dedicated conference on Shipping and Maritime, including the session titled, “Deep dive into alternative fuels – the case for Hydrogen, Ammonia and Methanol” featuring industry experts Richard Watts, Founder and Managing Director, HR Maritime, Natalie Gupta, Director Bunkering – Value Chain Partnerships, Yara, and Bjarke Nissen, Managing Director, Stolt Tankers. Register now to secure your place.

We are also hosting our Commodity Trading Week Americas in June, taking place in Chicago, where you can also find specialist sessions on Shipping and Logistics, featuring many key industry leaders giving their valuable insights. Register now to secure your place.

Written by: Commodities People


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