Shipping remains the most cost-effective, energy efficient, and sustainable means of transporting the world’s goods, but in an environment of ever-increasing decarbonisation regulation, owners face the challenge of profiting from new technology while reducing emissions.
The International Maritime Organization (IMO) has committed to reducing greenhouse gas emissions from the world’s shipping fleet by at least 50% from 2008 levels by 2050. At the same time, the IMO anticipates a potential threefold increase in the number of ships in the industry.
Given this growth estimate, to enable a 50% cut in the combined emissions from all ships in the global fleet, individual vessel level emission cuts will need to be in the region of 70%. The industry has a relatively short amount of time to improve energy efficiency, because vessels built today may well still be operating in 2050.
The immediate concern for owners and operators is to comply with the 2020 regulations, which require sulphur content of marine fuels to be reduced from the current 3.5% to 0.5%. The technological pathways to meet this compliance are relatively clear, and there are three different investment options shipping companies can take now to prepare for the future
The easiest option to adopt is to switch to low sulphur content fuel, which is now being made available by some oil companies. However, the cost and availability of this fuel remain in question.
Ship engines are capable of running on a variety of fuel oils, meaning that little or no engine modifications are needed to switch to Very Low Sulphur Fuel Oil (VLSFO). But even if there are no equipment costs, the fuel itself is likely to be expensive. One estimate is that fuel costs would increase by USD 60 billion should the industry adopt VLSFO. Even if this estimate proves too high, it’s fairly certain that the price differential between IMO 2020-compliant fuel and the current high sulphur heavy fuel oil (HFO) will be large.
A bigger problem than cost, however, is bunkering availability. Distillate fuels currently account for some 25% of all marine fuel consumption, with the vast majority of ships operating on residual fuels such as HFO. If these HFO users switch to distillate VLSFO, it will require a quadrupling of the currently available distillate fuel, which cannot be achieved merely by further refining of the residual fuels. The demand would need to be met by competing with other onshore distillate users, or by increased refining of crude oil.
So, while this is a relatively easy option to implement, it is likely to have a significant impact on operating costs, and bunkering availability remains an open question.
An alternative compliance option is to have the vessel fitted with an engine that can run on ultra-low sulphur fuel, such as liquefied natural gas (LNG). The use of LNG fuel is increasing globally; it has virtually no sulphur content and has the added advantage of reducing nitrogen oxide (NOx) emissions as well. In addition, there is nothing that the internal combustion engine does with HFO that cannot be done with LNG. Dual-fuel engines running on both regular fuel oil and LNG were introduced to the maritime sector some 30 years ago by Wärtsilä, so the technology is well-established.
The LNG delivery infrastructure is also developing rapidly. This is partly in response to the increasing popularity of LNG among shipping companies, but even more so by its adoption for use in heavy road transport vehicles in Europe, the United States and China.
This option allows the operator to continue using the same fuel as before, but with an exhaust gas cleaning system, or scrubber, fitted. The key technical component here is a reactor in the exhaust system that cleans the gases before they enter the atmosphere. The cost of retrofitting a scrubber system can run between USD 2 and 4 million.
This might be the safest option going forward, although the pace of implementation needs to be stepped up. By January 1, 2020 11% of the global fleet, representing approximately 16% of total fuel consumption, will be fitted with scrubbers.
While passing the sulphur compliance milestone seems attainable, meeting future emissions targets is more challenging. By 2030, greenhouse gas emissions from individual ships – primarily CO2 emissions – must be cut by an average of 40% compared to 2008 levels. This applies to all vessels, new and existing. None of the sulphur compliance solutions alone can get the CO2 levels down to the IMO’s 2050 target. Meeting this target will require a combination of different solutions in order to make the needed headway.
While a variety of options have been proposed for powering ships in the long term, including hybrid engines, fuel cells and clean-burning synthetic fuels, in the short term, the internal combustion engine will continue to be at the center of propulsion solutions.
According to Wärtsilä, combustion engines running on LNG and supported by the latest digital technology provide the best option for ships being built today. Most commodity vessels have limited technology on board for shore-based monitoring and analysis of fleet performance. In the past, the market deemed this type of technology a waste of Capex with no commensurate Opex savings, but decarbonisation will demand the use of data analytics to improve performance. Wärtsilä has shown that on a basic liner run, intense data analysis for performance optimisation resulted in a 12% improvement in efficiency. This reduces both Opex and decarbonisation at the same time: a win-win for owners and the environment.