When exploring their fuel of choice for their decarbonisation pathways, shipowners will find no cheap options among green hydrogen, ammonia or methanol
With IMO’s revised GHG reduction strategy in place and the EU ETS coming in 2024, ship operators are deciding on which low- or zero-carbon fuel will be their best bets to make it to the net-zero finish line by 2050. One of the critical factors will be price, and a July webinar, Alternative marine fuel markets: the impact of EU ETS in 2024 and IMO’s emissions strategy, produced by Argus, makes it clear, none of the choices will be cheap.
“Green hydrogen, biomethanol, green ammonia and blue ammonia do not really make sense financially at the current snapshot of time. They’re way too expensive,” observed Argus Marine Fuels editor Stefka Wechsler in examining alternative fuels through the prism of the EU ETS, which accounts for CO2 emissions from a tank-to-wake perspective. Ms Wechsler showed a bar graph during the webinar forecasting fue prices for alternative fuels on a US$ per tonne MGO equivalent (US$/t-MGOe) that included the EU ETS carbon tax for years 2024, 2025 and 2026.
Ships burning grey versions of LNG, methanol or ammonia would pay less than MGO, plus 40% CO2 costs in 2024. In 2026, when shipowners must pay for 100% of their CO2 emissions, LNG would cost US$795/t-MGOe, methanol US$845/t-MGOe and ammonia US$759/t-MGOe vs US$981/t for MGO.
“Ammonia on a tank-to-wake emissions perspective looks very attractive price wise”
Ms Wechsler said regardless of whether ammonia is grey, blue or green, it does not contain carbon. “So, burning ammonia does not emit carbon dioxide. If we are just looking at grey ammonia on a tank-to-wake emissions perspective, it looks very attractive price wise.”
But green ammonia is not. It will cost owners 3.5 times its grey cousin — a whopping US$2,708/t-MGOe.
Even with the EU ETS, scrubber-fitted ships burning high-sulphur fuel oil (HSFO) will still be able to operate more cheapl than those using any of the sustainable marine fuels in 2024 and 2025, observed Ms Wechsler. In those years, even paying the carbon tax, “your high-sulphur fuel bill will be lower than burning grey LNG, grey methanol, grey ammonia, B30 or B100,” she said.
In 2026, only grey ammonia beats a scrubber-equipped ship burning HSFO.
LNG early leader
With immediate CO2 emissions reductions of up to 25% compared to traditional marine fuels, LNG offers a viable path to decarbonisation. More than 500 LNG-fuelled vessels will be trading by year’s end.
A recently released report commissioned by SEA-LNG details the pathway to decarbonisation for LNG-fuelled ship operators. It suggests that by 2030 — one of the indicative check-points in IMO’s revised GHG reduction strategy — there will be a sufficient supply of bioLNG at ports to cover 3% of shipping’s energy demand. In 2050, an increased supply of bioLNG will cover 13% of shipping’s energy demand.
But LNG is not practical for every shipowner nd can be problematic and expensive for retrofits. Methane slip — which is being mitigated in newer engine designs — and methane leakage in the production process tarnish the fuel’s well-to-wake credentials.
Methanol shift
But methanol’s uptake in recent months has been nothing short of breathtaking. The latest surge of orders sees 48 methanol dual-fuel ships, including 15 retrofits, added to the global fleet in July — a record for one month, according to DNV. As a result, the global fleet now stands at 204 vessels, with 27 currently trading. This is a clear signal to fuel suppliers that there will be demand from shipowners for methanol, blue methanol and biomethanol in the years ahead.