Low Carbon Pathways: The 2020 challenge and alternative fuels

TIN news:  Panayiotis Mitrou, Marine & Offshore Technology & Innovation Manager, Lloyd’s Register, gave a presentation entitled “Low Carbon Pathways – The 2020 Challenge and alternative fuels” at the 2017 GREEN4SEA Conference. Mr. Mitrou noted that if shipping has a higher cost of decarbonisation than other sectors of the economy, it may be possible to offset some of shipping’s CO2 emissions by purchasing offsets from other sectors. He referred to major projects concerning the LNG as a fuel such as Poseidon Med II in which LR actively participates in setting a roadmap to LNG bunkering operations in East Mediterranean Sea. He concluded that futureproofing cannot be guaranteed, however, decabornisation is the mother of all challenges. Also, he advised not to think only about short-term but also beyond 2020.

The following regulatory highlights are going to hit the industry by 2020:

• All Low Flashpoint  fuels under IGF, Fuel Cells, Hydrogen guidelines (IMO MSC 94) 

• Global Sulphur Cap 2020, Roadmap to Decarbonisation 2023, EEDI 3 and 4? (IMO MEPC 70)

• EU Emissions Trading Scheme in Shipping
• California’s At- Berth Regulation 2017
• China to apply a nationwide Emissions Trading scheme by 2017

Specifically, regarding the SOx challenge, there is an estimated impact from different sources and studies ranging from 6 to 50 Billion $ per year. That lower limit is realistic, given by a BIMCO supported study, however many mention that it is quite impossible to have that figure at least for the first two years. In addition, there is the refineries’ X Factor; the distillates & the LSFO. However, it is obvious that the refineries are companies and they need to make profit. Moreover, the availability of HSFO is not clear yet, even though in the begging it was expected to be there and the scrubbers will not have a problem. Low SF Crude may prove a myth as proved by many studies because right blend out of this crude is needed to be used in other products. Thus, the bottom line is that for HFO that kind of concentration of Sulphur will not be kept in the end product. Last but not least, when it comes to GHG, Hydrogen and Desulphurization should also be kept in mind.

Under the Paris Agreement, it has already been decided to try stabilizing the temperature of the planet well below 2deg C and aiming for 1,5deg C. The figure below shows the new policies scenario – Nationally Determined Contributions under COP21. There is a 66% probability for keeping that 2degC Scenario. It is important to keep in mind what has already been legislated under the Paris Agreement:

• Electricity 95% Low Carbon
• Cars 70% electric
• Buildings 80% of existing stock retrofitted
• Industrial sector CO2 intensity 80% decrease

However, where do we see shipping fitting in the decarbonisation story? The above may affect any discussions about shipping. COP21 target in shipping may be achieved through a pathway moving away from fossil fuels.

A carbon pathways study was published quite recently. Some kind sort of Carbon Premium is expected after 2023 as per IMO roadmap. LNG is already offering a probability of 20% carbon reduction in comparison with the HFO. A Blend of Offsetting is certainly needed, which means that the shipping requirements will be offloaded to other sectors as well. Moreover, efficiency and Low Carbon Renewables or Bio Fuel will be needed. The latter the GHG policy starting, the greater the rate of decarbonisation has to be. There is further need for careful planning and seismic investment for the infrastructure development for non-fossil fuel switch. Financial schemes to support the shortsea sector will also bring a substantial benefit to the deep-sea sector as well by the maturity achieved for technology.

According to the US Ports

Research, more than 90% of the Societal Impact near ports comes from NOx and PMs. Marine Engines NOx Emission limits are 30-40 times greater than EURO VI (Cars). Thus, a differential between deep-sea and coastal shipping is clear here. Subsequently, more and different measures are being applied for those segments of shipping that produce the greater impact.  

Regarding the fuel compliance choices for 2020 and beyond, the vast majority of ships will just have to switch HSFO to LSFO, however, there is also the scrubber solution; LNG and methanol already and for the next ten years ethane; LPG and other gases; hybrid (being developed right now); other equivalence and biofuels; hydrogen perhaps being part of the final solution until 2050. Three years before the global sulphur cap implementation, thousands of ships and only 600 have decided or already installed scrubbers; not more than 100 LNG fuelled ships working already to operate; 6 methanol installations and around 20 battery installations in vessels. However, there are still reasons to be optimistic such as the driving change of technology.

Technology is improving with a significant pace. If not today, this is anticipated to happen within the next few years when we will have equilibrium in cost between renewable energy and fossil fuel energy. There is a significant substantial decrease in vital equipment needed for LNG, such as Type C Tanks, as well as a substantial decrease in the cost of batteries. All things considered, at the pace that scrubbers will be adopted, it is probably to witness a decrease in their prizes. A number of cases of ships are being built under this new schemes and new pressure as well; the Viking Grace; the Greenland; the Scandlines’ new ferry; the ColorLine concept and hybrid ships. How can all this be done? There is need to support this kind of change. From the EU Union part there has been quite a contribution as new tools have been already in place with the European Investment Bank (EIB) Green Shipping Scheme; the Connecting Europe Facility (TEN – T) and the EFSI – European Fund for Strategic Investment (Juncker Package). Additionally there is 50 % of debt financing for new vessels applying new technologies and 100% guarantee for green components of retrofitting operations in other ships activating in Europe.

In terms of what we are doing as a region, there have been three major projects in South Europe-the EU Med for LNG as Fuel; the Gainn4Mos; the Core LNGas hive and the Greece, Italy & Cyprus driven project Poseidon Med II. Furthermore, some 125 million euro have already been committed in developing the infrastructure and the framework for LNG in this area.

LR is also participating in the Poseidon Med II project, a sequel of the initial Poseidon Med I with 5-6 million budgets which will include the whole roadmap presented below aiming at the finalization of the LNG bunkering operations in East Med.

Finally, there is a new story about shipping electrification in EastMed, the elemed, which is the first shipping electrification in EastMed; the first zero-emission project and practically the first on-shore power connection East Med which LR aspires to see in Greece in 2018.

In conclusion, decarbonisation may be the most significant challenge to face in shipping. Societal Impact is likely to drive further measures on NOx, PM and Noise. Although the alternative fuels have not reached their potential, 2020 will speed up this process. However we should not think only about 2020 but also 2023 and beyond. The later we act, the harder the action will be. Therefore, further debate is needed as innovation and action cannot wait!