Denmark’s Maersk, the largest container shipping firm in the world, plans to have carbon-neutral ships on the water starting next year. But securing the correct fuel for these next-gen vessels is presenting its own set of challenges.
The company has 13 ships on order from South Korea’s Hyundai Heavy Industries that run on green methanol, which is considered greener compared to the fossil fuels that have powered global shipping for decades.
This is part of Maersk’s broader plan to have net-zero greenhouse gas emissions by 2040. However, procuring the vessels is only one part of the challenge. Getting them fully operational with green fuels is another.
“It is a chicken and egg type situation,” Morten Bo Christiansen, Maersk’s head of decarbonization, told CNBC.
“The vessels will arrive prior to the fuels, which is of course not ideal quite frankly. When we ordered the vessels, there was no supplier whatsoever,” he said.
“One of the points of ordering the vessels was actually to put a demand signal in the market so that the fuel production will start.”
In March the company signed partnerships with six energy developers globally to ramp up their production of green methanol.
Christiansen said that Maersk expects to have all 13 ships running on green fuels by 2026 at the latest. In the interim, the ships could run on fossil fuels but “the intention is clearly that these ships will be operating on green methanol.”
Maersk’s rival CMA CGM is pursuing a similar path and recently announced the purchase of six methanol-powered ships.
A spokesperson told CNBC that the company has “pledged that alternative fuels, like biomethane, will cover at least 10% of ships’ consumption by 2023.”
Regulatory moves
Shipping companies will need adequate amounts of green methanol or other greener fuels to power these ships to make a meaningful difference to their carbon footprint.
If Maersk and other firms have to use fossil fuels in the interim to operate their new ships it would mark a sidestep from their decarbonization goals. The shipping industry is responsible for nearly 3% of the world’s emissions.
Faig Abbasov, shipping director for the non-governmental organization Transport & Environment, said that the conundrum facing the shipping industry is similar to that of the early days of electric cars and whether carmakers would build vehicles to stimulate the development of charging points or vice versa.
“We need to send the demand signal before well in advance, so both the ships and the fuel manufacturers are ready to put their investments in place. We need to guarantee the demand with a mandatory regulation because if we leave it to the market, the market will not favor green fuels,” Abbasov said.
Many industries have set targets for decarbonizing or reaching net-zero emissions, with 2050 being a recurring target, Abbasov said, but it is still a nebulous goal.
“The 2050 decarbonization date is great. It’s sort of a signal but in practice it doesn’t mean much because 2050 targets set globally or at the European level are not enforceable on individual companies. It is an aspirational, overall impersonal target,” he said.
Strict regulation is what will drive the demand for greener fuels, he added.
One such law coming down the track is the European Union’s FuelEU Maritime Regulation, which sets targets for ships to significantly reduce their greenhouse gas emissions over the coming decades. It is expected to be in effect in 2025.
“The nice thing about that regulation is it provides a guaranteed demand for these new fuels in a quantity that’s predictable and that makes it a lot easier to invest in ships, the infrastructure that you need on the ship and onshore,” Bryan Comer of the International Council on Clean Transportation, told CNBC.
“Right now there’s just no way for the cleaner fuels to compete on price with fossil fuels.”
While Europe is just one cog in the vast global shipping industry, Comer added that regional regulation will drive others to follow suit, such as in the U.S., Asia and ultimately at the level of the U.N.’s International Maritime Organization.
Alternative fuels
Maersk has hitched its ambitions to green methanol but there is no full consensus on what alternative fuels the industry should be pursuing to decarbonize the world’s logistics routes in the long run.
“The other alternative we look at is ammonia. It is hailed as the big fuel for the future and it may well be,” Christiansen said, adding that infrastructure on ships to support ammonia is still some years away.
“The other challenge with ammonia is that it is a gas. It is complex to handle, it’s expensive to handle, and it is highly toxic both to human beings but not least to the marine environment. It means that safety on board is an issue.”
Comer said that the fuel that will have “the least regrets in my mind” will be green hydrogen but that also presents its own challenges.
“The issue with green hydrogen is that to store enough of it on board the ship, it almost certainly has to be in a liquefied state, so it has to be very cold to begin with, and then you store it in very insulated tanks,” Comer explained.
“That takes up space and the fuel itself is already low energy density by volume so you’ll have to refuel more often and you’ll need to make sure that the areas in which you’re operating have supplies of green hydrogen for you to fuel in.”
This gets to heart of the issue. It is not just a matter of building the ships and sourcing the fuel, the land-side infrastructure for refueling and maintenance requires significant investment as well if the industry is to meet its decarbonization ambitions.
“It’ll really depend not only on the size of the ship, the type of the ship, but also how it operates,” Comer said.
“We don’t have the luxury that we can just use one technology, we will need to use a host of technologies to solve the problem,” Christiansen added.
CNBC