Odfjell: Shipping will have to compete heavily for alternative fuels
The discussion around the decarbonization of the shipping industry is moving into a new stage and the issue is no longer around whether to decarbonize, but rather how to decarbonize the sector as efficiently and sustainably as possible.
The industry stakeholders know that they would need to transition to alternative fuels, however, the major challenge at the moment is the production of those fuels as switching to e-fuels would require a considerable portion of renewable energy.
Further down the line, there is also the issue of the efficiency, or lack thereof, of converting that energy into fuels and the overall potential of routing renewable electricity into fuels for ships to cut global CO2 reduction.
Based on the current estimates, numerous other sectors have a much bigger potential to cut global emissions by tapping into renewable energy than shipping. For example, routing renewable energy into electric cars would result in a 9 times higher reduction of global CO2 emissions than by using it for the production of fuels for ships.
“Shipping will require more than 50 percent of the available non-fossil electricity in the world to decarbonize,” Øistein Jensen, Chief Sustainability Officer at Norwegian shipping and tank terminal company Odfjell SE, said during a keynote speech at a Sustainability Live London event held last month.
Specifically, in 2020 the non-fossil electricity production totaled around 10k terawatt hours, while estimates show that shipping, which accounts for around 2% of the global emissions of CO2, would require around 5.4K of that.
As explained by Jensen, with that kind of ratio the issue boils down to where to channel the produced renewable energy to get the best effect on global emissions.
“The answer is not shipping, and that is a challenge for us, being a hard-to-abate sector,” he said.
“That means that we will compete heavily for alternative fuels and renewable energy.”
Commenting on the key issue regarding the acceleration of the uptake of alternative fuels, Jensen said that it was crucial to close the price gap between fossil fuels and alternative zero-emission fuels with policy measures.
Zero-emission fuels are expected to be twice as expensive as conventional fuels, at best.
“As long as shipping can have an alternative that is cheaper, it will choose that alternative due to the global character of this business. That is why we need policies to implement market-based measures to ensure that alternative fuel is on the equal scale as a fossil fuel,” he said.
Speaking on Odfjell’s strategy on decarbonization, Jensen explained that the company cannot bet on one fuel and that it will ‘focus on what we can control’.
Odfjell plans to cut its greenhouse gas emissions by 50% by 2030 compared to 2008 levels and have a climate-neutral fleet from 2050.
The targets exceed the objectives of the International Maritime Organization (IMO) of 40% CO2 emissions reduction by 2030 and a 50% reduction by 2050 compared with 2008.
For the current fleet that means a massive focus on improving the ships’ energy efficiency and minor projects related to fuel cells.
Over the past couple of years, Odfjell has completed 100 separate retrofitting projects with energy-saving devices, and for this year the company plans to complete 24 similar projects to reduce the carbon intensity on its ships.
Overall, the company has managed to achieve a 39% reduction in carbon intensity in 2022 compared to 2008 levels with maintenance and efficiency programs such as propeller cleaning. Over the past decade, Odfjell improved the energy efficiency of its managed fleet by 30%, the company data shows.
In line with its strategy, Odfjell plans only to order vessels with zero-emission technology from 2030. In practice, this means that the zero-emission tanker the company would order in the future would have to have fuel-flexible engines and state-of-the-art energy efficiency, as explained by Jensen.
“There is great momentum in the shipping industry. The recent regulations, the Inflation Act in the U.S. for example, as well as the EU and the IMO, show that great things are coming,” he said.
“I believe that nuclear power has to be part of the energy mix having in mind the challenges presented by the limited access to renewable energy. The current energy crisis will be an accelerator for the production of energy, and we have no alternative.”
Putting a nuclear reactor on a vessel would be challenging. Nevertheless, nuclear could play a significant role in the land-based production of renewable energy and alternative fuels, he said, adding that the sector should look into various opportunities to solve the decarbonization puzzle.
“A lot of changes will happen in shipping and we are standing in the face of a massive transition.”