IEA: Biofuels for the marine shipping sector | 2017

Summary

The merchant shipping sector is one of the mayor players in world trade. More than 80% of all goods are transported via international shipping routes. The sector consumes more than 330 Mt of fuel a year and accounts for 2-3% of the global CO2, 4-9% of SOx, and 10-15% of NOx emissions. This report is written for the biofuel provider and biofuel developer with the aim of providing an overview of the shipping sector, the technologies, fuels and regulations associated with its supply and consumption of fuels. The different biofuel technologies and their supply potentials are presented and discussed.

The shipping sector includes more than 85,000 registered vessels divided into small, medium, large and very large oceangoing ships. The two latter accounts for 20% of the vessels, but 80% of the gross tonnage. The majority of the shipping routes are connected by a relatively small number of ports in North America, Europe and Asia. Therefore a major part of the fuel supply and its infrastructure are concentrated at only a few locations.

Compared to road transport and aviation, the shipping sector uses much less refined or processed fuel types. Heavy fuel oil (HFO) is the main fuel used by oceangoing deep sea vessels, a fuel which is characterized by a very high viscosity and high sulphur level. More refined fuels are marine diesel oil (MDO) and Marine gas Oil (MGO), which has lower levels of viscosity and sulphur content. The latter mainly find applications in coastal waters and/or in smaller vessels operating in ports and inland waterways.

The main engines onboard the large and very large ships are 2-stroke diesel engines. These engines have a constant revolution as well as very high thermal efficiency (~60%) and often include state-of-the-art engine technologies. Associated with the engine is a fuel processing unit, heating the fuel and removing impurities prior to injection into the engine. Marine diesel engines can work with a wide range of fuels and are highly versatile.

Being international in its operation and organization, the maritime sector is regulated by the International Maritime Organization (IMO) under the UN. IMO handles issues regarding safety, security and pollution associated with international shipping. A major issue of pollution from shipping are the particles emitted due to the high levels of sulphur in the fuels. The IMO has put forward strict regulation of the fuel sulphur levels. Emission Control Areas (ECAs) have been set up in coastal waters in Europe, North America, and Asia. Within these areas only 0.1% low- sulphur fuels are allowed, and from 2020 ships sailing in non-ECA areas will need to use less than 0.5% sulphur in their fuel. If low sulphur fuels are not used, scrubbers needs to be installed in order to remove the SOx emissions.
These regulations means that an estimated 70% of the fuels currently used by the sector needs to be modified or changed. Greenhouse gas emissions, i.e. CO2 are currently not regulated, but expectations are that regulation of CO2 emissions will be implemented in the short to medium term.

The sector is currently looking at solving the issue of reducing sulphur levels by using more refined fuels, an operation done at the oil refinery. This will not only add an extra cost, but it will also increase the CO2 emissions associated with the fuel as more refining will be required. The low sulphur fuels currently introduced are labelled Very low Sulphur Fuel Oil (VLSFO) having between 0.1 to 0.5% sulphur and Ultralow Sulphur Fuel Oil (ULSFO) having below 0.1% sulphur content. Another solution to reduced sulphur emissions is to use liquefied natural gas (LNG) as fuel, but this requires a refitting of the engines, just as pressurized fuel storage needs to be installed onboard. Other fuels such as methanol are used to a smaller degree with the latest generation of diesel engine technology, but are still at a supply infrastructure premature state.

Biofuels have very low sulphur levels and low CO2 emissions, as such they are a technically viable solution to low-sulphur fuels meeting either the VLSFO or ULSFO requirements. The immediate challenge is that the shipping sector has little knowledge on handling and applying biofuels as part of their fuel supply. Another challenge is that the volumes of biofuels required to supply the shipping sector are large. A single very large ship may consume the annual production from a single medium sized biofuel facility e.g. 100 mio. liters. The market entry for biofuels in the marine sector is therefore most favorable onboard smaller vessels for coastal waters or for use as auxiliary ultra-low sulphur fuel in ports. Of the current biofuels commercially available, only plant biodiesel derived from plant oil or pulping residues and bioethanol are produced at a level where they can supply significant volumes of fuel. The current renewable diesel type fuels are mainly produced from plant based oils or products thereof e.g. used cooking oil (UCO), and the potential supply of sustainable renewable diesel with the current technology is an estimated 10-20 Mt. Another issue is that the plant oil based fuels are the main fuel type currently used at a significant scale for bio jet fuels, leading to competition for feedstocks between the shipping and aviation sectors.

Bioethanol can be sustainably produced from waste and lignocellulosic feedstocks, with much higher supply potential, capable of replacing all fossil fuels in the shipping sector, but bioethanol is not compatible with current marine diesels, and cannot be used as a drop-in fuel. However, the development in engine technology has seen the introduction of multifuel engines. These engines can use oil, gas, as well as alcohols (e.g. methanol or ethanol) in a diesel cycle. Therefore, the use of ethanol may grow significantly in the medium to long term as ships with new engines are introduced.

The cost of biofuels is higher than the cost of fossil fuels and is expected to remain so in the short to medium term. Specific mandates on biofuels or carbon taxes will make biofuels economically more competitive. Alternatively low-carbon transport may be introduced as a business model, putting a value on lower CO2 emissions.
In conclusion a combination of factors that include:

• New IMO regulations requiring reduced levels of sulphur in marine fuels
• Increased focus on reducing emissions of GHG from the marine sector from governments and customers of transportation services.
• A desire to be able to hedge the cost of fuels in local currency and away from fossil crude pricing
• The ability to “drop in” to existing fuel refining, blending and in some cases even the distribution infrastructure
• Potential regulations on CO2 emissions from the merchant shipping sector

Together these factors create a potentially large market for biofuels in the shipping sector. From a biofuel producer point of view, the wide technical fuel specifications are attractive, as they can lower production costs. However, both technical and logistic issues needs to be resolved before biofuels can be introduced at a larger scale in the shipping sector, and a closer collaboration between biofuel producers, engine developers and ship owners is recommended as a path forward.