Challenges and opportunities for alternative fuels in shipping
We asked you what the biggest decarbonisation challenge in shipping was and you answered:
We will be shedding some light on each of these four challenge areas; why they exist and which opportunities we believe they present for the industry, starting with alternative fuels
Why this is a challenge
Since the 1960s, heavy fuel oil – derived from processing and distilling crude oil – has been the leading energy carrier for the marine shipping industry because of its low cost, widespread abundance, and developed infrastructure. However, it also accounts for 13% of global sulfur oxide and 15% of global nitrogen oxide emissions (IMO, 2015). Accordingly, the International Maritime Organisation (“IMO”) has set targets aimed at progressively reducing the carbon intensity of maritime vessels, with overall goals to decarbonise the marine sector by the end of the century. Targets include halving GHG emissions by 2050, while reducing CO2 emissions intensity 40% by 2030 and 70% by 2050.
Replacing convenient, ubiquitous fossil fuels from upstream and downstream activities is a challenge faced by many industries. Yet, transitioning the legacy usage for marine shipping presents some specific barriers, for example:
- limited storage capacity on board ships coupled with, in some cases, long distances between land based refueling,
- limited storage capacity ashore at ports and terminals, and
- uncertainty in scheduling future ports of call and a preference to retain flexibility requires a responsive global bunkering network.
Why this offers opportunities
Despite barriers, the regulations being imposed on the industry by the IMO is driving shipowners to adapt to meeting reduction targets. Doing so, presents opportunities for greater demand, production, and adoption of alternative fuels which over time is closing the price gap to its legacy counterpart of crude oil. Such newfound demand for alternative fuels presents a unique opportunity for investment in this scale-up and diversification of the maritime fuel mix.
The industry has by no means formally agreed on a shortlist of alternative fuels, yet our ecosystem partners Watson Farley & Williams has conducted research with 545 senior industry leaders to try and gauge the expected adoption in the next ten years. In their respective report ‘The Sustainability Imperative’, they discovered that fewer than a third of shipping operators plan to use any alternative to traditional bunker fuel or liquefied gas such as LNG or LPG in the next five years.
Source: https://www.wfw.com/articles/alternative-fuels-what-does-the-future-hold-for-shipping (Watson Farley & Williams, 2021)
A significant opportunity is presented for the industry to remain focused on discovering the future carbon-neutral fuel with present alternatives to traditional HFO or liquefied natural gas (“LNG”).
How to engage with these opportunities
There are many ways to approach decarbonisation through innovation, one of which is embracing existing possibilities in the industry ecosystem. Partnering innovative startup solutions with enterprise assets and resources is a beneficial method to deliver impact at scale across the entire industry and achieving results in a short time-span.
At Rainmaking, we facilitate such partnership through several avenues, one of which being our Trade and Transport Impact program. This program is a supply chain-specific open innovation platform tailored for sectors such as shipping and maritime, where we scope customised challenges like alternative fuels and scout the globe for startups who can play their part in a solution to that challenge.