Navigant Research Blog

With Regulations Looming, Shipping Industry Weighs Biofuels Options

Mackinnon Lawrence — April 9, 2012

While aviation biofuels have become a hot topic in the advanced biofuels industry, old-fashioned emissions regulations and escalating diesel costs are making marine shipping’s dependence on bunker fuel seem outdated.  If aviation is the hare, than marine shipping may very well be the tortoise that could emerge the winner in integrating renewable fuels in this decade.

Aside from enjoying an easier path to broader market integration, marine shipping is faced with one very large incentive driving demand for alternative fuels: MARPOL.  Originally signed in 1973, MARPOL (short for “marine pollution”) is an international convention creating a verifiable, enforceable regime to prevent pollution discharges from ships.  It has been one of the key drivers of sustainability in the marine shipping industry.

Among other things, MARPOL sets limits on nitrogen oxide (NOx) and sulphur dioxide (Sox) emissions from ship exhausts as well as particulate matter, and prohibits deliberate emissions of ozone depleting substances.  Emission Control Areas (ECA) – coastal areas, regulated by national governments, have more stringent requirements.  In 2011, the International Maritime Organization (IMO), the UN agency that regulates the shipping agency, adopted mandatory measures to reduce emissions of greenhouse gases (GHGs) from international shipping, including new requirements on energy efficiency for ships.

Shippers’ Options

According to industry representatives speaking at World Biofuels Markets held in Rotterdam, Netherlands in March, the new regulations dictate that by 2015, vessels must reduce their sulphur footprint in certain ECAs, including North America.  The impact of these restrictions will be to spur the adoption of biofuels such as lignin, algae, and biomethane based fuels, as shipping lines will not be able to route vessels away from key markets to avoid regulation.

Shipping lines have three options: 1) manage fuel use by switching among options to burn the “right” fuel in the “right” place; 2) incorporate scrubbers to clean SOx and NOx from the exhaust; or 3) switch to alternative fuels such as biofuels and liquefied natural gas (LNG).

To the first and last points, biodiesel is an especially good candidate for replacing shipping fuel since it is biodegradable, non-toxic, and essentially free of sulphur and aromatics.  It can also be dropped into the existing fuel supply chain with little or no need for engine modification and its biodegradability reduces the risk of marine pollution in case of spills.

Two key developments demonstrate that a shift is already underway:

  • Maersk Line, one of the world’s largest shipping companies, is testing algae-based biofuels in anticipation of 10 percent of the world’s shipping fleets utilizing biofuels by 2030.
  • Solazyme currently has a contract to supply 450,000 gallons of algal biofuels for U.S. Navy testing ahead of its plan to deploy its “Great Green Fleet” by 2016.

As discussed in Pike Research’s upcoming biogas industry report, biomethane – upgraded biogas that can be mixed with natural gas – is also attracting interest in the maritime industry and driving investment in liquefied natural gas (LNG) infrastructure at ports.

As I noted in a recent post, with access to concentrated demand centers and no viable alternative to liquid fuels, the aviation industry is gaining traction as a potential near term “win” for biofuels.

Even so, targeting biofuels and bioLNG in maritime shipping could prove to be a much easier path for biofuel and biogas producers.  While supplanting fossil fuel dependence for commercial and military aviation has obvious benefits, the hurdles are generally more onerous given the scale of risk involved.  Engine failure caused by a bad batch of biofuels, for example, would have more dire consequences for the passengers on board a plane than a cruise ship.

Compared to ground and aviation transport sectors, the international maritime shipping industry, which carries 90 percent of world trade, has been a laggard in improving its sustainability profile.  Increased utilization of biofuels will go a long way to enabling the industry and its supply chains to become increasingly carbon neutral.

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