Alexander Feindt

The time to start taking action was yesterday

by Alexander Feindt, Global Business Development Manager, MAN Energy Solutions

Shipping – and its global CO2 emissions – is currently en route to Paris Agreement overshoot. Amidst new geopolitical uncertainties and their implications on trade volumes, shipping is expected to grow from 3.0 to 5.1 bn deadweight tons (60% growth) from 2020 to 2050. It is annually making large withdrawals on the carbon budget – so large they probably cannot be caught up. Cumulated overshoot of the carbon budget and of net zero is foreseen to reach 25 gigatons by 2050. Urgent consistent regulatory action and a carbon price is required to guide the shipping community in the right direction.

Those numbers are based on an MAN Energy Solutions assessment of share of renewable fuels by fuel type, where engine technologies follow the fuel mix. Based on current methanol engine contracting, shipping will demand approximately 1.2 million tons green methanol by 2025. Demand will rise steeply from there reaching approximately 19 million tons by 2030. Green ammonia will have a slower start than methanol, but is expected to increase more rapidly, demand will be around 11 million tons by 2030.

Despite the sobering current outlook, the shipping sector can be defossilised and decarbonised - although considered hard to abate. MAN Energy Solutions has a crucial role and considerable responsibility here. As 50% of world trade is being moved by MAN engines, our company is indirectly responsible for 1.5% of global CO2 emissions (Scope 3) and therefore has made its mission to provide the technologies needed to make shipping sustainable. We plan to reduce emissions from our production facilities by 50% through 2030 and plan to decarbonise our maritime business by 2030.

Also, to be clear, technology will not be the bottleneck for shipping decarbonisation. Large-bore methanol engines are a reality with 140,000 running hours, small-bore four-stroke engines following suit as we speak. The ammonia engine technology needs some maturing, but our ammonia engines will sail the seas in the middle of the 2020s.

So what should we expect and what needs to be done? A hard truth is that fuels and OPEX will become more expensive, either through emission regulation or penalties of conventional fossil fuels or „green“ production before any potential economies of scale kick in. So better start thinking about how to handle this contractually (e.g. cost/profit sharing, hedging, carbon contracts for difference). Operations and bunker frequency will change as fuel energy densities and tank sizes differ, as does the handling and necessary training for crew.

The cooperation with the fuel supplier or bunker operator will become more important as we see a need for development around production capacities – and willingness to take investment decisions – of green, synthetic fuels. Most likely, shipping will not choose its shipping fuel as we only represent 3% of global energy demand, so watch out for developments in competing sectors such as industry, agriculture or road.

It is a truism that all alternative fuels have their own advantages and downsides, and that we will see a mix based on applications and regions. In fact, we at MAN Energy Solutions are somewhat fuel agnostic and strive to offer solutions for all relevant options.

So let’s get to work on the open items such as ramp up of green fuel production and infrastructure; various guidelines, approvals and certifications of green fuels („guarantees of origin“) as well as safety standards and training. Acceptance by society and policy makers will also depend on how fast and well we work together as an industry.