The following is text of a news release from the Global Maritime Forum:
(COPENHAGEN) — To make the decarbonization of the maritime shipping sector successful, the coming three decades will need to see a fundamental shift toward zero carbon energy sources. This implies a need for significant investments in new fuel production, supply chains, and a new or retrofitted fleet.
Based on new analytical work conducted by University Maritime Advisory Services (UMAS) and Energy Transitions Commission (ETC), at least $1 trillion in investments will be needed to decarbonize shipping. The scale of cumulative investment needed between 2030 and 2050 to achieve the International Maritime Organization (IMO) target of reducing carbon emissions from shipping by at least 50 percent by 2050 is approximately $1 trillion to $1.4 trillion, or on average between $50 billion and $70 billion annually for 20 years. This estimate should be seen in the context of annual global investments in energy, which in 2018 amounted to $1.85 trillion.
If shipping was to fully decarbonize by 2050, this would require extra investments of approximately $400 billion over 20 years, making the total investments needed between $1.4 trillion and $1.9 trillion.
The estimate of investments required is based on ammonia (NH3) being the primary zero carbon fuel choice adopted by the shipping industry as it moves toward zero carbon fuels. Under different assumptions, hydrogen, synthetic methanol, or other fuels may displace ammonia’s projected dominance, but the magnitude of investments needed will not significantly change for these other fuels.
To avoid shifting emissions upstream, it is important that efforts to decarbonize shipping also include the decarbonization of fuel production. The analysis is therefore based on the use of low/zero carbon hydrogen as input to the production of ammonia.
The investments needed depend on the production method for the hydrogen used to produce ammonia. Total investment in infrastructure needed for three different methods of hydrogen production include pure electrolysis production, production based on pure steam methane reformation (SMR) with carbon capture and sequestration (CCS), and a mix between the two.
The investment to produce hydrogen from natural gas with carbon capture and sequestration is estimated to be lower than production of hydrogen from electrolysis. However, it cannot from this be concluded that hydrogen from SMR+CCS will be cheaper than hydrogen from renewable electricity, as this will also depend on the price of the energy feedstock.
The major need for investment is upstream in energy and fuel production
Investment needs can be broken down into two main areas: Ship-related investments, which include engines, onboard storage and ship-based energy efficiency technologies, and land-based investments, which include investments in hydrogen production, ammonia synthesis and the land based storage and bunkering infrastructure.
The biggest share of investments is needed in the land-based infrastructure and production facilities for low carbon fuels, which make up around 87 percent of the total investment. Hydrogen production make up around half of the total land-based investments needed, while ammonia synthesis and storage and bunkering infrastructure make up the other half.
Only 13 percent of the investments needed are related to the ships themselves. These investments include the machinery and onboard storage required for a ship to run on ammonia both in newbuild ships and, in some cases, for retrofits. Shiprelated investments also include investments in improving energy efficiency, which are estimated to be higher due to the higher fuel costs of ammonia compared to traditional marine fuels.
Green and blue hydrogen potential feedstocks for zero carbon ammonia
A major component of the investments is related to the production of low/zero carbon hydrogen, which can either be produced from natural gas using steam methane reformation (SMR) combined with carbon capture and storage (blue hydrogen) or from renewable electricity and water through electrolysis (green hydrogen).
The relative competitiveness of the two options is a function of the investment costs and the prices of electricity and natural gas and will be significantly influenced by technology development and policy choice. In the medium- to long-term, the rapidly falling price of renewable electricity and a reduction in electrolyser costs are expected by some to make electrolysers the lower cost production solution in many geographies – even if electrolysers are a more expensive option in capital cost terms.
Meanwhile, costs of CCS are also expected to decrease as technologies move beyond pilots and demonstrations. Acceleration of cost reductions for CCS would allow for a competitive marketplace between green and blue hydrogen, likely influenced by contextual geography and policy.
Synthesis and conclusions
While research and development is valuable across all technology areas pertinent to shipping’s decarbonization, the opportunity to reduce the overall costs of decarbonization is greatest in the upstream production of fuels. This emphasizes the need to involve stakeholders across the full fuel value chain to make the transition possible in the most economically efficient manner.
Hydrogen and ammonia have multiple applications in today’s economy and likely increasing roles in the global economy across energy storage, low carbon heat, transport fuels and, in the case of ammonia, as a key input in the production of fertilizer. This means that investments in hydrogen and ammonia production can serve other purposes than supplying fuels for shipping, which can create synergies and reduce the investment risk, especially in the early phase of the transition.
Finally, it is important to note that the significant investments needed to decarbonize shipping can only be expected to happen if there is a long-term commercially viable business case. Technological developments alone – although very important – are not expected to be enough to create such a business case as the costs of zero emissions fuels are expected to be significantly higher than traditional fossil fuels used in shipping in the coming decades.