EMEA News
Sweden's Renewable Fuel Surplus: A Maritime Catch-22
Sweden is a leader in the quest for sustainable marine fuels, driven by its ambitious goal to achieve net-zero emissions by 2045 and support for the International Maritime Organization's (IMO) target to eliminate greenhouse gas emissions from international shipping by 2050.
The nation is heavily investing in the development of biofuels, liquefied biogas (LBG), and synthetic fuels like eMethanol, showcasing a bold vision for the future of maritime energy.
Alternative fuel advances
In May 2023, Sweden marked a significant milestone with the commencement of construction on the FlagshipONE facility in Örnsköldsvik. This plant is set to annually produce up to 50,000 tonnes of eMethanol — a carbon-neutral fuel synthesised by combining captured carbon dioxide with green hydrogen annually. its goal is to make eMethanol a viable option for commercial shipping, directly contributing to the sector's decarbonisation efforts.
Further progress was made in August 2023 when ScanOcean introduced a new marine fuel derived from hydrotreated vegetable oil (HVO), produced domestically in Sweden. The tanker vessel Key Fjord became the first to be bunkered with this renewable fuel at the Port of Oskarshamn, paving the way for broader commercial use and demonstrating the country's commitment to innovative solutions.
Despite such advances, Sweden faces a paradox of an oversupply of renewable fuels with limited access to the broader European maritime market.
The industry grapples with a classic Catch-22. Shipping companies are hesitant to invest in vessels powered by alternative fuels due to the lack of widespread storage and supply infrastructure, while the development of such infrastructure is stalled by the low adoption rates of these fuels.
"Sweden is producing some of the most advanced renewable marine fuels," says Nils Igelström, Managing Director at GAC Sweden.
"But cargo owners are unwilling to pay higher freight costs – and without buyers, the environmental benefits remain unrealised, stalling progress towards decarbonisation.
"It's a pressing issue that threatens to stall progress towards decarbonisation."
This surplus not only represents a financial concern for fuel producers but also risks undermining Sweden's environmental objectives. The challenge lies in connecting the abundant supply with the demand from shipping companies, many of which are cautious about the higher costs associated with renewable fuels.
One of the key hurdles is the uneven distribution of infrastructure across Europe.
While vessels operating in the North and Baltic Seas have relatively easy access to Sweden's renewable fuels, those navigating other regions, such as the Mediterranean, face difficulties.
"If a vessel is always passing by Gothenburg, supply isn't an issue," Igelström explains.
"But for ships operating in areas without the necessary infrastructure, accessing our alternative fuels is much more challenging."
Logistical challenges in transporting and storing these fuels, along with regulatory complexities, contribute to higher costs. According to the World Economic Forum, green fuels can be up to four times more expensive than traditional heavy fuel oil.
This price gap is a significant deterrent for an industry operating on tight margins. A study by Drewry highlights that switching to green methanol could increase fuel costs by 350%, adding over $1,000 per 40-foot container shipped from Asia to Europe.
Such cost implications make widespread adoption a daunting prospect for many shipping companies.
Collaboration and Clarity
Addressing these challenges will take concerted effort from all industry stakeholders.
Clarity in regulatory goals, infrastructure development, and environmental objectives is essential to create an effective supply chain for green fuels.
"Shipping companies need certainty," notes Igelström.
"They cannot afford the risk of alternative fuel not being available where delivery points are scarce.
"The industry must work together to develop a uniform infrastructure and supply chain across Europe and beyond."
Sweden is actively collaborating with neighbouring countries like Finland, Iceland and the Faroe Islands to enhance the accessibility of renewable fuels. In May 2023, the Nordic Maritime Transport and Energy Research Programme launched the STORM project.
This initiative aims to identify and address barriers impeding the supply of alternative fuels to wider markets, develop frameworks for assessing fuel suitability, and propose policy options to accelerate the maritime sector's transition.
"Policymakers, industry leaders, and international organisations need to unite," Igelström emphasises.
"Only through joint efforts can we create the conditions necessary for renewable fuels to thrive in the marine sector."
Sweden's proactive approach positions it as a frontrunner in Europe's maritime energy transition. However, the country cannot drive this change alone. The broader European maritime industry must embrace collaboration to expand infrastructure, standardise regulations, and share the financial burden of transitioning to greener fuels.
The stakes are high. Failure to integrate Sweden's renewable fuels into the global market could result in wasted investments and a setback in environmental progress. Conversely, successful adoption could significantly reduce emissions, stimulate economic growth through new technologies, and set a powerful example for other nations.
"Sweden is doing its part," Igelström concludes.
"Europe is making strides in decarbonisation, but we need to work closely together to ensure that surplus renewable fuels are accessible across the continent and the globe."
Embracing renewable marine fuels is not just an environmental imperative for the maritime industry but also an opportunity for innovation and leadership. Sweden's progress represents a potential roadmap for sustainable shipping, but realising this vision requires unified action across all of Europe.
By bridging the gap between production and market adoption, Sweden can turn its current surplus of fuel into a catalyst for change across the continent.
