Industry Insight: Sustainable Marine Biofuel – Scaling-Up for a Crucial Role in a Low Emission Future for Shipping

CEO Dirk Kronemeijer founded the GoodNRG Group

"We have set a course here. The world has come together around an agreement that will empower us to chart a new path for our planet, a smart and responsible path, a sustainable path." The stirring words of U.S. Secretary of State John Kerry, who led the U.S. negotiations in Paris at COP 21, the recent United Nations conference on climate change.

Despite the absence of specific requirements from shipping in the Paris Agreement, as an industry we must continue to take responsibility for playing our part in contributing towards a "well below" 2-degree cap. To achieve this, a paradigm shift is required in terms of ship design, operation, integration of smart technology, and – crucially – new types of low carbon bunker fuels.

The shipping industry is starting to understand the potential of truly sustainable biofuels as an emerging solution. Driven by both regulatory and market factors, biofuels could make up 5-10% of the total global marine fuel mix by 2030. The introduction of a global ECA and greater financial incentives in ports for ships that emit fewer emissions will incrementally provide the impetus to reach that estimate.

In the immediate term, for the likes of leading dredging and marine expert, Boskalis and other forward-looking companies that are looking increasingly at the purchasing of fuel more holistically, corporate social responsibility (CSR) has become an important factor in influencing procurement decisions. Sustainable biofuels replace fossil fuels and significantly reduce both local emissions such as SOx and Particulate Matter (PM), but most significantly, biofuels can enable significant reductions in levels of CO2.

It is against this backdrop that GoodFuels Marine set out to develop sustainable 'drop in' marine fuels for the shipping industry, launching its initial project in October 2015 with Boskalis and Wärtsilä, the global supplier of engines and power systems to the marine sector.

For the market to properly embrace marine biofuels as a viable long-term solution, they should be comparable and compatible with current shipping fuels. They must also be truly sustainable; adhering to principles concerning all aspects of the biofuel chain, including the environmental, social, legal, local and global effect of biofuel extraction, production and delivery. This is why GoodFuels has worked hard to receive the highest standard of certification from the Roundtable of Sustainable Biomaterials (RSB), enabling the company to actively sell and promote RSB-certified biofuels to the shipping industry. The 'drop-in' nature of the fuel (put simply, to blend with traditional fossil fuels) is absolutely critical as it ensures that current logistical and operational systems can remain in place and all parties can remain in 'business-as-usual' mode. This in turn ensures that sustainable biofuel requires little or no infrastructure to be invested in; all that is required is a standard fuel tank and ex-pipe facility at berth or a standard bunker barge.

MGO and HFO

The immediate focus for GoodFuels and its partners has been on biofuels for blending with Marine Gasoil (MGO) to create Emission Control Area (ECA) compliant fuels. However bio heavy fuel oil (HFO) is also being explored and tested as one of our research goals, which requires 'drop in' fuel that does not require additional tank cleaning.

In addition to the potential for 'drop in' HFO, a bio HFO could be used as a 100% replacement fuel, which in the near term would suit 'point to point' vessel operations, such as a regular ferry route or short sea shipping operations. However as a long-term solution, blend-able HFO is the goal.

Assured availability is a crucial element to the supplying of sustainable marine biofuel. Although there is great opportunity for all types of vessels in the longer term, short sea shipping, which accounts for roughly 40% of all freight moved in Europe, with fixed routes lends itself well to consistent biofuel supplies in the near term. Vessels operating mainly in the vicinity of ports are an obvious target, as they benefit so greatly from the reduced emission profile of biofuels - especially as port authorities are increasingly focusing on emission reductions.

As was the case in the jet biofuel market, the first volumes will geographically concentrate on where the incentives are. The same "usage hotspots" are therefore anticipated for shipping, in, for example, Western Europe, the Nordics, west coast North America, followed by Australia, Asia and so on.

Price and Incentives

In terms of pricing, marine bunker fuel is the largest single operating cost for vessel owners and operators. And even though in around 70% of cases, those costs are picked-up by charterers, owners and operators have to remain competitive.

Recently DuPont were quoted in the Financial Times suggesting that biofuels derived from agricultural waste will not be competitive against conventional fuels until oil rises to $70 to $80 per barrel. To some extent, lower prices for crude do not support the acceleration of sustainable marine biofuel. However, GoodFuels' biofuel sources are far wider than just agricultural waste, and importantly, it is not only the product cost that shipowners are taking into consideration.

There are more than simply CSR drivers at play here; early movers such as Boskalis are attracted by additional incentives too. Sustainable 'drop in' biofuels, for example, ensure that all warranties remain in place, that there are no changes required to engine or infrastructure, and – as high performance fuels - produce less sludge waste and require less engine maintenance.

In the near term, local incentives will also play a significant role in biofuel take-up. The Port of Rotterdam and the Port of Amsterdam are already incentivising the use of lower carbon fuels, and we fully expect that other ports will follow.

Moreover new technologies that enable sustainable fuels to be derived from innovative lower cost sources will ensure fuel prices become lower still. The fact that sustainable biofuel is 'drop in' also helps – so if an incentive scheme is retracted or a shipowner wants to cut back or move the vessel to an alternative location, that vessel can revert immediately to traditional fossil based fuel with no loss of infrastructure investment.

Scale will be a key factor in further reducing the cost of sustainable marine biofuel. When economies of scale are applied to other commodities it has an effect on price, and this will be no different for biofuels – prices will come down. Having biofuel approved with a standardised biofuel specification under ISO and IMO is another core element of the sustainable marine biofuels programme, especially as biofuel becomes more commoditised.

Despite the absence of an explicit reference to shipping in the Paris Agreement, the international shipping community is, overall, ready and well placed to deliver ever-greater CO2 reductions, and in so doing play its part in contributing to lowering carbon emissions. Sustainable marine biofuels are not at an experimental stage – they are providing a commercially viable solution today, which is why more and more shipowners are actively pursuing this route.

As part of the energy mix alongside LNG, methanol and other cleaner fuels, as well as energy efficiency measures, marine biofuels are scaling up to contribute to a more sustainable and low emission future for the shipping industry.