AMF #04 - Green Methanol in Maritime

1. Introduction

With over 90% of global trade traveling by sea, the maritime industry plays a pivotal role in our interconnected world. However, this extensive reliance on ships has raised pressing concerns about their environmental footprint. These vessels, often powered by fossil fuels, emit substantial greenhouse gases (GHGs) into the atmosphere, contributing to climate change. Fortunately, the maritime sector is charting a course towards a more sustainable future and alternatives in the form of green and renewable marine fuels are gaining momentum, offering a glimmer of hope in addressing the GHG emissions challenge and steering the industry toward cleaner and more environmentally responsible navigation.

Back in 2018, the International Maritime Organization (IMO) introduced a strategy aimed at curbing GHG emissions from shipping. One of its key objectives is to cut total annual GHG emissions from international shipping in half by 2050, compared to 2008 levels. This target was further refined during MEPC 80, taking into account feedback from the industry. Moreover, the IMO has set an ambitious goal: eliminating GHG emissions from shipping entirely by 2050.

Enter methanol as a marine fuel, it plays a crucial role in helping the industry meet the IMO's 2030 emission targets. What's more, green methanol offers a clear path toward achieving net-zero emission operations, aligning perfectly with the IMO's latest GHG strategy update.

2. Green Methanol

Let's begin by exploring the world of methanol. Currently, the majority of methanol produced on a global scale comes from a process known as steam methane reforming (SMR), resulting in what's commonly referred to as "gray methanol." These SMR facilities can churn out as much as 5,000 tons per day or a staggering 1.8 million tons annually. Traditional natural gas-based plants have ways to reduce their environmental impact, such as recycling CO2, sourcing CO2 externally, incorporating green hydrogen, or swapping out natural gas-powered equipment with electric alternatives to create low-carbon, or "blue," methanol.

Now, let's fast forward to 2050, where things get greener. According to the International Renewable Energy Agency (IRENA), it is anticipated that e-methanol and biomethanol, collectively known as "green methanol," will dominate production, potentially accounting for around 80 percent of the total output, reaching a remarkable 500 million tons per year.

When it comes to producing green methanol, the process involves combining hydrogen generated through electrolysis with CO2 and CO2 intermediates within a synthesis reactor. Here, it's important to note that the CO2 input often originates from a direct air capture system (DAC). Additionally, it's crucial to consider the emissions associated with hydrogen production (termed feedstock emissions), which occur upstream of the methanol production stage. This highlights the significance of ensuring that the renewable electricity utilized is genuinely additional, rather than being diverted from other applications, to maintain the "green" status of methanol.

3.?Life Cycle Assessment (LCA) for Methanol Produced with SMR Process

As previously mentioned, the primary method for methanol production is currently SMR. In a recent report by the ICCT, they've outlined the range of emissions associated with methanol production via the SMR process, depicted in Figure 1 below. The most significant portion of these emissions arises during the combustion phase (TTW), represented by the dark gray section.

It's worth noting that while the IMO has accepted Resolution MEPC 376(80) and has been working on guidelines for the Life Cycle GHG Intensity of Marine Fuels during MEPC 80, specific carbon intensity values for methanol have not been finalized. Therefore, the methanol emission factors established by Brynolf were utilized in their report to assess methanol's potential as a marine fuel. Based on these findings, a value of 69 gCO2e/MJ was adopted as the emission factor for methanol combustion in the TTW stage. Since this fuel is derived from fossil sources rather than biogenic ones, all combustion emissions are attributed.

Upstream production emissions, indicated in teal, encompass activities such as converting feedstock into fuel, co-producing steam, and transporting it to end users. The incorporation of Carbon Capture and Storage (CCS), represented in green, offers a means to reduce emissions by capturing CO2 at production sites. Assuming a 90% capture efficiency rate, it's calculated that upstream production emissions can be diminished by nearly 70% when CCS is implemented at reforming plants. Consequently, the final estimated life-cycle carbon intensity for "gray" and "blue" methanol stands at 97 and 79 gCO2e/MJ, respectively.

4.?Importance of LCA for Green Methanol

Let's dive into why LCA matters for green methanol. There are various LCA calculations available, but one particularly noteworthy source is the ICCT's report. It provides estimates of life-cycle emissions for methanol derived from renewable electrolysis, measuring at a mere 1.2 gCO2e/MJ. On the other hand, methanol generated from grid-average electrolysis registers significantly higher life-cycle emissions, sitting at 177 gCO2e/MJ. It's essential to note that the report relies on 2020 U.S. grid average electricity emission factors. In regions with electricity grids less eco-friendly than the U.S. average, upstream emissions would be greater, while cleaner grids would yield lower upstream emissions.

Figure 2 provides a visual representation of the potential emissions associated with green methanol production across various life-cycle assumptions and scopes. "Green" methanol, produced using fossil-fuel-derived CO2, does emit non-biogenic emissions during combustion, illustrated in gray. When the conversion process incorporates renewable electricity inputs (depicted in teal), the upstream production emissions are relatively minor. Furthermore, the non-biogenic emissions from combustion can be balanced if methanol production involves capturing CO2 from the atmosphere (carbon capture and utilization, represented in green).

It's crucial to address the impact of presuming higher upstream methane leakage, as indicated in the hatched portion of the black bar. This underscores the critical importance of ensuring that the electricity used in alternative fuel production originates from truly additional resources. Even when electricity is designated as renewable for powering electrolysis, without adequate policy safeguards, there's a risk it might be diverted from power generation intended for the energy sector. Such diversion could lead to notable indirect emissions.

5.?Green Methanol Production and Sources

Let's delve into the world of "green fuels," which are essentially environmentally friendly fuels that emit significantly fewer greenhouse gases (GHGs) throughout their lifecycle compared to traditional fossil fuels, as explained earlier. The extent of GHG reduction varies among these green fuels, depending on how they are produced, as depicted in Figure 3.

Methanol, a versatile fuel, can be derived from various sources. These sources include biomass, bio-methane, renewable electricity/green hydrogen combined with CO2, as well as fossil fuels like natural gas and coal. The carbon intensity of methanol production varies depending on the source and the method used (refer to Figure 3). Presently, a substantial portion of methanol production relies on natural gas, serving both as a feedstock and process fuel. Emissions from these facilities are calculated using a carbon mass balance approach. In today's modern facilities, methanol is produced with an estimated carbon footprint of roughly 110 gCO2eq/MJ. This is slightly higher than what was considered cutting-edge two decades ago, which stood at about 97 gCO2eq/MJ. The increase is mainly due to a better understanding of carbon accounting with more up-to-date data.

Production from renewable sources, such as biomethane, solid biomass, municipal solid waste (which includes a significant organic waste component), and renewable energy, boasts a considerably lower carbon footprint. Most of these pathways achieve emissions ranging from 10 to 40 g CO2 eq/MJ, with some even achieving negative emissions (e.g., -55 gCO2 eq/MJ for methanol derived from biomethane from cow manure). This essentially means that these pathways either remove CO2 from the atmosphere or prevent emissions that would have otherwise occurred in other processes. When considering emissions from production to propulsion, bio-methanol and renewable e-methanol emerge as some of the most environmentally friendly shipping fuels.

Currently, the production of green methanol remains relatively modest, accounting for less than 0.2 million tonnes annually. In contrast, conventional methanol derived from fossil fuels amounts to a staggering 98 million tonnes. However, this landscape is projected to change dramatically by 2050, with estimates from the International Renewable Energy Agency (IRENA) suggesting that green methanol production could reach 500 million tonnes. This shift is significant as it could reduce annual carbon dioxide emissions by 1.5 gigatons, provided it predominantly comes from sustainable sources, a promising prospect for a greener future.

6.?Green Methanol Adoption in the Maritime

The maritime industry is showing remarkable interest in methanol-powered vessels, and this enthusiasm is backed by compelling numbers. According to Clarkson's June 2023 report, there are 29 vessels capable of running on methanol in operation, with 112 more on order. Additionally, there are three vessels prepared for methanol adoption already operational, and another 128 on the horizon. These new vessels, set to be delivered between 2023 and 2028, encompass a diverse range of types, and fresh orders continue to roll in regularly.

In a significant move, A.P. Moller-Maersk announced in August 2021 its accelerated commitment to fleet decarbonization. This pledge is being realized through the delivery of large ocean-going vessels powered by carbon-neutral methanol. The count of dual-fuel engines on order has surged to 19, with the first feeder vessel (2100 TEU) successfully completing her maiden voyage on Green Methanol in June 2023.

This green methanol, used during the voyage, originates from a U.S. based facility. The production process hinges on captured biogas from decomposing organic waste in landfills, which is upgraded into biomethane and injected into the gas grid. The methanol is then produced from this biomethane within the grid, following a mass-balance approach. This ingenious method allows for green methanol production using existing infrastructure and facilities, facilitating rapid production. Moreover, it contributes to a cleaner gas grid while curbing harmful methane emissions that would otherwise be released from the waste feedstock. The green methanol from this supplier is certified by the International Sustainability & Carbon Certification (ISCC) in accordance with the EU Renewable Energy Directive.

In pursuit of their ambitious 2040 goal of achieving net-zero greenhouse gas emissions, A.P. Moller-Maersk is targeting a minimum of 25% of ocean cargo transportation using green fuels by 2030, compared to the 2020 baseline. The 2,100 TEU feeder vessel powered by methanol marks a significant milestone in their journey towards the ultimate objective of transitioning their entire fleet to operate exclusively on green fuels.

Figure 4 illustrates the production pathways and potential GHG reductions on a life-cycle scale.

Furthermore, SunGas Renewables, a Texas-based subsidiary of GTI Energy, is taking a substantial step forward by establishing a new entity named Beaver Lake Renewable Energy (BLRE). BLRE is poised to construct a green methanol production facility in Central Louisiana, with a capacity to produce nearly 400,000 metric tons of green methanol annually for marine fuel. This methanol will be specifically designated to power A.P. Moller – Maersk’s fleet of methanol-driven container vessels. What's truly commendable is that the facility will utilize wood fiber sourced from locally-managed forests in a sustainable manner, and it's anticipated that the methanol produced will have a negative carbon intensity. This is achieved through the sequestration of nearly a million tons of carbon dioxide each year, a direct result of the project's endeavors. Construction of the facility is set to commence in late 2024, with commercial operations scheduled to begin in 2027, underlining a significant stride toward a greener maritime future.

7. Challenges and Future Outlook

When it comes to green methanol, significant availability remains a challenge, as previously highlighted. This scarcity has a notable impact on pricing. As we examine grey methanol, we observe regional price variations in areas like Asia, the USA, and Europe, encompassing spot market averages and forward contracts (refer to the table). These prices fluctuate between $327 and $366 per ton on the spot markets for February 2023. It's important to note that these are trading prices, and it's widely expected that green and blue methanol prices will be both rarer and more expensive. Additionally, the establishment of bunkering infrastructure for methanol in ports and terminals will introduce additional costs when it comes to cleaning methanol bunkers. Preliminary estimates suggest that green methanol might initially be supplied at a rate of around $1,000 per ton.

However, there's a promising shift on the horizon. The global landscape is witnessing a surge in the number of green methanol production initiatives. This growth can be tracked through the Methanol Institute's dashboard, which monitors a total of 90 projects. These projects, set to come online by 2027, are anticipated to collectively produce nearly 9 million tons of methanol annually. While not all of this production will be earmarked for shipping purposes, some projects are dedicated to serving the maritime sector. With this increased production capacity addressing the demand, there's optimism that it will eventually lead to competitive pricing levels.

8. Final Thoughts

In the realm of maritime fuels, the emergence of green methanol is a compelling narrative. As we've explored, it holds tremendous potential for reducing greenhouse gas emissions and steering the shipping industry towards a more sustainable future.

The numbers tell a story of both challenges and opportunities. The figures paint a vivid picture of the adoption of green methanol in the maritime sector. We see the rapid growth in the number of methanol-fueled vessels, the commitment of industry giants to greener alternatives, and the development of innovative production methods.?

However, it's evident that challenges persist. Availability remains limited, and this directly impacts pricing. Grey methanol prices fluctuate, and green methanol is expected to be more expensive in the short term. There are infrastructure costs to consider, particularly in terms of bunkering, which add to the equation.

Yet, optimism prevails. The burgeoning number of green methanol production projects worldwide, as tracked by the Methanol Institute, is a beacon of hope. These initiatives, set to come online in the coming years, have the potential to significantly boost production capacity. While not all this production is earmarked for the shipping industry, it's a clear indication of the growing commitment to green methanol as a viable fuel source.

In conclusion, the journey towards widespread adoption of green methanol in the maritime sector is marked by challenges and transformations. The numbers illustrate the complexities of this transition, but they also showcase the determination of the industry to embrace cleaner, more sustainable alternatives. With continued innovation, investment, and a shared commitment to environmental responsibility, green methanol may very well play a pivotal role in shaping the future of shipping.

Disclaimer: The opinions and views expressed in this article are solely those of the author and do not necessarily reflect the official position or policies of ABS. This article is not endorsed by ABS and should not be construed as an official communication from the company. While the author is an employee of ABS, this article is written in a personal capacity and does not represent ABS in any official manner. The content provided herein is for informational purposes only and should not be interpreted as professional or legal advice from ABS.