Setting Course, an ABS Podcast

Sustainability Outlook: What’s Next for Maritime?

• American Bureau of Shipping • Season 1 • Episode 14

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ABS recently launched the sixth edition of its sustainability Outlook series, Beyond the Horizon, Carbon Neutral Fuel Pathways and Transformational Technologies. The new Outlook provides a forecast for net zero scenarios factoring in the future fuel mix, energy efficiency technologies and shipyard capacity for retrofits.

On this episode of Setting Course, an ABS Podcast, Stergios Stamopoulos, ABS Director of Global Sustainability, and Ushma Ahuja, ABS Senior Sustainability Engineer, join host Brad Cox, ABS, to discuss the publication’s findings and major sustainability trends in the industry.

Download the latest edition of the Outlook at www.eagle.org/2024Outlook.

If you like this episode, share it with your friends, leave a review, or send feedback to podcast@eagle.org. More episodes are available at www.eagle.org/podcast and all major podcast platforms.

Key Points

  • The number of ships using alternative fuels is expected to continue growing.
  • Energy efficiency technologies have an important role to play in reducing fuel consumption and emissions.
  • Increased shipyard capacity for newbuilds and retrofitting is crucial for decarbonization.
  • Liquid hydrogen and nuclear energy have substantial potential to support decarbonization.
  • The industry needs innovation, regulatory compliance and collaboration to achieve net-zero targets.

Guests
Stergios Stamopoulos is the ABS Director of Global Sustainability for the Western Hemisphere, leading ABS activities in the Americas and Europe regions. Under his leadership, the ABS sustainability centers in Houston, Athens and Copenhagen are assisting ship and offshore owners, operators, and other stakeholders with achieving their sustainability goals. He joined ABS in 2007 as an engineer and has worked in Greece, South Korea and the U.S. in a variety of roles.

Ushma Ahuja is a Senior Sustainability Engineer at the ABS Global Sustainability Center in Copenhagen, where she supports ESG mapping projects. She has been a Secondee with the Regulatory Affairs team of Maersk Mc-Kinney Møller Center for Zero Carbon Shipping since 2023.

Brad Cox (00:08.691)
Welcome to Setting Course, an ABS Podcast, where we're charting the future of the marine and offshore industries. I'm Brad Cox, and I'll be your host today. ABS recently launched the sixth edition of its sustainability Outlook series. In Beyond the Horizon, Carbon Neutral Fuel Pathways and Transformational Technologies, ABS provides insight into, among other things, the future fuel mix, fleet dynamics, and energy efficiency technologies, all of which will play into potential net-zero scenarios.

We're joined by a couple of guests from the ABS Sustainability team to explore the Outlook and its findings. Here with me in Houston is Stergios Stamopoulos, ABS Director of Global Sustainability and one of several contributors to this year's edition.

Stergios Stamopoulos (00:50.082)
Hello, everybody.

Brad Cox (0:51.287)
And from the ABS office in Copenhagen, we have Senior Sustainability Engineer Ushma Ahuja, who is one of ABS's secondees to the Maersk Mc-Kinney Møller Center for Zero Carbon Shipping.

Ushma Ahuja (01:02.560)
Hi everyone, excited to be here.

Brad Cox (01:05.228)
Thank you both for being on the episode today. So, Stergios, we're going to go ahead and get started with you. I know you've been involved in several of the Outlooks over the last several years. You've seen how that big picture of net zero has evolved over time. What were the biggest takeaways from this year's edition? Were there any surprises?

Stergios Stamopoulos (01:22.438)
Thank you, Brad. I'm happy to be here, as Ushma said. This is the sixth Outlook that we’ve published. And we tried to look under the umbrella of the new IMO net-zero target. What are the elements of the industry that will support or create challenges for this target? 

Some of the key takeaways that we found was that our previous predictions on the fuel mix and the decline in the use of the oil-based fuels is still valid. Actually, there is an accelerated decline of the oil-based fuels. We see the emergence and the growth year-on-year on the use of methanol and ammonia as fuels. We see a gradual increase of LNG usage. This is as far as the fuel mix projection and the pathway to net zero.

The Outlook, of course, covered a lot of other elements relating to transformational technologies, relating to the offshore industry. The offshore industry is going through its own transformation, so we looked at that element also.

Ushma Ahuja (02:32.452)
And what's interesting here to note is that with every passing year, we have new fuel types coming up. We have more information, more research being carried out about the emission factors. And this year, we have particularly gathered all the information about well-to-wake scenario for a lot of fuel types. Now, well-to-wake scenario is a combination of two factors, which are the downstream emissions, which are tank-to-wake, and the upstream emissions, which are well-to-tank. When you combine these two factors, you get the overall life-cycle emissions of particular fuels.

What's interesting to note here is a lot of the e-fuels, which are usually electronic green energy-based fuels, those have started to gain a lot of traction. And there has been a lot of research being carried out over there with new information coming up about energy usage and how we should select pathways depending on the amount of energy every fuel gives us as an output compared to what we input in the system. So that is also one of the big factors of the report and how we shed light onto how different fuel pathways perform.

Stergios Stamopoulos (03:52.098)
And if I may add, Brad, one of the elements we also look at this year was — everybody's talking about the alternative fuels and the need to decarbonize, but we wanted to look at the capacity of the industry to support this transformation. When we're talking about the capacity, we're talking about the shipyards capacity in terms of new builds, in terms of retrofit. You do have a great number of vessels that they're still within the commercial stage of their life. I'm sure Usma will talk about this later on during our conversation. We looked at the capacity in both cases and if it can support the need to decarbonize as stipulated before.

Ushma Ahuja (04:38.292)
And with that, I think one other element which comes very nicely into the picture and is a big piece of the bigger puzzle is the shipyard capacity and how the existing fleet, which is operational at the moment, and it's young, they won't be reaching their end of life before we reach the 2050 target. How do we make sure the newbuilds that we have, who do not stand a chance right now to meet the goals, meet the reduction targets, how can they be supported? How can they be retrofitted with new technology, which is proving to be capex intense at the moment? How do we make sure that that element is also something that we consider? 

The shipyard capacity has also been discussed in the report in detail and our experts have predicted, given the data, they have forecasted how much we lack right now in terms of availability, time slots, as well as the technology in general because these are some of the new pilot features that we are talking about. Some of them have been tried and tested. Some of them are yet in the development phase of the new technology. 

What we need to make sure is we strike the right balance between picking up what suits best for the fleet, depending on the kind of fleet we have, depending on the kind of ships we are operating with, and making sure that each of them get a share of the overall mix.

Brad Cox (06:05.063)
Stergios, you mentioned the mix of fuels and where things are trending. How is this fuel mix shaping the order book today? What ships are being built?  What are they using? What are they burning? What's the near-term outlook of what people are ordering?

Stergios Stamopoulos (06:20.277)
Sure, before I dive into the orderbook, going back a little bit and as a segue to the market outlook and linking it to what Ushma just previously said about the need for retrofits for a substantial number of vessels is that this year we also look at a couple of scenarios, projections beyond the fuel mix. So the fuel mix up to 2050 is, as I said before, we see significant growth on methane and ammonia, LNG is on a more stable growth path and the decline of oil-based fuels. But also, we looked at three scenarios. One was the base case scenario where we forecasted — it was more of a conservative look at having gradual improvements in emissions reduction through the gradual adoption of dual-fuel engines and energy efficiency technologies — and with that base case scenario, conservative as I previously mentioned, we see that although the industry will achieve the 2030 IMO targets, it is unlikely to meet the 70% reduction targets by 2040. 

Then we looked at two additional scenarios, what we call the net-zero scenarios, and looking at what parameters will need to be, for the lack of a better term, modified to actually the industry reach net zero. What we call the net-zero scenario one, it's similar to the base case scenario previously mentioned with an even more accelerated adoption of new technologies and fuels, which still failed to meet the 2040 targets, but was able to meet the net zero by 2050 target. 

The second scenario described a more aggressive approach with a rapid fleet renewal and retrofitting, trying to link that to what Ushma said before about retrofitting and capacity, and trying to achieve a significant emission reduction to meet both the 2040 and 2050 targets.

The net-zero two scenario is what we should be aiming for. But that scenario relies on very quick development and availability of the alternative fuels, the zero-carbon fuels. So going back to the actual question about what we see in the market right now, we see a huge uptake in new builds of alternative fuels. If I recall correctly, 50% of the fleet currently in order in terms of GT are dual-fuel vessels. And I believe Ushma can give you some more numbers and trends on this.

Ushma Ahuja (09:05.886)
Absolutely. So, the orderbook as per 2024 April, we have 73% conventional fuel vessels. And compared to that, the alternate fuel number is low, for now. We have 27% alternate fuel vessels in the market. Within the alternate fuel orderbook, we see LNG dominating at the moment, which is closely followed by methanol as a fuel. The other fuel types such as ammonia or hydrogen or even biofuel, they're growing. They're rapidly getting there. However, they're not yet at a point of production where our fleet, our world fleet can operate on alternate fuels. 

We still need a decent amount of LSFO, of conventional fuel, to fuel us toward the pathway to reduction. However, the technology that we're looking at right now, the availability, the scalability, that is a challenge in the sector because we must remember that shipping is also at par with other sectors and we are fighting for fuel availability when it comes to airplane industry, road transport and other areas. Shipping will not solely be getting the entire fuel mix that is being predicted. We'll have to fight our way into the fuel mix market and make sure that shipping gets what it has promised to deliver on as we move forward with the goal of decarbonizing the industry.

Brad Cox (10:39.706)
Obviously we talk about all the alternative fuels — the LNGs, methanols, ammonias, hydrogens and all that — but is there any sort of wild card fuel or energy source? Maybe we're talking nuclear, maybe we're talking electrification. Is there anything like that that's not really on the horizon, but maybe beyond the horizon? What's the next next-generation of shipping going to look like?

Ushma Ahuja (11:01.771)
I think Stergios will agree with me that it will be most probably be liquid hydrogen, which will be coming up and taking the industry by storm, once it has been established. Liquid hydrogen, as such, is a very volatile kind of fuel. We need to make sure that a fuel which has the potential of reducing our emissions by almost 80 to 90%, it needs to be safe for our crews. The new fuels that are popping up on the market, they right now lack the risk assessment, the comprehensive risk assessment that needs to be completed before we jump on to using them. We are progressing, yes. However, there are a lot of uncertainties in that domain. And I know ABS, for one, is working with various industry stakeholders to ensure that the new fuels that come up, for example, hydrogen or ammonia, they match up the standards to keep our crews safe.

Stergios Stamopoulos (12:04.589)
I will agree with Usma, hydrogen is the, let's say, the holy grail of the industry. It has certain challenges as a chemical molecule itself. But again, we need to look at the whole decarbonization effort as a multi-layer problem. There is the issue with the fuels themselves, their safety, their availability. 

And another technology that is on the table, it's been around for quite a few decades, is the nuclear component. With nuclear, the technology has greatly improved, much more safe. You have the modular nuclear reactors now in terms of size, in terms of safety are nothing compared to the past. But again, with the nuclear technology, is the public, you need to change a little bit the public awareness. But yes, there is a lot of movement on this field and might be one of the solutions for the future. And there's not going to be one solution. We keep on saying that different segments, different areas, different ship types, different trades — they will end up finding their own way of meeting the net zero target. Certain areas, certain segments, certain trades might use ammonia or hydrogen or nuclear or electrification. We will see these variances playing out pretty soon.

Brad Cox (13:32.428)
Yeah, so, of course energy efficiency technologies also have a big role to play here in achieving net zero. Some of our past episodes, we've talked about wind-assisted propulsion, carbon capture, autonomous functions and how those all kind of fit into the equation. But a lot of those technologies are also at varying levels of readiness. So, what technologies are you seeing the most uptake now and what are the trends for the near future for EETs?

Ushma Ahuja (13:56.968)
Brad, that's very interesting that you bring it up. Energy efficiency is one of the biggest stars which will aid us to reach our targets, our net zero targets. And let me tell you why. Because if we switch fuels and we start using alternate fuels, what we are not doing is reducing the need to consume. What we are doing is simply switching from one source of energy to the other. Energy efficiency is a very important factor because we need to figure out ways how we can reduce the need to use the fuel in the first place. 

How do we make sure that we save each and every bit of fuel and extract the most out of it? How do we make sure that the potential of the fuel that we are using is maximized, the output is maximized? At the same time, we use less of what is needed. 

Energy efficiency along with alternate fuel uptake is a very nice combination. We just need to find the perfect balance. We need to strike the perfect balance to reach the target. This will not only help us bring down our opex cost, but it will also help us bring down our capex costs. Because if you look in the longer run, if we install a retrofit on a vessel, which is, let's say, two years old, three years old, five years old, the savings that we are going to get by reducing the amount of fuel that goes into that vessel for it to operate is ultimately going to come down. And that is what we aim for, because the reductions, they need to happen at source. And that is what energy efficiency technologies touch upon.

So the total fuel mix or the kind of fuels that we usually rely on, some of them have already been developed and they're in production right now. However, what we are lacking is the source and economic feasibility of switching to blue fuels. We need to look at carbon capture and storage as a very fundamental way of getting to the net-zero targets that we have in front of us. The carbon that can be stored on board, that in itself can prove to be a source of raw material for fuel. 

So, energy efficiency technologies, in totality, have a very big impact on how we function right now and how the future is going to look like.

Stergios Stamopoulos (16:28.267)
Yes, and, if I may add, is that this year, we took actually a little bit more of a deeper dive on some of the what we call key transformational technology. We looked at the onboard carbon capture systems and their role in being a viable solution for reducing emissions on ships. So, again, this onboard carbon capture is still in its early stages, but we see a lot of research and interest and pilot studies and projects being conducted right now. It can support decarbonization. It can achieve up to 80 % or higher rates of capturing carbon or emissions on board. But it has its own challenges, it will require a higher amount of energy and equipment. There are different pathways of carbon capture that are currently explored with each one with their own benefits and challenges, for example, post-combustion, pre-combustion and so on. 

Another transformational technology that we've seen recently the industry looking at and exploring is wind-assisted propulsion. It is evolving as a technology. It harnesses the wind power to a traditional ship engines, providing more economic environmental benefits. There are different types of wind-assisted propulsion out there.

One of the things that recently came into view is that the wind-assisted propulsion systems offer benefits under the new European Union regulations, both the EU ETS and the FuelEU maritime regulation. And wind-assisted propulsion can assist in reducing onboard fuel consumption, which in the context of EU ETS has a direct effect on the compliance cost, as less fuel consumed results in less taxed emissions. And an additional benefit under the FuelEU maritime is the potential of wind-assisted propulsion to provide 5% reduction on the greenhouse gas intensity calculation of energy used on board for those vessels where wind-assisted propulsion accounts for 15% or more of the energy used for propulsion. These two technologies are something that the industry is looking at in addition to what we call, in ABS, beyond the engine — technologies where we're talking about nuclear, we're talking about fuel cells, hybrid propulsion systems, which they also contribute in the efforts of the industry.

Brad Cox (19:08.401)
So, it's already been mentioned about the shipyard capacity. All these new ships, new engines, new technologies, they've got to be built somewhere. And there's only so much shipyard capacity around the globe. So, how will retrofitting factor into hitting 2030 goals? And is there enough retrofitting capacity to even do so?

Ushma Ahuja (19:26.930)
The way that the industry looks right now, we have two major players in the world who are the leaders in shipyard capacity and how they make sure that the world demands are met. One of them is China, and China has always been very big on the amount of gross tonnage they can handle when it comes to shipyard capacity. And following them closely is South Korea. Now, these two countries, they are handling such a big load of the entire global industry, the maritime industry, that at a point of time, if we do not expand our shipyard capacity, it might end up being difficult for us to reach the goals that we intend to. 

One of the other things to note over here is that retrofitting a ship is not as easy as it sounds. If you think about it, it's already a floating entity. All we need to do is do a bit of makeup on it, try to dress it up very nicely, and then off it goes, ship it away. However, that is not the case. It is a complex situation.

A yard's ability to design and execute a holistic fuel retrofit is dictated by a range of factors. It requires a highly skilled workforce, which includes naval architects and experienced electrical engineers. And also, the ability to handle it safely and make sure the retrofit engine, if it is done for alternate fuel types, is done in a safe and sound manner. And we have all expertise around us to make sure it becomes a success. 

Due to these reasons and these peculiar situations, it becomes harder for shipyards to make sure that retrofit projects take as much precedence as newbuilds. And that's why shipyards usually prefer going for newbuild projects rather than retrofit.

Stergios Stamopoulos (21:21.262)
And if I may expand a little bit on Ushma’s comments, within this year's Outlook, we did an analysis looking at the yard capacity in terms of fuel retrofit. What we found is that only a small number of shipyards currently can undertake fuel retrofits, mainly for the reasons that Ushma has stated. That analysis is around 50 shipyards. Based on this, it is expected that the current available capacity will be exceeded in 2027 when the demand for retrofits from the existing fleet will be well underway. So, we projected that additional demand for retrofits will be added to the mix also from the new vessels that are currently being delivered. It is important to note that when the fuel retrofit option gains traction, the number of yards capable of completing the demanding and complex fuel retrofits will increase, and thus we expect that additional capacity will be provided. So, we're looking at a very dynamic sector with new players coming in from countries expanding and improving their shipyards that focus on retrofits.

Brad Cox (22:49.551)
Right, and Ushma, I think you alluded to this a little bit earlier. Ships built today will be 25, 26 years old in 2050. So, when we get around to 2050, will retrofitting still be a factor by then? Or are we looking at a whole new wave of ships with even newer technologies? Obviously, technology develops fast. What are we looking at come 2050?

Ushma Ahuja (23:14.301)
That is a difficult question to answer partly because right now we are lacking the regulations. We do not know what is to come while we go along. The IMO is coming up with regulations year in, year out. So while we follow the path towards decarbonization, we are also thrown many challenges along the way. 

What is interesting to note is, in an ideal scenario, we'll be having a complete fleet of new vessels sailing on the best fuel possible with zero emissions. However, as you said, as technology advances, as we make advancements in new fuel types, in how to incorporate those new fuel types into an already existing vessel, it might become difficult to get them retrofit once they are already halfway through their life. 

So, it's important that we remember that when a vessel is built, it will last us 25 years. Do we invest in something which will give us results, which will help us meet the targets, which will help us meet compliance now? Or do we wait five to 10 years down the lane and wait for the industry to mature to look for other options? That would be, of course, based on a company's strategic decision. However, in an ideal scenario, I would say we'll be looking at a fleet which runs solely on zero-emission fuel, sailing towards a better future.

Brad Cox (39:04.995)
So as we get near the end of our episode, I want to open things up for any closing thoughts you two might have. Are there any other big trends we haven't discussed? Or what's the one big key to reaching net zero?

Stergios Stamopoulos (24:56.305)
Yes, Brad. So the key takeaways from this year's Outlook is mainly the increased and accelerated need for certain alternative fuels — LNG, methanol, ammonia. This is clearly indicated in the orderbook that will provide an illustration or a vision of how the shipping industry in the fleet will look like in the next 20, 25 years. New technologies are coming up, technologies and propulsion or power methods that previously were not discussed, for example, the nuclear element. Again, the transformation is highlighted by a shift from the traditional fuels. This is an element that we have identified several years now, from fossil fuels to more alternative, less carbon-intensive fuels. As the availability and production of those fuels become bigger, then that availability will feed the demand from the industry. 

One element that we also need to highlight is that this global energy transition effort gives rise to the need for the transportation of these new energy, let's say carriers or molecules. So marine routes link regions with high demand for clean energy sources, such as ammonia and hydrogen, in the near future, to production centers of alternative fuels. The trading of those new energy sources is going to be a big component as we move into the 2030s and the 2040s.

Ushma Ahuja (26:33.327)
And I can also echo here with Stergios because with MEPC 82 coming up, a lot of attention is being diverted into alternate fuels, how we shape the midterm measures, how do we make sure that the intensity of the fuel is met on an annual basis and our fleet is compliant.

Within all of these sectors, it is important to understand that measures can be complementary. We need to make sure that the decisions that are taken in today's day and age, they will last us till 2050. They will aid us in the development of technology and research, which will guide us towards the net-zero targets.

It has to be complementary also in the sense that the cost gap analysis for the industry, it gets easier for us to reach the target by making smart investments, by making smart choices, by forecasting what is out there in the industry, what we are missing, what the gaps are and addressing them point blank, making sure that we ask the right questions. And I think Outlook, the newly published Outlook, is a very big answer to a lot of the ifs and buts that we have in the industry right now. Because we give answers, we give clear cut values, we give graphics, we let the industry know what we have found when we have went inside and taken a deeper look as to what is present and consolidated all that information.

Brad Cox (28:08.156)
Okay, great. Well, Stergios, Ushma, thank you both for joining me for the show, it was very insightful. 

Stergios Stamopoulos (28:13.573)
Thank you so much for the time.

Ushma Ahuja (28:15.176)
Thanks, Brad. Thanks, Stergios.

Brad Cox (28:18.371)
And for everybody listening in, thank you for joining us. If you liked this episode, leave a review, share it with your colleagues, and give us a follow. You can download the latest edition of the Outlook at www.eagle.org/2024Outlook. Thank you for listening.