DNV Maritime Forecast: Shipowners Must Create Decarbonization Stairway

The pace of decarbonization is starting to accelerate in the shipping industry, but with a host of pressures building, it is far from the momentum needed to meet regulatory and stakeholder demands according to DNV. In the fifth version of its Maritime Forecast to 2050, the classification society seeks to map out the shifting regulatory landscape, provide a status update on technology and alternative fuels, and views on the energy transition to provide shipowners the information and tools to develop their individual decarbonization strategies.

“Choosing the right fuel today for operations tomorrow is a daunting task that all owners must face up to,” said DNV Maritime CEO Knut Ørbeck-Nilssen. “A misstep today in newbuild fuel strategies can have damaging consequences for businesses and assets in the future.”

Data from DNV’s forecast shows that around 12 percent of the current newbuilds ordered will have alternative fuel systems or dual-fuel capabilities. The figure has nearly doubled over the past two years indicating an increasing momentum. In 2019, batteries and LNG were the predominant methods, but in the past two years, DNV reports LPG has also grown but LNG remains the method of choice near-term for shipowners.

Beyond seeking to navigate an emerging patchwork of regulations, DNV notes that stakeholders are also increasing the pressure on shipowners demanding fact-based reports detailing the steps taken on ESG. Charterers and even consumers are demanding that shipping companies make progress on everything from emissions to seafarer wellbeing and increasingly they must be able to demonstrate progress in order both to remain competitive and gain access to the financial markets.

However, despite the tectonic shifts happening in the maritime world, Ørbeck-Nilssen resists the characterization of decarbonization as a race instead saying it will require collaboration and working with a range of organizations to meet the challenges. According to the Maritime Forecast to 2050, owners must identify their own decarbonization stairway, studying the costs and potential “showstoppers” including the technical design implications. However, with uncertainties and significant investments still to be overcome in emerging alternatives including ammonia and hydrogen, it is critical to incorporate elements into newbuild designs to accommodate fuel flexibility.

Studying current developments in the industry and progress on the emerging alternatives of methanol, hydrogen, and ammonia, DNV assesses that key fuel technologies facilitating the transition remain four to eight years away from being available.  As an example of the steps shipowners and shipbuilders can take today to maintain future flexibility, DNV points to the future challenges of handling ammonia as fuel and with ammonia emerging as a favored alternative the design changes today that can provide for the future. Ammonia takes three times the storage space versus conventional fuel and special handling due to the risks currently associated with it as a fuel. 

To make vessels flexible DNV says owners must consider how to balance the challenges of handling a fuel such as ammonia with the need to maximize cargo space. Consideration can be given in current newbuilds to the location of an ammonia fuel tank, the structural preparation, trim and stability, designs for toxic zones, selecting tanks that will be suitable for ammonia in the future as well as dual-fuel engines.

DNV forecasts that total CAPEX for onboard technology investments required to satisfy IMO decarbonization ambitions will range between $250 and $800 billion (dependent on fleet size) between 2020 and 2050. By factoring in flexibility in current designs DNV, however, says owners will be able to reduce refit times in the future to make conversions.

Linda Sigrid Hammer, DNV Maritime Principal Consultant and Maritime Forecast to 2050 report lead author, says “With between 1,000 and 2,000 ships expected to be ordered annually through 2030, there’s a real need for informed decisions that consider a diverse array of factors; from cost, to fuel storage and propulsion, through to flexibility in design, strategic approach, and fuel ready solutions. And of course, all of this is underpinned by the need for safety.”

DNV sought to provide the tools and framework for shipowners to advance their strategies. The report considers 12 different decarbonization scenarios pointing to dramatically different breakeven points that shift significantly over time between the decision for example to proceed with a mono-fuel versus dual-fuel vessel and making today’s newbuilds ammonia ready.

The maritime industry will go through a period of rapid energy and technology transition that will have a more significant impact on costs, asset values, and earning capacity than many earlier transitions, predicts DNV.

Ørbeck-Nilssen concludes, “There is no time to waste. Inaction is not an option. The challenge in front of us is huge, but the incentive to transform couldn’t be greater – the very future of our industry and society. The scene is set for a maritime renaissance.”