Demand aggregation can help accelerate availability and use of zero-emission bunker fuels

Demand aggregation measures have the potential to accelerate and broaden access to zero-emission bunker fuels by addressing some of the factors keeping first movers from securing supply, according to a new two-part insight brief series by the Global Maritime Forum on Thursday (22 August). 

The brief explored the topic of demand aggregation for zero-emission shipping fuels and the role it can play in supporting their early uptake in the sector.

The first brief provided an overview of the challenges early movers are experiencing in securing green methanol and ammonia, and how demand aggregation could help overcome them. 

The second surveyed the available approaches to aggregating demand for zero-emission fuels in detail and explores how they can be applied by early movers.

Key Insights

The International Maritime Organization (IMO) targets net zero emissions by 2050, with 5-10% of energy from alternative fuels by 2030. However, only a few shipping companies have secured an adequate supply of these fuels.

This challenge arises because operators must commit to long-term, large-scale, high-cost fuel contracts (10-15 years). Without such agreements, producers cannot raise the capital to begin fuel production, stalling the transition.

To overcome this, the Global Maritime Forum has identified novel solutions that fuel producers, would-be fuel users, and market enablers can use to scale availability such as:

Demand-led measures

Joint procurement – By pooling purchasing power, shipowners, operators and/or charters can exercise collective bargaining power, support the development of key infrastructure, and send strong demand signals to the market

Joint ventures – For participants in existing green corridor initiatives to share costs and risks, leverage combined financial capacity, and simplify shipping’s complex contracting

Third party-led measures

Market making – Having a government or international institution step in to make the commitment with producers and then selling the fuel on to shipping companies on a shorter, smaller, and/or cheaper basis.

Hydrogen hubs – Increased participation in hydrogen hubs to connect producers, consumers, and connective infrastructure in a specific location.

Supply-led measures

Time stacking – Encouraging fuel producers, and their financiers, to accept a package of shorter contracts so no single shipping operator must commit to a full 10 to15-year contract

Through these measures, sustainable fuels such as green ammonia and methanol can be produced in high enough quantities to hit international sustainable fuel targets, while keeping the burden on shipping manageable.

To help early movers understand the options at their disposal, these insight briefs survey these approaches and provide an overview of key considerations surrounding them. 

With demand aggregation being an evolving landscape, it is not intended to be an exhaustive presentation, but rather to serve as a starting point for further discussion on the topic.

Note: The two-part insight brief series by the Global Maritime Forum can be found here and here. 

Photo credit: Venti Views on Unsplash
Published: 26 August, 2024