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Top 5: Decarbonizing Shipping Will Not Come Cheap

02.18.20 | Blog | By:

Hello friends! Here’s my monthly take on five most interesting developments in fuels and vehicles trends. What I try to do each month is select stories, studies and other interesting items that you may not have seen elsewhere but that really represents an important issue or trend that I think you would want to know about. Or, I try to poke behind the hype to provide a deeper understanding of what’s happening (see Delta item below!). Have something interesting that you think should be shared? Let me know! Readers, clients, friends and even family send me things all the time! Items I selected this month include:

  • Decarbonizing Shipping: According to the Global Maritime Forum, the investment needed to decarbonize shipping is going to be close to US$2 trillion.
  • Electric Vehicles: Is rapid charging around the corner?
  • Automotive Startups: It seems the industry is less keen on autonomous vehicle and mobility as a service (Maas) startups.
  • Delta Going Carbon Neutral: We’ve all seen the news, but do the numbers really work?
  • Car Bans in the U.S.: It’s not just a “European thing.”

1. Global Maritime Forum: The Scale of Investment Needed to Decarbonize International Shipping – The price tag is large: about US$1.4-1.9 trillion cumulatively through 2050, according to a new study by UMAS and the Energy Transitions Commission for the Getting to Zero Coalition. The figure below shows projected costs for 50% and full decarbonization of the sector by 2050. For perspective, the total annual global investment in energy was about US$1.85 trillion in 2018.

Total Investments Needed to Achieve IMO Decarbonization Targets

Source: UMAS, ETC, January 2020

The shipping sector carries close to 80% of global trade and accounts for 2-3% of global GHG emissions annually, comparable to the emissions of large economies such as Germany and Japan. As global trade flows increase to serve a growing and more prosperous world population, emissions from shipping could grow between 50 and 250% by 2050 if no action is taken.

So what are the options for the industry? Ship-related investments, which include engines, on-board storage and ship-based energy efficiency technologies; and land-based investments, which include investments in the production of low carbon fuels, and the land-based storage and bunkering infrastructure needed for their supply. The land-based investments for fuels represent 87% of the share of investment needed (the figures cited above).

What fuels are being contemplated? Ammonia is at the top of the list. The authors note: “the estimate of investments required is based on ammonia (NH3) being the primary zero carbon fuel choice adopted by the shipping industry as it moves towards zero carbon fuels. Under different assumptions, hydrogen, synthetic methanol, or other fuels may displace ammonia’s projected dominance, but the magnitude of investments needed will not significantly change for these other fuels.”

The researchers say to avoid shifting emissions upstream, it is important that efforts to decarbonize shipping also include the decarbonization of fuel production. Their analysis is therefore based on the use of low/zero carbon hydrogen as input to the production of ammonia.

The figure below shows the modelled capital investment needed for two different overall rates of decarbonization – a 50% GHG reduction by 2050 on the way to 100% by 2070, as per the IMO mandate, and a 100% GHG reduction by 2050, as per a 1.5°C scenario. The investments needed depend on the production method for the hydrogen used to produce ammonia.

The figure also shows the total investment in infrastructure needed for three different methods of hydrogen production: pure electrolysis production, production based on pure steam methane reformation (SMR) with carbon capture and sequestration (CCS) and a mix between the two.

Total Investments Broken Out by Methods of Hydrogen Production

Source: UMAS, ETC, January 2020

2. Forbes: Is A Major Hurdle for Electric Car Use About To Be Jumped With Truly Rapid Charging? – Maybe, according to StoreDot. The company, with its partner BP, is developing battery technology which will allow a full recharge in 5 minutes, just like internal combustion engine car drivers’ can. StoreDot said it has demonstrated the technology on an electric scooter and is working on scaling it up. It expects to demonstrate the ability to recharge fast on an electric car by the end of this year or early in 2021, and manufacturers like Volkswagen or Mercedes should be able to incorporate them in the electric cars they sell to the public by 2023. The company is still using lithium batteries, but replacing the graphite with silicon, and it says it will reach the $100 kWh mark in the next year. Another story sent to me by my good friend Jack Peckham, describes Penn State researchers efforts to redesign batteries to charge 10 minutes or less.

Meantime, in another Forbes story from this month sent to me by my friend and colleague John Eichberger, Envision Solar is beginning to commercialize and scale up solar recharging for EVs. Its largest client is the city of New York. One of the draws for the city: overall cost reductions. “In New York City, it cost $2,000 per foot to dig a trench with the necessary cables before filling in the holes with asphalt. If it is a 100 foot trench, the cost is $200,000…[T]he EV-ARC, is $65,000, which also saves between $40,000 and $80,000 in electricity expenses over 20 years.” I expect other cities to follow New York’s lead, and potentially also retailers and other charging sites given the costs.

3. WIRED: Investors Hit the Brakes on Automotive Startups – The “experimental money and access to easy money is gone” in the automotive industry, which is using its own internal talent and resources to focus on electrification instead of autonomous vehicle (AV) investments and other ventures that may or may not turn a profit. Case in point: Last year, Ford shut down its recently acquired shuttle service, Chariot, and General Motors, Daimler, and BMW wound down their US-based car-sharing services. It would seem to me the car companies are less concerned about companies like Uber, which threatened to rewrite the mobility game but are now struggling to turn a profit. And maybe AVs aren’t as close to scale up as once predicted?

4. Delta Airlines: Delta Commits $1 Billion to Become First Carbon Neutral Airline Globally – “Starting March 1, 2020, Delta Air Lines is committing $1 billion over the next 10 years on its journey to mitigate all emissions from its global business going forward.” How is Delta going to do this? By:

  • Carbon reduction: Reducing Delta’s carbon footprint through enterprise-wide efforts to decrease the use of jet fuel and increase efficiency. Areas of focus include an ambitious fleet renewal program, improved flight operations, weight reduction, and increased development and use of sustainable aviation fuels.
  • Carbon removal: Investing in innovative projects and technology to remove carbon emissions from the atmosphere that go beyond the airline’s current commitments, and investigating carbon removal opportunities through forestry, wetland restoration, grassland conservation, marine and soil capture, and other negative emissions technologies.
  • Stakeholder engagement: Building coalitions with our employees, suppliers, global partners, customers, industry colleagues, investors and other stakeholders to advance carbon reduction and removal goals and maximize our global impact.

With flight shame now officially a thing and pressure to mitigate climate change in all sectors increasing by the day, my guess is we will see more airlines moving in this direction. But my friend Ameya Joshi of Corning raises an interesting point: “Delta posts a little over a billion dollars in profits every quarter, which translates to investing 2.5% of its profits in the decade to offset all emissions. According to the same post, it added 80 new aircraft in 2019 alone (aircrafts cost on the order of $100M each). Would love to see more details on how a billion dollars gets the airlines to carbon neutrality.”

I agree. The press release wording to me is a little “flexible.” The company doesn’t actually say it will achieve carbon neutrality, but a billion dollars is probably not going to come close. What I find interesting is that the company, along with many others in energy, appear to be getting behind CCS, soil carbon sequestration (something I have talked about with respect to the ethanol industry) and sustainable aviation fuels, which are just beginning to scale up.

5. E&E News: Gasoline Car Bans: EV Savior or ‘Stupid’ Idea? – Think the car ban phenomena is a “European thing?” It’s not. The idea is beginning to permeate into the U.S. as well by way of city governments and state legislatures. Nearly every Democratic presidential candidate has discussed the need for car bans as well – except for Amy Klobuchar (D-Minnesota).  This article reviews a legislative proposal from the state of Washington to ban internal combustion engine vehicles (ICEVs) within 10 years. While not mentioned in the article, Hawaii is considering a similar approach. An ICEV ban may not be achievable nationwide today, but that does not mean the concept is going away. Meantime, Future Fuel Outlook members can read more about the status of global ICEV bans next week.

Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.

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