A new report produced by the Energy Transitions Commission for the Getting to Zero Coalition catalogues the barriers to the early adoption of zero emission technologies throughout the entire energy value chain. More importantly, it calls attention to five key actions that first movers can take to make tangible progress towards zero emission pilots over the next three to four years:
- Join forces to fast-track technology trials and regulatory approvals
- Choose pilot locations that offer privileged access to low-cost renewable electricity
- Seize opportunities to repurpose and retrofit existing infrastructure and assets
- Co-invest in critical equipment such as bunkering assets and vessels
- Form consortiums with key value chain actors to establish voluntary offtake agreements and distribute cost across the value chain to the end-consumer
Renewable electricity for the production of green hydrogen represents the largest share of the total pilot cost for the ammonia and methanol fuel pathways that the report explores. First movers can lower electricity cost at the outset by selecting the right geographical locations for the energy production and by entering into long-term corporate purchase power agreements to secure large volumes of clean power at the lowest costs.
Though first movers will have to contend with higher investment and operational costs, the report shows that this can be mitigated through a green fuel premium, which would help distribute the additional cost throughout the value chain up to the end-consumer.
“Despite the higher business to business costs of operating zero emission vessels, the impact on end consumer prices is likely to be limited. The increase in the cost of a high-end athletic shoe will represent around 0.5-1% of the total cost,” says Michael Parker, Chairman, Global Shipping, Logistics & Offshore, Citi and Co-Chair of the Getting to Zero Coalition’s Motivating First Movers workstream.
To deploy zero emission vessels globally, new and existing stakeholders will need to work together in creating a new green shipping value chain. Forming consortiums with core value chain actors is another key action first movers can undertake to lower pilot costs. To lower investment costs, early adopters can also retrofit existing infrastructure, and establish industrial clusters of industrial sectors.
The report emphasizes that governments have to play a decisive role in supporting the shipping industry’s transition to zero emission. This ranges from direct grants, offering concessional loans to first movers, waiving electricity taxes and grid fees, co-investing in zero emission pilots, to exploring measures such as a carbon levy.
The first wave of pilots will prove the technological and commercial case for zero emission shipping, create demand signals for fuel producers and engine manufacturers, set the template for regulatory measures, and provide the foundations of the long-term infrastructure needed for the decarbonization of maritime shipping.