Mikal Bøe, CEO of CORE-POWER, writes today on how lifecycle economics stack up.
As the second oldest profession in the world, shipping is also the most fiercely competitive and capitalistic of all markets. Technologies that are either uneconomical or lead to losses don’t survive long in our markets.
Cheap fuel from the bottom of the barrel at oil refineries, has propelled the motorship to a point where low costs survive while the concept of investing in expensive, quality driven solutions does not. That era is coming to an end and we are now being asked to switch from cheap and dirty fuels, to clean and sustainable propulsion.
That has given birth to a red-hot market for ‘green’ technology and initiatives on how to reach zero emissions, and it’s becoming ever harder to tell the difference between decarbonising, renewable and sustainable energy.
Sustainable energy may not be decarbonising, renewable energy may not be sustainable, and decarbonising energy may not be renewable.
What matters most is a substantial reduction in emissions, carbon or not, and to make that shift economically sustainable so we can move forward, not backwards.
Sustainability accounts for the Total Life Cycle of an asset. Not just emissions and economics under operation, but also what comes before and after. Mining, smelting, industrial production, transport, maintenance, recovery, decommissioning and recycling. A full cycle of energy consumption and resource usage, without which the ‘asset’ could not exist.
When we look at the total life cycle of the building, running and scrapping of ships, we soon realise that it takes more than just ideology and good intentions to make a meaningful impact.
The EU, the US and other jurisdictions will gradually, but most certainly, start to impose pollution penalties, carbon taxes and emission levees on transport and industry, and when they do that, they will look at the total life cycle footprint of assets to measure how light or heavy such fines should be.
Adding pollution penalties to combustion fuels, that cover the ‘externalities’ of before-and-after consumption, inevitably make those fuels a lot more expensive than what we’ve become used to. Then comes a share of the supply chain infrastructure required to switch from fossil fuels to ‘green fuels’. Some suggest that could be a US$1.4 trillion bill to be paid by shipping and its customers over the next decades. In a well-coordinated world, the penalties would be used to pay for that infrastructure; but we don’t live in a well-coordinated world.
Then there is the significant challenge to select the right energy source which we need to move ships around. Switching to zero-carbon fuels, the most prominent of which is ‘green ammonia’ (green NH3), is unlikely to prove economically competitive for shipping unless it can be bought for less than half the price of fossil fuels. This is because green NH3 contains less than half the energy content (18-20 vs 44 MJ/Kg) and takes up 4.1 times the volume compared to 380CST bunker fuel.
That in turn means you must burn more than twice the amount of NH3 to get the same power output from your engine and need to quadruple the size of your fuel tanks to carry it around. To work, NH3 has to be below half the price of LNG or diesel, after adding pollution taxes to those fossil fuels.
To be truly ‘green’ that new fuel must be produced by a zero-emission energy source. Not just under operation, but for a Total Life Cycle, hence accounting for emissions from energy used in production and decommissioning of the energy source, in addition to what we may have from operations. In a normal world, that would add pollution taxes to ‘renewables’ as well, making it virtually impossible to get the price of NH3 below that of gas or diesel, unless production energy is free, and therefore not economically competitive.
The reality is that the only viable technology which can deliver a durable combination of close-to-zero emissions, marine-level reliability, walk-away safety and competitive economics, is atomic energy. The most effective way to make cheaper green synthetic fuels is therefore with atomic power, not ‘renewables, and especially not intermittent renewables.
Not ‘old nuclear’, like the technology that is used in power stations, on naval submarines, aircraft carriers and ice breakers, but new advanced ‘atomic battery’ technology in the form of the marine Molten Salt Reactor (the m-MSR). The m-MSR can provide all the positive benefits of atomic energy, without the negative problems of old nuclear.
Green synthetic fuels could work well for smaller ships in combination with efficient internal combustion engines, fuel cells and batteries. For the smallest 40,000 ships this could be the most economical and environmentally sustainable way forward. These are not as exposed to competition in brutal charter markets, and see much lower volatility in earnings.
With m-MSR power, floating production vessels could be positioned where fuel is needed. Making green fuels from air (Nitrogen) and water (Hydrogen) to create green ammonia (NH3) can be done in ports, substantially reducing the need for a trillion-dollar supply chain to be built around green fuels. Such floating production units could produce to meet demand, and switch to production of fuels for urban transport and infrastructure when demand for green marine fuel is lower. Production vessels could, and should, be owned by professionally run private companies.
For the largest 20,000 ships, green fuels will not be economical and installing an onboard m-MSR power unit makes the most financial sense. With an m-MSR, the fuel and coolant are the same, and exist at a constant ambient pressure. A leak in a pipe would not result in the expulsion of fuel and coolant. The molten salts in an m-MSR have extremely high heat capacity as well, so they too can absorb a lot of heat. This is a major safety advantage that enables passive decay heat removal. With no moving parts, and no engineering requirements for a refuelling system, the m-MSR can be mass-manufactured as a small compact ‘atomic battery pack’. That will drive the price down to very competitive levels.
Diesel engines are cheap but maintenance and fuel over the lifetime of the ship is expensive. On VLSFO, the total propulsion costs including Capex and Opex of a Triple-E Container ship can be more than $950m over a 20-year period sailing at full service-speed. m-MSRs are fuelled for life so are more expensive up front, but OPEX over the lifetime of the ship is very low. A Triple-E containership could be up to 30% cheaper to run on full service-speed with an m-MSR ‘battery pack’ over a 20-year period compared to one burning VLSFO, and potentially over 70% cheaper than the same ship burning green NH3.
A smart combination of mass-manufacturing (lower costs) and leasing (spread those costs over time), can bring both CAPEX and OPEX down to way below the cost of using a diesel engine or a gas turbine for most of the largest 20,000 ships in the global fleet.
For the past 40 years, the biggest obstacle to the development of advanced reactor technologies has been the swell of public distrust of ‘nuclear’ as a result of several high-profile terrestrial accidents involving conventional nuclear reactors also known as Pressurised Water Reactors (PWRs).
The m-MSR should be one of the main catalysts that turns public opinion in favour of new-nuclear, fuelled by a techno-optimism among young people, around our ability of mitigate climate change and create a zero-emission energy system which is safe, durable and scalable.
The dramatically enhanced safety characteristics of the m-MSR will prove that atomic batteries can be used at sea, on land, in proximity to people in cities and for industry and emerging economies to leapfrog the painful energy transition from fossil fuels and deep into a zero-emission energy future where the economic competitiveness of shipping can be reborn.
For an in-depth look at the hurdles atomic power faces as the future propulsion of shipping, do check out the September Focus feature in the latest issue of Splash Extra, the monthly subscription title giving readers a unique insight into what is shaping the shipping markets.