A recent study conducted by UMAS and the UCL Energy Institute Shipping and Oceans Research Group for the Global Maritime Forum evaluates the competitiveness of various marine fuel options under the International Maritime Organization's (IMO) Net Zero Framework (NZF).
Utilizing a Total Cost of Operation (TCO) model, the analysis indicates that ammonia dual-fuel ships present a clear competitive advantage from the mid-2030s onward.
In contrast, the short-term landscape remains uncertain, with multiple fuel and technology choices offering similar competitiveness, contingent upon various factors and unresolved policy specifics.
The report, titled "IMO’s new Net Zero Framework: implications for the competitiveness of different fuel/energy options," underscores both the clarity provided by the NZF's fuel standard and remedial unit pricing, and the uncertainties surrounding elements such as Zero and Near Zero (ZNZ) fuel rewards and the dynamics of the Surplus Unit (SU) trading market.
Dr. Tristan Smith, Professor of Energy and Transport at the UCL Energy Institute, stated: “Many stakeholders were waiting for ‘clarity’ from IMO in order to take decisions. Although there are significant complexities and uncertainties in what was agreed in April, even conservative projections of how remaining policy details will be finalised results in a ‘no brainer’ choice for shipowners in dual fuel ammonia. However equivalent clarity is not available for producers of fuels, particularly e-fuels. This analysis indicates it's likely that key investment decisions for e-fuels will await a strong outcome from the IMO policy debate on the ZNZ reward mechanism, unless they are supported by other opportunities or governments.”
The study further reveals that conventionally fueled vessels are becoming increasingly uncompetitive, both in the short and mid-term. LNG, while initially holding a competitive edge during the early transition period, faces challenges by the early 2030s due to its higher emissions intensity and reliance on carbon capture and storage technologies to generate surplus units.
The analysis suggests that infrastructure investments should prioritize ammonia capacity development, with an emphasis on preparing for potential rapid scaling. Conversely, LNG demand may experience a swift contraction following an initial surge.
The report indicates mixed signals for different fuel producers: conventional and LNG producers face significant demand uncertainty, while biogenic fuel producers receive clearer positive signals if they can achieve competitive pricing.
UMAS (University Maritime Advisory Services) is a commercial advisory service affiliated with University College London (UCL), specializing in maritime decarbonization strategies. It combines academic research with industry expertise to provide data-driven insights into shipping's transition to low-carbon fuels.
UCL Energy Institute Shipping and Oceans Research Group focuses on the intersection of maritime transport and energy systems. It conducts interdisciplinary research to inform policy and industry practices aimed at reducing greenhouse gas emissions in the shipping sector.