Wind Power Could Bring Seaborne Transportation Full Circle - OilPrice.com
Wind Power Could Bring Seaborne Transportation Full Circle | OilPrice.com
A dry bulk ship chartered by agricultural and bioindustrial specialist Cargill Plc has set out on its first voyage after being fitted with special sails aimed at studying how harnessing wind power can lower emissions in the shipping sector. Marine transport is one of the biggest consumers of oil, accounting for ~7% of oil consumption worldwide and 3% of global CO2 emissions.
"It is risk taking. There is no guarantee ... that the economics are going to work. But it is up to us to show the industry what is possible and hopefully get some more people confident around this technology," Jan Dieleman, president of Cargill's ocean transportation division, has told Reuters, adding that they plan to scale the operation if they get positive results. The five-year old Pyxis Ocean has been retrofitted with large wing sails measuring nearly 40 meters in height known as WindWings, with Cargill hoping to recoup the costs through fuel savings. Wind power is likely to be a far cheaper source of energy than another clean energy solution proposed by the World Bank: hydrogen.
Two years ago, the World Bank issued a recommendation to avoid LNG bunkering, saying hydrogen and ammonia offer the best long-term solutions as the shipping industry continues to adopt increasingly stringent measures to decarbonize.
Unfortunately, the economics of green hydrogen--the type favored by most governments--are not in its favor. Green hydrogen--i.e. Hydrogen made through the electrolysis of water using renewable energy--costs about $5 per kilogram compared to $1.50 per kilogram for gray hydrogen, which is created from natural gas, or methane, using steam methane reformation(SMR). Currently, 99% of U.S. hydrogen production is sourced from fossil fuels, with 95% from natural gas by SMR. Although the DOE is sponsoring a “moonshot” project to reach $1 per kilogram within a decade, it would require a huge scale-up of renewable electricity for green hydrogen costs to fall to such levels. For instance, meeting the EU green hydrogen target would require ~1,000 terawatt-hours of new solar and wind installations, nearly double the bloc’s installed capacity.
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The World Bank recommendation has faced plenty of backlash from industry representatives who say the industry cannot afford to wait for a perfect solution to address climate change. Instead, the shipping industry favors the adoption of technologies that can boost LNG’s carbon credentials.
Cheapest marine fuel
In its report, the World Bank presents an overview for policymakers regarding its perspective for the industry, saying that the industry needs to abandon fossil-based bunker fuels and turn toward zero-carbon bunker fuels in order to lower and ultimately eliminate its climate impact.
In addition to its overview of the issues, the World Bank presented a report entitled “ The Role of LNG in the Transition Toward Low- and Zero-Carbon Shipping.” The report says LNG is likely to play only a limited role in the decarbonization of the shipping sector even in the short-term, and recommends that countries should avoid adopting public policies that support LNG as a bunker fuel due to the risk of methane emissions and other highly damaging GCG emissions. In a twin report, entitled “ The Potential of Zero-Carbon Bunker Fuels in Developing Countries”, the World Bank identifies ammonia and hydrogen as the most promising zero-carbon bunker fuels for the shipping industry.
However, panelists at the opening of Singapore Maritime Week representing owners, charterers and shipbuilders have opposed that idea and instead see switching to LNG as one plausible, interim solution to a low-carbon transition that can happen sooner rather than later.
BHP CEO Vandita Pant has counter-argued that the maritime industry risks becoming “a laggard” if it fails to use LNG at least as a stop-gap measure and instead waits for “a perfect solution to come”.
But truth be told, the biggest reason why shipping magnates are not so keen on ditching LNG is simply due to the fact that it’s the cheapest fuel available.
According to data by international accredited registrar and classification society, DNV, over the past several years, Henry Hub natural gas has consistently ranked at or near the bottom of marine fuel prices when ranked by heating value. Henry Hub natural gas is selling for $2.56/MMbtu, the lowest among the six fuels ranked. Adding a $4/MMBtu liquefaction cost means it still remains considerably cheaper than low-sulfur Marine gasoil (MGO).
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On the investment side of things, commodity shipping stocks have pulled off from their February/March highs but several remain solidly in the green. Teekay Tankers (NYSE: TNK) and Tsakos Energy Navigation (NYSE: TNP) are leading with gains of 55.5% and 37.0% in the year-to-date, respectively.
By Alex Kimani for Oilprice.com
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Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.