A maximum market of about 9,000 to 12,900 large merchant ships will be suitable for a retrofit to alternative fuels but only a “small number” will actually be retrofitted, according to new analysis by class society Lloyd’s Register.
The analysis considered vessels in existence and on order up until 2030, after which the class society reckons that all vessels will be built with net zero or near-zero carbon fuels capability.
“In all likelihood only a small number of these vessels will eventually be retrofitted as the business case for converting older vessels (beyond ten years) and smaller vessels will likely remain challenging,” Lloyd’s Register explains.
The retrofittable-fleet would account for about 19-27% of the current world fleet, based on Equasis 2021 statistics excluding sub-500 gross ton vessels and excluding non-commercial freight carriers such as offshore vessels.
Lloyd’s Register’s vision of the retrofittable market appears to be limited by ship age and economic factors.
The Society points out that, in a low-cost scenario, both ammonia and methanol (two potential alternative fuels) would have to decrease in price by 50% and the carbon price would have to hit an “extremely high” cost of US$350, which is “just boeyond the tipping point at which alternative fuels become cheaper than continued use of conventional fuels”.
Lloyd’s Register adds that the cost of retrofitting is currently “uncertain” and will have a significant impact on the business case both for the owner and operator and it gave the example that the owner of a Newcastlemax (a dry bulker at maximum dimensions for entry into the Port of Newcastle, Australia) who wants to amortise a US$10 million retrofit over ten years would need to charge an 11% premium on current (at the time of publication) charter rates, representing a US$2,907 increase. That amounts to an extra USD$1 million a year on top of the cost of the fuel.
Candidates for conversion are vessels with electronically controlled engines; that exist in the current fleet; are less than eight years in age; and meet minimum size criteria (8,0oo TEU for box ships, 50,000 deadweight for tankers; and 150,000 for dry bulkers).
However, Lloyd’s Register added that, as retrofit technology and capability matures, the business case will broaden to include older and smaller vessels.
Retrofits are technically complex, involving changes to the engines, to fuel preparation rooms, tanks (which will need to be larger than conventional fuels owing to lower energy content in alternative fuels), piping changes, (bigger, double-walled pipes), to the electrical engineering, and safety arrangements including venting, purging, ventilation, fire detection (some alternative fuels burn with an invisible flame), gas leak detention and prevention. The changes will also have an effect on the vessel’s structural strength and integrity.
The Society adds that converting “even a fraction” of the potential market will require new capabilities and technologies from ship designers, years, and operators. Currently, only a few repair yard are capable of performing such conversions with about 16 yards able to carry out about 300 conversion a year in total.
Lloyd’s Register quotes a variety of other authoritative sources, such as an IMO submission by the nation of Japan and also reviews by independent consultants, that anywhere between 15,000 to 20,000 fossil fuelled ships over 5,000 gross tonnes will need to become zero emission vessels to reach IMO-mandated carbon free emissions by 2050.
The Society envisages a variety of solutions being deployed such as engine retrofits, drop-in net-zero carbon (or near zero fuels), adoption of alternative power sources such as electricity, direct wind propulsion, or carbon capture and storage, as being deployed to decarbonise vessels. And, it adds, “vessel owners must also weigh the benefit of decarbonising existing vessels against the option of replacing tonnage with zero-emission vessels”.
