• Monique Giese, Partner |

Highlights

  • The shipping industry still relies primarily on liquefied natural gas (LNG) for propulsion. While this is the most environmentally friendly alternative to date, the industry agrees that it is probably only a medium-term solution.

  • For international shipping, there is as yet no long-term sustainable solution, something that many international companies are also struggling with strategically. This is partly due to the unclear regulatory environment. The introduction and use of hydrogen-powered inland vessels has just begun.

  • The extent to which hydrogen can be a solution for international shipping remains unclear.

Ecological responsibility is on everyone's lips: Net zero CO2 emissions and climate targets dominate the news and the strategies of many multinational companies. What does this mean for international shipping companies that bring their goods to customers? And with the help of an industry that has historically relied heavily on fossil fuels for its success and is now facing major change and constraints - in the face of dwindling resources and increasing environmental impact?  

Recently, therefore, the shipping industry has turned its attention to alternative fuels. In the following, I highlight the benefits of hydrogen as a more environmentally friendly alternative to liquefied natural gas (LNG). I also address the challenges that should still be overcome. 

Producing hydrogen in an environmentally friendly way

Hydrogen is a chemical element with high energy density that can be used as a fuel similar to refined oil or methane. As a reactive element, hydrogen usually exists in chemical compounds such as water (H2O). These must first be reformed to make the hydrogen usable as a fuel. Depending on the chemical base material to be converted and the conversion process used, a color is assigned to the final hydrogen product.  

Currently, hydrogen is mostly obtained by steam reforming of natural gas. The resulting material is referred to as gray hydrogen. This is not a CO2-free extraction process. Other processes result in blue hydrogen (use of carbon capture and storage (CSS) technologies to offset CO2 emissions during hydrogen production) and turquoise hydrogen (recovery using methane pyrolysis with solid carbon as a byproduct).  

However, the preferred color designation is green. Green hydrogen is produced by splitting H2O compounds with the aid of electric current (electrolysis). Since the electricity required for this can be generated in power plants from renewable energy sources, the hydrogen obtained in this way is carbon-free. Because of this combination of renewable energy use and environmentally friendly conversion to electricity, green hydrogen would potentially be a compelling technology for meeting climate goals in the shipping industry. 

Hydrogen solves LNG's methane problem

Before the potential use of hydrogen gained momentum, LNG was traded as a potential source of more sustainable energy in transportation. While it is true that LNG is a means of reducing CO2 emissions. However, experts object that it poses even greater environmental risks due to high methane emissions, which could fuel interest in hydrogen. The potential of (green) hydrogen as a clean and environmentally friendly fuel makes it not only an attractive alternative to LNG, but also an investment opportunity should taxes and emissions rise and the use of conventional fuels become unaffordable.

First success stories in inland waterway transport

While the maritime industry is not currently focusing on the expansion and operation of hydrogen-powered ocean-going vessels, inland waterway transport has already started to develop hydrogen-powered vessels. In the Netherlands, for example, a transport ship between Rotterdam and Antwerp is to run entirely on hydrogen. This could reduce greenhouse gas emissions by 2,000 metric tons of CO2 per year.  

Several projects in the EU, South Korea and Japan are pursuing a similar approach. Nevertheless, the bulk of current shipbuilding is focused on pilot projects. The reluctance to place large orders for hydrogen-powered ships may be related to the fact that there are still economic concerns. 

Sustainability, infrastructure and cost are the main challenges

In 2020, the fuel consumption of the global civilian shipping fleet, with its 90,000 ships, amounted to about 370 million tons annually. If hydrogen use were relied on exclusively, the amount of fuel would need to be replaced with hydrogen. Global hydrogen production - green or otherwise - is about 500m³ per year. This amount is far too small to power the global cargo and commercial shipping fleet. A massive increase in extraction capacity would be required to meet the industry's needs. In addition, green hydrogen is currently four to eight times more expensive than conventional marine fuels.

According to estimates by the International Renewable Energy Organization, the cost of hydrogen could be reduced by more than 80 percent if electricity and electrolysers became cheaper and plants operated more efficiently.  

Aside from cost, the industry would have to deal with other challenges. Ports would have to be adapted to handle and deliver hydrogen. Ships would also need to be modified. Hydrogen is more storage-intensive compared to oil. Hydrogen-powered cargo ships could therefore also carry significantly less cargo. 

It will take time to adjust the current imbalance of supply and demand. And comprehensive technology adaptation efforts are needed to make a convincing case for a global hydrogen fuel network in the shipping industry. To be sure, there have already been some successes in pilot projects. It may be decades before hydrogen is used as propulsion by much of the shipping industry. Sea-going vessels are generally used for a very long time, and the cost of retrofitting or converting them is very high.  

But: hydrogen is seen as an unavoidable method for CO2 reduction. And that is precisely why it has the potential to be a sensible and viable tool for reducing the carbon footprint of an industry at the center of global trade. If not today, then almost certainly in the future. 

However, the implementation of a hydrogen strategy for shipping requires, in particular, a stable regulatory framework and a globally implemented infrastructure. These are the biggest challenges in the course of decarbonizing shipping.