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Can the store customer pay for shipping's biofuels?

03 July 2018

What is the business model for using bio-based fuels in shipping? Technically, there are no major problems for shipping to mix bio-based fuels into marine fuels, such as liquid biogas LBG or HVO and FAME / RME. However, the economic disadvantages and availability of biofuels delay a shift of fuels. A new pilot study from Lighthouse analyses a business model where the cost increase for bio-based fuels is transferred to the end consumer.

The Lighthouse members, IVL and Gothenburg University, have studied the possibility to introduce biobased fuels as marine fuels. A business model in which low carbon marine freight is offered to shippers is analysed.

The model is in many ways similar to existing schemes in the energy sector (“green electricity”, biogas and district heating). A fundamental principle of the model is that the cost increase in transportation when biobased fuels are used can be transferred to the end consumer.

Technical aspects, fuel supply issues, economic implications, and freight market aspects are all considered from a perspective of using liquid biobased fuel on ships. We find that both HVO and FAME/RME are suitable options to blend in fossil marine fuels. HVO comes with no special restrictions during operations, while the use of FAME/RME may need more close monitoring of fuel supply systems on board. However, price and availability are issues in large scale introduction on the market. Another option that is technically feasible is the replacement of LNG with liquefied biogas (LBG). From a sustainability perspective the use of palm oil as a source for HVO can be problematic due to unsustainable farming practices.

Several tests on biofuel use in marine engines have already been carried out. No technical issues are pointed out as the reasons for their short trial periods. We assume that the financial disadvantages have been the crucial aspects in these trials. There is also a recent example of a marine shipping service offering low carbon tonne miles to cargo owners.

In a continuation of this work, a project with real life tests is aimed for. In a workshop we therefore gathered stakeholders that have key roles in the proposed business model. A number of shippers that joined the workshop showed an interest in trying this model in cooperation with ship owners that provide their transports. Ship owners with bulk goods are less served by the suggested model, and alternative financial solutions are most likely needed in this segment.

Attachments: PDF iconDownload the pre study here!

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