Blue hydrogen-based shipping fuels will be cheaper than oil in 2035, if there's a carbon tax: Wartsila

Blue hydrogen-based shipping fuels could be cheaper than oil in just over a decade, if greenhouse gas emissions are priced into existing fuels, according to a report by Finnish technology group Wartsila.

Today, low-carbon fuels are much more expensive than the fossil fuels that the shipping industry mainly uses today, which cost between €400 and €700 per tonne.

The bloc has also recently passed the FuelEU legislation, which requires ships operating in European waters to gradually reduce their greenhouse gas emissions from the start of next year through to 2050, or face a penalty.

As such, fossil fuels for shipping are expected to get more expensive over time.

Biomethanol and liquefied natural gas, both more expensive than low-sulphur fuel oil now, are also expected to become cheaper alternatives in 2035, with the addition of the carbon tax.

However, while green hydrogen-based fuels will see a dramatic fall in price difference with low-sulphur fuel oil, most will remain slightly more expensive, even with the carbon tax.

However, renewable ammonia, which costs 4.3 times as much as low-sulphur fuel oil, will only see this price gap reduce to 1.2 times as much in 2035.

Similarly, e-methanol is 5.5 times as expensive now, but will only fall to 1.6 times the price, while synthetic methane will fall from 4.6 times to 1.4 times the cost of the fuel oil.

However, Wartsila notes that FuelEU — which includes a bonus emissions-reduction multiplier for the use of renewable fuels of non-biological origin, ie, made with green hydrogen — could also drive extra uptake.

The technology group calls for greater certainty, as well as carbon pricing, from global policymakers, in order to provide shipowners with the confidence to invest in vessels capable of using a certain type of cleaner fuel.

However, Wartsila — which has launched both methanol and ammonia engines onto the market — also argues that “shipping doesn’t need a winner” when it comes to which fuel will dominate the industry’s effort to decarbonise, since different fuels will meet different operators’ needs.

The technology group also calls for greater collaboration, such as buying pools, not only within shipping, but with industries that will also have to switch from fossil fuels to cleaner alternatives, such as aviation.

“For example, aviation requires the highest-grade fuel available. Shipping has much more leeway to accept lower grades of fuel while still decarbonising,” the report notes. “So, with the right guidelines, producers may be able to make both grades of fuel simultaneously in the same production cycle.”