Demand for green methanol, a more sustainable and functionally equivalent alternative to conventional methanol, is projected to grow substantially on the back of its growing popularity primarily as a marine fuel as the world focuses on cutting down carbon emissions, reports SP Global.
World’s largest methanol producer
Methanex, the world’s largest methanol producer, estimated that global methanol demand was approximately 88 million mt in 2022 and is expected to grow at a CAGR of approximately 3% or more than 14 million mt over the next five years. This increase would be supported by a gradual shift to renewable methanol.
The International Renewable Energy Agency, or IRENA, shares the same view on renewable methanol. “Looking ahead, the increase in methanol production is expected to see a progressive shift to renewable methanol, with an estimated annual production of 250 million mt of e-methanol and 135 million mt of biomethanol by 2050,” IRENA said in its 2021 outlook.
Waterborne transport generated 3% to 4% of total CO2 emissions in the EU in 2021, according to the European Commission. On March 23, the European Parliament and the European Council agreed to increase the maritime transport sector’s contribution to the European Union Green Deal, which aims to EU reduce greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels, and reach climate neutrality by 2050.
Under the European Union Green Deal, the European Parliament and the Council agreed to increase “the maritime transport sector’s contribution to reaching the EU-wide target of reducing net greenhouse gas emissions by at least 55% by 2030, and to achieve climate neutrality in 2050.”
Almost all forms of methanol are expected to play a crucial role in decarbonizing the shipping sector by 2050 and much greater quantities of fully sustainable green methanol will be available as capacities scale up. Methanol bunkering continues to garner support from major shipping companies as they see it as a viable fuel option over LNG amid steady prices and an expected ramp-up in biomethanol and e-methanol facilities worldwide, Methanol Institute COO Chris Chatterton told S&P Global Commodity Insights March 14.
Neste, one of the world’s leading producers of sustainable aviation fuel and renewable diesel, has committed to reach carbon-neutral production by 2035, and to cut the carbon emission intensity of sold products by 50% by 2040. Neste inked an agreement with Terntank for time chartering two new low-emission product tankers in March 2023.
Meanwhile, shipping giant Maersk is the first to come forward to adopt the technology at European Energy’s Kassø plant for fueling its first e-methanol powered container vessel. The Kassø project in Denmark is the world’s largest e-methanol production facility so far and is expected to start commercial production in H2 2023.
Renewable methanol, however, comes with a higher production cost over its conventional counterpart, and quick adoption for energy transition would require stricter regulatory measures and strong government and institutional support.
Project Air, an initiative in Sweden to develop large-scale sustainable methanol to replace fossil methanol, will be granted Eur97 million from the EU Innovation Fund. The project is expected to cut down greenhouse gas emissions by 123% compared with conventional methanol.
Ecoplanta Molecular Solutions, a joint venture in Spain between Agbar, Repsol and Enerkem, will produce 240,000 mt/year of methanol and recover 70% of the carbon present in non-recyclable materials. The venture signed a grant agreement with the European Commission under the Innovation Fund in April 2022. The plant is expected to get commissioned by 2026, and is projected to cut down 3.4 mtCO2e of GHG emissions over the first 10 years of operation.
The European Investment Bank is aiming to support more than Eur1 trillion of environmentally sustainable investments by 2030. In 2022, Danish company Topsøe AS signed a Eur45 million loan agreement with EIB to support its research into innovative green hydrogen technologies that may be used in several downstream sectors. Through this agreement, Topsøe is strengthening its research and development investments for the production of greener chemicals and renewable fuels, such as green hydrogen, green ammonia, biofuels and e-methanol.
Singapore, the world’s largest bunkering hub, is targeting to decarbonize international shipping through the adoption of low-carbon fuels. To support the development of new technologies and promote the adoption of alternative marine fuels such as methanol and biofuels, the Maritime & Port Authority of Singapore launched Maritime GreenFuture Fund in 2020 and committed $80 million toward R&D efforts in maritime decarbonization.
“By 2030, our port terminals will reduce absolute emissions by at least 60% from 2005 levels, amid projected growth in volumes. By 2050, our port terminals aim to achieve net zero emissions,” the Maritime Singapore Decarbonization Blueprint published 2022 said.
Changing government regulations in several countries worldwide have also encouraged players to enter an alliance to promote renewable methanol usage in several carbon-intensive sectors. Some of them are:
Coastal Sustainability Alliance
The Coastal Sustainability Alliance aims to build the next generation of Singapore’s maritime ecosystem and ramp up decarbonization efforts, transition to a circular economy and strengthen marine supply chains. The alliance was launched March 2022 by Kuok Singapore Limited (KSL) Maritime, with members including the Agency for Science, Technology and Research (A*STAR), GenPlus, Jurong Port Singapore, Sea Forrest, Technology Centre for Offshore and Marine, Singapore (TCOMS), and TES. According to KSL Maritime, CSA is expected to invest over around $14.7 million into various sustainability efforts over the next 10 years.
The First Movers Coalition
The First Movers Coalition is an initiative that aims to utilize the purchasing power of global organizations that have made ambitious net-zero commitments in at least one of the seven hard-to-abate sectors that make up nearly one-third of global carbon emissions. These are aluminum, aviation, chemicals, concrete, shipping, steel, trucking and direct air capture. FMC currently has more than 70 members.
For shipping in particular, companies that have joined the coalition to decarbonize the sector include Maersk, Agility, Aker ASA, Amazon and BHP. FMC has the following targets for carriers and cargo owners:
*Carriers: Members commit to using newbuilt and retrofitted zero-emission vessels fueled by zero-GHG emissions fuels. With this strategy, FMC aims for at least 5% of their deep-sea shipping to be powered by zero-emission fuels by 2030.
Cargo owners: FMC commits that at least 10% of their volume of goods shipped globally will be on ships powered by zero-emission fuels by 2030, with a vision of bringing this to 100% by 2040.
The Clydebank Declaration is a global initiative agreed upon by 24 countries that have committed to establishing “green maritime corridors”. These are specific maritime routes that are decarbonized from end to end, including both land-side infrastructure and vessels.
The member countries, which include the US, the UK, France, Germany, Canada, Japan, Singapore will be supporting the establishment of green shipping corridors between two or more ports.
“It is our aspiration to see many more corridors in operation by 2030,” excerpts from the declaration said. “We will assess these goals by the middle of this decade, with a view to increasing the number of green corridors.”
FuelEU Maritime Proposal
FuelEU Maritime in the European Commission’s 2021 Fit for 55 package is a regulation toward sustainable maritime fuels to decarbonize the shipping sector in EU-27 states by replacing the consumed fossil fuels with environment-friendly alternatives.
The proposal intends to catalyze the consumption of low-carbon fuels by introducing limits on carbon intensity of the fuels used by boarded ships and mandates usage of onshore power supply on European Union ports. It introduces a methodology for the lifecycle analysis of fuels and common principles for fuel monitoring, as well as puts the responsibility for compliance on the shipping company. It will ensure that the GHG intensity of fuels used by the shipping sector will gradually decrease over time, from 2% in 2025 to as much as 80% by 2050.
EU Emissions Trading System
While FuelEU Maritime sets emissions intensity reduction targets, EU-ETS is an emission cap-and-trade system for energy-intensive industries and the power generation sector.
The European Council and Parliament agreed on Dec. 18, 2022, to include maritime shipping emissions within the scope of the EU-ETS, making the EU the first jurisdiction to put an explicit carbon price on maritime emissions.
Under the EU-ETS, each company with ships trading in the EU and European Economic Area is required to deposit emission allowances corresponding to the amount of GHG emissions emitted over a calendar year starting 2024. The emissions will be reported and verified through the existing EU MRV (Monitoring, Reporting and Verification) system, which will be covering necessary GHG emissions, ship sizes and types.
“To ensure a smooth inclusion of the sector in the EU ETS, surrendering of allowances by shipping companies should be gradually increased with respect to verified emissions reported for the period 2024 to 2025,” Council of the European Union said Feb 8.
As the transition to sustainable fossil resources become a focal point of economies worldwide, the capacity of individual renewable methanol plants is expected to grow significantly in the next four to five years.
There are more than 80 renewable methanol projects already on cards with several more expected in the years to come. More than 8 million mt/year of renewable methanol is expected to be produced by 2027, the Methanol Institute estimates. Several global players, technology providers and consumers are joining hands to make this a more achievable goal.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: SP Global