There is an ongoing dilemma in the international shipping community: which renewable fuel solution holds the key to the industry’s green future? Focus has centered on fuels that can be produced using renewable electricity, known as e-fuels. E-fuels include ammonia, methanol, and hydrogen. Each type of e-fuel has its own benefits and drawbacks. In the long term, it’s unclear which is better for the industry.
Compatibility with combustion engines makes e-fuels a practical route to eliminate vessel emissions. Shipping is considered a hard-to-abate sector due to the immense power requirement of ships operating trans-continental trade routes. A renewable power solution for ships will need to be widely available near ports worldwide and economically practical. These are not small hurdles.
E-fuel Value Chain Source: Breakwave Advisors
Two leading shipowners have recently favored methanol, giving it a boost in attention. French container line CMA CGM began placing orders for methanol-powered ships in June 2022, and has tallied up 18 ships under construction in addition to 31 methanol-ready vessels already operating in its fleet. CMA CGM is in good company. Danish shipowner A.P. Moller-Maersk has 19 methanol-powered containerships on order and has taken steps to secure renewable methanol offtake agreements. Maersk needs a sizeable amount of methanol for its ships, but renewable methanol production is just beginning to take shape, making this a challenge. Maersk has had some success, contracting 130,000 tons of renewable methanol for delivery in 2023, 700,000 tons in 2025, and 500,000 tons in 2026.
Source: Methanol Institute, Bloomberg, 2023.
But why methanol fuel?
Methanex, a Canadian company that produces and distributes methanol, began using methanol as ship fuel in 2016 demonstrating methanol’s commercial viability for powering large cargo ships. Stena Line, one of the largest ferry operators in the world, also has a track record of using methanol. Stena first implemented methanol in 2015 to power ferries and was able to achieve a reduction of emissions by using the fuel. Methanol is currently available in over 100 ports.
Methanol is also already being commercially produced using renewable electricity but in small quantities. Carbon Recycling International (CRI), a private Icelandic company that uses geothermal power to produce renewable methanol, first began production in 2012. Since then, CRI has received more than 180 inquiries from stakeholders interested in renewable methanol. The company says it is prepared to deploy its technology “en masse.”
Even with a proof-of-concept, there are still major challenges. Obtaining an adequate supply of renewable electricity, developing production infrastructure at scale, and solidifying a distribution network are significant undertakings. But researchers are already developing technologies that will resolve these issues.
ETFMG Breakwave Sea Decarbonization Tech ETF (NYSE: BSEA) provides exposure to many of the companies involved in making methanol a viable fuel for the shipping industry, including Aker Horizons (Norway), Alfa Laval (Sweden), GTT (France), Methanex (Canada), OCI (Netherlands), Orsted (Denmark), Royal Vopak (Netherlands), Technip Energies (France) and Wartsila (Finland).
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