Finish tech firm promises carbon capture cost of Eur50-70/mtCO2
CCS users can profit from Hi-5 spread, lower carbon charges
Regulatory uncertainty and disposal worries persist
Wartsila aims to start selling a marine carbon capture and storage system with quick paybacks next year, according to a company manager, suggesting the novel technology could accelerate the shipping industry’s decarbonization pace for the International Maritime Organization’s climate target for 2040.
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Having been running the CCS system at an onshore test facility for two years, the Finnish technology firm will begin its sea trials aboard an LPG carrier this summer in partnership with shipowner Solvang.
“We are, say, full speed ahead…for installation” of the system, Wartsila’s director for exhaust treatment, Sigurd Jenssen, told S&P Global Commodity Insights in an interview. “We hope that we can go to market with the product quite quickly, sometime next year.”
“There is a lot of interest in the market in general, and both for retrofits and newbuilds,” Jenssen said.
With the EU and IMO set to tighten regulations on maritime greenhouse gas emissions in the coming decades, shipping companies have been seeking new fuels and technologies to decarbonize their operations.
While marine CCS can potentially remove most carbon dioxide from a ship’s exhaust gas, Value Maritime has so far been the only supplier for such novel technology, and industry participants said its effects are not yet fully proven.
Wartsila’s CCS will be combined with a scrubber system, according to Jenssen, as sulfur oxides would be removed from exhaust gas before CO2, based on its technology.
Theoretically, this means a user of the CCS-capable scrubber can reduce costs related to carbon charges while burning cheaper high-sulfur fuel oil instead of very low-sulfur fuel oil.
“If you’re running on [very] LSFO today…you would get the payback from the scrubber installation in addition to the CCS benefit,” Jenssen said.
Wartsila estimates its system would have a carbon capture cost of Eur50-Eur70/mtCO2 ($54-$76/mtCO2) inclusive of capital and operating expenses, according to Jenssen.
The EU emissions allowance contract for December delivery was assessed at Eur56.37/mtCO2e ($61.18/mtCO2e) March 1, not far from a 31-month low of Eur52.36/mtCo2e seen on Feb. 23, according to Platts, part of S&P Global. Many market participants expect EUAs to recover in the coming years.
On a global weighted average basis, the premium of VLSFO to HSFO — also known as the Hi-5 spread — stood at $143.76/mt, according to a calculation based on Platts Bunkerworld indexes.
Industry target
The IMO, shipping’s global regulator, has set targets to reduce life-cycle GHG from international maritime transportation by 20%-30% by 2030 and 70%-80% by 2040 against 2008, before reaching net-zero emissions close to 2050.
While suggesting low-carbon fuels should play an important role in decarbonizing shipping, Jenssen said a rapid uptake of CCS like Wartsila’s — which has an expected 70% carbon capture rate — would help the industry “meet the 2040 targets much, much earlier.”
Currently, Wartsila requires a lead time of 12-15 months to deliver a CCS-capable scrubber, but Jenssen suggested this could be shortened when more demand emerges as no critical materials are required during production.
Like other equipment providers, Wartsila ramped up scrubber output before the IMO’s 0.5%-sulfur cap for marine fuels came into force in 2020. “It’s possible to do that also for CCS…there are no exotic materials,” he said.
S&P Global analysts said the number of scrubber-fitted ships could surpass 6,000 by 2030 if carbon capture technologies are successful, compared with 4,500 in their reference case.
“We think this [CCS] is a practical way of addressing emissions from the fleet because in reality, there are many, many ships that will continue to sail on fossil fuels for many years,” Jenssen said.
Obstacles
Prospective marine CCS users are facing challenges on multiple fronts, including CO2 disposal, regulatory uncertainty and potential difficulties in securing on-board energy to capture carbon, some environmentalists and industry participants said.
In the Solvang pilot project, delayed by some quarters as the shipowner sought and successfully secured funding from Norway’s state-owned enterprise Enova, two 360-cu-m carbon tanks will be installed on the 21,289-cu-m Clipper Eris.
This means the CCS system could roughly take in 800 mt of CO2 in liquid form in a 20-day voyage. While liquid CO2 is expected to be widely accepted by future onshore storage facilities, “cross the Atlantic, and then the tanks will be full,” Jenssen said.
The storage requirements would increase on larger ships in longer voyages. While new-build projects could take CCS into account during the design phase, Jenssen suggested installing the system on existing ships might not always be feasible.
Moreover, shipowners would be more incentivized to acquire CCS if they could sell captured carbon to industrial users, but the EU only recognizes the technology’s decarbonization benefits if the carbon is permanently stored under its Emissions Trading System.
Brussels is still evaluating how to take carbon capture into account for its FuelEU Maritime regulation, which will start capping the GHG intensity of marine energy in EU-related trades from next year. IMO member states have yet to conclude CCS’s effects in its rules.
“There’s still work to be done in terms of aligning the different mechanisms and regulations on how this should be handled,” Jenssen said.
