Can Nordic forests really give fuel to our ships? This is what we asked Dirk Krone Meijer, founder and CEO of Good Fuels. He promotes the use of bio-fuel to the maritime industry.
No extra costs
Biofuel can be used in ships today without any engine rebuilding or in newbuildings without extra investments. The fuel can be mixed with marine diesel in various blends. The calorific value is approximately the same as for marine diesel and the fuel impose no significant extra maintenance costs. During 2015 and 2016 Good Fuels will carry out practical tests aboard ships of various types of bio-fuels in various mixes with marine diesel. The tests are expected to confirm that bio-fuel is a full-fledged operational alternative to marine diesel.
Meeting requirements of sulphur directive
Bio-fuel does not contain any sulphur and is thus a viable alternative to low sulphur marine diesel and LNG. NOx emissions are reduced by only 10% compared to marine diesel, but Good Fuels is working on additives that may change this.
80% reduction in CO2
CO2 emissions is reduced by 80% compared to marine diesel. The current solution does not have zero emission. This is because the production process and the transport result in CO2 emissions. In future this can be improved and reductions can thus be even greater.
The raw material for biodiesel is chips and bark from the forest industry and the CO2 resulting from combustion is offset against the CO2 that has been absorbed during the tree’s growth. The same raw material is currently used in remote heating, in power stations or being wasted. The production of bio-fuel is 100% sustainability and meet the requirements of Roundtable on Sustainable Biofuels. The business does not affect biodiversity and will not displace food production. Zero, a Norwegian environmental organization, is working actively working to increase the use of bio-fuel in the maritime industry.
1-2 million tonnes by 2020
Good Fuels has established a maritime department and estimates that the volume of bio-fuels will reach 1-2 million tons by 2020 and then have a market share of 10-15% in Europe. Initially, bio-fuel blended with marine diesel will be sold, but eventually also pure bio-fuel will be offered.
Cost of zero emissions is minimal
Basically, bio-fuels today are twice as expensive as marine diesel, which is priced $600/ton in Rotterdam (May 2015), but the extra cost is expected to fall to almost nothing by 2020. Currently, the additional cost of transport with 100% bio-diesel is €140 per 45-foot container for a round trip with a current ship from Rotterdam to Oslo at the current price of bio-fuel price of $1,200/ton. This represents an additional cost of just under 10% for a door-to-door transport and a share environmentally conscious cargo owners may be willing to pay this. This extra cost will be greatly reduced with increasing volumes of bio-fuel by 2020, due to economies of scale in production. For a new ship design for coastal transport the extra cost of bio-fuel only constitutes 7% of the door-to-door cost, since fuel accounts for a smaller share of the total cost of such a ship.
Zero emission business model
To build up the volume of bio-fuel, shipping line can approach the market segment that is willing to pay extra for reduced CO2 emissions and offer them to pay an additional amount equal to the extra cost. The shipping line then buys bio-fuel at a blend that corresponds to the proportion of the load that is paid extra for. In some EU countries, the government provides benefits for transport users who choose such solutions. The first customers will typically be transport users who sell consumer goods and thus will have a positive marketing effect. The extra cost of a zero-emissions sea transport will in most cases be negligible compared to the product price and value. Good Fuels have had success with this business model in the airline industry, where customers pay extra for zero-emissions flights. The company has already met with Heineken and IKEA to develop similar solutions for freight transport.
May save the forest industry
Demand for bio-fuel may compensate for the loss of production of newsprint for the forest industry. This will be attractive for the Nordic forest industry. Initially, Finnish Neste and UPM produce bio-fuel, but also other suppliers will be relevant. Statkraft and Södra are other actors who are considering such productions.