21 June 2024 (Lloyd's List) - SHIPPING could fall 3m tonnes of methanol short of the 14m tonnes it will need for dual-fuel ships by 2028, according to a new report by Bloomberg New Energy Finance.

The main driver of these methanol-fuelled newbuilding orders was the EU Emissions Trading System tax, since vessels included in the carbon market cover about 18% of global shipping, the report said.

“As of early 2024, low-carbon methanol production capacity is negligible and currently makes up less than 1% of the 110m tonnes of methanol production today,” BNEF said.

“However, there are 18m tonnes’ worth of low-carbon methanol projects in the pipeline, which, when commissioned, would consume 1.65m tonnes of hydrogen.”

The report found that injecting renewable hydrogen into biomass to make bio-methanol could become the most scalable way to make clean methanol.

China has the most planned projects, 60% of which planned to use renewable hydrogen with biomass.

Building a bio-methanol facility in China costs less than half that of a similar plant in the US, owing to lower construction and engineering costs. Capital expenditure forms the bulk of costs in making bio-methanol.

Producing bio-methanol with clean hydrogen injection would cost $610-$748 per tonne with today’s technology, assuming $100 per tonne for biomass and $4 per kg for green hydrogen.

Renewable hydrogen-derived e-methanol, the greenest kind, costs $1,000 per tonne.

The FuelEU Maritime regulation requires e-fuels to deliver 70% emission reduction over conventional fuels, while waste-based biofuels have a threshold of 50%-65% depending on a project’s commissioning date.

E-methanol production with direct air capture of CO2 is the least scalable method, as high prices for direct air capture drives total costs to around $2,400 per tonne.

“Around 44m tonnes of shipping fuel consumption falls under the EU regulations. Assuming low-carbon methanol displaces all of this, demand could reach close to 80m tonnes of methanol,” the report said.