Bio-LNG offers an advantage with extended compliance to reduce GHGs
New analysis from SEA-LNG, the coalition to accelerate LNG as a marine fuel, has determined that for every 10% of bio-LNG deposited and blended with LNG as marine fuel, a ship can achieve two more years of compliance with the Annual Efficiency Ratio Curve (ERR) used to secure preferable funding under the Poseidon Principles. This extends the average additional competitive advantage by seven years for Poseidon Principle loans obtained only with LNG.
The analysis compares LNG and bio-LNG from a sustainable zero-carbon source with conventional ship fuels such as HFO, VLSFO and MGO. Bio-LNG is fully compatible with existing LNG infrastructure and technologies and is increasingly recognized as a sustainable fuel that can be “deposited” and blended with LNG. Therefore, it represents one of the most viable decarbonization pathways currently available to homeowners.
LNG fuel allows greenhouse gas (GHG) reductions of up to 21% from the well upon waking and up to 28% from the tank upon waking. This means that LNG ships perform well under the funding criteria of the Poseidon Principles, which were prompted by financial institutions to improve strategic decision making and shape a better future for the shipping industry and society.
The Poseidon Principles measure progress towards these goals using an AER rating. This follows an increasingly tight decarbonization trajectory index through 2050, requiring an improvement in a ship’s overall carbon emissions intensity. This measure aims to align with IMO targets and encourage them to reduce total annual GHG emissions by at least 50% by 2050.
John Hatley, Chairman of the SEA-LNG Investment Committee, commented: “As banks increasingly align themselves with green finance principles, LNG offers benefits for reducing emissions and provides an ‘extended compliance trail’ for lending linked to the sustainability of the Poseidon Principle. . An investor retains more favorable financing conditions compared to conventional marine fuels such as HSFO, VLSFO and MGO. Using bio-LNG as a backup fuel can extend this trail even further – two more years for every 10% drop. This now means reduced emissions from ships and extended compliance which provides a long-term competitive advantage. ”
The recent CE Delft study concludes that bio-LNG is a scalable solution for the maritime sector. The estimated sustainable global supplies potentially exceed the future energy demand of the global fleet of vessels. It also showed that bio-LNG is likely to be commercially competitive against other low and zero carbon fuels.
This analysis is supported by a recent IEA report on the outlook for biogas and biomethane. The IEA report concludes that the raw materials available for the sustainable production of biogas and biomethane are enormous, but only a fraction of this potential is used today. For biomethane to realize its potential as a major zero-emission energy carrier, policies must remove barriers to scale-up and create a single, cross-border market for biomethane and bio-LNG. The policy will also play a key role in allocating biomass resources to the sectors most difficult to reduce such as maritime transport, heavy freight transport and aviation.
Bio-LNG has particular advantages when it is produced from household and agricultural waste. The process can capture methane that would otherwise be vented into the atmosphere, resulting in a fuel that is not only zero GHG emissions, but has the potential for negative emissions. By helping reprocessing waste, bio-LNG can support the circular economy and help alleviate another global concern; Waste Management. The potential benefits of GHG reduction from capturing and reusing the waste streams of the global economy are significant and must be taken into account in any serious discussion of alternative fuels. Ensuring a level playing field for the assessment of alternative fuel options will require the implementation of a Well-to-Wake analysis by regulators, including the IMO.
Peter Keller, President of SEA-LNG, added: “As GHG emissions are cumulative, the challenge of decarbonization only becomes more difficult later, we take measures to face it. Waiting for options is not an option. The industry must act now by using LNG and bio-LNG which we know offer benefits now and in the future.
“With the introduction of bio and synthetic variants, LNG not only provides a path to full-fledged decarbonization, but also provides the physical infrastructure and asset base that can be used by other alternative fuels, when and whether they become commercially viable. ”
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