Ready for biofuels?

Biofuels are a not a new concept. The very first diesel engines, designed by Rudolf Diesel ran successfully on peanut oil. Rudolf Diesel stated in 1911 - “The use of vegetable oils for engine fuels may seem insignificant today but such oils may become in the course of time as important as petroleum and the coal tar products of the present time”. Biofuels can exist in solid, liquid or gas form thereby potentially affecting three of our core markets. Solid biofuels or biomass tend to be used in external combustion but due to a general lack of appropriate information on biomass for shipping routes and economics forecasts, we have mainly looked at liquid biofuels as a supplement to hydrocarbon fuels up to 2030.

‘We can see a dilemma for the shipping as each change will require ships of different design’

So-called “first generation” biofuels relate to biofuels made from sugar or starch, producing bioethanol, and vegetable oil or animal fats producing biodiesel. First generation biofuels provoke increasing criticism through their dependence on food crops and issues over biodiversity, land use and human rights. Technical challenges exist in blending them effectively with conventional petrol or diesel. Second generation biofuels can be the solution to some of the problems related to first generation. They are made from waste biomass from agricultural and forestry, fast growing grasses and trees specially grown as so-called ‘energy crops’.

With technology, sustainability and cost issues to overcome, second-generation biofuels are still several years away from commercial viability and many second generation mass produced biofuels are still under development including the biomass to liquid, Fischer-Tropsch production technique. Third generation biofuels are green fuels and products made from energy and biomass crops that have been designed in such a way that their structure or properties conform to the requirements of a particular bioconversion process. Another example of third generation biofuel is algae fuel, which is formed solely of waste material, such as sewage, and grown on ponds. We can see a dilemma for the shipping industry as it tries to predict where, when and how the available capacity will be called on to transport basic bio-material or completed product from source to production area and then to the point of use. Each change will require ships of different configuration, size and tank coating type.

Effect of growth in biofuel production

Evaluating first generation biofuels, it becomes clear that large scale growth is dependent on exports and seaborne trade from key exporting regions, particularly South America. Brazil has a key role and has been producing ethanol from sugar cane since the 1970s with a cost per unit reportedly the lowest in the world. It should also be noted that ethanol is exported from Brazil as a finished product.

‘North America, Europe and Asia are the key importing regions based on the biofuels demand growth’

Brazil can still accommodate further supply to satisfy ethanol requirements. Figures provided by the Brazilian Biofuel Trade Association assert that Brazil has some 200 million acres of farmland available, more than the 46 million acres of land, required to grow the sugarcane needed to satisfy the projected 2022 US ethanol requirement. Looking at current shipping economics, we find a clear supply and demand balance driving the shipping trade picture for 2007. World ethanol consumption in 2007 is estimated at 51 million tonnes. The United States and Brazil comprise 68% of world ethanol consumption. The EU and China account for an additional 17%. Already we see a biofuel trade pattern emerging between the US, EU, and Asia and whilst Brazil exports the most ethanol globally at about 2.9 million tonnes per year, the top importers of the US, EU, Japan and Korea have increasing demand that will have to be satisfied by increased shipping capacity. If ethanol is dependent on first generation technology, then Brazil becomes the necessary supplier for large scale growth and will be the primary driver of ship design characteristics in the near future. North America, Europe and Developing Asia are the key importing regions based on the biofuels demand growth shown. The Latin American counties of Brazil, Argentina, Bolivia, and Paraguay and Southeast Asia’s Indonesia and Malaysia are assessed to be key suppliers. The key role of Southeast Asia in vegetable oil supply emerges clearly, with South America also gaining benefits. Seaborne vegoil trade has grown from 33 m tonnes in 2000 to a forecast of about 59 m tonnes in 2008, a 7.5% pa growth rate. Palm oil has been the single biggest component of the increase, with seaborne trade growing from 13 m tonnes in 2000 to 32 m tonnes forecast in 2008. Soybean oil exports have also increased from 7 m tonnes to some 11.5 m tonnes in 2008, largely from Argentina and Brazil.

Potential industries

On 15 January 2006, the Central Ohio Transit Authority (COTA) began a program to test a 20% blend of biodiesel (B20) in its buses. In two months they used approximately 45,000 gallons of B20. As a result of the test, in April 2006 they began using biodiesel fleet-wide. In addition to using B20 in the winter months, COTA has committed to using 50-90% biodiesel blends (B50 - B90) during the summer months. This is projected to decrease regular diesel fuel consumption by over one million gallons per year. The first trial of buses in the UK running on B100 was launched on 26 October 2007. In a pilot project, Argent Energy Ltd. (UK) is working together with Stagecoach to supply biodiesel made by recycling and processing animal fat and used cooking oil.

‘Ford announced a £1 billion research project to convert more if its vehicles to new biofuel sources’

Last year Ford announced a £1 billion research project to convert more of its vehicles to new biofuel sources. BP Australia has now sold over 100 million liters of 10% ethanol content fuel to Australian motorists, and Brazil sells both 22% ethanol petrol nationwide and 100% ethanol to over 4 million cars. The first train to run on biodiesel in the UK went into service in June 2007 for a six month trial period. The train uses a blended fuel, which is 20% biodiesel and the operator, Virgin Trains, is confident the mix can be increased to at least a 50% with the further possibility to run trains on fuels entirely from noncarbon sources.

Biofuels at sea

Technically speaking, the use of biofuels at sea can be advantageous. Marine engines are generally lower speed and more tolerant to burning alternative fuels than smaller, higher speed engines. This tolerance should allow marine engines to run lower grade and ultimately cheaper biofuels. Royal Caribbean Cruise Lines (RCCL) has trialled a palm oil-based biodiesel since 2005. Optimistic results made RCCL confi dent enough to sign a contract in August 2007 for delivery of a minimum 15 million gallons and for the four years after, a minimum of 18 millions gallons of biodiesel for its cruise ships fleet. It is the single largest long-term biodiesel sales contract in the United States. Biomass in the Fisher Tropsch process can also be used to produce bio lubricants, hydraulic oils and grease. Biodegradability and non-toxicity are the main advantages of these products. In the marine industry, biolubricants are particularly advantageous from an environmental and pollution perspective. The use of biofuels as a fuel has increased in most transport sectors, however remains largely excluded from major developments in the marine industry. Why is this so? The use of fuels on ships is less critical with respect to energy to mass content or ambient temperature performance to say the aviation industry. Cost is the driver and slow speed diesel engines can run on lower quality fuels so therefore replacing distillate marine oils with Biodiesel may cause some technical difficulties, but in principle marine application seems very appropriate. The energy content cannot however be ignored as biofuel with a lower calorific value for main propulsion could result in a reduced service speed, range or larger bunker tanks. We must remember that the properties of biofuels and the way they behave in the engine vary significantly depending on the source of the fuel. This makes any standardisation in the industry currently very diffi cult. Ship owners must be sure about quality of biodiesel burnt in their engines. Currently the fuel standard for marine applications, ISO 8217 relates solely to fossil fuels, and has no provision for biofuels. There are, however, a number of available national standards for biodiesel in the automotive industry, such as the European EN 14214, and we would need to see the marine bunker supply market working closely with regulators to develop suitable international marine standards. The new MARPOL Annex VI, which was agreed earlier this year and proposed for adoption in October 2008, has in the definitions of “fuel oil” any fuel delivered to and intended for combustion purposes for propulsion or operation on board a ship. This leaves the door open for biofuels. But at the moment the world-wide availability of biodiesel supply is limited. Current expectations, however, are that biodiesel would be initially suited for use in small craft operating in areas particularly sensitive to air and water pollution. For merchant ships, the way in which biodiesels are supplied to the ship must also be considered. There are two options in relation to this. Either the biodiesel is supplied to the ship pre-mixed to the required blend, or the biofuel and diesel are supplied separately to the ship, and then mixed on board. The latter gives the operator the chance to dictate the exact blend of biofuels depending on conditions but that would require new technology to be installed on board together with additional complexity for the crew. The first option, where the biodiesel is blended prior to delivery to ship is also affected by the biodiesel shelf life. Fuel aging and oxidation can lead to high acid number, high viscosity and the formation of gums and sediments. Fuel management will therefore become ever more complex in this new era.

Political issues

The key political drivers for biofuels are environmental concerns, energy security and agricultural policy. The tonne mile demand for future tankers will be greatly affected by national, regional or global policy and political decision making in these areas.

‘In many parts of the world, environmental concerns are the leading political driver for biofuels’

Once the regulatory framework is clear, economics will determine how the regulations will best be met and seaborne trade will be at the centre of the outcome. In many parts of the world, environmental concerns are the leading political driver for biofuels. Reflecting these concerns, the global Kyoto Protocol was negotiated in 1997, and this further provides a driver for the use of biofuels. The EU has stated that by 2020 a target of 20% of community wide energy will be renewable. Further to this, all member states are to achieve a mandatory 10% minimum target for the share of biofuels in transport petrol and diesel consumption by 2020. For the biofuel target to become binding and sustainable, second generation biofuels must be commercially available. The legislation highlights the importance in developing second generation biofuels into a dependable alternative resource. In particular, a target of at least two thirds of the supply of biofuels shall be produced from wastes, residues, non-food cellulosic material, and ligno-cellulosic material. Political drivers in Asia vary according to region. In Southeast Asia, the centre of world production for palm oil, coconut oil, and other tropical oils, political support for farming is the key driver. The issue affecting shipping is whether to refine and use biodiesel locally, or export the unrefined oil for production elsewhere. In the short term the economics have favoured the exports of unrefined oil - which is good news for us.

Conclusion – ready or not?

The shipping industry may be ill prepared to accommodate the global drive towards biofuel use and must make preparations for the global drive towards biofuels and argues. If second and third generation technologies are successful then current projections of demand would see the world fleet unable to cope with the logistic demands. The increase in demand for biocargoes would require an additional fleet size of 400 Handysize equivalents by 2030. Moreover, with additional environmental pressures, these vessel requirements may well increase. The International Energy Agency (IEA) World Energy Outlook projections for biofuel demand may well be inflated by political pressures to find alternative bio energy in shortening timescales. The implications for the shipping industry are significant. Whether first or third generation, whether biodiesel or bioethanol, shipping will be at the heart of the supply chain and anticipatory investment will have to be made by the industry. Contradictory information makes the risk in that investment uncertain and therefore it is vital to look at ways to hedge the future - through flexible initial oil tanker design for vessels to be constructed now and converted in the future to take advantage of growing biotrade. The biofuels industry is in the early stages of low carbon impact second and third generation biofuel development. Companies investing time and money in developing technology into economically viable and socially acceptable solutions are naturally keeping quiet about the technology or products being developed. Whether as a cargo - or for use in the engine room - these new solutions will have to be incorporated into marine systems. Current ship designs are constrained by current legislation, creating poor designs if biofuel becomes a large scale global energy source. New standards may be required to meet essential safety and environmental needs and an early start is essential to meet these challenges. Lloyd’s Register welcomes dialogue with all concerned and is ready to assist.

This article is based on the Stanley Gray Lecture given recently by Richard Sadler at the Institute of Marine Engineering, Science and Technology (IMarEST). More from: www.lr.org