LR report identifies TCO as barrier to methanol retrofits

Based on a 15-year comparison period, and assumptions that the modelled vessel would spend 65% of voyage time in EU waters, the report indicates that passenger ships retrofitted with methanol dual-fuel engines would endure TCO costs twice those supported by Blend B30, HFO and HFO with oCCS.

Overall findings identified in the report, based on analysis by the LR Business Advisory team, show the bunkering price of methanol to be the main commercial barrier for its adoption, with the use of less environmentally friendly fossil based (grey) methanol a more commercially attractive proposition for passenger shipowners than a blend of 50% grey, 25% bio- and 25% e-methanol, even when EU emissions taxes are taken into account.

However, the study highlights that methanol is a technically viable fuel for ship operators looking to reduce the carbon emissions of passenger ship newbuilds, owing to the similar characteristics of methanol to existing fuels. Viable retrofit paths have also been taken to the sector, such as the pioneereering Stena Germanica retrofit project in 2015. This technical viability is reflected in the global orderbook with passenger ships ranging from small inland vessels to the largest cruise ships awaiting delivery.

The report also outlines that greater investment is needed in green and bio-methanol production along with improved bunkering infrastructure to increase fuel availability and reduce costs to a commercially viable level.

Natasha Pritchard, VP Strategic Accounts (Cruise) Lloyd’s Register said: “Our latest Fuel for thought report brings some much-needed insights for passenger ship owners evaluating methanol as part of their energy transition pathway. Whilst methanol as marine fuel holds considerable promise as a low carbon solution for passenger ship propulsion, the total cost of ownership (TCO) compared to other fuels may represent an obstacle to its widespread take-up in the segment. It is therefore vital that renewable and low carbon production of methanol is prioritised in order to drive down these costs.”