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Why shipping is reinforcing hydrogen demand signals at COP27

Dialogue with energy ministers has been the real focus of the climate conference so far for shipping. The consistent theme of the meetings is de-risking investment

Shipping’s green fuel transition influencers have been out in force at COP27, reinforcing the industry’s projected demand for green hydrogen. However, policy failures are holding back investment in green fuel projects across sectors crucial to global decarbonisation, including shipping. Just 4% of globally announced green hydrogen projects are receiving full funding 

THE shipping industry needs to present a united front when it comes to the headline topic of green hydrogen at this year’s COP27 climate summit, currently backsliding towards a disappointing conclusion in Egypt this week.

Despite a flurry of commitments both in terms of industry demand signals and energy supply projections, there is a yawning gap between announced government led projects and the industry’s requirements.

New research due to be published on Tuesday shows that a lack of clear policies from governments means that just 4% of globally announced green hydrogen projects are receiving full funding.

Even if 100% of current projects were realised, this would only produce 24m tonnes of the 50m-150m tonnes of green hydrogen needed by 2030 to meet the industry’s projected 1.5°C pathway, according to a report from the Tyndall Centre at the University of Manchester. 

A pre-prepared showcase announcement on November 14 from 10 of the industry’s leading green influencers — including Maersk, MAN Energy Solutions and Fortescue Future Industries — all publicly committed to the rapid and ambitious production and use of low-carbon fuels based on green hydrogen.

Despite the high-profile fanfare from industry heavy hitters, there was little new substance in the commitments, but the showcase was largely a case of convincing governments, rather than making substantive new announcements. 

For those attending COP27 seeking to influence governments, this was about creating something that can be played to governments showing two things.

First, that supply of hydrogen has shipping clearly in its sights as end users and is ready to meet the demands of a rapid ramp-up that would be needed for a 1.5°C-aligned transition. Second, they wanted to show that the supply and demand side are now working together.

On both counts, they can point to some progress.

The importance of demand signal to governments and energy majors cannot be underestimated. This is why industry initiatives such as the Getting to Zero Coalition and Cargo Owners for Zero Emission Vessels, known as coZEV, have been setting clear targets for commercially viable vessels to be operational by 2030 alongside the establishment of so-called green corridors.

But even within the industry there are doubts regarding the viability of plans to produce sufficient green hydrogen and ammonia to meet shipping’s projected demands.

So, this latest show of force, co-ordinated by the UN Climate Change High-Level Champions and non-profit RMI, was there to refute those doubts and make it clear that producers are committed to meet shipping's demand. It was also a statement that is about the self-fulfilling prophecy risk.

Investment aligned to a 1.5°C trajectory is unlocked by adopting 1.5°C-aligned targets and policies, but the timescales are now so short that any mis-step by International Maritime Organization in the critical next few meetings could put the investment needed for an appropriate increase in activity out of reach, hence the messaging being reinforced at COP27.

“We are living in a climate emergency. We need to rapidly accelerate the global availability of green fuels,” said Maersk’s chief executive of Fleet and Strategic Brands Henriette H Thygesen, who has been heavily involved in pushing the industry line at COP.

Ms Thygesen was part of the industry delegation reinforcing the high level of industry ambition last week at the Green Shipping Challenge hosted by the US Special Presidential Envoy for Climate John Kerry.

She used the opportunity to recap on Maersk’s programme to scale green methanol production this year, pointing out that in addition to the protocol signed with Spain at COP, Maersk has also signed strategic partnerships with Egypt and six leading international producers from China, the US and Europe: CIMC ENRIC, European Energy, Green Technology Bank, Orsted, Proman and WasteFuel.

“These are important milestones, but it is not enough. The task ahead of us is huge. To de-risk investments, more is needed,” she told Mr Kerry. Her blunt message has now been reinforced by a succession of industry chiefs on parade in Egypt seeking audiences with every influential energy minister available.

Dialogue with energy ministers has been the real focus of COP27 so far for shipping. The consistent theme of the meetings is de-risking investment.

“Regulation, collaboration and investments in innovative projects are the most important pathways to reach a net-zero fuel value chain and to scale the production of commercially viable fuels for shipping,” said Ms Thygesen.

“But we need fast permit approval processes in place to be able to kick off the production of renewable energy and green marine fuels to accelerate the much-needed green transition.”

Hydrogen-based fuels present a major opportunity for the shipping sector. However, there is a big gap between the planned production of low-carbon hydrogen, and what is required to deliver these 1.5°C scenarios.

The International Energy Agency estimates low-carbon hydrogen production of 24m tonnes by 2030, but 1.5°C scenarios need at least double that figure. Moreover, the majority of the projects comprising this 24m tonnes are still at concept or feasibility stage.

“Although project announcements are growing very rapidly, projects with final investments decisions are scarce; with project developers unsure of potential markets, and potential consumers unsure of suppliers. Stronger policies are needed now to translate the recent surge of interest in hydrogen into actual projects, and to connect consumers and producers,” said the authors of the report being published on Tuesday by the Tyndall Centre and commissioned by the International Chamber of Shipping.

The authors identify growth in low-carbon hydrogen and sustainable bioenergy as essential to meet the Paris Climate Agreement’s goals. But they also found that a lack of enabling policies from governments, such as guaranteeing markets and prices for producers and consumers, was holding back investment in the shipping infrastructure needed to support the global energy transition.

There is a co-ordination issue potentially holding development of hydrogen in limbo, with hydrogen projects requiring buyers before final investment decisions are made, and sectors planning a move into hydrogen being unsure of supply.

These are compounded by major further infrastructure investments often being needed to deliver hydrogen products from producers to consumers. The priority is therefore to convert the current explosion of interest in hydrogen into actual projects in the coming few years. That is why the industry has been out in force seeking to reassure that it will be ready to hold up its end of the deal.

“The shipping industry knows it has a huge part to play in global decarbonisation in the coming decades, transporting the new green fuels the world’s economy needs. But for us to invest, governments need far stronger policies to de-risk green hydrogen production,” said Guy Platten, secretary-general of the International Chamber of Shipping.

“National hydrogen strategies must include an explicit focus on supporting the transport infrastructure needed for both imports and exports. Industry is ready to respond but we urgently need stronger market signals and infrastructure investment to make this a reality.”

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