Energy Outlook: The role of ports in a decarbonized energy system
Ports have been referred to as the ‘arteries of the energy transition’. They will play a pivotal role in the global decarbonization agenda and scaling the much-needed energy transition. But how will the energy transition impact ports themselves?
According to DNV’s Energy Transition Outlook (ETO), global emissions will only be 4% lower in 2030 than they are now and drop to 46% by 2050. But time is running out to make a significant difference in curbing carbon emissions the 2.0oC carbon budget is in a very precarious state!
Achieving net zero by mid-century would mean halving global emissions by 2030, but that is an ambition that DNV forecasts is at risk. Unfortunately, we predict that limiting global warming to 1.5oC is less likely than ever before. The slow speed of change means that the world is looking at 2.2oC of global warming above pre-industrial levels by the end of this century. Why is this?
Non-fossil fuel energy grows
Fossil fuels dominate the energy system today with 80% of the energy mix, and although their contribution reduces to 48% mid-century, they are still hugely important.
We expect peak oil to be in 2025 before gradual decline, as a result of the electrification of road transport, to be 17% of global energy use in 2050. Gas will account for 21% of the energy mix by 2050, the largest of all single energy sources owing to its cleanliness relative to coal and oil.
Oil demand halves
Today, the transport sector accounts for 25% of energy-related CO2 emissions globally. However, a steady switch to zero-emission propulsion with biofuels and hydrogen and its derivatives in large parts of the aviation and maritime sectors will contribute to total transport-related emissions falling by 44% by 2050. This is due to oil demand decreasing by nearly half. This demand for energy is replaced by electricity (in electric vehicles) and the scaling of hydrogen and its derivatives, like ammonia and e-fuels, which will scale in maritime and aviation from the mid-2030s.
How will the energy transition impact ports?
The energy transition will impact ports in several ways, including:
Hydrogen as feedstock and energy vector
Hydrogen has the potential to decarbonize hard-to-abate sectors and act as feedstock to produce electro or e-fuels when produced from electricity. The economic competitiveness of green hydrogen can become a reality in ports sooner than other locations owing to the abundance of renewable electricity.
Maritime transport: Which fuel will win?
Multiple low-carbon fuels have been identified to decarbonize port and maritime operations. However, storing fuels in an economic way will become a critical question. This will require additional investments in storage facilities and infrastructure. This poses a challenge to ports as they must decide in which fuel infrastructure to invest.
The maritime fuel mix will change dramatically
There are various fuels available to decarbonize the maritime industry and this can be achieved through a combination of slow-steaming, better asset use, efficiency improvements and a massive fuel shift to low and zero carbon fuels such as a) LNG, LPG, PNG, b) hydrogen, ammonia, and other electro-based fuels, c) biofuel and d) electricity for short-sea shipping and port stays.
By 2050, the dominance of oil in the fuel mix will have been displaced by low and zero carbon fuels which will have a combined share of 84% we see that Ammonia will win as the chosen fuel to decarbonize the maritime sector. Natural gas mostly LNG will take a 8% share.
Electrification and offshore wind integration
Our ETO forecasts that European fixed and floating offshore wind capacity will grow from 32 GW in 2023 to around 430 GW in 2050.
One of the biggest challenges with integration of offshore wind is the connection to the onshore electricity grid. For Northern European countries, where offshore wind is feasible because of relatively shallow water depths, the wind capacity will exceed hosting capacity of the substations at the shore, and the grid behind these substations. A large part of this power cannot be transported inland and will need to be absorbed by industry (electric boilers, electric furnaces, heat pumps) in and near ports as a cost-efficient alternative to battery storage to avoid curtailment.
Around the North and Baltic Seas, ports are the natural landing point for the planned capacity of offshore wind. These ports can play a major role in the development of offshore wind activities as they often have strong industrial clusters, which have the potential to offer flexibility that can be used to have a better match with offshore wind electricity production profiles. In addition, many industrial processes make use of hydrogen, which is currently in most cases produced using natural gas. By locating an electrolyser close to large ports, industry would get access to large quantities of green hydrogen, directly produced from wind power.
Port adaption for carbon capture and storage (CCS)
Ports can play an important role in the development of CCS. The North Sea offers a huge potential storage volume for carbon dioxide. By applying carbon dioxide storage offshore in depleted gas fields far from population centres, public support for CCS can be enhanced.
Ports around the North Sea might play an important role as hubs within the carbon dioxide infrastructure. If CCS takes off, they can provide the necessary infrastructure for shipping captured carbon dioxide to empty offshore oil and gas fields. The Port of Rotterdam in the Netherlands, and the Northern Light consortium involving the port of Oslo and Bergen in Norway are already actively involved in CCS. In the UK, the previous government had awarded more than 20 North Sea licences covering an area the size of Yorkshire to 14 companies that plan to store carbon dioxide trapped from heavy industry in depleted oil and gas fields.
How will ports act as a facilitator of the energy transition?
Ports are the arteries of the energy transition and the catalyst for new fuels onboard vessels. They are a natural hotspot for sector coupling and energy system integration as they host many industry sectors, including maritime, oil and gas, cruise-tourism, heavy transport, bulk transfer, manufacturing industries, power generation, electricity grid operators and offshore wind.
All stakeholders have their own key drivers for decarbonization:
- Port authorities are focused on decarbonizing operations and reducing energy costs
- The maritime sector is concerned with meeting regulations, such as emissions and pollution reduction
- Utilities need to provide reliable energy and heat
- Heavy industry needs to electrify its operations to reduce its own carbon footprint.
How can ports be proactive and ready themselves for change?
There are already examples of ports decarbonizing operations and becoming early adopters of low-carbon energy sources.
Case study: Port of Rotterdam
The green hydrogen economy model and its development in the Port of Rotterdam are in the early stages, indicative of the overall immaturity of the green hydrogen economy.
Ports situated near substantial offshore wind farms are more likely to attract green hydrogen producers.
Ports with a substantial industrial presence, including refineries and chemical industries can play pivotal role as initial off-takers for green hydrogen and its derivatives.
Ports like Rotterdam, centrally located in a large natural gas network or near planned hydrogen backbone have the advantage of supplying hydrogen further. Ports lacking connectivity to gas networks may miss out on opportunities to establish themselves as hydrogen hubs.
Case study: Northern Lights Consortium
The Northern Lights Consortium is developing infrastructure to transport CO2 from capture sites by ship to a receiving terminal in western Norway for intermediate storage, before being transported by pipeline for permanent storage in a reservoir 2,600 metres under the seabed.
Carbon capture and storage will play a major role in the Norwegian climate solution and utilizes the ports of Oslo and Bergen to facilitate the shipping of captured carbon.
The Northern Lights project is Norway’s first licence for CO2 storage on the Norwegian Continental Shelf and has enough storage for the equivalent of 750,000 car emissions every year in the first phase.
Policy recommendations
So, what are the policy recommendations to turn ports into frontrunners of the energy transition?
Support investments in hydrogen production through electrolysis at ports
Hydrogen production using renewable electricity from wind and solar will be an important aspect of the future energy ecosystem. Electric opportunity heating requires much lower investments and can outcompete green hydrogen production on the short term. To avoid electric opportunity heating creating a financial lock-in in the long term, green hydrogen production needs to be initially supported.
Ports facilitate the interaction between dispatchable and renewable power generation
The power mix will change fundamentally towards 2050. The new energy system will be defined by renewable sources of energy which will partner with dispatchable power generation, flexibility and infrastructure (incl. hydrogen). The current mix of dispatchable base, mid and peak power will adapt to high percentage of variable renewable power capable of handling the volatility in generation and demand. Ports should be allowed to play an important role in this context as they offer many opportunities for power generation, infrastructure and flexibility to interact in the same location.
Standardize shore power and remove barriers to standards
Some standards for shore power have been established, while more are in process for new technologies. Still these standards are not yet fully accepted. Some suppliers of charging equipment—especially for ferries—do not adhere to it, and instead opt for more automated and tailored solutions to reduce connection time and to save on handling cost. The use of the existing standards and evolution of new standards should be further promoted.
Stimulate electrification of port-connected activities for early movers
The general assumption of most innovative electrification projects designing, developing and testing installations and vehicles powered by electricity, seems to be that these alternatives are well suited for the assigned tasks. Follow-up investments are rarely made because of the high investments in charging infrastructure, initial lack of customers that will use it, and the current limited number of suppliers for equipment (comparable to the EV market 5 to 10 years ago). Interventions like funds for the unprofitable top, buy-back arrangements and accelerated depreciation should be considered to compensate first movers to implement existing, or soon to be available standards.
In conclusion, there are several changes on the horizon which will impact ports. But those making early moves to adapt operations by adopting low-carbon technologies will be the frontrunners in the energy transition and the most attractive in terms of investment moving forward.
Learn more about the role that ports will play as green gateways to markets.
9/4/2024 7:00:00 AM