INTERVIEW: DFDS sees battery, ammonia and methanol as future marine energy

Danish logistics group DFDS plans to raise the proportion of low-carbon energy sources in its bunker mix to meet its climate target by 2030, likely including electricity, methanol and ammonia, CEO Torben Carlsen told S&P Global Commodity Insights.

DFDS, which has aimed to achieve carbon neutrality by 2050, said in its annual report that it burned 818,911 mt of conventional, oil-based marine fuels aside from 1,902 mt biofuels last year.

As part of its decarbonization efforts to meet its interim goal of cutting greenhouse gas emissions from its fleet by 45% by 2030 against 2008 levels, Carlsen said low-carbon energy could make up 10%-15% of DFDS's bunker fuel consumption.

"We will not build another black vessel. we will only build green vessels," Carlsen said in a recent interview. "We are still waiting to see if the first one should be [powered by] ammonia, methanol or battery."

The company operates 65 ships in shortsea operations, including ro-ro, ro-pax ships, ferries and boxships. Of them, six operate between France and the UK and could be powered by batteries in the future, Carlsen said.

"We can electrify some of our investments in the English Channel [as they operate] in short distances," the CEO said in a recent interview, adding that DFDS could also opt for battery-powered ships in the Gibraltar ferry business it is acquiring from FRS.

Ammonia is a zero-emission fuel when produced from renewable hydrogen, but it is highly toxic and corrosive while ammonia-powered marine engines for deepsea trades are not expected to be technically ready by 2025.

Still, DFDS may acquire 2-4 ammonia-capable freight ships via newbuild contracts by 2030, Carlsen said. "There are some safety concerns with the ammonia, but we hope and believe that can be overcome."

DFDS is part of the consortium developing the HOST Power-to-X project at Esbjerg, Denmark, designed to produce 600,000 mt/year of green ammonia from a 1 GW electrolyzer powered by offshore wind from 2028-2029. Its final investment decision is due in 2025.

Methanol potential

DFDS had previously suggested it could operate its first "green ship" by 2025, potentially running on e-methanol, a carbon-neutral fuel.

The timeline might be overly optimistic and the company now hopes to have at least two methanol-capable ships via newbuild or retrofit projects by 2030, Carlsen suggested.

"We simply do not have the e-methanol fuel [in 2025] ... some of the largest container operators are scrambling to hold it," said Carlsen, adding DFDS still saw methanol as a future fuel but at a later date when more volume was available.

Based on the current methanol-capable order book, most of which are containerships, Dutch producer OCI Global expects green methanol demand could expand by more than 6 million mt/year by 2028. Some industry estimates put the current production at 100,000 mt/year.

DFDS has formed partnership with Orsted, SAS, Copenhagen Airports, A.P. Moller-Maersk and DSV to develop the Green fuels for Denmark PtX project in Copenhagen, which could have 300 MW in electrolysis capacity to produce green hydrogen, e-methanol and e-kerosene from by 2028-2029. But Carlsen said the company does not expect to receive any e-methanol from the project by 2025.

"We have eight ships as conversion targets to run on methanol...We'll probably have some newbuild or converted ships for methanol before 2030 when we have the fuel," he said.

In its reference case, S&P Global has expected methanol to make up 34.3% of global low-carbon marine energy sources in 2030, the largest share among them.

Green expenses

DFDS reported group-wide bunker expenses of DKK 4.1 billion ($578 million) in 2022, and the cost was expected to rise during a low-carbon transition as sustainable fuels are more expensive.

Platts, part of S&P Global, assessed the bunker price for very low sulfur fuel oil -- the most common type of marine fuel -- at $609/mt in Rotterdam on Oct. 2. Green methanol would be 4-5 times more costly than VLSFO, according to Carlsen.

To accelerate the uptake of green fuels, Brussels or EU member states probably would need to provide subsidies to producers or long-term consumers, Carlsen suggested.

For example, "if we enter a 10- or 15-year agreement we can get a reduced cost" based on such a scheme, he said.

With the introduction of biofuels to its bunker mix and the deployment of 60 electric trucks to its land transport network by end-June, DFDS has started selling decarbonization certificates -- reviewed by an external auditor -- to customers that want to claim Scope 3 emission cuts.

"Based on actual extra green energy in the system, we try to commercialize this and make sure that customers have access to decarbonization," Carlsen said.

"There is an extra cost, and we sell those certificates to the customers who want to buy them."

While the same mechanism can potentially be used to fund green marine fuels, a wide price gap between e-methanol and VLSFO would make such green freight products uncompetitive, Carlsen said.

"Commercially, you can add 5%, 10%, 15%, [but] you cannot add 100%," he said. "When fuels are five times more expensive, it is not an option to sell those services at this stage."