E-diesel in the shipping sector: Prospects and challenges

E-fuels, in particular e-diesel, will have to play a key role in replacing fossil fuels in shipping and thus promote climate change mitigation in this sector. However, at present, it remains uncertain whether e-diesel will indeed be utilized in the coming years, further adding to the challenge of predicting its availability and usage. Challenges such as inefficiency, high costs, and the absence of a clear policy framework  act as significant barriers to its widespread adoption.

This paper explores the sustainability of e-diesel for the shipping sector, examining factors beyond CO2 emissions, including electricity demands, carbon dioxide sourcing, resource utilization, and socio-economic ramifications. It emphasizes the need for renewable energy sources, closed carbon cycles, and consideration of local demands to ensure the sustainability of e-diesel in mitigating the shipping industry’s environmental footprint. However, many challenges, such as high land requirements, water scarcity and socio-economic considerations, underscore the complexity of transitioning to liquid e-fuels and the need for careful evaluation and international standards.

Examining countries boasting the most competitive costs for photovoltaic (PV) and wind power plants globally, the study reveals fluctuating estimated costs for e-diesel production across identified regions and over time, with the Levelized Cost of Electricity (LCOE) playing a pivotal role. The model developed in this paper underscores the persistently high costs of e-diesel, with projected reductions until 2030 deemed insufficient. Factors such as lower LCOE, technological advancements, and economies of scale are anticipated to contribute to cost reductions, albeit not to a significant extent. Until 2050, costs are projected to remain relatively high, particularly in the pessimistic scenario, while the optimistic scenario presents more favorable outcomes.

Despite the current high production costs and competition from conventional marine diesel, potential catalysts for change, such as policy incentives, present opportunities to reshape the economic landscape of e-diesel. The overall findings emphasize the necessity of government intervention to ensure the economic viability of e-diesel production, advocating for prompt action to support its successful market entry.

However, the current regulatory framework for e-fuels in shipping faces numerous challenges, including uncertainty, inadequacy, and a lack of international coordination. Public skepticism and political obstacles in developing countries further complicate the regulatory landscape. It is essential to recognize that the political role and governmental responsibilities in the shipping sector are intricate, given its international scope. Policy adjustments in this sector carry not only direct but also indirect global repercussions, underscoring the formidable challenge posed by the complexity involved. Acknowledging and addressing these challenges are crucial steps towards fostering a supportive environment for the transition to sustainable marine fuels.

By: Nesrine Souissi