Green ammonia volume analysis

Page 1


Executive Summary

Background Yara Clean Ammonia (YCA) has ambitious plans for the development of green ammonia production at Herøya, with planned production capacity of 400 ktonnes from 2026. To get a better understanding of how the future maritime market for green ammonia can be developed, Maritime CleanTech and Yara Clean Ammonia joined forces to create this roadmap. DNV has delivered the analysis needed as input for the report. The use of DNV and their AIS-analysis method was selected to make the roadmap comparable with other reports evaluating the need for CO2 reductions from domestic shipping. Whilst the maritime industry is developing technical solutions enabling the use of ammonia as a fuel, politicians and industry leaders are debating the economic feasibility of the solutions. The industry is calling for policies which reduce the risk of investing in green production capacity and zero emission ships. Through this roadmap we want to identify how the different instruments being considered will affect the uptake of alternative fuels towards 2030.

2


Summary

Main findings

Through a combination of Maritime CleanTech’s maritime insight, Yara Clean Ammonia’s production experience and the analytic expertise of DNV, this report examines how Norway can speed up the introduction of ammonia as fuel for domestic shipping. This roadmap analyses how regulations, available funding schemes and increased CO2-tax effect the uptake of green ammonia towards 2030. The findings demonstrate that Norway can accelerate the development and use of ammonia-powered vessels, creating a market for green production, bunkering infrastructure, and distribution technologies. In addition, the roadmap describes which enabling mechanisms and technologies are required to develop the demand for green ammonia fuel. Further, the report shares valuable safety knowledge obtained by the process industry, based on over a hundred years of experience. Ongoing pilot projects and initiatives for both bunkering solutions and onboard technology is described, showing the path forward for green ammonia powered vessels.

Based solely on the volume analysis, domestic demand for ammonia towards 2030 varies from close to 1100 ktonnes, to no uptake at all. With the currently committed CO2-tax and emission reduction requirements for defined segments (e.g., the offshore vessel segment and fish farming vessels) we are not able to meet the national target of 50 % reduction in GHG-emission from domestic shipping by 2030.

The report is written by Maritime CleanTech, in close collaboration with Yara Clean Ammonia. DNV has delivered a volume analysis, which can be seen in its entirety in Attachment 1.

Only in the scenarios that include defined requirements for emission reductions, and an incremental increase of CO2 tax up to 2000 NOK/ton in 2030, will we meet the 50 % reduction target set for 2030. By adding investment support, we see that the green ammonia demand is almost four times as high in 2030, compared to a similar scenario without investment support. This also results in a more rapid reduction of CO2 emissions from the considered fleet. Based on the experience from the introduction of battery-hybrids in the offshore vessel segment we have analysed how this segment can take a similar lead in the introduction of alternative fuels. When alternative fuel technology is proven, we may see requirements for zero emission technology from the energy companies/end users. This will lead to a significant uptake of green ammonia and could be an opportunity for Norway to demonstrate how zero emission shipping is possible in large scale. In the analysis the potential emissions reductions from ships in Norwegian domestic traffic vary from 682 ktonnes to 3078 ktonnes, comparing 2030 estimates with a 2005 baseline. As a reference the 50 % reduction target would be approximately 2200 ktonnes using similar (AIS based) numbers. This demonstrates that it is possible for Norway to reach its emission targets, and that with the right mechanism and cooperation between the public- and private sector, Norway can take a leading role in the implementation of green ammonia as fuel.

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Executive Summary in Norwegian

Bakgrunn Yara Clean Ammonia har ambisiøse planer for utviklingen av grønn ammoniakkproduksjon på Herøya, med tiltenkt produksjonskapasitet på 400 ktonn fra år 2026. For å få en bedre forståelse for hvordan det fremtidige markedet for maritim ammoniakk kan utvikles, har Maritime CleanTech og Yara Clean Ammonia gått sammen for å lage dette veikartet. DNV har levert analysen som brukes som bakgrunn for rapporten. Bruken av DNV og deres AIS-baserte analyse ble valgt for å gjøre analysen sammenlignbar med andre rapporter som evaluerer behovet for CO2-reduksjoner fra innenriks skipsfart. Mens den maritime industrien utvikler de teknologiske løsningene som muliggjør bruken av ammoniakk som drivstoff, debatterer politikere og industriledere de økonomiske rammevilkårene. Næringen etterlyser en politikk som reduserer risikoen både ved grønn drivstoffproduksjon og investeringer i nullutslippsfartøy. I denne analysen undersøker vi hvordan rammevilkårene vil påvirke opptaket av alternative drivstoff frem mot 2030.

4


Sammendrag

Hovedfunn

Ved å kombinere Maritime CleanTechs maritime innsikt, Yara Clean Ammonias erfaring med produksjon, og den analytiske ekspertisen til DNV, undersøker denne rapporten hvordan Norge kan akselerere introduksjonen av grønn ammoniakk som drivstoff for innenriks skipsfart.

Basert på volumanalysen varierer opptaket av grønn ammoniakk i 2030 fra nærmere 1100 ktonn til ingen opptak i det hele tatt. Med gjeldende CO2-avgift og krav til utslippsreduksjoner vil vi ikke nå de nasjonale målene om 50 prosent utslippskutt fra skipsfarten innen 2030.

Veikartet analyserer hvordan reguleringer, tilgang på finansieringsordninger, og en øke i CO2-avgift vil påvirke opptaket av grønn ammoniakk frem mot 2030. Funnene viser at Norge kan øke tempoet på utvikling og bruk av ammoniakkdrevne fartøy, og skape et marked for grønn produksjon, tilhørende infrastruktur og distribusjonsteknologier. I tillegg beskriver veikartet hvilke muliggjørende mekanismer og teknologier som kreves for å etablere etterspørsel i markedet. Rapporten deler også verdifull innsikt fra prosessindustriens erfaring med sikkerhet rundt ammoniakk, basert på over hundre år med produksjonserfaring. Pågående pilot-prosjekter og initiativer for bunkringsløsninger og skipsteknologi blir videre beskrevet for å vise hvordan utviklingen av ammoniakkdrevne fartøy ligger an.

Kun i scenarioene som inkluderer skjerpede krav til utslippsreduksjoner, samt en trinnvis økning av CO2-avgiften opp til 2000 NOK/ton i 2030, vil vi møte målet om halverte klimagassutslipp innen 2030. Ved å legge til investeringsstøtte ser vi at etterspørselen etter grønn ammoniakk er nesten fire ganger så høy i 2030, sammenlignet med scenario uten investeringsstøtte. Dette gir også en raskere reduksjon av CO2-utslipp fra den aktuelle flåten.

Rapporten er skrevet av Maritime CleanTech, i tett samarbeid med Yara Clean Ammonia. Volumanalysen er levert av DNV, og kan ses i sin helhet under Vedlegg 1.

Basert på erfaringen fra introduksjonen av batteri-hybride fartøy i offshoresegmentet har vi analysert hvordan dette segmentet kan ta en lignende rolle i innføringen av alternative drivstoff. Når teknologien for alternative drivstoff er tilstrekkelig demonstrert, vil vi trolig se krav til nullutslippsteknologi fra energiselskap og sluttbrukere. Dette vil føre til et betydelig opptak av grønn ammoniakk og kan være en mulighet for Norge til å demonstrere hvordan nullutslipps-skipsfart er mulig i stor skala. I de forskjellige scenariene som er analysert varierer reduksjonene fra 682 ktonn til 3078 ktonn i 2030, sammenlignet med tall fra 2005. For å nå målet om halvering innen 2030 må det kuttes ca. 2200ktonn. Dette viser at det er mulig for Norge å nå sine mål, og at vi med de rette mekanismene og et godt offentlig-privat samarbeid kan ta en ledende rolle innen bruk av grønn ammoniakk som drivstoff.

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Table of Contents 1.

Introduction 11

2.

Ammonia as a zero-emission fuel 12

2.1.

Environmental impact of ammonia 12

2.2.

Fuel comparison 13

3.

Volume analysis 14

3.1.

Scenarios for alternative fuel uptake

4.

Potential CO2 emission reductions 22

5.

Industry insights 28

5.1.

Reference group observations 28

5.2.

Pilot projects and initiatives 30

5.3.

Market demand for sustainability and impacts on shipping

6.

Barriers for implementation 36

6.1.

Bunkering solutions 36

6.2.

Green production volumes 39

7.

Green Ammonia Certificates 40

7.1.

What information needs to be certified?

7.2.

How to certify? 43

7.3.

Certification system operation and verification

7.4.

Certification status and next steps 46

7.5.

Importance of lifecycle analysis for future fuels

8.

Safety considerations 48

8.1.

Basic properties and characteristics of ammonia

8.2.

Human exposure 50

8.3.

Flammability 52

8.4.

Risk management of the chemical production process

52

8.5.

Safety barriers related to bunkering operations

56

8.6.

Ammonia cargo loading 57

9.

Relevant support schemes 60

9.1.

Research support 61

9.2.

Technology development with Norwegian support

62

9.3.

Technology development with European and Nordic support

63

9.4.

Schemes for the operating phase 63

10.

Concluding remarks 64

11.

References 66

16

35

42

46

47

49

Attachments 70

6


Table of Figures Figure 1:

Overview of modelled scenarios [15]

14

Figure 2:

Assumed fuel prices in Norway, with CO2 tax increasing to 2000 NOK/tonne in 2030

16

Figure 3:

Uptake of alternative fuels, Scenario 1

17

Figure 4:

Uptake of alternative fuels, Scenario 2

18

Figure 5:

Uptake of alternative fuels, Scenario 3 [15]

19

Figure 6:

Uptake of alternative fuels, Scenario 4

20

Figure 7:

Uptake of alternative fuels, Scenario 5

21

Figure 8:

CO2 emissions Scenario 1

23

Figure 9:

CO2 emissions Scenario 2

24

Figure 10:

CO2 emissions Scenario 3

25

Figure 11:

CO2 emissions Scenario 4

26

Figure 12:

CO2 emissions Scenario 5

27

Figure 13:

Several ammonia related projects are scheduled to set sail over the coming years

31

Figure 14:

Onshore based bunkering solution from Yara

37

Figure 15:

Floating bunkering solution from Yara

38

Figure 16:

Chain of custody methods

43

Figure 17:

Examples of certifications

35

Figure 18:

Hazard Identification illustration from Yaras HSE system

53

Figure 19:

Layer of Protection Analysis

55

Figure 20:

A complete Process Safety Management System utilized by large scale producer, Yara

55

Figure 21:

Future bunkering solution showing tanks (storage unit), transfer pipelines, and loading arm connected to a vessel

56

Figure 22: Ammonia storage construction, illustrated by Yara

57

Table of Tables Table 1:

Uptake of ammonia per year (ktonnes), Scenario 1

17

Table 2:

Uptake of ammonia per year (ktonnes), Scenario 2

18

Table 3:

Uptake of ammonia per year (ktonnes), Scenario 3

19

Table 4:

Uptake of ammonia per year (ktonnes), Scenario 4

20

Table 5:

Uptake of ammonia per year (ktonnes), Scenario 5

21

Table 6:

Elaborations for four different chain of custody methods

44

Table 7: Exposure guidance 50 Table 8:

Acute Exposure Guideline Levels

51

7


8


Abbreviations AEGL

Acute Exposure Guideline Levels

BECCS Bioenergy with Carbon Capture and Storage CCS

Caron Capture and Storage

CO2

Carbon dioxide

DAC

Direct Air Capture

EPA

Environmental Protection Agency

EU

European Union

GHG

Greenhouse Gas

GHS

Globally Harmonized System of Classification and Labelling of Chemicals

GSP

Green Shipping Program

GT

Gross Tonnage

HFO

Heavy Fuel Oil

ICE

Internal Combustion Engine

IMO

International Maritime Organisation

IPD

Demonstration Project in the Business Sector

IPN

Innovation Project in Industry

IPPC

Intergovernmental Panel on Climate Change

IRENA

International Renewable Energy Agency

LNG

Liquefied Natural Gas

MCT

Maritime CleanTech

MGO

Marine Gasoil

NDA

Non-disclosure agreement

NEZ

Norwegian Economic Zone

NOx

Nitrogen Oxides

NRC

Norwegian Research Council

UN

United Nations

RED

Renewable Energy Directive

R&D

Research & Development

SOx

Sulfur Oxides

TTW

Tank-to-wake

WTT

Well-to-tank

WTW

Well-to-wake

9


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1. Introduction

In august 2021, the Intergovernmental Panel on Climate Change (IPPC) released a much-anticipated climate report. According to UN Secretary-General Antonio Guterres, the report is nothing less than a “code red for humanity”. Whilst many of the changes to our climate were deemed irreversible for centuries, it is still possible to stay within the 1.5-degree target – if we urgently step up our efforts and pressure the most ambitious path [1]. International shipping enables 80 to 90 percent of global trade and makes up about 70 percent of global shipping emissions. If the international shipping sector was a country, it would be the sixth or seventh-largest CO2 emitter in the world, comparable to Germany. Yet, international shipping emissions fall outside national greenhouse gas (GHG) emission accounting frameworks [2]. This means that the shipping sector holds a huge responsibility for taking actions to reduce their emissions. The global shipping industry needs to cut GHG emissions by at least 50 percent by 2050. The International Maritime Organisation (IMO) released this strategy in 2018, where the goals were set to at least a 50 percent reduction compared to 2008 levels whilst working towards phasing out GHG emissions entirely as soon as possible. Another goal is to reduce carbon intensity of international shipping by at least 40 percent within the year 2030 [3].

These goals are in line with Norway’s national goals, and the sustainability goals set by

the Paris Agreement where Norway has agreed to reduce domestic GHG emissions with at least 50 percent by 2030 compared to 1990-levels [4]. By 2050, the Norwegian fleet aims to be carbon neutral. The opportunities for development of new low emission products for the shipping sector is great, and of huge interest due to the size of the market. However, the size and impact that global shipping has on the global economy makes the introduction of alternative fuels demanding. The alternative fuels available have lower volumetric densities than the fossil fuels being used today, meaning that ships will have to carry larger volumes of alternative fuels to travel similar distances at the same speed as they do with fossil fuels today. Increased need for fuel storage space will impact storage capacity of the ships and hence the overall efficiency. Despite some remaining challenges, there is a push from both the Norwegian national government and international governments to increase carbon tax, and to provide financial support for the establishment of value chains and technologies for alternative fuels. This is needed to enable a shift from fossil-based fuels to zero emission alternatives. This report will investigate the potential development for one of the most promising fuels for the future, green ammonia.

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2. Ammonia as a zero-emission fuel Ammonia releases no carbon dioxide when burned. Because of this, and as it is produced from abundant resources, ammonia is gaining favour in the global shipping industry. It can be used both in fuel cells and internal combustion engines. The potential is high, but there is still a need for technology development, infrastructure, and regulatory frameworks to support a large-scale implementation. Meeting both national and international targets on emission reductions will require a swift and widespread transition from fossil fuels to green alternatives. According to IMO, ammonia and hydrogen are predicted to be the leading alternatives to traditional fossil-based fuels by 2050 [5]. In 2019, DNV predicted that ammonia can make up 25 percent of the maritime fuel mix by 2050, where nearly all newbuilt ships run on ammonia from 2044 [6]. Ammonia consists of nitrogen and hydrogen. In 2020, the world produced about 180 million tons of ammonia, of which most was used in fertilizer production.

Yara as a single producer is shipping approximately 20 million tonnes of ammonia by sea per year, and there is established infrastructure for loading, storing, and handling of ammonia in 130 ports around the world. In addition to having been handled in shipping for years, the energy density of ammonia is higher than that of both batteries and hydrogen, making it a strong candidate for long-distance transportation [7].

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2.1. Environmental impact of ammonia

For ammonia to be a clean, zero emission fuel, choice of production method is crucial. Even though ammonia contains no carbon, there are large carbon emissions related to today’s production. To distinguish between the production methods and following emissions, we refer to grey, blue, and green ammonia. Grey ammonia is produced with fossil fuels as raw material, thus emitting large amounts of carbon. Most of the production today is of grey ammonia. Using this method, nitrogen is separated from the air, while hydrogen is produced by reforming natural gas to hydrogen gas and carbon dioxide. Using this process, one ton of ammonia produced will result in 1,6 tons of carbon dioxide emissions [8]. Blue ammonia is produced with the same method as grey ammonia. The difference lies in carbon capture and storage (CCS) during the natural gas reforming. For blue ammonia, 85 to 95 percent of the emissions are captured using natural gas reforming. Thus, the environmental impact of production is lowered substantially [9]. Green ammonia is the only zero-emission alternative. When making green ammonia, hydrogen is produced using renewable electricity. The electricity is then used to separate water to hydrogen and oxygen in electrolysis plants [7].


2.2. Fuel comparison Two strong candidates for replacing fossil fuels are ammonia and hydrogen. Ammonia, which has a large weight fraction of hydrogen, will in liquid form have a volumetric density about 45 percent higher than liquid hydrogen [10]. Ammonia therefore requires less storage space onboard ships, making it more suitable for long distance shipping. It requires smaller tanks and is liquified at a higher temperature than hydrogen – while ammonia is present as a liquid at temperatures below - 33.6 °C, storage of hydrogen as a liquid requires cryogenic temperatures as the boiling point of hydrogen at one atmosphere pressure is -252.8°C. This, along with hydrogens relatively low volumetric energy in compressed form, makes the storage of hydrogen complex. While ammonia can be stored in simpler, less expensive pressure systems, onboard storage systems for hydrogen will be of substantial weight, taking up loading capacity from the ship. This will also affect the delivery and distribution complexity of hydrogen [11]. Another alternative to fossil fuel is biofuels, such as biodiesel. Although biodiesel has similar GHG emissions from combustion as fossil fuels, it is considered climate neutral by the UN Climate Panel. The term climate neutral is used where the calculated amount of carbon released during use is already part of nature’s cycle. Biofuels also face criticism for utilizing a limited resource. While using biomasses that are not useful for other purposes is good resource utilization, there are for example cases where rainforest is cut down to grow more fast-growing plants for fuel, thus making a very negative impact on climate and biodiversity [7]. Methanol is also discussed as an alternative fuel to help reduce GHG emissions. To have a greater impact on the total GHG reduction, methanol needs to be produced from renewable sources. The ideal production method for methanol is green methanol production, which can produce e-methanol and bio-methanol. Green e-methanol is obtained by using CO2 captured from renewable sources (bioenergy with carbon capture and storage [BECCS] and direct air capture [DAC] and green hydrogen, i.e., hydrogen produced with renewable electricity). Bio-methanol is produced using biomass gasification and reformation.

The feedstock for this method is usually forestry and agricultural waste and by-products, biogas from landfill, sewage, municipal solid waste, and black liquor from the pulp and paper industry [12]. With current technology the cost of renewable methanol production is high and production volumes are low [13]. Batteries have zero GHG emissions when used, and they have become a popular alternative in the car industry. Compared to ammonia, batteries have low energy density/weight ratio, making them less suited for vessels with a high energy demand. Batteries are still a good option for certain parts of the maritime industry, such as car ferries that travel shorter distances and can recharge often. The technology is mature and well tested, and several ports are now offering charging infrastructure and onshore-power supplies. Still, today’s available technology makes fully electric vessels less suited for long-distance shipping [7]. An alternative that has been discussed for shipping for years, is Liquefied Natural Gas (LNG). Even though LNG does offer lowered emissions and improvements to air quality, it still has a substantial environmental footprint. This includes emissions of both carbon and other greenhouse gasses such as methane. The GHG reductions of LNG will not be sufficient to reach the GHG reduction targets set by the shipping sector [14].

Based on its characteristics, ammonia has gained a lot of attention as the preferred option among the alternative fuels. This is true especially for vessels with a high-power demand and that travel long distances. The ammonia needs to be produced from renewable energy sources to make sure the life-cycle emissions are meeting the targets set in the Paris agreement. For ships with lower energy demands that can refuel more often, hydrogen can be preferrable over ammonia. 13


3. Volume analysis

To form the basis of both the volume analysis and the potential emission reductions, a preliminary investigation was made by DNV to identify which segments of domestic shipping are potential users of ammonia. Fuel selection for each ship type is determined by the operational profile and sailing pattern.

It is in general acknowledged that battery-electric and compressed hydrogen operation is relevant for short-sea shipping, while liquefied methane, ammonia and methanol is in principle relevant for all types of trades – also deep sea.

Requirement Offshore and aquaculture: 100 % reduction in 2030

Scenario 3

Other. 50 % red. in 2030, 100 % in 2050

Whole fleet: 50 % red. in 2030, 100% red. in 2050

None

Scenario 2

Scenario 5

Scenario 4

No investement support

50 % investment support

Figure 1: Overview of modelled scenarios [15]

14

Scenario 1

Economics


Through use of AIS data, the analysis identifies all sailings between Norwegian ports (including offshore installations), defined as domestic traffic. All ships that are identified to perform at least one domestic sailing in 2020 is included in the further analysis [15]. Analysing future volumes of alternative fuels is a demanding task dependent on numerous factors. In this report, DNV has contributed with a method for calculating uptake of alternative fuels, based on their AIS analysis approach. Five different scenarios have been defined by Maritime Cleantech, Yara Clean Ammonia and DNV to showcase different outcomes based on varied parameter input. By analysing several different scenarios, it is possible to show the effects of both existing and future regulations, economical support schemes, and CO2-tax development. Results for each scenario is presented in subchapter 3.1. For more details on the calculation method and scenario descriptions, see Chapter 4 in the DNV report [15].

The uptake of alternative fuels relies on available technology. Therefore, this is a prerequisite for all the scenarios analysed. Ongoing pilot projects and initiatives from the industry, with support from national and international support schemes, is scheduled to verify the needed technologies in the coming years. This assumption of availability goes for all the fuel types and related technology throughout the analysis. As of today, methanol technology for internal combustion engine’s (ICE) is the most mature technology, but ammonia is continuously gaining more attraction as a viable alternative, potentially available from 2022 [16]. Hydrogen technology is also progressing with both PEM fuel cells and ICE technology. The delivery of PEM fuel cells for Norled’s first hydrogen powered ferry, by fuel cell provider Ballard Power Systems, is an important milestone for the future of hydrogen powered vessels [17]. However, the results from the analysis show that the role of hydrogen will be limited to vessels with lower power demands. Another prerequisite is availability of fuel. The analysis assumes 100

percent availability of all fuels, ignoring potential limitations in available renewable electricity for hydrogen- and ammonia production, access to biomass etc. Although the focus of this report and the presented analysis is on future ammonia demands, all fuel types and technologies are treated neutrally in the analysis, meaning that it is the characteristics and price of the fuel that dictates future uptake.

Resulting, the demand for ammonia towards 2030 varies in the different scenarios from close to 1150 ktonnes in 2030 in Scenario 3, to no uptake at all in Scenario 4 and Scenario 5. Detailed results per scenario are presented in the following subchapter.

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3.1. Scenarios for alternative fuel uptake Results for each scenario is presented below, together with the parameters set to determine the uptake. Figure 2 show the fuel prices used in the analysis. For further elaborations, see the full analysis presented in the DNV memo [15].

Figure 2: Assumed fuel prices in Norway, with CO2 tax increasing to 2000 NOK/tonne in 2030

16


Scenario 1

50 % investment support, 50 % reduction requirement in 2030 • CO2 tax increased to 2000 NOK/ton in 2030 • 50 % Investment support available (assumed available through different support schemes) • Whole fleet required to meet 50 % reduction in 2030, 100 % in 2050

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

0

0

3

40

138

251

498

646

797

1825

1908

1966

Table 1: Uptake of ammonia per year (ktonnes), Scenario 1

Figure 3: Uptake of alternative fuels, Scenario 1 [15]

17


Scenario 2

No investment support, 50 % reduction requirement in 2030 • CO2 tax increased to 2000 NOK/ton in 2030 • No investment support available • Whole fleet required to meet 50 % reduction in 2030, 100 % in 2050

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

0

0

2

5

12

70

131

250

352

826

931

1034

Table 2: Uptake of ammonia per year (ktonnes), Scenario 2 [15]

Figure 4: Uptake of alternative fuels, Scenario 2 [15]

18


Scenario 3

50 % investment support, 100 % reduction requirement for offshore and aquaculture in 2030 • CO2 tax increased to 2000 NOK/ton in 2030 • 50 % Investment support available (through different schemes) • Offshore and aquaculture 100 % reduction requirement by 2030, rest of the fleet 50 % reduction.

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

0

14

120

346

548

804

1134

1220

1305

1972

2018

2073

Table 3: Uptake of ammonia per year (ktonnes), Scenario 3 [15]

Figure 5: Uptake of alternative fuels, Scenario 3 [15]

19


Scenario 4 50 % investment support, no reduction requirement in 2030 • CO2 tax increased to 2000 NOK/ton in 2030 • 50 % Investment support available (through different schemes) • No requirements introduced

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

0

0

0

0

0

0

0

0

0

87

162

361

Table 4: Uptake of ammonia per year (ktonnes), Scenario 4 [15]

Figure 6: Uptake of alternative fuels, Scenario 4 [15]

20


Scenario 5 No investment support, no reduction requirement in 2030 • CO2 tax increased to 2000 NOK/ton in 2030 • No investment support available (meaning reduction from today’s situation) • No emission reduction requirement

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

0

0

0

0

0

0

0

0

0

0

69

102

170

Table 5: Uptake of ammonia per year (ktonnes), Scenario 5 [15]

Figure 7: Uptake of alternative fuels, Scenario 5 [15]

21


4. Potential CO2 emission reductions

To reach the climate goals both on a national and international level, we need to reduce emissions from shipping. An important part of this roadmap has therefore been to investigate the potential CO2 emission reductions following a transition to zero-carbon fuel. Each of the scenarios analysed have the potential to contribute to CO2 emission reductions. The results presented in this chapter do not rely solely on ammonia, but include the uptake of all alternative fuels, including batteries, and the effects of energy efficiency measures. To evaluate whether the estimated scenarios are on-track to meet the target values set for domestic CO2 reductions, we compare the CO2 reductions per scenario with a baseline value from 2005. The baseline value derived is of great value when considering adoption of new regulations, support schemes, and increased CO2 tax necessary to reach the targets of 50 % reduction by 2030 [4].

22


Scenario 1 50 % investment support, 50 % reduction requirement in 2030 The results from Scenario 1 are presented in Figure 8. In this scenario it is estimated a CO2 emission reduction from 4080 ktonnes in 2020 to 1994 k tonnes in 2030. Compared to the reference value of 4440 ktonnes from 2005 we see a reduction of 55 % [15]. This is in line with the national ambitions of 50 % reduction of emissions by 2030 [18].

In this scenario, alternative fuels are accounting for 2/3 of the reductions when comparing 2030 with 2020. After 2032 we see a rapid increase in the contribution from alternative fuels.

Figure 8: CO2 emissions Scenario 1

23


Scenario 2 No investment support, 50 % reduction requirement in 2030 In this scenario it is estimated a CO2 emission reduction from 4080 ktonnes in 2020 to 2112 k tonnes in 2030.Comparing this with the reference value of 4440

Figure 9: CO2 emissions Scenario 2

24

ktonnes from 2005 we see a reduction of 52 % [15]. Like Scenario 1, this is in line with the national ambitions of 50 % reduction by 2030 [18].


Scenario 3 50 % investment support, 100% reduction requirement for offshore and aquaculture in 2030 In this scenario it is estimated a CO2 emission reduction from 4080 ktonnes in 2020 to 1362 ktonnes in 2030.

Comparing this with the reference value of 4440 ktonnes from 2005 we see a reduction of 69 % [15]. This is the only scenario that significantly exceeds the target of 50 % reduction of by 2030 [18].

Figure 10: CO2 emissions Scenario 3

25


Scenario 4 50 % investment support, no reduction requirement in 2030 For Scenario 4 there is a limited uptake of alternative fuels in the period from 2021 to 2030. This results in limited CO2 reductions. The analysis estimates a CO2 emission reduction from 4080 ktonnes in 2020 to 3683 ktonnes in 2030.

Figure 11: CO2 emissions Scenario 4

26

Comparing this with the reference value of 4440 ktonnes from 2005 [15], the decrease is approximately 17 %, far below the national ambitions of 50 % reduction by 2030 [18].


Scenario 5 No investment support, no reduction requirement in 2030 Like Scenario 4, there is a limited uptake of alternative fuels in the period from 2021 to 2030 in Scenario 5. This results in limited CO2 reductions. The analysis estimates a CO2 emission reduction from 4080 ktonnes in 2020 to 3758 ktonnes in 2030.

Comparing this with the reference value of 4440 ktonnes from 2005 [15], the decrease is approximately 15 %, far below the national ambitions of 50 % reduction by 2030 [18].

Figure 12: CO2 emissions Scenario 5

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5. Industry insights

Through its network of approximately 150 cluster partners Maritime CleanTech has established a unique position in the maritime industry. With access to first-hand information on technology development across the entire value-chain, and involvement in several technology projects, the cluster partners are on the forefront of green maritime innovation. Through cluster activities and continuous dialogue with both industrial partners, research institutes, class societies and academia, the Maritime CleanTech community continuously accumulates knowledge of the latest developments within clean energy solutions for the maritime industry.

5.1. Reference group observations For this report a reference group including shipowners, academia, and equipment providers has supplied information about the latest developments within their segment, and their strategies for reduced emissions. In addition, the reference group has provided valuable input to the analysis performed by DNV (attachment 1). Through the industry reference groups contribution both strengths and weaknesses of such an analysis have been identified and the challenges of applying strict mathematical and economical logic to a complex, multidimensional, challenge has been debated.

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In general, the industry insight of each contributor in the reference group is more updated than the knowledge base which is typically used to perform analyses predicting future outcomes. This may be more relevant in a domestic study than what it would have been for an international study of similar sort. The material used by the reference group has not been subject to peer reviews and is not always publicly available. In addition, the reference group has very detailed knowledge of domestic operations within NEZ. However, the reference group consist of industry leaders who share their views and plans for

business development, and as such this is a true reflection of the industry’s future perspectives. We should also note that the views of the same reference group could be different if one had a global perspective on the analysis. Finally, it should also be mentioned that DNV is also a cluster partner, but the views of the reference group have had limited impact on the outcome of the analysis performed since DNV base their calculations on data found in publicly available sources. The main observations from the reference group are summarised below:


• The reference group is in general more optimistic to a rapid development of new technology and the implementation of alternative fuels than what can be found in literature, such as the DNV Maritime Forecast 2050 [6]. This goes both for ICE- and FC technology plus infrastructure such as bunkering networks. It is therefore important for the maritime industry to push for upscaling customer demand for low carbon solutions by working both on the regulatory side and securing incentives for green investment. • Total cost of ownership and potential fuel savings offered by efficient fuel cells are hard to predict in an analysis covering a wide range of vessel types. In the analysis performed by DNV the future uptake of ammonia is based on conversion to ammonia powered ICEs only. The interest seen within the Maritime CleanTech cluster is somewhat contradicting this. There is a lot of interest for FCs amongst ship owners, and there are several pilot projects ongoing with use of both PEM and SOFC’s. Multi-fuel FCs seems highly attractive in the shorter term where investments in new tonnage must be done while availability of alternative fuels is unknown. • To get a better understanding of the actual fuel needs the AIS data should be coupled with operational data for each vessel type/segment. Vessel types operating within aquaculture, bulk and offshore burn a significant part of their fuel during operations which is not captured by the AIS data method. Although the analysis account for some of this consumption it would be valuable to have a better understanding of the actual consumption. • Future fuel price predictions are significant for the results of the analysis, and it illustrates the challenge it is for vessel owners to select “future proof” solutions. • The potential for significant reductions in fuel consumption by shore power connections are still present and could, when realised, impact the selection of fuel type for vessels with operating profiles that includes high energy use while alongside. • Rebuilding of engines to allow use of ammonia fuel is expected to become a significant industry for engine manufacturers and related service providers in the years to come. However, the analysis bases the calculation on replacement of the existing engine. 29


5.2. Pilot projects and initiatives

Several pilot projects are ongoing to verify the technology developed for ships and for bunkering infrastructure. As the pilot projects will deliver results in the coming years, a following commercialisation of the products is needed for Norway to maintain its leading role as a green maritime nation. Such pilot projects are key enabling factors for the commercialisation, as both the

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product owners and the customers need assurance of the viability and performance of such products. This subchapter lists some of the larger projects and initiatives relevant from the fall of 2021 but does not constitute a complete list of all ammonia related projects. As the market is developing fast, more projects are starting to surface. Figure 13 shows a timeline of ongoing pilot projects

Figure 13: Several marine ammonia projects are scheduled to launch over the coming years.


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Wärtsilä and Eidesvik Offshore published the news of their Apollo project in October 2021. Apollo will convert an offshore supply vessel with Wärtsilä’s dual-fuel motors, from primarily using LNG to run on ammonia. The conversion allows a fuel mix of up to 70 percent ammonia, and a similar engine has already successfully been tested with this mix. End goal of the project is to reach a 100 percent ammonia driven propulsion. Completion is set to the end of 2023. Wärtsilä and Eidesvik are also involved in the EU-financed project ShipFC. This project aims to have a large 2 MW ammonia fuel cell retrofitted on the offshore vessel Viking Energy, allowing the ship to sail solely on clean fuel for up to 3 000 hours annually. The fuel cell will be developed by Alma Clean Power, and the green ammonia used for the demonstration will be delivered by Yara. The fuel cell system will be installed late 2023 and is the first MW scale ammonia powered fuel cell to be installed on a vessel. In the ShipFC project, another objective is to perform studies on three other vessel types, namely offshore construction vessels and two deep sea cargo vessels, to illustrate the possibility of technology transfer to other marine segments. In addition, Wärtsilä has teamed up with Grieg Edge to build a green ammonia tanker. In 2020 they received support from the Pilot-E scheme, to realise MS Green Ammonia. MS Green Ammonia will be the world’s first green ammonia fuelled tanker – used to ship green 32

ammonia. This vessel is scheduled to be in service in 2024. Höegh Autoliners is another company investing in the green shift. The company has ordered up to 12 LNG-fuelled ammonia ready vessels. The car and truck carriers ordered are suitable for a retrofit to ammonia or methanol propulsion as soon as the market is deemed ready. Specifically, Höegh ordered two ships for delivery in the second half of 2024, two for delivery in the first half of 2025 and options for eight more vessels [19]. In the NoGAPS (Nordic Green Ammonia Powered Ships) project, a cooperation project with several large partners, the project aim is to pave the way for the first ammonia powered vessels. As a first step, there will be developed a proof of concept on how barriers related to ammonia as a zero-emissions maritime fuel can be overcome. The focus is set on safety and efficiency, steady fuel supply chains, commercial viability, and sustainability. Based on their findings, the collaborating partners will explore the potential of continuing work on an ammonia powered gas carrier, transporting ammonia as a cargo in Northern Europe. The goal is to have produced a detailed ship design for such a vessel by 2023. The Castor Initiative is a joint development project with six major partners: Lloyds Register, MISC Berhad, MAN Energy Solutions, Samsung Heavy Industries, Yara International and the Maritime and Port Authority of Singapore. They

are on track to design, build and commission an ammonia fuelled tanker by 2025, a project that began in January 2020. Ammonia studies have also been made on passenger vessels. Color Line is running an ammonia pilot study within DNV’s Green Shipping Programme. The aim is to run the Wartsila Auxiliary engines on ammonia, or alternatively mix up to 30 % ammonia in the main engines of existing ships Color Magic (2006) and Color Fantasy (2004). In the DEMO2000 project, Wärtsilä have scheduled full-scale testing of a dual-fuel engine running on ammonia in 2022. The testing will take place at Sustainable Energy Norwegian Catapult Centre at Stord, Norway, as a partner in the project. Other project partners for the engine testing are Equinor, Repsol and Knutsen OAS. The aim of the DEMO2000 project is to show that existing Wärtsilä engines can run on the carbon free fuel ammonia, which will lead to significant reductions in marine GHG emissions. A consortium led by Sembcorp Marine has been granted approval in principle by the American Bureau of Shipping for a new ammonia bunkering vessel design. Sembcorp was, along with LMG Marin, responsible for the design phase. This announcement is only one of many; several new ammonia and ammonia-ready bunkering vessel designs are in progress, and more have received the approval in principle [20].


Aside from the pilot projects working on the realisation of specific vessels, there are several other initiatives aiming to speed up the ammonia transition. An example is the international safety project established with partners NYK Line, Lloyds Register, the Maersk Mc-Kinney Moller Centre for Zero Carbon Shipping, A.P. Moeller-Maersk, MAN Energy Solutions, Total and Mitsubishi Heavy Industries in 2021. The purpose of the project was to establish standards for the safe use of ammonia as a maritime fuel. It addresses the issue by carrying out safety assessments involving both the environment, people, and ship assets, through designing a concept ship with ammonia as fuel. In September the same year, the development of a concept design for an ammonia-fuel ready LNG-fuelled vessel was launched. The ship concept is designed as a bridge solution and can use ammonia as a marine fuel once its supply is ready. Another initiative worth noting is the Cargo Owners for Zero Emissions Vessels (COZEV) pledge. This joint statement was signed by nine large companies including Amazon, Ikea, and Unilever in October 2021. The pledge was coordinated by The Aspen Institute, and the aim is to use multinational companies as key actors to catalyse a clean energy transition. All nine companies have signed up to only move cargo on ships using zero-carbon fuel by 2040. A.P. Moeller – Maersk, the Danish owned international integrated

container logistics company, move approximately 20 percent of world trade every day. Similarly, to the COZEV pledge, Maersk announced in January 2022 an adjustment of their 2050 ambition to achieve net zero greenhouse gas emissions. Their new ambition is now to reach this goal by 2040, a decade earlier. In addition, the company set associated 2030 targets to ensure industry-leading green offerings and significant emissions reductions to start this decade [21]. The question of bunkering is often raised when discussing ammonia. ZEEDS, Zero Emission Energy Distribution at Sea, is an initiative that envisions a series of offshore platforms to make zero-emissions fuels available to the shipping industry. ZEEDS was established in 2019, with support from Nordic Innovation and involves core partners Aker Solutions, DFDS, Equinor, Wärtsilä and Grieg Maritime Group. The concept builds on an entire ecosystem of offshore clean fuel production and distribution hubs, spread across the globe. Fuel hubs will be set up next to offshore wind turbines, and energy produced by the turbines can be used to produce hydrogen and ammonia. Ammonia is thought to be saved in seabed tanks, using water pressure to keep the fuel liquid. Distribution is envisioned via EPVs: Energy Providing Vessels. These can be used to bunker the ships, thus moving bunkering activity from ports and busy hubs to sea. It is through the ZEEDS initiative that Wärtsilä and Grieg Edge signed the agreement to cooperate on MS Green Ammonia. 33


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5.3. Market demand for sustainability and impacts on shipping In addition to regulations and investment support, the market effects of sustainability demand from consumers are likely to affect the choice of future fuels for shipping. The concept of green marketing therefore becomes an important part of many corporate strategies. “Green marketing” can be defined as all marketing activities which are responsive to protecting the environment. Green marketing is a response to the public’s growing awareness of the possible effects products and services have on global warming, pollution, and biodiversity. For environmentally conscious consumers, the supplier with the lowest carbon footprint will often be preferred. This is now a growing trend, and many of the recent business initiatives to reduce carbon footprints and general impact on global warming, can be credited to the increased demand from consumers. Such demands are therefore pushing organisations to choose sustainable solutions, along with the government regulations and funding schemes [22]. There are several relevant stakeholders in the maritime industry who can benefit from greener products and services. Several large corporations have strategically included sustainability in their company value proposition. To deliver on this, it will in many cases be needed to greenify not only internal activities and products, but to demand greener solutions from the entire value chain. An example of this is the Cargo Owners for Zero Emissions Vessels pledge. When progressive companies such as Amazon and Ikea commit to only use ocean freight services powered by zero-carbon fuels by 2040, this forces the industry to adapt. Ikea alone stands for approximately 2 million shipments per year, and they have committed to becoming climate positive by 2030.

As only providers of zero-emissions transport will get contracts from these companies in the future, cargo transport providers need to rapidly accelerate their decarbonizing efforts to meet customer demand [23]. It is not only the customers who are demanding reduced emissions from the shipping industry. Up until now, reporting on sustainability has been in a voluntary basis. Due to the new EU taxonomy, and national forces suggesting new laws on a national basis, reporting on sustainability is becoming a requirement [24]. This is pushing ship owners and operators to prioritize sustainability, as new classification systems make it easier to compare climate impact for each company. Comparability will likely affect other companies and investors to determine which suppliers they wish to do business with. Another initiative by environmentally ambitious cargo owners is Viridis Bulk Carriers, a joint venture between Navigare Logistics, Amon Maritime and Mosvolds Rederi. The joint venture will be the world’s first zero emission shipping company. Viridis will develop, build, and operate zero emissions bulk carriers, as well as develop an efficient zero-emissions freight network together with several cargo owners aiming to be in the front of the green shift. Such initiatives demonstrate how progressive cargo owners are eager to reduce emissions and be in forefront of the rules and requirements. Viridis Bulk Carriers expect to place orders for ships during 2022, and deliveries are estimated to start in 2024/25 [25].

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6. Barriers for implementation

For ammonia to become the preferred maritime fuel in Norway, some obstacles remain. While technology development is happening fast, there is a need to adapt new regulations and procedures, and bunkering infrastructure. The following subchapters will introduce the current bunkering situation, and the need for green ammonia volumes. Safety will be discussed in Chapter 8.

6.1. Bunkering solutions While development of technology for ammonia-powered vessels is well on its way, without a bunkering infrastructure in place for supply, the realisation of ammonia-powered vessels will not happen. For the carbon-based fuels like marine gasoil (MGO) and heavy fuel oil (HFO), a worldwide, efficient, and flexible bunkering network exists today, minimizing costs and ensuring continuous supply security. Any new fuel being introduced must quickly be able to offer the same cost-efficiency and supply security. It is likely to believe that this will happen in stages: first in a specific region, for a specific market, and then expanded to a global scale.

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The optimization of supply, demand and related distribution is necessary to reduce the fuel cost for green ammonia, making it competitive with other fuels. The value chain needs to be flexible enough to provide cost-efficient fuel at varying volumes. This is especially important for the economic feasibility of the first ships, as network effects and economies of scale will eventually reduce distribution costs to a minimum as volumes grow. Some of the current barriers to achieve widespread adoption of blue and green ammonia fuel for shipping, firstly in Norway, and then for the world, are related to the surrounding infrastructure. There is a lack of networks for bunkering hubs, resulting in high distribution


costs and weak supply security. In addition, there is a lack of technical solutions, scalability, and operating procedures for ammonia fuel bunkering, including absence of specific standards and rules.

Figure 14: Onshore based bunkering solution from Yara

Today, ammonia is distributed as a fully refrigerated, semi-refrigerated or pressurized liquid. The ammonia bunkering hub will be expected to allow for import and export of ammonia in various thermodynamic states – unlike any ammonia terminal system operating today. This flexibility requires development of new procedures and configurations. Yara Clean Ammonia is currently

involved in development of bunkering solutions and the development is following two separate paths for supply, based on two different use-cases: Onshore-based bunkering solutions are ideal for industrial ports and supply bases, allowing direct ship bunkering alongside the quay, or transfer to a bunkering barge. Larger versions of the system can also function as bunkering storage terminals, serving a fleet of bunkering vessels. The system can receive ammonia from tank trucks, ships, and trains, in compressed, semi-refrigerated or fully refrigerated state.

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The second use-case concerns floating solutions. For floating solutions, an ammonia bunkering barge can be moored in a fixed location, self-propelled or moved by tugs. Floating bunkering solutions are flexible and movable, and thus ideal for the early years of the shift to ammonia fuel, when the first vessels may have to

bring their own fuelling station to their most common ports of call. After that, a floating bunkering solution will retain its flexibility, and will be useful also to bunker ships at anchorage. This system can also receive ammonia from tank trucks, ships, and trains, in compressed, semi-refrigerated or fully refrigerated state.

Yara Clean Ammonia is a partner in the ShipFC project where the goal is to demonstrate operation of a 2 MW fuel cell onboard the PSV Viking Energy. In this project the vessel will need to bunker green ammonia several times per week. In a separate project called “Ammonia Fuel Bunkering Network”, Yara Clean Ammonia

aims to develop and demonstrate a fuel bunkering network for ships. These projects are a testament to the commitment seen not only in the maritime industry, but also on the land-based production and supply side. The demonstration of bunkering solutions is scheduled for 2024 for both ShipFC and the Ammonia Fuel Bunkering Network.

Figure 15: Floating bunkering solution from Yara


6.2. Green production volumes Ammonia production currently relies heavily on fossil fuels, making it an energy-and emissions-intensive industry. As the world’s population is growing, an increase in the demand is expected for agriculture as well as for energy. We will therefore need more ammonia in the future, but with less emissions [26].

Yara Clean Ammonia is established to meet the future needs for green ammonia production. Yara has also established projects for green ammonia production in Pilbara (Australia), and in Sluiskil (Netherlands). For each of these plants different renewable energy sources will be used. At Porsgrunn the available green hydropower will be used, in Pilbara the main power source will be solar, whilst the plant in the Netherlands will be connected to Ørsted’s offshore wind farms.

For near-zero-emission production methods such as electrolysis, methane pyrolysis and CCS, existing and announced projects per 2021 are totalling nearly 8 Mt of blue ammonia production capacity scheduled to come online by 2030. This equals three percent of the total global capacity in 2020. In Norway, several initiatives are targeting green ammonia production. Yara Clean Ammonia’s project to decarbonize and electrify Yara’s Porsgrunn plant will have a production capacity of approximately 400 000-tons green ammonia per year from 2026. A necessary requirement for the project is the availability of renewable electricity on site.

Access to clean energy and sufficient grid capacity is crucial for all production of green ammonia. A report from IRENA finds that announced projects for renewable ammonia will total 17 Mt of ammonia per year by 2030 – around 9 percent of the current global ammonia production of around 183 Mt produced per year. Such a finding denotes important momentum in the industry in moving towards scaling-up renewable ammonia production [2].

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7. Green Ammonia Certificates

As the difference of the environmental footprint of ammonia varies largely from green, blue, and grey ammonia, the need to verify its state and origin becomes essential. It is in this regard that the topic of certification often arises in the context of ammonia. As certification is a means of providing proof of compliance, it can be an important tool to ensure origin identity. Yara Clean Ammonia is developing an internal clean ammonia certification scheme to substantiate specific claims of their ammonia produced. Examples of such claims include the color of the product, the specific carbon footprint, and compliance with different standards and schemes. A critical element is to ensure that sustainability characteristics and GHG emission savings can be assigned to individual physical batches of ammonia, and that the amount of clean ammonia sold does not exceed the amount of clean ammonia produced and sourced. Yara Clean Ammonia has therefore engaged DNV to help design internal procedures and tools to ensure the integrity of its certification system and to ensure that the information mentioned in the previous chapter can be documented and audited.

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The need for substantiating such claims is even more important given that customers of ammonia currently have no way of telling the difference between grey, blue, or green ammonia. All industrial ammonia, regardless of its carbon footprint, is physically and chemically the same. There is no test with which to independently distinguish one production-color from the other. In today’s market, any producer can to a certain degree make marketing claims about the ammonia they sell without certification. The question is then how to prove that a particular batch of ammonia is clean, especially when such batches might be traded, blended, transported, and stored in various ways throughout the supply chain.


For Yara Clean Ammonia’s production, the aim is to provide customers with transparent, traceable, and complete information. This will be provided through GHG accounting methods, outlining the carbon footprint and origin of the ammonia delivery. There are several reasons for doing this: • Trust in the ammonia’s clean attributes is likely to be an essential part of the value proposition for many customers. Without sufficient credibility, customers likely won’t be willing to pay the premium price of clean ammonia, or they will buy a competitive product instead. • Certification will be required for complying with obligations placed on renewable fuel suppliers and consumers in the EU, and likely also in other regions in the future. • Certification can be required to qualify for public funding for capital investment projects in clean hydrogen and ammonia. • Certification can be important for the customers of Yara Clean Ammonia’s customers, e.g., for disclosure of Environmental, Social and Governance (ESG) data or for complying with regulations.

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7.1. What information needs to be certified? In general, there are three categories of information that are important to include in a clean fuel certificate: 1. Environmental attributes of the product, such as: o Product carbon footprint (x tCO2/tNH3) o Production technology utilized (e.g., electrolysis with renewable electricity) o Geographical origin of the energy and the raw materials 2. How the product attributes have been preserved throughout each step in the supply chain: o Details on how traceability is ensured through the chain of custody 3. How the information is verified and how the certification system complies with specific standards: o Details on how the scheme is operated, audited, and reported o What standards and methods were followed to collect, calculate, and report the information The next subchapter will briefly explain how each of these types of information will be collected and reported.

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7.2. How to certify? When it comes to clean ammonia’s environmental attributes, most of the effort goes into calculating the carbon footprint. There are several widely used standards for this, such as ISO 14067. Last released in 2018, this standard specifies principles, requirements and guidelines for the quantification and reporting of the carbon footprint of a product, in a manner consistent with international standards on life cycle assessment (ISO 14040 and ISO 14044) [27]. One of the main challenges with the concept of carbon footprint is that there is no single, globally harmonized, robust way to calculate this. This is because different actors use for example different methodologies, different life-cycle boundaries, different data sources and conversion factors. There is currently a lot of work going on, at country level, regional level, and industry level to reach consensus on a common standard, for clean hydrogen and its derivatives such as ammonia.

Regarding the chain of custody, every element of a supply chain for clean ammonia will have to provide evidence of compliance with the sustainability and GHG emissions saving criteria of a particular standard or regulation. For fuels sold on the European market, the Renewable Energy Directive (often referred to as RED II) is an important example of such regulations. Compliance will typically require certification of every step in the supply chain. To ensure that all the relevant product properties and related sustainability characteristics are forwarded through the supply chain to the customer of the fuel, adequate traceability and chain of custody measures are required. Traceability describes the ability to identify and trace the origin, processing history, distribution and location of products and materials through supply chains. Traceability includes the requirement to be able to physically trace products and materials through supply

chains but also to be able to tell what products are made of and how they have been processed. ‘Chain of custody’ is a general term for the process of transferring, monitoring, and controlling inputs and outputs, and related specific information as they move through the supply chain. This provides credibility that a given batch of material or product is associated with a set of specific characteristics, and that the information on the specific characteristics linked to the material or product is transferred, monitored, and controlled throughout the supply chain. There are in general four different chain of custody methods available. These are illustrated in Figure 16, from the white paper “Enabling a Circular Economy for Chemicals with the Mass Balance Approach” by co. project Mass Balance [28].

Figure 16: Chain of custody methods [28] 43


These methods are further elaborated in Table 6.

Model

Principle

Example

Identity preservation

It is possible to physically track the product to its desired origin, ensuring unique traceability and physical separation of products from other sources along the supply chain.

Buying food from a single certified farm.

Segregation

Consists in the aggregation of volumes of products of identical origin or produced according to the same standards in one stock item.

Buying food from a trader that exclusively handles identically certified supplies.

Mass balance

Considering the output, no physical or chemical difference exists between in-scope and out-of-scope. It involves balancing volume reconciliation to ensure the exact account of volumes of in- and out-of-scope source is maintained along the supply chain, provided that the volume or the ratio of sustainable material integrated is reflected in the product produced and sold to customers. This model requires that a reconciliation period is defined (e.g., a month, a year).

Buying a certain percentage of a supply from certified origin. Applies to, e.g., sustainable forestry, recycled, bio-based or renewable materials, aluminum, organic cotton.

Book and claim – certificate trading

The certified product / component is completely disconnected from the certification data. The certified product evolves in separate flows from the certified supply. Credits or certificates are issued at the beginning of the supply chain by an independent body reflecting the sustainable content of supplies. The intended outcome is that outputs from one supply chain is associated with total credit claims corresponding to the certified input.

Buying renewable energy certificates offsetting GHG emission by equivalent agroforestry CO2 capture certificates.

Table 6: Elaborations for four different chain of custody methods [28]

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Yara Clean Ammonia is currently reviewing which chain of custody, or combination of chains of custody, is best suited for the certification of its future clean ammonia supply chain. One of the main challenges in common fuel supplier supply chains is that of co-processing: the simultaneous, common processing of clean and fossil inputs. While customers in general may prefer segregation or even identity preservation chains of custody, this would in practice, in the case of ammonia, result in duplicating most of the supply chain infrastructure and logistics to create physically separated streams. Doing so will be prohibitively costly and will significantly increase the price of clean ammonia. Therefore, Yara Clean Ammonia will very likely turn to a mass balance and/or book & claim chain of custody. Mass balance and book & claim chains of custody are not new or unique to Yara Clean Ammonia. They are used in several sectors such as tea, cocoa, timber, sugar, electricity, and biofuels. Examples of known certifications schemes are presented in the figure below.

Figure 17: Examples of certifications

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7.3. Certification system operation and verification The third pillar of a certification system concerns the governance of the system. This involves information about how the system is operated, how it is audited, by whom, how frequently, to what standards, methodologies and what data sources are used. The goal is to enable customers to understand and evaluate what processes were followed to substantiate the claims on the certificate. It’s important that any claims the certificate or its users make are clear, relevant, and can be checked. They enable customers to make informed purchasing choices. The scope and design of the certification system should be accurately reflected in any claims, ensuring these are not misleading. Certification governance is often a part of the above-mentioned global effort to define standards for clean hydrogen and ammonia.

7.4. Certification status and next steps Yara Clean Ammonia’s program to design and implement a clean ammonia certification system has kicked off in 2021 and will continue into 2022. One part of the program focuses on designing and implementing internal procedures and tools for the product attributes and chain of custody. The other part focuses on contributing to clear and robust industry standards for clean hydrogen and ammonia, and a credible international governance system. This work is always done in collaboration with large groups of external stakeholders. There are several such initiatives, for example by the Ammonia Energy Association, the Green Hydrogen Organisation, CertifHy, the EU’s RED II and Australia’s Smart Energy Council. The timelines of these initiatives are mostly still undefined, but first results are expected in 2022. Both parts of Yara Clean Ammonia’s certification program depend on each other and progress in parallel.

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7.5. Importance of lifecycle analysis for future fuels To get a full overview of the environmental footprint from each future fuel under considerations, there needs to be a common standard for which emissions analysis to use. A lifecycle analysis refers to the assessment of GHG emissions from the entire lifecycle of the fuel. This includes emissions related to every stage, from production until usage onboard the vessel, and is often referred to as a Well-To-Wake analysis (WTW) [30]. The WTW emissions equals the sum of upstream, Well-To-Tank (WTT) and downstream, Tank-To-Wake (TTW) emissions. By including GHGs such as methane and nitrous oxide, and not focusing solely on the carbon dioxide emissions, a life cycle analysis will make it harder for regulators to ignore the overall climate pollution from maritime transport [31]. Still, there are many actors in the industry that argue for the sole use of a carbon intensity or a TTW analysis to be the standard. The TTW approach includes emissions from when the fuel is burned directly from the tank. It therefore ignores the origin of the fuel, thus allowing for ship owners to sail for example on grey ammonia, whilst claiming to be non-polluting for sailing on a zero-emissions fuel. This means a clear misrepresentation of the total climate impact, and a potential misleading of both customers and decision makers.

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8. Safety considerations

Most alternative fuels have chemical and physical properties which generate more severe safety challenges and requires a more complex fuel containment system than conventional fuel oils. Additional safety barriers are required to maintain the safety level, and each alternative fuel has its unique properties and associated hazards that requires special considerations. For ammonia, toxicity is the main issue, but also flammability and lowered temperatures need to be considered. With an increased production and use of ammonia, one must consider all potential risks and their impact on public safety. Identification- and transfer of inherent knowledge within the process industry is crucial to succeed with safe and rapid implementation of ammonia as fuel. The active role Yara is taking in projects such as ShipFC is important to facilitate for knowledge transfer and execution of safe pilot projects. The following sections are written in close collaboration with Yara, addressing some of the key safety considerations for ammonia as fuel.

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8.1. Basic properties and characteristics of ammonia

When developing security measures for handling ammonia, it is fundamental to have an understating of its main properties and chemical characteristics. Ammonia is transported in the liquid state; therefore, it must either be compressed or refrigerated, or some combination of the two. Fully refrigerated ammonia storage tanks contain liquid at -33 °C at atmospheric pressure, while fully pressurised tanks are designed for 18 bar which corresponds to the ammonia vapour pressure at 45 °C. Under atmospheric temperature and pressure, ammonia is a colourless, toxic gas with a strong and pungent odour. Ammonia is

hygroscopic, which means that it has a high affinity for water, and dissolves easily in water to form ammonium hydroxide (NH4OH), a caustic solution and weak base. In its pure form, ammonia is referred to as anhydrous (“without water”) ammonia.

ammonia will be spilled partly as vapor and partly as a boiling liquid, which will spread over the ground whilst evaporating. Initially the cloud is cold and heavy, but gradually, while dispersing and drifting with the wind, it heats up and becomes buoyant [32].

In gaseous form ammonia is lighter than air. However, due to its hygroscopic properties, relase of anhydrous ammonia will create a visible white vapour cloud due to absorption of, and reaction with, the moisture in the air. This cloud may have a higher density than air. Upon catastrophic rupture of a tank and release, the anhydrous

The most critical property to control is the toxicity. Since ammonia vapors are lighter than air, and a certain level of concentration must be reached for it to be harmful for people, the greatest risk of harm is to employees and workers exposed to high concentrations and standing closest to the release.

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8.2. Human exposure Human exposure limits for ammonia are defined by legislation and is typically a function of concentration and exposure time. An exposure guidance is presented in Table 7, displaying the effects of concentration levels.

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Effect

Ammonia concentration in air (by volume)

Readily detectable odor

20-50 ppm

No impairment of health for prolonged exposure

50-100 ppm

Severe irritation of eyes, ears, nose, and throat. No lasting effect on short exposure

50-100 ppm

Dangerous, less than ½ hours of exposure may be fatal

2,000-3,000 ppm

Serious edema, strangulation, asphyxia, rapidly fatal

5,000-10,000 ppm

Table 7: Exposure guidance [33]


The limits to ammonia exposure can be defined as presented in Table 8. This is based on Acute Exposure Guideline levels (AEGL) for airborne chemicals, developed by the Environmental Protection Agency (EPA) [34].

Table 8: Acute Exposure Guideline Levels [34]

Ammonia 7664-41-7 Expressed in ppm

10 min

30 min

60 min

4h

8h

AEGL 1

30

30

30

30

30

AEGL 2

220

220

160

110

110

AEGL 3

2700

1600

1100

550

390

AEGL 1: Notable discomfort, irritation, or certain asymptomatic non-sensory effect. However, the effects are not disabling and are transient and reversible upon cessation of exposure.

AEGL 2: Irreversible or other serious, long-lasting adverse health effect or an impaired ability to escape.

The odour of ammonia is well known in general society, as it is often used for cleansing. All-purpose household ammonia cleaners’ range in concentration from five to ten percent ammonia. Its production and use can be considered routine, owing to a century of accumulated industry knowledge. Since anhydrous ammonia is hydroscopic, it will seek water from the nearest source, including the

AEGL 3: Life-threatening health effects or death.

human body, causing potential caustic burns. Areas like skin, lungs and eyes are exposed to greatest risk due to their high moisture content. Most deaths from anhydrous ammonia accidents are caused by severe damage to the lungs and throat from a direct blast to the face. Another concern is the low boiling point of anhydrous ammonia. The chemical freezes on skin contact at room temperature and will cause burns like those caused by dry ice, but more severe [35].

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8.3. Flammability In regards of flammability, ammonia is flammable, but hard to ignite. Outdoors, ammonia vapors will generally not constitute a fire hazard. Indoors, in confined areas, the risk of ignition will be higher, especially if oil and other combustible materials are present. Ammonia can generate moderate explosions. Yet, the explosivity window is narrower than with other fuels, the activation energy required is far greater, and the consequences of a cloud ignition are relatively mild and without a critical pressure wave. For example, the front flame speed for ammonia combustion is approximately 0,07

m/s while hydrogen can reach between 1,5 and 2 m/s. Pressure vessels used for storage of ammonia may explode when exposed to high heat input. There have been cases of this caused by overfilling, or by fires that has spread from other locations on the vessel. Ammonia has alkaline properties and is corrosive. It will corrode galvanized metals, cast iron, copper, brass or copper alloys. Inherent safe design choices in for example construction materials or welded flanges can drastically reduce possible exposure.

8.4. Risk management of the chemical production process

By volume, ammonia is in the top five of chemicals produced and used worldwide. It has been handled for more than a century, in tens of thousands of locations spread across the globe. Large accidents related to releases are still rare, and amongst those that have occurred, most would have been prevented had the correct safety designs and handling processes been utilized.

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To guarantee safe handling, ammonia industries have put in place strong chemical process risk management systems. Risk management is a continuous process, guaranteeing that control measures are efficiently implemented throughout the complete asset lifecycle. It is initiated by a Hazard Identification exercise, the so called HAZID, illustrated in Figure 18. Supported by various methodologies control measures are defined to bring the residual risk to an acceptable level. The most important principle applied when defining these control measures is their hierarchy in terms of efficiency, maximizing the highly efficient ones:


HAZID High efficency Elimination

Substitution / Reduction (of the hazard)

Engineer Control (safe job analysis)

Risk assessment

Risk Management

(of the hazard)

Administrative controls PPE

Low efficency

Figure 18: Hazard Identification illustration from Yaras HSE system 53


This principle is mainly applied during the LOPA exercise: Layer of Protection Analysis. Here, each layer, independent from each other, is acting one after the other to first guarantee that the ammonia will remain in the pipe. In case it doesn’t, the layers are designed to mitigate the exposure consequence to people and environment. An illustration of the analysis is presented in Figure 19: Layer of Protection Analysis.

As emphasized, chemical process risk management is a continuous process. Once the asset is built, multiple systems must be put in place to guarantee the asset operation will remain as safe as it was initially, over time. The complete process safety management system utilized by Yara, as a large-scale ammonia producer, is illustrated in Figure 20.

As deliverables from their project phase, the Standard Operating Procedures and Maintenance/Inspection Procedures are defined. These procedures must be formally integrated to the way of working for all those handling ammonia: including training, work permitting, change control, emergency preparedness and operational discipline. An important follow up to these procedures involves the implementation of regular controls. For Yara, a thorough incident management process coupled with key performance metrics and comprehensive audit practices, are implemented to ensure efficient learning and continuous improvement, completing this “classic” Plan Do Check Act - approach.

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6. Emergency response

5. Physical protection system

Migration

4. Safety system 3. Alarms and operatior corrective action

Prevention

2. basic process control system

1. Design

Figure 19: Layer of Protection Analysis [36]

Figure 20: A complete Process Safety Management System utilized by large scale producer, Yara 55


8.5. Safety barriers related to bunkering operations In this subchapter, we draw on the experience made by Yara with ammonia loading of chemical tankers. In general, all efforts must be made to avoid any release of ammonia vapors during the bunkering process. Typically, but not exclusively, a bunkering installation will consist of three main components: The ammonia storage unit, the transfer pipeline going from storage to loading, and the loading arm or hose.

Figure 21: Future bunkering solution showing tanks (storage unit), transfer pipelines, and loading arm connected to a vessel

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8.6. Ammonia cargo loading Regarding the storage unit, the most recent constructions are double integrity with the inner shell in steel and the outer shell in concrete, as illustrated in Figure 22 . The ammonia is transferred by use of a “submerged pump” with wheels at the bottom of the tank, long shaft, and the driving engine on the roof.

Multiple systems are designed to guarantee a constant pressure within the tank, as redundant boil of gas compressors and redundant pressure relief valves. Excess gasses are collected and routed to flare or scrubber systems.

Figure 22: Ammonia storage construction, illustrated by Yara

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In most cases the storage area is fenced with restricted access. No combustible material nor circulation is allowed within a certain radius. Various detection systems are located at strategic locations to ensure safe storage of the chemicalas. For the transfer pipeline, the number of flanges is minimized and depending on the length and size of the pipe, Yara has applied multiple sectioning with automatic isolation valves to minimize the release quantity in case of a failure. Shock protections are implemented depending on the pipeline exposure. In some cases, the pipeline is buried. The complete length of the pipeline is monitored with optical fibre to detect and locate the smallest leak. Regular inspections are performed to ensure pipeline integrity during the entire lifetime of the materials. Regarding the loading arm or hose, the design is made with materials rated for ammonia service, capable of retaining adequate strength even in cold conditions. Multiple conditions are monitored during the bunkering operation and set up to trigger automatic transfer shut down in case of ship movement, high pressure on the receiver side, low pressure on the feeding side etc. In addition to having quick release coupling, isolation valves are located as close as possible to the loading point, again to minimize the released quantity in case of a leak.

Bunkering operations are constantly monitored with a redundant supervision in direct communication. During the bunkering operation, one tends to minimize simultaneous operations as far as possible. Safety zones with restricted access are defined and set up with clear visibility. All personnel handling the chemicals must be specifically trained to work with a chemical process in ammonia service. For ships using ammonia as fuel, additional crew training will be required. People involved in the bunkering operations should be equipped with Personal protective Equipment (PPE) to protect them from exposure to anhydrous ammonia. The protective clothing and equipment should cover all skin so that no part of the body is unprotected. Emergency procedures are developed to mitigate the potential consequence of ammonia leakages. These range from rapid and localized interventions with recondensation kits or water curtains, to confinement in gas tight room and/or evacuation procedures.

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9. Relevant support schemes

For certain actors in the maritime industry to transition to zero-emission fuels such as ammonia, financial support may be necessary. Support from the public funding schemes requires a high level of innovation. For the Norwegian support schemes, seeing potential for global export that can follow their support of pilot development in Norway is of high importance. Depending on the level of innovation in the solutions that are chosen for implementation of greener fuels, different parts of the Norwegian and European support schemes can be potential partners for part-financing initial costs and reducing project risks. In addition to the level of innovation, zero emission fuel projects also have other societal benefits that should be considered. The societal impacts of replacing fossil fuels in the maritime industry with greener options such as ammonia include cleaner air when air pollution is reduced and help to reach the climate goals when emissions are reduced.

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A large-scale implementation of ammonia can showcase how the Norwegian maritime industry is a leader in green technology, and the massive export potential that follows such technology development projects is a key societal benefit. In the following subchapter potential partners from the Norwegian funding schemes are introduced. The “jungle of funding schemes” is an ever-changing landscape, where one must expect both new calls and financial possibilities to emerge in the coming years, both on the Norwegian and the European level.


9.1. Research support The Norwegian Research Council (NRC) invests in research and innovation through different portfolios. For green fuel related projects, the Energy, Transport, and Low Emissions portfolio is highly relevant. This portfolio works to ensure that the energy and transport sectors deliver sustainable, smart, and secure solutions, technologies, and services, that cities and urban regions are inclusive, adaptable and attractive to live in, and that we as citizens and social actors take climate and environmentally friendly choices that reduce pressure on biodiversity. Degree of financial support differs from the different calls for proposals. For projects to be eligible for support from the NRC the application must be made by research institutions, in collaboration with industry actors. A relevant funding scheme for large scale, innovative industry projects is the “Innovation Project for the Industrial Sector 2022 (IPN)” call. Total funding for this scheme is 1,27 billion NOK, and the call is aimed at companies engaged in business-led innovation projects where research and development (R&D) is a critical part of the innovation process. The innovation

project must lead to renewal and sustainable value creation for the participating partners, working together to develop sustainable innovations. It must also secure socio-economic benefits by making new knowledge and new solutions available. Relevant subjects are both ocean, energy, transport, and low emission solutions. The “Demonstration Project for the Industrial Sector (IPD) 2022” call from the Research Council aims to strengthen the business community’s own commitment to demonstrating new technology for applications with high socio-economic benefits. Such projects should contribute to securing Norwegian expertise, jobs, value creation and a competitive industry. Subjects relevant for this call also includes ocean, energy, transport, and low emission solution, making it relevant for several projects in the ammonia value chain. Presumed total amount of available funding is 120 million NOK, with a funding scale ranging from one to 16 million per project.

include the “Knowledge-building Project for Industry” and “Collaborative Project to Meet Societal and Industry-related Challenges” calls. The purpose of these is to develop knowledge and generate research competence needed by society or the business sector to address important societal challenges. It is also possible to apply for an Industrial PhD Scheme for Doctoral Projects in Industry, to boost research efforts and long-term competence building. In addition, the NRC offers the “SkatteFUNN” R&D tax incentive scheme. This is a government program designed to stimulate research and development (R&D) in Norwegian trade and industry. The incentive is a tax credit and comes in the form of a possible deduction from a company’s payable corporate tax. All branches of industry and all types of companies can apply for support from the SkatteFUNN Tax Incentive Scheme. To be eligible to apply for SkatteFUNN, the company must seek to develop a new or improved product, service, or production process through a dedicated R&D project. The project must generate new knowledge, skills, and capabilities within the company.

Other relevant calls related to energy, transport and low emissions

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9.2. Technology development with Norwegian support Technology suppliers who participate in the development of new projects related to green fuels are candidates for technology development schemes by Innovation Norway. For cooperation projects, up to 45 percent of the development costs can be covered for small businesses, 35 percent for medium sized and 25 percent for larger corporations. This will for example be relevant for yards and technology suppliers when developing new technologies for vessels. The requirement for this kind of support is that the level of innovation is high, and that new and improved environmental technology must be developed in the project. Innovation Norway also offer advisory on innovation and development, as well as financing. Another provider of public finance schemes in Norway is Enova, who is owned by the Ministry of Climate and Environment. They aim to contribute to reducing GHG emissions and aid the development of energy and climate technology. Enova can contribute to businesses who start using new, climate friendly technologies, and invest more than 3 billion NOK in this each year. Enova also help

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in the development of new pilot projects. This is for projects where one needs to develop technology that is not currently available in the market, as for example ammonia powered fuel cell technology for shipping. Relevant calls from Enova include “Piloting new energy- and climate technology”, “Demonstration of new energy- and climate technology” and “Full scale innovative energy-and climate technology”. These calls aim to help projects where one wants to start using new climate friendly technology, and to help mitigate risk and costs for those who are first to market. A criterium for Enova support is for the applicant to be registered in the Norwegian Business Register, and to have economic activity in Norway. Pilot-E is a funding scheme to Norwegian business and industry, established in cooperation between the Norwegian Research Council, Innovation Norway, and Enova. The objective of the scheme is to promote more rapid development and deployment of new, environment-friendly energy technology products and services to help reduce emissions both in

Norway and internationally. Calls for proposals under the Pilot-E scheme are targeted towards specific societal challenges, and the scheme is a good fit for larger consortia that address complex challenges ranging from research activity to commercial realization. Pilot-E is designed to follow up participants throughout the entire technology development pathway – from concept to market. Similarly, the NRC, Innovation Norway and Siva will together mange the funds of the Green Platform Initiative. First launched in 2020, The Green Platform Initiative was part of the Government’s third package of financial measures launched in response to the coronavirus pandemic. The Government then granted NOK 1 billion over a period of three years to a green transition of the industrial sector. This initiative is to stimulate bigger and more rapid investments in green sustainable solutions and products, and a new call is expected in 2022.


9.3. Technology development with European and Nordic support European support schemes can also be relevant for projects aiming to move from fossil fuels to green alternatives. In the new Horizon Europe-program, one of the main subjects are cluster 5, “Climate, Energy and Mobility”. When applying for financial funding from the European Union (EU), a project must be developed with a larger consortium of European partners. The level of support obtainable is

high, with up to 100 percent cover for public actors and 60 percent for private actors. During the work with applications, Norwegian participants are offered up to 500 000 NOK (PES Scheme) in support from the NRC. Utilizing this support scheme, one must often take a longer course of project development into account. Maritime Cleantech’s EU-advisor assist cluster members in finding

relevant calls consortiums.

and

European

There are also Nordic programs that support research and innovation projects with Nordic partners. Nordic Energy Research is a specific program that regularly announces (normally during spring) support for maritime transport and energy projects.

9.4. Schemes for the operating phase The Norwegian public finance scheme system does not part-finance the operation for realized vessels. The EUs Innovation Fund on the other hand, does. In relations to maritime projects, this fund can support up to 60 percent of operational cost for demonstration of innovative

use of low-carbon energy carriers. Enova can offer support for the application process for this EU scheme. Contracts for difference (CFD) is currently being considered as a support scheme by the Norwegian government. While the industry is pushing for a rapid introduction

of CFDs the government is still requiring more time to evaluate whether CFDs will be introduced, and how they can be installed in the most effective way. Based on this CFDs is not considered in the scenario analysis performed by DNV.

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10. Concluding remarks

Meeting both national and international targets on emission reductions will require a swift and widespread transition from fossil fuels to green alternatives. Amongst the alternative fuel candidates, ammonia is quickly gaining favour. The ongoing pilot projects both on the production side, and onboard vessels, show that green ammonia is enroute to become commercially available in the coming years. However, availability alone is not enough. The solutions need to be commercially attractive if the needed uptake of green fuels can happen before 2030. Current policies are not sufficient to reach the ambitious national targets set. Moving forward, increasingly stringent regulations need to be adapted, along with the already suggested increase in CO2-tax. If Norway is to take a leading role in the introduction of low, and zero emission shipping, cooperation between the government and different parts of the value chain is crucial. To trigger investments in increased production capacity for green fuels, such as green ammonia, risk reducing measures need to be in place. The current price gap between conventional fuels and green alternatives is too large. This can be mitigated either through increased investment support or by stimulating the demand side through regulations. Through introduction of battery-hybrids in the offshore segment we have seen how proven technology quickly can become the new industry standard. This segment may be able to take a similar lead in the introduction of alternative fuels. The scenario with the most rapid introduction of green fuels is seen in our scenario 3, which is set up to show what happens if the offshore segment becomes zero emission by 2030. This

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approach triggers green fuel demand from 2025 with rapid increase up to 1134 ktonnes in 2030, resulting in significant and quickly decreasing CO2 emissions from the domestic fleet. Emission reductions vary from 15 percent in the lowest scenario, to 69 percent in the highest scenario. All scenarios assume full availability of all fuel types, and the needed technology. These assumptions are considered realistic by the industry reference group. Based on these findings it is now a matter of introducing the correct policies to put Norway on the map as the frontrunner in the green maritime shift. Another interesting find is the gap in optimism between the industry outlook and the economic calculations. Whilst the calculations by DNV set strict financial requirements to rule decision making, it appears that market drivers such as sustainability and climate ambitions weigh heavier for the maritime industry partners. The industry is already launching several pilot projects aiming to demonstrate ammonia as a fuel with related technologies, long before they are considered profitable in the analysis. In conclusions, we see that the national climate goals are within reach. Yet, the maritime industry will not reach these targets on its own. It will also require collaboration with other industries, like we see in Yara’s green ammonia initiative at Herøya, to build complete new green value chains. We need government incentives to support the industry’s optimistic outlook on technology and infrastructure if Norway is going to become a global leader within green ammonia production and use.


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11. References

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[11] U.S. Office of Energy Efficiency and Renewable Energy, “energy.gov,” [Online]. Available: https://www. energy.gov/eere/fuelcells/hydrogen-storage-basics-0. [Accessed 2021]. [12] IRENA, “Innovation outlook: Renewable methanol,” IRENA, Abu Dhabi, 2021. [13] International Renewable Energy Agency (IRENA), “Innovation Outlook: Renewable Methanol,” 2021. [Online]. Available: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2021/Jan/IRENA_Innovation_ Renewable_Methanol_2021.pdf. [Accessed December 2021]. [14] The Natural Resources Defence Council , “Sailing to nowhere: Liquefied natural gas is not an effective climate strategy,” NRDC, December 2020. [15] DNV, “Ammonia Demand Analysis - SCENARIOS FOR AMMONIA DEMAND IN NORWEGIAN DOMESTIC SHIPPING,” DNV, 2022. [16] Hyrdogen24.no, “Hydrogen24.no,” Februar 2022. [Online]. Available: https://hydrogen24.no/2022/02/04/ verdens-forste-gronne-ammoniakk-skipsmotor-blir-klar-for-salg-i-2022/. [17] Teknisk Ukeblad, “Tu.no,” Februar 2022. [Online]. Available: https://www.tu.no/artikler/brenselcellene-til-hydrogenfergen-mf-hydra-er-levert/517110. [18] Klima- og miljødepartementet, “Regjeringens handlingsplan for grønn skipsfart,” 2019. [19] Höegh Autoliners, “Höegh accelerates decarbonisation with new industry leading vessels,” 22 June 2021. [Online]. Available: https://www.hoeghautoliners.com/news-and-media/news-and-press-releases/hoegh-accelerates-decarbonisation-with-new-industry-leading-vessels. [Accessed 31 January 2022]. [20] Ammonia Energy Association, “Sembcorp Marine granted AiP for ammonia bunkering vessel,” 20 January 2022. [Online]. Available: https://www.ammoniaenergy.org/articles/sembcorp-marine-granted-aip-for-ammonia-bunkering-vessel/?mc_cid=5dbcda1d43&mc_eid=72d8d50232. [Accessed 02 February 2022]. [21] Maersk , “A.P. Moller - Maersk accelerates Net Zero emission targets to 2040 and sets milestone 2030 targets,” 12 January 2022. [Online]. Available: https://www.maersk.com/news/articles/2022/01/12/apmm-accelerates-net-zero-emission-targets-to-2040-and-sets-milestone-2030-targets. [Accessed 01 February 2022].

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[22] A. McConnell, “Environmentalism and Social Impact of the Green Marketing Strategy,” Sacred Heart University , 2021. [23] IKEA, “Zero-emission fuels for ocean shipping,” October 2021. [Online]. Available: https://about.ikea.com/ en/newsroom/2021/10/18/zero-emission-fuels-for-ocean-shipping. [Accessed December 2021]. [24] Norwegian Shipowners Association, “Krav om rapportering på bærekraft og taksonomi - hva betyr det for maritim næring?,” January 2021. [Online]. Available: https://rederi.no/aktuelt/2021/krav-om-rapportering-pabarekraft-og-taksonomi--hva-betyr-det-for-maritim-naring/. . [Accessed December 2021]. [25] Viridis Bulk Carriers AS, “Viridis Bulk Carriers: the World’s first zero emission shipping company,” [Online]. Available: https://www.viridisbulkcarriers.no/. [Accessed December 2021]. [26] IEA - International Energy Agency, “Ammonia Technology Roadmap,” https://www.iea.org/reports/ammonia-technology-roadmap, Paris, 2021. [27] International Organization for Standardization, “Iso.org,” [Online]. Available: https://www.iso.org/home.html. [Accessed 2021]. [28] Co.Project Mass Blance, “Enabling a circular economy for chemicals with the mass balance approach,” Ellen MacArthur Foundation. [29] International Sustainability & Carbon Certification (ISCC), “ISCC.com,” 2021. [Online]. Available: https:// www.iscc-system.org/ce100-whitepaper-enabling-a-circular-economy-for-chemicals-with-the-mass-balance-approach/. [30] Hellenic Shipping News worldwide, “What is well-to-wake emissions analysis?,” International Shipping News, 06 June 2021. [31] International Council on Clean Transport (ICC), “Accounting for well-to-wake carbon dioxide equivalent emissions in maritime transportation climate policies,” ICC, 2021. [32] H. Pasman, Risk Analysis and Control for Industrial Processes - Gas, Oil and Chemicals, Butterworth-Heinemann 2015, 2015.

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[33] A. Karabeyoglu and B. Evans, “NH3 Fuel Association: Fuel Conditioning System for Ammonia-Fired Power Plants,” October 2012. [Online]. Available: https://nh3fuelassociation.org/wp-content/up-loads/2012/10/evans-brian.pdf. [Accessed December 2021]. [34] United States Environmnetal Protection Agency (EPA), “Acute Exposure Guideline Levels for Airborne Chemicals,” August 2021. [Online]. Available: https://www.epa.gov/aegl. [Accessed December 2021]. [35] C. V. Schwab and M. M. L. Hanna, “Play it Safe with Anhydrous Ammonia,” Iowa State University, 1993. [36] International Electrotechnical Commission (IEC), “IEC 61511-1:2016: Functional safety - Safety instrumented systems for the process industry sector - Part 1: Framework, definitions, system, hardware and application programming requirements”. [37] International Maritime Organization, “Cutting GHG emissions from shipping - 10 years of mandatory rules,” 2021. [Online]. Available: https://www.imo.org/en/MediaCentre/PressBriefings/Pages/DecadeOfGHGAction. aspx. [38] IMO, “Fourth IMO GHG Study,” IMO, London, 2020. [39] International Renewable Energy Agency (IRENA), “Navigating the way to a renewable future: Solutions to decarbonise shipping,” IRENA , September 2019. [40] A. Nygaard, “Grønn markedsføringsledelse,- om bærekraftig entreprenørskap, strategi og markedsføring,” Magma, May 2019. [41] D. Arseculeratne and R. Yazdanifard, “How Green Marketing Can Create a Sustainable Competitive Advantage for a Business,” International Business Research, January 2014. [42] United Nations New York and Geneva, 2011, “Globally Harmonized System of Classification and Labelling of Chemicals (GHS),” 2011. [Online]. Available: https://www.unece.org/fileadmin/DAM/trans/danger/publi/ghs/ ghs_rev04/English/ST-SG-AC10-30-Rev4e.pdf. [Accessed December 2021]. [43] DNV, “Oppfølging av handlingsplan for grønn skipsfart. Forbedring av omstillingsbarometer.,” DNV, 2020.

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Attachments

Attachment 1: DNV 2022: SCENARIOS FOR AMMONIA DEMAND IN NORWEGIAN DOMESTIC SHIPPING

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Memo to:

Memo No:

Final version

Tore Boge, NCE Maritime CleanTech

From:

Environment Advisory

Christian Berg, Yara Clean Ammonia

Date:

February 17, 2022

Prep. By:

Nikolai Hydle Rivedal, Magnus Strandmyr Eide

SCENARIOS FOR AMMONIA DEMAND IN NORWEGIAN DOMESTIC SHIPPING

1

INTRODUCTION

Norway has a goal to reduce the CO2 emissions from domestic shipping and fishing with 50 % within 2030, compared to 2005. This implies a reduction from 3194 ktonnes in 2005 to around 1600 ktonnes in 2030. In 2020, the official emission of CO2 equivalents was 3710 ktonnes1. Hence, there is an urge to quickly reduce energy consumption and phase in carbon-neutral fuels in large parts of the fleet to meet emission reduction targets. There are also strong international drivers for the decarbonization of shipping, such as the ambitions and measures proposed by the IMO2 and the EU.3 Both national and international ambitions and measures implemented to meet the ambitions will affect the fleet of ships engaged in Norwegian domestic shipping. Carbon-neutral ammonia is one of the fuels that can be part of the solution to decarbonize shipping. NCE Maritime CleanTech and Yara Clean Ammonia are therefore preparing a roadmap to showcase the potential use of ammonia in Norwegian domestic shipping. As part of this work, DNV has been engaged to perform an analysis of scenarios for carbon-neutral ammonia demand towards 2030 and beyond. The analysis shall break down the fleet in segments, describe the fleet composition of ships engaged in Norwegian domestic shipping, and give a high-level evaluation of the technology development, costs, policy measures, and other drivers that may affect the uptake of ammonia and other fuels in the fleet. The results will be used along with NCE Maritime CleanTech and Yara Clean Ammonia’s own evaluations. This memo describes the ammonia demand analysis and its findings. In chapter 2, the current fleet, its energy use and emissions is described. A description of conventional and alternative marine fuels is given in chapter 3, including a discussion on technology development and technical aspects relevant for ammonia. The modelling of scenarios is presented in chapter 4, and a summary of the ammonia demand in the various scenarios is provided in chapter 4.4, together with a discussion on the findings.

1 Time series for the official emissions from domestic shipping and fishing is found at SSB web pages: https://www.ssb.no/statbank/table/08940/ 2 https://www.imo.org/en/MediaCentre/HotTopics/Pages/Reducing-greenhouse-gas-emissions-from-ships.aspx 3 https://www.dnv.com/news/fit-for-55-new-eu-ghg-regulations-for-ships-coming-soon-208746

DNV Headquarters, Veritasveien 1, P.O.Box 300, 1322 Høvik, Norway. Tel: +47 67 57 99 00. www.dnv.com Memo – Scenarios of Ammonia Demand in Norwegian Domestic Shipping

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2

CURRENT FLEET, ENERGY USE AND CO2 EMISSIONS

This chapter describes the current fleet of ships in domestic traffic in Norway, its estimated energy use and CO 2 emissions. The analysis of the current fleet forms the basis for the scenario analysis.

2.1

Method: AIS analysis

DNV’s model MASTER4 uses AIS data (e.g. positions and speed of individual ships) coupled with data from the ship register (e.g. engine power, ship type and ship size) to estimate the energy consumption and emissions of ships. The method was developed in the 2000s (DNV, 2008) and has been further developed throughout the years. The AIS based approach uses the speed in time as recorded by AIS data to estimate the fuel consumption, using engine power data from the ship register. The AIS based MASTER model estimate of fuel consumption gives good match with reported fuel consumption for ships that have the majority of their consumption during transit, i.e. where the utilized engine power correlates well with the speed of the ship. For ships that can have a high engine load also at low or zero speed – such as for instance offshore ships in operation by an offshore installation or a fishing vessel in operation at a fishing field – the MASTER model can under-predict the fuel consumption. For zero speed operation at sea or in port, only assumed auxiliary engine fuel consumption is estimated.5 However, AIS-based analysis remains the best available tool when the aim is analyze emission reduction potentials of a large fleet, for which operational characteristics and fuel consumption data on ship level is typically not available from other sources. Therefore, the MASTER based fuel consumption and emissions data forms the basis for several analyses of emissions and emission reduction potentials both in Norwegian and international waters (DNV, 2008; DNV GL, 2014; DNV GL, 2019; DNV GL, 2020; DNV, 2021). It is referred to these reports for further description of the method and its application. In the present work, AIS data for 2020 for Norwegian waters has been used, as this is the latest complete year of data available. The overall effect of the COVID-19 pandemic on the ship activity seems to be limited. The total number of unique ships and the calculated total distance sailed by ships in Norwegian waters in 2020 is similar to previous years. The dataset of 2020 can therefore be considered representative for a typical year, although the effects of the pandemic are significant for certain segments, such as passenger vessels (cruiseships in particular). The MASTER model calculates energy consumption for all ships with an IMO number for which AIS data is available. Hence, the analysis excludes smaller ships - typically passenger vessels below 100 GT (gross tonnage) and other vessels below 300 GT. However, the majority of ships constituting the Norwegian domestic emissions are included. Through the AIS analysis, we identify all sailings between Norwegian ports (including offshore installations), defined as domestic traffic. All ships that are identified to perform at least one domestic sailing in 2020 is included in the further analysis.

2.2

Description of Current Fleet engaged in Norwegian domestic trade

The analysis shows that 3602 unique ships were in Norwegian domestic traffic in 2020. This is similar to the number of ships with domestic sailing in previous years. However, most of these ships spent more time outside of Norwegian waters than within. To distinguish ships based on time in Norwegian waters (defined as Norwegian Economic Zone; NEZ), the 3602 ships are distributed within the following NEZ traffic categories: •

0-20 % of registered global AIS time in 2020 is in NEZ; a total of 1473 ships

20-80 % of registered global AIS time in 2020 is in NEZ; a total of 747 ships

80 % or more of registered global AIS time in 2020 is in NEZ; a total of 1382 ships

4 Mapping of Ship Traffic, Emissions and Reduction Potentials 5 The AIS based approach uses the speed in time recorded by AIS data to estimate the fuel consumption, by assuming that the utilized main engine power is

proportional to the third power of the speed. In addition, typical auxiliary engine power is used both when the ship is moving and at rest. (DNV, 2008)

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The number of ships vs time in NEZ is shown in Figure 2-1.

Figure 2-1 Number of ships in domestic traffic, divided into NEZ ratio categories (left) and percentage of time in NEZ for each ship, sorted by descending percentage (right)

The fleet is further categorized by ship type and ship size. Figure 2-2 shows the number of ships in domestic traffic distributed among ship types and time in NEZ. Especially the cargo and bulk segments are dominated by ships spending much time outside of Norwegian waters, while most car ferries and passenger vessels primarily operate within NEZ. The aquaculture segment comprises primarily live fish carriers and large workboats, while smaller service vessels operating on the aquaculture installations are not included in the AIS data. The offshore segment offshore work ships like supply, support, and anchor handling vessels. Rigs, floaters etc. are not included in the data material, as AIS based calculations are not suitable for floaters performing the majority of their work while not in transit. Ships transporting gas or crude oil are included in the wet and dry bulk segment, performing more international sailing. The segment other vessels include miscellaneous ships like tugs, research survey vessels and patrol vessels. The ships are further divided into size categories, shown in Table 2-1 for 80- % and Table 2-2 for all.

Figure 2-2 Number of ships distributed among ship types and time in NEZ

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Table 2-1 Number of ships in domestic traffic, with at least 80 % of time in NEZ 1-1000

1000-

5000-

10000-

25000-

Ship type

GT

5000 GT

10000 GT

25000 GT

50000 GT

Aquaculture

34

58

Car ferry

119

115

20

Cargo ships

51

54

1

Fishing

267

111

Offshore

14

91

32

5

Other vessels

177

23

12

5

Passenger

129

5

3

12

3

13

8

4

6

1

1

33

804

465

72

30

5

6

1382

50000- GT

Total 92 254

2

1

109 378

vessels 5

147 217 152

vessels Wet and dry bulk Total

Table 2-2 Number of ships in domestic traffic 500001-1000

1000-

5000-

10000-

25000-

100000

100000-

Ship type

GT

5000 GT

10000 GT

25000 GT

50000 GT

GT

GT

Aquaculture

46

99

7

Car ferry

120

119

22

12

6

Cargo ships

63

595

159

47

8

vessels

679

282

8

Offshore

34

166

93

37

244

57

22

15

138

8

3

5

11

2

1

168

bulk

19

127

61

131

53

74

16

481

Total

1343

1453

375

247

82

85

17

3602

Total 152 281

2

872

Fishing 969 4

341

7

Other vessels

338

Passenger vessels Wet and dry

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2.3

Energy use and CO2 emissions

A total CO2 emission of 4080 ktonnes is calculated for domestic traffic in 2020. For comparison, the total global emission for the 3602 ships is around 19 500 ktonnes, reflecting the fact that many larger ships constituting only a little part of the domestic emissions (0-20 %) are primarily in global traffic. This is shown in Figure 2-3.

Figure 2-3 Global emissions (left) and Norwegian domestic emissions (right), distributed within NEZ traffic categories

The domestic CO2 emissions distributed among ship type and NEZ traffic categories is shown in Figure 2-4. The offshore segment constitutes the largest part of emissions, followed by fishing vessels. Ferries and passenger vessels are the segments with the most of emissions from ships in the 80- % category. The 2020 figure for these segments is most likely affected by the Covid-19 pandemic, but these segments are less important to this analysis since batteryelectrification and to some degree hydrogen is more relevant to decarbonize these. The electrification of ferries has already played a role in reducing their emissions compared to previous years. From the above it is clear that ships primarily operating in Norwegian waters (80- % NEZ category) contribute the most to total domestic fuel consumption and emissions. In Table 2-3, the total annual fuel consumption for this set of ships is shown per type and size category, both in total for each size category and on average per ship type. The average fuel consumption per ship is established by dividing the total fuel consumption by the number of ships within each ship type in Table 2-1. Obviously, the actual fuel consumption for a specific ship depends largely on the size of the ship. Also, for illustration purposes, the amount of ammonia required if the total consumption per ship type should hypothetically be covered by ammonia is shown in the rightmost column.6

6 Here is used LHV of 42.7 GJ/tonne used for MGO, and 18.65 GJ/tonne for ammonia, with same converter efficiency assumed. If some of this would be converted by

fuel cell system, the amount would be lower, due to the higher efficiency of the fuel cell. All ships are assumed technically suitable for ammonia use, and 100 % of MGO consumption is assumed replaced by ammonia. These are strictly hypothetical assumptions, as elaborated on in the following sections.

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Figure 2-4 Domestic CO2 emissions (ktonnes), distributed by ship type and NEZ traffic category Table 2-3 Total annual fuel consumption (MGO equivalents) for ships spending 80 % or more of their time in NEZ (hypothetical ammonia consumption given by ktonnes ammonia) Average fuel

Hypothetical

Total fuel

consumption

ammonia

1000-

5000-

10000-

25000-

50000-

consumption

per ship

consumption

1-1000

5000

10000

25000

50000

100000

(ktonnes

(tonnes MGO

(ktonnes)

Ship type

GT

GT

GT

GT

GT

GT

MGO eq.)

eq.)

Aquaculture

6

64

70

761

160

Car ferry

18

63

89

170

671

390

Cargo ships

7

48

3

61

559

139

Fishing

54

160

214

565

489

Offshore

3

119

108

14

271

1845

621

Other

35

21

20

10

85

394

196

45

2

11

61

123

809

282

40

19

14

14

6

92

2803

212

208

495

245

102

33

1087

787

2489

3

vessels

27

vessels Passenger

4

vessels Wet and dry bulk Total

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The different ship types operate differently when it comes to ports or other geographical locations they sail between. Among the 80- % in NEZ ships, offshore ships on average are found to visit 14 unique locations (including offshore installations) during a year, while wet and dry bulk ships visit 24 ports, and cargo ships 31 different ports during a year. Most of the energy use both for offshore and wet and dry bulk ships is from voyages departing from a fairly low number of ports, as illustrated in Figure 2-5. Figure 2-6 shows the same picture for passenger and ferry, fishing vessels and aquaculture and other ships. Although not used directly in the scenario analysis of ammonia demand, the potential implications of this operational pattern is discussed in chapter 4.4.

Figure 2-5 Total energy consumption for voyages departing from Norwegian ports/locations to another, for offshore vessels (upper), cargo ships (center) and wet and dry bulk ships (lower) with 80- % of time in NEZ. The ports are ordered by total energy consumption, such that “Other ports” include a multiple of ports each with lower energy consumption than the top 20, indicated by their name. Offshore installations are here included as a port/location.

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Figure 2-6 Total energy consumption for voyages departing from Norwegian ports/locations to another, for passenger vessels and ferry (upper), fishing vessels (center) and aquaculture and other ships (lower) with 80- % of time in NEZ. The ports are ordered by total energy consumption, such that “Other ports” include a multiple of ports each with lower energy consumption than the top 20, indicated by their name. Offshore installations are here included as a port/location.

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3

CONVENTIONAL AND ALTERNATIVE MARINE FUELS

This chapter first provides a very brief overview of marine fuels, and then describes the potential use of ammonia as a marine fuel in more depth.

3.1

Short Overview

Figure 3-1 shows selected fuels and technologies for use in ships. This overview does not include all possible options; a further description of marine alternative fuels and onboard technologies is given for example by previous versions of DNV’s Maritime Forecast to 2050 (DNV GL, 2020c). The conventional fuels are MGO (marine gas oil) and LNG (liquefied natural gas). These both have their drop-in options, which can be biofuel (e.g. HVO or LBG) or carbon-based electro-fuels (e-MGO and e-LNG). The most widely used zero-emission technology is the use of electricity from grid stored in batteries on board (battery-electric), with the potential of leading to fully electric operation primarily of ferries and smaller passenger vessels. Liquefied methane onboard technology is mature, but in principle more complex than methanol and ammonia technology, especially due to the required fuel storage in cryogenic tanks (Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, 2021). Although the onboard fuel storage and handling technology of ammonia may be less complex than that of liquefied methane and considerably less complex than that of compressed or liquefied hydrogen, there still are challenges related to safety and other aspects that need to be solved (Green Shipping Programme, et al., 2021). Also, the piloting of ammonia as fuel on ships has not yet been realized in practice, but is soon to come. Most ships with alternative fuel capabilities have a dual fuel setup. This implies that a dual fuel engine capable of combusting both liquid and gas fuel is used, and the ship has both conventional fuel tanks and an alternative fuel tank. This is also the case for battery-powered ferries; the vast majority of them have redundant diesel system on board. The relative production complexity of hydrogen-based fuels varies. Pure carbon-neutral hydrogen can be produced by electrolysis or from natural gas with CCS (carbon capture and storage). Carbon-neutral ammonia or methanol can be produced by the further processing of this hydrogen. It is worth noticing that for the e-methanol to be considered carbonneutral in a lifecycle perspective, a carbon-neutral CO2 source is required, i.e. the CO2 needs to be sequestrated from biomass or direct air capture.

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Fuel Supply Fuel Oil

Battery-electric

Liq. Methane Hydrogen

Ammonia

e-Methanol

Onboard technology

MGO: Fossil fuel 0-MGO: Carbon-neutral drop-in fuel, such as HVO (advanced biodiesel) or e-MGO

Conventional engine (ICE) Conventional fuel tank and handling system

Electricity from grid

Energy storage in batteries, el. Converters

LNG: Fossil fuel 0-LNG: Caron-neutral drop-in fuel, such as LBG or e-LNG

ICE or FC Cryogenic tanks and gas handling system

Electrolysis with renewable energy SMR with CCS

ICE or FC Special gas tanks – compressed or cryogenic - gas handling system

Hydrogen with nitrogen synthesis

ICE or FC Tanks for liquid, pressurized and/or refrigerated, gas handling system

Green hydrogen with methanol synthesis, requiring CO2 source

ICE or FC Standard tanks with minor modifications, special piping

Figure 3-1 Overview of selected marine fuels/energy carriers and technologies (ICE – mono or dual fuel internal combustion engine; FC – fuel cell; SMR – steam methane reforming; CCS – carbon capture and storage)

3.2

Potential Use of Ammonia

The use of ammonia is currently evaluated by ship owners as one of the relevant options to obtain decarbonization for their ships, and it is in various analyses of decarbonization of shipping often argued to become one of the dominant fuels in shipping’s future energy mix (UMAS, 2021; DNV, 2020; Transport & Environment, 2018). Ammonia may technically be applied as a fuel in both ICEs and FCs. As far as FCs are concerned, ammonia may be consumed directly in high-temperature fuel cells such as SOFCs, or after being cracked into hydrogen and purified for traces of ammonia for use in low-temperature fuel cells such as PEMFCs. No ammonia-fueled propulsion systems are currently available on the market. However, major work is carried out by engine developers to make the technology ready for market. Notably, the engine manufacturer MAN ES is developing a concept for applying ammonia as a fuel in two-stroke dual fuel engines, to be commercially available in 20248. Wärtsilä aims at having an engine running fueled purely by ammonia by 20239. Research efforts are being made with respect to the application of ammonia in FCs. The first ammonia projects on selected ships will according to plans be in operation before 2025, and the same applies for hydrogen ships. Methanol used in ICEs is already relatively mature for several ship types. For fleet-wide application, we assume ammonia, hydrogen and methanol technology to be commercially available for all ship types from 2025. This is based on evaluations in DNV’s Maritime Forecast to 2050 (2021) and used as a basis in the modelling in chapter 4. A short status of current development and piloting of technologies is given below.

Current Projects The Getting to Zero Coalition gives a comprehensive overview of maritime zero emission projects and highlights that while only four ammonia projects for ships above 5000 DWT were initiated before 2020, 10 new projects have since 8 https://www.man-es.com/discover/two-stroke-ammonia-engine 9 https://www.argusmedia.com/en/news/2234110-wartsila-targets-ammoniaready-engine-in-2023

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started (Getting to Zero Coalition, 2021). There are quite a few ammonia initiatives announced in Norway. In 2024, the world’s first tanker running on green ammonia is planned to be launched 10. Viridis Bulk Carriers have ambition to place newbuild orders in 2022, with deliveries from 202411. An important development project for the use of ammonia fuel cells is the ShipFC project, aiming at installing the world’s first high-power ammonia fuel cell on the offshore vessel Viking Energy by 202312. Also, ammonia combustion engine from Wärtsilä is also planned to be installed on another Eidesvik offshore supply vessel retrofit by late 202313. These dates supports that 2024 may be the year of the first demonstration ship (cf. ). Also, there are multiple ammonia pilots initiated under the Green Shipping Programme14.

Technical challenges There are technical challenges that need to be considered when designing a ship to operate on ammonia, hydrogen, or methanol. In this chapter, we briefly discuss some of these, focusing on ammonia. It should be noted that many similar issues and challenges were of concern and solved during the introduction of LNG as a ship fuel from the 2000s and onwards. First, all these fuel options have lower volumetric energy density (units of energy per volume) than conventional fuel oil (diesel/MGO), as shown in Figure 3-. This lower volumetric energy density implies that more space on board needs to be allocated for storage of fuel to store the same amount of energy, compared to conventional fuels. Alternatively, the ship will have to be designed with a lower sailing range per tank bunkering. With reduced energy storage density it will also be important to reduce fuel consumption as far as possible, by speed reduction, implementation of energy efficiency measures etc.

Figure 3-2 Volumetric energy density of alternative fuels15, including tank system (LH2 – liquefied hydrogen gas, CH2 – compressed hydrogen gas, NH3 - ammonia) (MariGreen, 2018).

As described in the above chapter, the fuels can be utilized on fuel cells (FC) or internal combustion engines (ICE). The latter can be either mono fuel or dual fuel ICE. Although minor amounts of some of these fuels can be mixed into some conventional diesel engines (blend-in), specific ammonia, hydrogen or methanol engines need to be used for any significant amounts of fuel. Conversion kits will be available for some engines, that may be retrofitted for use with ammonia16, but in general most ships need to be built with new engines. Even if blend-in may seem like an attractive 10 https://www.griegstar.com/grieg-and-wartsila-to-build-groundbreaking-green-ammonia-tanker/ 11 https://www.viridisbulkcarriers.no/fleet-technology

https://www.oceanhywaycluster.no/news/viridis-bulk-carriers-zero-emission-on-ammonia

12 https://shipfc.eu/ 13 https://www.marinelog.com/offshore/eidesvik-and-wartsila-to-retrofit-osv-for-ammonia-fueling/

14 https://grontskipsfartsprogram.no/pilotprosjekter/ 15 The higher efficiency of battery-electric operation (higher energy output than ICE) is reflected in the number for battery in the figure. If fuel cell applications are used

for one of these fuels, the volumetric density in terms of energy output for that fuel would be relatively higher than shown in the figure.

16 https://www.wartsila.com/media/news/15-05-2020-flexibility-key-to-enabling-shipping-s-transition-to-future-fuels-2823479

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solution for lowering the carbon footprint of existing vessels, this is not a straight-forward option due to the regulatory implications and requirements to the vessels’ fuel supply and storage systems. Since ammonia is a gas at ambient pressure and temperature, the use of ammonia will require separate fuel tanks and fuel handling systems in addition to the traditional diesel system. Ammonia is a low-flashpoint fuel, and its application in ICE typically requires a certain amount of diesel as pilot fuel, injected into the combustion chamber to ensure proper combustion. An alternative for ammonia is to crack some of the ammonia into hydrogen and use this hydrogen as pilot fuel. Further technology development will however be needed for this option to become viable. Safety is a key barrier for the use of ammonia as fuel. The experience on ammonia stored on board ships is limited to carriage of ammonia as cargo in gas tankers and as a refrigerant (e.g. on fishing vessels), but not as a fuel. The toxicity of ammonia creates new challenges related to bunkering, storage, and handling on board. However, concentration needs to be of some 1000s ppm to be fatal, and the risk increases with exposure time17 and is highest indoor and close to the source.18 International regulations on ammonia as fuel have not been developed. DNV issued class rules for ammonia as fuel in July 2021 to support owners, shipyards, and designers in their consideration of ammonia as fuel. This is contrary to hydrogen, for which prescriptive rules / class rules are not expected in the near future. A further description of safety aspects of ammonia can be found in an ammonia safety handbook issued in 2021 (Green Shipping Programme, 2021). To obtain acceptance from the flag state for the use of ammonia as fuel, the shipowner in practice needs to go through an alternative design process as per IMO Circ. 145519 and carry out a risk analysis to demonstrate that the risk is equivalent to that of a conventional diesel driven ship. The flag state can choose to accept class rules (as exists for ammonia) as a substitute to an alternative design process. Although safety issues and implications for design can be solved on a case-by-case basis in the early projects, general guidelines and rules will most likely be needed to be in place before widespread use of ammonia or hydrogen as fuel for ships can be realized. Some newbuilds today are built as fuel ready ships. Fuel ready is a new DNV class notation which indicates that a newbuild has accommodated a conversion to an alternative fuel, i.e. that the ship is partly prepared for later conversion to one or more alternative fuels (DNV, 2021). Some ammonia ready designs have already been developed and approved.20

17 https://www.ncbi.nlm.nih.gov/books/NBK546677/ 18 https://www.helsebiblioteket.no/forgiftninger/aktuelt/ammoniakk-fra-uhell-med-vaskemiddel-til-alvorlige-ulykker-med-potensielt-dodelig-utgang 19 https://www.imorules.com/MSCCIRC_1455.html 20 https://www.ammoniaenergy.org/articles/maritime-sector-is-set-to-become-ammonia-ready/

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4

SCENARIOS TOWARDS 2040

To evaluate what role ammonia may play in the future energy mix of Norwegian domestic shipping, we analyse some scenarios. It should be noted that the applied modelling approach is based on the large-scale economical and technical drivers that may affect the uptake of alternative fuels in the fleet. Therefore, the potential short-term ammonia demand by the currently ongoing R&D or pilot projects are not reflected in the scenarios, but this is highlighted and discussed in the summary in section 4.4. It is eventually difficult to judge what the outcome of the pilot projects will be in terms of actual ammonia demand, and it is in the end fair to consider the economic and regulatory conditions that will determine if and when a larger part of the fleet with be fuelled by ammonia or other alternative fuels. A bit on the side of, but still related to, the regulatory landscape comes requirements from cargo-owners and buyers of shipping services, that can also play an important role in driving the transition.21 In this chapter, we present the method and some key assumptions in sub-chapter 4.1. Assumptions on fuel and technology costs are given in sub-chapter 4.2. The scenarios are presented in sub-chapter 4.3, and summarized and discussed in sub-chapter 4.4. The method overall follows the logic illustrated in Figure 4-1. In addition to technical-operational suitability and technological maturity, regulations (e.g. limitation on the use of fossil fuels, or emission/fuel requirements from cargoowners) and economic considerations will be key to determine whether and when there will be an uptake of zeroemission technologies and fuels.

Figure 4-1 Illustration of logic determining the uptake of technology and fuels

4.1

Method

We use a scenario model to simulate the development of the domestic fleet described in chapter 2, and potential future energy mix under different conditions. An illustration of the model is given in Figure 4-2. The model has three analysis modules: analysis of technology applicability, calculation of fleet development and analysis of uptake of technology and fuels. A range of parameters is input to the model, and the result is governed by what is assumed for these parameters. An economic evaluation governs the uptake of technology and fuels – each ship chooses the least costly way to be compliant with the emission target or adhere to the policy measures. The three analysis modules are further described in the sub-chapters below, together with related key assumptions.

21 https://www.ammoniaenergy.org/articles/cargo-owners-for-zero-emission-vessels-cozev-launched/

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Figure 4-2 Illustration of the Decarbonization Scenario Model

4.1.1

Fleet Development

The replacement of old ships in the fleet with new ships is important when analysing possible transition to zero-emission technologies. Therefore, the number of newbuilds each year is calculated based on assumed activity growth and the age of the fleet. We assume a typical lifetime of a ship of 30 years – the year of build of existing ships is available from the ship registry. When an old ship is scrapped, it is replaced with a newbuild. If there is activity growth within a ship segment, this leads to more newbuilds, while if activity level is assumed reduced, the number of ships is reduced. The annual growth factors for the different segments are assumed similar as in previous studies of domestic shipping (DNV GL, 2020a) and listed in Table 4-1. A positive number implies that the segment in terms of number of ships will grow, and vice versa for a negative number. Hence, for example the activity in the offshore segment is assumed to be reduced.22 In the modelling, newbuilds that are added because of fleet growth or to replace old ships are assumed to have the similar technical characteristics (size, engine power etc.) and operational pattern. This implies that we assume the current fleet and operational pattern as described in chapter 2 to be representative for the future fleet, since the model is based on the AIS analysis for this year.

22 This is exemplified by the large number of offshore that are presently laid up (out of service). Some of these may be retrofit and used for other services in other

segments.

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Table 4-1 Assumed annual growth of the different ship segments in Norwegian domestic shipping Ship type

Annual growth

Aquaculture

2.2 %

Car ferry

0%

Cargo ships

2.2 %

Fishing vessels

-0.25 %

Offshore

-1.6 %

Other vessels

-1.6 %

Passenger vessels

0.8 %

Wet and dry bulk

2.2 %

4.1.2

Technology Applicability for Ships

Based on current development tracks described in chapter 3, we assume in the scenario analysis hydrogen, methanol and ammonia technology to be available for all ship types from 2025. The operational profile and sailing pattern will determine if the fuels with lower energy density are relevant for the ship. It is in general acknowledged that batteryelectric and hydrogen operation is primarily relevant to short-sea shipping, while liquefied methane, ammonia and methanol is in principle relevant for all types of trades, also deep sea. This reflects the fact that the volumetric energy density of these fuels is considerably higher than hydrogen and battery-electric, as seen in Figure 3-2. We therefore want to estimate how much of the fleet will see battery-electric and hydrogen operation as feasible: To evaluate the potential applicability of these options, the energy consumption for each voyage for each ship is calculated; the most energy-demanding voyage becomes the dimensioning voyage. The volume of the onboard hydrogen storage or battery system necessary to store this energy is then estimated, and the ratio of this volume divided by the ship’s volume expressed by GT is calculated. If this ratio is below a threshold (assumed 3 times the average ratio for MGO for the respective ship segment), then the technology is assumed to be applicable for the ship. Otherwise, it is not applicable. This is a necessary simplification to get a rough estimate of how much of the fleet is suitable for batteryelectric or hydrogen operation depending on each ship’s sailing distances and energy consumption, without assessing each ship design in detail. The feasibility of the different fuel options for a specific ship will in practice depend on the trade and sailing pattern, relevant bunkering locations, possibility of design modifications and so on. More space allocated for fuel storage will lead to a changed ship design, and it is difficult to say generally how this will affect for example ship size, cargo space etc. It should be noted that this is the case both for LNG, methanol and ammonia, not only hydrogen and batteries. Table 4-2 and Table 4-3 show the result of this analysis for battery-electric and compressed hydrogen respectively. A similar exercise is done also for liquefied hydrogen, giving somewhat higher applicability rates than compressed hydrogen.

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Table 4-2 Applicability of battery-electric, ratio of >80 % fleet 1 - 1000

5000 - 9999

Ship type

GT

1000 - 4999 GT

GT

10000 - 24999 GT

25000 - GT

Aquaculture

0%

0%

0%

0%

0%

Car ferry

100 %

100 %

50 %

10 %

0%

Cargo ships

10 %

0%

0%

0%

0%

vessels

10 %

10 %

0%

0%

0%

Offshore

0%

0%

0%

0%

0%

10 %

20 %

0%

0%

0%

40 %

0%

0%

0%

0%

0%

0%

0%

0%

0%

Fishing

Other vessels Passenger vessels Wet and dry bulk

Table 4-3 Applicability of compressed hydrogen, ratio of >80 % fleet 1 - 1000

5000 - 9999

Ship type

GT

1000 - 4999 GT

GT

10000 - 24999 GT

25000 - GT

Aquaculture

10 %

20 %

0%

0%

0%

Car ferry

100 %

100 %

100 %

30 %

0%

Cargo ships

40 %

20 %

0%

0%

0%

vessels

10 %

10 %

0%

0%

0%

Offshore

30 %

20 %

20 %

0%

0%

10 %

50 %

60 %

0%

0%

50 %

30 %

0%

0%

0%

30 %

0%

30 %

50 %

0%

Fishing

Other vessels Passenger vessels Wet and dry bulk

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4.1.3

Uptake of Technology and Fuels

We let the model calculate the cost of all feasible, allowed options each year. By allowed is meant as indicated in Figure 4-1 – there can be regulations not allowing fossil fuel use from a certain year, or a required emission reduction of 50 %. For each ship in the model, we calculate the total cost of the various technologies (net present value) for each year. This includes both investment costs and energy costs (total costs over an investment horizon of 10 years). It should be noted that in the modelling it is assumed that the decision maker, i.e. the ship owner, “sees” the requirements and cost trajectories within the investment horizon, i.e. takes these into account when evaluating the different options. One policy instrument that can be included to reduce the net present value is subsidies for investment in zero-emission technology. Each year, the option with the lowest net present value is selected. If it is cheaper to use biofuels than to make a conversion to / design newbuilds for zero-emission operation, the ship will choose this to meet the emission target. As long as fossil fuels (including potential taxes) are cheaper than the carbon-neutral ones, the ship will only use the amount of carbon-neutral energy carrier needed to meet the emission target. We therefore assume that all ships that can use zero-emission technology can also be operated with conventional fuel (dual fuel setup, further described in section 4.2.2). This is probably most realistic in a transitional phase where zeroemission fuel has limited availability, and also how operation is planned in current projects with ships with zero-emission technology (by using dual fuel engine technology and two fuel tank systems). In the modelling, it is assumed no cap/limitation in the availability of fuels.

4.2

Fuel Prices and Investment Costs

This chapter describes assumptions on fuel prices and investment costs of onboard technology.

4.2.1

Fuel Prices

Future fuel prices are uncertain, both for conventional fuels and especially for carbon-neutral fuels not available today. However, the fuel prices are crucial for the future energy mix, as fuel expenditure is a major component of the cost of shipping and therefore key when shipowners consider future investments. It has for instance been estimated that almost 85 - 90 % of the additional investment needed for the decarbonization of shipping is due to the added fuel costs (UMAS and Global Maritime Forum, 2020). Our assumed fuel prices are shown in Figure 4-3.23 In our scenario modelling, we assume the following about fuel prices. We use the price prognoses of HVO (advanced biodiesel) and LBG (liquefied biogas) from Klimakur 2030 (Norwegian Directorate of Environment et al., 2020). Here annual prices are given until 2030, and we assume the same trend thereafter. With increased demand for sustainable biofuel, the price is assumed to continue to increase, given the fact that it is a limited resource.24 The prices of the carbon-neutral hydrogen-based fuels compressed hydrogen (CH2), liquefied hydrogen (LH2), ammonia and e-methanol are especially uncertain since these fuels are not available today. For these fuels, we use a high estimate and a low estimate. These are in-house estimates from DNV’s Maritime Forecast to 2050 and external analyses relevant for hydrogen produced in Norway. All alternatives are carbon-neutral variants, i.e. based on blue or green hydrogen, and for e-methanol CO2 from a carbon-neutral source (biogenic). In the shown price estimates, the cheapest alternative of blue and green hydrogen and ammonia is used. Typically, blue is the cheapest option in the short and mid term, while green may become cheaper in the long term. As seen in the Figure 4-3, a significant reduction in the low estimates for the hydrogen-based fuels is found. This relies on a great upscaling of production facilities and

23 Given as price per energy unit, not accounting for efficiency differences in engine/converter. If electricity is used in a battery or hydrogen or ammonia are used in a

fuel cell, less energy input is required per energy output compared to ICE, giving lower “effective fuel costs”

24 https://www.miljodirektoratet.no/tjenester/klimatiltak/klimatiltak-for-ikke-kvotepliktige-utslipp-mot-2030/sjofart-fiske-og-havbruk/avansert-biodrivstoff-i-avgiftsfri-

diesel/

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technology learning reducing the production costs. The high estimates are a more conservative trend where such efficiency improvement is not present. Regarding the electricity price, the long-term market analysis from Statnett (Statnett, 2020) describes an increased electricity price in Norway over the coming decades, from around 0,30 NOK/kWh in 2020 to around 0,40 NOK/kWh in 2040. Including grid tariff (an increase from 0,33 NOK/kWh to 0,40 NOK/kWh is used by Norwegian Directorate of Environment et al. (2020)) gives an effective electricity plus grid cost of around the 0,8 NOK/kWh. However, the price may vary considerably between different ports (ZERO, 2020). and for simplicity a price of 1 NOK/kWh today is assumed today, increasing to 1,33 NOK/kWh in 2050. Note that this is the assumed cost of electricity when bunkered for use on the ship – for low prices of green hydrogen to be obtained, the electricity cost must be far lower than this. The shown electricity price in the figures reflects the higher efficiency of battery-electric propulsion (efficiency assumed 95 %), to illustrate the comparison against fuels on ICE (efficiency assumed 43 %). For LNG and MGO, we use prognoses from DNV’s Maritime Forecast to 2050. There is a CO2 tax for MGO and LNG in Norway. In 2021, this is 594 NOK/tonne CO2, while for 2022 it will be around 760 NOK/tonne CO2.25 This significant increase is a step towards the planned increase to 2000 NOK/tonne CO2 in 2030, announced by the government. Although there is political consensus of increasing the tax to this level, the specific setup of and level of the CO2 tax is determined each year in the state budget. Figure 4-4 shows the effect of such a CO2 tax level on the fuel prices. While the price of the alternative fuels never become competitive to the MGO price with no CO2 tax in place (Figure 4-3), Figure 4-4 shows that the low estimates become competitive in the 30s with the CO2 tax raised to 2000 NOK/tonne. It should be noted that the CO2 tax on fossil fuels applies for ships in domestic traffic only. However, there are initiatives to include a price on CO2 also for ships in international trade. The EU has in its Fit for 55 package announced that shipping between EU/EEC ports will be included in the EU ETS (emission trading system; cap and trade).

25 https://www.regjeringen.no/no/statsbudsjett/2021/statsbudsjettet-2021-skatter-og-avgifter/statsbudsjettet-2021-endringer-i-klimaavgiftene/id2767839/

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Figure 4-3 Assumed fuel prices in Norway, with no CO2 tax on MGO and LNG

Figure 4-4 Assumed fuel prices in Norway, with CO2 tax increasing to 2000 NOK/tonne in 2030

4.2.2

Investment Costs

We estimate additional investment costs compared to a conventional vessel, assuming the following: •

The ship has a new tank and new gas or fuel handling system, in addition to a conventional tank system (applies both for newbuilds and conversion of existing vessels).

For engine/converter, both fuel cells and combustion engines can in principle be considered. However, since fuel cells have significantly higher investment costs (at least 20 000 NOK/kW for a fuel cell system) than

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combustion engines, it is in the modelling assumed that dual fuel combustion engines are used both for the ammonia, hydrogen and methanol alternative.26 There may be cases and operational profiles where fuel cells are found more beneficial, but this assumption does not change the outcome of the scenarios. For a conversion of an existing ship, the dual fuel engine is assumed to replace the existing engine. Some ships may get a converted engine to be able to run on some of these fuels - Wärtsilä has for instance stated that many engines can be converted to ammonia rather than replaced with new ones, to reduce the retrofit costs. Anyway, it is expected that a large part of the conversion costs will be related to design modifications, yard work, piping and accommodation of tank and fuel supply system, and not only to the engine itself.27 With this dual fuel configuration, the ships will for example be able to run on drop-in fuels (e.g. biofuel) if they are required to reduce emissions before the alternative fuel technologies become available or competitive. The additional investment cost for LNG vessels compared to conventional vessels is found from experience data of additional costs for LNG ships from the NOx fund. A review of more than 100 LNG projects shows a range of 20-100 MNOK additional costs for LNG newbuilds compared to conventional ships, depending on ship type and ship size. We use this as a benchmark for estimating the additional investment costs for ammonia, hydrogen and methanol ships in the fleet. A study indicates that the additional cost of medium-sized methanol ship and ammonia ship in 2030 is respectively around 30 % and 20 % lower than that of an LNG ship (Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, 2021). Using this assumption, we estimate the additional investment cost of methanol and ammonia newbuilds compared to conventional ships. For hydrogen ships, it is assumed an additional investment cost 50 % higher than an LNG ship, based on experience data from pilot projects. The cost for retrofitting an existing ship with alternative fuel technologies is very uncertain, and it will not be possible on all ships. The feasibility and cost will be highly dependent on what changes are needed to change engine and power system, design modifications or rebuilding to accommodate tank systems etc. There is no experience data available for the alternative fuels considered here. Based on a review of known conversion projects for LNG of various ship types, the average additional cost of an LNG retrofit is at least 50 % higher than the additional cost of an LNG newbuild. A methanol conversion will be simpler to handle than LNG conversion, while it may be more challenging to convert a conventional ship to ammonia and especially hydrogen operation. For simplicity, we use a conversion addition of 50 % to the newbuild additional costs described above. The actual retrofit costs will obviously vary greatly from ship to ship; in some cases it will not be economically feasible. Again, these investment cost estimates are uncertain, and it may be higher additional costs especially for the first ships, before the technologies are fully commercialized and operationalized on a range of different ship types.

4.3

Scenarios

Currently there are drivers among maritime stakeholders, e.g. charterers, cargo owners, banks, oil and gas companies, that may result in commercial requirements or incentives for emission reduction or the application of low- and zeroemission technology on ships. But this is currently limited to selected projects and a few players and does not cover the whole fleet. Also, there are measures from authorities and governmental bodies, such as the Norwegian government, EU and IMO that will drive decarbonization forward in the coming decades. EU taxonomy for sustainable activities will also play a role. In Norway, this includes a planned increased CO2 tax, and several initiatives to support investments in and piloting of new technologies, and potential zero emission requirements to certain ship segments. These are conditions that will affect the energy mix of Norwegian domestic shipping in the coming years.

26 Even if it is assumed an efficiency of 60 % for fuel cells, and thereby reduced fuel use, the higher investment costs leads to a higher total cost of the fuel cell option

than the dual fuel engine option. An efficiency of 43 % for ICE is assumed.

27 In a pilot project by Green Shipping Program, an ammonia retrofit of a Color Line passenger vessel was analyzed. The estimated cost of converting main engines

were 60 NOK, while the cost for piping, engineering, tanks etc. were estimated to be 144 MNOK (Green Shipping Programme, 2021). This is not used in this analysis, but included to indicate that retrofit costs may be substantial and not only related to converting the engines.

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With our scenario approach, we evaluate how the energy mix and emissions in the fleet develop under various conditions. As described in chapter 4.1, we have evaluated which alternative fuel technologies are applicable for the different ships in the fleet. In the scenarios, we let the different ships choose the cheapest, applicable option that meets potential regulatory requirements, using the economic evaluation described in chapter 4.1.3 and the cost assumptions described in chapter 4.2. We place no restrictions on the availability of fuels. The outcome of the scenarios, with respect to uptake of ammonia as well as other key variables, will depend on the frame conditions assumed in each scenario. These frame conditions, in our modeling, vary on two axis. The first axis is the level of requirements to emission reductions assumed to be placed on the industry or some ship segments – primarily by the Norwegian government. Simply put, we can assume that the government will require that the emissions meet the policy target (50% reduction by 2030) – and that suitable, yet to be identified, policy measures will be implemented to achieve this, e.g. emission requirements to some or all segments. Alternatively, we can assume that no specific requirement will be in place. In the model, we emulate such a requirement, by forcing each ship is each year to reduce the CO2 emissions with an increasing percentage compared to its 2020 emissions. This is not equivalent to any current regulatory policies of limiting the use of fossil fuels. However, segment specific low and zero emission requirements have been considered by the government, such as the aquaculture and offshore segments. Also, a policy measure limiting the use of fossil fuels is considered both by the EU (FuelEU Maritime28) and the IMO. If introduced, these measures will be effective for larger ships (> 5000 GT). However, the required fossil fuel reduction for instance by FuelEU Maritime is fairly low before 2030. Similarly, the CII measure from the IMO is applicable only for larger cargo and passenger ships above 5000 GT, and the level of carbon intensity reduction required under the CII scheme in its current form is not sufficient to lead to substantial uptake of zero emission fuels before 2030. The second axis is used to gauge the specific impact of a limited set of policy measures most likely to be used as part of a government effort to reach said targets. In all scenarios, it is assumed that the government policy ambition of gradually increasing the CO2 tax to 2000 NOK/tonne in 2030 will be realized. As an economic measure, we look at the effect of 50 % governmental support of onboard technology investments. It is worth noting that while an increase in the CO2 tax is a stated government policy ambition, the actual implementation of this is not bound by any binding agreement with parliamentary majority and will as such be subject to the negotiations of the annual state budget. Similarly with the assumed 50% investment support, this is currently applicable to ammonia powered ships – but the mandate of ENOVA (currently in charge of this support) is to assist in the early phase of the market introduction of new technologies, and have historically been scaled down or removed once the technology development reaches a certain level of maturity. ENOVA provides financial support for pilot and R&D projects and has provided certain time limited schemes for support of investment in emission reduction technologies such as onboard batteries or charging infrastructure. Thus, a fleetwide, long-term, support program such as modelled herein would likely require a change in ENOVA mandate and policy. We have chosen as our main scenario (scenario 1), a scenario which assumes that the policy ambition of 50% reduction by 2030 will be met though governmental requirements to all ship segments, and further to 100 % reduction in 2050. We also assume that the 50% support on onboard technology investments will be in place. This means that the ship owner has to cover only half of the additional investment cost for alternative fuel technology (cf. investment costs described in chapter 4.2.2). However, these assumptions are highly uncertain, and thus other scenarios are explored to gauge the implications of changes to these assumptions, using scenario 1 as a reference: •

In scenario 2, we maintain the given assumptions of scenario 1, apart from the 50% investment support which is removed.

In scenario 3, we maintain the given assumptions, but have even stricter requirements than in scenario 1. In this scenario, it is required for the offshore and aquaculture fleets to reduce by 100 % by 2030. This reflects

28 Under the planned FuelEU Maritime regulation, the GHG intensity of the energy used on ships under the EU MRV regulation will be required to improve by 2 % in

2025 relative to 2020, ramping up to 75 % by 2050. https://www.dnv.com/news/fit-for-55-new-eu-ghg-regulations-for-ships-coming-soon-208746

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(partly) a stated ambition from the Norwegian government to require low and zero emission for these two segments.29 For the remaining ship segments, it is required to reduce gradually to 50 % in 2030 and further to 100 % in 2050 (like in scenario 1) •

In scenario 4, we remove the government requirements altogether, but maintain the 50% investment support – thus isolating the effect of these two measure.

In scenario 5, we also remove the 50% investment support.

Figure 4-5 gives an overview of the modeled scenarios. In the below sub-chapters, the results of the scenarios are shown and discussed in terms of domestic CO2 emissions and energy use until 2040. As a basis for the scenarios lay the assumptions and conditions described in chapter 4.1 and 4.2, and some sensitivity analyses are performed in chapter 4.3.6 to see the effect on some of these assumptions. A summary of the ammonia demand per year in the modeled scenarios is provided in chapter 4.4.

Figure 4-5 Overview of modelled scenarios

29 Hurdalsplattformen (the governing document of the current Norwegian government) states the following regarding these two segments:

[Regjeringen vil] stille krav til lavere utslipp fra offshoreflåten og fra fartøy som benyttes innenfor havbruk, inkludert underleverandører. Kravet må utformes slik at det sikrer trinnvis innfasing av beste tilgjengelige teknologi og legger til rette for teknologiutvikling i norske kompetansemiljøer [Regjeringen vil] stille krav om lavutslippsløsninger fra 2025 og nullutslipp fra 2030 til offshore supplyskip

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4.3.1

Scenario 1 – Planned CO2 tax, 50 % support, fleet emission req.

Scenario 1 is a scenario where strong measures are in place to realize the Norwegian emission goals for domestic shipping. With the introduction of a requirement to reduce emissions compared the reference level, all ships are “forced” to implement measures to reduce emissions. Parts of the required reduction can initially be covered by energy efficiency measures. A certain share of the energy mix is electricity from grid, which consists of battery ferries and small passenger ships. Before 2030, the dominant carbon-neutral fuel is drop-in biofuel, while the large volumes of ammonia and hydrogen come on a later stage. The reason for this is that it takes time for these options to become competitive, and that older ships find it cheaper to go for drop-in bio that converting to ammonia. However, the increase in ammonia use is significant – from zero in 2025 to around 500 ktonnes in 2030. As such this requires many ammonia ships to be introduced in a relatively short time. There are several newbuilds and conversions to ammonia, and once the ammonia is cheaper than MGO with CO2 tax (the low price scenario assumes this to happen in 2033), it becomes the dominant fuel in the fleet. Until this point, ammonia ships only use the amount of ammonia necessary to obtain the requirement (i.e. the amount required for each ship to reduce 50 % in 2030 compared to its reference level). It is important to note that such an outcome is depending on a build-up of ammonia production capacity with resulting price reduction, as well as a willingness by shipowners to invest in new ships and conversions to ammonia, caused by them taking account of such an expected cost reduction in their investment decision.

Figure 4-6 Domestic CO2 emissions and energy mix in scenario 1

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4.3.2

Scenario 2 – Planned CO2 tax, fleet emission req.

Figure 4-7 show the results of scenario 2. The dynamics is similar to that of scenario 1, but without the presence of investment support, the introduction of ammonia and hydrogen comes at a later stage and in smaller volumes than in scenario 1. The whole of the fleet is required to use carbon-neutral fuels, but drop-in biofuel becomes a larger share. especially in the 2020s. This reflects the fact that the total cost of drop-in fuels is lower than the cost of investment and use of the hydrogen-based fuels. After 2030, ammonia and methanol become dominating. Hydrogen - primarily compressed - constitutes a smaller part of the share than in scenario 1, and there is also more methanol than in scenario 1 due to its lower investment cost than ammonia.

Figure 4-7 Domestic CO2 emissions and energy mix in scenario 2

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4.3.3

Scenario 3 – Planned CO2 tax, 50 % support, offshore/aquaculture req.

Scenario 3 is the most aggressive scenario from an emission requirement point of view. Here, only zero emission is permitted from 2030 for the offshore and aquaculture segments gradually increasing from 10 % emission reduction in 2023. In addition, all other segments are required to reduce at least 50 % in 2030. This is a more aggressive step-up of the emission requirement than in scenario 1 (which was 50 % reduction for the whole fleet in 2030), and the amount of ammonia consequently becomes larger in scenario 3. As seen in Figure 4-8, this gives a quick uptake of ammonia especially in the offshore segment, as this for most ships is found to be the feasible option with the lowest cost to obtain zero emissions within this short time frame until 2030. Later, there is also uptake of hydrogen and ammonia in other segments. It should be noted that it is not straight-forward to impose an emission requirement or a zero-emission technology requirement on offshore ships in Norwegian waters, for a number of reasons that are not discussed further here.

Figure 4-8 Domestic CO2 emissions and energy mix in scenario 3

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4.3.4

Scenario 4 – Planned CO2 tax, 50 % support

Without any emission requirements, the uptake of emission reducing measures and fuels is driven by economics only. The presence of CO2 tax linearly increased from today’s level to 2000 NOK/tonne in 2030, together with the assumed reduced fuel costs, eventually make the hydrogen-based carbon-neutral fuels cost competitive to fossil fuels. The uptake of these fuels is determined by the total cost of technology investment (CAPEX) and the fuel costs over the investment horizon. If this total cost becomes lower than the total cost of fossil fuel with tax, there will be an uptake. The resulting emissions and energy mix of scenario 4 is seen in Figure 4-9. The investment support is especially important for hydrogen30, which has the highest investment costs. Due to compressed hydrogen having a lower fuel cost than ammonia, hydrogen is introduced at an earlier stage. However, as ammonia is feasible for more ships and the cost of ammonia fuel is assumed to reduce further, ammonia towards 2040 becomes more dominant in the energy mix. There is only a small fraction of methanol in the energy mix by 2040.

Figure 4-9 Domestic CO2 emissions and energy mix in scenario 4

30 In all the scenarios, hydrogen is in the form of compressed hydrogen. There is no uptake of liquefied hydrogen, due to high costs. The ammonia or methanol

alternative is a more commercially viable alternative for the ships where compressed hydrogen is not feasible.

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4.3.5

Scenario 5 – Planned CO2 tax

Compared to scenario 4, scenario 5 does not have a continuous investment support in place. Comparing Figure 4-10 to Figure 4-9 shows the effect of the presence of continuous investment support. Although some dual-fuel hydrogen and ammonia ships are built in the 2020s in this scenario, they do not start using the fuel until the cost is lower than MGO with tax (happening around of after 2030), since there is no direct emission requirement in place enforcing the use of these fuels. Hence, these fuels are not introduced to significant extent in the 2020s, as seen in Figure 4-10.

Figure 4-10 Domestic CO2 emissions and energy mix in scenario 5

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4.3.6

Sensitivities

The scenario results are sensitive to the assumptions and inputs used in the modelling. In this section we explore some of these. We begin with fuel price sensitivity. Unless there is a limit for biofuels or there is a requirement to use zeroemission technology not allowing the use of bio-fuels, fuel price reduction is a prerequisite for the widespread use of the hydrogen-based fuels. In the scenarios, the low price estimates from chapter 4.2.1 are used. Figure 4- shows scenario 1, but with the assumption of high fuel prices. These price estimates are conservative, but it could be that the actual future prices of hydrogen-based carbon-neutral fuels will fall somewhere in between high and low.

Figure 4-11 Scenario 1, but with high fuel prices We also perform a sensitivity where we assume ammonia technology to available for newbuilds and retrofits from 2023 instead of 2025, and see how this affects the outcome of scenarios 1 and 3. However, due to the emission requirements being the driver behind the uptake of ammonia, and not the technology availability, this does not lead to a significantly different outcome (and thus we present no illustration of the result from this analysis). There is however a small volume of a few offshore ships in scenario 3 starting to use some ammonia in 2024 instead of in 2025 to obtain the required emission reductions (see scenarios 1_sens and 3_sens in Table 4-4 in chapter 4.4).

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4.4

Summary and discussion

The scenario modelling applied in this analysis is an approach that can assess how certain assumptions on costs and policies will affect the energy mix in the fleet on a large scale. It should be noted that the strict economic logic that is applied cannot capture all drivers and initiatives towards the transition to ammonia and other fuels. It could be that certain players will shift to these fuels before they are economically viable, and the demand from these first movers will be important to ramp up the use of carbon-neutral fuels. However, economic competitiveness is a prerequisite for these fuels to be considered by most ship owners and for them to constitute a large part of the energy mix, unless there are direct emission requirements in place. This can be obtained through price dynamics (market-based measures such as investment support/tax vs cost reduction of hydrogen-based fuels) and/or regulations limiting the allowed use of fossil fuels. Table 4-4 shows the modelled ammonia demand (ktonnes - thousand tonnes) from 2023 to 2035 in the five scenarios, as well as the sensitivities 1_sens and 3_sens described in chapter 4.3.6. In the main scenario (scenario 1), where we assume governmental incentives to be put in place to reach the policy ambition of 50% emission reduction by 2030, the largest ammonia volumes are obtained, on the long term. However, scenario 3 with a zero-emission requirement for the offshore and aquaculture segments in 2030 gives the quickest uptake and largest volume before 2030. An alternative to the governmental emission requirement for the entire fleet (scenario 1, 2 and 3) or specific requirements for some segments (offshore and aquaculture in scenario 3) would be requirements from cargo owners or charterers with willingness to pay for emission reductions or zero emission technology, e.g. oil and gas companies putting emission requirements in their contracts. Although such initiatives among cargo-owners are starting to gain momentum, they will most likely not cover all players, and only cover some cases or parts of the segments. Also – the results shows clearly that if the incentives and requirements assumed in scenario 1, 2 and 3 are withdrawn, the uptake of ammonia quickly diminishes, at least on the short term. As such, emission requirements from stakeholders is crucial to gain emission reduction at an early stage. Comparing scenario 1 (with investment support) to 2, and scenario 4 (with investment support) to 5, also shows the important effect of continuous investment support to obtain the largest volumes. The domestic CO2 emission in 2030 in scenarios 1, 2, 3, 4 and 5 is 1994, 2112, 1362, 3683 and 3758 ktonnes respectively. The AIS based estimate for 2005 is 4440 ktonnes (DNV GL, 2020b). Hence, scenario 1, 2 and 3 fulfil the ambition of 50 % reduction in 2030 compared to 2005, when based on AIS estimates. Also shown in the table is an estimate of ammonia demand compiled by Yara 31 based on a list of 11 current pilot projects, all aiming to use ammonia. The projects involve ships in a multitude of segments including supply vessels, tankers, bunker vessels, container ships, and fishing vessels. The first of these projects is planned to be launched in 2023. The remainder in 2024 and 2025. Table 4-4 Modelled ammonia demand (ktonnes) in the scenarios 1 – 5, and short-term demand estimates compiled by Yara Scenario*

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

1

0

0

0

3

40

138

251

498

646

797

1825

1908

1966

1_sens

0

0

0

3

40

138

251

498

646

797

1825

1908

1966

2

0

0

0

2

5

12

70

131

250

352

826

931

1034

3

0

0

14

120

346

548

804

1134

1220

1305

1972

2018

2073

3_sens

0

3

14

120

346

548

804

1134

1220

1305

1972

2018

2073

31 E-mail correspondence with Maritime CleanTech/Yara January 4th 2022.

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Scenario*

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

4

0

0

0

0

0

0

0

0

0

0

87

162

361

5

0

0

0

0

0

0

0

0

0

0

13

20

33

Yara

18

49

106

121

129

129*

129*

129*

129*

129*

129*

129*

129*

*) These numbers reflect only the ammonia demand from the initial 11 projects, not accounting for further additions. The volume of ammonia required by these 11 projects is stipulated to increase from 18 ktonnes in 2023 to 129 ktonnes in 2027 when the last of the 11 projects is assumed completed. Compared to our modelled scenarios, the Yara numbers are not dissimilar to our most optimistic scenarios (scenario 1 and scenario 3) - although in our scenarios the volume starts with at a lower pace and picks up somewhat later. In other words, a delayed start, but steeper growth. Furthermore, rapid growth continues towards 2030 and beyond, especially in scenario 1 and 2. It is noted that it is difficult to assess the likelihood of these 11 projects reaching fruition. Our understanding is that few of the projects have contracted yards to build the vessels or secured contractual commitment from charterers obliging them to use the vessels. The ShipFC project is however made possible through Eidesvik’s contract with Equinor, and EU support. Comparison with the modelled scenarios suggest that realizing the potential of these projects will likely require a change in policy and financial incentives to counter the inherently higher cost of an ammonia powered vessel compared to a conventional vessel. If such incentives are not provided by the government, the cost gap must be covered by private actors willing to pay a significant premium for zero-emission shipping. The most optimistic scenarios see a massive transition over a decade, with ammonia dominating the energy mix in Norwegian domestic shipping. In the scenarios, there is to a large degree retrofitting of vessels across all segments, especially in the offshore and cargo segments. This is enforced by the rapidly increasing requirement for emission reduction that is put on the fleet. While some ship types are suitable for retrofitting, such as offshore ships, this can be more complex for other segments. The coming years will show which ship types will be retrofitted. It could be that the drivers for emission reduction could rather enforce a shorter lifetime of vessels and increase the newbuild rate. This is not accounted for in the scenarios. The findings in the most optimistic scenarios (scenario 1 and scenario 3) indicate the ability of ammonia to become an important fuel in decarbonizing the Norwegian domestic shipping sector. For this to take place, strong policy measures need to be in place. Our modelled investment support of 50 % is thought of as a support to all ships investing in zero emission technology, also when the technology is commercially mature. Hence, this investment support has a wider scope than the investment support for the present pilot projects, provided by Enova, Pilot-E and other bodies. The technology cost gap makes this an important contribution to scale up the use of technologies to a large number of ships in the fleet, and not only the first movers. The current project and pilot support provided by ENOVA is still crucial to make the business cases of the first movers viable and commercialize the technology and fuel production for more players to come on board. As such, it is a prerequisite for the large ammonia uptake in the scenarios to take place. Finally, it is noted that in the scenarios, we assume no limit on the availability of fuels. Further, all incentives and requirements are modelled as technology and fuel – neutral, meaning that they give no preference to any one fuel as long as they reduce emissions. Any such limitations or incentives (by design or by market dynamics) could skew the results in favour of the competing alternatives. It is clear from the analysis that ammonia can play a vital role in meeting the Norwegian maritime emission goal for 2030. Several policy measures are introduced by the authorities to support the realization of this goal, and the scenarios reflect some of these. An emission goal needs to be accompanied by sufficient policy measures in order to be realized. By analysing a scenario where the goal is met, and others where not all sufficient policy measures are in place to meet the goal, we point at different outcomes and show that to realize the goal, strong measures will need to be in place. In a

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roadmap for ammonia in Norway it would be fruitful to chart a course into a future where such a climate goal is met and showcase the potential for ammonia to play a role there.

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