The Current State of Green Fuels - Delayed Progress and Market Realities

Despite ambitious targets, the adoption of alternative fuels such as methanol, ammonia, biofuels, and nuclear energy faces significant challenges, leading to a supply-demand mismatch and slow uptake of dual-fuel vessels.

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Current State of Green Fuels in Shipping

Shipping companies are exploring various green fuels to reduce emissions:

• Methanol: Gaining industry interest for its ease of handling and compatibility with existing infrastructure, but supply constraints and high costs are slowing adoption. Production is struggling to keep pace with demand, with some supply agreements failing to materialize, leaving operators without sufficient fuel. Beyond availability, cost remains a key hurdle, adding uncertainty to the transition. Without significant investment in scaling production and reducing costs, shipowners must weigh sustainability goals against operational and financial challenges. Financial Times / ReedSmith / Yahoo Finance

• Ammonia: Offers potential as a zero-carbon fuel but presents safety concerns due to its toxicity. The infrastructure for ammonia as a marine fuel is still in the early stages of development.

• Biofuels: Derived from renewable sources, biofuels can reduce emissions but are often limited in availability and can compete with food production.

• Nuclear Energy: While nuclear propulsion offers zero emissions during operation, it raises concerns about safety, regulatory approval, and public acceptance.

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Supply-Demand Mismatch

The transition to green fuels is hindered by a significant supply-demand imbalance:

• Production Constraints: The production capacity for green fuels like methanol and ammonia is insufficient to meet the growing demand from the shipping industry. Scaling up production requires substantial investment and time.

• High Costs: Green fuels are currently more expensive than traditional bunker fuels. For instance, alternative fuels can cost more than twice as much as conventional options, posing economic challenges for widespread adoption.  

• Infrastructure Gaps: Ports and bunkering facilities are not yet equipped to handle large volumes of alternative fuels, necessitating significant infrastructure development.

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Order Book Projections and Dual-Fuel Vessels

Shipping companies are adopting dual-fuel vessels capable of operating on both conventional and alternative fuels to navigate the uncertain fuel landscape:

• Fleet Expansion: As of October 2024, there were orders for 522 dual-fuel vessels, indicating a growing interest in fuel transition. While dual-fuel orders remain a fraction of the overall global fleet, they reflect an evolving strategy where shipowners seek to maintain flexibility rather than committing entirely to a single fuel pathway. Reuters

• Strategic Hedging Through Fuel-Ready Designs: With uncertainty surrounding the availability and scalability of green fuels, many shipowners are prioritising flexibility by ordering dual-fuel vessels or fuel-ready designs. Instead of committing to a single alternative fuel, some newbuilds are designed to operate on conventional fuels today while being structurally prepared for future retrofits - such as methanol- or LNG-readiness. This approach allows shipowners to defer major fuel decisions until supply chains, infrastructure, and regulatory frameworks are more stable, reducing the risk of stranded assets and ensuring long-term compliance.

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Data Insights from Maersk Mc-Kinney Møller Center and McKinsey

Collaborative research provides deeper insights into the challenges and potential pathways for decarbonizing shipping:

• Green Corridors: A report by the Maersk Mc-Kinney Møller Center for Zero Carbon Shipping and McKinsey outlines the concept of green corridors - specific trade routes designated for zero-emission shipping. The feasibility of these corridors depends on factors like alternative fuel availability, infrastructure readiness, vessel technology, and cargo demand. McKinsey & Company

• Decarbonization Levers: McKinsey identifies five critical levers for maritime decarbonization: technological advancements on ships, energy and fuel innovations, policy and regulation, financial sector mobilization, and customer willingness to support green shipping. These levers must work in concert to drive meaningful progress. McKinsey & Company  

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The Urgency for Alternative Measures: Investing in Technology

The maritime industry’s push for green fuels is undeniable, but the transition presents significant challenges. Alternative fuels like methanol, ammonia, and biofuels require more storage volume, are costly, and demand infrastructure adjustments. To make this transition feasible, energy efficiency technologies (EETs) must play a central role. Njord’s approach - integrating tailored energy-saving retrofits - offers shipowners a pragmatic solution to bridge the gap between ambition and operational reality.
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1. Fuel Volume Trade-offs: Efficiency Technologies as a Balancer

One major challenge with methanol, ammonia, and biofuels is their lower energy density compared to traditional fuels. Ships running on these alternatives require larger fuel storage capacity, reducing the space available for cargo and potentially affecting operational efficiency. To counter this, vessels need to optimise energy consumption and reduce overall fuel demand.

Njord’s technology retrofits, including hull modifications, wind-assisted propulsion, and air lubrication systems, directly address this challenge. By cutting fuel consumption through improved hydrodynamics and propulsion efficiency, Njord enables vessels to offset the fuel volume trade-off, maintaining competitiveness while adapting to alternative fuels.
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2. Countering High Fuel Costs with Energy Efficiency

Recent data indicates that green methanol is priced between $400 and $891 USD per metric ton, depending on the region (Methanex). In contrast, conventional marine fuels like very low sulfur fuel oil (VLSFO) averaged approximately $620.50 per metric ton as of February 2025 (Shipandbunker). However, when factoring in the lower energy density of green fuels, vessels require nearly twice the volume compared to conventional fuels. As a result, green fuels come at a premium - effectively costing two to four times as much as traditional marine fuels when considering the total energy required for operations.

This cost disparity poses a financial challenge for shipowners. Without additional measures, the operating expenses of vessels running on green fuels will be significantly higher.

By optimising vessel performance, Njord helps shipowners reduce overall fuel consumption, making green fuel adoption more economically viable. Retrofitting vessels with EETs such as propeller upgrades, trim optimisation, and automated voyage management ensures that ships burn less fuel per voyage, mitigating the financial impact of switching to expensive alternatives.
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3. Reducing Operational Risks in Early-Stage Fuel Adoption

The infrastructure and supply chains for alternative fuels remain uncertain, with limited bunkering availability and fluctuating production rates. This unpredictability creates operational risks, especially for long-haul shipping routes where access to green fuels is inconsistent.

Njord’s approach provides shipowners with an immediate and reliable way to enhance fuel flexibility. Efficiency retrofits extend the range of vessels and reduce dependency on fuel availability, allowing shipowners to maintain operational stability while the alternative fuel market matures.
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4. Future-Proofing Investments Against Regulatory Uncertainty

The regulatory landscape for alternative fuels is still evolving, with varying global incentives and carbon pricing schemes. Shipowners investing in newbuilds powered by green fuels face the risk of policy shifts that could alter the economic viability of their chosen fuel type.

Njord’s energy efficiency solutions future-proof investments by reducing overall emissions, regardless of the fuel used. This strategic advantage ensures that shipowners stay compliant with emerging regulations while maximising vessel performance, even as policy frameworks evolve.

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Conclusion

The transition to green fuels is necessary but fraught with economic, technical, and operational challenges. Njord’s technology retrofits offer a critical bridge, enabling shipowners to optimise existing vessels and prepare for a multi-fuel future. By improving efficiency, reducing costs, and enhancing operational resilience, Njord helps the industry move forward while ensuring that shipowners achieve sustainable profitability.

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