Financial Services Association, May 16 (Reporter Hu Haoqiong) The decarbonization of the shipping industry has also brought new opportunities and challenges to the energy industry.

Maersk, the world's second-largest liner company, has continued to “search” for green methanol sources in the Chinese market in recent years to achieve its shipping decarbonization goals. In April of this year, Maersk signed a memorandum of cooperation with Longyuan Electric Power (001289.SZ, 00916.HK). The two sides are willing to seek cooperation in the fields of green electricity, green fuel, and corresponding regional and international regulations.

Tang Jian, chairman of Longyuan Electric Power, said at the signing ceremony of the aforementioned cooperation that the company is also closely monitoring and promoting the development of the new energy green chemical industry chain, actively exploring the coupling of clean energy with the shipping sector, and assuming more responsibilities and missions in supporting global decarbonization and emission reduction.

“This time, Longyuan Electric Power and Maersk signed an intentional agreement, and no specific projects have yet been involved.” Li Xingyun, deputy general manager of Longyuan Electric Power, said in an exclusive interview with a reporter from the Financial Federation that at present, the company has promoted Green Power's hydrogen, ammonia, and alcohol production projects in Inner Mongolia, Gansu, Jilin and other places. The first batch of projects that are progressing faster will have full construction conditions this year. It is expected that 2025 will enter the construction period, mass production will be achieved in 2026, and green certification work will begin simultaneously to ensure the official entry into force of the EU Carbon Border Regulation Mechanism (CBAM).

According to Li Xingyun, the first methanol-powered ship of a shipping company under the Guoneng Group will also be launched in the near future. The company plans to supply the first batch of green methanol for use by the ship. Relying on this opportunity, the Green Alcohol Project, which is planned to support construction, is currently improving the design plan and striving to start construction by the end of this year or the beginning of next year. Currently, the short-term planned production capacity for formal projects is 200,000 tons/year. Green ammonia production capacity is being adjusted and optimized according to downstream market demand.

The marine market is the main sales channel for green alcohol

According to data provided by the Norwegian Bureau of Shipping (DNV) to the Financial Federation, in April 2024, there were a total of 23 new orders for alternative fuel vessels. Among them, 12 methanol-fueled vessels accounted for the largest share, exceeding the number of orders for liquefied natural gas fuel carriers (7 new orders), and 4 new orders for ammonia-fueled vessels. Since this year, the number of orders for methanol-fueled vessels has also been the highest, with a total of 47 new orders, an increase of 42% compared to the same period in 2023.

Judging from the order situation, the new order market is increasingly shifting to alternative fuel ships, and new orders in the oil tanker sector have increased significantly. Shipowners' investment in ammonia-fueled vessels is also increasing.

“The green alcohol currently produced is mainly supplied to the shipping industry. Demand from other areas is still being explored, and there is room to expect a premium in the marine fuel market. But this is also gradual. Currently, demand for marine green fuel is not rising, and a large number of energy companies have already begun to lay out the green methanol industry. Considering that future green alcohol production capacity may not match demand, the increase in project production capacity also needs to be progressed steadily.” Li Xingyun confessed, “We don't want the project to lose money as soon as it is put into production.”

Short-term production capacity planning, application scenarios, production costs and market prices of green alcohol and green ammonia are the main influencing factors.

“Normally, green methanol is at least twice as expensive as gray methanol. As soon as the price drops, demand for green alcohol will be further released.” Li Xingyun said, “The pricing formation mechanism for the future green fuel market also needs to be improved.”

The main reason for the current high prices, Li Xingyun gave an example. For example, the production cost of green methanol is mainly affected by factors such as hydrogen production costs and biomass storage costs. About 70% of the cost of green hydrogen production is the cost of electricity. Currently, the cost of new energy power generation is falling year by year, mainly benefiting from the rapid decline in equipment prices, but as the prices of wind turbines and photovoltaic modules drop, the profit level of equipment manufacturers is generally low. Unless new technology appears, there is not much room for costs to continue to drop. Moreover, equipment related to electrolyzers has not yet formed a large-scale industrial chain. Although equipment prices have declined, they are still high. Furthermore, the possibility of future fluctuations in the upstream market is not ruled out.

In terms of biomass sources, it can be expected that with the gradual increase in domestic green methanol projects, the prices of biomass raw materials such as straw and rice husk will rise, which is not conducive to reducing the cost of green methanol to a certain extent.

In contrast, the source of ammonia is relatively easy to obtain. The proportion of nitrogen in the air is as high as 78%, and it is not affected by the purchase price of biomass. Currently, many companies in the market are experimenting with the green hydrogen ammonia production path on a small scale and have plans to lay out related projects, but their industrial chain has not yet been formed.

Generally speaking, Li Xingyun believes that the current development of new energy sources such as green methanol, green ammonia, and green aviation coal is “in the dark before dawn.” “With the development of the wind power and photovoltaic industry, after some companies that 'dare to eat crab' have broken through, the industrial chain will gradually grow and improve. At the same time, the strong technological innovation capabilities of Chinese enterprises are expected to further reduce the prices of related equipment, and energy companies can also gain profit space from it.”

Rapid energy iteration, “big waves and sand; if we don't advance, we retreat”

Judging from the development history of the marine fuel market, it is easy to see that from LNG to green methanol and green ammonia, the iteration time for energy fuels is getting tighter.

According to Li Xingyun, energy and fuel will be iterated more and more rapidly in the future. “A technology route will create a leading enterprise. After 3 to 5 years, under the new technology route, new leading companies will also be created. Market updates will be rapidly iterated, that is, 'make big waves, retreat if you don't advance. '”

There is a process of green energy transformation and restructuring in China. It is not something that can be achieved overnight. We must insist on “first, then break, not break without first standing.” During the period of “pioneering” new energy and “unbroken” thermal power, the volatility of new energy sources will cause a large amount of wind and light to be discarded. The electricity limit rate rises rapidly, and trading electricity prices continue to drop. In order to improve the conversion and utilization rate of new energy generation and raise the profit level of new energy enterprises, green chemicals such as green hydrogen, green alcohol, and green ammonia are also the only way to achieve the “start first, then break” process.

Judging from the development space of energy fuels such as green alcohol and green ammonia alone, the market prospects are undoubtedly bright, but it will take time for the market to mature.

According to Li Xingyun, from a technical perspective, although production technology for green methanol and green ammonia has made some progress, there are still problems such as high production costs and low production efficiency, which require further technical development and optimization. Furthermore, policy support and mutual recognition of domestic and international standards are also key factors driving market maturity. Currently, there are differences in green energy policies among countries, and the formulation and mutual recognition of international standards requires time and effort.

For companies, looking at the development space of the green alcohol and green ammonia market, it is necessary to comprehensively consider long-term and short-term factors. In the short term, although there are still certain uncertainties and risks in the market, the application fields of green methanol and green ammonia will gradually expand as technology advances and policies are promoted, bringing certain business opportunities to the company. In the long run, with the transformation of the global energy structure and the increase in environmental requirements, the green methanol and green ammonia markets are expected to grow rapidly and become an important part of the future energy sector.

However, as the green methanol and green ammonia market continues to expand, the increase in entrants may indeed lead to price competition. In response, Li Xingyun said that this will also push companies to continuously improve production efficiency, optimize production processes, and reduce production costs, thereby enhancing the competitiveness of the entire industry. At the same time, government policies and market demand will also have an important impact on prices.

Overall, the production costs of green methanol and green ammonia are expected to continue to decline in the future, and the specific extent and speed of decline will be affected by various factors. As the market continues to develop and technology advances, price competition may intensify, but this will also drive the progress and development of the entire industry.

Photovoltaics and wind power will be the dominant clean energy in the future

“Vigorously developing new energy is not only a necessary path for China to achieve the goal of 'double carbon', but also an intrinsic requirement to achieve a new energy security strategy.” Li Xingyun said that judging from technical maturity, industrial conditions, etc., clean energy will continue to be dominated by wind power and photovoltaics for a long time to come, and various forms of energy such as biomass energy, geothermal energy, photothermal energy, and marine energy will coexist. As a tertiary energy source converted from green electricity, green hydrogen energy will also play an important role in energy use fields such as metallurgy, chemicals, and transportation.

According to its report, by the end of the first quarter, the total installed capacity of wind power and photovoltaics had accounted for 37.3% of China's total installed capacity, and had become the main source of increase. After years of development, the wind power and photovoltaic industry chain is highly mature. In particular, the photovoltaic industry has occupied more than 70% of the global market share, and manufacturing costs are still in a declining range. It is difficult for any other energy type to replace wind power and photovoltaics as the main growth drivers in the short term.

Other types of clean energy can be developed according to local conditions according to the different resource endowments and energy needs of each region. For example, in an area rich in geothermal energy in the southwest, you can consider using geothermal energy for power generation or heating; in an area rich in lighting resources in the northwest, you can consider using photothermal power generation in a large base, etc.

The application of the green hydrogen-based chemical industry will be more reflected in the transportation sector, including highways, railways, shipping, aviation, etc. This is a huge incremental market, and demand will gradually increase as the energy consumption structure of the transportation sector is adjusted.