Sweden is in the prime position to become a major net exporter of alternative fuel supplies to ports across Europe. However, limited access to the wider European market is putting the brakes on its commercial use at ports across the continent.
That’s according to Nils Igelström, managing director at GAC Sweden, part of the global GAC Group, which has its own bunker fuels trading arm.
Mr Igelström says that Sweden is making bold strides to become a leading developer of alternative fuels for the maritime sector across Europe.
Aligned closely with the country’s ambition to reaching net-zero emissions by 2045, Sweden has invested heavily in infrastructure projects to support the development of biofuels, liquefied biogas and natural gas and synthetic fuels like eMethanol.
In May 2023, it broke ground on the FlagshipONE facility in Örnsköldsvik to produce up to 50,000 tonnes of eMethanol annually that would be directly available for ports and vessels.
That was followed, in February 2024, by the launch of Swedish energy company Jämtkraft AB’s new NorthStarH2 facility which aims to produce up to 100,000 tonnes of eMethanol annually to aid Sweden’s green electricity supply and offer eMethanol for commercial distribution, notably for the maritime sector.
Beyond eMethanol, Sweden is also using locally produced hydrotreated vegetable oil to develop a groundbreaking marine fuel. In its first trial, the tanker vessel Key Fjord was bunkered with the new fuel at the Port of Oskarshamn to showcase its potential as a commercially viable option for ports and vessels.
Such eco-friendly fuels have real-world applications for the maritime sector and ports in Sweden and, as a result, the country is growing in prominence in greener fuel development. But beyond its borders, Sweden is facing hurdles that are limiting its market reach and its ability to access ports across Europe.
Catch-22 situation
Shipping faces its own Catch-22 when it comes to alternative fuel adoption. With shipping companies slow to adopt greener fuels, the infrastructure and supply chain needed to supply them to ports is minimal. Meanwhile, those same shipping companies are waiting for ports to build the infrastructure before committing to suitable newbuildings or retrofitting projects.
This disconnect is worsened by the increased costs associated with renewable fuels. According to a study by Drewry, it is estimated that a switch to green methanol would increase fuel costs by 350%, the same as an additional US$1000 per 40ft container shipped from Asia to Europe.
With bunkering costs accounting up to 50% of a vessel’s daily operating costs, operators are reluctant to adapt to new fuels until the port-side infrastructure is in place. And that dampens Sweden’s prospects as a net exporter of alternative fuels, resulting in surplus of green energy.
“Sweden is producing some of the most advanced renewable marine fuels in Europe, but cargo owners are unwilling to pay higher freight charges. And without customers willing to buy and use them, the environmental benefits will remain unrealised. It’s a pressing issue that threatens to stall the maritime sector’s progress towards decarbonisation,” says Mr Igelström.
“Swedish companies like Preem, which is producing a commercially viable biofuel alternative, are at the forefront of the development of alternative fuels. If companies are willing to try them, they are readily available at ports across Sweden.
“The problem is that, because of low adoption rates, Sweden currently has a big surplus of renewables. As an industry, we need to do more to get these fuels to the customers.
“Sweden has everything that it needs to be a net exporter of fuels. It has already made significant investments into refineries and fuel development. There is no going back - these fuels are going to be produced regardless of the demand. New facilities that have come online or are set to launch aren’t just going to pull back. The mission now is to get the fuel to the market and to ports beyond Swedish borders.”
Supply bottlenecks
Supply chain bottlenecks of alternative fuels range from logistical hurdles in ensuring safe and secure transportation and storage, to a lack of infrastructure at or near ports across in Europe. Consequently, exporting surplus alternative fuels from Sweden to such areas means higher costs and greater regulatory complexities.
This uneven distribution of Sweden’s alternative fuels presents a challenge for the maritime sector, particularly for vessels that do not have easy or regular access to ports within the North and Baltic seas.
“If you have a vessel always passing by Gothenburg once every third, fourth or fifth day, you have no supply issues whatsoever,” says Mr Igelström. “But if a vessel is plying waters in areas without the necessary infrastructure, then accessing Sweden’s alternative fuel supplies is a lot more challenging. Right now, it’s great that you can get it at ports in Sweden or Finland or Germany, but what if you don’t call there?
“These products are available in so few places at the moment. It is very hard for shipping companies to make big investments in their vessels unless they have certainty that the supplies are going to be available.
“As an industry, we need to make sure Sweden’s alternative fuel supply is more easily accessible at ports across Europe to enable ship owners to make the right investments and aid their energy transition.”
This lack of clarity remains a key hindrance for those shipowners that base their fleets and voyage decisions on what fuel they can access and where. It is also a challenge when it comes to ensuring that ports have the right infrastructure in place, and that all players meet the regulatory requirements that have become so stringent in shipping over the past years.
“Shipping companies need certainty,” Mr Igelström notes. “They operate on tight margins and cannot afford the risk of fuel not being available at ports, especially in regions where alternative fuel delivery points are scarce. The industry needs to work with partners across Europe – and beyond – to develop a more uniform infrastructure and supply chain. Only then can we ensure that ships powered by renewables can operate efficiently around the globe.”
The way forward
With the growing need for a more robust supply chain that can support ports’ access to and storage of alternative fuels from major exporters, Sweden is again taking a leading role to help devise a supply chain that can effectively support the maritime sector’s access to green fuels.
In May 2024, the Nordic Maritime Transport and Energy Research Programme, in collaboration with partners in Sweden, Finland, Iceland and the Faroe Islands, launched its STORM project to help scrutinise several areas that are impeding the supply of alternative fuels to wider markets. This includes fuel supply, distribution and fuelling processes to understand the impact of various fuel options.
The project will also look to develop and apply a framework for assessing the suitability of fuels for various shipping segments, identify barriers and opportunities within the shipping industry and formulate tailored solutions, and finally propose policy options to accelerate shipping’s transition to renewable marine fuels.
This latest development is a major opportunity for ports beyond the North Sea to gain access to Sweden’s abundance of alternative fuels, particularly as it looks to ramp up production to meet stringent local energy targets.
However, Mr Igelström notes that like most issues in shipping, these solutions will take time to develop and require the inputs of multiple partners across several industries if ports are to have the access they need to green fuel alternatives.
“Sweden is doing its part in shipping’s fuel transition. Not just from the development of fuels but to regulatory frameworks. But it cannot do it alone. Europe is making great strides in its decarbonisation efforts but it needs to work closely together to get surplus renewable fuels across the continent,” he concludes.
