The framework has been created to offer clarity around the term ‘readiness’ which is used in multiple ways across the shipping industry.
The rankings were developed based on observations that some shipowners have had a design for conversion to zero carbon fuel done as a paper exercise, without a plan for how the conversion would be carried out.
Others have some or all the required equipment (for example: engine, tank, pipework, fuel management system) already installed. Another group of vessels have a dual fuel engine that could run on a zero-carbon fuel but may require an engine retrofit to do so.
This figure provides a framework for assessing the actual readiness of a vessel for the transition to zero carbon fuels:
Five levels are defined, from 1 (highest level of readiness) to 5 (lowest level of readiness). Existing fossil fuelled vessels that have no possibility of conversion have no readiness level.
By classifying vessels in this way, stakeholders are given clarity over the status of any given vessel and the industry will have a standard benchmark for comparing vessels when it comes to zero carbon readiness.
The framework can be applied to vessels in the existing fleet, that are newly built, or are on order. It is designed to accommodate any vessel that is or could be zero GHG emissions fueled, measured on a well to wake basis. At this point it is being applied to ammonia, hydrogen and methanol.
Whilst the framework describes the asset, not how it is operated, it is the intention of the framework that vessels make use of the capability to be operated from zero carbon fuel as and when the fuel is available.
In addition, this framework does not address the resources used, or the production method for, the fuel actually used on board. It describes the capability to burn zero carbon (or ‘green’) fuel but does not indicate whether that fuel has actually been produced in a carbon emitting (e.g., grey) process. Likewise, it does not indicate whether any electricity used (e.g., for shore power) is renewably sourced.
This framework is independent of Class Societies’ rules and notations. Certification from any class society may be used as evidence to support a given readiness level. As ships are modified during their lifetime, a vessel built to a certain level may be downgraded at a later date and may require a survey before being upgraded.
This framework is designed to be completely separate to current regulations such as EEXI and CII. These are aimed at near-term improvements in vessel energy efficiency (and therefore GHG emissions) but not targeted at the longer-term goal of zero-carbon fuels.
Level 1: The long-term goal is near net zero GHG vessels
Ultimately, 2050, all vessels in service need to all intents and purposes, be near net zero. This means capable of bunkering and operating with fuel with lifecycle emissions of net zero for all energy sources (be these propulsion or otherwise) and in all modes of vessel operation.
We call these ‘near net zero’ to allow for the reality that even fuels without a carbon molecule may involve a small unavoidable release of some GHGs somewhere in the end-to-end supply chain. Such vessels, which cannot be powered by fossil fuels, are categorised as level 1.
As of today, very few vessels in service meet these level 1 requirements and those that do are short sea ships such as passenger ferries.
Level 1 defines the aspiration for ocean going shipping and we expect businesses to publish strategies and plans showing how they intend to reach level 1.
Level 2: At present we are able to build low GHG vessels
For ocean going shipping, today’s focus is on low GHG Vessels, categorised as level 2. These are ships that are capable of bunkering and operating today for primary propulsion in a majority of operating modes, often dual fuelled. They may use fossil pilot fuels or operate mainly using fossil fuels where zero carbon fuels are not yet available.
At present most of the level 2 ships in service are methanol capable, typically dual fuelled with a 2-stroke diesel engine. A majority are either tankers or containerships. There is also a healthy methanol capable orderbook.
Level 3: Vessels with conversion under preparation are a strong signal of intent by the industry
We describe vessels that cannot use zero carbon fuels today but have some of the components needed in place already, as conversion under preparation, categorised as level 3.
This shows that the asset has advanced beyond the design stage and work is underway to make the vessel capable of propulsion with zero carbon fuel, albeit recognising there will be further conversion costs later.
This category attempts to de-risk the asset and maximise optionality by balancing upfront investment against downstream investment.
An analysis of preparing container vessels for conversion to alternative fuels7 by The Mærsk Mc-Kinney Møller Centre for Zero Cabon Shipping expands upon Level 3, going beyond the engine and tank, detailing additional factors such as:
• Allocation of space for new equipment • Putting key structural elements in place to support new equipment • Installing piping, cabling and ventilation
This study also examines newbuild and conversion costs for the container ship case study, addressing pros and cons of upfront investment now to maximise readiness vs downstream investment at the time of conversion.
Level 4: A design for conversion is the foundation of vessel readiness
Many vessels that are described as ‘ready’ are just at the design stage. For example, a fossil fuel vessel, existing or newbuild, has been subject to a design study showing how it could be converted to a zerocarbon fuel in the future.
This may be a high-level conceptual design with general arrangement drawing showing how the layout would change. Or it may be a detailed design with complete equipment specification, identified components and detailed design drawings.
There may have been an Approval in Principle (AIP) for the design provided by a classification society. Either way there is much to be done to make the vessel ready and usually the investment case is unquantified.
In addition, design drawings often become out of date once a vessel has been in service for few years, as equipment is changed, and repairs and modifications are made.
We categorise this as level 4, design for conversion. Experience in shipping and other industries tells us how important it is to design safety in as early as possible (see box: Safety needs to built in from the beginning).
The costs of adding safety in when converting an existing vessel are much higher than when newbuilding. And the level of safety achievable may well be lower. From a safety perspective the design stage is critical.
Level 5: Dual fuel engines are becoming the default for newbuilding
Marine engine manufacturers are increasingly developing and offering engines of a modular design, that can be retrofitted to run on a different fuel simply by replacing or adding certain parts. The manufacturer typically offers these parts as a retrofit pack which can be purchased at a later date. This removes a barrier to later conversion in that there is no need for a complete engine replacement.
However, in reality this represents a very low level of readiness as major investment is still required and all of the factors described above also need to have been addressed. We categorise this level of readiness as level 5, potential for conversion.
Charles Haskell, Director, LR Maritime Decarbonisation Hub, said:
“As ships built today will still be in service in the 2040s, it’s essential for shipowners to understand the full implications of actual vessel ‘readiness’ for zero carbon fuels to meet the industry’s 2050 decarbonisation targets. These differing standards and classifications of ‘readiness’ across the industry have made it difficult for owners to conduct a transparent assessment of their vessels’ commercial prospects in a zero-emissions future. In view of the significant structural and technical complexities of vessel conversion, we developed the ‘Zero Ready Framework’ to help investors, charterers, insurers and prospective shipowners better understand and assess the risks and conversion costs of both existing and newly built fleets.”
“Until now, we have found that current regulations have focused on near-term improvements in vessel energy efficiency and GHG emissions, but have yet to address the longer-term goal of vessel readiness for zero carbon fuels,”
said Andrew Keevil, Strategy Development Manager for LR Maritime Decarbonisation Hub and lead author of the framework.
“We designed the ‘Zero Ready Framework’ to accommodate the spectrum of vessel capabilities in both the fleet and the order book. We hope that the industry adopts these readiness levels, thus creating a common understanding of where ships are today on the journey to zero. By committing to a clearly defined readiness standard by a specified date, shipowners are better able to factor climate risks into their business plans and demonstrate climate action to both their customers and stakeholders.”
The framework has been developed through cross-industry consultation through a series of workshops with industry stakeholders.
Haris Zografakis, partner at the law firm Stephenson Harwood LLP, who's involved in various maritime decarbonisation projects and is an expert in the contractual aspects of decarbonisation, said:
“Many aspects of decarbonisation suffer from an absence of accepted standards and precise definitions; for example, in relation to measurement of emissions, the specifications of new fuels, and their fitness for purpose. Another nebulous area is the commonly used term ‘zero-ready’ vessels (either newbuilds, or following retrofits), which has no classification or regulatory definition. Standards and clarity are not merely desirable for debates, policies, technological progress, or investments. They are also critical in the world of contracts: shipbuilding, ship conversion, chartering, but also finance, where uncertainty and ambiguity always gives rise to disputes, for example in relation to pre-contractual misrepresentations, or breach of contractual warranties. LR’s efforts in creating a set of definitions for the various types of ‘zero ready’ vessels is an important development, as it will allow parties to incorporate the relevant definition into their contracts, so as to identify precisely which type of readiness they adopt. A fine example of voluntary initiatives, aided by contracts, moving ahead of regulations.”
Nikos Benetis, Technical Director, Greenheart Management, the in-house shipping desk for Hayfin Capital Management’s maritime funds, said:
“A first in our industry where stakeholders have had an opportunity to voice their concerns and challenges via a focused and well driven forum/platform, with a set deliverable. The framework captures and summarises the critical factors in a concise way and sets out clearly defined discussion topics and roadmap for owners, investors, manufacturers and shipyards, that will support understanding, benchmarking and ultimately adoption within the industry.”
Tim Berckmoes, CEO of Anglo Belgian Corporation, added:
“Zero carbon fuel readiness is a critical issue for shipping today. The Zero Ready Framework defines a series of levels that will help to steer the industry to zero through step-by-step improvements in readiness. Both dual fuelled and 100% hydrogen marine engines are already available, enabling the highest possible levels of readiness in the 1MW to 2.6MW power range today. In addition, innovative engine platform solutions will deliver the flexibility needed to respond to uncertainty and evolve with vessels as they progress upwards through the readiness levels.”
Whilst the ‘Zero Ready Framework’ signals a positive step forward, the LR Maritime Decarbonisation Hub continues to seek to further collaboration with potential partners to apply the framework in projects and initiatives to advance shipping’s decarbonisation.