As demand for lower-carbon marine fuels grows, bio-residues are emerging as an increasingly important alternative to conventional fossil fuels. However, the shift also brings challenges, from feedstock variability and supply-chain traceability to fuel compatibility, storage and machinery performance. Mark Smith of NorthStandard examines the opportunities and risks associated with marine biofuels, while outlining key fuel-management, testing, certification and loss-prevention measures for shipowners and operators.
By Mark Smith, Loss Prevention Director – NNE and Decarbonisation, NorthStandard
While traditional food crops such as corn, sugarcane, wheat and vegetable oils can be converted into fuel, their use for food is driving demand for more prudent alternatives, including waste and by-products from agricultural, forestry, food-processing and other biological industries.
These bio-residues can be processed into fuels or fuel blends that act as ‘drop-in’ replacements for conventional oils, offering ships a pathway to reduce greenhouse gas emissions.
Regulatory Tailwinds and Market Drivers
The regulatory framework surrounding maritime decarbonisation is increasingly encouraging the use of bio-residues.
- FuelEU Maritime: The regulation financially incentivises the use of bio-residues, allowing operators with a reduced-emissions ‘surplus’ to sell it to ship operators in deficit, helping them avoid compliance penalties.
- EU ETS and SMAP: A proposed revision to the EU ETS would introduce a technology-neutral framework known as SMAP (Sustainable Maritime Alternative Propulsion), designed to help close the cost gap between fossil fuels and low-carbon alternatives.
- RED III: The EU’s Renewable Energy Directive encourages biofuel production from a wide range of residues. These include used cooking oil (UCO), some animal fats, Palm Oil Mill Effluent (POME), tall oil, a pine wood pulp by-product, and lignocellulosic residues from non-food plant parts, alongside forestry, agricultural and some industrial residues.
- IMO Net Zero Framework: In its initial form, the IMO Net Zero Framework (NZF) envisaged a GHG pricing mechanism supported by incentives for lower emissions. However, member administrations remain divided over whether such a measure is workable or desirable. The 85th session of the Marine Environment Protection Committee (MEPC) will be important in determining the basis on which the NZF can move forward.
The Continuing Demand for Drop-In Fuels
Despite the regulatory debate, demand for marine biofuels continues to grow.
In its Maritime Forecast to 2050, DNV notes that 89.8% of in-service tonnage can operate only on oil fuels.
“This implies reliance on drop-in fuels such as fatty acid methyl ester (FAME) or hydrotreated vegetable oil (HVO) for decarbonization, unless these vessels are converted to use alternative fuels or equipped with onboard carbon capture and storage,” notes DNV. “For vessels currently on order, 60.6% of the tonnage and 79.5% of the ships by number face similar limitations.”
Against this backdrop, suppliers seeking to satisfy maritime demand are likely to increasingly look beyond conventional feedstocks towards more complex bio-residue sources.
It is therefore important to recognise that bio-residues are waste-derived fuels that require enhanced fuel-quality management and pollution preparedness.
Potential Unintended Consequences
As RED III applies across multiple industries, shipping will also face competition from the aviation and heavy-transport sectors for access to bio-residues. This growing cross-industry demand could introduce additional risks for the maritime sector.
Buyers may be exposed to lower-quality residues, including chemically variable feedstocks and blends derived from multiple residue streams. Pressure may increase on traceability systems, while fraud risks could rise through the misclassification of sustainability values in Proof of Compliance documents. Disputes over chain of custody could also become more frequent.
For ship operations, these risks may translate into oxidation instability, greater variability in acidity and cold-flow properties, or degradation during storage.
Lower-quality fuels could foul injectors or cause fuel-pump wear. Increased sediment formation could lead to more blockages in purifiers and filters, while microbial growth could become more prevalent where residual contaminants or water are present.
Compatibility with conventional marine fuels and the risk of cross-contamination may also become issues when biofuel specifications are unreliable. Fuel incompatibility can cause problems with seals, gaskets, coatings and certain alloy metals.
Inconsistency in fuel composition between batches can also affect ship performance, both during an individual voyage and in terms of machinery condition over time. Uncertainty over long-term engine performance could ultimately result in higher maintenance costs.
Loss Prevention: Managing Bio-Residue Risks
Given the rising uptake of biofuels and the associated risks, NorthStandard recommends particular care in marine fuel management.
- Rigorous tank preparation: Members are advised to ensure that stringent tank-cleaning requirements are upheld before biofuel bunkers are taken on board.
- Enhanced fuel testing: Standard fuel testing may not include parameters such as microbial growth, chemical contamination or other contaminants. NorthStandard recommends that Members consult fuel-testing agencies about enhanced testing specifically tailored to biofuels.
- Use of data insights: P&I Club members can use VPS fuel insights to review ISO Grade-categorised data, identify common off-specification biofuel parameters, monitor suppliers with the most ISO 8217 off-specification fuels at barge level, and identify ports with the highest incidence of off-specification fuels, among other information.
- Strict storage and monitoring: NorthStandard’s general recommendation to minimise fuel-storage duration is particularly relevant to biofuels. Additional monitoring should include temperature and water drainage, while purification, filtration, sludge production and fuel-transfer systems should be closely monitored for abnormalities. Owners should also consider enhanced monitoring of fuel pumps, injectors and cylinder condition.
- Transfer and contingency preparedness: Users of fuels derived from bio-residues should ensure that transfer procedures, spill-contingency plans, Shipboard Oil Pollution Emergency Plans (SOPEP) and crew training are suitable for the fuels being used.
Fuel-composition documentation, including details of any blends, should also be obtained and retained. This information can assist with potential pollution clean-up operations where fuel properties may affect how pollutants disperse.
Certification and Traceability
To help ensure that uncertified products have not entered the supply chain, specific attention should also be given to certification such as the widely used International Sustainability & Carbon Certification (ISCC EU).
Appropriate documentation is essential as proof that a biofuel has been produced from waste or residue rather than crops. It also helps verify life-cycle GHG emissions and supports third-party compliance audits.
As the maritime industry increases its reliance on bio-residues as part of the transition towards lower-carbon fuels, robust fuel-quality management, traceability and pollution preparedness will become increasingly important.
Read more about biofuels in NorthStandard’s whitepaper, Biofuels: Driving the Green Transition.
About the Author
Mark Smith is Loss Prevention Director – NNE and Decarbonisation at NorthStandard, where he advises Members on loss prevention, decarbonisation and problematic fuels. He brings extensive maritime technical experience to his role, having previously served as a Technical Superintendent and Fleet Superintendent, with experience spanning vessel management, dry-docking, major repairs and technical support across ship operations.
About NorthStandard
NorthStandard is a leading global marine insurer and one of the largest Protection and Indemnity (P&I) clubs within the International Group. The company provides comprehensive marine insurance solutions, supporting shipowners and maritime businesses with expert underwriting, claims management, and loss prevention services.
Insuring approximately 350 million gross tons of shipping worldwide, around 20% of the International Group’s total, NorthStandard is backed by an ‘A’ financial strength rating from Standard & Poor’s. With offices across Asia, Australasia, Europe, and the United States, the company combines global reach with local expertise to help clients manage risk, enhance operational resilience, and support long-term success in the maritime industry.
Source: NorthStandard | Mark Smith