Authors: Dr. Jean-Paul Rodrigue, Dr. Theo Notteboom, and Dr. Athanasios Pallis

Ports are strategically important locations in the collection, storage, transformation and distribution of energy. Many have undertaken a transition toward their electrification and the use of alternative energy sources.

1. Energy Efficiency in Transportation

The world’s energy needs continue to grow, with a 30% rise in global energy demand expected from 2020 to 2040. The majority of the required energy has conventionally been derived from fossil fuels, but a shift is slowly taking place with a growing share of renewable energy sources. Still, higher energy efficiency and the growing use of less carbon-intensive energy sources worldwide are expected to mitigate energy-related carbon emissions. Changing towards a greener energy mix is of key interest and concern in the transportation sector. Efficiency gains from more stringent energy performance standards play an important role in the evolution of energy demand.

The share of electricity in global final energy consumption is approaching 20% and is set to rise further. Electricity is increasingly used in economies focused on lighter industrial sectors, services, and digital technologies. In advanced economies, electricity demand growth is modest, but the investment requirement is massive as electrical generation and distribution infrastructures are upgraded. A common issue with electrification, which has a much lower environmental footprint, is how electricity is generated. The usage of fossil fuels to generate electricity upstream in energy supply chains undermines its environmental benefits downstream.

Renewable energy is expected to see the fastest growth, with natural gas expected to have the strongest growth among fossil fuels, with consumption rising by 50% by 2040, but this growth comes from a small share of about 5% of total energy consumption. Coal use has seen strong growth in recent years, attributable to China and India, but consumption levels are expected to stabilize and decline, as is already the case in Europe and North America. Growth in oil demand is expected to peak by 2030, and a shift in the balance of energy consumption is taking place between developing and advanced economies. By the mid-2030s developing economies in Asia are expected to consume more oil than Europe and the United States.

International agreements concerning the environmental footprint of energy generation and consumption have been implemented with mitigated outcomes. For instance, the objectives of the Paris Agreement on climate change, which entered into force in November 2016, are pointing toward a vague goal of transformative changes in the energy sector. Countries are generally on track to achieve and even exceed, in some instances, many of the targets set in their Paris Agreement. Therefore, five-year review mechanisms built into the Paris Agreement underline the importance of reviewing pledged commitments. This should include actions such as:

• The acceleration of the deployment of renewables, nuclear power, and carbon capture and storage.
• Greater electrification and efficiency across all end uses.
• Clean energy research and development efforts by the private and public sectors.

By 2040, about 60% of all new power generation capacity is expected to be derived from renewables, with the majority of renewables-based generation being competitive without relying on subsidies. However, there is a risk that cost reductions for renewables could be insufficient to decarbonize electric power generation systems. Structural changes to the design and operation of the energy grid are needed to ensure adequate incentives for investment and to allow for a higher contribution of wind and solar power, which have specific operational considerations.

The rise of solar and wind power gives unprecedented importance to the flexible operation of power systems in order to secure enough energy during periods of peak demand. The cost of battery storage is declining fast, and batteries increasingly compete with gas-fired peaking plants to manage short-run fluctuations in supply and demand. However, conventional power plants remain the primary source of system stability and flexibility, supported by new interconnections, storage, and demand-side response. The European Union aims to create an “Energy Union” to deal with imbalances in demand and supply between different member states, replicating the existing electric grid exchange systems in North America that allow regional grids in Canada and the United States to trade surplus electricity.

Despite expectations for greater use of renewables, fossil fuels such as natural gas and oil will continue to form the backbone of the global energy system for many decades to come. The transition towards green energy sources is an overstatement as there is more green energy production, but fossil fuel production is growing at a similar pace. By 2040, oil demand is expected to drop to levels similar to the 1990s, while coal use will move to levels last seen in the mid-1980s. Only natural gas will see an increase relative to the current consumption level. Based on an expected increase in oil prices in the long term, the trend for exploring fossil energy sources will continue to offshore locations, including deeper waters and harsher environments. More complex energy sources, such as tar sands, fracking, or methane hydrates, are also being exploited. Energy production on offshore wind farms will significantly increase, and other water-based energy production devices using wave and tidal current energy will have a broader market. These developments will lead to a massive increase in renewable energy, but the capabilities and market share of such systems remain uncertain. They will also result in a significant increase in the production and transport of fuels such as LNG, ammonia, shale gas, and hydrogen.

2. Ports as Energy Platforms

At the global level, about 40% of all the cargo handled by ports is energy-related, which is massive and carried in bulk. Conventionally, ports played a strategic role as energy platforms, particularly for fossil fuels, which substantially impacted their size and economic function. This process began with the coal trade and the transformation of shipping with the introduction of the steam engine in the mid-19th century. The increasing use of coal by steamships made ports large consumption markets and attractive locations for coal transport and storage. It also helped establish a network of coaling stations along shipping lanes to help refuel coal ships since their range was limited to the coal stores they could carry. Further, related activities, such as steelmaking, found port sites particularly suitable, leading ports to become important industrial complexes. Jointly, the increase in ship sizes through steam engine designs and the growth of port-centric industrialization led to the massification of port complexes.

By the early 20th century, the switch to petroleum allowed for even larger ship designs and the pressure for ports to expand with more piers, deeper drafts, and adjacent land. Other ports lost their prominence as coaling stations along shipping lanes as oil-powered ships had a longer range. The setting of petrochemical complexes led to several ports becoming major energy platforms relying on three interrelated functions:

• Ports can be energy transport platforms, acting as gateways for the exports or imports of energy products, including their temporary storage. This relies on the principle of economies of scale that ports offer to transport energy products, particularly in bulk.
• Ports can be energy transformation platforms, where they act as sites for the energy industry to perform their activities. This relies on the principle of economies of agglomeration, where energy activities benefit from the adjacency or proximity of suppliers and users.
• Ports can be energy generation platforms that can provide conventional and alternative energy sources to their users. This relies on the principle of economies of scope benefiting from the diversity of the energy provision and user base. Coal plants (common) and nuclear power plants (less common) are elements of ports.

Depending on their position within energy supply chains, the clustering of energy transformation activities can either be upstream (close to extraction sites) or downstream (close to consumption markets) of the supply chain. Other ports benefit from their intermediary location to act as energy transformation platforms, such as Singapore, one of the world’s largest petrochemical complexes.

The relations between ports and energy markets are undergoing an energy transition in their functions as providers, consumers, and energy processors. Even if ports and maritime shipping only account for about 3 to 5% of global carbon emissions, there are pressures to improve their environmental performance, mainly because of their high level of integration with energy supply chains. It is perceived that improvements in the energy performance of ports are contingent on improvements in the energy supply chains they support. This is commonly articulated as the decarbonization of ports.

3. The Decarbonization of Ports

The decarbonization of ports involves a series of potential strategies and a network of actors clustering around energy generation, electrification, and distribution:

• Operational improvements. Improvement in operational efficiency represents a low hanging fruit since it does not require substantial investments in equipment and infrastructure. For instance, improving the queuing system of port arrivals can reduce ship voyage emissions in the range of 10 to 25%, depending on the ship type. Since ships can spend 4 to 6% of the annual operation time (15 to 22 days) waiting at anchor for a berth to be available, any reduction in this time reduces carbon emissions.
• Transformation of port-centric energy generation. Ports have conventionally been highly involved in energy generation, with facilities such as coal and gas power plants. Since resources were brought in bulk by maritime shipping, ports were effective locations for energy generation systems built on the principle of economies of scale, including centralized distribution. Any future energy system relying on this principle will be inclined to use port facilities. Still, ports are rarely involved in the energy generation business. They are convenient locations for energy generation facilities operated by third parties, particularly public or private energy companies.
• Ship energy supply systems. The ongoing regulations toward low sulfur bunkering, including LNG, will involve a new energy transformation process and related port-centric activities. Still, alternative energy ships are about 35% more expensive than their fuel-oil counterparts, implying high conversion costs for shipping lines. The location of bunkering is likely to remain the same, but the transition can offer opportunities to ports able to provide lower-emission fuels first. Another transformation concerns cold ironing, which supplies docked ships with electrical power instead of power generation by the ship’s power generator. Shore-generated power has a net cost advantage since the electricity is cheaper than the supply generated using onboard generation systems.
• Electrification of port-centric activities. These activities include terminal operations, bunkering, logistics, and freight distribution, cold storage facilities, service vessels (e.g. tugboats), and supporting buildings. In addition to reducing carbon emissions, the electrification of port equipment lowers noise emissions and their negative community impacts. However, this requires a network of recharging stations that must be supplied by an energy production system and supported by an energy distribution grid.
• Electrification of port-centric industries. Many heavy industries located within port facilities depended on fossil fuels as a core energy input. The transition of port energy systems will be accompanied by a transition of the port industrial ecosystem.
• Offshore wind power generation. Through the maritime interface, ports can access large coastal oceanic areas, offering wind generation opportunities. The port and its industries already offer an existing demand for installed wind generation capabilities and can offer port authorities new revenue sources. The port can also act as the platform to procure, install, and maintain offshore wind power systems. This has allowed several ports, particularly small and medium-sized, to find new sources of activity.
• Integration of port energy systems. Port clustering allows different energy systems (conventional and alternative) to operate independently, seeing a better integration between supply and demand. This allows for an energy trading system where energy surpluses could be traded between suppliers and users within the port community. A more efficient electric grid and energy storage capabilities have to be developed in tandem.

Once the energy transition of ports has matured, it is expected that ports will play a more strategic role within the respective regional energy systems as platforms to generate and distribute energy.

There are multiple challenges that ports face as actors in the energy transition. They include securing funding, finding the right expertise to implement new technologies, adapting the strategic planning of port land use, managing complex operations (energy generation and distribution), collaborating with stakeholders, and dealing with technical uncertainty. Applying a “one plan fits all” approach is contentious. Every port has its profile defining its jurisdiction, options, priorities, cost structure, and potential role. Concerning the latter, seaports often play a role in connecting multiple cargo flows and energy storage and distribution. In general, ports are complied to balance commercial, environmental, and economic objectives. At the same time, the energy transition offers opportunities in terms of cost savings, securing market share, and attracting new cargo and industries.

4. Port Electrification

A fundamental element of the energy transition of ports concerns their electrification. Due to the nature of their equipment, port electrification is a straightforward strategy that is less prone to risks than the energy transition of carriers. Equipment such as cranes, gantries, and conveyor belts has a high propensity to be electrified, and many, if not most, already are. Electrification can convey several benefits but also involves several drawbacks. The most notable expected benefit is an improvement in the energy and environmental performance of ports. Electrification is expected to lead to lower operating costs if electricity costs are low compared to other sources. It is also expected that electrification increases port resilience, particularly if the port is able to generate a share of its electricity and is able to function outside the local power grid. Still, these expected benefits have not been fully demonstrated.

Port electrification is subject to several challenges. First, the potential for electrification is strongly dependent on local factors, including the cost of electricity and the capabilities of the local grid. The electrification of a terminal facility will likely place a significant load on the local grid, which may not be able to handle without improvement in power distribution and generation capabilities. There is an intrinsic risk of being dependent on the capacity and reliability of the local electric grid since the utility provider may be unable or unwilling to accommodate additional needs or may take an undue amount of time to do so. This can be a challenge, particularly in developing economies. The development of microgrids is a mitigation strategy that can involve two options:

• Independent microgrids. The port or terminal facility, usually a critical piece of infrastructure (e.g., operations building, reefers), is serviced by a power grid that can function outside the local grid. It may have the option of being connected to the local grid but can function independently. To function, these grids need power generation capabilities, such as a diesel generator, and power storage if the power source is photovoltaic or wind.
• Networked microgrids. Consider the connection between several microgrids into a more complex power system. This complexity is based on redundancy if it involves the same power source or on diversity if the power sources are different.

Microgrids need to be resilient to events such as load surges, local power outages, and disruptions resulting from extreme weather events. Within the port, supplying electricity can come from:

• Combustion-based generation. Power generation from fuel combustion, irrespective of the nature of this fuel. Diesel, gasoline, and natural gases are the most common fuels, and biofuels are also being implemented. If this power generation comes from fossil fuels, then electrification mainly displaces the pollutant emission source.
• Solar voltaic. Low-intensity electric generation that requires 5 to 10 acres of solar cells per megawatt of power. They can be suitable for small microgrids powering terminal lighting or telecommunications. Although ports and terminals have substantial surfaces, they can only be partially used for solar power generation, such as roofs.
• Hydrogen. Can be used either as a combustion fuel or in fuel cells, which is the most common usage. Fuel cells are usually applicable for small-scale uses, such as buildings and warehouses. Still, hydrogen energy systems have not been fully implemented and remain experimental.
• Wind. Wind farms can generate around 30 megawatts for ten wind turbines, making wind energy suitable for electrification if combined with power storage to account for the notable variability in production. The matter remains the selection of sites for wind turbines, which can be within the port facility (onshore) or offshore, where there may be jurisdictional issues. A drawback is that by design, ports and terminals tend to be located in low wind areas so that navigation is not impaired.
• Wave and tidal. Since ports are commonly facing oceanic masses, there is a potential to capture wave and tidal energy. Still, such projects are capital-intensive and may impair navigation.
• Modular reactors. Using small self-contained nuclear reactors to generate electricity. These are unlikely to be available for deployment in the near future.

The energy transition of ports, including their further electrification, will likely result in a wide diversity of functions and power systems, underlining the enduring unique role each port plays. Because of the unique composition of the wider port area and the supply chains it services, each port presents a different energy landscape. Therefore, there is no optimal form of energy transition, but a variety of options and opportunities remain to be demonstrated and validated as commercially viable.

5. Green Hydrogen and Seaports

A. Green Hydrogen as Part of the Green Energy Mix

In the past decade, hydrogen (H2) has attracted a lot of attention in the energy transition and decarbonization debate. Hydrogen is set to meet up to 12% of global energy demand by 2050 (figures of IRENA). The transition to hydrogen is not merely a fuel replacement but a shift to a new system with political, technical, environmental, and economic disruptions.

At present, hydrogen is primarily used in the production of chemical products, such as plastics and fertilizers. Most of the hydrogen production is by means of natural gas. This is called grey hydrogen, using a process of steam methane reforming, where natural gas is mixed with very hot steam and a catalyst. Blue hydrogen is also hydrogen produced from natural gas, but this process is made carbon-neutral by capturing and storing the CO2 emissions (also called Carbon Capture and Storage or CCS). Green hydrogen can be obtained via electrolysis, i.e., the use of (renewable) electricity to split water into hydrogen and oxygen. Green hydrogen has no carbon impacts, as the energy used to power electrolysis comes primarily from renewable sources like wind, water or solar. The use of green hydrogen as a raw material and fuel can thus reduce emissions in industry and make a contribution to the 2050 climate targets. When produced at times and places where solar and wind energy resources are abundantly available, renewable hydrogen can also support the electricity sector, providing long-term and large-scale storage, as well as improving the flexibility of energy systems by balancing supply and demand.

There has been strong regulatory and political support in recent years, with many countries having developed hydrogen strategies. The growing focus on hydrogen has also given impetus to the development of so-called hydrogen valleys. These are regional ecosystems that link hydrogen production, transportation, and various end-uses such as mobility or industrial feedstock. The valleys are considered important steps in enabling the development of a new ‘hydrogen economy’. By 2050, there would be about 100 worldwide by 2030. There is a strong policy-backed focus of the private sector on technological innovations in, and the manufacturing of, equipment like electrolysers and fuel cells.

B. Green Hydrogen and the Port Energy Landscape

Green hydrogen is expected to assume a role in an emerging new energy landscape in ports. Ports can play a crucial role in the production and distribution of green hydrogen. They are important nodes, given existing and future local demand for hydrogen, the emerging offshore parks, and as junctions of transport nodes, some of which could shift to hydrogen or related fuels (e.g., vessels, barges, trucks). Additionally, the infrastructure and handling capabilities of seaports make them prime locations for the storage and distribution of hydrogen. Seaports can serve as hubs for the import or export of green hydrogen to other countries, helping to drive the global transition to clean energy.

Ports aiming for a strong position in green hydrogen are challenged to be active in all parts of the hydrogen value chain. A favorable location, a well-developed pipeline network, strong worldwide maritime connectivity, state-of-the-art terminal and logistics infrastructures, well-functioning and efficient industrial ecosystems and a strong customer base, are all important factors enabling a seaport to take up an important, pioneering, role in an emerging hydrogen economy, positioning itself as a hydrogen import, transit and production hub.

A number of seaports are stepping up their efforts to become energy and feedstock hubs and growing producers of green hydrogen. Projects related to imports of renewable energy are taking shape. Extensive feasibility studies are conducted to analyze ideal sourcing regions, to prepare seaports for receiving the hydrogen carriers of the future, and to set up specific pilot projects in the context of a sustainable economy. Although quite a few initiatives for hydrogen export and import facilities have been announced, we are still in the early days of the creation of a global hydrogen carrier, shipping and port network.

Green hydrogen is likely to influence the geography of energy trade, regionalizing further energy relations, with the emergence of new centers of geopolitical influence, around its production and use. Net energy importers such as Chile, Morocco, and Namibia are making plans to emerge as green hydrogen exporters, while fossil fuel exporters, such as Australia, Oman, Saudi Arabia, and the UAE, are increasingly considering green hydrogen to diversify their economies. The developments in the geography of energy trade will obviously impact origin-destination relations of cargo flows handled by seaports. Ports vying for a hub role in the global hydrogen network are urged to align their commercial and marketing efforts with the future geographical shifts in energy flows, and to partner with leading private companies and local, regional and national governments in establishing closer relationships with existing and upcoming countries in the hydrogen economy.

Next to large to very large projects, the port industry is also engaged in a lot of smaller initiatives on the production and use of hydrogen. For example, a number of logistics companies are planning to produce green hydrogen on their sites in port areas by using electricity provided by the solar panels on warehouses, or to use hydrogen-powered internal company transport or terminal equipment, linked to mobile hydrogen filling stations.

The focus on green hydrogen connects different parties and stimulates cross-value chain collaboration in and around seaports. Several seaports have joined various partnerships focused on hydrogen, such as Hydrogen Europe, Clean Hydrogen Alliance and the German H2Global Foundation. The International Association of Ports and Harbors (IAPH) joined the Global Ports Hydrogen Coalition in 2021. The coalition is part of the Hydrogen initiative (H2I), originating from the Clean Energy Ministerial (CEM), dedicated to support the scale-up of clean hydrogen in the global economy.

The focus of port ecosystems as regards hydrogen is not only on green hydrogen, but also on the decarbonization of grey hydrogen. Blue hydrogen relies strongly on CCUS (Carbon Capture, Utilization and Storage).

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Related Topics

• Chapter 2.7 Ports and the Circular Economy
• Chapter 8.3 Ports and Energy

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References

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