According to Lloyd’s Register’s (LR) latest Engine Retrofit Report, the maritime industry has made progress in retrofitting ship engines for alternative fuels, but a lack of supply-side incentives may hinder progress.
Since LR’s initial report in 2023, the industry has completed the first methanol fuel conversions since 2015 and expanded shipyards with retrofit capabilities.
However, the new analysis underlines that the incentives required to promote the use of alternative fuels are growing at a slower rate.
Despite legislative drives like the European Union (EU)’s FuelEU Maritime and Emissions Trading System (ETS), which penalise carbon emissions, demand for alternative fuels remains low due to a lack of substantial incentives for fuel producers.
A surprising development in 2024 was the return of LNG retrofits, as shipowners sought quick carbon reductions to meet regulatory standards.
More than 305 LNG-fuelled ships were ordered last year, accounting for approximately 14 per cent of newbuilding orders, significantly outpacing methanol and ammonia alternatives.
While LNG provides a near-term compliance solution, the research warns that more emissions reductions will be required after the next decade.
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Methane emissions and the long-term availability of bio- and e-LNG remain issues, but with zero-emission fuel supply chains still in their early stages, many operators regard LNG as the most practical retrofit option.
The report by LR emphasizes the importance of supply chain readiness, warning that without better coordination among engine manufacturers, fuel system suppliers, and shipyards, lead times for conversion projects could exceed 18 months.
Additionally, recent amendments to the MARPOL Annex VI NOx Technical Code are expected to ease certification challenges for converted engines.
Another key difficulty mentioned in the first assessment was the limited capacity of shipyards capable of carrying out alternative fuel conversions.
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While the number of suitable yards has expanded (about 16 shipyards, primarily in China and the Middle East), the most recent assessment pegs current refit capacity at roughly 465 vessel conversions per year—far less than the predicted peak demand of over 1,000 conversions yearly.
Despite the sluggish growth of new retrofit orders in 2024, engine designers are anticipating future market demands. Retrofit projects have a shorter lead time than newbuilds, hence more projects for completion in 2026 and 2027 might be announced in 2025.
In response to the original study, which identified shipyard capabilities as a potential barrier to retrofits, LR created a system for assessing potential shipyard candidates.
This gives shipowners assurance that the chosen partners can meet the refurbishment project criteria.
Claudene Sharp-Patel, LR’s Global Technical Director, said: “The technology and shipyard capacity to retrofit vessels is improving, but without decisive action to scale up alternative fuel supply chains, shipowners will face increasing compliance costs and operational uncertainty.
“We need greater regulatory clarity and investment to bridge the gap between ambition and action.”
