LR: Regulatory obstacles on dual fuel conversions eased in 2024

Lloyd’s Register updated 2025 Engine Retrofit Report finds that in 2024, the industry has made advancements in retrofitting ship engines for alternative fuels, however a critical lack of incentives threatens to delay progress.

In the past year, the maritime industry’s ability to execute ship engine retrofits for alternative fuels has progressed, according to LR. The first conversions to methanol fuel since the outlier Stena Germanica in 2015 were completed, and the number of shipyards with retrofit capability continued to grow. However, the new report emphasises that the incentives needed to accelerate the adoption of alternative fuels are evolving at a slower pace.

In 2023, LR published the first Engine Retrofit Report, assessing the potential for alternative fuel engine conversions and the technology, safety, and regulatory challenges ahead. In this update, LR assesses how those factors have developed in 2024.

RelatedNews

LR: Nusa Penida and Gili Matra islands new PSSA

DNV Maritime experts put green solutions under the microscope

What’s driving demand?

The original Engine Retrofit Report identified a market of around 13,500 existing vessels that may need engine conversions to use alternative fuels in order to meet IMO’s ambition of reaching net-zero emissions from shipping by or around 2050. While the IMO regulatory framework to achieve this ambition is under development, the EU’s FuelEU Maritime regulation was highlighted as a key driver to alternative fuel uptake.

At the end of 2024, FuelEU Maritime – combined with the EU Emissions Trading System (ETS) – remains the only major cost driver encouraging shipowners towards deep emissions reductions and hence uptake of zero- or near-zero emissions fuels. The IMO has progressed discussions for proposed mid-term measures, including an economic and technical measure, to enter force from 2027.

Until those are finalised it will be difficult for shipowners to assess how their existing fleets can be best adapted to minimise exposure and achieve the expected reductions in emissions. Beyond costs associated with carbon pricing, shipowners also need visibility on alternative fuel availability to weigh up the viability of converting their fleets.

LNG retrofits

One result of the low availability of zero- or near-zero emissions fuels was that, over 2024, increasing numbers of shipowners turned to LNG to reduce exposure to carbon pricing. More than 305 LNG-fuelled ships were ordered, far outpacing growth in the methanol- and ammonia-fuelled fleet.

In addition the lack of availability of other fuels also makes LNG a favoured option for regulatory compliance over the next decade. As with renewable ammonia and methanol, there are challenges for scaling up bio- and e-LNG, but the existing supply infrastructure and installed base may help owners make a pragmatic case for investing in LNG today.

Current retrofit orders

The lack of new drivers in 2024 meant that orders for retrofits did not evolve rapidly. The inaugural Engine Retrofit Report anticipated alternative fuel conversions beginning from a small base in 2025 and reaching significant numbers (over 200 a year) from around 2030.

Moreover, data on planned and completed fuel conversions shows the shift towards conversions for fuels with zero- or near-zero emissions potential. Following the first projects in 2024, methanol conversions will become more prevalent over the next four years, driven primarily by confirmed orders from the container segment. The data for 2025 include two projects already completed, with the remaining six scheduled for later in the year.

While some ammonia conversions have already taken place – on two offshore vessels and one tugboat – these are pilot installations of fuel cell and small engine technology that is not transferable to the wider fleet of large merchant vessels. Further ammonia retrofits are likely once large engine technology has been introduced.

Evolving shipyard capabilities

The capacity of shipyards capable of converting vessels for alternative fuels was highlighted as a significant barrier to uptake in the Engine Retrofit Report in 2023, with capacity well below the projected demand.

Assessing yards based on their experience of alternative fuels and complex naval architecture projects, LR identified an indicative group of around 16 shipyards, mainly in China and the Middle East, that were capable. This number will have to grow significantly to meet future requirements.

Addressing supply concerns

Another concern highlighted in the Engine Retrofit Report was the potential for supply chain disruptions. The supply chain around dual-fuel engines is expected to be relatively secure given engine builders’ capacity investment plans.

Regulatory obstacles to dual-fuel engine conversions were also eased somewhat in 2024, when draft amendments to the MARPOL Annex VI NOx Technical Code were approved. Due for adoption in April 2025, the amendments support the recertification process for engines that have undergone substantial modifications.

With carbon pricing becoming a reality, shipowners are looking for solutions now to reduce exposure to regulations including FuelEU Maritime, the EU Emissions Trading System and future IMO mid-term measures. But while demand side drivers are falling into place, supply side stimuli are lacking.

In 2025, there will be many more conversions based on existing orders, offering vital experience for the fledgling market. Whether the growth in order numbers themselves will accelerate will depend largely on the signals that both alternative fuel producers and shipowners receive from regulators.