Methanol and its role in achieving a carbon-neutral future

Methanol and its role in achieving a carbon-neutral future blog
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As climate change becomes more urgent, governments and industries look to reduce their carbon footprint and other environmental impacts. Using methanol can be part of the solution, as highlighted by the 39th World Methanol Conference (WMC2021) in November 2021.The online event was organised by IHS Markit and attracted around 150 attendees from over 30 countries. With 25 expert presentations and live panel discussions, the conference gave an excellent overview of current and projected methanol demand and uses, as well as the different technological solutions and policy mechanisms needed to increase the role of methanol in a carbon-neutral future.

Methanol is an essential building block of hundreds of products that touch our daily lives. For example, it is in aerosols, fragrances, solvents, clothing, and medical protective equipment such as masks, gowns and gloves. It is also found in carpets, paints, mattresses, and many other household items. Methanol is also used increasingly as fuel for cars, trucks, ships, cookstoves, kilns, generators and fuel cells. The multitude of uses for methanol means demand for it is growing in most economies.

Methanol can be produced from various feedstocks, including natural gas, coal, biomass, waste, recycled carbon dioxide (CO2) and hydrogen. However, 99% of methanol is currently made from natural gas and coal. Nevertheless, public policy frameworks are driving towards low carbon solutions, and corporations are implementing sustainability agendas, so ‘green’ methanol has become a hot topic.

Green methanol includes bio-methanol (methanol from different biomass and waste materials) and e-methanol made from CO2 and green hydrogen. Currently, the market for renewable methanol is in its infancy. There are many uncertainties, including future demand and the economics of production. For example, in Europe, only a few green methanol plants are operating, but dozens of projects have been announced. Significant additions are also planned in North America. However, how they will change the market situation once they come online in the next few years remains unknown. Nevertheless, there are a few potential scenarios, as noted by Geoff Mullett (IHS Markit). One possibility is that in Europe, these projects will displace some fossil fuel-based methanol. Another likelihood is that green methanol will be used as fuel in the shipping industry if there is strong demand. The other possibility is that these new projects will shift American imports from Europe to Asia. There are also uncertainties about the role of methanol made in Russia.

However, even if all the projects planned in Europe come online, they will only generate about 1.25 Mt/y of green methanol. This is just over half of the methanol demand for fuel applications projected for 2027. The restricted volume is because the capacity of green methanol projects is much smaller than coal- and oil-based units. Additionally, the projects are often bespoke, and the price of green methanol still lacks transparency. Nevertheless, at the conference, it seemed that many organisations are prepared to pay a premium for greener fuel to reduce their carbon footprint.

As the global shipping industry looks to address various international and national ambitions to reduce its emissions, methanol is emerging as a leading alternative to diesel bunker fuel. Major shippers, including Maersk and Proman, plan to add methanol-powered vessels to their fleets or convert the existing ones to run on dual fuel. Key ports are also launching methanol pilots. So, it is clear that green methanol use in the sector will increase. However, the extent of the increase is unclear as investment by the sector will depend on appropriate policies, which change frequently, as do their CO2 targets. More predictable, longer-term policies would facilitate the industry to make significant investments in green methanol. Thus, as methanol demand grows over the next decade, fossil fuels will still supply most of this market.

The World Methanol Conference gave a great overview of the issues surrounding methanol production and its markets and highlighted methanol’s role in achieving a carbon-neutral future. I am looking closely at these issues in my upcoming report, which will be available at the beginning of 2022.