Improving the energy efficiency of vessels is essential for achieving a sustainable, decarbonized shipping industry, according to the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMCZCS).
Not only does greater energy efficiency cut operational costs, but it also reduces greenhouse gas (GHG) emissions and other pollutants. As explained, on a global scale, lowering the energy demand of the world fleet also eases pressure on upstream energy resources, amplifying the environmental benefits.
Studies from the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMCZCS) indicate an approximate 4:1 ratio of renewable energy required for green fuel production to delivered energy on board vessels.
One way of improving the energy efficiency of existing vessels is by retrofitting energy efficiency technologies (EETs). As explained, EETs are changes to a physical aspect or control systems of a vessel made with the intention of reducing the energy required for propulsion.
Credit: MMMCZCS
Examples of implementing EETs include:
Fitting a new bulbous bow to the vessel
Replacing the vessel’s propellers
Applying a low-friction (i.e., foul release) coating to the hull during dry docking
Implementing engine control software to optimize fuel consumption
Installing suction sails for wind-assisted propulsion
The aim of retrofitting EETs on existing vessels is to immediately reduce the vessel fuel consumption and energy demand, which leads to reduced demands on both conventional and alternative fuel production, and a reduction in GHG emissions.
It should also bring a positive net cash flow to the fuel bill owner and be a positive business case in an asset’s lifetime.
A large part of the global fleet is not owned and operated by the same company but is instead operated through time-chartering agreements. In these agreements, the charterer normally pays for the fuel.
This may cause a split-incentive problem: the charterer benefits from fuel savings achieved through retrofitting EETs, while the shipowner normally bears the cost of the retrofit — an investment which is not necessarily reflected in the vessel’s charter-market value.
As a result, shipowners often lack a strong financial incentive to invest in EETs. Additionally, perceived risks related to the operation of the technology, return on investment, variation in fuel prices, and other factors may result in misaligned interests.
Sharing the benefits and costs of implementing EETs at the individual contract level may help align the interests of owners and charterers, thereby reducing barriers to implementing EETs. To enable cost-benefit sharing, the parties need a method for quantifying the benefits of EETs: specifically, reduced fuel consumption, energy demand, and GHG emissions.