Pressure and Propulsion
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Hello and welcome to another episode of the Aronnax show, the podcast powered by Fathom World and hosted by me, Crag Eason.
Later in the programme we will hear from Orestis Schinas from innovative ship finance firm HHX.Blue who has estimated for the EU funded wind assisted ship propulsion project, the potential value of the wind assist propulsion technology market as ships all around the world face the challenge of meeting the targets set for shipping’s immediate carbon intensity reduction.
At Fathom World I focus on the transformation of the shipping maritime and ocean space, but undoubtedly the most exciting part is keeping track of the changing technologies and solutions that are becoming available to help shipping become a cleaner industry.
Shipowners around the world face some excruciatingly difficult decisions in the coming years, and I mean the coming four or five years as expectations rise to reduce CO2 emissions and then decarbonise.
Political pressure is mounting.
Here’s Nigel Topping, who is the UK high level champion for climate change for the next UNFCCC COP meeting which will be in Glasgow at the end of this year.
“So, it seems to me that we clearly, very rapidly moving to convergence on agreeing that a transition to zero is feasible within the scientific required timeframe by 2050. All signs are pointing to hydrogen and ammonia being the most promising fuels. Zero emission fuels being ready by 2024, ready to order by 2022 - those dates seem to be coming forward every time - I'm not steeped in shipping – but every time I dip in, we seem to be getting more confident we can go faster.
And I think the rapid increase in greenhouse commitments from both governments and private sector players is encouraging. We have a large number of cargo owners in The Race to Zero, but we need to have more shipowners so far only, only, only the only container shipping is Maersk, we need more players along the value chain more commitments from ports and from fuel manufacturers so that we can drive that near term collaboration across industry and government to drive the pace needed.
Finally, long term, we've got to have a level playing field. And that I think it's going to mean that some sort of carbon levy or similar forcing mechanism. And there the IMO role is going to be critical. And the discussions at the MEPC in June, on the proposals from the Marshall and Solomon Islands will be, I think, an important opportunity for the IMO to indicate its commitment to playing an active role in the transition to net zero.
I know that a lot of people are looking to the IMO to show that leadership and are sceptical at that moment, because I feel I haven't seen it. So I would encourage all governments to make sure that your IMO delegations are sending a clear message on the need for rapidly increased ambition. We can't continue to have one set of ambition communicated through climate ministries and a separate one through transport ministries”.
That is Nigel Topping The UK high level champion on climate change for the next UNFCCC COP meeting in Glasgow towards the end of the year.
He was talking during a World Bank webinar to explain two recent papers the Bank has recently commissioned and published. One looks at the benefits for developing countries of a decentralised fuel network as shipping turns to fuels such as hydrogen and ammonia that can be made using renewable electricity and not the hydrocarbons of today which are controlled by a powerful few.
The second papers outlined explained its views that shipping is heading down a dead end if it continues to order ships powered by LNG. This report is more controversial and has been criticised by groups who say that hydrogen and ammonia fuel and engines that can burn the fuel will not be available in the short term.
Nigel Topping sides with the World Bank perspective, but he also believes countries, the UN member states that are also IMO member states, are under increased pressure in the face of the UNFCCC meeting to align their priorities. And that means making sure that what they say about decarbonisation goals in general is what they get their delegations to say at MEPC. The IMO has been riddled with inaction in the past as delegations procrastinate on one theme or another over about 20 years.
Things seem to be changing now though.
Both the UK and US have alluded to increased pressure on the shipping industry, an industry that has agreed to certain targets by 2030 and 2050 but which may soon find that those targets are just not going to be enough.
The UK has said it it wants to bring what it sees as its share of shipping’s emissions into its own GHG budget accounting along with aviation’s. The US has reaffirmed in a recent world leaders summit its commitment to the talks at the International Maritime Organization.
So, yes. The pressure, and the rhetoric seem to be mounting.
Since the Paris Agreement in 2015 the science has shown that even the sudden surge in acceptance of the problem has not resulted in enough action. So, this year, despite the restrictions of the pandemic we see the world looking to the next UNFCCC meeting which is in Glasgow in November. It is seen by some as the most important meeting since Paris.
Some of the papers for the IMO’s June MEPC meeting include submissions about market-based measures from the Bahamas that Topping alluded to, as well as papers on the two agreed measures to make initial curbs on shippings emissions – that’s the EEXI and the CII, the Energy Efficiency Existing Ship Index and the Carbon Intensity Indicator – as well as more acceptance of alternative technologies especially as pressure may increase to strengthen the current 2030 goals.
Now, one such technology is wind assist solutions. These are a growing range of solutions which provide some additional thrust to an existing vessel. these are flettner rotors, wingsails and kites that can harness wind and provide a vessel with a little push, enabling the vessel’s engines to be run at a more efficient power, reducing emissions, while the ship still maintains its expected speed.
If you look back in the Aronnax Podcast archives you will find a number of interviews with companies that have been developing, testing and selling such concepts.
There are now more than a dozen examples on commercial shipping, some of which are subject to additional research to achieve better understanding of the benefits, as well as a better way of estimating what these technologies can offer by way of fuel savings and reduced emissions for owners interested in new installations.
But one of the issues with WASP technology deployment is access to capital both for the companies developing the technology and the shipowners interested in using them.
I recently took part in a webinar organised by the Wind Assisted Ship Propulsion project, an EU funded project organised through the Interreg North Sea Europe programme, part of the European Regional Development Fund (ERDF). The project has brought together universities, research groups and ship owners to not only test wind assist system performance, but to also look at how modelling of performance can be better developed and then this modelling both used to assess technology potential performance on a retrofit.
In this way the aim is to give better reassurance to ship operators that have an interest in applying wind assist technologies to an existing ship or one they want to order and have built.
Wind assist technologies from companies such as Norsepower, AirSeas, Anemoi, Econowind, and others are still new, but they are a very visible demonstration of how the industry is changing. But in order to convince shipowners and operators that these technologies can be applied, it needs both good data to show expected results and a good finance model to show the return of investment.
As part of that webinar, I heard from Prof. Dr. Orestis Schinas from alternative ship finance firm HHX.Blue who said that the regulations that have recently been approved, namely the EEXI and CII will be drivers for technology investment. And that this should be good news for anyone with investments in cleantech.
“Allow me to remind you that the value of the assets, let's say the ships currently in the water, is around $1trn to $1.2trn, and as per the current regulatory requirements, the ones that we expect to have in MEPC 76, and in the near future, almost 80% to 90%, depending on the ship type and size, will not comply with the regulations of EEXI, energy efficient operating index, and the Carbon Intensity index. And this gives a huge, let's say, trigger for financers and operators, to invest in shipping assets gain.
“And this is, let's say, what this is also the outcome of the studies and the input that we get from classification societies where practically 90% of the total fleet of existing total made does not comply with the EEDI phase three requirements.
“In this regard, bank lending, and generally available capital for debt is decreasing from banks, due to banking and financial regulatory issues, so the leverage of the industry is still 50%. And that means, I mean, right now I'm talking about I'm talking about across segments and sectors. So and that means that it is really challenging for ship owners to raise capital in order to retrofit, or lets say to update with the technology onboard, or build new ships. And this is challenging.
“We have concluded an analysis that will be published soon, where around $300bn is the cost of the estimated decarbonisation efforts in assets, for the period 2025 to 2030. That is the day the first period of the compliance with the 2030 goals for the IMO. And we have, as I said, this figure is very close to what other sources estimate. So you can have a range from $250m to $350m, only for, let's say new ships for retrofit in this period and keep in mind that the order book right now most yards worldwide, is, let's say empty.
“To cut a long story short, if we estimate $100 billions. That is let’s say the total amount of costs for decarbonisation and to achieve the goals of IMO 2030. And considering that the wind assist technologies are already in, let's say in the list of technologies that are promoted by classification societies, technical experts, etc, etc. And it will consider that only 10% of this budget will be allocated to wind-assist technologies- why because it is easy to let's say retrofit, because it's easy to install, because there is already knowledge and technology and know how, then we can see that a new market of $30bn potential is generated.
“And this is a very interesting point for our colleagues working on the technical aspects for WASP, because unless we have credible data, from a technical point of view, unless we have a credible data on the energy, let's say savings, on the operating profiles. Unless let's say we do our technical homework properly, then our financial calculations are more speculative than, let's say, very well substantiated”.
Prof. Dr. Orestis Schinas HHX.Blue talking during the EU funded WASP project webinar recently.
Now, there is another option when it comes to wind powered technology and that’s to build a ship that can use the wind for its entire sailing power.
A return to sail sounds nostalgic and even romantic, but it can be commercially sound according to Sail-Cargo CEO Danielle Doggett. She and her team are currently building CEIBA a wooden schooner that she says can run commercially and make a profit. Now, this is certainly not a big vessel, it’s cargo capacity under deck is the equivalent of only 9 x twenty foot containers. But size is not everything.
The vessel is being built in Costa Rica and everything about it has been thought through in a sustainable way. The shipyard where the vessel is being built was built by Sail-Cargo. The ship will be ready to sail next year, so I caught up with Danielle, and we have the full interview in next weeks episode of the Aronnax Show, but here is what she told me about the start of realising her ambition.
“Starting this with next-to-no financial backing actually made it more necessary for us to have the answers to every single question, to have planned better to have a stronger foundation to have more, have done more feasibility studies to have every everything figured out. Because we needed our investors to trust us.
“It's not easy to say to somebody you've never met, please send $20,000 to this account and Central America where I'm standing in a field. And we have nothing to show for it. So we needed to have those answers. It's something important that you brought up is that we are a for-profit business model, while we do maintain a lot of nonprofit organization goals and values.
“But that wasn't the point of this business, we wanted to say exactly, as you said, we can hold up our numbers, and that, you know, it's a much smaller scale, but hold up our numbers and the numbers beside Maersk or any other for-profit shipping company. And we could say, look, we did it, we paid our taxes, we paid our investors, we paid our crew, and we did it, carbon negative. And so that was very, very important for us to be able to say that.”
The jungle ship being built in a wooden shipyard on the coast of Jungle Rica. More from Danielle Doggett about the ship, its trade and her business plans in the next edition of the Aronnax Show.
So now we have our regular update from Nick Chubb, at Thetius, on some of the other activities that have been shaping the transformation of the shipping and maritime industry over the last few days.
“Thanks, Craig. It's been a big week for technology funding. Singapore-based fleet performance startup Alpha Ori closed a $6 million series A round with shipowners, Hafnia and BW Group leading the round. Alpha already develops fleet management tools that help operators to better manage their fleets. The start-up surpassed 100 deployments in 2020. And this latest investment will help them fuel their growth.
“Also, raising a series A this week is Israeli start-up Orca AI. The company has developed a collision avoidance system that uses computer vision to help bridge teams to make better decisions and ultimately, to enable autonomous collision avoidance in the future. The $13 million investment was led by OCV partners with Ms Ma Ventures and Playfair capital, also joining around.
“Over in the UK the Port of Southampton has announced that is deploying the UK's first private 5G network in a port alongside Nokia and Verizon. The aim is to create an ultra-low latency high security network to enable technologies such as IoT and edge computing that will improve the operation of the port.
“Coming back to Singapore now and the Maritime and Port Authority has announced a new $90 million fund for a Maritime Decarbonization Research Center that will be set up in the city. Corporate partners including VW Group, Eastern Pacific Ocean Network Express, and BHP to name a few. Each chipping in around seven and a half million dollars to be part of the program. MPA, Singapore is going to match their contributions.
“We just launched a new report on Singapore as a maritime technology ecosystem. One of the key findings is that technology spending is set to grow from 11% of the country's maritime economy to 20% over the next decade, with digital technologies becoming a major source of growth for the country's maritime industry.
The 44 page report which was sponsored by Startup Wharf and Inmarsat is available to download for free from our website”
Nick Chubb from Thetius ending this episode of the Aronnax show.
And a final personal note. If you like this podcast I would really appreciate it if you could rate it, share it and give it a thumbs up. Such small acts do nothing more than make me feel good and reassure me that people want what we can offer.
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Until the next time, Goodbye
I am grateful to the Wind Assist Ship Propulsion project, funded by the EU North Sea Region funds for permission to use the excerpt from their recent webinar on the project. Details can be found here