It seems there is no more common mantra in shipping recently than “the industry is changing.”
This statement is usually followed by discussion about how change has always been fundamental to shipping. Conversations about environment and energy will continue on to question whether the industry is innovative enough, the IMO capable enough, and the massive problems even tractable enough to allow timely solutions.
The answer to all of these is usually a qualified “yes” with a raft of historic examples to back up the affirmation. Even so, the change mantra persists. It still feels correct. Having merely glimpsed recovery from an unprecedented economic crisis, the industry has entered a new era of high technology and low sulfur. These new circumstances may contribute to the unease, but technologies have evolved steadily for years. Options for low-sulfur fuel have long been proven, if not yet fully adopted. There is something else looming in ether.
Unlike past cycles of highs and lows in shipping, a new sense of uncertainty is entrenched; a sense that any part of this familiar, turbulent business could fundamentally change in a short period of time. The types of “disruptive” change that have shaken other sectors are beginning to waggle their eyebrows at the shipping industry.
In the era of softball-sized communication satellites and automated drones capable of carrying off small children, changes to business models could come from many directions. Truly disruptive change, however, will be in response to truly massive problems. The single biggest new problem on the horizon is decarbonisation. In order for shipping to play a role proportional to the 195 countries signed on to the Paris Agreement, recent studies by Lloyd’s List and the Danish Shipowner’s Association show that shipping must reduce its greenhouse gas emissions intensity by 80% before 2050.
It is difficult to imagine the energy source that could feasibly replace the stalwart fuel oils that move over 50,000 ships and 10 trillion dollars of goods around the world each year. It is equally difficult to imagine the catastrophic effects of a world climate that is changing at record pace. As IMO grapples with how to create an ambitious but achievable policy trajectory, the current quiver of policies and technologies can only get about half way to the goal.
Shipping will ultimately have to repower, and must begin the process soon. Ships being ordered in coming years will have to be able to compete in a low-carbon economy later in their lives or risk becoming obsolete. This may simply chafe the already calloused hands of an industry that has recently seen dry-bulk vessels scrapped in their early teens. The difference is we know it is coming. We know even before plans are drawn up and the keels are laid.
The knowledge does not come packaged with a clear solution, however. The end is in sight for fuel oil just as we have finished a 10-year transition to low-sulfur bunkers. These promise cleaner air but not a cooler planet. The other prominent option, LNG, having failed to meet the growth expectations of its proponents as a solution to conventional air pollution, is being rebranded as a “bridge” fuel capable of reducing GHG emissions by up to 20%.
This 20% assumes a lot. Upstream gas supply chains around the world were never built to be leak-tight and errant hydrocarbons can “slip” through a ship’s massive combustion cylinders. Even a few molecules of gas emitted can have a substantial effect on climate, so natural gas can easily offset or outweigh any savings. This means that seeing climate benefits from LNG would require an unprecedented level of vigilance in supply chain management and engine operation. In an industry that is increasingly favoring flexibility, LNG also serves to lock in expensive and inflexible landside infrastructure.
Still, at this point there are no clear winners or losers. In order to move decisively away from traditional fuel oils, a robust price or policy signal needs to emerge. This could come in the form of a tax or target from IMO, but the forum’s progress on GHG regulations continues to be a slow and politically fraught process.
This creates a unique opportunity for industry to lead with innovations that pre-empt the political process and guide future regulation. There is no lack of such leadership, but there is a lack of a clear and common vision of what a decarbonized industry looks like. Fortunately, an eventful year of remarkable technical progress has lit a few beacons to illuminate the path. Integrating among a range of new compelling technology trends, from digitization to automation, one endpoint is clear: the future is electric.
One indicator for this comes from the landside. Electric passenger vehicles have crossed squarely into the mainstream with some countries now mandating their deployment. Viable electrification options for trucks and heavy machinery are quickly evolving and small and mid-sized marine applications are becoming both mainstream and cost effective.
Another indicator for an electric future is that increasing sophistication and efficiency will require greater versatility than the one-size-size-fits-most designs currently allow. Electric drive facilitates this versatility and is already common in some of the largest cruise ships being launched. It has not caught on with other commercial maritime applications simply because energy losses historically made the electric drive around 3-5% less efficient. That gap has narrowed substantially in recent years, though not completely.
Proponents will argue that the reliability and low-maintenance of a new generation of permanent magnet motors and other step-change technologies will shift the life-cycle cost balance of electric drive. It could certainly facilitate uptake of autonomous ships whose main failure liability (aside from complex electronics) is the number of mechanical systems on board requiring regular maintenance.
More critically for a decarbonized future, electric drive is agnostic to its source of electrons. While a mechanical drive diesel engine implies obsolescence for the entire vessel, the versatility of electric propulsion allows any number of power source arrangements. Optimized hybrid and modular configurations could be upgraded as technologies continue to advance. With fuel cell technology quickly gaining notoriety as the IMO’s IGC code looks to finalize standards as soon as 2021, hydrogen power will soon jump from rumor to reality.
So the industry is certainly changing, but not in an unprecedented way. A transition from diesel to hydrogen may one day be as obvious as sail to steam. In the meantime, designing for energy flexibility will ensure that the rapidly evolving seascape of fuels and technologies will see fewer ships stranded in a low-carbon future.
Written by Galen Hon, Principal at the PoliSea Group
The views presented hereabove are only those of the author and not necessarily those of GREEN4SEA and are for information sharing and discussion purposes only.
About Galen Hon
Galen Hon is a consultant specializing in air quality and energy efficiency climate for the freight and maritime industry. He has over eighteen years of experience in environmental research, policy, and strategy. Galen most recently led the Shipping Program for the Rocky Mountain Institute’s Carbon War Room, a non-partisan think tank-and-do tank that develops market-based approaches to accelerate a move to greater efficiency and sustainable energy. In recent years, he led the development of cutting-edge tools and strategies to improve ship efficiency, facilitated high-level conversations on industry decarbonization, and advised the White House on maritime climate policy. Galen’s past career includes work with Starcrest Consulting, the International Council on Clean Transportation (ICCT) and the Port of Tacoma. He has worked on projects for a broad range of clients in the public and private sector and has advised the IMO ports delegation on climate and air quality issues for the last 5 years. Galen holds a master's degree in Engineering and Public Policy from Carnegie Mellon and dual degrees in Civil Engineering and Humanities from Seattle University.