More Than Technology 1920 x 690

Decarbonising maritime will take more than technology

3 min read

18 May 2021

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Wärtsilä

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Wärtsilä

3 min read

18 May 2021

Text:

Wärtsilä

Photo:

Wärtsilä

The maritime industry's discussion of decarbonisation thus far has focused upon uncertainties, but Wärtsilä sees the situation rather differently. While many aspects of decarbonisation are indeed unknown, explains Andrea Morgante, Vice President, Strategy, Marine Power, certainties do exist, and Wärtsilä is well prepared to advise its customers on how the right decisions can be made.

 

Why is arriving at a decarbonisation strategy such an important first step for Wärtsilä's customers?

As a company that has been active in maritime for over a century, we perhaps have the ability to perceive and flag megatrends early on. Many fleet owners have shared our observations around the immediate need to confront decarbonisation, and are increasingly open in the way they address the topic. Seen in this light, I consider joint discussions on what we are seeing and what we can do about it quite natural.  

When we sit down together, we are able to help our customers examine their uncertainties and start identifying possible strategies they can follow to de-risk their investment, and to reposition their fleet.

The longer we wait to define a pathway to decarbonisation, the steeper and more disruptive that path will be.

- Andrea Morgante, Vice President, Marine Power Strategy

Not necessarily from a technological standpoint, but from a financial one. Today, we have the time to evaluate which vessels can be retrofitted with readily available solutions that reduce carbon emissions. We also have the time to plan for newbuilds, so that they can be designed to incorporate new technology when alternative fuels become viable, for example. Building a vessel today, with a good understanding of the changes you are likely to make in the future, is the only way to minimise the cost and impact of those changes. 

If we don't begin this process, we can't expect similar apathy from the pressures the industry is facing. This might look like an expensive process, but it would be significantly more so if we were to wait another 5-10 years to make these kinds of decisions. 


 

What are the key drivers guiding technological development?

In terms of the technology, I see two main drivers at the moment. One is the type of index focused on design, of which the Energy Efficiency Existing Ship Index (EEXI) is the most recent example. Simply stated, if you cannot take your vessel below the required threshold in terms of this index, this asset will not operate. To do so by 2023, the time for evaluating options and deciding is relatively short.   

A much-discussed example is engine power limitation. As a matter of fact, today vessel speed is already lower than it used to be, so you can take the existing design speed down to a new design point and improve your EEXI. In other words, because this is a design-focused index, the measures that you select may improve a vessel's index rating, but not necessarily improve its operational carbon intensity.  

The way the index is calculated – in terms of a specific speed, at a specific power output – leads you to look immediately at two alternatives. Either you reduce the vessel's power and therefore you lose speed, or you improve the hydrodynamics of the vessel, so you use less power to maintain the same speed. Other options like wind assist and shaft generator retrofit are also being evaluated. The immediate process of achieving compliance is a balancing act of these metrics, and when faced with the sudden need to comply with EEXI, those are the first options to be considered.   

The second driver is the operational carbon intensity quantified by the Carbon Intensity Index (CII).  While IMO is still finalizing its formula, we know it will measure and rate the vessel's annual carbon intensity: the resulting rating will be defined against limits which are getting tighter year by year. Compared to a binary index like EEXI, the CII has the merit of pushing the industry to look at decarbonisation with long-term plans. Many options are available, including hybridisation and solar, to name just two. Fuel conversions, of course, will play a significant role and become increasingly common when alternative fuels are available on the market. 

 

Each vessel will require its own solutions, and we're prepared to meet that demand and supply those technologies.

- Andrea Morgante, Vice President, Marine Power Strategy

Any course of action needs to take the fleet into account in a holistic manner, based on the customer’s industry and the vessel types they employ. The operational questions that have to be answered regarding EEXI and CII are essential to address – at this point, they are simply fundamental for maritime business owners.

 

Does the decarbonisation journey suggest new ways of doing business?

In effect, decarbonisation is directly linked to reduction in fuel consumption, and there are many different ways to achieve that. To learn about all of these on an operational level, find the best practices, and continuously refine them are not necessarily core competences the customer has at their disposal.  

This is where we believe outcome-based business will have a major impact. On one hand you have technological disruption and disturbance of the existing business model. On the other, we at Wärtsilä are a technological provider with the capability to manage these risks, provide the customer with savings, and be compensated with a proportion of the resulting revenues.  

We've proved that by doing maintenance at the right time with the right competences, you improve fuel efficiency, and thereby reduce vessel carbon intensity. We know we can do it, and we know the customer will benefit, so the next step is to look towards different types of outcomes.

 

We have been successfully running a fleet-wide fuel consumption-based performance agreement since 2017. We have recently signed the first uptime-based agreement, and we believe that emission-based agreements will follow.

- Andrea Morgante, Vice President, Marine Power Strategy

When the customer's climate-based costs enter the equation, their focus will be upon the total emissions of their fleet, and making the right selections. You may then ask: once the customer has shifted to alternative fuels, and their carbon issues are resolved, why is fuel efficiency still relevant? The answer is simple: alternative fuels will represent a significant operational expense, and the customer will be still looking to reduce fuel consumption dramatically. 

I would state that in the next five to ten years, there will be a race towards higher and higher efficiency at the vessel level, and at the system level. And these are areas where we can provide hugely valuable expertise. By joining the customer in an outcome-based agreement today, we can already set them on this path.  

 

In the longer term, Wärtsilä is describing decarbonisation as an opportunity for its customers. How would you characterise the fleet owner of the future, active in a fully decarbonised industry, who has successfully captured this opportunity?

I would say that the customer of the future is one who invested in decarbonisation early on. Only those players who are better positioned, with more far-sighted plans, will secure funding. Therefore, it's safe to assume that customers coming out of this journey greener will also be stronger and more competitive, and emerge with a larger portion of the market. 

Let's not forget that other industries have already begun asking questions. Container vessel owners can find themselves dealing with companies like Amazon who have their own carbon footprint plans, or roadmaps for their own carbon neutrality. These are companies that will examine all aspects of their value chain, and select logistics partners that make a good fit with their objectives.  

A fleet owner who begins decarbonising sooner is also likely to be a more attractive investment partner for banks required to have a green portfolio. Lending money to such a partner will allow these banks to demonstrate adherence to the green taxonomy.  

This is why we stress the importance of working on the fleet. If you don't concentrate on the fleet as a whole, and you only focus on newbuilds, the process of decarbonisation will be too slow. And if you do nothing, the EEXI becomes a good benchmark for what is to come: discussed in 2020, ratified in 2021, implemented by 2023, and you're either in or out. I think this provides a taste of the future.  

 

This is why we say that decarbonising maritime will take more than technology.

- Andrea Morgante, Vice President, Marine Power Strategy


So I would say that the customer who will successfully capture the opportunity decarbonisation represents is not difficult to predict today. It's the customer who develops a holistic decarbonisation strategy for the whole fleet, who picks the right technology for their vessels based on this, and can thereby reach their operational decarbonisation targets. This is why we say that decarbonising maritime will take more than technology. With all this in place, we believe our customers can achieve financial backing, outpace the competition, and develop in terms of market share as a direct result.