
Fuel efficiency is part of the business for shipping, but the pace and extent of change is challenging traditional thinking.

Published Jan 11, 2023 6:22 PM by
Sean McLaughlin
Fuel efficiency is always good for business. Owners and operators have been investing in improved ship efficiency for years, but the need to decarbonize the fleet combined with the recent and unprecedented increase in fuel costs is driving it from good business ethics down to a core and urgent purpose.
To add to the regulatory pressure to decarbonize, there is already significant and growing pressure to do more from charterers, financiers and consumers, and pressure from internal stakeholders who want to be part of a company that delivers a change. While these other stakeholders are making plans and setting decarbonization goals, the harsh reality is that shipping companies must maneuver multi-decade assets ahead and meet the many practical challenges involved.
The anticipated development step changes the game significantly for ship owners. Ten years ago, the business case for an investment in new technology, compared to today, was relatively straightforward. Now, the inputs to that assessment go beyond basic investment comparisons and direct financial returns. They should include the wider commercial impact of GHG and other environmental mitigation, and, importantly, have a view to the reporting and cost implications of future regimes such as the European ETS and EU Taxonomy.
Energy efficiency and renewable propulsion (clean) technologies such as wind-assist, air lubrication and waste heat recovery can reduce fuel consumption and therefore GHG emissions, but Houlder’s recent survey of ship owners from in the container, tanker, bulk, cruise and ferry sectors shows that collaboration between owners, as well as collaboration between clean technology providers, remains an obstacle to the uptake of new technology at a rapid pace required.
Every senior industry player interviewed confirmed that there is a willingness to collaborate on projects that facilitate the use of new technology. They understand that this is essential to achieving rapid, fundamental change. However, collaboration is less visible in practice, as owners, understandably, focus on achieving emission reductions while protecting competitive advantage.
There is unanimous support for the need for collaboration to play a major role in shaping the shipping industry of the future. This need is especially important for those with smaller fleets who lack the luxury of an in-house R&D team.
However, the participants felt that a more proactive, more innovative approach was needed rather than relying on everyone throwing their goals into the competition. Some small ship owners who rely on grant-funded projects find that the collaborative environment is fragmented and moves away from early development research rather than getting new solutions to the problems. ship
Data-driven decisions
Many interviewees identified the lack of good quality and relevant data as a key barrier to the use of clean technology. There is also a perceived lack of independent corroboration for the claims made by some technology vendors.
None of the participants accused the technology providers of suggesting a deliberate misrepresentation of the results but showed that the data in a brochure is inevitably related to another ship. Therefore, the results (and any unintended consequences) of new technological interventions must be recognized as a retrospective (and sometimes fundamental) design change.
We find that the work we do with ship owners supports the comments made about the lack of good quality data. Generally, we see that there is a need for significant work to interrogate the data held, and there is often a need to spend time gathering new data to support investment decisions.
Change in funding
Environmental performance is an additional focus in all financial discussions, and securing funding to carry out clean technology projects is another key challenge identified by the ship owners interviewed. Large organizations tend to find accessing green finance relatively straightforward, with the challenge being to find projects that match the funder’s criteria.
In contrast, small owners looking to explore clean technology options are increasingly dependent on accessing grant and other government funding. This is a resource-hungry process where ship owners are often distracted from their primary purpose to the funding call.
Many reflect on the fact that they are asked by their funders for more data related to their environmental performance when seeking financing. This data is often used to set environmental performance agreements. As with clean technology choices, bridging the data gap is a growing challenge.
Collaboration solutions
Ship owners cannot be expected to settle this on an ad hoc basis.
Consortium bid requirements for government grants make it difficult to participate for small companies that lack internal resources. Managing grant processes can also increase the project timeline.
There is a need for more agile, industry-wide, independent convenors to facilitate project collaboration. Flag states, industry coalitions, financial institutions and independent consultants can fulfill this role. National and international chambers already disseminate information and lobby for their members, but they can also be proactive convenors for projects that can be of particular benefit to their younger members.
Independent advisors also help ship owners manage the needs of financiers and other stakeholders. They can provide an independent analysis of the benefits of clean technologies, individually or in combination with other or new fuels. Operationally, they can evaluate the short- and long-term viability of proposed clean technology strategies, monitor international and regional developments related to regulations and new fuels, and help manage in the timing of newbuild and retrofit projects to minimize operational disruption.
It was clear from all our conversations that things got better and better. Let’s make this the new “business as usual” and make sure that decarbonization goals are achieved for everyone.
Sean McLaughlin is a Strategy Consultant at Houlder, an independent design and engineering consultancy with sustainability at its core.
The full whitepaper covering all research findings can be accessed here.
The opinions expressed here are those of the author and not necessarily those of The Maritime Executive.