UMAS has worked with the Carbon War Room in its shipping operations to develop a methodology for assessing fuel savings for an innovative financing model, whereby multiple vessels could be upgraded with retrofit efficiency technology with tailored preferable finance and insurance in place to facilitate the retrofits for maximum scalability across the industry.
The third party financing model brings innovative financing models used in other sectors to the shipping sector improve the uptake of proven technologies with documented service experience and fuel savings. The model allows vessels to be retrofitted with zero capital expenditure while allowing owners to benefit from the savings in fuel and CO2 emissions. UMAS had two key roles in the development of this financial model. UMAS provided a background to the barriers inhibiting uptake of proven technologies, such as the split incentives, access and cost of capital, lack of measurement and verification methods, enabling the financing model to effectively overcome these barriers. The key role, however, for UMAS, included building a robust monitoring and measurement methodology for the retrofit measures in order to rigorously test the performance claims of technology providers and bring confidence to the investors.
UMAS is also currently working with the Carbon War Room in the Shipping Innovation Fast Tracker (ShIFT) project, which aims to increase the mass uptake of double digit fuel efficiency technologies, such as wind technologies. These are less mature technologies without documented service experience which may be entrapped in the ‘valley of death’. We work with six wind technology providers to provide data and research that can help to quantify the risks and benefits associated with the wind technology – to both investors and shipowners/charterers.
Some of the findings that we feel are beneficial to various technology providers seeking to penetrate the maritime sector are highlighted below:
Characterising the shipping market: For an owner or charterer to invest in a technology, they need to have the confidence they will be paying a certain amount of fuel for long-enough period of time to be able to recoup the fuel savings of the technology. The different sizes of the charter market in different sectors as well as the heterogeneity in the market can present a challenge for technology firms. Firms need to carefully consider the sector, size of the firm and their exposure to different types of charter. An initial report is presented with further details being addressed in an upcoming journal paper.
Premium rates for energy efficient ships: A key point that influences owners decision to implement energy efficiency technology depends on whether owners who invest in more energy efficient ships are being rewarded in terms of higher rates. The extent to which the fuel cost savings are passed back to the owner-operator through higher charter rates will create direct incentives for shipowners and operators to implement wind technology. Paper written by Agnolucci, Smith & Rehmatulla (2014) show that on average 40% of the financial savings delivered by energy efficiency accrue to the shipowner for the period 2008–2012 in the drybulk panamax sector. Another report by Smith et al. (2013) shows that energy efficiency is generally factored in across the four shipping markets, the charter market, sale and purchase market and newbuildings and demolition.
Sectoral operational profiles and future demand: Understanding fleet wide characteristics especially those related to the operations of ships is important for estimating fuel savings for wind technologies as well as enabling technology providers to focus on specific sectors given the operational characteristics and future growth. The Third IMO GHG 2014 study led by UCL Energy Institute provides aggregate level information on this e.g. fleet speed, number of ships active, future demand scenarios for different ship types etc.
Click here to read the executive summary and the full report.