Mis-treatment of new technologies by the powers that be is a well-worn tale. Though the regulation of new technologies garners the majority of attention, it is, in fact, the gradual elimination of outdated and environmentally damaging technologies that is having the most significant impact on the maritime industry.
We are seeing this play out in real-time with the International Maritime Organization’s new 2023 regulations. These regulations, which include the Carbon Intensity Indicator (CII), the Energy Efficiency eXisting Ship Index (EEXI), and the Energy Efficiency Design Index (EEDI), are geared towards mitigating the carbon intensity of shipping and cruising. The industry, which has hitherto been reluctant, and understandably so (if ain’t broke, don’t fix it) to embrace novel approaches, is in for a rude awakening.
The CII, a new measure of how efficiently a ship transports goods or passengers, is measured in carbon emitted per carrying capacity and assigns ships a rating from A to E. For ships that achieve a D rating for three consecutive years or an E rating in a single year, a corrective action plan needs to be developed as part of the SEEMP and approved. An operational figure assessed annually per ship above 5,000 Tons, the CII will become increasingly stricter over time. (Note: it is unclear how severe the consequences of non-compliance are, though we conjecture that they will intensify over time. To date, the only punitive measure involves being called in front of the IMO for remediation.)
The EEDI is a regulatory tool that measures a new ship’s energy efficiency based on its design parameters, such as speed, size, and engine power. The resulting EEDI value is expressed in grams of CO2 emissions per tonne-kilometer of transport work. Compliance is achieved if the ship’s EEDI meets the required minimum level, with the option to still be certified if certain measures are taken to improve energy efficiency.
While EEDI governs new ships, the EEXI is applicable to existing ships and measures the energy efficiency of the ship’s operation. It sets a minimum standard for the energy efficiency of existing ships based on their technical and operational parameters, such as the ship’s engine power, speed, and fuel consumption. The EEXI value is also expressed in grams of CO2 emissions per tonne-kilometer of transport work and is used to determine compliance with the IMO’s energy efficiency requirements.
As for the implications of this salvo of late-2022 regulations, we’ve only seen the first act. The iceberg of regulations will only grow taller, presenting new operating challenges to an industry that will have to adapt like any other.
With one look at the CII formula, we can see that ship operators, who must maintain a low rating (A is best, E is worst), might spend more time away from port (at sea) or find creative ways to turn off their mechanical engines while docked. One group for which this presents a conundrum is cruises: commercial itineraries with little on-shore time for guests to explore local cities are hard to sell, but a docked cruise ship running its engines will be penalized. It is no wonder that installations of shore power, enabling cruise ships to plug into electricity rather than pollute, are growing rapidly.
EEXI presents a challenge, but also an enormous competitive opportunity to existing shipping and recreational operations.
Because older ships burn the dirtiest fuel, typically bunker fuel or heavy fuel oil (HFO), operators are directing their captains to go slower, as engines are least efficient at high power. Well-meaning regulation meant to green the climate might push the economy toward the red—slower ships means less goods delivered less quickly, a drag on growth.
Hagal believes that the IMO’s top-down regulation at sea will be met with bottom-up regulation at the destination. In this way, long-distance shipping emissions will exist primarily under the purview of the IMO while near-shore activity is supervised locally—states, cities, inland waterways, ports, and docks. The California Air Resource Board, for example, has already implemented At-Berth, Shore Power, and Oceangoing Vessel Fuel Regulations, while the EU has its own Emissions Trading Scheme that requires ships to monitor and report their carbon emissions for each voyage and offset their emissions through the purchase or creation of emission allowances.
This fusillade of regulations will create winners, who adapt, and losers, who move too slowly. The most successful maritime operators, from cruise companies to tug operators to commercial shippers, will be those who invest in new technologies enabling them to comply with increasingly stringent regulations on emissions without sacrificing on profitability. But thankfully legislation won’t be the only chapter in this green-backed story.
While regulators have cast us off into a new era for alternative fuels and efficiency-saving technologies, the maritime industry is at an inflection point: market forces too are supercharging the adoption of water-based battery power.
The Canary in the Naval Mine: The Electrification of Road Transport
We can look to land-based transport for a glimpse into what is coming to the seas. The first “EVs” were trams and streetcars, which were constantly “plugged in” when operating. The advent of maritime electrification looks much the same: shore power now enables ships at dock to pollute less and save cost on fuel. Over-time, on land, technologists found a way to pack enough punch (energy density) into a battery for the vehicle to be freed from its anchor.
As entrepreneurs improved the chemistry, form factor, performance, and cost of batteries, we saw the advent of electro-chemical battery passenger transport (not constantly plugged in). Range anxiety perennially present, the initial product-market fit was for shorter trips. Airport buggies and eventually urban transport. But the direction is clear—as batteries get cheaper and better, industry is budging.
Unlike consumer car buyers, fleet operators make decisions based almost solely on economics. We are now witnessing the large-scale electrification of road fleets. Because the EV operator has certifiably lower total cost of ownership, we are seeing shorter haul applications with high-utilization and low weight electrify rapidly: e.g. taxi and parcel delivery. Heavy weight, longer-haul is next. Though long-haul will rely primarily on Methanol for propulsion, batteries will still play a key role in optimizing fuel consumption.
Let’s get back to boats. An enormous boon to international growth and living standards, about 80% of global trade volume is carried by sea. This responsibility is driven by cost—it is roughly 1/10th the cost to ship goods by sea than by truck. This is because ships have a larger capacity than trucks and are able to transport more goods in a single trip, which can help to lower the overall cost per unit of cargo. Additionally, shipping companies are often able to take advantage of economies of scale, which can further reduce the cost of shipping by sea.
Boats contribute meaningfully to both global trade, in a good way, and to climate change, in a not so good way: vessels are responsible for 3% of all Greenhouse Gas Emissions. But who can blame them? Boats require enormous amounts of power to move. With their high energy density, liquid fuels like heavy fuel oil, bunker fuel, and diesel have long been the sea-going standard. But just as land hauling is hitting an inflection point with regard to electrification, batteries are trickling into ocean hauling.
The Sea Change
Just as we saw on the roads, short-haul and near-shore shipping are moving into primary battery propulsion, as the shorter trips, higher utilization, and greater time spent at dock make for a more complete and economic solution. Ferries, tugs, workboats, and fishing boats are already participating, to varying degrees in this shift.
Ferries, constantly shuttling people and cars among local (charging) terminals, are the first movers. As in most things electric, Hagal’s home turf, Norway, is leading the charge: Norway has one of the world’s largest electric ferry systems, with over 100 hybrid and electric vessels participating. Seattle and New York are following suit: the Port of Seattle has set its sights on being the nation’s greenest port, hybridizing its ferries and installing shore power for vessels, while the New York City Economic Development Corporation will roll out 50 electric ferries.
Tugboats are the oxen of the seas. Pulling enormous loads around the clock, downtime for tugs is a death knell for local industry. Diesel engines tend to break down, and with current commodity prices, are expensive to feed. From Hagal’s discussions with Tug customers in the US, the single biggest pain point for fleet operators is paying for and finding maritime engineers to fix engines that are out of commission. Battery power, as we know from the Cybertruck vs. F-150 tug of war generates more torque. Because electric power can provide lower fuel costs, reduced maintenance costs, and better performance, the first e-Tugs are rolling off the shipyards.
In the medium and longer-haul applications, batteries are serving two roles: 1. Propulsion as part of a hybrid solution, e.g. battery-e-methanol, battery-ammonia, battery-hydrogen) 2. Auxiliary power for on-board peak shaving, load-balancing, and dynamic positioning, among others. In both cases, batteries serve to flexibly support on-board operations and eliminate the usage of engines in low-efficiency (and highly pollutive) ranges.
The shift towards maritime electrification is now driven not only by regulation but more so purely by economics—fleet operators are beginning to recognize how transformative the cost savings can be. One of the biggest hurdles is the catch 22 of shore power, which does not accelerate without electric ship retrofits and vice versa. Nonetheless, we are witnessing opportunistic shore infrastructure owners, such as the Port of Seattle and Port of Miami roll out shore power. Ports make money by earning more traffic and fees. Boats with batteries will, all else equal, choose to moor at ports that can inject them with life.
We hope you’ve enjoyed this discussion of the changing sea-scape and how the design space for maritime batteries is truly infinite. If you are a maritime business keen to learn how to stay ahead of the curve, or if you have an immediate need for maritime battery solutions, get in touch at Hagal Ocean.
Hagal Ocean is a Norwegian company focused on maritime solutions built on our rugged, DNV-certified battery system. We have offices in Oslo, Miami, and San Francisco.
