While the aerospace industry has attracted much attention given the terrible blow it was dealt by the Coronavirus crisis, another giant transport industry has also been seeking to adapt to the challenges of this century: the shipping industry. The globalization and intensification of trade links, accompanied by the emergence of transitioning economies, along with a growing culture of consumerism and delivery culture has resulted in cargo ships handling 11 billion tons of product per year. These range from raw materials to manufactured goods and amounts to 90% of the world’s global trade. The cargo shipping industry is now caught in between the pressure of a growing demand for goods and the imperatives of climate change. Nearly everything around us has once been on a boat meaning that ships and ports are a key part of the infrastructure on which our ways of life rely. As such they represent an important source of reducing our environmental footprint. The solution of wind-powered cargo ships is slowly making its return after being replaced two centuries ago by the coal-powered steamships.
International shipping in a carbon constrained world
Shipping typically accounts for 3 to 4 percent of all anthropogenic emissions, with annual emissions of around 940 million tons of CO2 (which are expected to rise by 50 to 250% by 2050 in a business-as-usual scenario). The fuel used by diesel engines in containerships contains sulfur and is highly polluting. In fact, 18 to 30% of global nitrogen oxide and 9% of sulfur oxide is caused by freight. In addition, issues of oil spills, wastewater and solid waste are also widespread problems in the maritime industry.
However, in perspective, shipping is the cheapest mode of transport but also the most carbon-efficient. If big cargo ships can use on average 110 tons of fuel oil per day they emit roughly 10 grams of CO2 to transport 1 metric ton of cargo for 1 kilometer, that is to say one-fifth as much as a truck and a fiftieth of what a plane emits to carry out this same journey. This notable advantage of seaborne freight combined with the long timeframe involved in ship building and international regulation implementation, deters innovation and stifles the possibility for a swift move to greener cargo ship alternatives. Evidently, moving towards cleaner sources of fuel would have a tremendous impact on emissions reductions. However, the task at hand is complex and has often been overlooked.
Despite its significant potential, international shipping hasn’t been a primary focus of either international agreements organized by the UN Framework Convention on Climate Change (UNFCCC) nor the COP talks in Paris. The International Maritime Organization (IMO) responsible for the climate agenda of maritime transport had implemented Energy Efficiency measures since 2013 to plan a slow phasing out of CO2 emissions. However, several studies have shown the limited efficiency of these policies and they were proven to only encourage ‘mainstream’ innovations like hydrodynamics or hull and propeller appendages, without any uptake of innovative technology. In its 2018 strategy, the IMO reiterated its commitment to reducing the carbon intensity of international shipping by pledging to cut total annual greenhouse gas (GHG) emissions by at least 50% by 2050 compared to 2008 levels in accordance with the Paris Agreement temperature goals. Amidst this, companies are increasingly looking for ways to improve their efficiency.
The wind-powered containership
A promising solution, offering significant fuel savings on existing ships is wind-assistance technology. Depending on the design, route and size of the ship there are three main wind-assistance technologies that ships can rely on for propulsion. These are namely: Flettner rotors (vertical cylinders that propel ships by generating lift at right angles to the wind), kites and sails.
For example, the German company SkySails has designed a kite flying at altitudes between 300 and 400 meters and is reportedly able to save 10 tons of fuel per day in good conditions by producing one kilowatt hour of wind power for the cost of only six cents. Another prominent example is that of the Oceanbird, an automobile carrier of 200 meters with a capacity of 7,000 cars equipped and long sails reaching 105 meters above water capable of rotating 360 degrees without touching each other. The vessel will be launched in 2024 by a Swedish consortium made up of Wallenius Marine (owner of the concept), KTH Royal Institute of Technology and SSPA. The wind-powered cargo ship will emit 90% less CO2 than conventional vessels (120 tons of CO2 per day versus 3 to 12 tons for Oceanbird). It will also have an average speed of 10 knots (compared to 17 for a conventional ship) and an Atlantic crossing time of 12 days (normally 7 days). It will also feature a fuel powered engine for operating in ports or when wind is very weak. Such a ship is likely to cost more to build than conventional ones but operating costs should be significantly lower as more than half of the journey costs usually come from fuel. From all appearances, wind technologies seem set to provide the international shipping transport industry with the right solution to remain within the global carbon budget.
Challenges to market uptake
However, several barriers exist for wind-powered cargo ships entry into the market. As was previously mentioned, the fact that ships have a lifetime of 30 years implies high sunken cost, inertia and resistance to innovation. Moreover, as is the case for Oceanbird, vessels cannot entirely rely on wind power as ports operate on tight schedules and demand reliability.
The economic barriers to wind technologies in the shipping industry fall under two categories: market and non-market failures. A study has shown that wind technologies have the poorest score in terms of barriers amongst several technical energy efficiency technologies. This is largely due to the fact that there is a lack of significant practical knowledge about the technology. In terms of market failure, there is an information deficit with regards to average fuel consumption and to the efficiency of new fuel-efficient technologies (tests for new technologies remain highly hypothetical) which undermines investor confidence considering the unpredictability of the ocean. Asymmetries of information are also existent between ship owners and the charterers who hire ships as the former are incentivized to misrepresent the fuel efficiency of their ship to the latter. This is typical of the principal-agent problem that exists in the shipping industry wherein owners bear the cost of capital and maintenance while charterers bear the cost of fuel. This means that the benefits of energy-efficiency will largely accrue to the charterer and not to the owner who would have first invested in the new technology.
In terms of non-market failures, external risks linked to overall economic trends, regulations and fuel price and technical risks linked to the performance and reliability of the technology are all relevant. The main technical risk for wind-technology is the difficulty to operate in rough weather which implies constraints on operating the ship, stability, and crew safety. Another significant barrier is the access to capital markets as the shipping industry is known to be very conservative and risk averse. On top of this, wind technology includes hidden costs such as the price of installation and the opportunity cost of temporarily suspending activities to install the technology on the ship, but also the hidden cost of having to calculate an optimal alternative sailing route because of the wind.
If wind-powered cargo ships can provide a response to the carbon constraints which the international shipping industry faces, it will need a strong regulatory framework and a combination of market and non-market incentives (such as setting a higher price on CO2 emissions). This will help steer the industry in the right direction and help overcome the structural, technical and economic barriers of wind technology.
By Ambre Barria
Ambre is a third year International Development student at King’s College London. She is the Editor of the Energy and Environment Policy Centre at King’s Think Tank where she explores the field of energy transition covering subjects such as economics, geopolitics and technological innovation. This was originally a guest blog post written for the Applied Negative Emission Centre which can be found at this address https://www.negativeemissionscentre.co.uk/blog-1/decarbonisingshipping.
The featured image (top) is by Ian Taylor on Unsplash.
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