COLLABORATE TO INNOVATE

There was unanimous support for the need to collaborate on decarbonisation in Houlder’s recent survey of shipowners.

Sean McLaughlin, Strategy Consultant at marine consultancy Houlder, explains how it can be channelled to greatest effect.

To support the decarbonisation transition, and as part of its sustainability and advisory work, Houlder recently undertook a qualitative survey of senior executives from large and small shipowners from across the container, tanker, bulk, cruise and ferry sectors. Every senior industry player interviewed confirmed that there is a willingness to collaborate on projects that will enable the uptake of new technology.

Participants did, however, feel that it needs a more proactive approach than simply relying on everyone dropping their competitive aims. As one executive we interviewed said: “Shipowners collectively need to try out the new technologies and bring the cost down. But you need to make sure you don’t pay too big a penalty yourself and everyone else gets the reward.”

It is much easier to demonstrate the case for clean technology investment in the liner trade with long term charters than on the voyage/spot market. In the latter case, many technologies such as wind assist will have highly varied and unpredictable benefits, and if a market is over supplied its often the cheapest ship that wins. In the liner trade, the owner and operator receive the benefits of a technology that improves efficiency and reduces fuel consumption. However, in time charters, the cost and the benefit hit different pockets.

Updates to BIMCO’s Carbon Intensity Indicator (CII) Operations Clause for Time

Charter Parties should help address these split incentives and allow shipowners and charterers to share the cost and benefits of clean technology adoption. And, in the medium term, the International Maritime Organization’s (IMO) CII should differentiate the fleet between the more and less fuel efficient ships, and higher day rates should follow those with the best performance.

One executive we interviewed highlighted the benefits of action: “If you save fuel, you save emissions. If you save emissions, you save the planet. It’s a virtuous circle in that regard. So – right now – efficiency is the opportunity.”

Collaborators and convenors

Industry-wide, there is a need for more proactive, independent convenors to facilitate project collaboration and the sharing of data on new clean technologies.

“We need a mechanism to easily come together and find the right partners,” explained one executive. Its not enough for large owners or those in the liner market to see the benefits. We need mechanisms which make change accessible across shipping.

Convenors are the solution. They can initiate and drive projects, acting as a central black box, bringing sensitive information together to paint the full picture, while protecting the confidentiality of the data owners. They can also help shipowners share the cost of trialling a new technology, while giving them all access to the benefits.

Organisations such as national and international chambers already disseminate information and lobby on behalf of their members, but they could also become more proactive convenors for projects that could be a particular benefit to their smaller members and those in the spot/voyage markets.

Flag states also have a convening role to play. They seek to differentiate themselves to attract registrations, and leadership in clean technology will increasingly become a strong differentiator.

Independent advisors can help shipowners manage the requirements of financiers and other stakeholders. They can provide independent analysis of the benefits of clean technologies, individually or combined with others or new fuels.

Operationally, they can evaluate the short and long-term viability of proposed clean technology strategies, monitor international and regional developments relating to regulations and new fuels, and help manage the timing of newbuild and retrofit projects to minimise operational disruption.

Collaboration in action

There are some great examples of collaboration in action today. There are large-scale initiatives such as the Poseidon Principles, a global framework for assessing and disclosing the climate alignment of financial institutions’ shipping portfolios.

The Getting to Zero Coalition, a powerful alliance of more than 200 organisations within the maritime, energy, infrastructure and finance sectors, is a good example of collaboration that is supported by governments.

The Coalition is committed to getting commercially viable deep sea zero emission vessels powered by zero emission fuels into operation by 2030 towards full decarbonisation by 2050.

Those with the biggest concerns about the risks associated with collaboration saw initiatives such as green corridors providing a powerful environment for collaboration along supply chains. Ferry routes are a great example of this.

Historically the differentiators for ferry providers (other than price) have been the customer experience. A point-to-point green corridor covering some of the busiest ferry routes could provide an opportunity for vessel owners to pool their collective intellectual and financial resources in arriving at a single fuel/propulsion and overall vessel class.

This would open a clear pathway to providing the necessary shore side infrastructure and would then leave operators to compete on the same basis as they have done for years.

A green corridor

A green corridor project is a great convening environment, particularly across national borders. If it is led by an independent third party or one or more of the participant ports, it offers the opportunity to overcome many of the barriers to collaboration.

Some large owners and charterers are opening their doors to new technology. Rio Tinto’s Pioneer Project is a good example. Rio Tinto is one of the world’s largest dry bulk shippers and its marine team orchestrates a fleet of more than 230 chartered vessels at any given time, operating alongside 17 vessels which the company owns, to transport more than 300m tonnes of product per annum.

It has invited the owners of emerging technologies to participate in a project with up to $20m of funding for the retrofit of technologies to two of its owned Newcastlemax vessels which will be made available to retrofit as a “floating lab” in 2023.

It has indicated an intention to share the results of these trials and remove some of the barriers to the development of earlystage technologies.

While projects such as this are driven to a large degree by wider corporate environmental, social and governance objectives, the benefit to shipping as a whole is clear.

Ultimately, it’s all about driving sustainability while safeguarding competitive advantage.

Thanks to the growing determination of the industry, new opportunities are emerging all the time and they are growing in scale.

As one executive we interviewed pointed out: “This is our generation’s biggest challenge.”

Subjects covered include:

» Material types, flow properties and handling equipment requirements

» Self-heating, fire, explosion and safety

» Dust and degradation, pneumatic conveying and wear

» Dust control and management

» Explosion protection and ATEX regulations

» Engineering of equipment for storage and discharge

» Ship unloading

» Biomass potential and possible future trends