The Fuse

Autonomy and Electrification to Shake Up the Shipping Industry

by Matt Piotrowski | July 20, 2016

In most discussions of global oil markets, consumption in the shipping industry tends to get overshadowed by demand for gasoline for cars, diesel for trucks, heating oil for homes, and jet fuel for aviation. But fuel used to move some 70,000 vessels on the water every day makes up roughly 8 percent of total oil consumption. The amount needed to move ships around the world is expected to grow as global trade picks up. Just as important, the fuel used in these ships is typically inefficient and harmful for the environment. Bunker fuel, the common term used to refer to what powers ships, is either fuel oil or diesel high in sulfur and nitrogen dioxide. Although new regulations will improve efficiency and curb pollutants, the electrification of the vessels on the water and the growth of autonomy in shipping, similar to changes in the auto industry, can bring about widespread benefits.

Although new regulations will improve efficiency and curb pollutants, the electrification of the vessels on the water and the growth of autonomy in shipping, similar to changes in the auto industry, can bring about widespread benefits.

In 2014, bunker fuel demand averaged just under 8 million barrels per day, with forecasts calling for it to reach 9.5 mbd by the beginning of next decade, according to Transparency Market Research. When counting volumes solely for international navigation (with ships used for domestic purposes stripped out), the IEA puts demand at just under 4 mbd. The move to electrification of ships, similar to the car fleet, is motivated by the desire to improve efficiency and reduce demand for oil. With autonomy, the top priorities are different. For cars, the main purpose for transitioning to autonomy is safety, given how many deaths occur each year on American roads, with limiting fuel use and spurring mobility as side benefits. Autonomous vessels will also provide safety benefits, but they will offer more in regards to efficiency and cost savings for shippers.

New regulations provide motivation for greater efficiency

The maritime industry has come under heavy pressure with new national and international regulations to cut pollutants. The International Maritime Organization has mandated that by 2020, the cap on sulfur oxide emissions to be 0.5 percent, down from current levels of 3.5 percent. These changes will force ships to use diesel instead of fuel oil, which now accounts for about 75 percent of bunker fuel. The diesel market, however, is much more competitive and costly than fuel oil, prompting motivation to seek alternatives.

Moreover, given that most ships are old, inefficient, and difficult to retrofit, builders are further incentivized to look for alternative fuels. Natural gas and biofuels are two options, and in fact, LNG, according to the IEA, will replace some 300,000 b/d of bunker oil demand over the next five years. Further penetration of LNG has a number of hurdles, however, which include limited infrastructure, installation of proper tanks to keep LNG liquid, proper international regulations, and low oil prices.

Against the backdrop of limitations surrounding diesel and LNG, electric ships look more attractive, particularly for small vessels that travel short distances.

Against the backdrop of limitations surrounding diesel and LNG, electric ships look more attractive, particularly for small vessels that travel short distances. The use of hybrid ships or ones that are fully electric can provide large cost savings. Similar to EVs, electric ships have been held back by reduced range and large batteries. But, also similar to the EVs, batteries on ships have become lighter with capacity to increase range, giving them the opportunity to become more attractive.

Electric propulsion is now being seen more earnestly than ever before (electric boats have been around since the end of the 1800s), but will take time to fully revolutionize the industry. The cost and fuel savings are hefty. According to Siemens, diesel-electric ships use a third less fuel than normal and also reduce wear and tear on the engines. Electric ships are also a lot quieter than ones that have diesel engines. For short trips, a fully electric vessel is possible to use as the battery can recharge while the ships are docked. For instance, last year, Norway began using the first electric ferry to transport cars across water, and the country has identified a host of other routes where electric ferries can be used.

There are, of course, challenges to electrification, most of which are no different than the challenges surrounding the penetration of EVs. Some of them include the capacity to travel long distances, proper charging stations, and staff training, both on the vessels and at the ports.

Autonomy on the seas

The technology to produce automated commercial ships is becoming closer to reality with e-navigation, improved connectivity between ships, and the desire to cut manpower at sea. The industry stands to gain a lot from the transition to autonomy because of cost savings and improved safety.

The technology to produce automated commercial ships is becoming closer to reality with e-navigation, improved connectivity between ships, and the desire to cut manpower at sea.

Lloyd’s Register, a leader in maritime intelligence, noted that autonomy will be one major trend in the industry for the next decade and a half. “Commercial shipping will be better connected, while the digital world will closely integrate people, software and hardware. This will change the way we operate and interact,” Luis Benito, the global strategic market manager for Lloyd’s, said. Lloyd’s recently released guidelines for shipping autonomy, with six levels of autonomy, in order for the industry and regulators to have clarity going forward. “The levels provide a procedure to address the safety and practical issues required to meet classification, regulatory and market drivers,” Benito said.

In a report by Rolls Royce, which has a large marine business, the company laid out a timeline for adoption of autonomy in shipping. By 2020, it expects companies will be able to reduce crew on vessels because some functions will be operated remotely. In a decade from now, unmanned coastal vessels will be operated by remote control. By 2030, it says to expect unmanned ships traveling on the ocean to be operated by remote control, and in 2035, the ships will be fully autonomous on the oceans.

The maritime industry can learn from other industries adopting disrupting technology, such as aviation with drones and automobiles with driverless cars.

The Rolls Royce report looks at how the maritime industry can learn from other industries adopting disrupting technology, such as aviation with drones and automobiles with driverless cars. Like autonomous cars, ships will use sensor fusion to combine technology such as radars, thermal imaging, and visual cameras. Control algorithms will help improve navigation and avoid collisions. Connectivity between autonomous ships and proper communication among different crews will be important in optimizing safety and overall benefits. The report concludes that the benefits of autonomous shipping consist of: “More efficient use of space in ship design; more efficient use of crew and their skills; and more efficient use of fuel.”

Transformation ahead

The shipping industry does not consume as much petroleum as trucking or everyday consumers, but it players a key role in the global oil markets. With new regulatory changes now occurring alongside technological advances, major shifts are on the horizon, with electrification and autonomy at the fore. Just like in the auto industry, the fuel savings and benefits to society could be enormous.

 

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