Magnus Hellström
Professor
Åbo Akademi
University
Finland
magnus.hellstrom@abo.fi
Magnus
Gustafsson
PhD, Docent
Åbo Akademi University and Partner at PBI Research
Institute
Finland
magnus.gustafsson@abo.fi
Shipping is expected to contribute to the green transition and notably the global GHG reduction goals. Much focus has been devoted to improving energy efficiency and using alternative fuels and power sources, and their applicability to different shipping segments. Less has been discussed on how shipyards can contribute to this development and what implication it has for their business models.
Much of the green development has occurred in terms of new propulsion system and energy efficiency technologies. This has reinforced the tendency of shifting the power from the shipyards to the technology providers and vendors, whose share of the ship value has been growing with increasing sophistication of the ship systems and service-oriented business models of the vendors. Ship-builders have indeed also been active in incorporating GHG emission reduction technologies and more efficient hull and system designs onboard the vessels.
One implication of the adoption of renewable fuels is the uncertainty around new ship investments, stemming from the much higher cost and still limited availability of these fuels. This requires a much more active sales approach by the shipyards, where they must work harder to convince ship owners and operators about the performance of the ships and that the chosen technology will not become obsolete during the lifetime of the ship or that the ship is upgradeable and will not lose its value. In addition, the investment decisions are often subject to sector integrations, where the availability of the fuel is dependent on the energy market and actions taken by ports to ensure proper bunkering infrastructure.
Despite that very little has happened in terms of how we build ships. Not even the renewable fuels are likely to change the institutionalized structure of the industry (besides creating a need for more space efficient ship designs and a new sales approach). The design and construction processes are still largely centred around the internal combustion engine and its auxiliary systems.
However, the electrification of transportation that already has shown its advantages in the electrical vehicle (EV) market is also coming to heavy transportation, including shipping. For all-electric battery-powered vessels, the evolution has been rapid. The world’s first (large) all-electric car ferry, MF Ampere, with a battery capacity of 1090 kWh, was commissioned in 2014, while the first RoPax (or car and passenger ferry), MS Ellen, started operation in 2019 and was equipped with a 4,3 MWh battery pack. Until recently, the biggest BE vessel in operation today was the Yangtze River Three Gorges 1, with an installed battery capacity of 7,5 MWh. On April 29, 2024, the Chinese container shipping company COSCO reported that its Greenwater 01, an all-electric container ship equipped with batteries exceeding a capacity of 50 MWh, performed its inaugural voyage. Obviously, all-electric propulsion is beginning to be an economically viable option in short-sea shipping, especially for RoPax ferries and other short-range applications.
The removal of the ICE as the primary power source on a vessel could have enormous effects on the ship-building process as it may change the ship construction, remove auxiliary systems such as fuel supply and exhaust gas piping. The implications for shipbuilders are numerous.
Firstly, fully electrified vessels are simpler and easier to build. They may even alter established logics regarding the sequence in which ships are built, which could allow for later capital tie-up in the form of late installation of the capital-heavy batteries. Secondly, as vessel design anyway are rethought a new playground for standardization and platform-based business models opens. With the removal of mechanical systems requiring constant maintenance and an inventory of spare parts, there are less reasons for ship owners to request special design solutions and the use of specific vendors. The idea can be compared to the Volkswagen Group’s MEB platform, from which a wide variety of different EVs can be derived. Thirdly, not exclusive to electric vessels (which, however, are easier to automate), the advent of digitalization and the continuing introduction of IoT technologies onboard ships, holds the potential to not only increasing the level of automation but enables data to be collected regarding how ships are operated and how well their designs perform in different conditions. This constitutes a feedback loop to shipbuilders that has not earlier existed and that may have further positive effects like improved energy efficiency.
For the European shipbuilding industry, it is imperative not to miss the opportunities brought about by the electrification of shipping. New technologies and business models should be explored in parallel to use the green transition to strengthen the competitiveness of the European maritime industry as a whole.