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A new model for efficient shipping: Electricity as a Service (EaaS)

With the growing concern about the state of our oceans, a great deal of attention is being directed at the maritime industry. Ship owners today face many different and new challenges, stricter regulations, rising fuel prices and a demand for green shipping from regulators and customers alike.

The need for both merchant and cruise ship owners to adapt to environmentally friendly and cost-effective energy solutions is urgent. In fact, just over a year from now the International Maritime Organization’s regulations on sulphur emissions will come into full force. The current limit of allowed sulphur content in exhaust gases will be reduced from 3.5% to 0.5%

So, what are the options?

There is not much time left for implementation. Operators who are investigating options other than a fuel shift need to have their strategies ready with viable actions they can take. However, those who decide not to install a scrubber on their vessels will be left with only one option – to switch to a lighter and more expensive fuel like MDO, MGO or ULSFO.

There is no one-size-fits-all solution. The best option to comply with the upcoming regulation depends on the vessel type and size, operational patterns and which fuels are available in the short and long term. Since it is likely that the more expensive fuel types will become the norm, energy efficiency is crucial for ship owners in order to keep costs down. Especially when fuel prices may rise even more in the future.

Given that the efficiency of a ship engine is usually around 35% to 45%, that means 50% of the total fuel energy is lost as heat during the combustion. Typically, a significant amount of this heat has been viewed as low quality and could not be captured. However, new systems have been engineered to convert this waste heat into electricity at high efficiencies. One example is the Climeon Heat Power system, which can convert low-temperature waste heat into electricity, resulting in fuel savings.

The drawback of Waste Heat Recovery (WHR) systems is that the required investment sometimes doesn’t meet the industry’s demand on payback times. One possible step forward to accelerate the implementation of these solutions could be the “Electricity as a Service” model (EaaS). As Mark Bonchek wrote in his interesting article about the hurdles to adopting new technologies in the Harvard Business Review[i], “data, information, and value propositions are not enough to sell innovative products.” Often what is required is a new way of thinking – which is what the cruise industry and cargo shipping companies will need to do in order to meet the new requirements.

How does it work?

You might already be familiar with monthly, pay-as-you-go mobile phone subscriptions, where you only pay for the minutes, texts and data that you use. Take that idea and simply replace minutes, texts and data with kilowatt-hours and you have the EaaS-model.

In such a model either the vendor or a third party, let’s call them the EaaS-Provider, owns the power generation equipment and sells the produced electricity to the shipowner or operator. The EaaS-Provider has total responsibility for the Waste Heat Recovery installation, including feasibility, project integration, performance and maintenance. Some shared service responsibility with the crew on board will likely be necessary, in case minor work is required while the ship is at sea. However, the main benefit to the ship owner or operator is that they do not need to worry about CAPEX and OPEX for the WHR plant, but simply pay for the electricity that is produced.

The following diagram shows how such a setup would work:

What are the advantages?

Access to the latest, most efficient and operational improvement technology
Decreased fuel costs & improved CO₂ balance sheet
No locked-up capital
The provider is responsible for feasibility, integration and performance
Minimal maintenance responsibility for the ship owner
Ships pay only for the produced electricity

What do you think about this business model?

In your opinion, what are the pros? What are the cons?