Decarbonisation is shipping’s white swan (I refer to the kind made popular by Nassim Nicholas Taleb), or rather, a bevy of little white swans if you will. Complete decarbonisation is inevitable; the only question now is when, not if. It is necessary for the industry to survive, and thrive in the world we will be living in. Vessels built in 2050 will be very different from the ones we build today. But given the longevity of vessels, those that we build today can co-exist with the ones built in 2050; only if we make them and the ecosystem they operate in sufficiently resilient.
Commercial shipping is a low margin business and only the very forward-thinking cargo owners are willing to pay a premium to ship goods sustainably. We don’t yet know what the technology, fuel or regulatory landscape will look like in a few years. Yes, we have a ton of limitations. And this forces us to innovate from the point of view of scarcity, with a focus on optimisation and incremental change. But the scale of the problem ahead of us requires fundamental change, delivered rapidly. Instead, if we think about this from the point of view of abundance, where we don’t have to make the business case for each single vessel work right now, would we come up with different solutions? And could we bring those solutions to scale, in turn making the economics work? When I thought about this — giving priority to resource efficiency and rapid deployment — here’s what I came up with.
(As I do not want this to be a which-is-our-future-fuel debate, my fuels and technologies are called Q,W,E,R,T and Y. If you have spent too much of your lockdown watching detective series like me, and are trying to figure out if there is a subliminal link between an alphabet and a particular fuel or technology, don’t. It’s completely random, my keyboard just threw the alphabets at me in that order.)
We can push the boundaries of flexibility further
We are already working on flexible and modular solutions and are developing concepts where fuel storage, and energy systems are containerised and swappable. But is there a way in which we can push this concept further, to increase our preparedness, and consequently resilience, in the face of uncertainty on multiple dimensions?
Let’s start with the vessel as a whole. We are preparing ships to operate on fuel Q, W or E in anticipation of future developments. But what would it take to make a vessel all-currently-possible-future-fuels-ready? Let’s assume that fuel Q has the most challenging ventilation requirements, W has the highest flammability risk and E is highly corrosive. What’s keeping us from taking all of the worst-case boundary conditions of Q, W and E, and designing vessels keeping those in mind? Isn’t a multi-future-fuel-ready vessel a far more attractive investment than a vessel betting on a single fuel?
Similarly for fuel storage, different fuels require different kinds of tanks. We are thinking of making them modular and easy to put them on and remove from a vessel. But there is then still a risk that I invest in a tank for fuel R for my vessel and 3 years later, I need to retrofit her again to be able to operate on T (because T is now way cheaper, or more widely available) or vice versa. In this situation, I would prefer a tank that can be used for both R and T.
Let’s assume R, T and Y are all liquid/cryogenic fuels. T has to be stored at the lowest temperature of all of these. At first glance, it might not make sense to store Y in a tank meant for much colder T. But what exactly is the difference, and how much of it has to do with certification/regulation than the actual design, materials or parts used?
What if we picked the more difficult of the fuels, let’s say T, and tested and certified the tank for all similar fuels (i.e., R and Y as well)? I realise this might double, triple or quadruple the cost. But if this flex-fuel tank were available, would several more vessel owners be more willing to dip their toe in the decarbonisation ocean? Probably.
Would this mitigate a certain amount of risk, and enable easier access to capital? Quite possibly.
And if the manufacturer sold twice or thrice the number of tanks, would they be able to recover the costs of the extra investment? That could easily be calculated, right? Would this accelerate deployment and give shipping a collective competitive advantage? I believe it would.
These are just some examples, I’m sure there are a lot of other possibilities. Unless we get new technologies into the water, we are not going to find out whether or not they will be effective and efficient. We tend to keep waiting for someone else to figure this out in order to deploy them, firmly planting ourselves in the midst of a classic chicken-or-egg conundrum. Accelerated deployment will break this un-virtuous cycle, and we must do all we can to move things along.
We have the opportunity to leverage fuel, cost and regulatory uncertainty to innovate and prepare ourselves for the most technically challenging scenario, and for a complete lack of consensus. While this is not what comes to mind at the first instance, the advantage of this approach is that it will make us highly flexible and it can radically speed up deployment (which is our biggest bottleneck at the moment). This would, in turn, set us in good stead to deal with white, grey or black swans that the next couple of decades might throw at us.
Written by Prasanna Colluru.
Contact Prasanna on LinkedIn.