Waiting for the cleantech tide to turn in shipping

Despite that it accounts for 3 percent of global emissions, shipping has largely been exempt from emission reductions requirements to date.

The lack of interest in reducing emissions from shipping has also been expressed in the venture capital community. Germany-based SkySails – a maker of towing kite propulsion systems for today’s modern maritime shipping industry – received $10.3 million of venture capital funding way back in 2006. California's KiteShip, pursuing a similar idea, won an award at the California Cleantech Open, also in 2006. Since then SkySails, in particular, has been making gradual commercial progress.

Artist's rendering of a SkySails system.

The vendors say the technology has the potential to cut down fuel costs significantly. Depending on the prevailing wind conditions, SkySails claims it can reduce a ship’s annual fuel cost by 10 percent to 35 percent, and under optimal wind conditions, temporarily up to 50 percent.

However, there are signs that the tide is turning and the shipping industry may soon be required to set emission targets, potentially reinvigorating the market for such products.

Pressure is coming from a number of countries and NGOs for Copenhagen to set reduction targets for shipping, and indeed the shipping industry has reacted positively. The Danish Shipowners Association, which represents the Danish shipping industry, has said that it is ready to enter a specific climate agreement in Copenhagen.

The Association has suggested the idea of a compensation fund where a purchase of one ton of oil leads to a surcharge of 25-40 dollars. This would reward the use of environmentally friendly technologies in ships in the form of a lower charge. This proposal is supported by shipping associations in the countries that account for 70 percent of the world's tonnage.

There is also plenty of low hanging fruit in cutting emissions from shipping. The IMO released a report earlier in the year that shows the shipping sector could save money by cutting emissions, even without a price being levied on emitted carbon. The study explored a range of techniques, including operating ships in more efficient ways to save fuel, speed reductions, kite sails, and upgrades to machinery such as hulls, engines and propellers
(see Shipping sector could cut CO2 by 25%—at no cost).

We believe that investment in energy-efficient and energy-generation technologies in ships will see much more interest over the next 3-5 years. Technologies are still in their early stages, but here are three recent deals in shipping that have been getting the ball rolling.

1. In October, A123Systems announced a deal with Japan-based heavy equipment manufacturer IHI Corp. IHI is aiming to sell A123’s batteries for use in ships.
2. British Columbia-based Princess Cruises recently spent $7 million to equip its ships with new technology allowing them to plug into an onshore transformer and tap into hydropower generated by the local utility instead of running their diesel-powered engines, and
3. In September, a full scale fuel cell test system was installed on board supply vessel Viking Lady as part of the FellowSHIP project led by shipping insurance giant DNV. The next and final phase of the project are to involve further testing of the fuel cell system and aims to deliver between 1MW to 4MW of power.

Under a business-as-usual scenario, emissions from shipping are expected to grow. If you couple this with a forecasted rise in energy costs, then the case for developing economical ways to reduce emissions from shipping becomes even more compelling.