SSI workstream - Accelerating the uptake of technology: Demonstrating the business case for new technologies and techniques

1. A step change in energy
technology innovation
and uptake

2. Challenge & vision
Our approach
Step change technologies
• Findings
• Recommendations
Voyage Optimisation
• Findings
• Recommendations
Pulling them together: towards a strategy for energy step change
What’s next?
Contents

3. Challenge & vision
• The global shipping industry needs to achieve a step change in the way it uses
energy, in the face of persistent energy price rises and the need for action on
climate change
• In our Case for Action in 2011 we noted the scale of the challenge: if the industry
were to double in size by 2040, while playing its part in delivering global
emissions cuts of at least 50%, it will need to cut its own emissions per tonne km
by 75%
• Incremental improvements will not be sufficient. We need an explicit, active and
ambitious programme to shift industry energy efficiency. No one technology or
technique is likely to do this alone; we will need a portfolio of technologies,
operational approaches and a diverse mix of energy resources, which may apply
differently to different ship types and trades
• There are new technologies and techniques promising the double digit efficiency
gains we need, but they often face difficulties being taken up at scale
• This work stream aims to identify key opportunities and barriers associated with
the innovation and uptake of new technologies and operational techniques.
Together, we aim to accelerate the pace of change and identify ways of
overcoming the barriers

4. Summary of the work
stream
The SSI wants to see widespread uptake of step
change technologies and techniques that reduce
ship energy consumption and dramatically cut
greenhouse gas emissions.
We have developed real world case studies
which demonstrate:
• There are step change technologies that offer
the potential for cost effective double digit
cuts in energy consumption, but many are
stalled for the sake of fully scale trials
• Collaboration works and is key to managing
risk and unlocking potential
• Supporting startup companies is key
• Slow steaming still offers unrealised potential.

5. Our overall approach

6. Our overall approach
The workstream has focussed on real technologies and techniques in its work, rather than
on generic processes or barriers, in order to understand real-world challenges.
We have focussed in parallel on two different approaches to a step change in energy use:
• Step change technologies offering significant energy savings which are at, or nearly
at the demonstration stage rather than proven technologies which need to scale
• Voyage Optimisation (VO) techniques which may not lock in such significant
efficiency gains, but are more flexible, have lower barriers to entry and may therefore
be easier to scale.
Techniques: Voyage optimisation
including, weather routing, virtual arrival, slow
steaming, trim optimisation.
Barriers to entry: low
Applicability to fleet: moderate-high
Maturity: moderate
Ambition: moderate
Step change technologies:
 Air lubrication
 Wind assistance
Barriers to entry: Moderate-High
Applicability to fleet: moderate
Maturity: Low
Ambition: High
(analysis from SSI Energy technology workplan, 2012)

7. Step change technologies:
Findings & recommendations

8. Identifying promising step change technologies
The workstream carried out research into and analysis of the range of
technologies and techniques available to the industry to improve energy
efficiency. This analysis included savings claimed, potential financial
performance, applicability (retrofit/new build, ship type), and maturity.
Based on the analysis, we identified two technological areas of focus:
• Wind assistance such as kites and rotors
• Air lubrication of hulls to reduce propulsive power needed. Again there were
several potential suppliers
Step change technologies

9. What we did
SSI members subsequently evaluated the potential of step change technologies for
specific vessels:
• Air lubrication: DK Group Air Cavity System (ACS) and another technology
• Wind assistance: a Flettner rotor system and Skysails (propulsion kite). Work on
Skysails was based around a pre-existing relationship between Cargill and Skysails
In each case one or two SSI members worked with the supplier to develop our
understanding of the potential offering, and evaluate how the technology could work for
their own operations, including risks arising and potential financial performance. This
enabled detailed analysis of probable savings from the technology, and development of
financial indicators in service. Some trials data was also reviewed by Lloyds Register.
Step change technologies

10. Summary findings
• The step change technologies we looked at do indeed offer the
potential for double digit cuts in energy consumption, and can be
cost effective, with some indicating payback times of 2 years or so
• But many are stalled for the sake of full scale trials to prove
savings
• The start up nature of many of the companies offering these
innovations adds additional challenges.
Step change technologies

11. These step change technologies offer the potential for
double digit cuts in energy consumption
Technology Literature
estimates pre SSI*
Fuel savings indicated
by SSI case studies
Basis
Air lubrication
DK Group
ACS
10-15% (tanker/bulker)
5-9% (container)
10% (bulker) Tank testing witnessed by
GL, data reviewed by
Lloyds Register
Mitsubishi
MALS
Up to 10% depending
on vessel type, speed &
draft.
7% at light draft
2% at scantling draft
Cost benefit analysis for
new building vessel for
delivery 2015
Wind assistance
Flettner Rotor >15% (supplier
expectation)
Not yet available, work on-
going
Skysail 10-35% 20% Cargill analysis of weather
vs. trading patterns
* unless otherwise indicated literature claims are from Ship Effiiciency: The Guide. Fathom Shipping 2012
Step change technologies

12. … and can be cost effective
One technology, the DK Group ACS (Air Cavity System), was taken through financial
analysis by two SSI members. These members derived similar results – that the
technology, if it performed in line with the case study results, would deliver an acceptable
payback time of 2-2.5 years.
In addition, prior to SSI an investment decision had already been made by Cargill for the
Skysail. This is expected to be deployed at sea Q4 2013. The SSI members will then be
able to analyse the full in-service testing data.
The MALS system was not taken through the same analysis. While the MALS system has
been shown to be effective for shallower draft, broad beamed vessels, for the SSI
member the subject vessel’s deep draft and mainly fully laden operational profile were not
ideally matched to the system’s strengths and the cost effectiveness of implementation
would have been marginal at best.
Step change technologies

13. But they are stalled for the sake of full scale trials to
prove savings
Despite these mainly positive findings on savings and payback, our members have not yet
been able to make a new investment decision for any of these technologies.
One reason is performance risk: the nature of these technologies, involving complex air
and water flow, means that even the best tank testing and computer modelling can only
offer so much, and the real performance of the technologies can only be proved by full
scale trials. An investing owner/operator therefore has to take the risk that the technology
does not perform in line with tests and so does not deliver savings which justify the
investment. While the potential reward, if scaled across a fleet, might be considered large
compared to the investment cost of a trial installation (eg of the order of $1m), it has to be
remembered that, in the current depressed shipping market, investment tends to be in
tried and tested technologies.
By comparison operational risk, the risk that the new technologies might impede the
delivery of goods/services to customers, did not emerge as a major problem.
This critical demonstration/risk barrier is often known in technology development circles as
the
“Valley of Death”
Step change technologies

14. The startup nature of many of the companies offering
these innovations adds additional challenges
With the exception of Mitsubishi’s MALS, all the case study technologies were offered by
start up companies dependent on one product. This raises the following potential
challenges:
• These companies often find it difficult to fund testing, moving their product from
drawing board to test tank/ computer modelling, and into trials
• They may not have enough capital to offer cut price “first mover” deals as a way to
profile, prove and refine their technologies – a way of overcoming performance risk,
and gaining market penetration
• They may not have enough experience to know what information is needed by
potential customers at the various stages of technology evaluation and investment, or
how to work up investable business proposals with them.
Step change technologies

15. Case study findings: Air lubrication
Technology
description,
supplier
DK Group ACS
Air Cavity System (ACS) is an air hull lubrication system that reduces drag on the flat bottom of
a ship using a series of air-filled cavities fitted to the flat of bottom which create a stream of
micro-bubbles as a result of the vessel’s forward motion through the water
Applicable to both newbuilds and retrofit.
Literature quoted savings of 10-15% (tanker/bulker)l; 5-9% (container)*
Mitsubishi MALS
Air hull lubrication Compressed air from a blower is
released through a series of openings in the forward flat
bottom of the vessel to form a carpet of air bubbles which
reduces the frictional resistance between the hull and sea
water. Literature quoted savings of up to 10% depending
on vessel type, speed and draft*
Case study
Company
Case study
process
Under auspices of SSI:
 Conclusion of joint NDA between DK Group, Gearbulk, Bunge, LR.
 Access to and evaluation of test data conducted by HSVA
 Further data review by LR as part of SSI
 Development of MALS cost benefit analysis for
planned 62500t vessel.
 Meetings with management
 Development of performance estimates
for 63000t Gearbulk vessel
 Meetings with management
 Secure owner who would host
(but not pay for) initial trial
 Negotiation around alternative
financing arrangements
 Investment proposal
Headline
results:
technical,
financial
 Fuel saving: 10% scantling draft, more
at lighter drafts
 Payback: 2.5 years
 Cost: €1.1m
 Fuel savings: 10% (bulker)
 Payback: 2 years
 7% at light draft (bulker)
 2% at scantling draft
Investment
decision/
reasons
Not able to proceed.
 Implementation limited to a few yards,
outside normal locations, due to IPR
concerns – substantial additional
drydock/deviation costs
 Performance risk could not be reduced
sufficiently without full scale trial.
Not able to proceed.
 Performance risk could not be
reduced sufficiently without full
scale trial
 No alternative financial
arrangements available
 Greatest benefits for vessel in ballast
 Gearbulk’s mostly fully laden operational
profile would therefore not allow it to gain the
maximum benefit from the technology.
*unless otherwise stated, quoted savings are taken from the Fathom Shipping
guide
Case study findings are specific to the SSI member companies, their vessels and
operations. Other applications of the technologies may get different results.
Step change technologies

16. Case study findings: Wind assistance
[insert full page table]
Technology description Flettner Rotor
Wind assistance technology that uses the Flettner
rotors and the Magnus effect to help drive the vessel.
Suitable for both retrofit and newbuild.
Supplier expectation of >15% saving
Skysail
Wind assistance technology using a large automated kite to help
tow the vessel.
Literature quoted savings of 10-35%*
Case study company
Case study process
(bullets)
 Involvement of SSI members LR and Namura
involved in evaluating design and integration
into ship structure.
 Results not yet complete – draft business case
under review.
 Frequent visits to supplier
 Close liaison between vessel owner (on long term
charter), Cargill and technology supplier.
 Inhouse analysis of weather vs trading patterns
 Fit with Business Unit and Corporate Responsibility goals
 Purchase and retrofit of Skysails system to handy size
vessel
 Implementation of comprehensive MRV approach in trail
vessel to ensure accurate baselining of performance.
Headline results:
technical, financial
 Not yet confirmed  20%
Investment decision/
reasons
 No decision yet  Decision to proceed.
 Implementation expected Q4 2013. Cargill are paying full
cost of system.
*unless otherwise stated, quoted savings are taken from Ship efficiency: the guide,
Fathom Shipping 2012.
Case study findings are specific to the SSI member companies, their vessels and
operations. Other applications of the technologies may get different results.
Step change technologies

17. Recommendations
We have identified the following critical needs to enhance shipping energy technology
uptake, which are candidates for SSI action in the next phase:
• Risk management: crossing the “Valley of Death”. Shipping faces a similar barrier to
that identified in land based clean energy innovation (below). Our work found the
commercialisation (or demonstration) valley to be the key barrier, rather than the
technological (or proof of concept) valley
• Supporting technology suppliers – especially start-ups
Bridging the Clean Energy Valleys of Death, Breakthrough Institute, 2011
Step change technologies

18. Recommendation 1: Horizontal risk sharing
We recommend further work on the following risk management approaches, to help the industry cross
the energy technology demonstration “Valley of Death”.
“Horizontal” risk sharing – i.e. industry peers share both the investment and the performance
findings for one or more step change technologies. This could be considered as a “technology club” of
owner /operators. Technology trials could be carried out on a one-off basis where several interested
owner/operators share the cost of implementation on one ship, and then share the results. Alternatively
a group could test a basket of several technologies, sharing all the results.
Advantages include:
• increasing the chance of a successful outcome
• Our experience is that collaboration increases confidence, and speed of assessment
Barriers and potential solutions include:
• Intellectual property: SSI members dealt with this successfully using a group NDA approach as
part of this workstream
• Comparability: a technology club would work best for members with similar vessels/operations
• Split incentive*: this barrier is avoided for integrated owner/operators. Equally a technology club
could be combined with the SAYS model (SSI Finance workstream), which is a form of vertical risk
sharing (see below)
Step change technologies
*Split incentive occurs when the benefits of a new technology eg in fuel savings to
charterer do not accrue to the party who makes the investment eg owner. This
barrier has been addressed by the SSI Finance workstream, resulting in their SAYS
(Save As You Sail) financial model

19. Recommendation 2: Vertical risk sharing
“Vertical” risk sharing – i.e. technology suppliers and shipping technology customers collaborate on
sharing risk, potentially with the participation of other relevant players like financiers and class
societies. Approaches include:
• First mover deals, and performance guarantees: These are the best established sales aid
approaches for innovative products, suitable for suppliers with the financial resources to offer
them and deliver on guarantees. However, many new technological innovations, including all
but one of the technologies investigated by the SSI, are from startups who lack these
resources
• Financial collaboration such as equity participation by the first mover customer, or an equity
for technology deal. This helps provide a startup company with finance in return for supply of the
technology to the customer/investor, and of course the customer then gets to share in any
subsequent financial success by the startup. The barriers to this approach are that a) shipping
customers, being relatively risk averse, do not see themselves as venture capitalists either, and
b) the startup shareholders may not wish to dilute their shareholdings. One of our members
suggested equity participation in a startup as part of a deal for the first implementation of their
technology, but this was not taken up
• Third party guarantees: even if a startup cannot offer performance guarantees on their own
account, there may be others who will, if they are in possession of enough information about the
technology. Insurers should therefore be involved in work in this area
Step change technologies

20. Recommendation 3: Supporting technology suppliers
Supplier checklist
• Based on our case study experience, we
have developed a checklist and innovation
flowchart for suppliers in preparing for and
working with potential technology buyers (see
Resources).
Buyers group
• There is the potential for a “one stop shop”
grouping of shipping industry buyers seeking
step change technologies, who can act as a
focal point for technology suppliers, share
data and provide feedback etc. This could
dovetail with a horizontal risk sharing group
as in recommendation 1. However, scope
would have to be set carefully to minimise
resource requirements for the Buyers Group
companies.
R&D
Proof of concept
Business proposal
Pitch preparation
Commercialisation
Pilot / demonstration
Step change technologies
Innovation process
summary.
An expanded version
with key supplier /
client actions
required, will be
available as the

21. Other approaches
The following also have potentially important contributions to make, although their development is likely
to be led by other bodies than SSI.
• Grants or other 3rd party funding for demonstrations of technologies
• Market Based Measures : These have far reaching consequences beyond demonstration stage
technologies, and are of course already in established discussion in key industry fora such as IMO
Step change technologies

22. Voyage Optimisation
Findings & recommendations

23. What we did
• Objective: establish to what extent Voyage Optimisation (VO) measures are
a worthwhile focus in reaching the SSI vision of a step change in energy
performance
• Our Voyage Optimisation focus included slow steaming, virtual arrival,
weather routing and trim optimisation. However, slow steaming (and virtual
arrival as an enabler) is the only one to promise step change potential and a
key focus was assessing benefits, remaining potential and barriers
• Our start point was a detailed case study analysis of VO implementation,
energy savings and barriers for one member, BP Shipping
• This was followed by a summary assessment of VO implementation, savings
and barriers for our other owner/operator members: Bunge; Cargill; Gearbulk,
Rio Tinto and U-Ming. This included specialist analysis of some of the data to
filter the impacts of local sea and weather conditions
Voyage optimisation

24. Summary findings
• Implementation of VO measures may be falling short of its potential, with a range
of barriers keeping implementation of slow steaming in particular down to a minority of
many fleets
• Slow steaming is a special case: SSI members reported data indicating significant
energy savings where implemented, but a range of barriers mean that implementation
levels are in many cases below 50%
• There is reasonable source data availability, but potential for more and better analysis
to ensure adequate understanding of VO benefits
• There are significant and legitimate concerns over the “lock in” potential of slow
steaming in the face of changing market conditions
• Slow steaming will not be commercially viable for all vessels or voyages. But with
energy savings potentially double (or more) those of some “step change” technologies,
maximising the potential of slow steaming, and measures to lock them in, are too good
to pass up and should be a priority for the industry
• For other VO measures except slow steaming and virtual arrival, energy savings are
hard to separate out from wider operational variances. Nevertheless their low cost and
cumulative effect makes further action worthwhile
Voyage optimisation

25. Implementation of VO measures may be falling short of
potential
• VO measure implementation by our members is broadly in line with industry rates, apart from slow
steaming, which is being used to some extent by all our members.
• However, a range of barriers (next page) is limiting slow steaming to a minority of voyages in many
cases. This means there may be significant unrealised potential.
Voyage optimisation
Measures used/
performance
SSI members % Industry
with some
implementation *
1 2 3 4 5 6
Weather routing ● ● ● ● ● ● 75%
Virtual arrival ● ● 50%
Trim optimisation ● ● ● 55%
Slow steaming 40%
(of voyages)
25%
(of vessels)
20%
(of voyages)
45%
(of sea days)
~75%
(of vessels)
60%
(of sea days)
55-75%
(of companies)
Fuel savings with
slow steaming
(estimated)
16% n/a 16% n/a 10%
(for whole fleet)
39% 19-36%**
Notes
• Analysis based on at least a year’s recent data for all voyages reported by members. Additional analysis in some
cases. Baseline approach for savings may vary: both standard speed/consumption rates and calculated baseline
filtered for other factors have been used. Therefore savings data is not directly comparable between companies.
• * Survey data from UCL Energy Institute, 2012. Data is % of respondents implementing to some level, not
necessarily % vessels/voyages
• **IMarEST 2010, quoted by Fathom guide, for 10 and 20% speed reduction.
• Dot sizes indicates wider implementation vs. small scale/trial

26. Slow steaming is a special case
• The energy saving potential of slow steaming is well known and our findings suggest SSI members
are achieving indicative savings of 16-39% when doing so, in line with industry estimates
• With slow steaming still only applied to a minority of many fleets, there is still major unrealised
potential, including potential from Virtual Arrival
• These savings are being realised under current market conditions and exceed those available from
other technical solutions. Increased freight rates could wipe them out, and increase industry CO2
emissions significantly. But given the urgency of action on climate change, they are a valuable short-
medium term contribution
• Our work found difficulties in deriving implementation and savings data, with different
approaches and existing data going unused. The industry needs a more accurate understanding of
savings, to maximise potential. This approach will also benefit understanding of other VO measures
Voyage optimisation
Speed/CO2: Smith et al. (2011)
• The challenges in identifying true savings include:
• Measurement and reporting errors
• Defining the baseline: what is the “normal” speed?
E.g. standard vessel fuel consumption data vs. a
“counterfactual” analysis which estimates what the
vessel consumption would have been in the real
weather sea state conditions prevalent
• Depending on market conditions, slow steaming may
require more vessels in a fleet, which may involve
additional embedded carbon

27. Slow steaming (2)
• The most significant barriers to scaling slow steaming are*:
• Charter parties
• Logistical constraints (e.g. navigation, tides etc, customer needs)
• Monitoring, reporting and verification (MRV) limitations undermining
robustness of savings data
• Technical limitations (engines) and commercial viability (fuel saved vs. vessel
cost)
• Virtual arrival (Just in Time arrival) allows a vessel to slow steam to meet a port
schedule, and as such is less vulnerable to market conditions. BP Shipping has
pioneered this approach and developed charter party clauses (see Resources) to help
scale. Virtual Arrival has been effective for 1% of BP voyages, delivering fuel savings
of 14% for those voyages
Voyage optimisation
* Identified by both SSI members and industry survey (UCL, 2012)

28. The performance of other VO approaches needs further
work
• As part of the workstream we looked at members’ use of other VO approaches,
principally Weather Routing and Trim Optimisation
• Weather routing (WR) is the most widely used. However members have not been
able to definitively relate fuel savings to WR, and fuel saving is often not its main
purpose, with safety, cargo care and performance claims also key considerations
• Trim optimisation is only in limited/trial use by members:
• Literature sources suggest savings generally 1-5%.
• There are some technical barriers which may need to be addressed, such as changes in
vibration and crew comfort.
Conclusions:
• These measures arguably do not amount to step change techniques.
• However, they are relatively low cost with a cumulative effect, and not subject to the same
market vulnerabilities as slow steaming.
• The same Monitoring, Reporting and Verification (MRV) focus recommended to maximise
slow steaming potential will enable better identification of other VO benefits
Voyage optimisation

29. VO Recommendations
With industry leaders achieving 75% or so but many others well below 50%, it is clear
more can be done. The key measures to achieve this are:
• Better analysis of vessel data, to get clarity and precision on implementation and
savings. In many cases the data is there already, but needs consistent analysis and
better baselines. This may be a suitable activity for the next SSI phase, and may be
supported by:
• Standardisation of reporting structures will contribute to this process: this
may apply both within and between fleets. BP Shipping is already
implementing this measure
• The EEOI* as a consistent format for actual data (but not baselines)
• Charter Parties need to be reviewed, to allow the addition of clauses which aid the
use of slow steaming, Virtual Arrival etc. (see Resources for BP clauses)
Voyage optimisation
* EEOI: Energy Efficiency Operational Indicator, developed under IMO auspices

30. Pulling them together:
How might step change technologies and VO combine?
• Combining step change technologies and VO techniques may be more complex than
just “do both”
• While step change technologies may offer significant locked-in efficiency
improvements, they have a significant capex requirement, and may face “rebound”
effects – e.g. where an operator takes the benefits in higher speed rather than
reduced fuel use, as the enhancements may benefit from higher freight rates:
• VO techniques have a much lower barrier to entry. Slow steaming may offer benefits of
20% or more, perhaps exceeding those of step change technologies
• But these benefits are not locked in, and may be abandoned in different market
conditions
• Therefore the optimum choice between step change technology, VO or a combination
of the two is likely to depend on vessel/voyage including age, and market conditions
• We have not tested interactions between the two approaches in the workstream, but
as they move to scale, the industry needs to consider these interactions
Step change technologies Voyage optimisation

31. Pulling them together:
towards an integrated strategy for energy step change
• There are potential interactions between step
change technologies and VO, as outlined in the
table
• An integrated strategy would therefore need to
prioritise investment and VO application, e.g:
1. All vessels use VO techniques to some extent,
given low barriers to entry
2. Step change technologies may be most
appropriate for the newest vessels and fastest
routes; whereas:
3. Slow steaming could deliver the greatest benefits
for older vessels with higher fuel consumption
4. There may be particular interactions – e.g.
combining wind assistance with sophisticated
Weather Routing
Developing such a strategy is likely to be a future need
after proving the capabilities of step change technologies.
Possible interaction with step change
technologies
Slow
steaming
 Technology delivers benefits but
absolute financial savings may be
smaller than at standard speeds
 Enhanced energy technology may
increase vessel value / freight rate,
reducing or eliminating financial
benefits of slow steaming.
Virtual
Arrival
 As for slow steaming
Weather
routing
 WR likely to be key to optimum
performance of renewable
technologies like wind, solar.
Trim
optimisation
 Some technologies may have specific
trim needs.
Synergy or cannibal? Possible interactions
between step change technologies and voyage
optimisation techniques
Step change technologies Voyage optimisation

32. What’s next?

33. Next steps
The following actions are already under way:
• Cargill Skysail implementation due in Q4 2013. Full before & after data will be made
available to SSI members. This is the kind of critical “first mover” action that can
transform technological uptake in the industry
• Completion of investigation of Flettner rotor technology. Rio Tinto is reviewing the
technical and business case and subject to satisfactory completion will move to a trial
installation. If so test data will be shared with SSI members
• BP Shipping is implementing measures to standardise reporting structures, identified
as a result of the SSI VO case study
Candidate collaborative actions for the next SSI phase:
• Development of vertical or horizontal risk sharing approaches
• Development of more sophisticated, consistent voyage data analysis to improve
understanding of VO savings. This may not require collection of additional source data
from vessels

34. Resources
• Case studies in technology evaluation created by SSI members
• An evidence base for voyage optimisation
• Supplier checklist and technology innovation process
• BP Shipping Virtual Arrival clauses
• Full performance data for the Cargill Skysail will be shared with SSI members after its
implementation in late 2013
To access the resources visit www.ssi2040.org
To express interest in the SSI contact ssi@forumforthefuture.org

35. Thank you
Prepared by Rupert Fausset and Ben Ross of
Forum for the Future
ssi@forumforthefuture.org
www.ssi.2040.org