by GuestfromEU » September 4, 2021, 10:27 am
To the topic of emissions regulations. EGCS, or Scrubbers, remove NOx and SOx, but not CO2. CO2 (Carbon Dioxide) is the pollutant of concern with regards to the new IMO regulations as a result of MEPC 76. Scrubbers were installed to permit vessels to burn high sulfur HFO and MGO. Upgrades to existing ships, and designs for new ships, have taken into account economic factors, but the new regulations were not foreseen even just two years ago. Many shipowners are now finding themselves with an apparent poor investment in capital upgrades.
To further clarify my earlier remarks, EEXI (Energy Efficiency Existing Ship Index) is a value which is calculated for every single vessel, new and old. There is a set, calculated value for which each ship must meet or exceed. The set value does not change, and the calculated value would change only if modifications are made to improve the efficiency of the ship. This is not about reducing pollutants, it is about reducing fuel consumption, or changing to alternative fuels and thereby reducing Greenhouse Gases (GHG's). Regarding alternative fuels like Methanol, Hydrogen, or Ammonia, the technology for engines to consume these fuel is just progressing beyond infancy, and land-based production, infrastructure, and distribution are years away from being a viable option.
The Carbon Intensity Indicator is another regulation coming into force alongside EEXI. The primary difference is whilst the EEXI is a static value, CII is a fluid value. EEXI calculates the vessel benchmark one time, whilst the CII calculates annually, thus getting a real time, current picture of the vessel efficiency and GHG emissions. It is not a set value and each year will revise downward slightly, requiring a ship to be approximately 2% more efficient than the year prior. By efficiency, this can be taken as fuel consumed for each cargo ton moved over a measured distance. Each ship will be assigned a grade from A to E, based on the calculations performed each year and respective ships of same type and size. As each new ship is delivered, with attractive, compliant EEXI and CII values, the global average set value will trend downward, forcing existing ships to meet the new values. Grades A, B, and C are compliant. Grades D and E are not compliant, and must be improved to become compliant or the vessel cannot sail. Also to note, banks, financial institutions, and charterers are focusing on this and some will institute restrictions on charterparties, mandating only grade A or B vessels be engaged on moving their cargo. This may not be a factor on the lakes, but very well could affect to some degree.
To put this in perspective, almost every shipowner in the world is scrambling to perform the calculations, often outsourced to Class Societies, engine manufacturers, or independent consultants. Many are bringing in consultants to advise on the path forward, whether that is limiting engine power, installing energy improvement devices, upgrading engine components, and other options. The important thing to remember is these investments are not one off. That is, continual improvement is required to stay compliant. Considering engine power limitation, some ships just 10 years old may see a reduction of up to 40-50% of engine power at the onset, and further reduced each year. At what point does a ship become unprofitable? Engine Power Limitation is a quick solution, but installation of other options - re-designed propeller, exhaust gas recirculation, different turbochargers, upgraded generator engines - are all projects that take time, one year to execute at best, often longer. Every shipowner is taking some action on this and the limited capability for manufacturers to keep up production will make for difficult compliance in meeting timely targets with each passing day.
To the topic of emissions regulations. EGCS, or Scrubbers, remove NOx and SOx, but not CO2. CO2 (Carbon Dioxide) is the pollutant of concern with regards to the new IMO regulations as a result of MEPC 76. Scrubbers were installed to permit vessels to burn high sulfur HFO and MGO. Upgrades to existing ships, and designs for new ships, have taken into account economic factors, but the new regulations were not foreseen even just two years ago. Many shipowners are now finding themselves with an apparent poor investment in capital upgrades.
To further clarify my earlier remarks, EEXI (Energy Efficiency Existing Ship Index) is a value which is calculated for every single vessel, new and old. There is a set, calculated value for which each ship must meet or exceed. The set value does not change, and the calculated value would change only if modifications are made to improve the efficiency of the ship. This is not about reducing pollutants, it is about reducing fuel consumption, or changing to alternative fuels and thereby reducing Greenhouse Gases (GHG's). Regarding alternative fuels like Methanol, Hydrogen, or Ammonia, the technology for engines to consume these fuel is just progressing beyond infancy, and land-based production, infrastructure, and distribution are years away from being a viable option.
The Carbon Intensity Indicator is another regulation coming into force alongside EEXI. The primary difference is whilst the EEXI is a static value, CII is a fluid value. EEXI calculates the vessel benchmark one time, whilst the CII calculates annually, thus getting a real time, current picture of the vessel efficiency and GHG emissions. It is not a set value and each year will revise downward slightly, requiring a ship to be approximately 2% more efficient than the year prior. By efficiency, this can be taken as fuel consumed for each cargo ton moved over a measured distance. Each ship will be assigned a grade from A to E, based on the calculations performed each year and respective ships of same type and size. As each new ship is delivered, with attractive, compliant EEXI and CII values, the global average set value will trend downward, forcing existing ships to meet the new values. Grades A, B, and C are compliant. Grades D and E are not compliant, and must be improved to become compliant or the vessel cannot sail. Also to note, banks, financial institutions, and charterers are focusing on this and some will institute restrictions on charterparties, mandating only grade A or B vessels be engaged on moving their cargo. This may not be a factor on the lakes, but very well could affect to some degree.
To put this in perspective, almost every shipowner in the world is scrambling to perform the calculations, often outsourced to Class Societies, engine manufacturers, or independent consultants. Many are bringing in consultants to advise on the path forward, whether that is limiting engine power, installing energy improvement devices, upgrading engine components, and other options. The important thing to remember is these investments are not one off. That is, continual improvement is required to stay compliant. Considering engine power limitation, some ships just 10 years old may see a reduction of up to 40-50% of engine power at the onset, and further reduced each year. At what point does a ship become unprofitable? Engine Power Limitation is a quick solution, but installation of other options - re-designed propeller, exhaust gas recirculation, different turbochargers, upgraded generator engines - are all projects that take time, one year to execute at best, often longer. Every shipowner is taking some action on this and the limited capability for manufacturers to keep up production will make for difficult compliance in meeting timely targets with each passing day.