The ability to compete effectively is a crucial issue for any shipping company at any point in time. Recently, we have seen fuel prices rise to record high levels, and even following the recent plunge fuel will remain a significant cost element. Also, with emission reductions high on the international agenda, fuel and energy efficiency should receive additional focus from ship designers and operators.
Investments undertaken in the business world are based on the expected future returns through reduced costs, improved performance or increased earnings. Shipping companies also take this approach, and the renewal of their fleets is based upon this argument.
Effective transportation is about meeting a transport demand at the lowest cost and with the least harm to people and the environment. Improving fuel efficiency will increase competitiveness and reduce the damage to the environment. However, this is not as simple as it may sound. There are many constraints and stakeholder expectations to take into consideration when providing transportation services. Some of these expectations may be contrary to fuel-efficient operations.
DNV uses a set of analysis tools as part of its overall systemic approach to help ship owners and operators handle the complexity of developing transport services, thus supporting more effective decision-making in transport-system and ship-design development. The figures presented are based on a case example of a ship in a transport system (see fact on page 23).
Cost-benefit approach A cost-benefit approach is used when consi-dering different alternatives on both a ship-design and transport-system level. All measures will have a cost as well as an economic benefit when it comes to reduced fuel costs. This can be calculated into a Cost of Averting a Tonne of Fuel – CATF.
Efficiency measures are not always compatible. A hull design that produces a 3% reduction effect and a propeller that has a 4% reduction effect will not necessarily in combination produce a 7% total effect. When applying several measures, it is vital to consider the combined effect. The CATF of the second measure being applied will be different, as the reduction effect will most likely be lower. This is referred to as the marginal CATF – the cost of reducing the next tonne of fuel. When the marginal CATF reaches the fuel price, the measures are no longer economically profitable.
A set of measures can be shown in a fuel-reduction marginal cost diagram, based on the present value of the investment costs and reduction effect. Each measure can be evaluated and applied based on a decision criterion – in this case the expected future fuel price. If the decision criterion is set at USD 300, a new design should apply measures that reduce the fuel consumption by 24%. This will increase the newbuilding price but the extra cost will be compensated by the reduced fuel cost.
Speed reductions Speed is a significant factor when talking about saving fuel. The fuel consumption per day increases roughly with the cube of the speed, but the reduced speed leads to a longer time at sea. The ship’s capital and operating costs will increase as a function of the sailing time, and thus reducing the speed will lead to higher ship costs, and at a certain level the cost increase will be higher than the fuel savings. This is referred to as the optimal speed given the fuel and ship costs.
At the same time there are many issues complicating this matter. The technical issues include whether the engine can run at lower loads and whether the mode of operation is efficient with regard to specific fuel consumption. On the operational side, longer sailing time will lead to reduced transport capacity and a need for more ships, or it can be compensated by a faster turnaround time in port. In order to ensure a certain service level, it may be desirable for the ship to have the capacity to go faster in the case of delays and bad weather.
When fuel reducing measures are applied, the ship will become more expensive and the fuel savings from reduced speed will be less. The optimal speed of such a ship will be higher than that of a traditional design. As a ship is built to last for many years, it will operate under different fuel prices. The ship should be designed to handle this by being able to operate at different speeds without harming the engine or operating it on inefficient engine loads.
Other efficiency options such as cargo loading equipment and different ship sizes, which can affect efficient operations, must be assessed. Solutions relating to crewing, scheduling and deployment can be handled through the use of optimization tools, which can act as both a strategic tool for developing transport systems and a tool for running the operations.
Designing a ship for future demands requires consideration of the market, stakeholder expectations, upcoming regulations and scenarios regarding cost elements such as steel, fuel and crewing. Significant fuel reductions can be made by considering larger parts of the transport chain and examining and aligning the stakeholder expectations with efficient operations. Given the volatility of costs and demand, the opportunity to be efficient in a range of market circumstances, especially regarding fuel and ship costs, will be critical.