I was listening to an episode of Bloomberg’s Switched On podcast on ammonia to better understand where the shipping industry is heading towards decarbonization.
While I recommend it for a quick primer on the subject, a short mention by BNEF analyst and interviewee Adithya Bhashyam caught my attention.
Adithya mentions that, in the big picture of shipping decarbonization, only 40% of gains will be made by all of these new fuel technologies - biofuels, methane, or ammonia.
The majority of fuel reduction, a full 60%, will come from gains in efficiency.
I found this shocking- there is so much room for efficiency in this sector. It is consistent with our collective approach to decarbonization. Using less is the quiet, unsexy way to move things forward among the headline-grabbing new fuels, new toys, or new tech.
IMO Sets Ambitious Climate Goals
In July of this year, the International Maritime Organization (IMO) updated its commitment to decarbonization with a set of much more ambitious climate goals.
“These new goals, agreed upon in July 2023, would see countries strive for net-zero greenhouse gas emissions from international shipping by “close to” 2050… trying to cut international shipping’s annual emissions by at least 20 percent, compared to their 2008 levels, by 2030, and by at least 70 percent by 2040.”
+Green shipping picks up speed - Tasmanian Times
The previous commitments, established in 2018, called for a 50% reduction by 2050. So you can see the improvement here.
It’s worth noting that 175 nations, including the U.S., are members of the IMO.
One of the many benefits of targeting fuel efficiency is that the shippers don’t have to wait for the infrastructure for new alternative fuels to be in place.
There is no need for global coordination on green shipping corridors. Many of the solutions are logistical or are technologies that can be retrofitted to existing fleets. (Remember those cool sails for cargo ships!)
According to Maersk’s sustainability report:
“Improving fuel efficiency is an area Maersk knows well, and it is how we reduced our carbon intensity by close to 40% between 2008 and 2022. It includes fleet and network optimisation, e.g., by relying on more efficient, larger vessels, and improving network execution such as port productivity and reducing vessel waiting times.”
+Maersk Sustainability Yearly Report
Benchmarking, Again
Last week’s article was all about benchmarking company progress towards the SDGs. Benchmarks work, and the IMO has built two measurements into its commitment.
First, there is the Energy Efficiency Existing Ship Index (EEXI), “a technical measure for existing ships requiring them to attain a certain energy efficiency.”
Then there is the Carbon Intensity Indicator (CII), which rates operational energy efficiency of vessels and assigns a grade from A to E.
As the Maersk sustainability report further noted:
CII rules are based on individual vessel compliance rather than a pooling or fleet approach such as FuelEU Maritime.
This means ship owners must focus on incremental smaller energy efficiency gains on all vessels rather than investing in fully carbon neutral vessels that operate on green fuels – the most impactful way to drive the green transition.
You can read more about these efficiency benchmarks on the IMO website below:
+Improving the energy efficiency of ships - IMO
Katapult Investor Day
With this idea spinning in the back of my mind, I logged on to listen to the Katapult Investor Day earlier this week to listen to presentations by startups in their ocean fund.
In last Saturday’s Dawn Patrol post, I linked to a TechCrunch article highlighting 23 recent investments by Katapult VC, noting that over half of them were in the ocean space.
Katapult Ocean is one of the first ocean-themed venture funds. Taking a look at what companies are in their portfolio is really insightful.
While everything from seaweed-based bioplastics to ocean data gathering was discussed, a couple of these startups - Hullbot and Pascale Technologies - were focused on fuel efficiency in shipping and maritime industries (ferries, recreational boating).
Another company, Icodos, was working on making methanol production greener and more affordable, thus easing the transition to this more sustainable shipping fuel.
And one thing they mentioned, which is now even more apparent, is that the total addressable market (TAM) for fuel-saving technologies in shipping is massive.
Hull Cleaning Saves Fuel
Why keep a clean hull?
“Using hull cleaning as a measure to curb emissions and improve the energy efficiency of the world fleet is also important for at least two reasons. First, hull fouling is a substantial contributor to increased emissions… Second, it is the only main driver over which the ship owner has a large degree of control.”
Hull cleaning leads to less fuel consumption. It’s that simple. Fuel is the largest variable cost, accounting for 50-70% of a ship’s total running cost. The industry-wide fuel bill exceeds $80 billion a year.
+The energy efficiency effects of periodic ship hull cleaning - Science
A company called Hullbot presented at the Katapult Investor Day.
You can see a video overview of their technology from the Ocean Impact 2022 Pitchfest.
Clearly, it made an impression.
Riding On Air
The other company proposed another way to save on fuel - make the vessel float on air.
Pascal Technologies’ fuel-saving solution may not be geared toward the shipping industry per se. Still, its use in vessels such as ferries and workboats means they are also addressing a sizable market.
Short-haul vessels are the first segment of the maritime sector to being fully electrified. Electric ferries are already rolling out worldwide, so making them more efficient is critical.
Take a look at how the AirHull works:
The ocean economy is where new tech collides with old, even ancient industries.
Startups like Hullbot and Pascal Technologies (with the support of investors like Katapult) will help large, hard-to-abate industries like shipping meet their net zero goals.
And with a market as big as the global shipping industry, there is room for everyone to get on board.