WHY ARE WE FAILING TO WIDELY ADOPT ENERGY SAVING TECHNOLOGIES THAT OFFER POTENTIAL FUEL SAVINGS, CARBON REDUCTION AND GREATER FLEET PERFORMANCE?

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1 WHY ARE WE FAILING TO WIDELY ADOPT ENERGY SAVING TECHNOLOGIES THAT OFFER POTENTIAL FUEL SAVINGS, CARBON REDUCTION AND GREATER FLEET PERFORMANCE? Vessel Performance Optimisation Conference; Copenhagen; VPO Conference; 31 st October 2018

2 What is VTAS? To be the recognised authority for the independent assessment and verification of energy saving technologies and to become a valued risk share enabling partner in the shipping industry 2

3 Challenges facing the industry How (why) to incorporate greater technology Competition Vessel utilisation Timeline of opportunities Meeting external regulations Capital and operating costs Split incentive Evaluating sales pitches Awareness of the problem Market trends Funding risk Leaders or followers? Prioritising needs (Sulphur cap, ballast water) Fleet optimisation A complex industry with many interdependencies 3

4 Imperative to change is growing Push & pull factors IMO s MEPC 72 et al are leading the change of imperative 4

5 Available energy saving technologies (ESTs) Selecting the right EST mix that generates bankable benefits is critical 5

6 Barriers to adoption Technical Commercial Operational Finding an acceptable commercial solution remains a challenge 6

7 Opening up the market supporting ESTs from concept to deployment Energy efficiency measures are in place now; some are proven, many will emerge Measurement & Verification (M&V) reliability & confidence to validate the benefits is improving but remains a challenge Bunker delivery note: Tank level indicator: Flowmeter: 3% for HFO and MGO/MDO 5% for HFO and MGO/MDO 8% for HFO and 10% for MGO/MDO Uncertainty Analysis of Methods Used to Measure Ship Fuel Oil Consumption; Hunsucker et al, Jan 2018 that will need to be resolved Ensuring the best way of saving energy now and into the future 7

8 Opening up the market Working together to introduce ESTs will require a balance of pragmatism and ambition Ensuring the best way of saving energy now and into the future 8

9 Levers to gaining confidence and viability Providing the levers to gain knowledge, supported by experience, will result in a better understanding of the viability Levers can be partisan or independent If you don t measure it, you won t change it Ensuring the best way of saving energy now and into the future 9

10 The end game : performance guarantees Pre-requisites to the contract An agreed methodology for comparing past performance with actualised future performance Ability to accommodate different voyages An agreed methodology for M&V sufficient to enable the contract Meaningful data from the technology suppliers Independent provision and administration of the contract agreement Cross party collaboration to un-pick the issues and form a balanced and incentivised model 10

11 EST installation and operational costs over a 3 year period Sales PGM Fuel saving gain share Capex Charter rate change Charter utilisation Fuel saving Fuel saving gain share Capex Charter Rate change Charter utilisation Charter rate Charter utilisation Fuel saving Fuel saving Fuel saving gain share Impacts on the party s to the contract Owner Charterer Technology Manufacturer Simplified schematic showing the impacts to various parties for a 3 year gain share scenario Challenge is to make the contract work to the benefit of all parties without placing excessive risk on any one party Understanding risk and the upside/downside implications is critical 11

12 Working collaboratively Understanding and quantifying the issues Accept that we need to learn from each other to form the right framework and approach Creating a low risk environment in which to do so Form collaborative clusters to learn and test the methodologies, protocols, contracts and technologies Integrate sufficient information from the EST supply chain to inform the proposition Image courtesy of Norsepower, Shell, ETI and Maersk Tankers. Collaboration is the key to unlocking performance 12

13 Summary Adopting ESTs to enhance performance Global external push factors will increase over time Pull factors are likely to increase with consumer influence Energy saving technologies are in place or emerging Technical and operational barriers can be overcome; commercial solution will require innovation The objective is to learn collaboratively to understand the right deployment, the implications of the commercial models and the optimal way forward Working collaboratively to save fuel and reduce greenhouse gases 13

14 Nick Merrick +44 (0) Noel Tomlinson +44 (0)