Tighter regulations on air emissions are prompting rapid change within the shipping industry. Orders for scrubber systems have soared higher than before, suppliers of emissions monitoring software are rapidly taking great orders, and the market for LNG-powered engines continues to break new ground.Choosing the most cost-effective way to reduce air emissions is vital for the industry. Regulations for Emissions Control Areas (ECAs) are now enforced across many countries and there are further designation zones under discussion, also the maximum sulphur content in fuel burnt in such designated areas will drop from 1% to 0.1% in just two years time. This change will be wide-reaching: around 80-90% of merchant vessels will enter an ECA in their lifetime. What's more, failing to adapt to the change could be expensive: the cost of low-sulphur fuel that is compliant with regulation is stated to be up to 30% higher than the price of standard bunker fuel.
In the face of heightening the costs of bunker fuel spend to ensure low-sulphur fuel is consumed within ECAs it is important to have a solid understanding of how the benefits of different technology solutions for reducing said emissions compare.
This week, Fathom looks at the relative benefits of using LNG as fuel versus scrubber systems, focussing on the containership market.
What are the Options?
The two major technological options are to either burn liquefied natural gas (LNG) as fuel or to install scrubbers on the engine exhaust. The low sulphur content of gas means that sulphur emissions are virtually eliminated, whereas scrubbers capture sulphur emissions after they are produced and before they are released into the air.
Both technologies are mature and commercially viable.
The business case of each technology can be assessed by comparing the installation and operating costs with the cost of using MGO. The longer that a ship spends in an ECA, the greater the benefits are of a sulphur-reducing technology.
The Business Case for Containerships
In a major study in 2011, Germanischer Lloyd and Man Diesel compared the relative benefits of LNG versus scrubber technology for the specific sector of containerships.
This study looked at the costs of scrubbers and LNG systems across five sizes of container vessel, from 2,500 to 18,500 TEU, compared to a reference vessel that only burnt heavy fuel oil (HFO). The study also compared the relative costs and benefits of installing waste heat recovery as part of these systems.
For a 1,250 TEU containership that uses either LNG or scrubbers, the study predicted rapid paybacks and significant reductions in costs after the ECA regulation comes into force in 2015. The benefits were larger for ships that spent more time in ECAs.
For LNG systems the payback time is shortest for the smaller container vessels like the 900 TEU and 1,250 TEU. This is due to the fact that LNG systems on smaller vessels require lower levels of capital investment when compared to larger vessels. The cost of supplying LNG to ships could lengthen this payback, although the level of this cost is likely to drop as LNG becomes more widely available.
Installing waste heat recovery has the biggest benefits for the largest containerships. These vessels have a higher installed engine power, so have higher savings from WHR. The payback time for an LNG or scrubber system on a 14,000 TEU vessel is shorter with a waste heat recovery system implemented.
Overall though, the relative attractiveness and payback of each system relies on three key parameters.
The first of these is the upfront investment for LNG storage tanks. The payback time of LNG systems roughly doubled in line with a doubling of tank system costs.
The second of these is the price differential between LNG and HFO. So long as LNG was at equal price or cheaper than HFO, then LNG was more attractive than a scrubber system.
Source: C-Tech