With the market in a slow recovery, OSV owners need to think about how they can operate more efficiently and differentiate themselves from their competition. I think one of the most viable solutions is outfitting your vessel with battery technology.
Batteries can provide reserve power for redundancy requirements and act as an alternative to spinning reserve power to handle variable loads or peak shaving to lessen the heavy loads on engines. The use of batteries in hybrid applications also allows operators to install smaller horsepower engines. Battery-hybrid propulsion provides true operational flexibility.
After hearing Corvus Energy vice president Halvard Hauso speak at the Annual Offshore Support Journal Conference, I am even more convinced that the future for OSVs is battery charged. Battery-hybrid propulsion technology promises longer intervals between engine overhauls because you are either running your engine at an optimal load or not running it at all by using battery power instead.
Not running your engine equates to not burning fuel. Mr Hauso put fuel savings at 20-25% and maintenance savings at 35-50% for a DP vessel.
US-based Seacor Marine has made a significant investment in 12 battery hybrid-powered platform supply vessels through its joint ventures in Mexico and China. Seacor felt the fuel savings they could achieve through battery-hybrid propulsion would give the company the boost it needed to stand out in the crowd.
The environmental benefits of the technology are also compelling. Depending on the operating profile of the vessel, I have heard CO2 emissions can be reduced by 10-30%.
At the conference, OSV owners discussed their efforts to shed older OSVs and reconfigure their fleets to feature a core of 'Tier 1' vessels – those with dynamic positioning class 2, with large clear deck areas and younger than 10 years old. What if those Tier 1 vessels also featured battery-hybrid propulsion? I think those vessels would have an upper hand when competing for a charter.
Equinor appears to agree with that sentiment. It has already put requirements in its long-term charter contracts stating that OSVs must be fitted with battery-hybrid systems. Other oil producers are bound to follow Equinor’s lead.
While switching to battery-hybrid propulsion might give operators an edge in competing for charters, the initial cost outlay is still a chief concern for OSV owners who have been battered by the prolonged downcycle in the market. How can OSV owners who do not have strong balance sheets afford to finance the conversion of a vessel to battery-hybrid technology?
Costs should come down as the use of battery-hybrid propulsion expands. As we pointed out in our 'Five Trends for the OSV market in 2019' article earlier this year, battery-hybrid propulsion is gaining traction among OSV owners. As of this year, there are 157 vessels with batteries in operation, 22 of which are OSVs, with another 100 under construction, including 20 OSVs. The fleet of battery-equipped vessels in operation and under construction should grow to over 300 by 2021.
Many Norwegian OSV owners have used the Norwegian NOx fund to help finance their investments in battery-hybrid technology for their vessels. For wider-spread adaption of battery-hybrid propulsion, non-Norwegian companies need access to innovative financing solutions.
I would suggest borrowing a page from the aviation industry, where the power-by-the-hour engine maintenance approach has been going on for decades. In the aviation model a complete engine and component replacement service is offered by the manufacturer on a fixed-cost-per-flying-hour basis. This aligns the interests of the manufacturer and owner. With the digital tools now available to monitor vessel equipment, a similar model could be applied in the marine space with battery-hybrid technology. It might just be the financing solution needed to put a charge into the industry’s future.