Design Novelty and Cost-Learning Dynamics in Offshore Fish Farming

Abstract

Fish farming in exposed and offshore waters are potential solutions to many biological and environmental problems currently facing marine aquaculture. Offshore fish farming will require development of larger, more complex marine structures and elaborate logistical support systems, including service vessels. While innovation in concept design for these systems are currently awarded by regulators, production costs that are substantially higher than for existing fish farming system represent a barrier to competitiveness. In this paper, we show that offshore fish farming can become competitive when global seafood demand grows, due to cost-learning dynamics previously documented in a wide range of industries. Using historical time series for production and costs, we find evidence of cost-learning curves in existing aquaculture, suggesting that unit capital expenditures decline at a given rate every time cumulative production capacity doubles. To investigate the potential for offshore fish farming, we develop a simple system dynamics model of key trends and important feedback mechanisms that drive investments in technologies for offshore fish farming. The analysis indicates that policies that reward novel concepts, like license waivers or subsidies, can trigger cost-learning dynamics and move offshore fish farming towards competitiveness. We also find that design novelty may limit the cost reductions that accrue from cost-learning effects. Following the quantitative results, we discuss how the forecasted cost-learning dynamics can be exploited under a regulatory regime that favors innovative concepts. Finally, we reflect on the opportunities an emerging offshore fish farming industry provides for ship design and for the re-use of vessels that have become stranded assets.