Abstract
This study considers incentive provisions for investment decisions related to waste heat recovery system (WHRS) installations on ships to reduce CO2 emissions and improve ships’ engine efficiency. The economic assessment of WHRS installations in the shipping sector is not widely covered in the literature. A reason for this might be that the conventional financial evaluation of sensitive choices is commonly done through capital budgeting methods, which are not flexible enough to integrate future changes in fuel prices and long-term aspects of other costs. Thus, this work evaluates the WHRS investment using the classical budgeting instruments as well as the real-options approach (a more sophisticated approach) to accommodate the presumed expected future changes in the volatile maritime markets. Following the methodology of triangulation, three case studies of ships with varying operational conditions empirically validate the result to depict the practical use of the real-options evaluation method in investment assessment. The capital budgeting analysis reveals that the investment in maritime WHRS technology is only economically favorable under certain frame conditions projected in the work that shows a more realistic assessment of the project.
Highlights
Global green and environmentally friendly shipping is enjoying growing attention on issues concerning the reduction of ship emissions, energy savings and cost reductions of shipping operations [1,2]
This study considers incentive provisions for investment decisions related to waste heat recovery system (WHRS) installations on ships to reduce CO2 emissions and improve ships’ engine efficiency
The fulfillment of the Sulphur Emission Control Areas (SECA) regulations in 2015 and the establishment of the Global Sulphur Cap at the beginning of 2020, made shipping companies opt for suitable compliance strategies requiring investments in expensive abatement technologies and some had to identify suitable compliant fuel management practices to cope with the regulations [4]
Summary
Global green and environmentally friendly shipping is enjoying growing attention on issues concerning the reduction of ship emissions, energy savings and cost reductions of shipping operations [1,2]. One of the International Maritime Organization (IMO) regulations for international shipping focuses on limiting CO2 emissions by establishing standards for the Energy Efficiency Design Index (EEDI) for ships. Compliance with this regulation has further led to higher propelling costs and additional abatement investments for ship-owners [2] at a time when the shipping industry is already highly competitive and plagued with low margins and other tightened environmental regulations [3]. The installation of abatement technologies to control air pollution from ships is linked to high investment costs and studies within this context have revealed additional energy consumption resulting from the operation of these emission reduction devices [3]
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