During a recent visit to Tokyo, Saara Kuusisto, VP, Head of Sales, Marine Systems, and Mahesh Krishnappa, SVP, Head of Local Division Singapore at ABB Marine & Ports, sat down with Yasumasa Suetsugu, CTO of e5 Lab Inc., a consortium convened by the Japanese Shipowners Association (JSA) to research and develop renewably powered vessels, to discuss the challenges facing Japan's domestic shipping sector and e5's vision for decarbonizing the fleet and transforming the ecosystem.
The Japanese economy today faces the same challenges as other countries, namely high inflation, slowing global manufacturing demand and geopolitical turbulence. "It's fair to call this a recession even. In international shipping there is overcapacity, which is very visible in low container shipping rates, and the difficult operating environment is creating financial pressure across the board. For a cyclical industry we're in a trough, but what goes down must go up again, so personally I'm optimistic," says Kuusisto.
Meanwhile, the Japanese government has pledged to achieve net zero greenhouse gas (GHG) emissions by 2050, setting the country on course to become carbon-neutral in just 30 years. Japan boasts the world's third-largest merchant fleet and in October 2021 the JSA also espoused its commitment to achieving net zero, in line with IMO targets. It believes that research and development of new zero-emission ships, new fuels and infrastructure will create a new source of competitiveness for the shipping industry. In terms of the merchant fleet, it estimates that an average of 100 vessels per year will need to be built, requiring an investment of some USD 10bn annually and extensive co-operation between supply-chain stakeholders including shipyards, energy industries, ports, cargo owners and trading companies.
"How we will get there is still an open question," says Krishnappa. "Japan is looking at both ammonia and hydrogen as potential fuels in its decarbonization roadmap, but there are a whole host of challenges to solve in terms of availability and safety. These can be overcome locally but the big unknown is if other countries will develop the same infrastructure. It's a global challenge that requires cross-border collaboration lest we end up with a fragmented patchwork of solutions."
Coastal shipping lifeline
Meanwhile, as an archipelagic country with a population of 123 million Japan also has one of the world's biggest domestic shipping fleets. "Short-sea cargo and RoPax logistics are an essential link in Japan's transport infrastructure chain and this domestic fleet also requires rapid decarbonization," Kuusisto says.
However, decarbonizing is not the only challenge. Domestic shipping is suffering from an acute human resources shortage amid a long-term decrease in the Japan's productive age population. "The average age of seafarers working in domestic shipping is 55 in Japan and there is significant attrition through retirement, just like in Finland. As well as a high turnover rate, many seafarers quit the industry during the pandemic, exacerbating the problem. It has become very hard to source the young people the industry needs. There is a huge gap between supply and demand," Krishnappa says.
Suetsugu emphasizes that Japan's international and the domestic shipping markets are very different animals. "Together with government R&D sponsorship, Japan's global shipping companies have the wherewithal to plot their own path to sustainability. But the domestic shipping industry requires fundamental structural reform to become sustainable, not only environmentally, but also in terms of commercial growth. The status quo is not sustainable and our mandate at e5 Lab Inc is to create a new paradigm to make the industry clean, efficient and profitable for the future."
The e5 Lab consortium was originally launched in 2019 and brings together Asahi Tanker Co., Ltd., Exeno Yamamizu Corporation, Mitsui O.S.K. Lines, Ltd. (MOL), Mitsubishi Corporation, Idemitsu Kosan Co., Ltd., Tokio Marine & Nichido Fire Insurance Co., Ltd. and Tokyo Electric Power Company Holdings, Inc. in an open innovation platform. Covering shipbuilding, ship owning and operating, marine insurance and technology, the partnership's name reflects its five 'focus points': electrification, environment, evolution, efficiency and economics.
Electrification champion
"There are 5,500 ships in the domestic market and 3,500 will need to be replaced within the next 10 years," says Suetsugu. "We identified electrification as the easiest way to achieve our environmental ambitions while reducing crew workload through progressive robotization of ship operations."
He pinpoints three core pillars to accelerate the transition. The first is physical standardization both in ship designs, electrical systems, smart cockpit and major equipment including automated cargo handling. "This is the backbone of e5's ROBOSHIP electric vessel (EV) concept, which is designed from scratch and can be scaled across standard vessel types and sizes. Through modularization and having the same powertrain and power management configuration on all new ships we can reduce both capital and operational costs, increase productivity at yards and equipment manufacturers, enhance after-sales maintenance, and drive value for shippers. The potential to export next-generation ship packages will be an extra benefit."
ROBOSHIP powertrains will feature batteries in combination with diesel generators and permanent magnet shaft generators, but adapted for new fuels, as well as auxiliary energy sources such as solar and wind, in future. "Ammonia and hydrogen propulsion is still some way off; we need practical electrification solutions that work right now," says Suetsugu.
The plan is also to implement a standardized software platform and common broadband network that will facilitate shore to ship communications, including remote diagnostics and smart navigation.
We see more of a hybrid future.
Streamlining operations
"All these standardized solutions will make ROBOSHIPs simpler to operate and reduce the level of experience needed versus conventional ships. We anticipate, for example, that the 499-gt tanker class will require just three seafarers to operate. This will reduce the number of seafarers required across the fleet," Suetsugu adds.
As an aside, he notes that although e5 is researching autonomous technologies to support on-board tasks currently done by humans, autonomy is not a goal in itself. "We see more of a hybrid future. We will still need a reasonable number of crew onboard for a long time yet to ensure safety."
The second pillar is radically reducing the domestic fleet age profile. "In the conventional model, ships involved in domestic shipping have an average lifespan of 25 to 30 years. We want to change this cycle to around seven years tops, whereafter the ships can be sold for a good price to operators in the Middle East or elsewhere in Asia. This rolling renewal will enable rapid uptake of the latest design innovations and technologies so fleet performance remains optimal," he says.
e5's third ambition is to standardize and centralize the industry within an entirely new business model embracing ownership, management, manning and education, insurance and finance. "Japanese domestic shipping is dominated by many small owners with either one or two vessels that they also manage. It's a very low-margin business and they lack resources to replace ships with expensive one-off newbuilds. There is also little incentive to introduce digital tools given the cost and training required. So, we have a situation where all these small owners cannot continue to operate old vessels safely, they can't hire young seafarers because the talent pool isn't there, and they don't have the cash to make investments," Suetsugu says.
Monopoly risk
In addition, many of these small companies are typically led by individuals who are themselves getting on in years and, in some cases, are close to giving up. "Yes, some could merge or sell their assets to one of the bigger players who do have these capabilities, but that is unsustainable as it runs the risk of concentrating capacity in too few hands. We want to avoid the creation of monopolies," Suetsugu says.
The three pillars where all the complementary elements work together to form a virtuous ecosystem will help small owners get financial traction by reducing costs. "This completely new commercial approach is essential for electrification to work at scale. Numbers justify everything. We are discussing this with the government but it's not a wholly new idea. This approach was first mooted 20 years ago but owners were hesitant. Today the situation is different and the need for a mindset change is urgent," Suetsugu adds.
Ship ownership and ship management must be completely divided and centralized for maximum efficiency. "We must also centralize training of seafarers with new schools offering simplified training in standardized systems, as well as create new domestic licensing rules specially tailored for electric operations and a high degree of automation."
Long-term collaboration required
Forging long-term relationships with shipbuilders and system vendors will be essential. "The relationship between ship owners, yards and suppliers is often one of love and hate. They are typically transactional relationships based on single ship orders. When the ship is delivered that's usually the end of the relationship. Not being ship owners, the big difference with e5 is that to succeed in designing this new holistic domestic shipping ecosystem we need a strong commitment from yards and standardized offerings from manufacturers as part of the support structure. With fixed, reliable suppliers in place, we can then connect the other dots. This is the kind of collaboration and trust we are cementing with ABB, for example."
Krishnappa applauds the impressive scope of e5's ambitions. "It's a massive shake-up but I think it's achievable with the buy-in from all stakeholders. The projected scale of electrification demands new technology requirements and we are well placed to help in three fundamental ways. Firstly, our discrete base solution can be scaled to different power ratings and made future ready using, for example, fuel cells. We can increase power volume using standardized modules."
Should we simply change the fuel, add equipment like sails, orcompletely redefine the concept of ships and carve out a new era?
Milestone projects
Secondly, ABB can apply its extensive hybrid and electric solutions experience in the shortsea segment, including its involvement in two high-profile projects in Japan under the ROBOSHIP umbrella. "Together with e5 Lab and IHI Power Systems Co., Ltd. we developed systems for both the battery -powered hybrid tugboat Taiga, delivered to Tokyo Kisen Co., Ltd. for operations in Tokyo Bay this summer, and for the hybrid-electric biomass fuel carriers first ROBOSHIP on order for Asahi Tanker Co., Ltd. for servicing Aioi (Kobe) biomass fuel power plant. These vessels represent a big milestone as the projects were completed despite the pandemic. Our remote diagnostics team in Singapore are supporting operations of both vessels, enabling the owners to minimize crew numbers and reduce maintenance costs," Krishnappa says.
Remote diagnostics system (RDS) form part of ABB's market-leading global service offering and Krishnappa notes that when, in future, domestic ships are sold after seven years to other countries, ABB can continue to support these vessels remotely, benefitting the new owners.
“The collaboration with ABB has been beyond our expectations in delivering world-leading technology promoting efficiency, safety and reliability for these coastal vessels in line with specific size and weight reductions,” says Suetsugu.
Kuusisto agrees that standardized solutions are increasingly important in an industry where traditionally there has been a lot of tailoring for individual ships. This applies especially to the very price-sensitive cargo segment. "It is the key to cost-efficiency," she says. "And when Suetsugu-san says long-term relationships are e5's top priority, we can certainly promise that ABB will still be here 20, 30, 50 and more years in the future. As a partner in decarbonization we take pride in our solutions developed inhouse on the journey towards net zero."
In conclusion, Suetsugu notes that "humanity has been enriched by the evolution of ships – from oar-powered boats to sailing ships to steamships to diesel. Many are now asking what comes after diesel? Should we simply change the fuel, add equipment like sails, or completely redefine the concept of ships and carve out a new era?"
Nobody has the answer yet, he says. "But if we are to take on a challenge, I want it to be towards an exciting future, and electrification is a necessary requirement. The system should be as simple as possible – I believe this can be the backbone of the new future of ships.”
