Modern Windships; Phase 2

10. Feasibility Study

Introduction
Background
Choice of Vessel Type
Route Selection
The Product Carrier
Fuel consumption of the Modern WindShip.
Comparison with a Conventional Ship
Assumptions
Scope of Analysis
Conclusion
Comments on the Mærsk Broker Study
The Impact of Bunker Prices
Lessons to be Learned
On the Choice of Vessels
On Trade patterns, Speed, Fuel Consumption and Productivity
Conclusion

Introduction

When judging the possible future of WindShips, economic analyses of their profitability plays an important role. In phase 2 - being a study aimed at an improved rig-design, hull improvements etc., such a study was initially not foreseen in the application from Pelmatic Knud E. Hansen, but was included at a later stage.

With regard to this particular part of the project, Mærsk Broker of Copenhagen was contracted to carry out this task, through their Research & Marketing department. Their report, "Windship Phase 2 - Analysis of Profitability", Ref. 9, forms part of the total project and presents an analysis of the economic profitability of a wind-driven product carrier compared with a conventional product tanker.

In order to achieve the most realistic comparison between the two product tankers, the vessels have been compared at a service speed of 13 knots, as this is a minimum speed requirement for current tankers of this size and employment.

All data specific to the wind-driven product carrier has been procured by Pelmatic Knud E. Hansen A/S. All other data has been complied by Mærsk Broker, Research & Marketing.

Background

Since the mid-fifties, where studies of modern sailing vessels began at the University of Hamburg, feasibility studies aiming at the economy have accompanied the more technically oriented studies. In the mid-seventies a thorough study: "Feasibility of Sailing Ships for the American Merchant Marine", was carried out at the University of Michigan by Professor John B. Woodward. About a decade later, in the mid-eighties, the Japanese Government in co-operation with several Japanese shipbuilding associations performed a number of in-depth studies regarding the feasibility of wind-assisted vessels.

The previous report of this project, see Ref. 1, also included a feasibility study, which concluded that WindShips presently were not able to compete economically with conventionally powered vessels. Measured in Required Freight Rate (RFR), the difference was relatively small, appr.7% in disfavour of the WindShip.

Choice of Vessel Type

The product carrier was chosen in collaboration with Mærsk Broker as study object. This was motivated by the fact that the masts can prove a hindrance if cranes were to be fitted to the ship. Since the ship size was 50.000 dwt most of the existing bulk-carriers carry cranes, Mærsk Broker felt that the comparison would be made on unequal terms if one compared a gear-less design with one that had cranes. The choice was then either to increase the size of the ship, since larger bulk-carriers are often gear less, or find a gear-less ship type of proper size.

Product carriers were proposed, as they often are of suitable size, gear-less, and typical sail speed is in the region of 13 knots, the same as bulk carriers. This was accepted as a feasible alternative.

Route Selection

Mærsk Broker then investigated typical product carrier route patterns. There were no adaptation of the routes as to fit into existing weather patterns. This was motivated by the fact that we wanted to compare with existing, well-known data, not future routes adapted specifically to the WindShip performance.

Mærsk Broker found two trade patterns described above, see section "Trade Patterns" in chapter 9. They basically consisted of three trade routes each. On each route the two product carriers made roundtrips back and forth from the exporting harbour. The product carriers were assumed to trade one third of the year on each trade route, sailing in ballast when shifting from one exporting harbour to another. In this manner the tanker ended up in the same harbour it started a year earlier.

In principal, a product tanker trading in the spot market will operate where it can obtain the highest hire at any given point of time. This means that it is very difficult to predict the precise trading pattern of a product tanker. The chosen patterns in this report will therefore have their shortcomings compared with the real world, but we believe that current trade patterns are the best possible, given the scope of the project.

The Product Carrier

A product carrier is a common description for a specialised tanker-vessel, constructed mainly for the transportation of refined oil-products, typically from the refineries to the customers. Product carriers vary considerably in size, from small coastal carriers having loading capacities from 2,-6,000 tdw up to ocean-ranging product carriers having loading capacities from 60,-100,000 tdw.

Often a product carrier will carry a number of different cargo-types at a time; 8-10 different cargo-types are not unusual. Therefore, the tank-system of a product carrier is divided into many smaller tanks, often separated with cofferdams in order to avoid contamination from one cargo-type into another. The pump-system can also handle several different cargo-types simultaneously.

Speed-wise, smaller product carriers sail in the 11-12 knots area, while bigger product carriers sails at around 13-15 knots.

Looking at Danish owners, the coastal carrier-category is typified by m.v. "ORAKOTA", owned by Rederiet M.H. Simonsen, Svendborg. The vessel has an overall length of 85 metres, a loading capacity of approximately 2.600 tdw, 10 tanks and 4 pumps and a service speed of 11,5 knots.

In the upper end of the scale we find m.v. "SITALOUISE", owned by Tschudi & Eitzen Tankers, Copenhagen. This vessel has an overall length 229 metres, a loading capacity of 84.000 tdw, 12 tanks and 12 pumps, the service speed is 14,8 knots.

The investigated WindShip product carrier lies in the medium-size area and will have an overall length of 215 metres. The loading capacity will be approximately 50.000 tdw and a will have a service speed of 13 knots under power alone. Under favourable wind conditions, speed will touch the 20 knots. Tank- and pump-capacities have not been decided at this stage of the project.

Fuel consumption of the Modern WindShip.

The fuel consumption of a WindShip is depending of a wide spectre of variables:

	The efficiency of the rig
	The desired average service speed
	The trade route: loaded or ballast return
	The weather pattern: wind speed and wind directions
	The seasonal weather fluctuations
	The reliability of the weather routing from the meterologists

The average fuel consumption for propulsion depending of average service speeds has been calculated for two trade patterns: The Atlantic and the Indian-Pacific. The calculations were based on the weather routing results for the typical year 1993.

The results are illustrated in the graphs below, see Figure 70 and Figure 71. The graphs show the fuel consumption for 10, 11 and 12 knots average service speed for two typical trade routes. These results were later averaged for the economic feasibility analysis. The results from that calculation can be found in Appendix 10.

Figure 70. Look here please

Figure 70. Atlantic trade pattern fuel consumption.

Figure 71. Look here please

Figure 71. Indian-Pacific trade pattern fuel consumption.

From the graphs some conclusions may be drawn:

1. In the trade Rotterdam – New York the consumption is about twice in the west going loaded direction than in the east going ballast direction
2. The reliability of the weather routing for the North Atlantic weather pattern was not sufficient in 1993
3. There is a pronounced seasonal variation in the consumption depending of the route and direction
4. The gain from the wind power combined with the lower hull resistance is about 25 – 30 % for each one knots speed reduction.

It seems therefore to be very important to select the current trade pattern for a WindShip with respect to the seasonal variation in the weather pattern and to the demand for service speed.

Comparison with a Conventional Ship

It is of course of high interest to compare the fuel consumption of the modern WindShip with a conventional ship. To enable a comparison some estimates were performed at Pelmatic Knud E. Hansen A/S. They are described below in more detail. It should be noted that these numbers are not exact, further investigations should be carried out in this area.

First the overall propulsion efficiency at 13 knots for the conventional ship was calculated to:

h _{prop, conv. ship} = 0.59

This should be compared to estimated propulsion efficiency for the modern WindShip at 13 knots:

h _{prop, WindShip} = 0.54

The difference of almost 10% to the disadvantage of the WindShip was mainly due to the Z-drives, the smaller propeller diameter and that the back flow from the hull adversely affects a two propeller choice. See Figure 60 for propeller arrangement.

Using the fuel consumption calculated for the WindShip on the Atlantic trade pattern for different speeds, and estimating the effect of reducing speed on a conventional ship; Table 23 can be calculated:

Table 23. Estimations of average fuel consumption at three speeds, conventional ship and modern WindShip on the Atlantic trade pattern, fully laden.

The highest fuel saving was achieved on the North Atlantic route between Rotterdam, Holland and New York, USA. Sailing at 11 knots, a fuel saving of 27 % was achieved.

It can be concluded that reducing speed has beneficial effects on the fuel savings of the WindShip. Adding the rig saved approximately three tons HFO per 24 hrs, regardless of speed. It should be noted that the fuel consumption of the conventional ship estimated by Pelmatic Knud E Hansen differs from the fuel consumption estimated by Mærsk Broker, see Ref. 9, table 8, page 14. The estimated consumption of HFO at 13 knots was here 26.9 tonnes / 24 hr for the conventional ship compared to 27.1 tonnes / 24 hr on average for the modern WindShip. It is our belief that the numbers used by Mærsk Broker were slightly optimistic.

Assumptions

Mærsk Broker was given fuel consumption data of the modern WindShip as it appears from Appendix 10, in order to perform the feasibility study.

The fuel consumption was calculated for each route in the Atlantic and Indian-Pacific trade pattern, taking into account days at sea, loaded or in ballast. As all simulations were performed in fully loaded condition. The fuel consumption for the WindShip in ballast was estimated as 85% of the consumption when fully loaded. The total amount of all consumables etc. onboard was assumed to be of equal size, 2500 tonnes per trip on both types of ships.

In harbour the consumption of the WindShip was estimated to 2 tons/24 hrs when loading, and 5 tons/24 hrs when unloading. All fuel burned in harbour was assumed to be MDO. In Ref. 9 an average value was used for ports, not taking into account whether it was loading or unloading. Another assumption was that the electricity needed while sailing the WindShip was generated by electric generators running on MDO. The conventional tanker used generators coupled to the main engine running on cheaper HFO.

These assumptions proved to be a disadvantage for the WindShip, as the total MDO-costs turned out to be higher than for the conventional product carrier.

It was assumed that the harbour costs were the same for the WindShip as for the conventional ship. There was thus no economic advantage in the superb manoeuvring capabilities of the WindShip, where tugs are largely superfluous.

It was assumed that the crew costs would be the same as for a conventional ship. Some of the crew functions might alter and extra training be needed, but the system design is such that a normal crew should be able to handle it. Mærsk Broker assumed a crew of 24, 10 officers and 14 ratings. Of the officers six were British, four were Philippine.

An extra cost of 30 million dkr was added to the building price for the six masts. Maintenance and repair costs were assumed to be equal with the conventional ship. Insurance fees were calculated on basis of the building price. Interest rate was assumed to be 8.07%, with 15 year repayment. The prices and capital costs can be seen in Table 24 below:

Table 24. New-building price and capital costs. From Ref. 9, table 13, page 19.

As can be seen the capital costs for the modern WindShip were 15% higher than for the conventional ship.

The productivity of a tanker is basically dependent of its speed, dead weight and cubic size. For a product carrier there are however additional parameters, such as average stem size and loaded oil product. The following data were assumed for the two tankers, see Table 25:

Table 25. Dead weight and cubic metres. From Ref. 9, table 15, page 9.

The beneficial volume of the WindShip stems from the different internal layout. A maximum intake limit of 47,500 tonnes was used on both ships. The dead weight restriction therefore constrained the max load capacity, not the internal volume.

Scope of Analysis

The analysis and comparison of the product carriers was based on a full years sailing. An evaluation of the implications of lower speed for the wind-driven product carrier was made. Effects of varying the bunker price when sailing at 13 knots was also performed.

Conclusion

Even though the wind-driven product carrier receives extra propulsion power via the sails, its costs are higher than for the conventional product carrier. Thus, the conventional product carrier has a commercial advantage over the wind-driven product carrier in both the Atlantic and the Indian-Pacific trade pattern. Measured in required freight rate (RFR), the wind-driven product carrier requires an appr.10% higher freight rate in order to cover its total costs per day.

Voyage costs of the wind-driven product carrier are higher, because bunker costs at 13 knots are higher than those of the conventional product carrier. With regard to operating and capital costs, added costs of the wind-driven product carrier are substantial compared to the conventional product carrier, due to sail and rig.

As far as the two trade patterns are concerned, the cost difference between the conventional and the wind-driven product carriers is substantially higher in the Indian-Pacific trade pattern than in the Atlantic trade pattern, which indicates that the Atlantic trade pattern is more beneficial to the wind-driven carrier.

The sensitivity analysis of the bunker costs show that the bunker costs of the wind-driven product carrier are higher, and grow faster, than the conventional tanker, when bunker prices increase. This means that total costs of the wind-driven product carrier will be higher than for the conventional product carrier for given bunker prices. This goes for both the Atlantic and Indian-Pacific trade patterns.

If the service speed of the wind-driven product carrier is lowered, there is a negative coherence between the service speed and the required freight rate (RFR) for the wind-driven product carrier. This means that a lower service speed requires a lower freight rate in order to cover total costs. The relative decrease in required freight rate is lower between 12 and 13 knots than between 11 and 12 knots.

Bunker costs are most positively affected by decreasing service speed in terms of the wind-driven product carrier. This decrease is larger for the Atlantic trade pattern than for the Indian-Pacific trade pattern.

Comments on the Mærsk Broker Study

With given premises regarding speed, trading areas, commercial conditions etc., the conclusion was clear: WindShips were not able compete on commercial terms with conventional ships.

Furthermore: WindShips, in the Indian-Pacific trading area, will consume more or equal amount of HFO than the conventional ship. The lack of favourable winds combined with the lower propulsion efficiency at 13 knots average sailing speed resulted in nothing but additional costs when adding a rig. Adding to this is the assumed higher consumption of MDO for the WindShip.

The are however a few points worth considering:

The better internal volume of the modern WindShip cannot be readily utilised in a product carrier, as the limitation was on dead weight. The study performed by Mærsk Broker shows that the productivity of the WindShip is equal with the conventional product carrier with a stem size of 35,000 tonnes. However, if the average stem size was increased to 47,500 tonnes the modern WindShip could transport 525,000 tonnes per year on the Atlantic trade pattern, whereas the conventional tanker could transport 430,000 tonnes. On the Indian Pacific trade patterns the modern WindShip could transport 510,000 tonnes whereas the conventional could transport 440,000 tonnes. That means that the modern WindShip could be 22% respective 16% more productive than the conventional ship. The calculations above were performed assuming a ship speed of 13 knots.

The coherence between the service speed and the required freight rate (RFR) for the modern WindShip means that we were not sailing at the WindShip optimal speed. See Table 26 below.

	There is thus a 5% decrease in RFR when lowering the average speed from 13 to 11 knots when using the WindShip. All economical comparisons were made using 13 knots as average speed. The higher RFR on the Atlantic trade pattern was due to the higher port costs on those routes.
	It is our belief that an equal consumption of MDO should be possible. If the modern WindShip was optimised for 13 knots of sailing it would probably also use shaft generators driven by the main engine. That would lower the consumption of MDO at sea. The fuel consumption of the two ship types would then be roughly equal, despite the lesser propulsive efficiency of the proposed WindShip.
	In some ports there will be a price reduction for the WindShip as it needs less tug assistance than a conventional ship. This was not included in the analysis.

The Impact of Bunker Prices

The Mærsk Broker study used a HFO-price of USD 90.5 / ton, which is an average of prices in 1994-99. The economic study of phase 1 during 1996 calculated with an average HFO-price of USD 134 / ton.

In the current study, bunker prices accounts to about 10% of total costs, in 1996 the same item represented 15% of total costs. The economic impact of bunker costs on a ship's budget has thus been reduced with one third over the last 3 years.

As bunker costs is the only economic parameter where a WindShip can perform better than a conventional vessel, the economical incentive of using WindShips is significantly reduced with current fuel prices.

Fuel prices have varied quite dramatically over the last 25 years, as Figure 72 below indicates.

Figure 72. Look here please

Figure 72. The variation of fuel oil prices since 1974.

Since 1986 the prices have been varying between 65-100 $/ton for the (3%) HFO. We see that rapid changes in oil price are not unusual. Between 1976 and 1986 the price was about 170 $/ton. Recently, prices have been rising somewhat from a historical low.

The future level of fuel prices is difficult to forecast. In 1996 the International Energy Agency (IEA) foresaw a level in the year 1999 of about USD 148 for HFO and USD 258 for MDO. The reality in 1999 was however an HFO-price of about 95 USD and about. 150 USD for the MDO.

There are however some indications on the direction of future fuel prices. The consumers must pay for higher production costs due to production areas getting more difficult to access. In addition, in some of the major oil producing countries there is today a tendency to "stretch" their oil reserves.

We conclude that long-term decision making based on current oil-prices is extremely difficult, as the oil prices vary so rapidly.

The feasibility study included a sensitivity analysis, which aimed at establishing that level of bunker price where the WindShip was able to compete commercially with the conventional ship. As there were practically no fuel savings in using WindShips in the product tanker trade sailing at 13 knots this part of the study ended blind. No matter how high the level of bunker prices went up, it was obvious that the WindShip would never enter into a break-even situation.

Lessons to be Learned

The study clearly drafts up the limitations of modern WindShips. As such there are a few hard-earned lessons worth stressing.

On the Choice of Vessels

Originally the intention was to make an economic comparison between two bulk carriers. These are from a technical point of view simple vessels that can be found all over the globe in many trades. They carry relatively cheap cargoes and parameters like speed and punctuality are not critical.

For various reasons this idea was left and it was decided to concentrate the study on the product tanker market, a rather specialised market where punctuality is of greater importance.

This choice therefore had the implications that drawbacks of the WindShip’s like limited speed was stressed, whereas the advantages of the WindShip, like its better cubic capacity, for market-specific reasons within the product tanker market, had little impact on the economical result.

On Trade patterns, Speed, Fuel Consumption and Productivity

No attention was paid to the wind conditions when the two trading patterns were selected. The service speed of minimum 13 knots was a precondition, dictated by market circumstances. As the study shows, there are limited fuel-savings for a WindShip at this speed:

If speed requirements had been set at 11 knots, instead of 13 knots, annual bunker costs on the Atlantic trade pattern would have been approximately 545.000 USD per year instead of approximately 885.000 USD - a saving of approximately 340.000 USD.

The similar figures on the Indian-Pacific trading pattern are approximately 620.000 USD, respectively approximately 972.000 USD, which gives an annual difference of approximately 352.000 USD. Translated into consumption, there is an annual fuel saving in the region of 2.500 tonnes.

	WindShips will not be able to succeed commercially on randomly chosen trade patterns with high-speed demands and specialised cargoes. There are on such routes and markets neither any economic nor any environmental advantages connected with using wind-propulsion. If WindShips should be given a chance to prove their commercial abilities, it is of utmost importance that trade the patterns are selected with due respect to the wind conditions in the area.
	Spot trading, which means that a vessel in principle can be employed anywhere on the globe, is less compatible with WindShips. Long term contracts of affreightment between known destinations in areas with generally favourable wind conditions should be sought after instead.
	Cargoes must be selected with the better care. High-value cargoes, with high demands on speed and punctuality are not compatible with wind propulsion. Low-value, low-density cargoes, utilising the better cubic volume of the WindShips, will offer better opportunities.

The above restrictions leaves out a number of market areas where WindShips cannot be applied, but, looking at the volume of global ocean trade, there still exists many areas, where WindShips can be applied despite their restrictions.

On the given premises, the Mærsk Broker study presents a clear picture of the limitations of a WindShip in particular trading areas. The study with its narrow scope should not be used as a guideline when judging the future possibilities of all types of WindShips.