Over recent decades the ferry industry’s renowned resilience has been tested by threats such as fixed links, the loss of duty-free sales, competition from low-cost airlines, economic downturns and sky-rocketing fuel costs. Having survived and even thrived against these and other challenges, we now face a new tidal wave of regulations. Most relate to the environment, but a major safety issue is also looming – and if that isn’t enough, we have surging insurance premiums to worry about.
Chief among the environmental certainties, new sulphur regulations for Emission Control Areas (ECAs) will apply from 1 January 2015. ECAs are currently in place in northern Europe and North America. For various reasons, North American ferry operators have been burning low-sulphur diesel for many years, so the immediate impact will be less pronounced for them. In Europe the switch from heavy fuel oil to ultra-low 0.1% sulphur diesel will trigger a 50% increase in fuel prices and consequently a dramatic rise in ticket prices. There are alternatives to 0.1% diesel – notably scrubbers, which remove sulphur from the emissions rather than the fuel; or converting to cheaper low-sulphur fuels like LNG or methanol.
Operators including DFDS, TT-Line and Color Line are installing scrubbers on some of their vessels. This will be challenging. Some other industry quarters query the reliability of scrubber technology or have concerns about adding a lot of weight in the upper area of a ship. There are also questions on the still unrefined regulations on scrubbers – as yet there is no guarantee that their use will actually be sanctioned.
LNG has many attractions as a marine fuel and has been pioneered by coastal shuttle ferries in Norway. In northern Europe, bigger LNG ferries have followed for Fjord Line and Viking Line while others are on order for Scandlines and Brittany Ferries. Brittany also has plans for LNG conversions on two of its ships. In North America, LNG conversions are being considered by Staten Island Ferries and by Washington State Ferries, where assistant secretary David Moseley notes: “With current LNG prices here, the business case for retrofitting ships is very exciting.” Meanwhile Quebec Ferries has newbuilds on order and BC Ferries has issued a tender. Even fast ferry operators are turning to LNG – Incat of Australia has delivered the first large LNG fast ferry to Argentina’s Buquebus (see interview in this issue with the line’s CEO, Juan Carlos Lopez Mena) and Spanish operator Balearia is investigating the conversion of its fleet.
Strangely, however, after promoting LNG as the panacea to all evils, Norway intervened at the IMO in January with a proposal to significantly limit the size of LNG tanks on passenger ships. A DNV-classed design like Fjord Line’s Stavangerfjord could not be built if the proposal is adopted – prompting CEO Ingvald Fardal to remark that “the opportunities for LNG-powered ferries will be very limited if we have to refuel during every port call.”
Other initiatives are under way to address the sulphur dilemma. Stena is looking into methanol while Scandlines has obtained European Union funding to test the feasibility of a hybrid solution combining batteries and small scrubbers. This all adds up to an impressive outbreak of innovations – but it would surely be more meaningful if the rules took effect in 2020 instead of 2015. The fact is that the vast majority of northern European ferries will have to settle for expensive low-sulphur diesel next year. It is hard to predict the outcome, but the ferry market will likely be in competitive turmoil for some time. Operators currently in a strong competitive position may be able to survive a 50% rise in fuel costs. However, this may not be so on the many routes where there is strong competition from other ferry operators, fixed links and overland options using shorter ferry crossings. Furthermore, there are sure to be unintended consequences from regulatory attempts to protect the environment – as more customers look for road alternatives, the impact from increased traffic congestion and vehicle emissions may more than offset the benefits from reduced ship emissions.
Another environmental measure will see the Energy Efficiency Design Index (EEDI) take effect for newbuildings in 2016. Interferry fought hard against the initial version of this complex mathematical formula because ferries were being treated in much the same way as deepsea ships on trans-ocean routes. The only way a ferry could comply was to reduce speed, which would be extremely detrimental to the business case on many routes. Happily we won our argument for the development of a more compatible ferry formula with other options.
Next up, the regulations on ballast water treatment are a prime example of bizarre rule making. I think everyone understands the environmental damage caused by invasive marine species being transported around the globe in ballast water. However, the regulatory solution applies to every ship operating on an international route, regardless of distance. This means that even a ferry travelling ten miles will have to install expensive treatment equipment despite the remote chance of importing any invasive species. The regulation allows for exemptions but only if the operator surveys the marine biology at each port twice a year and periodically repeats the testing. To make matters worse, there are serious doubts about the accuracy of current treatment equipment. The agreement was adopted by the IMO ten years ago but is not yet in force because it has not been ratified by enough countries representing a sizeable portion of the world fleet. The bad news is that ratification by one more large flag state will tip the scales.
This article appeared in the Spring/Summer 2014 edition of International Cruise & Ferry Review. To read the full article, you can subscribe to the magazine in printed or digital formats.
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