What price autonomy?

Malcolm Latarche
Malcolm Latarche

17 August 2018


On 15 August, Norwegian fertiliser producer Yara announced a major step forward in the development of the autonomous ship when it signed a deal with shipbuilder VARD worth appr NOK 250 million (almost $30m) to build the vessel. VARD will deliver Yara Birkeland for launch in early 2020, and the vessel will gradually move from manned operation to fully autonomous operation by 2022.

The project first hit the headlines in 2017 but beyond it being an electric powered container vessel, few further details were released. As the design and construction stage progresses these gaps will be filled in. More than half of the vessel’s cost has come from Norwegian government support which probably helps makes the project viable.

“A vessel like Yara Birkeland has never been built before, and we rely on teaming up with partners with an entrepreneurial mindset and cutting-edge expertise. VARD combines experience in customized ship building with leading innovation and will deliver a game-changing vessel which will help us lower our emissions and contribute to feeding the world while protecting the planet,” said Svein Tore Holsether, President and CEO of YARA.

This is an innovative project despite its rather high price tag and one whose progress surely be followed by a number of interested shipowners as well as specialists and regulators. Autonomous ships have been promoted as a means of improving safety and saving crew related costs although sceptics say both those ambitions are difficult if not impossible to quantify.

The 3,200dwt ship has been described as being around 80m in length and with a capacity of 120teu. A battery energy storage system will power the vessel and as the planned operating region is in Norwegian coastal waters the energy from the local grid will most likely be generated by hydropower. That could save on fuel costs but is not necessarily something that could be repeated in many other locations where electricity is still generated using fossil fuels. Mooring and unmooring will be done automatically using specialist equipment at the three ports the ship is intended to serve.

Initially, the ship will run with a crew on board but over time they will be removed and it will run autonomously. That will save on crew wages of course but autonomy also has its costs. Kongsberg has said that three centres with different operational profile are planned to handle all aspects of operation. These centres will handle emergency and exception handling, condition monitoring, operational monitoring, decision support, surveillance of the autonomous ship and its surroundings and all other aspects of safety. Considering a conventional small ship of similar size could be run with a crew of five or six, there would not appear to be much of a saving in wage costs.

Obviously as a prototype there are costs which will not necessarily be associated with production vessels of a similar size and type, but it is interesting to muse about what type of vessels – and how many – a $25m bank balance could purchase. We asked VesselsValues, a specialist in ship valuations, what sort of ships $25m would buy.

It seems that we could get a brand new 4,250teu Panamax container ship and have almost a million dollars in the bank. Alternatively, if we wanted something smaller, obtaining a pair of seven year old 1,100teu Feedermax container ships would leave about a quarter or a million dollars in small change. If we were a little less fussy about the age of the ship but wanted to establish a coastal fleet, it is highly likely that we could have picked up around 10 small ships of up to 3,000dwt. Looking at other ship types entirely, the options include a 15-year old 305,000dwt VLCC for $21.75m and a 2017-built 60,000dwt Supramax for $25.36m.

The price of the project probably can’t be compared in that way even if traditional shipowners may believe otherwise. However, the long-term future of autonomous ships is something that definitely will be decided on its financial merits not least because with few exceptions ships and shipping are financed by private capital and it is the return on investments that is the bottom line.