There’s a Paradigm Shift Taking Place as Engine Makers Transition from Diesel to Hybrid Technologies.
(Article originally published in Nov/Dec 2017 edition.)
In evolving and cyclical maritime markets, engine manufaturers provide a similar and steady propulsive force. Adjusting focus as markets shift, they are a reliable supplier of dependable, high-quality and innovative products and services to the maritime industry.
A year ago in this space I described the maritime industry’s continued dependence on the century-old power plant developed by Rudolph Diesel and the ongoing effort to overcome its inherent inefficiencies. Now that effort has gotten bigger, and a slow but inevitable paradigm shift is occurring, a shift reflected in the response of equipment manufacturers to market trends. That shift entails the transition from diesel to hybrid power.
Intake: The Market
Engine and power-solutions companies have traditionally competed across the many subsegments of the marine market globally, adjusting and balancing their tactics across the array of market sectors. These sectors include commercial transport, offshore, fishing, recreational, passenger, and government and defense.
Commercial transport appears to be on the upswing globally. Container trade in the U.S. has increased over four percent in 2017 on a year-over-year basis, according to data analysts IHS Markit. Consistently low oil prices have driven a surge in port and infrastructure activity to support growing trade in petroleum-based products. Unfortunately, the offshore energy sector (except for offshore wind) continues to suffer from the same low oil prices that are triggering a surge in other areas.
The slowdown in offshore-oriented newbuild programs has prompted shipyards around the world to restructure their practices to meet increased demand in other areas such as industrial fishing and research vessels, recreational yachts and passenger ferries. Government and military sectors continue to offer strong prospects, and the Trump Administration’s pledge to expand the U.S. Navy has resulted in a tangible increase in potential opportunities in coming years for both shipbuilding and related marine engine markets.
Compression: Leveraging Knowledge
Companies like Cummins and Fincantieri are accustomed to responding to fluctuating market conditions by incorporating diverse approaches to various industry sectors learned over their long histories. As pressure builds to continue generating sales and revenue, the decline of one industry sector inevitably opens opportunities in another. With a long, successful history come many lessons that can be leveraged for current and future markets.
Since its founding almost a century ago, Cummins has built its reputation on technological innovations that continue to drive its success today. Cummins maintains strong ties with the industry and its client base to ensure it meets their diverse needs. “We are constantly innovating to help our customers succeed by bringing them the right products and solutions at the right time,” says Eddie Brown, Commercial Marine Segment Leader. “Leveraging our experience across a global network uniquely positions us to serve and support our clients all over the world with a consistent customer experience.”
Italy’s Fincantieri Group is likewise well positioned to take advantage of a wealth of experience with more than 7,000 vessels built over its 230-year history. With twenty shipyards globally, the company is one of the world’s largest shipbuilding groups and has long served major cruise operators and big defense contractors worldwide. In North America, Fincantieri Marine Services is the supplier of Isotta Fraschini Motori (IFM) marine diesel engines, noted for their compact size and weight and adaptability to a variety of applications.
The approach espoused by Cummins and Fincantieri illustrates perhaps the only guaranteed route to success in today’s volatile marine market: Participate in all areas where diesel engine technology and power generation are needed. Broad-based participation provides diverse perspectives on economies and markets across the industry and across the globe, generating a better understanding of the interconnectedness and dynamics of different sectors. It allows the leveraging of information from a higher perspective, permitting companies to aggregate all learnings from across sectors and even across industries that utilize similar technologies.
In addition to the wider opportunities that diversification brings, there is also a core principle at work: As demand in one sector results in advances in technology, those improvements inevitably transfer to other sectors. In addition to the continued development of dual-fuel engines already in use in the marine industry, the industry is investing in new technologies adopted from other sectors.
Integrating existing technologies with new ones is where newer companies have an opportunity to shine. Energy integration company The Switch started 10 years ago with a focus on the wind industry. With a unique perspective on the industry compared to centuries-old stalwarts, The Switch offers a fresh approach to the same issues and promises to be a key player in the integration of old and new. According to Mika Koli, Business Development Manager, “Lowering costs was the driver in wind. Today, the same issues are affecting vessels. How to produce energy at the lowest possible cost both for more profitable operations as well as the impact on the environment.”
Hybrid solutions and DC networks are a key focus of The Switch with the understanding that hybridization and associated technologies are the key to the future of the marine industry. “Future engine design should be focused to better adapt to the hybrid world,” says Koli, “including alternative fuels such as LNG, which is an intermediate solution.”
Cummins is likewise pursuing innovative developments in power generation and has recently announced renewed efforts in the field of electrification, actively working on several vessel projects utilizing what it refers to as “true hybrid technology” – involving both engines and generators with battery storage components. It’s expected that these technologies will be adopted first in the revenue-generating marine segments in the more mature markets of Europe and North America, thereby increasing operating efficiencies and improving the bottom line for customers.
Hybridization is also a focus for Fincantieri. By targeting specific areas of development and combining them, the industry powerhouse aims to create an innovative and reliable hybrid solution that can be marketed to customers around the world. “We believe that hybrid systems are the future of marine engine design,” says Marketing Coordinator Joelle Cooper, “significantly reducing both fuel consumption and emissions. Between engine data analytics, hybrid systems and continued performance improvements, we see a bright future for the marine engine market.”
Regardless of market focus, stakeholders are championing a common approach that further adds to a broad range of solutions for their customers. While recognizing that improving existing technologies such as powertrain efficiency are important, they are actively pursuing hybrids and electrified products where they believe they are viable. Likewise, investing and developing a wide network of service providers and integrated connectivity are critical to ensuring they can offer greater value to clients.
Exhaust: Regulatory Impact
The last decade has been incredibly impactful from a regulatory standpoint, and new regulations are being applied at a quickening pace, particularly to the marine industry. As the marine market becomes increasingly homogenized, the lack of harmonization among varied regulatory bodies has created significant differences across the globe. These disparities, in turn, have led to difficulty in fairly and adequately addressing environmental concerns. Now, beyond meeting accepted global standards industry, stakeholders must take into consideration sometimes stricter regional requirements as well.
To address this, companies have taken a unique approach by, in effect, ignoring the regulation and instead developing systems and equipment that actually exceed the minimum standard set by regulatory bodies. “Regulations are not enough,” says Koli, “Companies are becoming more proactive in exceeding regulatory requirements, not just to promote the efficient systems we are developing but also to support our clients’ goals of lowering operational costs and decreasing environmental impact. These goals do not need to be mutually exclusive.”
Despite recent government efforts to remove regulatory restraints on emissions and similar environmental protections, the paradigm shift has begun – perhaps with environmental impact as an afterthought. Engine manufacturers like Cummins expect that diesel will be the main solution in many applications for the foreseeable future.
While innovative diesel engine technologies promise cleaner, lighter, more fuel-efficient and powerful engines, the ultimate goal is to provide cost and value benefits to customers. By developing engines and power systems with efficiency and reliability in mind regardless of regulatory requirements, lifecycles can be increased and assets “future-proofed.” MarEx
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.