Harilaos N. Psaraftis, Professor at the Department of Management Engineering of Technical University of Denmark, shares his view on the recent exchange between Panos Zachariadis and James Mitchell on the subject of the Existing Vessel Design Index (EVDI), which is an EEDI applied to existing ships. Following analysis, Dr. Psaraftis concludes that EVDI has basic flaws, and that ‘it is not a reliable index for ranking a ship’s energy efficiency or environmental friendliness’.
First of all, a central assumption of proponents of ship energy efficiency vetting schemes such as the EVDI -and in fact the whole philosophy of the scheme is based on that assumption- is that owners of ships on time charter or bareboat charter may have little or no incentive to adopt measures for the reduction of fuel consumption (and hence emissions) of their ships, since the fuel is paid for by the charterers and not by themselves. This assumption is incorrect as is explained below.
When a ship is fixed on a time charter, the ship’s speed and consumption are clearly described in the charter party. During negotiations, the ship’s capacity, warranted speed and consumption are evaluated by the charterer. A ship with a poorer warranted speed and consumption will receive a lower charter rate than a ship with a better consumption curve. If during the charter the ship does not perform up to charter party terms, the charterer will lodge a claim on the ship and deduct monies accordingly as compensation for his contractual loss. English arbitration case law is full of such incidents. Under these circumstances, the owner of a ship on time charter has every incentive to make every possible effort to economize on fuel consumption while on time charter.
Second, EVDI is an index based on the Energy Efficiency Design Index (EEDI), adopted by the IMO in 2011 as an amendment of MARPOL’s Annex VI. The use of EEDI for ships built prior to 2013 has not been allowed by the IMO, and there has been a long discussion justifying that decision. But EVDI, which is really EEDI applied to existing ships, is applicable universally.
EVDI, like EEDI, is calculated assuming a basic design speed for the vessel. This is the speed corresponding to 75% of the ship’s Maximum Continuous Rating (MCR). The typical assumption is that such design speed is the one that is recorded and displayed in world fleet databases, which are available commercially. Yet, this may not usually be the case, as in some cases the design speed as recorded in such databases is at the 100% MCR level. Some years ago my team and I performed some regression analyses on EEDI, and I called the developer of the commercial fleet database we were using and asked who provides the broad set of ship particulars that is in the database. I was surprised to hear that ship owners are the main source of such information, and this includes design speed. As there is no independent verification of such information, inaccuracies in the value of the design speed can translate into inaccuracies in the computed value of EVDI. Given the whole uncertainty on the subject, it is not a surprise that that even sister ships may exhibit a different EVDI, as reported by industry circles.
Third, and even in the hypothetical case of perfect information on the assumed value of the 75% MCR speed, commercial ships do not necessarily trade at that speed, or at any other predetermined speed. Whoever pays for the fuel (owner or charterer) will select an appropriate speed which is a function of basically two factors: fuel price and freight rate. High fuel prices and/or low freight rates will induce slower speeds and hence lower fuel consumption. Conversely, low fuel prices and/or high freight rates will induce ships to speed up. The practice of slow steaming, much prevalent these days, may involve speeds drastically lower than the 75% MCR speed, and the corresponding reduction in fuel consumption will be even higher. Engines operating at 10% of MCR have been reported, for speed reductions of about 50%. This basic behavior cannot be captured by the EVDI index, therefore rankings according to this index may give a distorted picture of the actual comparison of two vessels in real market and operating conditions.
Last but not least, EVDI carries with it a basic deficiency of EEDI, which is the risk of designing underpowered ships so that EEDI compliance can be achieved. An easy solution to achieve a good EEDI is to install a smaller engine on a ship, which might perform fine in calm water but have difficulty maintaining speed in bad weather, emitting more CO2 in the process. In fact the IMO has been, since 2011, under intense discussion on how to reconcile EEDI compliance with the minimum safe power requirement. This is a highly technical discussion and the jury is still out on how the issue will be resolved. My own impression is that an impasse is imminent, and I hope I am wrong. Given that the baseline for the maximum permitted EEDI is gradually reduced in the years ahead, it will be increasingly challenging for a ship to be EEDI compliant and have adequate minimum safe power at the same time, unless of course there is a quantum leap in improving energy efficiency in the foreseeable future.
The developers and advocates of EVDI may have the best of intentions. But at least for the above reasons, I believe that EVDI has basic flaws, and that it is not a reliable index for ranking a ship’s energy efficiency or environmental friendliness.
As to what might be a better alternative, this can be a long discussion which transcends the scope of this short note.
Written by Harilaos N. Psaraftis, Professor at the Department of Management Engineering of Technical University of Denmark
The views presented hereabove are only those of the author and not necessarily those of GREEN4SEA and are for information sharing and discussion purposes only.
Harilaos N. Psaraftis is a Professor at the Technical University of Denmark (DTU), Department of Management Engineering. He has a diploma from the National Technical University of Athens (NTUA) (1974), and two M.Sc. degrees (1977) and a Ph.D. (1979) from MIT, USA. He has been Assistant and Associate Professor at MIT from 1979 to 1989 and Professor at NTUA from 1989 to 2013. He has participated in 20 or so EU projects, and has coordinated 3 of them, including project SuperGreen on European green corridors (2010-2013). He has been a member and chairman of various groups at the IMO, and has also served as CEO of the Piraeus Port Authority (1996 -2002). He has published extensively and has received several academic and industry awards. His latest book is entitled “Green Transportation Logistics: The Quest for Win-Win Solutions” (Springer International Series in Operations Research and Management Science, 2016).