Maritime Investment Appraisal: The Case of Waste Heat Recovery Systems Installation

Abstract

<p>To ensure the compliant of the CO2 regulation, the IMO set standards for the Energy Efficiency Design Index (EEDI) for ships that also led to a higher propelling costs and additional abatement investments for ship owners making energy efficiency and fuel-saving a high priority in shipping operations.</p><p>This study focuses on the financial analysis of investment on waste heat recovery that has its origin in the heavy industry especially in power plants, steel mills and other high-energy fabrics. As with other industries, the waste heat recovery systems (WHRS) can also be used to reduce emissions and fuel consumption of ship engines but is still relatively new in the maritime industry and until now, the economic assessment of the installations are still not adequately covered in the scientific literature.</p><p>The evaluation of the investment of the WHRS installations on ships carried out in this work used the traditional capital budgeting analysis followed by the real-option approach that includes a fuzzy model. The results were validated using data from a ferry plying between Tallinn and Helsinki. The capital budgeting analysis reveals that the investment in maritime WHR technology is economically favorable only under certain frame conditions. On the other hand, the real-option analysis shows a practical and pragmatic assessment of the WHRS investment even when implemented under high uncertainty and volatility condition in material resource markets.</p><p><br></p>