Investment and Economic Assessment of Energy Saving Devices (ESDs) for Ships
An Energy Saving Device (ESD) can improve propulsion and help reduce fuel costs. The economic assessment examines whether the saving during future service outweighs the additional costs. Engine operation, the work required and the remaining operating period all matter. For the investor, the share of the financial benefit that the investor actually receives is also decisive. An individual ESD, a modified propeller or a combined design may therefore produce a different investment outcome. A comparison on the same technical and financial basis makes clear which design can add value and which uncertainties may still influence the decision.
From Lower Power Demand to Fuel Savings
The technical starting point is lower shaft power demand at the same speed through the water and under comparable ship and environmental conditions. The results of hydrodynamic design and performance validation of ESDs describe the expected power improvement and the conditions for which it has been investigated. What matters for the business case is how much less fuel the engines or generators concerned use as a result.
Specific fuel consumption and losses in the drivetrain partly determine how lower power demand translates into fuel savings. An engine may operate more or less efficiently at a lower load. The percentage fuel saving therefore need not equal the percentage reduction in power. With a controllable pitch propeller, a shaft generator or diesel-electric propulsion, control and the distribution of power among the machines also influence the outcome.
The fuel saving at each operating point is linked to the corresponding operating hours, including less favourable operating settings. Consumption by other onboard installations does not automatically decrease. The chosen mode of operation also matters: maintaining the same speed while using less fuel is a different comparison from travelling faster and saving voyage time. Time savings acquire financial significance only when they yield a demonstrable return or cost reduction.
Comparing an ESD Investment with Other Propulsion Improvements
An ESD can offer improvement while retaining the existing propeller and rudder. Where one of those components is no longer well matched to the service or local flow, its optimization also merits investigation. The financial choice then concerns the additional investment and return from each feasible alternative, not solely the highest power saving.
An equivalent state of maintenance and the same future operational profile form the basis for comparing an ESD investment with propeller or rudder optimization. The alternatives are assessed over the same operating period. Where propeller replacement is already planned, what matters is the additional investment in an optimized design relative to a suitable standard replacement. Early replacement of a propeller that is still serviceable requires a different cost comparison.
For combinations, costs and savings must describe the same modification. A jointly developed propeller and Pre-Swirl Stator are compared as a complete package with the relevant alternatives. If the decision concerns only adding the stator to a selected new propeller, what matters is the additional investment against the additional saving, with that same propeller without the stator as the reference. The full improvement from the package is not the individual return from the stator.
The Costs and Payback Period of an ESD Retrofit
The total additional investment and annual net return determine the payback period of an ESD retrofit. Alongside the device, the necessary engineering, measurements, structural modifications, installation and relevant approvals form part of the cost estimate. Work that would also take place without an ESD is distinguished from the additional work for the investment under consideration.
For that estimate, structural integration, maintainability and the requirements throughout the service life matter. Installation during a planned docking may limit the additional costs. Extra steelwork or an extension of the docking period may change the outcome. For downtime, what matters is the actual financial disadvantage of the delay, rather than automatically the entire lost revenue.
The annual net return consists of avoided fuel costs and other attributable benefits, less additional operating and maintenance costs. Avoided emissions costs count only where they apply, accrue to the investor and have not already been included under another item. A more favourable EEXI or CII does not in itself represent a separate monetary return.
Particularly under a time charter, the owner may pay for the retrofit while the charterer bears the fuel costs. Agreements on compensation or other demonstrable benefits then determine the return the owner receives. Without positive net returns for the investor, there is no finite payback period on that basis, even if the ship performs better technically.
The simple payback period is an initial measure where positive annual net returns remain approximately constant. Comparing cash flows over the remaining operating period can provide more insight when maintenance expenditure and savings vary from year to year. The net present value calculation discounts those cash flows to their present value and compares them with the investment. Returns after the payback point also count.
Savings Uncertainty and the Investment Decision
How much uncertainty about the expected ESD saving matters depends on the margin between the expected return and the minimum required return. A credible, less favourable scenario shows whether the investment still meets the financial objective with a lower saving. A small deviation need not be decisive if there is sufficient margin.
The cause of the uncertainty determines which investigation will help. An uncertain hydrodynamic prediction may require further validation; uncertainty about future operating hours primarily calls for insight into the plans for the ship's service. A lower fuel price changes the value per tonne saved, not the performance of the ESD. These factors must nevertheless be considered together consistently. A changed operational profile may alter both the performance at each operating point and the number of hours for which it is used. Without further substantiation, the scenarios do not represent statistical probabilities of payback.
Targeted further investigation is valuable when its outcome can change the decision. If the project remains attractive under less favourable, credible assumptions, further refinement of the percentage saving need not be decisive. If the outcome is close to the financial threshold, additional substantiation may make the difference. The cost of investigation and the effects of delay on the intended docking date form part of that assessment.
When Does a Feasibility Analysis Provide Sufficient Confidence?
An initial screening may show that further investigation of a Pre-Swirl Stator (PSS), a Pre-Duct, Propeller Boss Cap Fins (PBCF) or a Rudder Bulb is worthwhile. A feasibility analysis for an ESD investment must support a different decision: is the proposed design sufficiently substantiated to justify further investment? For this purpose, the expected saving, feasible work and costs are all related to the same configuration.
Ship data, the operational profile and the reference must match the proposed design. The installation space, structural modifications and required approvals must also be sufficiently well known. The financial assessment distinguishes costs based on quotations from items that are still estimates. An uncertain distance between the Pre-Duct and propeller, for example, may first require a geometry check if that dimension could change the feasibility or scope of the project.
Not every detail needs to be finalized before the investment decision. Safe implementation must, however, be plausible, and the consequences of outstanding issues must be known. For a conditional decision, it is established which check will follow, who is responsible for it and what outcome is required before the relevant irreversible project step is taken. A positive feasibility outcome is not technical approval for manufacture or installation.
From Business Case to a Feasible ESD Project
During the project discussion, the design investigated, the pricing basis and any performance agreements are considered alongside the assumptions of the business case. Quotations, consumption data and the maintenance schedule make clear what information is available and which points still need to be confirmed. We support the technical assessment and project coordination with a specialist international partner, so that the proposed ESD or combined propulsion modification can be developed in detail.
The investment decision remains tied to the design for which costs and returns have been assessed. If the design, schedule or distribution of benefits changes, the financial consequences are also taken into account. In this way, a technically suitable improvement can develop into a project whose expected return over the intended operating period also offers sufficient value to the investor.