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The global electric ships market size was USD 5.50 billion in 2019 and is projected to reach USD 10.82 billion by 2027, exhibiting a CAGR of 11.2% during the forecast period.
Most of the gas carriers, oil tankers, cruises, general cargos, and container ships utilize heavy diesel oil for operation. The total worldwide fleet of around 90,000 ships produces nearly twenty million tons (Mt) of Sulphur dioxide and consumes around 370 Mt of fuel every year. Marine diesel is used for inland shipping which is less polluting than heavy oil. The growing maritime trade and tourism will result in the increased emission of exhaust gases by these ships.
Electric drive systems are a suitable environment-friendly alternative for conventional fuel used in inland shipping, as well as large merchant ships. Electric ships are cleaner and more efficient and electric charging is considerably cheaper, as compared to heavy oil, especially marine diesel. These factors are expected to propel the adoption of hybrid and purely electric ships over the forecast period.
Delay in Funding for Programs such as Autonomous Vessel Operation amid COVID-19 to Hinder Growth
The automation of electric ships is a key area of focus for several manufacturers. However, owing to the pandemic, investors and original equipment manufacturers (OEMs) have been compelled to scale back funding for innovative programs such as autonomous vessel operations.
For instance, Yara International indefinitely delayed the launch of the world’s first all-electric autonomous container ship, the Yara Birkeland, in May 2020. The company attributed the delay to the uncertain market conditions owing to the pandemic. The ship was scheduled to launch in early 2020 under manned operation before operating autonomously from 2022. However, an uncertain development timeline as a result of the COVID-19 pandemic further impacted the commercial availability of this ship that was originally intended to enter into service in 2018 before being delayed to 2020.
The supply of materials for battery systems is also a concern for manufacturers. Countries such as China and Japan are the dominant suppliers of raw materials such as lithium, nickel, and cobalt among others. They are essential for the batteries powering the propulsion systems on electric ships. However, trade restrictions owing to the pandemic induced lockdown have created a significant bottleneck for their supply. The shortage of lithium is expected in 2020 with a significant price hike over the next two years. This may result in a decrease in the production of considerably expensive all-electric ships. Hence, the delay in autonomous operation funding and the shortage of supply for essential battery materials are expected to be the key negative effects of the pandemic on the market.
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Increasing Collaborative Efforts by Manufacturers to Propel Adoption of Electric Ships
In May 2020, seven Japanese companies, namely, Asahi Tanker, Idemitsu Kosan, Mitsubishi Corporation, Mitsui OSK Lines, Tokyo Electric Power Companies, Exeno Yamamizu, and Tokio Marine & Nichido Fire Insurance established the e5 consortium. The consortium is an expansion of the efforts by four of these companies that established the e5 lab in 2019. It aims to develop and commercialize all-electric zero-emission vessels over the next two years. For instance, Asahi Tanker announced its plan to build two worlds’ first all-electric tankers based on designs by the e5 lab in May.
Furthermore, the consortium has also developed its plans to build electric tug boats and smaller coastal electric vessels. Similarly, Wärtsilä, a key player in the market along with five other Nordic companies established the Zero Emission Energy Distribution at Sea (ZEEEDS) initiative. This consortium aims to reduce 940 Mt of CO2 emissions produced by the global shipping industry. Hence, a rise in collaborative efforts between manufacturers is expected to positively influence the growth of the market.
Implementation of the 2020 Global Sulphur Cap to Augment Growth
In January 2020, the International Maritime Organization implemented the global Sulphur cap that requires ships operating outside of emission control areas (ECAs) to use low Sulphur fuels. Ships need to utilize fuels with a Sulphur content of 0.5% or less, as compared to the previous limit of 3.5% or less. However, unlike the residual fuels used by the majority of the ships, the cost of compliant fuels is expected to be around 50% higher.
Furthermore, according to the International Chamber of Shipping (ICS), a collective cost of USD 50 billion to the industry is expected owing to the new regulations with an additional price spike. It is attributed to the early uncertainty regarding the availability of compliant fuels. Hence, the increasing adoption of environment-friendly electric ships is expected among ship operators. It can also help to reduce operating costs. These factors are set to fuel the electric ships market growth.
Positive Environmental Impact of Electric Ships to Boost Growth
Operational benefits of ships that utilize electric drive include enhanced safety, less noise, vibrations, and reduced fuel consumption. Apart from that, owing to the decreased fuel usage and low maintenance cost, the life cycle costs of electric ships are also low. Additionally, as compared to conventional systems, the installation space required for electric propulsion machinery is also significantly lesser and compact which would further result in the extra load space onboard the vessel. Hence, these factors are expected to propel the growth of the market.
Current Battery Technology & High Capital Expenditure to Restrain Growth
The primary restraint for the adoption of fully electric vessels is the current battery technology. Even ships sailing over short distances require a large amount of energy. The energy density of current batteries is not capable of accommodating the energy needs of large merchant ships. Besides, the capital expenditure for ship-owners is also considerably high owing to various factors such as the lack of battery charging infrastructure and the high cost of energy storage as the current battery capacity is still low. Hence, these factors are expected to restrain the growth of the market.
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Hybrid Segment Dominated in 2019 Owing to Reduced Risk of Failure
By power source, the market is segmented into fully electric and hybrid. The hybrid segment dominated the market in 2019. This technology can reduce fuel consumption by nearly 20% and lower up to 15% of CO2 emissions from ships. They can also enable sailing with fully electric propulsion for a short time (15 to 30 minutes for large ships). Hence, the reduced risk of failure and the environmental sustainability of hybrid ships are set to boost the dominant share of this segment.
The fully electric segment is anticipated to show significant growth in the market owing to the increased adoption of fully electric propulsion for small passenger ships and ferries operating on inland waterways. For instance, the world’s first fully electric vehicle ferry called ‘Ampere’ operating since 2015 in Norway weighs half the size of a conventional ferry. Additionally, its CO2 emissions are only 5%, as compared to a conventional ferry. The operating costs are around eighty percent lower and the ship saves nearly 1 million liters of diesel every year. Hence, these factors are anticipated to spur the growth of this segment.
Less than 75 kW Segment to Grow at a Faster Pace Stoked by Lesser Charging Requirements
By power output, the market is segmented into less than 75 kW, 75-745 kW, 746-7560 kW, and more than 7560 kW. The less than 75 kW segment is projected to grow at a faster pace over the forecast period owing to the increased adoption of electric propulsion in inland transportation vessels and passenger ships. These ships dock frequently, have less extensive battery requirements, and can be recharged every time they dock or can be charged completely overnight. These factors are expected to fuel the growth of the segment during the forecast period.
The 75-745 kW segment held the largest share of the market in 2019. Ships with this power output have a greater preference in the shipping industry. However, the rising emphasis on reducing the carbon footprint has resulted in the increased adoption of propulsion systems that produce minimal emissions and offer advantages, such as low engine noise and vibrations. This has further increased the adoption of electric drive, particularly in medium-sized marine ships, as well as luxury and expedition ships. These factors are attributable to the high share of this segment.
Commercial Vessels Segment Held Largest Share in 2019 Fueled by Environmental Concerns
By vessel type, the electric ships market is segmented into commercial vessels and defense vessels. The commercial vessels segment held the largest share of the market in 2019. The rising trade liberalization has increased the maritime trade volume over the last few years. Consequently, the number of ships such as bulk carriers, oil tankers, and container ships added to the existing fleet has also increased considerably. However, concerns related to air pollution, climate change, and fuel efficiency have resulted in the increasing adoption of electric drive, particularly hybrid-electric propulsion in the above-mentioned ships. These factors are attributed to fuel the growth of this segment during the forecast period.
The defense vessel segment is anticipated to show significant growth in the market. Factors such as lower maintenance costs, greater fuel economy, and quiet operation of electric systems are advantageous for advanced warfare operations. These would drive the growth of this segment.
Semi-autonomous Segment to Dominate Backed by Increasing Retrofitting on Existing Vessels
Based on the autonomy level, the market is segmented into semi-autonomous and fully autonomous. The semi-autonomous segment held the largest market share in 2019. As fully autonomous vessels are projected to be commercialized during the forecast period, sales have been primarily driven by semi-autonomous ships. These systems can increase the operational efficiency of vessels. Additionally, they can be retrofitted on manually operated existing vessels. Hence, the semi-autonomous segment is expected to dominate the market in the coming years.
The fully autonomous segment is anticipated to exhibit a higher CAGR during the forecast period. They enable efficient load transportation using advanced maneuvering systems and contribute to a decrease in human errors. Also, reduced operational costs owing to factors such as eliminating labor costs would aid growth. At the same time, faster operation and the shortage of mariners are some of the factors anticipated to fuel the growth of this segment.
Europe Electric Ships Market Size, 2019 (USD Billion)
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Europe is expected to hold the largest share of the market over the forecast period. The growth is attributable to the greater awareness regarding the effects of maritime emissions, particularly in seaports such as Rotterdam and Hamburg. Also, various government initiatives would propel the adoption of electric vessels.
Additionally, countries such as Denmark and Norway are actively introducing fully electric passenger ferries to replace conventional vessels. Hence, the governmental support in terms of incentives and stringent emission regulations are expected to increase the demand for these ships in Europe in the near future.
Asia Pacific is anticipated to show significant growth in the market. According to the IMO, China, Japan, and South Korea account for more than 90% of the global ship production, specifically large merchant vessels such as tankers and cargo vessels. Recent regulatory developments such as the global Sulphur cap and voluntary initiatives by manufacturers, particularly in Japan and China to improve electrification in large-sized vessels are some of the factors anticipated to influence the growth of the market in this region.
The market in North America is characterized by the rising demand for fully electric cruise ships, yachts, and ferries among others. Moreover, the increasing adoption of all-electric vessels by the U.S. Navy such as the USS Zumwalt which is the largest and most advanced stealth destroyer in its fleet is anticipated to drive the growth of the market in this region throughout the forthcoming years.
The market in the rest of the world is anticipated to exhibit steady growth over the forecast period owing to the increasing naval expenditure in countries such as Brazil, the U.A.E., and Saudi Arabia with a focus on the procurement of smaller vessels, namely, all-electric patrol boats and hybrid frigates.
Key Companies Focus on Developing Autonomous Systems to Gain a Competitive Edge
Key players in the market include General Dynamics Electric Boat, Leclanche, Norwegian Electric Systems, Kongsberg, Corvus Energy, and MAN Energy Solutions SE, among others. The majority of them are focusing on developing autonomous systems that can increase operational efficiency via features such as advanced navigational systems and comprehensive route planning.
For instance, Yara International, Kongsberg, Vard, and Kalmar are collaborating to produce the world's first fully autonomous and zero-emission container ship. The ship is being built by Vard, with Kongsberg providing the enabling technologies such as sensors and integration required for remote and fully autonomous operation. Furthermore, Kalmar will provide the autonomous equipment for loading and unloading with the level of autonomy increasing gradually over the next two years. Additionally, the project has also received USD 15.8 million in funding from the Norwegian government enterprise ENOVA. Hence, a greater emphasis on improving vessel autonomy by key players in the market is expected to influence the adoption of electric ships over the forecast period.
An Infographic Representation of Electric Ships Market
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The electric ships market research report covers a detailed analysis of the market and focuses on key aspects such as leading companies, product types, and leading applications of the product. Besides this, it offers insights into the market trends and highlights key industry developments. In addition to the aforementioned factors, it delivers an in-depth market analysis of several factors that have contributed to its growth over recent years.
Value (USD Billion)
By Power Source
By Power Output
By Vessel Type
By Level of Autonomy
Fortune Business Insights says that the global market size was USD 5.50 billion in 2019 and is projected to reach USD 10.82 billion by 2027.
In 2019, the European market value stood at USD 1.93 billion.
Registering a CAGR of 11.2%, the market will exhibit good growth in the forecast period (2020-2027).
The commercial vessel segment is expected to lead the market during the forecast period.
The implementation of stringent emission regulations is the key factor driving the market.
Kongsberg, General Dynamics Electric Boat, and Leclanche are the major players in the global market.
Europe held the highest share in the market in 2019.
The greater awareness regarding maritime emissions and reduced fuel consumption and emissions via the use of electric drive technologies are expected to drive the adoption of electric ships.
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