White Paper: Capital and maintenance cost of the STI Emissions Reduction System and comparison to other emissions control methods

Winter, 2011

Simulation Tech, Inc.

Page 1

Table of Contents: Table of Contents: .................................................................................................................................. 2 Abstract: ................................................................................................................................................. 3 Executive Summary: ............................................................................................................................... 3 The Problem: .......................................................................................................................................... 3 About STI: ............................................................................................................................................... 4 The STI Emissions Reduction System Solution: ...................................................................................... 5 SULPHUR EMISSIONS REDUCTION SYSTEM (SERS): ............................................................................. 6 Nitrogen Emissions Reduction System (NERS): .................................................................................. 7 Emissions Monitoring System (EMS) ...................................................................................... 9 Ship Performance Management (SPM) .................................................................................... 10 Washwater Emissions Reduction System and ...................................................................... 11 Washwater Emissions Monitoring System (WERS and WEMS) .......................................... 11 CO2 Emissions Reduction System (CERS) ............................................................................ 13 STI System Total Costs: ........................................................................................................................ 14 Other Emissions Control Options: ......................................................................................................... 15 Low Sulphur Fuel........................................................................................................................... 15 Slide Valves ................................................................................................................................... 15 Emulsion Fuel ................................................................................................................................ 15 LNG Propulsion ............................................................................................................................. 16 Cost Comparison Charts: .......................................................................................................................17 Conclusions:.......................................................................................................................................... 19

Simulation Tech, Inc.

Page 2

Abstract: STI has compiled a comparison of various emissions control technology methods for marine vessels. STI’s mission is to provide effective and affordable emissions control technology to ship owners that meets, or exceeds, all MEPC requirements in satisfying IMO emissions regulations through 2020. This paper reveals that, based on long-term financial benefits, the STI ERS is the most cost effective way to reduce ship exhaust emissions.

Executive Summary: Emissions control regulations for marine vessels are rapidly changing the way that ship owners need to look at their operations. Emissions control technology is developing and changing on a rapid, nearly daily basis, and there is much confusion in the market about the technology, the costs of controlling emissions, and the long term costs and benefits of the technology. This white paper attempts to answer some of the questions that ship owners have about emissions control technology and its’ associated costs. It will show comparisons between different methods and costs, and will show that STI’s method is both a fiscally and environmentally sound and effective method of maritime emissions control.

The Problem: Emissions control is emerging technology. As with other emerging technologies, developments are continually occurring and products are refined and innovated. Additionally, in a politically charged environment, governments, regulatory agencies, and NGOs routinely endorse different technology solutions that may not always be neither the most efficient, nor cost effective.

In controlling emissions at sea, engineering challenges not encountered on land complicate possible solutions. Finally, the fact that “emissions” is a general term, encompassing numerous types of elements, all originating from different sources, means that there is no one complete solution available on the market to control every type of exhaust emission. SOX, NOX, CO2, Smoke (Black Carbon), and PM all come from either combustion (NOX, CO2), or the fuel itself (PM, Smoke, SOX). For instance, if a SCR is installed to control NOX, another solution, say, for example, a seawater scrubber, must be added to control SOX.

Simulation Tech, Inc.

Page 3

About STI: Simulation Tech, Inc., founded by Dr. Kim Daegyu and headquartered in Seoul, Korea, started in 2000 as an innovator in manufacturing simulators for the LNG industry. A company of scientists, STI has utilized its’ unique human capital to expand its’ expertise into the emissions control market and into small shipbuilding.

STI has developed the most efficient emissions reduction system available on the market, developing components that focus as much on the financial concerns of ship owners as the engineered capability of emissions removal. Our mission is to continue to innovate the most effective emissions control equipment in the maritime market and produce financially sound alternatives to both ship owners and operators.

Figure 1. STI's new campus near Suwon, Korea

Simulation Tech, Inc.

Page 4

The STI Emissions Reduction System Solution: STI’s Emissions Reduction System is composed of different modules, each designed to control a specific emissions type or solve a different problem associated with emissions control. Each module can be purchased and used individually, or operated as part of a complete emissions control system.

Figure 2. ERS line diagram

Simulation Tech, Inc.

Page 5

SULPHUR E MISSIONS R EDUCTION S YSTEM (SERS):

Figure 3. Installation of SERS on a small vessel (M/V Saenuri)

Purpose of Module: Control of SOX and Smoke (Black Carbon). SOX Removal Efficiency: 96%, exceeding MEPC requirements. Black Carbon Removal Efficiency: 86%. MEPC regulations still pending. Unit Description: The SERS is STI’s patented cyclone-type seawater scrubbing system. The unit consists of a cylinder with a turbine that produces an emulsion of emissions and water. The emulsion is then separated, with sulphur and black carbon removed. The SERS’ unique design allows a more efficient, both in SOX removal efficiency and power consumption, control of SOX than any other seawater scrubber on the market. Module Equipment Cost: US$750,000 to US$1,500,000, depending on vessel size and engine power. Estimated Module Installation Cost: US$500,000 (New Build) to US$750,000 (Retrofit). Power Consumption Requirements: 30 – 40 kWh Fuel Penalty: <1.5%. This is offset by other STI components. Daily Operating Cost: US$390 at current HFO prices. Operations Savings: The SERS allows the use of HFO within SECA areas. Low Sulphur Fuel premiums range from 7% - 15% over HFO prices. At 90 t fuel consumption per day, this equates to savings of US$3,308 to US$7,808 per day, greatly exceeding the SERS’ operating cost.

Simulation Tech, Inc.

Page 6

Nitrogen Emissions Reduction System (NERS):

Figure 4. STI's NERS installation.

Purpose of Module: Control of NOX. NOX Removal Efficiency: >90%. Unit Description: STI’s NERS was developed in partnership with KOPEC, Korea’s largest power plant operator and equipment manufacturer. The unit is known as an SCR, Selective Catalytic Reduction, and is highly efficient at removing NOX from exhaust emissions. The exhaust is misted with Urea, and forced over a catalyst. The NOX “sticks” to the catalyst, much like a filter, and is removed from the emissions. The SCR is normally installed after the SERS, and is heated to a minimum 240ºC in order to initiate the catalytic reaction. Module Equipment Cost: US$590,000 to US$ 750,000, depending on engine power. Module Installation Cost: Typically installed at the same time as the SERS. If ordered on its’ own, approximately US$300,000. Power Consumption Requirements: 10 – 20 kWh. Urea (40% solution) Consumption: 15g/kWh. Urea Cost: US$425 / ton.

Simulation Tech, Inc.

Page 7

Catalyst Life Cycle: Two Years. Replacement Cost of Catalyst: US$30,000 per set. Average daily operating cost: Depends heavily on vessel / engine size. For a small vessel (under 30,000 t), an estimate of US$249 per day, for a large vessel (VLCC, 8,000 TEU, Aframax) an estimate of US$2,400 per day is accurate. Fuel Savings: The NERS eliminates the need for compression adjustments required for MARPOL Tier II to Tier III compliance. This results in a net fuel savings of approximately 7.5%. At current HFO prices of US$525 / ton, this equates to US$3,540 per day of operations, exceeding the operating cost of a large vessel by US$1,140, direct bottom line cost savings. This figure nets to US$285,000 per year.

Figure 5. NERS Nozzle Diagram

Simulation Tech, Inc.

Page 8

Emissions Monitoring System (EMS)

Figure 6. Emissions Monitoring System (EMS)

Purpose of Module: Monitoring of all emissions, meeting MEPC requirements (CO2, CO, O2, SOX, NOX, PM, Smoke) Unit Description: The STI EMS is our emissions monitoring system, compliant with MEPC regulations requiring accuracy in emissions monitoring and recording in ECA areas. Reports are customizable, and may be transmitted remotely or printed onboard for immediate reference. The EMS is a CEMS unit, permanently installed. Accuracy: Within the 98% accuracy required by MEPC. Module Equipment Cost: US$270,000. Module Installation Cost: Average of US$50,000. Module Operating Cost: Negligible.

Simulation Tech, Inc.

Page 9

Ship Performance Management (SPM)

Figure 7. SPM unit display

Module Purpose: Optimization of fuel consumed. Minimization of emissions produced. Emissions Reduced: SOX, NOX, CO2, PM, Smoke. Average of 5%. Unit Description: STI has partnered with Seatechnik in developing the SPM. The SPM is sold in different levels of functionality, ranging from simple engine efficiency calculations using torque and location , to highly complex algorithms that integrate engine efficiency, location, weather, hull efficiency and forecasting, automated and interfaced with the ship control system onboard. STI guarantees a 4.5% fuel reduction from SPM, and the module greatly adds to the self-financing of the ERS by eliminating waste and inefficiency in operations. Module Equipment Cost: US$95,000 to US$395,000, depending on system complexity. Module Installation Cost: US$ 50,000 to US$ 90,000, depending on complexity of system. Operating Cost: Negligible. Fuel Savings: 4.5%. At 90t consumption per day, this averages to US$ 2,127 per day.

Simulation Tech, Inc.

Page 10

Washwater Emissions Reduction System and Washwater Emissions Monitoring System (WERS and WEMS)

Figure 8. WERS sludge treatment

Module Purpose: Treatment of discharge water from SERS in compliance with MARPOL regulations. Emissions Reduced: Discharge water is treated to environmentally neutral pH levels. 99.99% of solids removed. Unit Description: The WERS is a series of separators and filters used to treat the wash water used in SOX treatment. The WERS only treats the wash water if the pH is outside the 3.5 limit imposed by the IMO in open sea. For discharge of the wash water within an ECA, the WERS MUST be used. The system uses a NaOH treatment to adjust pH. Though the SERS is an 80% closed loop system, the environmental impact of the remaining 20% of the wash water must be treated, since to do otherwise simply would shift pollution from air to water. The WEMS is a mass-spectrometer unit that analyzes the discharge, giving precise indications of the composition of discharge, and ensuring environmentally safe discharge. Module Equipment Cost: Included in SERS. Module Installation Cost: Included in SERS. Module Power Consumption: 5-10 kWh.

Simulation Tech, Inc.

Page 11

NaOH Cost: Approximately US$80 per day. Daily Operating Cost: Varies based on operating area, but on average, US$190 per day, to be added to the SERS daily costs.

Figure 9. WEMS process diagram.

Simulation Tech, Inc.

Page 12

CO2 Emissions Reduction System (CERS)

Module Purpose: Reduction of CO2 emissions. CO2 Removal Efficiency: 35% - 50% Unit Description: The CERS is under development by STI as a unique method of reducing CO2 emissions from ships. The most notable feature of the CERS is that it produces waste material that is a carbon solid, and, hence, innately measurable and proven in terms of the amount of CO2 reduced. The CERS uses a proprietary electrolytic reaction to remove the CO2.As patents are still pending, the method of reduction is still proprietary, however the method has been used in the past on land. The system will be available for retail sale in Mid-2011, and final testing is currently ongoing. Projected Equipment Cost: US$ 1,250,000. Projected Installation Cost: US$500,000. Projected Operating Cost: Presently difficult to estimate, as it will be highly dependent on the engine and vessel. Costs will primarily be related to chemicals and power requirements of approx. 50 kWh. Projected Savings: This depends on the final format of Cap and Trade regulations or other Marketbased mechanisms. Current regulations are delayed due to the lack of agreement on an EEDI (Engine Efficiency Index). If roll-out similar to the EU ETS is chosen, current Carbon Prices are selling for approximately US$20 per ton.

Simulation Tech, Inc.

Page 13

STI System Total Costs: Assumptions: 250 Operations Days / Year 90 tons fuel consumption per day Fuel Price of US$525 / ton Includes financing cost benefits

System Cost (Including Installation, but excluding CERS)

US$ 4,000,000

System Payback Time

20 Months

Daily Operating Costs (Large Vessel, Average)

US$

2,980

Daily Savings (Large Vessel, Average)

US$

12,603

Operating Cost per kWh

US$

5.40

Cost Savings per kWh

US$

22.83

Capital Expenditures Cost per kWh (During Payback Period)

US$

25.60

Simulation Tech, Inc.

Page 14

Other Emissions Control Options: Low Sulphur Fuel

Cost of Installation: Engine modifications may be required, due to lubricicity and other known issues with low sulphur fuel. US$500,000 – US$750,000. Cost of Fuel: 7% - 15% over HFO prices. Currently US$37 – US$79. Emissions Reduced: SOX (Approximately 90%), PM, Smoke. HFO Operating Cost per kWh: US$ 85.60 LS Cost per kWh over HFO: US$98.48

Slide Valves

Cost of Installation: US$270 Each Emissions Reduced: PM, Smoke, CO2 Cost per kWh: US$1.90

Emulsion Fuel

Cost of Installation: Nil. Emissions Reduced: PM, SOX, NOX Cost per kWh: Fuel cost reductions from 7% - 20% over HFO. US$51.60 fuel cost per kWh savings. Note: Emulsion Fuel without treatment does not meet ECA requirements. Emulsion fuel is not covered under the EU HFO ban.

Simulation Tech, Inc.

Page 15

LNG Propulsion

Equipment Cost: 6 mW engine at US$7,000,000 Emissions Reduced: SOX, NOX, PM, Smoke Fuel Cost: US$300 / ton. Capital Equipment Cost / kWh: US$1,166 Operating Cost kWh: US$48.91

Simulation Tech, Inc.

Page 16

Cost Comparison Charts:

Capital Expenditures Emissions Control Methods 25,000,000 20,000,000

STI

15,000,000

Low Sulphur Fuel

10,000,000

LNG

5,000,000

Emulsion Fuel

0 Equipment Cost

Daily Vessel Operating Costs / kWh

100 80 60 40 20 0 Daily Vessel Operating Costs / kWh

Simulation Tech, Inc.

STI Low Sulphur Fuel LNG Emulsion Fuel

Page 17

Captial Equipment Costs / kWh, First Year

1,500 1,000

STI Low Sulphur Fuel

500

LNG

0 Cost of Emissions Control per kWh

Emulsion Fuel

Emissions Control Operating Costs / kWh

6 4

STI Low Sulphur Fuel

2

LNG

0 Daily Vessel Operating Costs / kWh

SOX

NOX

STI

X

Low Sulphur Fuel

X

LNG

X

Emulsion Fuel

Emulsion Fuel

X (90%)

CO2 X

X, with CERS + residual

increase X (90%)

increase

PM

Smoke X

X

X

X

X

X Slight

Figure 10 Emissions Reduced by Different Methods

Simulation Tech, Inc.

Page 18

Conclusions: As the charts above clearly show, though there is a capital expenditure required for STI’s ERS, daily operating costs are significantly reduced, leading to an average system payback time of only 20 months, on average. This is substantially less than LNG propulsion and, unlike merely switching to lowsulphur fuel, which carries its’ own capital costs, the ERS controls all emissions when installed as a package. Therefore, from a fiscally responsible perspective, the ERS is the only way that ship owners can receive financial benefits and still be 100% in regulatory compliance in all ECAs.

Simulation Tech, Inc.

Page 19