As the world overcomes the shock of the pandemic, sustainability is fast returning to the top of the supply chain agenda. Companies are naturally determined to reduce their carbon footprints, and logistics is seen as one area where real progress can be made.
Amid these developments, a number of startups have emerged with solutions that could bring about real change. One of those is Zero Emission Services, whose ZESpack concept of exchangeable batteries stored in shipping containers is now being used by brewing giant Heineken.
Earlier this month, an inland-shipping vessel that was converted to use electric energy from ZESpacks set sail for the first time. The Dutch company now has ambitious plans for ZESpacks to power 150 ships by 2030, and has attracted attention from as far afield as the US and China.
Keen to discover more about the concept and how it could be utilised in the future, we got in touch with Hein Oomen, Head Of Business Development at Zero Emission Services.
In this Trans.INFO exclusive, Hein reveals how the ZESpack concept was conceived, how it may be used outside of logistics, and where the company’s services are likely to expand to next.
Hein, thanks for taking the time to talk to us. First and foremost, how was the concept of ZESpacks created, and how did you arrive at the various use-cases for the ZESpacks?
It was not my idea personally, but my colleagues were involved in it from the beginning. It all started when there was an initiative called ‘Green Circles’ led by Heineken, who were basically trying to look into the future and see how they could reduce the emissions of their activities in and around their breweries. So that’s where the original idea came from.
The concept was further developed together with people from ING as well as Engie. When the idea was conceived initially, it was called MEC, which stands for modular energy container. That was then further developed into an actual business.
Along the way, Wärtsilä, who develop marine technology and innovation, followed by the port of Rotterdam, joined as well, and the company was founded in June 2020.
The role of Heineken was and remains very important, because the company basically said from the beginning that they would, together with their logistics services provider, enter into their first contract with Zero Emission Services so as to electrify one of their inland shipping vessels. So Heineken immediately became our first customer, together with their carrier CCT, who owns the first vessel to sail with ZESpacks.
Zero Emissions Services recently launched the maiden voyage of its new zero-emission inland shipping service in the Netherlands, and the company has plans to launch new routes. What kind of data and metrics will you be monitoring from your existing service to plan what routes to launch next?
Well, I think that there’s two answers to that.
First of all, what we are measuring is mostly operational data; the container is equipped with all kinds of sensors to monitor the state of charge, as well as the temperature and performance of the battery. We even have a GPS system on board to know where the ship is and how fast it’s sailing and so on.
All those things are logged, and we can remotely monitor everything. So we’re definitely going to learn from that and use the data to optimize our logistics.
Service levels are also particularly important to track, as ultimately, we want to offer our customers a worry-free experience that matches the one that they have today whereby they need only fill a tank with diesel.
In that sense, the first voyage that was completed a few weeks ago was the beginning of that period where we’ll be optimizing our operational phase and formalizing it too.
The second part of the answer concerns what routes to launch next. That has less to do with what we’re measuring. It’s more just a case of analyzing the statistics of container traffic flows in the Netherlands.
The Dutch network of inland waterways has a handful of transport corridors that more or less all originate from or terminate at the port of Rotterdam. They go into Germany across the Rhine, go into the south east of Belgium via the Meuse and go south towards Antwerp. Indeed, they even go north via Utrecht and Amsterdam.
So it makes sense to focus on parts of those routes that are used by lots of different vessels, and to look at shorter distances initially. With our current ZESpack, we can presume that an average ship can sail about 75 kilometres.
Then it would be a case of looking at regular shuttle services of ships doing the same thing every day of the week, so that we can achieve a high system utilization grade.
In order to be truly Zero-Emission, your ZESpacks are charged with energy from renewable sources. Some countries naturally produce more green energy than others. At the same time, some countries have geography that is more conducive to inland shipping than others. Taking this into account, which European countries do you think would be well placed to benefit from a zero-emission inland shipping service such as yours?
Today, how it works is that we draw electricity from the conventional electricity grid, and receive only certified green electricity from the grid. This is just the same way millions of households nowadays consciously purchase green electricity for their own use.
I think such services are becoming more readily available in most European countries. So that doesn’t appear to be a concern to us; we are not worried about there being insufficient green electricity to charge our battery packs.
On the other hand, I think even if the ZESpacks were to be charged with ‘gray electricity’ produced in a coal plant or a gas fired power plant, the efficiency of these massive plants is still better than the conventional engines inside most ships. In that sense, even then we would reduce emissions.
However, of course, it is our purpose to provide fully green, zero emission, services. Therefore we only use certified green energy. But I think it’s only a matter of time before most of the energy that is supplied to the grid will be green.
As for which countries are well placed to benefit from our system, that’s mostly determined by how big an inland waterway network they have. Other key factors would be the distances between the terminals and how intensive the traffic is.
For us, we are focusing initially on Belgium and Germany, which are very obvious areas to expand to. We are already making quite some effort to plan for that. However, we have also received requests from France, Denmark and even Lithuania.
Another possibility is the Danube region a bit further into Eastern Europe, which also has a very extensive inland waterway network. On top of that, we’re getting requests from specific areas of the US and even Japan with short sea traffic.
In the end, the system will have a lot of applications.
How difficult is it to take an existing vessel used for inland transport and convert it to so that it is powered by a ZESpack?
That’s a very important question. The vessel that we used, the Alphenaar, had already been sailing for a couple years. It was however, designed as a diesel-electric, in other words, a hybrid ship. So in that sense, we only needed to install some frames in order to accept the battery containers and build a special connector that automatically links to the battery, plus some cabling and other minor things. It was relatively straightforward and only took a few weeks to get sorted.
Now, that’s a diesel electric ship, and there are a few vessels like that. However, the bulk of the ships are obviously still designed to be fully diesel powered. The modifications on those vessels will therefore be more substantial. First and foremost, you’ll have to electrify the propulsion system. It’s a non-negligible cost that is required for those ships and an important element to make our system work.
One thing that is important to mention here, however, is that regulations, both at national and EU level, are increasingly stringent when it comes to emissions from these types of engines.
You may also be aware of the current requirements for ships to move to Stage V standards, which have lower limits on what an engine can emit in terms of CO2 and NOx. This means that on the long term, vessel owners have no option to keep sailing as they do today. They will have to switch eventually.
So what matters is the cost of converting to diesel electric versus the cost of converting to a Stage V engine that meets the latest emission rules. I think that difference is already now relatively minor.
As I understand it, the company has ambitions to build a network of 45 electric ships, 14 docking stations and 75 ZESpacks by 2025. What will you need to do between now and then to achieve this goal?
Well, first of all, I would say that 45 is only the beginning. We are aiming for 150 ships by 2030 and eventually we hope to cover a significant share of the total market.
What do we need to do to achieve this goal? It is a big challenge of course. It’s particularly difficult because of the typical chicken and egg dilemma – we need to build a number of charging stations at strategic locations at the same time we increase the number of ships that use them.
It needs to happen together as neither of those investments will make any sense without the other one happening in parallel. So that’s a focus area for us; we need to make sure those two investments happen simultaneously.
We will require subsidies to make this rollout happen. This is just down to the nature of the fact that the emissions that are coming from the traditional engines don’t have an additional cost today. We will need subsidies to compensate for that until we are at a scale whereby we can basically run a commercial business.
What you’ll see is that as we increase scale, then we automatically improve the utilization rate of the ZESpacks, which means that we can charge a lower tariff per kilowatt hour. We’ll increase the utilization rate of the docking stations too, which are basically public infrastructure investments.
Once we achieve that scale, we also reach the kind of ticket size that can attract asset financing parties.
For example, in the US you have these big fleets of electric buses. There are financial parties that are willing to provide competitive loans for those large quantities of batteries. That would help to drive down costs further and really make it a competitive alternative to diesel.
Fortunately, there are quite a few different subsidy funds available for initiatives like ours. That’s true on both a European level as well as national level, and even a regional level. That said, there’s still a lot of work to go through with the application processes in order to qualify for those subsidies.
One example that’s particularly worth mentioning in the Netherlands is called the Clean Air Treaty. Basically, the initiative allocates subsidies to those who can reduce emissions. The level of the subsidy is just calculated by multiplying the amount of CO2, of NOx and of particulate matter that you reduce in kilograms. You can then multiply that by a certain cost that those emissions have to society. The final number is the subsidy you get. I think it’s a really nice way to assign public funds to things that should matter to society as a whole.
If you do meet this target, what kind of positive environmental impact would it have?
We can say that on average, if we convert one inland ship from diesel to electric, then we can cut 1000 tonnes of CO2 per ship, per year, as well as 7000 kilograms of nitrogen.
If we reach our goal of 400 ships in 2050, we can save 400 kilo tonnes of CO2 and 2,800 tonnes of nitrogen per year. Additionally, these ships won’t produce any particulate matter and hardly any noise – which is important as inland shipping routes cross national parks and inhabited areas. Actually, the absence of noise struck me very much when I was aboard the ship: it’s just so wonderfully silent.
Your pay-per-use model is seen by ING as an increasingly important instrument for promoting sustainability. However, is it also sustainable from a business perspective?
Yes, it is. As I said earlier, we do rely on subsidies to roll out our business model. However, we see that by achieving the required scale throughout the second half of this decade, we can become a commercially viable company.
The pay-per-use model ING developed is essential here because we can’t ask individual ship owners to make the investment not only in an electric engine, but also in the battery packs.
If you treat every ship individually, then the costs of adopting the system will be prohibitive. The pay-per-use system offers a way whereby we make the investment in the ZESpacks, and we just charge the user of the electricity a tariff per unit of energy per kilowatt hour.
The key here is to sign long term contracts with users so that we can guarantee our investment and make a return on it.
Besides inland shipping, are there any other transport modes that could use ZESpacks to their advantage?
Yes, it’s definitely possible. They’re designed modularly to be moved around and be picked up. They can handle a lot of abuse too. Having said that, not every form of goods transport will have the space to carry one or multiple 20-foot containers.
Obvious areas for us to look into next are things like dredging vessels, offshore supply vessels, cruise ships, even short sea routes as well as land based applications.
Outside of transport, they can be used at festivals and construction sites – basically anywhere you need quite a high amount of power and don’t have access to a grid connection. That’s where the ZESpacks come in handy indeed.
We have also developed the docking stations in such a way that once the battery is docked and it’s charged, it can actually operate in the so-called ancillary services markets on the grid, which can help to stabilize imbalances in the grid. That can represent an additional revenue stream for us as well.
The agreement with Heineken appears to be a very important one for Zero Emission Services. Are you hopeful that the participation of a big name like that can convince other major companies to get involved too?
Yes, Heineken’s commitment in signing a 10-year contract, together with CCT, has been instrumental in delivering the proof of concept.
Heineken clearly sees the strategic benefit and necessity of realizing an emission free overall supply chain, as well as the fact that today’s customers are increasingly basing their purchasing decisions on manufacturers’ environmental awareness and carbon footprints.
Supply chain and logistics represent a significant share of the CO2 emissions of companies. Heineken is the largest user of inland container shipping services in the Netherlands. So when they take the lead, the whole sector watches and we hope to see others follow suit.