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Alternative Ship Financing

As CEO of PBS SA Capital Group, Alexander’s Christodoulakis’ passion is to assist companies to grow, expand and reposition themselves in the market.

Using a vertically integrated management system for his global portfolio at PBS SA Capital Group, this has helped to provide companies under management with a degree of stability, sustainability, and growth in volatile global market times. Alexander’s management system enables asset and ship equity growth via alternative ship financing solutions. The ship financing solutions include fleet optimization and ship refinancing.

The global shipping industry is a capital-intensive business. The industry’s players need CapEx financing, credit lines, and ship operational liquidity to handle the large scale opex of the intense daily cash flows. Over the past decades, international shipping enterprises relied on traditional ship finance, which was heavily dependent on bank financing, while alternative ship financing was limited or unattractive, up until the recent years.

However, the introduction of a number of alternative financing options in the wake of the global economic crisis created new means of alternative funding which in turn came in handy to those who needed it and had nowhere else to go. Significant changes to the market conditions in many parts of the shipping industry with newly created successful partnerships between financiers and experienced shipping groups.The shipping industry gained added advantages from capital markets in the recent years since they are able to issue debt easier as well as attract more equity participations. Initial public offers (IPOs) became popular among investors and shipping companies.

Today, there is a relevant disconnect between freight rates which remain low and are expected to increase and gain more traction during the winter months and the attractiveness of last year’s IPOs which were relatively low. But, is expected to grow, starting from the winter season as well. While Private equity (PE) funds have been focusing on opportunistic investment options and have been doing well until presently, a number of capital management companies invested heavily with a specific focus on the shipping industry and real estate market.  Private Equity funds provide flexibility in extending credit and also extend loans to riskier projects where banks would be more restricted from providing such funding.

The capital markets remain critical for the enhancement as well as the promotion of shipping business growth and the creation of corporate value since capital markets perform the following fundamental functions. As capital markets act as qualified intermediaries in providing funds required to finance new investment projects and sustain business growth.

This has created the important shift that has been seen in the recent years until today in the shipping industry. The international capital markets played a protagonist role of key importance, predominantly equity and bond markets, which provided a large share in fund-raising for shipping enterprises.

As shipping is a cyclical industry with idiosyncratic characteristics, strategic market timing remains of key importance to any shipping investment. The behavioral pattern of shipping business is related predominantly to the nature of shipping demand and supply, being sensitive to economic growth and trade, cyclicality in freight rates and vessel prices, demand and supply imbalances and fragmented business structures.

The issue of optimal capital structure blending with the appropriate funding method is critical for an industry that is capital intensive and its operation employs real assets (Ships) of high commercial value. Strategic decisions in shipping enterprises today, shift from simple profit maximization to corporate value enhancement. The capital intensity and magnitude of shipping investments always requires capital availability, but also careful vessel selection and reliable fleet diversification, based on solid capital frameworks is a must. In a highly dynamic and volatile business environment, modern shipping finance becomes highly sophisticated, innovative as well as complex in today’s market environment.

 

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The Global Shipping Industry of Today

Inside the last century, the global merchant shipping industry has seen the increasing trade volumes along with the expansion of free trade and the increased demand for consumer and industrial goods. However, it is inside the last 50 years that shipping has become the predominant means of merchant transportation globally, making it responsible for the transportation of approximately 90% of global trade.  Main reasons for this leading position of shipping are of course globalization of trade and important technological advances that have taken place in the industry. Although the industry is growing, shipping is cyclical as well as capital intensive. By this, we mean that it is highly affected by the aggregate global demand for industrial or consumer goods whereas the global macroeconomic and financial events can affect the values of the shipping assets and their financing levels. Despite this, shipping industry as a whole is already diversified at some level.

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Different types of vessels are employed concurrently at every phase of the business cycle but with different performances depending on the phase of the cycle and the global demand levels.  So in the main categories of shipping, we meet tankers which transport crude oil, petroleum and chemical products, bulk carriers which transport unpackaged bulk cargo, such as grains, coal, iron ore, and cement, container ships which carry most of the world’s manufactured products, specialist ships like offshore supply vessels, anchor handling tug supply, platform supply vessels and construction support vessels among others. Finally, we meet Ferries which are passenger and vehicle ships (roll-on – roll-off, RoPax etc.). All these different types of vessels support today’s global transportation industry by offering a good diversification for those considering an investment in the shipping sector.

Shipping faced a serious economic downturn in the 2008 global financial crisis. From then on, it has faced and continues to face constant challenges and interesting changes. From recent collapses of shipping giants to good M&A activity that has taken place in the last 12 months and with the bigger deals taking place inside the last 3 years, the industry adjusts itself to the new policies and environmental regulatory standards that are about to be established soon and to those already implied. All these are expected to increase the financial burdens of shipping companies which are already facing increased pressures on their margins. Proactive anticipation has become the new norm in the industry, and it is definitely a realistic way for shipping managers and ship-owners to face the regulatory stakeholders.

Despite all the challenges, the existing functions of shipping like the proper management of security standards, the operational and technical management of ships, the management of the chartering function, the ship selection and acquisition process and the management of human resources and multicultural diversity are being kept at a very good quality level worldwide and this good level is expected to increase further also due to increased competition in the market. For the coming years and according to a consensus by many analysts’, we expect on average for the industry’s benchmark players the Earnings per share and Return on Equity ratios to be higher than the last 5-year average. It will take a long way, however, before seeing again pre-crises rates. Under these new circumstances, shipping companies will still have to optimize their fleet, acquire new vessels, hedge against macroeconomic, geopolitical and environmental risks while confronting at the same time the extra costs of the new policies. Therefore it is crucial for the shipping companies to manage cautiously the financing activity as an on-time and well-structured financing will determine the quality and types of fleets that will dominate the seas the coming years. The longer-term view for an industry moving in parallel with the increase of the global population, and new infrastructure developments that are expected to take place in major economic hubs of both east and west, suggest that the industry can proliferate enough from the estimated increase in demand.

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World seaborne trade has increased in a steady manner the last years and this is also reflected on major shipping stock benchmarks. Shipping transportation remains efficient, safe and economical and is set to remain competitive as an industry. Even if the current year is not an easy one, global maritime trade is expected to increase.

Air Freight vs. Ocean Freight

International shipping connects the global trade market. Exporters have major business choices to make in terms of how they transport their shipping. In the logistics industry, transporting goods requires a lot of consideration. Air freight and ocean freight are the two choices of transportation when shipping overseas. So how do businesses decide how they ship? Take a look at the factoral differences between air freight and ocean freight.

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Cost  

Many people assume that ocean freight is cheaper than air freight, however, that is not always the case. Depending upon the chargeable weight, which is how carriers charge for international shipping, size will determine whether air or ocean freight is cheaper. When calculating which option is cheaper, a company has to compare the transportation fees with the value of the goods. Whichever way the company ships, they still have to consider the customs and destination fees. Warehousing fees at seaports are typically more expensive than airports. As a general rule, when we have to deal with heavier and larger shipments, it is often more economical to choose sea freight transportation. However, as a shipment becomes significantly smaller, margins between the prices of the different transportation means get smaller and sometimes air freight could even turn out to be less expensive.

 

Speed 

It’s no question that time is money. Speed is a priority for many companies, including cargo shippers and their clients. Air freight is much faster than ocean freight, only taking about a day or two for arriving at the destined airport. The faster a business can provide goods to their customers, the greater customer satisfaction is.

As technology expands, so does the ability to track shipping because it’s a component of a positive experience. There’s a level of comfort that consumers have when they know where an item that they paid for is at all times, even if it’s in transit. Consumers expect a speedy delivery. Airfreight provides tracking and shows how quickly a package arrives from location to location until it’s delivered to a consumer’s door.

 

Reliability

 In the world of international shipping, businesses and consumers want reliability with their shipments. Ocean carriers are nowhere near as reliable as air freight. Not only does air freight transport goods in a matter of days, but trackability is much more efficient as well. Ocean freight can take multiple days, or even weeks to arrive at the destination. Although air freight has a shorter history than ocean freight, it’s quickly progressed in terms of reliability and matching up to the expectations exporters have in the logistics industry.

 

Following an ocean carrier arriving at a seaport, there’s still land travel time that must be accounted for. Air freight has the ability to arrive closer to the final destination because of the numerous airports inland vs. the seaports on the coasts.

 

The Importance of the Greek Fleet – History, Past and Present

TANKER BLUE LIGHTGreek Shipping roots are as old as the Greek Prehistory. Dating back to the time of the Argonauts, a sorority of legendary heroes in Greek mythology, who in the years before the Trojan War, around 1300 BC, accompanied Jason to Colchis in his mission to find the Golden Fleece. Their name comes from their ship, Argo, named after its designer, Argus. The literal meaning of “Argonauts” is “Argo sailors. Greece, a country surrounded by sea, which according to the World Factbook, is the 11th in rank country based on a coastline length of 13,676 km, made an early statement of dominance in the Mediterranean Sea since the ancient times.

The early Greek sailors, loved the sea for the freedom and for the new opportunities that the sea was giving them. Helped by their adventurous spirit, the Greek climate conditions and geographically being located at the important crossroad of the sea trade routes of the time, the Greeks became masters of the seas by overcoming the competition that was spawned by other Mediterranean ethnic groups. The connection of the sea trade with the development of the Greek civilization and Greek colonies of the ancient times in the Mediterranean region was so strong, that it settled the base for a long and an unparalleled maritime tradition. Until the time Greece was conquered by the Romans, the Greek merchant shipping flourished uninterruptedly since the 11th century BC with Alexander’s the Great ruling times setting the Greek sea trade at its greatest glory.

The centuries that followed, even during the period of the Roman dominance, Greeks continued to be heavily involved in the merchant shipping as Romans were more focused on the building of infrastructure and were not so well versed with the matters of the sea. After the period of the Romans and during the Byzantine era, Greek merchant shipping recovered its power for the next ten centuries. Byzantium formed shipping policies that greatly supported the growth of the Greek merchant marine through the centuries that followed. Again, towards the end of the Byzantine Empire, the Greek merchant marine declined significantly. However, the Greeks still offered their services and knowledge on foreign ships.

During the 400 years of the Ottoman Empire occupation of Greece that followed the Byzantine Era, Greek Shipping faced numerous challenges but even in difficult times, it managed to compete or cooperate with shipping super powers of the West. The historical facts that took place during that period are not linear, and there were periods of volatile interdependencies, alliances, economic privileges or economic barriers, new markets as well as new threats. The only sure thing is that Greek Merchant Shipping which underwent several transformations, played a crucial role in the regional and the European economic life and its value was recognized both inside and outside the Ottoman Empire. As the European landscape was going through great historical changes, the Greek Merchant activity was influenced both in positive and negative ways by these changes, while at the same time, it had a rather beneficial impact on the local and European trade. In the 19th century, reaching towards the decline of the Ottoman Empire, the Greek shipping had strengthened and during the Greek Revolution (1821- 1830), many ship owners financed the Revolutionary Army and used the ships in warfare operations against the Ottoman Navy in the Aegean Sea. After Greece gaining its independence, there were certain technological advances that had taken place in the Western Shipping. Greek ship-owners having lost a great size of

After Greece gaining its independence, there were certain technological advances that had taken place in the Western Shipping. Greek ship-owners having lost a great size of the fleet during the Greek war of independence, in order to survive in such a capital intensive industry had to work really hard, offer specialized services and be more flexible from their European counterparts. They succeeded to expand their activity and manage shipping operations both from Piraeus, London as well as from other global major shipping hubs and with steady steps to build again a good recognition and access in the global shipping network. In the 20th century the Greek shipping faced many setbacks, especially during the two world wars that took place, but after that and in the next 50 years, it managed again to grow and prosper despite the challenges it encountered in the 70’s due to two oil crises and the rise of Japanese yen against the United States dollar. It was after the early 90’s that Greek Shipowners started building again at a tremendous pace.

The Greek fleet today: How and why the Greek-owned fleet is the largest in the world

Screen Shot 2017-01-18 at 9.33.05 AMAs at January 2016, the top five ship owning economies (a ranking based on the percentage controlled by each country out of the total world tonnage) were Greece, Japan, China, Germany, and Singapore.
Today, the Greek-owned fleet isScreen Shot 2017-01-18 at 9.33.28 AM still the largest in the world. Ιn 2016 the Greek shipping, according to the latest annual report of the United Nations trade service, UNCTAD, the share of the Greek-owned fleet is 16.36%, versus 16.1% a year ago and 15.5% in 2014.

 

A country so small and yet managed to dominate the seas of the planet. When we come to numbers, the Greeks manage 4,600 ships, i.e. 20% of the world fleet (in dwt) and 50% of the European. Greek ship owners control a total of 4136 ships, against 4.017 ships in 2015. Moreover, the contribution to the Greek economy is significant as Greek shipping contributes 7% of Greek GDP, maintains 192,000 jobs and has contributed 140 billion Euros in the balance of payments of Greece in the last decade. The size of the Greek fleet by capacity amounts to 293 million Tons dwt versus 279.4 million Tons last year.

*See the next pages for more statistical facts about the global ownership of the world fleet in the form of graphs.

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Total Market Share

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Shipping (Maritime) and Offshore Drilling (Oil & Gas) Industries and Uses of Offshore Companies

AlexShippingA Glance at the Offshore Industries

The global increasing demand for energy has led the growth of the two major offshore industries. The global offshore oil and gas and the offshore wind energy. Key role in the Oil and Gas industry’s’ Exploration and Production (E&P) phases, plays a specialized category of the shipping industry which is broadly recognized as the offshore shipping industry. These Offshore ships are the vessels which are particularly set to support the offshore industry (oil drilling or wind). They are the main means of transportation for carrying supplies and personnel to the huge oil stations deep inside the ocean or for example, drill ships which are used as offshore platforms in the oil and gas E&P cycle.  Offshore ships can generally be categorized into PSVs (Platform Supply Vessels), AHTS vessels (Anchor Handling Tug Supply vessels), CSV’s (construction support vessels), offshore barges, with all the other types and sub-types of these specialized sea vessels. The offshore shipping industry, despite the challenges, has kept up well with many technological developments that have taken place through the years. It is a well-known fact that these capital intensive businesses are called to operate in a very tough environment. Offshore operations are inherently difficult to execute and the smallest error could be proven disastrous, whereas at the same time the investment at stake is significant. In the case of a failure in the operations, the environmental, human and economic cost is huge. Another important fact is that as the offshore shipping industry players grew in number, so did the competition.  Therefore, it is crucial for the offshore shipping companies to attain the highest level of effectiveness and efficiency without compromising their success and at the same time by keeping the standards of environmental and economic sustainability high.

The Impact of the Regulatory Framework

There are many factors that contribute to the prosperity of this industry and one of the most substantial of them has to do with the regulatory framework and the tonnage tax regime under which the offshore shipping companies operate. In the conventional, standardized shipping industry (bulkers, tankers, and passenger vessels) major changes took place in the past 25 years and basically this happened in parallel with the introduction of the commercial friendly regimes in the shipping industry. However, there is no uniformity in these regimes, especially when it comes to a specialized category of shipping like that of the offshore shipping. As it is understood, the jurisdiction of the company plays an important role here and the research that has been conducted on the matter shows that the regulatory framework in many countries is outdated or not focused enough on the offshore shipping industry.

The difference on the jurisdiction’s friendliness is primarily due to the particular tariff regime followed like for instance, if it is a tonnage tax regime, a tax efficient regime but without any incentives for shipping companies, or a regime that is based on specific shipping benefits and incentives. However, the overall tariff and legislation framework is also affected by the specific type of offshore business. The business types of Oil and Gas Drilling, Ocean Wind Farms and the Offshore construction industries, also define the tax environment in a great extent. From an onshore perspective (i.e. the jurisdictions that cannot be purely characterized as offshore despite their beneficial taxation structures), there is a positive correlation, between most of the countries and their respective offshore business types that offer an advantageous and constructive environment for offshore shipping operations. Thus for international shipping companies the process to select the proper location from where they will conduct their business operations, is a demanding one. Tonnage tax regimes – are based on the tonnage of the vessels should be carefully observed as they can differentiate between different vessel types or they are phased out in certain regions. Taking into consideration several variables, starting from the qualitative capabilities of the company’s ship management and the accurate matching of the company’s specialized operations with the respective tariffs framework, to cost efficiency and financing decisions along with the whole capital and operational structure.

Going Offshore and Public at the Same Time

Due to the fact that both financing and tax-regime selection decisions are crucial for a company’s growth, there are companies that combine a going public strategy with headquartering in their Stock Exchange listed entities or their subsidiaries in offshore jurisdictions of good and long-established reputation. There are numerous companies headquartered in offshore jurisdictions like Bermuda, Marshall Islands, and the British Virgin Islands, in various sectors and industries, represented in major and non-major stock exchanges worldwide like London Stock Exchange, NASDAQ, NYSE, OSLO, Singapore, Hong Kong and others. From the Energy, Minerals and Industrial Services sectors, there are companies in the Oil and Gas production, Contract Drilling, Engineering and Construction, Oil and Gas Pipelines, Oilfield Equipment and Services and Mining. From the Transportation sector the Marine Shipping industry (mainly Deep Sea Freight Transportation, Marine Cargo Handling, categories of shipping) which are largely represented in the international stock exchanges. In the Financial sector with the industries of Banking, Investment Management and the Insurance sector with Property and Casualty Insurance at its core, these also are represented in the stock exchanges. In conclusion, despite the complexity level of decision-making in the offshore shipping industry, there are alternatives in relocating or repositioning offshore and being publicly listed on a stock exchange as well. These alternatives are friendlier towards some businesses in this industry. Companies operating in this industry face frequent risks and challenges as they operate in difficult and demanding environments thus every factor should be carefully weighted.

Legitimate Uses For Offshore Companies: Past and Present

Offshore financial facilities have evolved remarkably due to economic globalization, political and economic instability, technology advances and evolution in telecommunications. These dimensions have led to a significant increase in the demand for offshore operations. The offshore company industry has developed into a major international business, linking all regions, comprising, in one way or another, roughly half of the world’s international lending and deposits by value. However, despite the fact that we live in a globalized and open economy that offers numerous options for investments and capital mobility, still offshore companies and offshore financial structures are often in the middle of worldwide controversies, attracting considerable attention which eventually harms the reputation of these financial and trade facilities. The undisputable fact is that these low- tax overseas jurisdictions are an important and indispensable part of the global financial system and the reason, of course, is not their illegal use by some entities. Nevertheless, before seeing the real reasons that offshore companies have legitimate and important uses in the global trade and economy we will first take a look on the origins of these tax-efficient economic zones.

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Historically, in order to boost trade, increase capital movement, and secure trade gains, free-tax economic zones were developed, since the 2nd century B.C. in the Mediterranean region and especially in the area of Greece with the Delos island playing the role of the special economic zone. The type of trade that was taking place there, was free of customs duties and it faced no taxes. Important role to this economic regime of that time, played of course the geographical positioning of the island. Throughout the history, the generation of low-tax states always serviced the needs of traders and seamen.  From the medieval period to the industrial revolution, the need for friendlier towards the commerce regimes never stopped. The important fact here is that most of the times these beneficial economic zones existed in islands and ports, the places where the real risk takers, the seamen traders were living and working when they weren’t in the sea. By reaching the 19th century and the 2nd industrial revolution with the respective expansion of capitalism, these tax-friendly jurisdictions also grew. It was after the First World War that European and United States tax rates started rising. This, combined with the increased global uncertainty of that period and the easy methods of incorporation in the offshore jurisdictions, led to the growth of these jurisdictions like for instance the ones in the British overseas. In a post-colonization era, and as the economy was becoming more interconnected and the foreign direct and indirect investments grew, the demand for international financial services increased. The Demand for global offshore financial facilities also grew in the 1970s, partially because of the substantial amount of money that petrostates needed to reutilize after OPEC effectively raised oil prices. Moreover, the downfall of the Bretton-Woods system also increased the risks from the exchange rate fluctuation. The international nature of cross-border businesses led to the increase of cross-currency transactions in all the quarters of the world and the need for international management of cash and tax planning by the companies, made the need for offshore companies and offshore structures and financial services to flourish. Of course, in the course of history, there were entities that misused these business friendly offshore facilities in order to promote illegitimate practices and this is something that can only be regulated with global efforts and cooperation between countries. However, there is a global legitimate use and need for these jurisdictions that make the global trade easier and more efficient, especially in a period where the global economic, political and geopolitical risk is elevated.

There is a variety of reasons for the utilization of offshore companies and structures both for legal and physical entities. The focus of this article is on the corporate users of the offshore companies and facilities.  

From Holding companies to royalty and intellectual property companies, major financial institutions, shipping companies, middle market companies that seek international expansion, multinational corporations, and conglomerates, they may need at some point of their corporate structuring to conduct their operations through offshore entities that will facilitate the specific characteristics of a particular business need. For instance, it is common practice in the shipping industry to use constantly offshore companies in order to facilitate its global trade and banking needs in the most efficient way particularly when there is the need for a ship registration or for a Flag of Convenience. Another example has to do with treasury management operations. The ultimate goal of treasury management is managing the firm’s liquidity and mitigating its operational, financial and status risk by concurrently taking care of the investment and funding activities. The treasurers of corporations often allocate their money market instruments and cash resources between their subsidiaries which as a process, is regularly carried out through offshore facilities and structures. It is also common for International joint ventures to be often structured as offshore companies when the parent entities want to keep the venture as jurisdiction neutral. Other important legitimate uses for offshore companies is that they can be used as asset holding companies where risky assets are held isolated from the main entity, thus reducing any unnecessary risk transition to the rest of the group. In the case of a company having non-risky assets that it wants to protect from a politically unstable environment where the rest of the firm operates, then with the use of an offshore company can accomplish that goal also. Investment companies also use offshore companies at a great extend in order to invest in derivatives and securities trading without facing regulatory limitations for their investment and trading undertaken risk. Finally, companies expedite their capital raising needs both in equity and debt capital markets, by forming offshore companies. This usually happens as in many occasions, a more efficient and simple structure may be needed or the existing legal framework of the main country of operation, may not support or help the company raise capital in a non-conventional way.

Unmanned Vessels: The Future of the Shipping Industry

unmanned_ships_BLUEOur ever changing technological society has improved many facets of our daily lives. It’s hard to even imagine life without a constant access to the Internet and our email and technology has also radically shifted almost every industry imaginable. Concept driverless cars are already being tested, so it’s no surprise that plans are also in the works for unmanned ships in the shipping industry. While the media doesn’t tend to focus on the technology of unmanned ships as opposed to self-driving cars, these ships could revolutionize the entire industry, making it more energy efficient in line with the International Maritime Organization’s (IMO) goals.

The idea of an unmanned ship is not a relatively new concept, but it has only been recently realized as a possibility. In 1973, author Rolf Schonknect wrote about ships being controlled by a captain in his office in his book ‘Ships and Shipping of Tomorrow.’ Since that time, unmanned ships have been discussed frequently as a possibility for the shipping industry, like in Japan in the 1980s as a means for cheaper shipping without the expense of labor costs.

It wasn’t until 2012, when the Maritime Unmanned Navigation through Intelligence in Networks (MUNIN) project was launched by several European research groups, that unmanned ships began to seem feasible. The MUNIN project researched the idea of unmanned ships for 3 years and decided it was a possibility for long open sea voyages, but not in congested waters.

At this time, Rolls Royce is currently working on developing unmanned ships that would be controlled on the shores. These “drone-ships” will have cameras that send visuals to the operators who would be able to steer the ships remotely. Testing of this new advanced technology is already being done in Norway. While it’s not a reality yet, Rolls Royce plans to have a fleet of completely unmanned ships by 2020.

Unmanned ships could make a remarkable difference in making the shipping industry more fuel efficient and optimized. Instead of having a crew with section for their living quarters, the ship could be packed to capacity. Along with that, there would be less safety concerns for human workers since they would not need to be on the ship at all, and the ship would be about 5 percent lighter and use 12-15 percent less fuel.

The Importance of Renewable Energy in the World and the Reduction of CO2 Emissions

There are many types of renewable energy. Most of them depend on sunlight. Wind and hydroelectric power are the direct results of differential heating of the Earth’s surface which leads to air moving about (wind) and precipitation forming as the air is lifted. Solar energy is the direct conversion of sunlight using panels or collectors. Biomass energy is stored sunlight contained in plants. Other renewable energies that do not depend on sunlight are geothermal energy, which is a result of radioactive decay in the crust combined with the original heat of accreting the Earth, and tidal energy, which is a conversion of gravitational energy.

Renewable Energy CO2

The main types of renewable energy:

Solar. This type of energy relies on the nuclear fusion power from the core of the Sun. This energy can be collected and converted in a few different ways. The range is from solar water heating with solar collectors or attic cooling with solar attic fans for domestic use to the complex technologies of direct conversion of sunlight to electrical energy using mirrors and boilers or photovoltaic cells.

Wind Power. The movement of the atmosphere is driven by differences in temperature at the Earth’s surface due to varying temperatures of the Earth’s surface when lit by sunlight. Wind energy can be used to pump water or generate electricity but requires extensive areal coverage to produce significant amounts of energy.

Hydroelectric energy. This type uses the gravitational potential of elevated water that was lifted from the oceans by sunlight. Most of the available locations for hydroelectric dams are already used in the developed world.

Biomass (energy from plants). Energy in this type is commonly used throughout the world. Unfortunately, the most popular are the burning of trees for cooking and warmth. This process releases copious amounts of carbon dioxide gasses into the atmosphere and is a major contributor to unhealthy air in many areas. Some of the more modern forms of biomass energy are methane generation and production of alcohol for automobile fuel and fuelling electric power plants.

Hydrogen and fuel cells. Hydrogen can be burned as a fuel, typically in a vehicle, with only water as the combustion product. This clean burning fuel can mean a significant reduction of pollution in cities. Or the hydrogen can be used in fuel cells, which are like batteries, to power an electric motor. In either case, significant production of hydrogen requires abundant power. Due to the need for energy to produce the initial hydrogen gas, the result is the relocation of pollution from the cities to the power plants. There are several promising methods to produce hydrogen, such as solar power, that may alter this picture drastically.

Geothermal power. Energy left over from the original accretion of the planet and augmented by heat from radioactive decay seeps out slowly everywhere, every day. In certain areas, the geothermal gradient (increase in temperature with depth) is high enough to exploit to generate electricity. This possibility is limited to a few locations on Earth and many technical problems exist that limit its utility. Another form of geothermal energy is Earth energy, a result of the heat storage in the Earth’s surface. Soil everywhere tends to stay at a relatively constant temperature, the yearly average; and can be used with heat pumps to heat a building in winter and cool a building in summer. This type of energy can lessen the need for other power to maintain comfortable temperatures in buildings, but cannot be used to produce electricity.

Other forms of energy. Energy from tides, the oceans, and hot hydrogen fusion are other forms that can be used to generate electricity. Each of these is discussed in some detail with the result being that each suffers from one or another significant drawback and cannot be relied upon now to solve the upcoming energy crunch.

The geographical size of the ‘Renewable Energy’

Renewable energy resources and significant opportunities for energy efficiency exist over wide geographical areas, in contrast to other energy sources, which are concentrated in a limited number of countries. Rapid deployment of renewable energy and energy efficiency, and technological diversification of energy sources, would result in significant energy security and economic benefits. It would also reduce environmental pollution such as air pollution caused by burning of fossil fuels and improve public health, reduce premature mortalities due to pollution and save associated health costs that amount to several hundred billion dollars annually only in the United States. Renewable energy sources, that derive their energy from the sun, such as hydro and wind, are expected to be capable of supplying humanity energy for almost another 1 billion years, at which point the predicted increase in heat from the sun is expected to make the surface of the earth too hot for liquid water to exist.

Climate change and global warming concerns, coupled with high oil prices, peak oil, and increasing government support, are driving increasing renewable energy legislation, incentives, and commercialization.

Small solar PV systems provide electricity to a few million households, and micro-hydro configured into mini-grids serves much more. About 44 million households use biogas made in household-scale digesters for lighting and/or cooking, and more than 166 million households rely on a new generation of more-efficient biomass cookstoves. United Nations; Secretary-General Ban Ki-moon has said that renewable energy can lift the poorest nations to new levels of prosperity. At least 30 nations around the world already have renewable energy contributing more than 20% of energy supply. National renewable energy markets are projected to continue to grow strongly in the coming decade and beyond, and some 120 countries have various policy targets for longer-term shares of renewable energy, including a 20% target of all electricity generated for the European Union by 2020. Some countries have much higher long-term policy targets of up to 100% renewables.

The importance of Renewable Energy in the world

Renewable energy is important because of the advantages it provides. The key advantages are:

Environmental

Renewable energy technologies are clean sources of energy that have a much lower environmental impact than conventional energy technologies.

Energy for our children’s children

Renewable energy will not run out. Ever. Other sources of energy are finite and will someday be depleted.

Jobs and the Economy

Most renewable energy investments are spent on materials and workmanship to build and maintain the facilities, rather than on costly energy imports. Renewable energy investments are usually spent within the country, frequently in the same state, and often in the same town. This means your energy money stay home to create jobs and fuel local economies, rather than going overseas.

Energy Security

For instance, after the oil supply disruptions of the early 1970s, United States had increased its dependence on foreign oil supplies instead of decreasing it. This increased dependence impacts more than just the national energy policy.

What are CO2 emissions and the importance of reducing them?

Carbon dioxide (CO2): Carbon dioxide enters the atmosphere through burning fossil fuels (coal, natural gas, and oil), solid waste, trees and wood products, and because of certain chemical reactions (manufacture of cement). Carbon dioxide is removed from the atmosphere when it is absorbed by plants as part of the biological carbon cycle.

There are both natural and human sources of carbon dioxide emissions. Natural sources include decomposition, ocean release, and respiration. Human sources come from activities like cement production, deforestation as well as the burning of fossil fuels like coal, oil, and natural gas.

Due to human activities, the atmospheric concentration of carbon dioxide has been rising extensively since the Industrial Revolution and has now reached dangerous levels not seen in the last 3 million years. Human sources of carbon dioxide emissions are much smaller than natural emissions but they have upset the natural balance that existed for many thousands of years before the influence of humans.

This is because natural sinks remove around the same quantity of carbon dioxide from the atmosphere than that produced by natural sources. This had kept carbon dioxide levels balanced and in a safe range. But human sources of emissions have upset the natural balance by adding extra carbon dioxide to the atmosphere without removing any.

Energy Efficiency Initiatives in the Shipping Industry

CargoShipThere’s no denying the importance of the shipping industry. According to the International Chamber of Shipping (ICS), the shipping industry carries food and different goods all over the globe and contributes to around 90% of the world’s trade. Without shipping, people wouldn’t be able to get what they need to survive at an affordable price, and technology and business would come to a screeching halt.

There are over 50,000 cargo ships in the world, transporting a vast array of goods from point A to point B. With all of these ships moving to and fro across the oceans, the time has come to put effective energy efficiency initiatives into action.

The International Maritime Organization is committed to the safety, security, and carbon emissions of the shipping industry. During the IMO’s Marine Environmental Protection Committee’s, it was decided that a strategy to reduce carbon emissions would be put into action in 2018. Across the entire shipping industry, energy efficiency tactics must be adopted in order to reduce greenhouse gases.

What can be done?

It seems like a monumental overtaking, but there are smaller steps that each shipping company can take in order to be more energy efficient. One such step is to regularly polish propellor blades. When propeller blades are properly polished, it helps the ship run smoother and can reduce emissions by about 8%. Shipping companies are at tight deadlines most of the the time, but slowing the ship down can also reduce emissions by as much as 30%. Additionally, investing in autopilot, more efficient pumps, and cleaning the hull all increase energy efficiency by varying percentages.

Rolls-Royce starting to design unmanned ships as an answer to the energy efficient problem. These autonomous ships offer greater energy efficiency than the ships of today, and would be safer than having a crew of people on board. There would be no need to include the sections normally reserved for housing the crew, meaning the ship would only store cargo. This additional room for goods actually makes the ship about 5% lighter and would use less fuel than today’s ships.

Newer ships will also be equipped with more energy efficient features that include improving the design and shape of the hull to increase hydrodynamics and technologies onboard to improve engine efficiency.

It is now mandatory for crews of ships 5000 tonnes and over to keep track of each type of fuel oil their ships. This data will then be used to decide future policies regarding energy efficiency requirements. Since many initiatives have already been started, the future is sure to hold a more energy efficient shipping industry.

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