As the cruise industry works towards net zero by 2050, the focus is shifting from ambition to implementation.

In this episode of Seatrade Cruise Talks, John Sifling is joined by Maikel Arts, Head of Cruise at Wärtsilä, to explore how cruise lines are turning decarbonisation ambition into operational reality. From the growing maturity of LNG and the challenge of methane slip, to fuel flexibility, digital optimisation and smarter, data-driven maintenance, this conversation looks at how ships can operate more efficiently today while preparing for the future.

Recorded ahead of Seatrade Cruise Global, this episode is a must-listen for anyone looking to understand the key decarbonisation topics set to shape conversations across the industry in the weeks ahead.

Sponsored by Wärtsilä

>> John Sifling: Welcome everyone to Seatrade Trade Cruise Talks.

I'm John Sifling, Seatrade Trade Cruise Ambassador

for safety and sustainability and with me today is

Michael Arts, Head of cruise at Wartsilla. Good to

see you again, Michael.

>> Michael Arts: Thank you Joan.

>> John Sifling: Michael, today we're here to talk about the cruise

industry's journey to net zero carbon emission.

But before we do, maybe you could tell us a little

bit about yourself. I mean you and I are familiar

because you've spoken many times at the Safety and

Sustainability Theatre at ah, Seatrade Trade. But

I think some folks listening today may not know so

much about what you do, your bio and what you do

at Wartsilla. So can you just give us a little

overview?

>> Michael Arts: I work at Versila and Versila is a technology and

service provider for the marine industry and

energy business. On land I'm part of the marine

business. And for this industry we sell engines,

fuel handling and storage solutions, exhaust gas

treatment, propulsion and all kind of digital

optimization solutions. We are a technology

provider and a service partner of the industry. So

we are both in the new build and in the lifecycle

phase, active. And in my role I'm head of cruise,

so I'm responsible for our activities within the

cruise segment. Together with our network sales

team. I mainly advise customers about new

technologies, about how we can improve their

business and make their ships run better. This is

mainly focusing on technical operations and

decarbonization is absolutely front and centre in

those discussions.

>> John Sifling: Fantastic. So a lot going on. So as I mentioned

we're here to talk about decarbonization in the

industry. I was thinking Michael, maybe we could

kick this off with a discussion of the current

state of play. So what are the industry's

decarbonization goals and how are things going

overall?

>> Michael Arts: The industry is committed to net zero by around

2050. So that's a commitment from the industry. If

we look at regulatory landscape then it's more of

a mixed situation. So we have the EU that has

implemented EU ETS and Fuel, EU maritime. So a

comprehensive set of regulations that is targeting

the maritime industry and is giving at least a

clear landscape of what it is that the industry

needs to comply with. So even though this

increases the cost of operation for cruise lines

and the shipping industry in general, it's at

least a clear pathway of where we stand today and

where we're heading in the future because it's

kind of ramping up as we speak. The other side of

the coin is the imo. In the imo, there was a big

meeting last year in which the net zero framework

was coming up for a decision to adopt it. And that

decision got postponed at least within a year. So

that decision is coming up at the end of this

year. It's uncertain at the moment what will

happen. If there again will be no decision or it

will be rejected, then I think that that would be

a situation where there is a lot of uncertainty

into the market because then the, ah, shipping

industry and cruise doesn't know what will come in

the future. The risk side of this, of course, is

that countries, individually will start to

implement their own emission regulations that

would give a very much a fragmented landscape,

which I think nobody wants. But there was a lot of

opposition against the IMO framework as they laid

it down. So there was kind, of a carbon taxation

element and a structure to reduce the greenhouse

gas footprint of the fuel they were going to use.

So it's a bit of a tense situation, if I'm honest,

John. And we'll know at the end of the year,

around October more what will happen.

>> John Sifling: All right, so everybody's agreed. The goal is to

get to net zero by 2050. There's that interim

point of 2030. IMO has some goals there, but it's

my understanding the cruise industry is aimed to,

exceed those goals by 2030.

>> Michael Arts: Yes, correct. 2030 has the, target of 40%

reduction compared to 2008. And if we look

overall, the cruise lines are ahead of the curve.

They have made great steps. And what I also see

within the cruise industry is that with or without

the imo, the direction is clear for

decarbonization. If you look at a cruise ship

today, the investment is huge. The economic life

of a cruise ship is well into the, over 30 years

or 35 years, give or take. Last week I was at the

MSC World Europa, which is a huge cruise ship.

More than 200,000 cross tonight with the

delegation. We visited the engine rooms, the LNG

tanks, et cetera. So if you look at this kind of

equipment being put on new ships, it's impossible

to change it out. It's economically very

unfeasible. So the choices that you make today and

that you put in your ship in terms of equipment,

most likely will stay there for the rest of the

economic life of the ship. And that means that

even though the IMO hasn't decided today, you

still see that the direction towards

decarbonization is clear and it makes good

economic business sense to move in that direction.

So it's also very much kind of a Safety precaution

for cruise lines that invest in new ships to make

sure that these ships have the latest

decarbonization equipment installed.

>> John Sifling: Right, right. This is what some people refer to a

little bit as, future proofing. Though I would

argue it's, you can never be 100% future proof,

but you do the best you can. But Michael, you

mentioned lng, so let's talk about that a little

bit. That was a major move by the industry, a very

rapid pivot. Can you, talk a little bit about, the

role of LNG in the cruise line's decarbonization

journey?

>> Michael Arts: LNG certainly has a big role to play. At Virtila,

we say green is not black or white. There's a

multitude of steps that we see cruise lines are

taking today in order to prepare themselves for

future regulations. And, one of them is reduction

of energy consumption. The second step is cleaning

up emissions. And the third step is to switch to

low carbon and net zero carbon fuels. So this is

where LNG kind of comes in, maybe starting with

the first one, reduction of energy consumption. So

this is about energy efficiency. This is about the

latest engine technology that really has made a

tremendous step, change in efficiency, propeller

designs, optimised hull lines, but also digital

solutions to optimise the use of the ship. So this

is energy consumption reduction. The second step,

cleaning up of emissions is, for example, in the

case of lng, if you work with lng, then methane

slip production is extremely important to make

sure that your greenhouse gas footprint is as low

as possible. And the last step is to switch to low

carbon and net zero carbon fuels. Here is biofuel

coming in, so biodiesels, but also lng. And this

in the last couple of years has really taken the

centre stage as the dominant fuel option for

particularly large ships. And if you now look at

the order book in cruising, if you look at it in

terms of gross tonnage, because these ships are

measured in gross tonnes, then you see that more

than 70% of the current order book is having LNG

as a main fuel. So that says enough about, how

dominant this fuel option is.

>> John Sifling: Maybe we could just back up a little bit. Can you

talk, Michael, about how LNG actually works to

fuel the ship? I mean, most folks are familiar

with standard liquid fuels. You know, they go into

their autom. LNG is a little bit of a different

thing. And then you mentioned methane slip. Maybe

you could talk a little bit about that as being

one of the challenges of burning lng. Maybe help

us with some of the basics here.

>> Michael Arts: Yeah, LNG stands for liquefied natural gas. So you

can store then a lot of energy which you need for

shipping. It came to to the market as an

alternative for sulphur emissions. So that worked

excellent. Later on the discussion moved to

decarbonization and actually LNG was also very

effective at that. So it gives, you, give or take,

between 10 and 20% reduction in greenhouse gas

emissions compared to diesel fuels if you have a

good grip on methane slip. So if you combust LNG

as a fuel, there is a small amount of methane

which is escaping the engine unburned. And this is

what we call methane slip. This has always been a

focus at the engine makers because why would you

lose a valuable fuel? But it has really gotten a

lot more attention as methane is also a potent

greenhouse gas and it is also addressed and

targeted within, for example the EU regulations

and IMO regulations to reduce those emissions. So

there is of course an economic element, but there

is also an element to maximise the reduction of

your greenhouse gas emissions. So at Versila, we

really have put a lot of effort in reducing

methane slip. And our latest generation of

engines, two stage turbocharged engines, 46Ds, the

31, the 25, they, all these engines, they have a

market leading low methane slip and this has

proven very effective. So we see that in our

discussions with customers, methane slip is front

and centre and all the LNG operators out there. So

this is absolutely a key topic and it is making

good economic business sense to invest in

technologies that keep these emissions as low as

possible.

>> John Sifling: So most people are again going back to the

automobile analogy here. There's only one kind of

fuel that can go into your particular car and you

put a diesel fuel into a petrol car, you're going

to have big problems. And the reverse is also

true. But the engines manufactured today for

cruise ships can burn a number of different fuels

while realising all these efficiency gains that

you've talked about. And I think that's fairly

amazing, the fuels can vary widely. That they can

burn that in and of self is a major technological

achievement.

>> Michael Arts: Absolutely. The LNG engines that we provide to the

market, they are in fact dual fuel engines. So

these engines can run on LNG's main fuel, but they

can instantly switch to diesel as a backup fuel.

And we have seen today, unfortunately, and we've

seen it in the past as well, is that the fuel

market out there can be quite volatile, it can be

disrupted. So this fuel flexibility is, is like an

insurance policy for Cruise lines to make sure

that if one fuel type is not available, they can

still continue operations on kind of the backup

fuel, type. So I think that this has helped

greatly in ramping up, for example the use of lng.

I mean it is ramping up quickly in terms of

availability and bunker vessels, but it is still

not available of course in every port. And dual

fuel engines give you the ability to always

sustain your operations and, and make use of LNG

where available. The same goes for methanol, dual

fuel and fuel flexibility will be a requirement

for many years, to come. We would need to have a,

yeah, quite a different fuel infrastructure market

in order to go for a single fuel option. But fuel

flexibility is certainly something that is

worthwhile to invest in and we have a lot of

experience, and success cases with that.

>> John Sifling: So Michael, you talked about methane slip and how

to reduce it. Is there any other new technologies

on the horizon that you're working on to further

increase efficiency for lng?

>> Michael Arts: Yeah, so we have been very successful in reducing

methane slip, but the target is to really

eliminate it. And we have now also developed what

we call next DF technology. This is a

revolutionary combustion technology to reduce

methane slip inside the engine. So optimising the

combustion process and the reason we're capable of

doing that is that this new generation of engine,

they all have highly advanced digital controls and

everything is electronically controlled in terms

of injection timing, valve timing, turbocharger

pressures, etc. And this gives you the ability to

implement a new combustion technology. This is

what we then call next ef. This really has made a

quantum leap in reducing methane slip. So we

really brought it down now, let's say close to 1%.

I can hereby now also announce that we have this

technology available on the large bore engines,

the medium Borg engines and the small bore

engines. So for large cruise ships, medium sized

or even small cruise ships, they can now all

benefit from this next EF technology. And given

the dominant position that LNG has in the cruise

ship order book, we think that this new technology

is extremely suitable for cruise ships of all

kinds of.

>> John Sifling: Well, that's fantastic. So you mentioned that

you're down to 1%. Can you give everybody a

perspective on where it stood before? You know,

what kind of a percentage reduction have we seen?

>> Michael Arts: Yeah, I can give you a couple of examples. The EU

has 3.1% as default value for medium speed four

stroke engines. The IMO has a default value of

3.5% methane slip. So this is less than a third

of, let's say the default values. Our engines were

already below the default value, but coming from

around just below 2% to touching, 1% or just above

that. I mean it's again a quantum leap ahead and

still, we're not resting. I mean the target

clearly is set to completely eliminate it and

Virta is committed to finding solutions for that.

>> John Sifling: Michael, I'd like to talk a little bit about the

role of energy efficiency and data. so there's a

lot of new tech out there. Wardzilla been deeply

involved in that. Digitization is involved.

there's continuous health monitoring of various

ship systems, main engines, generators, et cetera.

And then there's new approaches to maintenance

which may surprise some people. So can you talk a

little bit about these new energy efficiency

initiatives?

>> Michael Arts: I would say working with data is not new for us.

We have been working with data for the last 15

years. So we have collected a lot of experience in

collecting data and how we can draw valuable

insights from that data. One example is Eniram.

That's a digital optimization solution. So it's

now part of our voyage solutions offering. Within

you have any ram, trim, speed and voyage. So this

is giving you a tool that is giving you the

insight. What is the optimal trim for my ship?

What is the optimal speed and voyage for my ship,

which is not the straight line from A to B? These

type of digital optimization solutions are widely

used within the cruise industry. We have many

references and I would say any professional cruise

line out there is working with some kind of

digital fleet optimization solution of some kind.

But also the hotel accommodation side, for example

H vac optimization, it's a big energy consumption

on board of a ship and there's a lot of

improvement to be made. If you use digital

insights to optimise the use of H vac systems,

where we have also made great steps, is how we use

all the data points coming from the engine room to

make energy efficiency gains. And these can be

very practical examples. For example, the

replacing of a fuel injector of an engine. So

there is a standard lifetime for an injector. And

for example it has, I don't know, 12,000 hours,

8,000 hours. But if you carefully, look at data,

then you can already see, for example that there

might be the economic life of the injector is

still good or the technical life of the injector

is still good, but that there is a slight increase

in fuel consumption. So using the data we can then

spot what is the ideal, moment to replace the

injector and that is perhaps a bit earlier than

the technical life. But if the fuels consumption

is going up then in terms of cost of emissions of

fuel, it might still be good to do that a bit

earlier. All these data points coming from the

engine room are also giving us valuable and

actionable insights which allows us to inform the

crew this would be a good component to replace

because it saves you money and emissions.

>> John Sifling: Yeah, this is fascinating to me that you would

essentially replace sooner what appears to be a

perfectly good part. But that the AI technology

catch that early and you have an opportunity to

save. I think that's, that's amazing. This might

be a difficult question to ask Michael, but when

you think about all these deficiency technologies,

can you give the listeners some idea of like what

kind of percentages of fuel savings can you

realise if you've got a nicely optimised system

over just the old way of doing business?

>> Michael Arts: I mean of course it depends case by case and

customer by customer. But for one of the leading

cruise lines we have been really in multiple

percent fuel savings that we have been able to

achieve by doing the maintenance in a better way.

So it wasn't that they were making a mess of the

engines, but doing it on time. M when let's say

the data is telling us now is the right time to

replace that. So this is about multiple grammes of

fuel consumption per kilowatt hour produced. This

is not some dream technology that may be on the

horizon ten years from now. But this is available

here now. And yeah, I think that that is certainly

something which is catching a lot of interest

within the industry for sure.

>> John Sifling: For sure. And I mean these are things that quickly

pay for themselves I assume as well.

>> Michael Arts: Yeah, we really see that maintenance decisions and

should we go for an agreement that that decision

is almost moving out of the engine room and into

the boardroom of the major cruise line. So the

system complexity of new technology board of ships

is increasing. there's a new set of fuels that is

entering the market. But this focus on operating

at peak efficiency, I would say the industry is

laser focused on optimising efficiency. And this

is a topic that is absolutely at all levels within

the cruise lines there is a focus on it.

Efficiency is also what you hear when you hear the

top executive speak. This is something they focus

on a lot of the time. So it's getting more and

more known that using the right data points is

giving you the possibility to operate your engines

within the most Efficient range. But also that

good upkeep of the engines is really saving you a

lot of fuel consumption and, and reduces the

normal wear and tear and deterioration that go

with that. I think it's the combination of the

data with the OEM expertise and the dedicated

support team that virtuala with our agreement

solutions are offering to our customers now. 90%

of the issues were able to solve remotely, 80% of

the issues of the technical issues are solved

within the same day. And in general there is a 25%

reduction of unscheduled maintenance costs. So

these are a couple of very powerful percentages

that you know are important for cruise lines to

optimise their operation. And that combined with

the ability to increase your fuel consumption is

really making that this maintenance topic and

agreement topic is becoming a boardroom decision

these days.

>> John Sifling: You teed up earlier the topic of future proofing

and a cruise ship is a very very expensive capital

asset. Regulations change over time, technologies

change, new fuels become available. How does your

company work to as much as possible to future

proof a ship?

>> Michael Arts: One of the things that our company is doing is

that we consistently invest in R and D new

technology. So the average spend is between 4 and

5% of our net sales is going into R and D. And

this is not something we did last year but this is

a consistent figure over a long period of time.

And that gives us an R and D pipeline of

fundamental technology development. So that we

know, for example how do we combust methanol or

how do we combust hydrogen or ammonia. Not saying

that's a logical feel for cruise, but we have a

broad range of technologies that we, we are doing

R and D on. And then when there is a product

market demand so there is a market segment within

cruise or the energy business that would like to

use that fuel option or would like to use that

technology option, then we, we productize that. So

for example cruise lines, a big cruise ship these

days is, is sitting closer to 2 billion US dollar

than 1 billion number of years ago. So the

investments are tremendous economic life of 35

years plus. So they want to have certainty that

the partners they work with that they are ready

for the future with their R and D programme. And

we are getting some very senior executives

visiting us at the SDH in Vasa which is the R and

D side where we're doing cutting edge technology

development. I can honestly say each cruise line

that visits us there comes back inspired in terms

of there is so much possible on the technology

front. There is so Much potential in engine

technology to further reduce emissions to increase

engine efficiency. So we have brought methane slip

now back to roughly the 1% market. Depends a bit

engine type by engine type. But that's let's say a

reasonable ballpark figure of what cutting edge

technology ah, is capable of. But we're still

pushing it further down. So we have confident

that, that in a number of years from now we will

make another step change to reduce that further. I

don't think we have seen the highest engine

efficiency yet. What we are able to achieve from

our engines, if you look at an engine, it's an

extremely flexible energy converter. so the heat

coming from the engine is also further used on

board of a cruise ship. So there is heat recovery

systems and we have made tremendous step changes

there as well. So we have now also on our large

bore and medium bore engines, what we call heat

recovery plus systems. So that means that not only

the cooling water system is actually usable as

heat, but also the loop oil temperature is usable

heat. So that means actually that compared to

other energy converters is actually the leading

product out there. And we believe that that will

remain so still. We're working with other

technologies as well. So battery systems are

entering the market and we have a lot of

experience in implementing battery systems on

board of ships. In fact we don't manufacture

batteries ourselves, but we are the largest hybrid

technology provider in the marine industry whereby

we source from other battery technology out there

in the market and we make sure that that is

fitting and integrated correctly into the

electrical system of the ship. And this is

something that we do for many cruise lines, also

other shipping segments, so ferries and merchants

for example. So we see that next to the engines

that are other technologies which are also

entering the market and they also have a place. So

there we then take that integrator role, which is

important of course to cover as well.

>> John Sifling: Yeah, I agree wholeheartedly, with that Michael.

We're getting near the end of our time together,

but I did want to touch on two final topics. So

we've talked up to this point mostly about fossil

fuels. I'd like to maybe just touch on synthetic

fuels, fuels not derived from fossils, and discuss

a little bit carbon capture. So you reduce the

amount of carbon coming out the stack, but you

never zero. But there's ways now that one can

efficiently capture carbon before it is even

released into the atmosphere. So you want to say a

little bit of something about synthetic fuels, non

fossil fuels and this carbon capture technology.

>> Michael Arts: So the fossil based fuels either Liquid or gas,

there's lng. So we all know that clearly. We see

that biofuels are now entering the market. So

biodiesel, if you, your existing fleet that has

been working with diesel or HVO needs to switch to

a portion of biofuel in order to remain compliant,

we see that also with LNG that there is now also

bio LNG entering the market. The good thing of bio

LNG is that you can use it inside the existing

infrastructure. So you do not need to change

anything on the ship or on, let's say the bunker

vessel or the whole supply chain going to that

chip. So it's the same molecule. You can blend it

in at any ratio which you like. You can today

bunker bio and tomorrow again bunker fossil if it

is not available. So it's an extremely flexible

fuel option in terms of of lng. And the same goes

for synthetic fuel. So with synthetic fuels the

production starts with the manufacturing of green

hydrogen. So that could be with wind power, solar,

we produce green hydrogen and then with that green

hydrogen you produce any of the fuel options that

we are using. And methane is basically CH4. So one

carbon with four hydrogen atoms, that would be

fantastic fuel. I mean this is very little in

terms of availability. But bio LNG is now coming.

So we see that you could almost say that it's not

LNG that is changing, but it's the fuel itself

that is evolving over time. This is something that

is really helping the industry to move forward.

Another technology that we are now also promoting,

is carbon capture and storage as you mentioned.

John, we see for example that there is a whole

range of ships out there that still needs to rely

on fossil based fuels because these are existing

vessels. The same goes for cruise ships, of

course. And these ships could make use of what is

called carbon capture and storage. So the same as

a scrubber installation is used to remove sulphur

from the exhaust emissions. A similar type of

technology could be used to remove carbon from the

exhaust emissions. So without going too deep first

there is kind of a scrubber trap where you remove

the sulphur from the emissions and then there is a

similar trap, you remove carbon from the exhaust

and this carbon is kind of liquefied, it's stored

in a tank. We have released a pilot project at the

end of last year. That's a ship which is in

operation. It's a chemical tanker actually from a

Norwegian owner. Solvang ship is now in operation.

It's capturing 70% of the carbon. We have found

out that at 70% capture rate, that's where the

sweet spot is in terms of energy consumption and

how much carbon we can capture from the exhaust.

But if you think about it, if that would give you

a 70% reduction of your carbon emissions, you need

much, much less biofuels in order to comply with

future regulations. So this ship is an example

that's already capable of being well ahead of the

curve. I think, to be fair, it would be quite a

major, upgrade to install a carbon capture and

storage system. So I'm not saying this is a

solution for every ship, but certainly ships that

have sufficient economic life ahead of them there,

this could be certainly an option to investigate,

to. Hey, how could this help us, move in the right

direction? And again, 70% carbon, capture is,

really a step ahead.

>> John Sifling: This has been a fascinating conversation. So

you'll be at Seatrade Trade this year. You want to

let folks know where they can find you?

>> Michael Arts: Yes, we will be, at Seatrade Trade. The virceland

team will be there. So do stop by. we are at the

VIP lounge at the conference. Stop by for a cup of

coffee and a good conversation. I will have

several panels, and, my colleagues will be

available, to discuss with, all of you. So, do

stop by.

>> John Sifling: Fantastic. And, you can find me at the safety and

sustainability theatre on the main show floor. My

booth number is 1259. I'm over there near Rhena

and Fincantieri. So, Michael Arts, head of cruise

at Wartsilla, what a fantastic conversation. Thank

you so much.

>> Michael Arts: Thank you so much. Dion.