Establishing a Framework of the Open Maritime Electric Energy Market

Abstract

The paper introduces a framework of operation of maritime-related enterprises like port authorities and ship-owning or operating companies along with electric energy providers in the electric energy market as a consequence of the global decarbonization effort and, in particular, due to the implementation of ship electrification at berth. Within this context, the main rules of this energy market framework will consist of a proper combination of power purchase agreements along with contracts for difference in an attempt to obtain transactions that are mutually beneficial at least on a mid-term basis. The methodology, which is fully compatible with the electric energy market rules of the European Union, is enriched by a variety of alternative scenarios on the selling prices of electricity, showing that even when monthly or annual periods are used for reference, it is highly possible that all parties engaged have benefits.

1. Introduction

Sustainable decarbonization in maritime transport has introduced, among other innovative ideas, the concept of shore-side electricity (SSE), also widely known as “cold ironing” or “onshore power supply” (OPS). That is, the electrical interconnection between the shore grid and the ship (while the latter is in port, i.e., at berth, with all her main and auxiliary engines shut-down) seems to be the most readily available technology for implementation. The foundation stone of this sustainable green energy measure is that electricity in the inland grid is generated via more environmentally friendly methods compared with those on board ships, namely, renewable energy sources (RESs).

The first attempt to implement massively this concept was performed in the USA by the state of California [1] but only from a purely technical point of view. Moreover, the European Commission after the Paris Convention and the Green Deal has declared a set of measures toward decarbonization [2]; SSE has been one of the key measures included in this maritime sustainable policy as analyzed by the European Sea Port Organization (ESPO) [3]. Furthermore, the implementation of SSE introduces a green energy policy in ports [4], engaging a number of energy conservation [5] and smart management measures [6], while it can enhance the resilience of the entire grid by applying modern grid expansion methods [7]. Within this context and in good alignment with the global policy of the International Maritime Organization (IMO), the European Commission (EC) has developed the forthcoming new maritime-related regulations of the European Union (EU), namely,

• FuelEU Maritime;
• Alternative Fuel Infrastructure;
• Emission Trade System;
• Energy Taxation Directive.

The last two, on one hand, urge for the investment in deployment of SSE installations in the core and comprehensive port networks of the European Union, while on the other hand, they make the effort to provide means to financially support the wide electrification initiative.

From the technical point of view, the European Maritime Safety Agency (EMSA) has released a set of guidelines [8], according to which the SSE interconnections must comply with the IEC/ISO/IEEE 80005 series of standards, namely, 80005-1 [9], referring to high-voltage interconnections; 80005-2 [10], referring to communication and control systems; and 80005-3 [11], referring to low-voltage interconnections. A typical configuration of an SSE system comprises three distinct sub-systems (see Figure 1):

• The shore-side part comprising one voltage transformer (matching the voltage difference between the shore and ship grids), a frequency converter (often used to match the shore grid frequency with that of the ship to be served), and an isolation transformer used to match the different grounding schemes (the shore and the ship ones) [9,10,11];
• The ship-side part consisting mainly of the switchboard used to connect the interconnection plugs and synchronize the ship with the shore grid [9,10,11,12];
• The interface between the ship and shore parts, comprising a sophisticated cable management system used to interconnect them. The interconnection cables comprise one or more three-phase flexible power cables along with a flexible cable connecting the earthing resistor of the isolation transformer with the common earthing point on the ship’s hull [9,10,11]. It is stressed that the flexibility of the power cables is mandatory so that the interconnection is attained easily and within a short time interval. Furthermore, in Figure 2, a most realistic view of a port hosting and supplying with electricity more ships is shown in a manner to demonstrate the complicacy of the power distribution network under development within the ports as well as the significant number of energy transactions engaged between the port and each ship separately.

It is worth noting that the electric power demands of ships at berth vary from 250 kW (small passenger ferries) up to 20 MW (big cruise ships) [13,14]. Moreover, a similar effort consists in charging battery powered ships. More specifically, it has been proven that an environmentally friendly solution for short-sea shipping vessels is when the main power supply comprises batteries that provide energy to all equipment installed on board, including propulsion, which is fully electrified. To this end, in [14], the idea of an SSE-ID card has been introduced, according to which the energy demands at the berth of each ship must be registered along with other information; this will facilitate the energy management and scheduling within the ports.

However, the successful materialization of all the aforementioned measures necessitates, from the entrepreneurial point of view, certain amendments in the way that ships and ports operate.

Thus, besides the new technical challenges that need to be faced, their business models must be reconsidered. This has been hinted in [13] and in particular in [15] for the case of Italy, while it has been characterized as one of the barriers in [16] in the case of the UK. Moreover, the pricing of maritime electricity is a critical issue. Initially, it was hinted at in [17], showing that special subsidies are required. Moreover, in [15], the Italian Regulating Authority of Energy, ARERA, raises all issues that must be resolved from the financial and entrepreneurial point of view that need to be resolved in the maritime sector.

Shipping has, by default, an international perspective; however, within the European Union this alteration of the vision and organograms of the ports and ships must be aligned with the regulatory framework regarding fuel provision as regulated via Regulation EU/2017/352 [18] and the electricity trading in the open electric energy market as directed via the Directive EU/2019/944 [19].

More specifically, the implementation of SSE engages strongly the electric energy sector players, e.g., producers, suppliers, traders, transmission, and distribution operators along with the ports, their terminal operators, and their hosted clients, i.e., the ships with their owners and operators. Thus, a brand-new landscape in the electric energy market is introduced, which needs to be somehow matched to the maritime-related activities at least within the ports. A major challenge to be addressed is the way that the high investment cost of OPS installations is to be paid back while the price of electricity is fairly high and fluctuating on an hourly basis. A rather limited number of efforts have demonstrated that there is a significant gap regarding the regulatory framework and the pricing policy, which is the most critical issue, within this “maritime electric energy market”. More specifically, an initial hint of the manner in which the OPS usage can be treated is found in the CARB documents referring to the ports of the state of California [1]. Moreover, in [17], which has been officially published by the European Commission, an interesting analysis is performed mostly based on German studies, showing the reasons but also the limits of subsidizing the maritime electricity. In addition, in [15], the Italian Regulating Authority of Energy (ARERA) has released a document on public consultation highlighting the importance of setting up a regulatory framework on the electric energy transactions between ports and ships, stressing that the directive 944/2019/EU [19] does not cover the maritime case. Additional information about the similarities but also the differences with Italian industrial units can be found in [13]. Moreover, in [16,20,21], BPA recognizes the barriers and cites the parameters that need to be addressed in order to successfully implement OPS facilities in ports of the UK and Ireland, providing some possible solutions as recommendations. An analysis of the upper limits in pricing in the pioneering ports of Sweden can be found in [22,23]. A significant effort to take into account the big power demands of ships in ports and investigate the energy policy parameters can be found in [24] for a number of ports in Germany and The Netherlands on the occasion of a dedicated research project. Similar efforts and concerns have been reported in other countries like Djibouti [25] and China [26], highlighting, among others, the difficulties and barriers in implementing this technology in full scale. At any rate, to date, there is no concrete market (anywhere in the world) for the aforementioned field of green electric energy transactions related to the maritime sector; thus, this paper aims toward this goal.

Thus, this paper cultivates further a previous work of the authors presented in [27] and taking into account other non-maritime applications [28] makes the effort to provide a significant contribution toward this direction providing alternative schemes of operation of both ports and ships in the open electric market based on the already existing rules or introduce the concept of some necessary amendments. Following the analysis initially introduced and justified in [27], the pricing model of maritime electricity cannot be based on the spot daily market enabling high entrepreneurial risks but rather on long-term power purchase agreements (PPAs). Moreover, the paper provides a set of rules on electric energy transactions comprising a combination of power purchase agreements (PPAs) along with contracts for differences (CfDs). Within this context, it is in good alignment with the announced new policy of the European Union on the electric energy market rules according to which member states are encouraged to promote energy transactions via CfDs and PPAs. Moreover, the proposed novel framework is enriched by figurative numerical examples showcasing that all engaged parties, i.e., energy suppliers, ships being end users, and port authorities acting as energy distributors, can operate in a mutually beneficial environment.

2. Maritime Electricity from the Bunkering Point of View—Regulation 2017/352/EU

In this section, an attempt is made to present the way that ports can take part in the electric energy supply chain. Within this context, the norms regulating the services provided by ports that are defined by Regulation 2017/352/EU [18] are cited and analyzed in detail next.

According to Article 2 of 2017/352/EU, “bunkering means the provision of solid, liquid or gaseous fuel or of any other energy source used for the propulsion of the waterborne vessel as well as for general and specific energy provision on board of the waterborne vessel whilst at berth”. Hence, electric energy provision to ships at berth can be considered a bunkering service.

Moreover, in Article 6 of 2017/352/EU, it is stipulated that “Where the managing body of a port, or the competent authority, provides port services either itself or through a legally distinct entity which it directly or indirectly controls, the Member State concerned shall take such measures as are necessary to avoid conflicts of interests. In the absence of such measures, the number of providers shall not be fewer than two, unless one or more of the reasons listed in paragraph 1 justifies a limitation on the number of providers of port services to a single provider”. Hence, it is deduced that in normal conditions it is mandatory that the minimum basis of competence must be ascertained such that at least two providers of each good must exist. It is worth noting that the exceptional cases of paragraph 1 refer to cases where due to space limitations or for safety reasons, the port authority can claim for a derogation of the minimum rivalry condition, of course, by providing the appropriate justification.

Furthermore, in Article 8 of 2017/352/EU it is stated that “Without prejudice to Article 6(6), the managing body of the port, or the competent authority, may decide either to provide a port service itself or to do so through a legally distinct entity over which it exercises a degree of control similar to that which it has over its own departments, provided that Article 4 applies equally to all operators providing the port service concerned. In such a case, the provider of port services shall be considered to be an internal operator for the purpose of this Regulation”. Thus, it is concluded that the port authority could be one of the providers of the supply chain.

Thus, in summary, the Regulation 2017/352/EU [18] stipulates that

• Electric energy provision is included in the bunkering services provided by ports to the ships they host.
• The electric energy provision must be in compliance with the open market rules, i.e., competence must exist in most if not all cases; extreme cases must be well justified
• Port authorities either directly or via subsidiaries can be one of the providers of electric energy to the ships they host.

This electrically related activity will be incorporated in the business scheme of the ports. To this end, the regulatory framework within the EU as explicitly outlined in the 2019/944/EU Directive [19] is cited in brief, next.

3. Maritime Electricity Complying with the Electric Energy Market Rules—Directive 2019/944/EU

It is the official policy in the EU that the market must be unbundled, comprising distinct (i.e., without mutual overlaps) activities such as generation, transmission/distribution, storing, trading, etc. Thus, a legal body can have only one distinct activity and not a combination of them.

In order to facilitate the discussion, some terms that are further exploited are presented next.

Aggregator: An aggregator is an entity (natural or legal person) that combines multiple customer loads or generated electricity for sale, purchase, or auction in any electricity market. The aggregator acts as an intermediary in the electricity market, being able to negotiate prices of electricity in bulk.

Thus, a group of customers can compose an aggregator bargaining for a low price, while a group of energy producers can compose another aggregator bargaining for a high selling price.

Closed distribution network operator (CDNO): In certain cases, it is prudent to establish the electric network of a specific region or an industrial unit as a “closed distribution network”. This scheme can be used to ensure the optimal efficiency of an integrated supply that requires specific operational standards or where the distribution system is maintained primarily by its owner–operator, the CDNO without unnecessary administrative burden between the main distribution system operator and the system users. Typical examples are met in industrial plants, commercial sites, airports, hospitals, etc.

Active customer: This term refers to one or more final customers, who in addition to consuming can produce and/or store electricity. In this way, it is possible that they participate in flexibility or energy efficiency schemes.

Energy community: An energy community is a legal entity comprising natural persons and local authorities, including municipalities or small enterprises. Its primary purpose is to provide environmental, economic, or other social-type benefits to its members or shareholders or to the local areas where it operates rather than generate financial profits. Within this context, an energy community may be engaged in all distinct electric-related activities such as generation (e.g., from renewable sources), distribution, supply, consumption, aggregation, energy storage, energy efficiency services, or charging services for electric vehicles or provide other energy services to its members or shareholders.

It is underlined that there is no explicit rule within 2019/944/EU regarding energy transactions related to the maritime sector, i.e., between ports and/or ships as electric energy players. However, based on the aforementioned energy entities as recognized according to 2019/944/EU Directive, there are a number of alternative business models that could match the ports and/or the ships as discussed next.

3.1. First Alternative Operating Model

According to this approach, the port operates as a closed distribution network operator (CDNO) (see Figure 3). Hence, the port is responsible for the reliable and resilient distribution of electric energy into the zone of its jurisdiction but cannot have any other activity, i.e., it cannot be an energy provider or producer. On the other hand, all energy providers or suppliers inject their energy to the point of common coupling (PCC) of the port, which distributes it to the ships at the port energy terminals.

Furthermore, the ships are to be treated as active customers, which participate in the electricity market either directly or as member of one or more aggregators; the latter could be proven beneficial for them, in terms of attaining lower prices, as an aggregator can negotiate for large amounts of energy.

3.2. Second Alternative Operating Model

The port in this case operates as a CDNO, and hence, it cannot be an energy provider or producer, at least directly. However, another entity somehow related to the port (e.g., a subsidiary) can be one of the energy providers (see Figure 4).

This, according to 2019/944/EU, is eligible provided that the members of its administration council are not the same with those of the board of the port authority. The ships are active customers that participate in the electricity market either directly or as members of an aggregator, and they negotiate with all energy providers, including the subsidiary of the port authority.

This solution seems favorable for large-sized ports, where the port authority is strongly interested to be a key player in the energy market, too. From the ship-side point of view, the electric company of the port could be regarded as a “last resort power provider” selected, in particular, by ships visiting the port rather infrequently and on a not foreseen basis and hence not being able to bargain for the best market price well in advance.

3.3. Third Alternative Operating Model

This third alternative model is fairly different as the port along with the ships compose an energy community; both of them can still be active customers, too. It is noted that the energy community can be engaged in all electric market activities, e.g., own renewable energy sources (RESs) and/or energy storage units, as well as serve other members of this very same community, namely, the ships at berth, etc. (see Figure 5).

This business model merges both ships and ports and can be favorably applicable in small-sized ports with a small number of visiting ships. The ship-owning companies and the port authorities can be small- to medium-sized enterprises (SMEs) with fairly common benefits by being partners in the same energy community.

3.4. Contractual Agreements

3.4.1. Power Purchase Agreements—PPAs

PPAs are bilateral agreements to purchase electricity mainly originated from renewable energy sources (RESs) between an energy seller (who may or may not be a producer) and a buyer of energy, which can be a business, an organization, or even a group of businesses and, under conditions, a set of households.

A bilateral power purchase agreement (PPA) may cover an existing unit that may have been operating under the feed-in tariff regime, may concern a unit that will operate in the future, or may also replace an expired contract.

The contracting parties in a PPA are

• The energy seller;
• The energy buyer;
• In some cases there, another party that is an energy provider.

The seller undertakes to provide energy from RESs that could be located anywhere, while the buyer receives the generated energy through the grid. The seller assesses the risks related to the ownership and operation of the unit. The buyer agrees to purchase the electricity at a fixed price according to the terms and conditions described. The contract is usually a long-term one (i.e., of a mean duration of about 10–20 years) without, of course, excluding a shorter-term contract.

3.4.2. Contracts for Difference—CfDs

Τhe contracts for difference (CfDs) enable traders to foresee and speculate on the future market movements of an underlying asset (e.g., foreign exchange rate, share prices, stock market index levels, commodities, etc.), without actually owning or even taking part in any physical delivery of this underlying asset.

CFDs enable the traders to speculate on the short-term movements. The gain or loss depends on the price of the underlying asset when the contract starts and ends. If the price moves in the favor of the traders, a portion of their earnings supplies the fund of the CfD; otherwise, the loss of the trader(s) is compensated by the fund of the CfD.

In the case of the energy market, the contracts for difference (CfDs) compose the main tool of a central government to support the innovations in the energy, e.g., the low-carbon electricity generation on the basis of a “win–win” scheme. Furthermore, in the case of earnings on the supplier side, the central government is to decide on the value of the portion that is to feed the corresponding CfD. A plausible value of this portion would be 10%, i.e., 10% of the earnings can feed directly the CfD. Moreover, this proposition is well aligned with the European Commission’s intention to amend the rules of the open electric market framework encouraging the member states to implement the CfD schemes to the maximum possible extent.

3.5. The Proposed Solution

The solution framework that has been elaborated and proposed as an optimum one in this paper is outlined next.

All ships are, in general, subject to a cost of generating electricity on board by their own auxiliary engines (generators). This cost will comprise the following:

o

The procurement cost of conventional fuel (most often marine diesel oil—MDO), the value of which varies but is monitored on an online international basis. This is to be supplemented by the accompanying cost of the lubricating oil of the diesel motors (i.e., the prime movers of the generators).

o

The emission trade system cost (ETSc), i.e., the penalty to be paid once the ship generates electricity by conventional generator sets and pollutant fuel. Based on the basic concept of the emission trade system, this cost is to increase gradually up to 2030.

o

The maintenance cost of the auxiliary engines and any external cost due to the emissions that is not included in the ETSc.

For instance, an indicative cost of generating electricity on board via MDO is about 0.2 EUR/kWh or 200 EUR/MWh, with no environmental fee included [4]. Considering that regarding CO₂ emissions, the production of 1 MWh of electricity by MDO produces 0.69 tn of CO₂, while the approximate cost of CO₂ is 100 EUR/tn, this means that 1 MWh of electricity by MDO has an additional cost (due to CO₂ penalties) of 69 EUR/MWh. Thus, the indicative resultant cost of generating electricity on board is 269 EUR/MWh. The additional costs of NOx, SOx, and PMs can, by all means, be added upon it, too. Evidently, the cost of conventional fuel can fluctuate on an hourly or daily basis; however, in this paper, it is considered constant so that the whole proposed method can be understood more easily.

The aforementioned cost as analyzed will be used as the reference value to be compared with the cost of the shore-side electricity attained during an energy transaction while at berth in port. Considering that this cost must be regarded as the upper limit of the energy transaction cost, let us name this value marginal cost, MC, in EUR; thus, in the previous numerical example, MC = 269 EUR/MWh.

The ship as a stand-alone active customer or as a member of an aggregating scheme of customers will be the first party of a PPA, with the (green) energy traders/producers being the second party. By all means, this second party can be an aggregating scheme, too. The duration of the PPA considering the big amounts of the energy related is anticipated to be fairly long, e.g., for 1–5 years. Within such an interval, the procurement cost of electricity for the ship partner of the PPA could be fixed, say, to A EUR/MWh. Variations of this concept could also exist, for instance,

o

The power demand of the installation B in kW/MW can be also a parameter, similarly to the industrial customers connected in a medium- or even high-voltage network.

o

The main part of the cost could be fixed, but a small portion of it could follow the prices of electricity or oil, etc.

o

At any rate, let the total resultant cost for the ship partner of the PPA, summing all partial, fixed, and variant costs, be C in EUR/MWh. Based on the PPA, C will be the PPA agreed price of shore-side electricity and must be less than or equal to MC (C < MC).

Hence, referring to the aforementioned numerical example, C must be less than or equal to 269 EUR/MWh.

The ports, depending on the operating model they have selected to be, either can be on the side of the traders’ aggregator or can simply act as a distributor with their benefit being the usage fee of their distribution network. Thus, the ports can either

o

Participate in the PPA on the trader partner side;

o

Act independently as energy distributors with a distribution usage fee.

In either case, their benefit, e.g., their distribution usage fee (say Z in EUR/MWh), must be considered and incorporated into the procurement price value C.

Now, let the generation cost of the (green) electricity be P in EUR/MWh. Depending on several conditions of the energy market, P can be bigger or smaller than C (the agreed value of the PPA), introducing either excessive benefit or loss for the trader partner of the PPA. However, as this could be not in favor of promoting shore-side electricity, a solution needs to be elaborated. Here comes the role of the CfDs via the intervention of the regulating authority and/or the state. More specifically, a CfD dedicated to shore-side electricity must be released acting as non-loss guarantee for all parties engaged in the shore-side electric energy transactions (see also Figure 6 and Figure 7). It is noted that for the sake of simplicity, all costs are considered to be constant for rather long periods, e.g., as depicted in Figure 6 and Figure 7.

o

If P < C, then the power supplier has a benefit in excess of the PPA. A portion of the supplier’s earnings, i.e., a% (C-P), is to supply the fund of the CfD (see Figure 6).

o

If P > C, then the power supplier has a loss. In this case, the amount (P-C) reflecting the loss of the trader is to be compensated at least partially by the CfD (see Figure 7).

As mentioned above, based on the role of the port, the benefit of the port Z is either directly or indirectly included in the cost on the supplier’s side, P.

Considering the variety of risks engaged in the CfD operation, the state must monitor and supervise the proper execution of these contractual agreements, most probably via the corresponding regulating authority. Moreover, at least at the initial stage, the state could guarantee the initial deposit of a supplementary fund supporting the CfDs so that any difficulties in compensation are superseded.

Furthermore, CfDs could be implied by the European Commission itself, in an attempt to ascertain a uniform and centralized tariff policy on the selling price of shore-side maritime electricity. Of course, special bilateral agreements could be made between two different countries (e.g., member states of the European Union) that are interconnected via maritime transport lines. An indicative example of special interest could be the establishment of such a bilateral policy in maritime electricity transactions among the states of the Adriatic Sea, Greece and Italy, in particular. It is noted that Greek ports (e.g., Patras, Igoumenitsa, and Corfu) and Italian ports (e.g., Venice, Trieste, Bari, and Brindisi) are interconnected via coastal shipping lines served by large-size passenger ferries [29]. The benefits of such an agreement would be mutually beneficial for all parties involved, as

o

If the price of maritime electricity were different between the two countries (EU member states, in this case), then shipping companies would be in favor of having longer berthing times at the ports where electricity is less expensive;

o

On the contrary, having a common and uniform pricing policy would not alter the balance in shipping routes and trips, the berthing intervals of which would depend on pure maritime circulation/traffic parameters.

Evidently, similar contractual agreements could be made between non-EU states, too, but in this case, the guarantee of the European Union for the compensation of losses would not be present.

4. Figurative Case Studies

In this section a number of case studies are used to implement the aforementioned method. All case studies were investigated using the price of 1 MWh as a reference, while the time interval considered was a year. The reference period of one calendar year was considered fairly representative. For instance, it could be ideal for cruise ships, the scheduling of which is on annual basis. In future work, any variation depending on the ship type under study will be further investigated.

The agreed electricity price as purchased from the ship owner/operator, i.e., the MC value of the PPA, was considered constant and equal to 269 EUR/MWh, which was the mean value of electricity production by the auxiliary engines of the ship with an additional surplus of the emission taxation (mainly referring to CO₂). In this way, the ship owner/operator had the same cost of electricity and had no reason to be dissatisfied with SSE implementation. As already mentioned, this cost could vary continuously; however, in this paper, it was considered constant so that the whole proposed method could be understood more easily.

The average production cost of electricity, which reflected the selling price from the electricity suppliers, is considered constant on a monthly basis. Thus, twelve (12) values of the selling price of 1 MWh supplied were considered; their values were the same for all the scenarios considered. The total compensations of the PPAs under study were to take place at the end of each calendar year; the annual basis was considered a good interval where the CfD was to be exploited and either collect the excessive earnings of the sellers or compensate the latter if they had losses.

On the other hand, the electric power distribution usage fee, i.e., the charging rate of the delivery of the energy to the ship by the port and/or the terminal operator, taking into account the usage of the SSE facilities installed in the ports, was investigated to a greater extent.

4.1. Case Study No. 1

In the first case as presented in

Table 1. Calculated results of case study no. 1.

	Supplier’s Selling Price	Port Distribution Usage Fee	Total	(Production Cost by Ship D/G)		Loss of Supplier	Benefit of Supplier
			Supply Cost	Agreed Price	Difference
Month	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]
1	250	10	260	269	−9	0	9
2	400	5	405	269	136	136	0
3	300	5	305	269	36	36	0
4	210	10	220	269	−49	0	49
5	220	10	230	269	−39	0	39
6	180	10	190	269	−79	0	79
7	272	5	277	269	8	8	0
8	300	5	305	269	36	36	0
9	285	5	290	269	21	21	0
10	290	5	295	269	26	26	0
11	210	10	220	269	−49	0	49
12	190	10	200	269	−69	0	69
					−31	263	294
				PPA	CfD

and Figure 8, the delivery cost function was considered to be rather simple. More specifically,

• Port distribution usage fee = 5 EUR/MWh if the supplier’s selling price was greater than the MC (269 EUR/MWh)
• Port distribution usage fee = 10 EUR/MWh if the supplier’s selling price was less than the MC (269 EUR/MWh)

As could be seen on a yearly basis, the supplier(s) had a total benefit of 31 EUR/MWh, which meant that no compensation was required via the CfD. On the contrary, a fair portion of this benefit, e.g., 10%, could be used to supply the fund of the CfD for the upcoming years.

4.2. Case Study No. 2

The second case was slightly different from the first one, as the delivery cost was equal to double that of case study no. 1, i.e.,

• Port distribution usage fee = 10 EUR/MWh if the supplier’s selling price was greater than the MC (269 EUR/MWh)
• Port distribution usage fee = 20 EUR/MWh if the supplier’s selling price was less than the MC (269 EUR/MWh)

In this case, as can be seen in

Table 2. Calculated results of case study no. 2.

	Supplier’s Selling Price	Port Distribution Usage Fee	Total	(Production Cost by Ship D/G)		Loss of Supplier	Benefit of Supplier
			Supply	Agreed Price	Difference
Month	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]
1	250	20	270	269	1	1	0
2	400	10	410	269	141	141	0
3	300	10	310	269	41	41	0
4	210	20	230	269	−39	0	39
5	220	20	240	269	−29	0	29
6	180	20	200	269	−69	0	69
7	272	10	282	269	13	13	0
8	300	10	310	269	41	41	0
9	285	10	295	269	26	26	0
10	290	10	300	269	31	31	0
11	210	20	230	269	−39	0	39
12	190	20	210	269	−59	0	59
					59	294	235
				PPA	CfD

, on an annual basis, the supplier(s) had a total loss of 59 EUR/MWh; therefore, a compensation was required via the CfD. Comparing these results with those of the previous case study, it could be seen that the prices of the distribution fees of the port had a predominant role, as the final result (i.e., whether CfD was to feed the supplier or the other way round) was sensitive to it.

4.3. Case Study No. 3

In the third case with the variation of the cost depicted in Figure 9, the delivery cost was set as

• Port distribution usage fee = 10% of the monthly supplier’s selling price

As can be seen in

Table 3. Calculated results of case study no. 3.

	Supplier’s Selling Price	Port Distribution	Total	(Production Cost by Ship D/G)		Loss of Supplier	Benefit of Supplier
		Usage Fee	Supply Cost	Agreed Price	Difference
Month	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]
1	250	25	275	269	6	6	0
2	400	40	440	269	171	171	0
3	300	30	330	269	61	61	0
4	210	21	231	269	−38	0	38
5	220	22	242	269	−27	0	27
6	180	18	198	269	−71	0	71
7	272	27.2	299.2	269	30.2	30.2	0
8	300	30	330	269	61	61	0
9	285	28.5	313.5	269	44.5	44.5	0
10	290	29	319	269	50	50	0
11	210	21	231	269	−38	0	38
12	190	19	209	269	−60	0	60
					189.7	423.7	234
				PPA	CfD

, at the closure of the year, the total loss of the supplier(s) was 189.7 EUR/MWh; therefore, a compensation was required via the CfD. Once again, the critical role of the port distribution usage fee emerged.

4.4. Case Study No. 4

In the fourth case, the distribution usage fee (i.e., the fee of the port and/or terminal operator) was once again proportional to the energy delivered but varied depending on the selling price by the trades. More specifically,

• Port distribution usage fee = 2% of the monthly supplier’s selling price if the supplier’s selling price was greater than the MC (269 EUR/MWh)
• Port distribution usage fee = 5% of the monthly supplier’s selling price if the supplier’s selling price was less than the MC (269 EUR/MWh)

In this case, as it can be seen in

Table 4. Calculated results of case study no. 4.

	Supplier’s Selling Price	Port Distribution	Total	(Production Cost by Ship D/G)		Loss of Supplier	Benefit of Supplier
		Usage Fee	Supply Cost	Agreed Price	Difference
Month	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]
1	250	12.5	262.5	269	−6.5	0	6.5
2	400	8	408	269	139	139	0
3	300	6	306	269	37	37	0
4	210	10.5	220.5	269	−48.5	0	48.5
5	220	11	231	269	−38	0	38
6	180	9	189	269	−80	0	80
7	272	5.44	277.44	269	8.44	8.44	0
8	300	6	306	269	37	37	0
9	285	5.7	290.7	269	21.7	21.7	0
10	290	5.8	295.8	269	26.8	26.8	0
11	210	10.5	220.5	269	−48.5	0	48.5
12	190	9.5	199.5	269	−69.5	0	69.5
					−21.06	269.94	291
				PPA	CfD

, on a yearly basis, the supplier(s) had a total benefit of 21.06 EUR/MWh; therefore, no compensation was required via the CfD. As already discussed, an idea to investigate in more detail is that the state (i.e., the central government of each country) determines that an amount of these earnings (e.g., 10–20%) feeds the CfD, which, in turn, can be used, in the future, to compensate the suppliers, if the whole situation is reversed. Furthermore, comparing with the results of case study no. 3, it was concluded that a variable and rather flexible pricing by the port resulted in a benefit for the supplier, too.

4.5. Case Study No. 5

Finally, in the fifth case study, a more complete scenario was studied. More specifically, the port distribution usage fee comprised a fixed price and a fee proportional to the energy consumed:

• Port distribution usage fee = 0.5 EUR/MWh + 1.5% of the MC if the supplier’s selling price was greater than the MC (269 EUR/MWh)
• Port distribution usage fee = 1.725 EUR/MWh + 5% of the MC if the supplier’s selling price was less than the MC (269 EUR/MWh)

In this case, as can be seen in

Table 5. Calculated results of case study no. 5.

	Supplier’s Selling Price	Port Distribution Usage Fee	Total	(Production Cost by Ship D/G)		Loss of Supplier	Benefit of Supplier
			Supply	Agreed Price	Difference
Month	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]
1	250	15.175	265.175	269	−3.825	0	3.825
2	400	4.535	404.535	269	135.535	135.535	0
3	300	4.535	304.535	269	35.535	35.535	0
4	210	15.175	225.175	269	−43.825	0	43.825
5	220	15.175	235.175	269	−33.825	0	33.825
6	180	15.175	195.175	269	−73.825	0	73.825
7	272	4.535	276.535	269	7.535	7.535	0
8	300	4.535	304.535	269	35.535	35.535	0
9	285	4.535	289.535	269	20.535	20.535	0
10	290	4.535	294.535	269	25.535	25.535	0
11	210	15.175	225.175	269	−43.825	0	43.825
12	190	15.175	205.175	269	−63.825	0	63.825
					−2.74	260.21	262.95
				PPA	CfD

, on an annual basis, the supplier(s) had a total benefit of 2.74 EUR/MWh; therefore, no compensation was required via the CfD. On the contrary, an amount of these earnings can feed the CfD for the future, e.g., when the suppliers will lose on an annual average basis. Moreover, similarly to case study no. 4, it was concluded that a variable and rather flexible pricing by the port resulted in a benefit for the supplier, too.

This final case was considered to be more realistic than the other ones; therefore, the investigation was developed even further. More specifically, an actual case of a port with SSE infrastructure of 4 MVA (3.6 MW) was considered. Moreover, representative values of usage of the SSE installation were considered varying between 40% and 55% (see

Table 6. Complete case study investigating the viability of the proposed framework.

	Usage of Installation	Total Energy of SSE	Supplier’ Selling Price	Port Distribution Usage Fee	Total	(Production Cost by Ship D/G)		Loss of Supplier	Benefit of Supplier	Total Billing Price
					Supply	Agreed Price	Difference
Month	[%]	[MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[EUR/MWh]	[kEUR]
1	50%	1296	250	15.175	265.175	269	−3.825	0	3.825	348.62
2	45%	1166.4	400	4.535	404.535	269	135.535	135.535	0	313.76
3	55%	1425.6	300	4.535	304.535	269	35.535	35.535	0	383.49
4	42%	1088.64	210	15.175	225.175	269	−43.825	0	43.825	292.84
5	48%	1244.16	220	15.175	235.175	269	−33.825	0	33.825	334.68
6	50%	1296	180	15.175	195.175	269	−73.825	0	73.825	348.62
7	53%	1373.76	272	4.535	276.535	269	7.535	7.535	0	369.54
8	48%	1244.16	300	4.535	304.535	269	35.535	35.535	0	334.68
9	49%	1270.08	285	4.535	289.535	269	20.535	20.535	0	341.65
10	41%	1062.72	290	4.535	294.535	269	25.535	25.535	0	285.87
11	40%	1036.8	210	15.175	225.175	269	−43.825	0	43.825	278.90
12	42%	1088.64	190	15.175	205.175	269	−63.825	0	63.825	292.84
			SUM				−2.74	260.21	262.95	3925.51
						PPA	CfD

). It was underlined that this was a mutually beneficial solution (a “no-lose–no-lose” scheme if not a “win–win” scheme) for all parties involved as

• The ship side (owner or operator) had no dissatisfaction as the cost paid for electricity was equal to that of conventional fuel (including any taxes, penalties due to emissions, etc.).
• The supplier side was not in discomfort as on an average basis, there was no economic loss. Moreover, a part of the total benefit could be directed to the fund supporting the CfD.
• The port side (port authority or terminal operator) had an income that assisted the total effort to make the investment in SSE technology appear beneficial and viable, i.e., the payback period was plausible.

As already stressed above, the CfD framework must be monitored, regulated, and economically supported, e.g., by a central governmental authority, so that the ultimate goal, i.e., the successful implementation of SSE, is attained.

5. Discussion of Results

As already mentioned, all case studies were investigated using the price of 1 MWh as a reference, while the time interval considered was a calendar year, which can be considered a fairly representative period where fluctuation of the price can take place due to variations of the production by RES, which is strongly dependent on weather conditions, e.g., solar radiation and wind. Moreover, as mentioned above, the reference period of one year was fairly representative for certain ship cases like cruise ships. Similarly, in all case studies, all prices were considered constant for an entire month, while of course they vary on a real-time basis. However, based on the official policy recommended by the European Union in other similar sectors, big electric energy transactions are based on fairly long time intervals where all abrupt fluctuations of energy price are smoothened. Of course, for the sake of investigation, in future work, other scenarios will be examined too.

At any rate, in all cases considered, it was proven that

• The price of fuel oil (the conventional fuel for the electric energy production on board) must be used as a reference, so that the energy transactions can be for the benefit of the end users, i.e., the ships. Evidently, this conclusive remark is still valid regardless of the length of the time periods considered.
• The PPAs cannot ascertain the benefits of all parties. On the contrary, it is highly likely that the energy provider loses due to the measures keeping the electricity cost equal to that of the conventional fuel under all circumstances. This mismatch is resolved via the CfD. As shown in all case studies, they can compensate the losses of the suppliers. The clearest and safest input of the CfD can be originated from the providers’ profits when the electricity is significantly cheaper than the conventional fuel. The compensation is to be performed not on a real-time basis but upon the closure of a year. Moreover, it is stressed that in order to avoid any toxic side effects of CfDs, it is recommended that they are monitored and controlled by the central governments.
• The pricing model of the port (or the terminal operator) has an important impact on the final result as this price is added upon the supplier’s cost. Keeping in mind that the port (or the terminal operator) makes large investments in the SSE infrastructure, it is important that these investments are not economically detrimental. Of course, they can be eventually paid back via a tariff that is either

  o

  Proportional only to the energy consumed;

  o

  Proportional to the combination of the energy consumed and the rated power capacity of the SSE installation used.

In either case, it has been shown that the combination of PPA and CfD market tools can result on mutually beneficial results (“win–win”) for all three parties engaged, i.e., the electricity supplier, the port (or terminal operator), and the ship supplied. More specifically, as PPAs are to be in favor of the end users (i.e., the ships), the CfDs are to assist the suppliers and the ports by compensating them in case they lose.

• CfDs are to be monitored and regulated by the central governmental authorities. Moreover, as shipping has an international aspect interconnecting ports of different countries, CfDs can play a significant role so that a uniform financial policy of the maritime electricity market is attained. In the case of the European Union, this combination of PPAs with CfDs can be used to assist the successful implementation of SSE in all core and comprehensive ports of the European Union, ascertaining a common tariff policy.

6. Conclusions

The work presented in this paper aimed to demonstrate in a most figurative manner that the implementation of shore-side electricity (SSE) in ports can be successfully incorporated in the electric energy market. Within this context, a novel framework of electric energy transactions among all stakeholders involved is presented and discussed analyzing a set of representative numerical case studies. All parties engaged, i.e., ship operators, port operators, and energy providers, can cooperate synergistically via a combination of financial instruments comprising both power purchase agreements (PPAs) and contracts for differences (CfDs). This framework of rules is applicable to a single country, but considering the international character of the maritime sector, it can be applied among different countries, too. The baseline of this proposed framework consists in that the ship owners will keep paying at a price equal to that of the conventional fuel (marine diesel oil) they tend to use. The port operators can have a payback of the investment in the maritime electricity facilities via their power distribution fees. Finally, the energy producers along with the port operators can provide energy at a beneficial price, which is covered by the combination of PPAs and CfDs.