From factory to doorstep, home delivery is on the rise. However, as much as the average American loves next-day delivery of goods, we know little about the energy it takes to ship them and the environmental cost. Ocean freight transport is the most used mode with 53% imports and 38% exportsing. Xander talks to this week's guest, CEO, and Co-Founder of Marine Energy CEO of SWITCH Marittime LLC, Pace Ralli, to dive into how shipping contributes to more than 3% of carbon emissions and how Ralli is solving the problem.
"The shipping industry runs off of the dirtiest fuel we have.", says Pace. "Over a billion tons of CO2 a year." He said that while other industries are shifting towards decarbonization, the shipping industry is behind, but through SWITCH Maritime, Ralli is launching the first eco-friendly fleet in North America and changing the shipping industry's future.
"It's just one of those industries that you wouldn't know too much about unless you're in it," says Ralli, who was inspired to lower shipping emissions when he partnered with a friend formally working for a shipping company. His friend opened his eyes to the amount of fuel being used, even with smaller ships using at least 25 thousand gallons daily. "There's a hundred thousand of them, those big ships running around the world 24/7; they never stop running." He says, "That's the big problem." While the industry was slowly starting to regulate emissions in 2012, he says that there is essentially no jurisdiction to shipping industries acting as "cowboys in the ocean." Pace knew he had to be innovative and find the fleets he could convert first with the plan to take on what he calls "the big dogs" later with his technology.
Pace's motivation to solve this problem comes from knowing how globalized and interdependent we are on goods. "90% of it comes off of a ship.", he says, "The shipping industry is moving what we want, we want our things, we want it delivered the next day, that's why the shipping industry is as important as it is." This growing industry currently requires diesel fuel due to the amount of energy it supplies. Still, Ralli wants to continue its evolution of sailing to steam and eventually diesel to battery and hydrogen-powered ships.
Through his mission to ensure that new vessels being built are de-carbonized, Ralli has innovated the first hydrogen fuel cell ferry. "The only bi-product of that, rather than the black smoke, the only bi-product is like 100% pure water, drinkable water." The technology offers an electrical motor as opposed to a diesel one. "We just think that being able to come out and show that SWITCH Maritime is able to do it and we had to take a bunch of risks to do it, we'll be able to show that we pulled it off.", says Ralli, "and once it's proven, then it really forces the shipping industry to say, 'ok, no longer am I going to wait for the future, I guess it works."
His primary focus now is on the ferry industry since many of those vessels are up for renewal and a ship's life is up to 3 decades. "If we build 25 out of a thousand, that doesn't seem like a lot when you think about the larger fleet in the US." Ralli says, "but when you think about the capital that you get to deploy, which is what we're doing, we're essentially putting private equity to work in these long-lived core capital assets that are going to be around for the next few decades."
However, Pace says, "There is no silver bullet.", but like Exxon & Shell, who were challenged to make a change, it takes the consumers and companies to also demand more from its distributors and make it known that it can't be business as usual. "It will be eyebrow-raising to see vessels in the shipping industry that are still chugging away with a big black smokestack.", "We're on a path." He says, "We're working our way towards de-carbonized transportation."