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How can small and medium-sized shipowners operating near-shore commercial vessels affordably start their decarbonisation journey? Andrew Southwood, Marine Finance, Siemens Financial Services UK lays out short-, medium- and long-term solutions for a sustainable transition.
Since the government released its maritime decarbonisation strategy, the industry is planning around three milestones:
Speed is therefore key in the industry’s transformation. Unlike past industrial and technological revolutions, the energy transition has a deadline[ii], and it is expected to unfold at twice the historical pace – over just one generation.[iii]
Moving at pace comes at a cost. Transitioning to low-carbon technologies demands substantial investment in new vessels, retrofitting existing fleets, and developing supporting infrastructure – a particular challenge for small and medium-sized shipowners.
One report estimates that approximately £75 billion (€86 billion) will be required over the next three decades for the UK’s domestic maritime sector to achieve net-zero emissions.[iv] To put this figure in context, the size of the marine finance market for UK SMEs is around £2 billion (€2.2 billion).
Additionally, unlike deep-sea shipping, which has greater economies of scale and access to global fuelling infrastructure, near-shore operations must contend with shorter routes, smaller vessel sizes and fewer refuelling or recharging options. These factors complicate the choice of decarbonisation pathways.
At the same time, the uncertainty surrounding future fuel options, infrastructure and regulations, makes investment (and therefore lending) more uncertain. In summary, the following factors add up to make funding access challenging for SMEs:
Despite these challenges, decarbonisation cannot be avoided. To feasibly make the transition, the industry therefore needs solutions for the immediate, medium and long term. And to set these solutions in motion, collaborating with financial institutions that understand the industry’s unique challenges can provide a strong safety net.
As vessel operators seek fuel strategies that balance cost, practicality, and emissions reduction, engineering solutions can reduce emissions in the short term.
There are a number of technological (and affordable) developments happening right now that the industry can consider. They involve propulsion methods, but also other energy/fuel saving economies.
Efficiency through design is probably the easiest way to reduce emissions in the near term. The upfront costs are affordable and some measures, such as weight reduction, can actually be cost beneficial. More efficient vessels use less fuel and therefore save operating costs as well as reducing greenhouse gas emissions.
Secondly, wind-assisted propulsion can make a positive, cost-effective contribution to decarbonisation. The fuel savings (and thus GHG emissions) are proven, the costs involved are affordable, and the pay-back period is comfortably within the equipment useful life.
And thirdly, battery systems remain one of the most scalable short-term solutions for smaller vessels. Near-shore operations where vessels have predictable, short-range routes are currently best-suited for battery technology.
Lack of onshore grid capacity, as well as energy density, weight and cost, remain significant barriers to wider adoption. However, as batteries improve in performance and price, and as infrastructure improves, battery systems will become increasingly viable.
Mainprize currently operates crew transfer vessels (CTVs) across the North Sea. Proprietary vessel designs means that Mainprize’s CTVs have a unique ability to operate in challenging sea and weather conditions all year round. To enable the acquisition of new CTVs, Mainprize sought a financing partner who would understand how it operates as well as its growth ambitions. Bob Mainprize, owner of Mainprize Offshore, explains: “Our business needs specialist financing partners who understand our products, our markets, asset values and applications, and the dynamics of a business like ours. Though the greener CTV market is relatively nascent, SFS needed no explanation on the value of CTVs in supporting offshore wind. Their understanding of new vessel build times, for instance, is reflected in our financing agreement, which offers flexibility on the fund drawdowns. SFS also indicated potential for a future financing arrangement to further expand the fleet and support business growth. The backing of a significant partner such as SFS with the possibility of a longer partnership helped to set them apart from generalist financiers.”
Medium-term options reduce emissions today while providing options for tomorrow. Coming back to battery technologies, for instance, many operators are now exploring hybrid systems that pair traditional diesel engines with battery packs.
These systems enable “silent running” in ports or environmentally sensitive areas and allow peak shaving during high-demand operations. They offer measurable fuel savings and reduced emissions without full electrification[v] – a flexible ‘bridge technology’.
Other transitional solutions include: diesel-electric propulsion for easier future integration with batteries or fuel cells[vi]; using methanol as a marine fuel to reduce emissions without significant changes to vessel design and bunkering infrastructure[vii]; or digital energy management systems that optimise power use across batteries, generators, and propulsion.
Looking beyond transitional technologies, the maritime sector must eventually adopt zero-carbon fuels to meet long-term climate goals. Several fuels are in development or early-stage deployment. However, each has its own advantages and disadvantages, and no single option currently meets all operational, environmental, and economic needs.
For small and medium commercial vessels – such as workboats, ferries, service craft, and near-shore cargo carriers – the future fuel landscape presents unique opportunities and limitations, which are briefly summarised here:
Fuel typeProsCons
Hydrogen
Feasible for short-range, small vessels in regions with early hydrogen infrastructure
Storage constraints and safety regulations pose challenges
Ammonia
May eventually play a role in larger coastal vessels, subject to major regulatory and engineering developments
Less suitable for smaller vessels in the short term due to toxicity concerns, high safety requirements, and a lack of proven small-engine technologies
Methanol
Greater near-term potential for smaller vessels because it is liquid at ambient temperatures, compatible with modified diesel engines, and relatively easy to handle
Lower energy density
Biofuels
‘Drop-in’ capability means small vessel operators can reduce emissions today without changing equipment or infrastructure
Concerns about sustainable sourcing remain
Synthetic/
E-fuels
A potential long-term solution for smaller vessels, offering a path to decarbonisation without major changes to vessel design
Currently expensive and limited availability
As well as assessing the range of decarbonising solutions available, UK shipowners also face the task of accessing funding and selecting appropriate partners. The fact that the green transition is being driven by regulation rather than efficiency and cost savings (as is usually the case) has implications for financing access.
Regulation as a driver means the changeover to more environmentally friendly technologies often does not deliver near-term cost savings. In fact, it may deliver less efficiency from an energy density point of view and greater costs.[viii] A financing partner must therefore have the appetite to share the risk of sustainable investments.
There are a range of specialist lenders that have the skills and sector knowledge to offer financing that helps owners and operators transition to low-emission technology. The trick will be to probe sufficiently to understand which financiers truly have that expertise and can make investments in cleaner propulsion more affordable and cash-flow friendly.
As the UK government seeks to place itself at the forefront of maritime decarbonisation[ix], UK shipowners are likely to find regulations changing at a faster pace than many other countries.
Additionally, organisations client-side are looking to their supplier-partners to contribute to the decarbonisation of the whole supply chain. So low emission vessels may well rapidly become a ‘must have’ to win tenders.
It is not all cause for concern. Though near-shore operators have multiple challenges to consider when planning a low-emission future, there are also opportunities to capture. Their shorter operational ranges may make them better suited for battery technology, hybrid systems or alternative fuels that are not yet viable for deep-sea applications. This article is a starting point for decarbonisation strategies aimed at seizing these opportunities.
Request your copy of the full framework, “Maritime decarbonisation: A lender’s perspective on navigating change and opportunity” by contacting: Specialistfinance.sfs@siemens.com.
Siemens Transform is back for 2026 at Manchester Central on 15 and 16 July. The event brings together thousands of industry participants, to help accelerate digital and sustainability transformation. Register your interest here.
Learn more about vessel and marine financing here.
[i] https://www.gov.uk/government/news/course-charted-for-carbon-free-shipping-by-2050
[ii] http://rmi.org/the-energy-transition-is-a-technological-revolution-with-a-deadline/
[iii] https://rmi.org/the-energy-transition-is-a-technological-revolution-with-a-deadline/
[iv] https://www.marine-capital.co.uk/ukmaritimedecarbonisationreport/
[v] https://www.longitude-engineering.com/news/diesel-electric-battery-hybrid-vessels-is-it-for-every-vessel/
[vi] https://oceantimemarine.com/en/blog/2017/06/18/diesel-electric-propulsion-is-this-a-safer-more-efficient-solution-for-your-vessel/
[vii] https://north-standard.com/insights-and-resources/resources/news/methanol-as-a-marine-fuel
[viii] See, for example:
https://www.forbes.com/sites/feliciajackson/2025/02/27/why-protectionism-could-make-energy-transition-more-expensive/;
https://russellinvestments.com/us/blog/energy-transition-summary-part-2
[ix] https://assets.publishing.service.gov.uk/media/5d24a96fe5274a2f9d175693/clean-maritime-plan.pdf
