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Cost-Benefit Analysis for Ship Automation Retrofit: The Case of Icebreaker Frej

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Abstract:

A detailed cost-benefit analysis of a retrofit of the Advanced Technology to Optimise Maritime Operational Safety (ATOMOS) platform on board icebreaker Frej is presented. After accurately determining the relationship between the costs and benefits, an analysis is implemented in order to assess the most basic advantages and disadvantages of the suggested retrofitting action in monetary terms. A two-step approach is adopted. The first step is to define the major categories of the ship operational aggregate costs and benefits (for example, the actual cost of the ATOMOS platform and of equipment not part of the ATOMOS platform but still necessary for its installation and operation, or the expected crew decrease because of the higher degree of automation). The second step is to examine the various basic components of these categories (for example, administration and training cost, required automatic radar plotting aid [ARPA] and electronic chart display and information system [ECDIS] equipment acquisition cost, fuel benefits, and insurance benefits). The cost-benefit analysis performed is followed by a sensitivity analysis of the most important factors affecting the net present value of the investment. It is shown that it takes about 5 years for the ATOMOS retrofit to be fully paid back by the annual savings it offers and it takes about 6.5 years for the net present value of the investment to turn positive. This coupled by the increased vessel safety justifies the decision to retrofit Frej with the ATOMOS platform. Furthermore, it is found that the cost of the ATOMOS platform, the benefits from crew decrease, and the interest rate are those factors that essentially determine the profitability of the investment. In the case of Frej, it is concluded that the retrofit is worth undertaking for the majority of future scenarios.

Document Type: Research Article

Publication date: April 1, 2005

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  • Marine Technology is dedicated to James Kennedy, 1867-1936, marine engineer, and longtime member of the Society, in recognition and appreciation of his sincere and generous interest in furthering the art of ship design, shipbuilding, ship operation, and related activities.

    The Technical papers in this quarterly flagship journal cover a broad spectrum of research on the latest technological breakthroughs, trends, concepts, and discoveries in the marine industry. SNAME News is packed with Society news and information on national, section, and local levels as well as updates on committee activities, meetings, seminars, professional conferences, and employment opportunities.

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