In an uncertain environment, systems that keep multiple pathways open gain value.
With long operational lifespans and an uncertain fuel future.
Cost, complexity, and maintenance effort must be proportionate.
Systematically integrate flexibility into residual value and investment logic.
Engine flexibility refers to the ability of a propulsion system to burn more than one fuel – either through dual-fuel configuration or through retrofitability. For two-stroke engines, dual-fuel technology has advanced considerably in recent years. MAN Energy Solutions offers the ME-LGIM (methanol), ME-GI (LNG) and the ME-LGIA (ammonia, in development) as a broad portfolio. Wärtsilä serves the four-stroke market with comparable solutions.
The value influence arises from a simple logic: a vessel that can only burn conventional fuel today loses marketability with every regulatory tightening step. The CII trajectory deteriorates annually, EU ETS costs are rising, and FuelEU Maritime will demand a declining greenhouse gas intensity from 2025 onwards. A flexible engine can respond to these changes without requiring the entire propulsion system to be replaced.
What is decisive for valuation, however, is not theoretical flexibility but practical usability. A dual-fuel engine that runs only on conventional fuel due to the lack of tank infrastructure offers optionality – but no realised value yet. The value differential only materialises when the supply infrastructure enables the actual use of the alternative fuel.
For residual value calculation, this means: flexibility must be modelled as an option value, similar to a financial option. The value increases with uncertainty about future fuel prices and regulation, with the remaining service life of the vessel, and with the breadth of fuel pathways covered. A vessel that can burn LNG, methanol and conventional fuel has a higher option value than one that merely switches between HFO and VLSFO.
Measurable price differences are already visible in the S&P market. Vessels with dual-fuel propulsion achieve higher prices than comparable conventional tonnage – the premium varies by segment, age and fuel pathway between 5 and 20 per cent. This premium reflects the expectation that the vessel will remain competitive for longer and can clear regulatory hurdles with less effort.
For new orders, the flexibility question has immediate implications for the specification. The decision between a conventional engine with a later retrofit option and an immediately operational dual-fuel drive depends on the trade pattern, the planned operational duration and the owner’s risk appetite. A blanket recommendation for flexibility is not sensible – it must always be weighed against the concrete costs and expected benefit.
Banks and financing institutions are also increasingly factoring engine flexibility into lending decisions. The Poseidon Principles and comparable frameworks require an assessment of the climate compatibility of the financed vessel. Flexible drives improve the profile and can lead to more favourable financing terms.
Large container shipping lines pursued the flexibility approach early. Maersk consistently ordered methanol dual-fuel vessels from 2021 onwards, whilst CMA CGM opted for LNG. Both strategies reflect different bets on future fuel availability – but both increase flexibility compared with purely conventional fleets considerably.
In the bulker and tanker segments, flexibility penetration is significantly lower. Conventional engines continue to dominate, sometimes supplemented by “ready” options. The challenge for these segments is that the remaining service lives of the existing fleet are long and the fuel choice is even more uncertain than in the container segment. Precisely here, a realistic flexibility assessment could deliver the greatest value contribution.
The evaluation of engine flexibility should encompass three dimensions. First dimension: technical breadth – how many fuel pathways are actually covered? Second dimension: temporal availability – when can the flexibility be utilised, and what lead times are required for activation? Third dimension: economic proportionality – does the added value of flexibility justify the premium over a conventional solution?
As a guiding principle: if the expected remaining service life of a vessel is less than ten years and the regulatory situation on the main routes is stable, a conventional solution may be more economically sensible. With remaining service lives exceeding 15 years and high regulatory uncertainty, the option value of flexibility increases markedly.
When a flexible propulsion system is presented during a financing or insurance discussion, the counterparty rarely accepts the dual-fuel label as sufficient evidence on its own. What is typically requested is documentation of actual operating hours on the alternative fuel, the bunkering infrastructure available on the vessel's trading routes, and any technical restrictions that limit how much of the operating profile can realistically run on that fuel. A vessel with the right engine but no practical access to the alternative fuel is assessed closer to a conventional ship than its specification sheet would suggest.
For owners preparing such a discussion, the more persuasive case combines the technical specification with a route-level supply analysis: which ports along the trading pattern already offer the alternative fuel, which are expected to within a relevant time horizon, and what contractual arrangements exist to secure access. Banks applying climate-linked lending frameworks increasingly ask for this evidence explicitly, and owners who can produce it are in a stronger position to negotiate terms than those relying on the engine specification alone.
Insurers approach the question from a different angle, focusing on operational experience with the fuel pathway rather than its theoretical value. A vessel that has logged meaningful running hours on methanol or LNG without incident builds a track record that supports more favourable terms over time, while a newly delivered dual-fuel vessel with no operating history on the alternative fuel is initially underwritten much like a conventional vessel until that experience accumulates.
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