Transitioning to electrification: Optimal strategies for ship fleet replacement

To reduce carbon emissions, some shipping companies are strategically transitioning their fleets from diesel-powered ships to electric ones. However, the question of how to cost-effectively design this fleet conversion and the construction of charging stations for electric ships remains a critical issue. In this paper, we present a Mixed-Integer Nonlinear Programming (MINLP) model to minimize the total cost of designing the ship fleet replacement plan within a given planning horizon. At the planning level, the yearly strategic transition schedules for purchasing and salvaging ships are obtained, while the optimal strategy for charging station construction is also determined to satisfy annual cargo demand and charging demand. Then, our model integrates the operational level to determine optimal fleet deployment strategies and operational decisions. Meanwhile, the impact of real-world factors such as waterway depth and emission cost are discussed, respectively. Moreover, we introduce two subsidy schemes and compare their effectiveness on the fleet electrification process. Finally, the proposed model is applied to the Yangtze River shipping network in China using real data. The results show that the shipping company will initially invest in lower-cost electric ships with a limited budget, followed by the acquisition of larger ships. The charging stations are strategically established in the downstream areas, coinciding with the initial deployment of electric ships. Moreover, the impacts of fuel prices and emission cost of diesel-powered ships on the electrification process are compared, with the results indicating that the increase in emission cost has a more pronounced effect on the total cost compared to the rise in fuel prices. Additionally, the subsidy schemes’ effect is explored, revealing that financial incentives markedly accelerate the fleet electrification process.