Shore power price competition between ports

Abstract

Air pollution and climate change arouse consistent attention of international community. Shipping industry, being one of the most important transport methods, carries more than 80% of the total international trade and has been recognized as a potential source of air pollutant mitigation. In order to reduce emissions of marine traffic, especially in the area of coastal waters, regulations about the quality of marine fuel have been carried out, and the maximum sulphur content allowed for marine fuel becomes increasingly stringent as time goes by. In order to comply with the regulations, shipping has to take various measures, including adopting electric power from shore while berthing. Shore-side electricity, also called cold ironing, refers to the use of electricity from shore side while berthing at the port instead of auxiliary engine. In recent years, shore power has been adopted in an increasing number of ports; in China, most ports are able to provide shore power for ships while berthing. For ships with shore power facilities, the price of shore-side electricity is an element that can influence their choice of port to visit. It is an incentive for ports to lower the power price. This paper tends to investigate what is the best price to maximize the port’s total benefit in the competition with other ports in the same group. In order to describe the competition among ports, game theory is applied, and the Bertrand model is adopted.