DISMANTLING POWERFUEL’S ECONOMIC ARGUMENT FOR CRUISE SHIP SHORE POWER
Powerfuel Portland’s planning application to build an “energy from waste” facility at Portland Port puts the need to supply power to cruise ships at the heart of its argument:
“One of the key reasons for the siting of the proposed ERF is the provision of shore to ship power for vessels in the Portland harbour.” — Powerfuel Portland, Environmental Statement, Technical Appendix G (August 2020)
“Shore power supports local tourism by facilitating the retention and growth of the growing cruise liner sector and so will assist Portland’s future economic growth” — Powerfuel Portland, Design and Access Statement (September 2020)
“The ERF will help the Port to attract even more tourists to the area” — Giles Frampton, Powerfuel Portland, letter to the Dorset Echo, November 15
The application refers to “the plant’s provision of shore power, which is necessary for continued success in attracting cruise liners”, and argues that “the provision of shore power by the proposed development will enable Portland Port to retain and grow its cruise business”. In other words, in late-2020, Powerfuel is talking about the “continued success” of a “cruise business” which has been utterly shattered by Covid-19.
“The coronavirus pandemic has devastated the cruise ship industry after multiple outbreaks occurred at sea and ports worldwide.” — Business Insider, October 3
In 2020 “the COVID-19 pandemic all but destroyed the industry” (Reuters) so to talk about the “continued success” of the cruise ship business in 2020 is profoundly misleading.
But this, as we’ll see, is typical of Powerfuel’s planning application, which trivializes and at times simply ignores the catastrophic effect of the Covid-19 pandemic on the international cruise industry. The economic realities of this collapse are either glossed over or in many instances simply not factored in at all.
➤ THE “SWIFT RECOVERY”
Powerfuel states grandly (and with no references to back it up) that “optimism is high for the future of cruising generally”, insisting that the sector expects to make “a swift recovery”. This cheery prediction rests on a bizarre comparison:
“Both the cruise ship sector and Portland Port are expecting a swift recovery, reflecting the experiences post-September 11 2001 and post-2008 financial crash.” — Powerfuel Portland, Environmental Statement, Chapter 6
This astonishing claim, that the 9/11 attacks and the financial crash would effect the cruise industry in the same way as Covid-19, is trotted out again by Powerfuel:
“After the September 11th attacks in 2001 and the 2008 financial crisis there was a rapid drop in cruise activity – and an almost equally rapid recovery.” — Powerfuel Portland, Environmental Statement, Appendix F2
Perhaps if Al-Qaeda had flown jets into a couple of Carnival Cruise liners, that might be an appropriate comparison to make — but as it stands, the remark is facile to the point of being distasteful. Neither 9/11 nor the 2008 financial crash had a sector-specific effect on cruising, whereas Covid-19 has been peculiarly devastating for the cruise industry. To quote the World Economic Forum:
“Of all those affected in the devastated travel sector, the $150 billion cruise industry — which was expected to carry 32 million passengers in 2020 — has been particularly badly hit.” — World Economic Forum, Agenda, November 6
The cruise industry was front and centre in Covid’s crosshairs. A senior official from the CDC (the US infectious diseases agency) described cruise ships as “uniquely vulnerable” to the coronavirus.
“Of all the calamities that befell tourists as the coronavirus took hold, those involving cruise ships stood apart…” — The Guardian, June 18
The entire industry became “a symbol of the coronavirus pandemic” (Chicago Tribune). And yet, not only does Powerfuel’s planning application assert, with blithe confidence, that the cruise industry is expected to make a “swift recovery”, in the very next sentence the economic devastation caused by the Covid crisis seems to have been entirely forgotten:
“However, it is possible that the continued success of the cruise business at the port could be adversely affected in future if the port is unable to provide shore power.” — Powerfuel Portland, Environmental Statement, Chapter 6
As if they’re identifying a possible downturn in a glorious upwards trend. Powerfuel’s argument seems to be that the “continued success” of an almost entirely wiped-out business might be threatened by the inability to provide shore power to cruise ships, many which are currently being taken out of service and scrapped:
“cruise liners are being scrapped in growing numbers as operators hit by the fallout from the coronavirus pandemic look to turn their unemployed vessels into cash in the recycling market” — Wall Street Journal, November 10
Perhaps if Powerfuel Portland were pitching to build a scrapyard for ships at Portland Port their economic arguments might make more sense. But Powerfuel’s economic argument requires there to be (in the face of all the evidence) an upwards trend which would be undermined by not building the incinerator. In which the cruise business is booming:
“The port hosts an increasing number of cruise ships that bring visitors to the area” — Powerfuel Portland, Planning Supporting Statement
Which is a pre-Covid statement in a post-Covid world — like it’s been cut and pasted from a 2019 economic analysis. It simply doesn’t apply any more. And to use it as support for a planning application is either ignorant and lazy or just plain deceptive.
As you might expect, the conclusion this document draws is: “that there is a robust and compelling need for the proposed Portland ERF” in order “to support the retention and growth of the cruise liner sector”. Except that the sector hasn’t been retained and it isn’t growing.
It’s in freefall.
➤ THE CRUISE INDUSTRY’S COVID CRISIS
Before examining Powerfuel’s cruise-based economic argument more closely, it’s worth spending a few moments assessing their easy claim that “optimism is high for the future of cruising generally” and their happy faith in the “swift recovery” of the cruise industry.
From the very earliest days of the Covid-19 pandemic, cruise ships have been at the centre of the Covid-19 storm. The nightmare of the early outbreaks, like the ‘Diamond Princess’ cruise which left 14 passengers dead, dominated the news cycle. After a series of high-profile quarantines the plug was pulled on cruising in mid-March, when US authorities issued a “No Sail” order. An by early April, the Economist grimly declared:
“The pandemic has been a catastrophe for the industry… revenue has collapsed.”
— The Economist, April 2
Massive borrowing, cash burn, stock sales, cruise line bankruptcies and ship scrapping followed, until in November the main industry body (Cruise Lines International Association) gave up on 2020 altogether. The industry is in a perilous state — in the words of Jamie Rollo, an analyst at Morgan Stanley, quoted in the Financial Times:
“When sailing does resume, it might take only a small outbreak on one ship to cause global operations to be suspended again” — Financial Times, June 6
A handful of cruises have been attempted. But in mid-November, the most high profile one, the ‘SeaDream 1’ cruise to the Caribbean via Portsmouth, ended in Covid chaos, with multiple cases on board, and the cruise was halted:
The news of a cluster of infections aboard a cruise ship is a blow to the industry, which is among the hardest hit sectors of the global economy.” — Motley Fool (investment advice), November 11
And as for a “swift recovery”, Powerfuel’s confidence isn’t shared by the world’s second biggest stock exchange, NASDAQ:
“The cruise line industry can’t seem to catch a break in 2020 and there aren’t any indications that conditions for the industry are going to get better… If the current surge in COVID-19 cases continues, it’s unlikely cruise lines will see much demand for cruises, even if they are allowed to sail.” — NASDAQ.com, October 28
For the cruise companies, Covid-19 isn’t a blip. They’re in a long-haul fight for survival:
“even if the companies survive, it could take years for them to fully recover” — New York Times, April 7
➤ POWERFUEL’S CRUISE SHIP ARGUMENT
When Powerfuel talks about “the growth of the growing cruise liner sector” it’s essentially making a pre-Covid, 2019 projection in a 2020 reality. But for their argument to work, for it to be “necessary” to provide shore power to ships, they’re forced to ignore the reality of the cruise sector’s collapse, and lock in on supposedly growing the growth.
Powerfuel’s own summary of its cruise ship argument is woven through with pre-Covid, upwards-trending language, such as “continue to attract” and “grow this sector further”:
As demonstrated by the Economic Impact Assessment, the proposed ERF will support the economic provision of shore power facilities at the port which will enable the port to continue to attract cruise liners to the port, and grow this sector further, with the benefit of the passenger spend in the local area. If the ERF is not approved, the shore power facility is unlikely to be provided at Portland Port and the loss of cruise liner business would lead to a significant loss in tourist related income and related jobs. — Powerfuel Portland, Planning Supporting Statement
Incredibly, they’re projecting a potential loss within a business that’s already actually lost. So, in the same document, they insist that “the proposed ERF [Energy Recovery Facility, their preferred name for the waste incinerator] will deliver substantial economic benefits” to the area by providing:
“Support for the delivery of shore power at the port, safeguarding existing cruise liner related tourism spend in the local area and encouraging further growth of this sector.” — Powerfuel Portland, Planning Supporting Statement
It’s hard to tell whether this is deliberate obfuscation or breathtaking stupidity — to talk of “safeguarding existing cruise liner related tourism spend” in late 2020. They want to safeguard this spend? What — against Covid? If ever it’s been too late to save safeguard something it’s cruise liner tourism spend. That ship, as they say, has sailed.
On the few occasions Powerfuel does muster the courage to mention Covid, it is dismissed in the most casual language, as something barely worth factoring in:
“Whilst the Covid-19 pandemic has had an impact on the amount of cruise liner activity taking place during 2020, it is expected that normal activities will resume in due course and that demand will begin to increase.” — Powerfuel Portland, Planning Supporting Statement
So Covid-19 had an impact on cruise liner activity? You might as well say hunting had “an impact” on the Dodo. And has their ever been a vaguer economic projection as “it is expected that normal activities will resume in due course and that demand will begin to increase.” Just a general undifferentiated expectation that, sooner or later, at some point, everything will get back to normal and demand will increase (although given that demand is currently zero, predicting that it will “increase” is hardly a tough call). As for timescale, the “swift recovery” is now “in due course”, but no actual dates. Just an optimistic wave of the hand towards the future.
➤ PORTLAND’S CRUISE SECTOR BASELINE
The first of the two “Economic Effects” documents, Appendix F1, sets out the “Socio-Economic Baseline” to the incinerator project — “the baseline report provides a summary of the current economy”. Oddly, for a project which lays so much emphasis on the economic necessity to provide “shore power” to support Portland’s thriving cruise business, only one paragraph in the entire 34-page document refers to cruise ships (along with one other general reference to “shipping”). The paragraph refers to a section of a local Portland policy document: “Neighbourhood Plan for Portland 2017-2031 Referendum Version (2020)”, the latest version of which appears to be dated February 5th, 2020.
It talks about how Portland’s deep harbour makes it a viable berth for “some of the largest cruise ships in the world”, and gives an overview of the port’s cruise business:
The cruise business is already a success story and a significant financial investment in berth infrastructure should open up in excess of 95% of the global cruise fleet enabling continued expansion into international market and an increase in tourism. — Powerfuel Portland, Economic Effects, F1, Socio-Economic Baseline
That statement — “the cruise business is already a success story” — could hardly be more pre-Covid. But this is important: in the planning application, the baseline overview of Portland Port’s “current economy” and cruise business is drawn from a pre-Covid world.
So for example, in the “Baseline” section of Powerfuel’s “Communtity, Health and Economic Effects” document, there is a list of “references and data sources”. The only specialist source for baseline data about the cruise industry is “Cruise Lines International Association, 2019, Environmental Technologies and Practices Report”, a pre-Covid report.
Yet another example: in section 6 of their Scoping Response Report, dated August 2020, Powerfuel sets out the “community, social and economic effects” of building the incinerator, with reference to the “currently known baseline” of the local economy. In terms of the cruise sector, this “currently known baseline” is given as follows:
“Portland Port hosted 44 cruises in 2019, accommodating over 62,000 passengers(6)” — Powerfuel Portland, Scoping Response Report
Amusingly, the footnote (6) is a reference to a press release published online by Portland Port which is dated October 26, 2018 — and which looks forward (from 2018) to the 2019 season — but this is framed in the planning application as a statement of historical fact. In the Port’s press release it’s clear:
Portland Port can now announce that 2019 is going to be another record breaker, with a massive 38% increase in cruise calls compared to this year. The 44 calls are spread between April and October… Meanwhile, a shift towards larger ships, as well as the increase in call numbers, sees the port expecting to handle more than 62,000 passengers during its 2019 season. — portland-port.co.uk
So the August 2020 baseline is drawn from an October 2018 projection of 2019. These are some really “robust and compelling” data. And that’s quite apart from the utter absurdity of drawing a cruise sector economic baseline from pre-Covid figures.
➤ THE “ECONOMIC IMPACT” ON THE CRUISE SECTOR
The F2 appendix makes a “forecast” of the port’s cruise business, comparing what would happen to the cruise sector if the energy-from-waste incinerator was built or not. And it becomes apparent, almost immediately, that this comparison is being made entirely outside the context of the Covid cruise industry collapse. The document states:
Under the ‘without shore power’ scenario, the first ship ‘lost’ to the Port is in 2026 and a small number of cruise ship calls continue to be lost annually until the last year of the forecast (2050). — Powerfuel Portland, Environmental Statement, Appendix F2
So, that’s an economic forecast in which the first ship is “lost” to the port in 2026, which has already lost all of its cruise business in 2020. It’s completely meaningless.
Powerfuel’s economic forecast is operating in some weird alternate future where the port suddenly feels a loss of cruise business caused by the non-construction of an ERF power source some 6 years after the entire cruise business has already fallen over. It’s important to labour the absurdity and unreality of this economic forecast because the planning application puts so much weight upon it.
The analysis becomes more surreal the more it ploughs on: earnestly speculating as to the economic effects on a sector that has already been shattered beyond recognition; warning of “a knock on impact of the loss of cruise based tourist trips” in some future 2019-ish realm where this impact hasn’t already taken place:
The impact of the loss of business will be felt firstly by the Port and its stevedoring suppliers, and also by coach trip and transport operators, in the form of lost income, potentially leading to lost employment. — Powerfuel Portland, Environmental Statement, Appendix F2
It’s hard to say what’s more tragic: the fact that Powerfuel Portland paid a consultant for this analysis, or that they then submitted it to Dorset Council. It’s such utter garbage it’s almost worth building the incinerator just to burn it.
As the document gathers steam it takes its bearings explicitly from a pre-Covid business landscape. We’re given another pre-2020, pre-coronavirus baseline:
In 2019, based on the approximately 54,000 passengers coming through the Port, spending an average of £71 per head on day trips (source: CLIA), an estimated spend of £3.8m would have been generated over the ‘cruise season’. — Powerfuel Portland, Environmental Statement, Appendix F2
In a moment of high irony, Powerfuel says that the £71 per head spend is actually a “conservative” estimate, because it’s based on “a 2017 figure”. Never mind the fact that if it were a 2020 figure it would be £0.
In the following paragraph we arrive at the confused heart of Powerfuel’s economic analysis, which makes explicit the planning application’s 2019 economic assumptions:
Using these assumptions of per head spend and estimating future passenger throughput based on an assumed 1,500 passengers per ship, enables us to model the impact (on tourism passenger spend alone) from cruise calls under each of the with/without shore power scenarios. The net difference is essentially the impact of offering shore power. — Powerfuel Portland, Environmental Statement, Appendix F2
Extrapolating from this unrealistic baseline, Powerfuel draws a bleak conclusion:
“Without shore power, the number of lost cruise calls at Portland Port is predicted to result in the loss of on-shore passenger spending of between £3 and £4.3m per annum (gross, before displacement is removed) of spending in the Level 1 and 2 areas combined. This is equivalent to the loss of approximately £2-£3m of annual local tourism spend” — Powerfuel Portland, Environmental Statement, Appendix F2
This theoretical loss (calculated from a pre-Covid baseline) is the stick that Powerfuel is wielding, alongside the carrot of increased tourist spending “amounting to tens of millions of pounds over the operating period of the plant”.
Powerfuel’s fantasy forecasting is given the veneer of certainty and economic rigour: the analysis “demonstrates” the economic benefit of the ERF, the ERF itself is “able to ensure the continued economic impact of short to medium term growth in cruise ship calls.” For the ERF to be able to “ensure” such a thing, in the face of the Covid-19 pandemic, would be an achievement little short of miraculous. However, in none of the planning application documents is there a reference to incinerator’s magical powers.
➤ ECONOMIC FANTASY VS. ECONOMIC REALITY
In the planning application, the economic forecasting around the cruise ship sector is worse than feeble; it’s is grossly misleading. Powerfuel’s economic argument rests on pre-Covid baseline data and assumptions. Economic threats are conjured up out of a fantasy world where Covid-19 hasn’t already wreaked havoc. For example:
“It is predicted that the loss of cruise business as a result of shore power not being provided would lead to an average decrease in spending in the Weymouth and Portland and wider Dorset area of £2.38 million per year, with an associated loss of 45 jobs…” — Powerfuel Portland, Environmental Statement, Chapter 6
This forecast would be extremely concerning in 2019. But in 2020 it’s just absurd. A grim and specific warning about the possible “loss of cruise business” — but founded upon a warped economic analysis which is completely detached from the real world.
Meanwhile, out in the real world:
“Colossal ships — complete with swimming pools, theatres and high-end restaurants — are now being pulled apart…” — World Economic Forum, Agenda, November 6
Cruise lines are going bankrupt. The world’s biggest cruise line, Carnival, recently posted a $3billion third quarter loss — the company is burning through hundreds of millions of dollars of cash per month, and has had to raise huge amounts of money to survive:
“despite admitting the the sector may never fully recover.” — Guardian, September 15
The bitter economic reality of the cruise sector collapse was on view along the Jurassic coast this summer:
“Empty cruise ships have become Dorset’s newest tourist attraction” — Telegraph, August 24
Despite this, Powerfuel has nerve to issue a stern warning of a possible “loss of cruise business” if their ERF isn’t built, and to declare, bizarrely, that building the ERF would be an economic “safeguard” for the sector (as if the sector hadn’t already been decimated):
“The provision of shore power as a result of the proposed development would therefore safeguard this spending and the associated jobs.” — Powerfuel Portland, Environmental Statement, Chapter 6
It would almost be comical if this pseudo-economic analysis weren’t such a strenuous exercise in misdirection and dissimulation, which risks having a real and longterm impact on the area. Certainly there are moments of farce — for example, in the Energy Need Statement where Powerfuel makes this claim:
Without the provision of shore power at Portland, cruise numbers are forecast to fall to just 10 per season by 2034, and ultimately to zero by 2045. — Powerfuel Portland, Energy Need Statement
A staggering and important claim: the total loss of the cruise industry to Portland by 2045 if the incinerator is not built. And the source of this claim? It’s given in footnote number 36:
(36) Powerfuel Portland estimation
➤ LOOKING TO THE FUTURE: THE CRUISE TO NOWHERE
Powerfuel is urging Dorset Council to stake Portland and Weymouth’s future on a pipedream — on a spurious economic analysis which all but ignores Covid-19 and the collapse of the cruise industry — and on some recklessly unrealistic forecasting.
Of all their forecasting, perhaps the most unrealistic is when Powerfuel looks forward to a return to “normal” for the cruise sector:
“it is expected that normal activities will resume in due course” — Powerfuel Portland, Planning Supporting Statement
“Normal activities”? Literally nobody seriously believes that “normal activities” in the cruise business will ever resume. As one of the world’s largest management consultancy companies, McKinsey, says of the cruise sector:
“There is no question that the industry will come out of this crisis looking very different from when it went in.” — McKinsey.com report
If it survives at all, “safety measures will radically change the cruise experience” (Forbes) — and something that’s already being trialled in this “very different” post-Covid cruise sector are “cruises that don’t actually visit any ports” with “nonexistent excursions” (CNN):
“cruises to nowhere may be the next big thing in Covid-safe travel” — CNN, October 8
Also, any excursions that are made on shore are likely to involve protective protocols, keeping interaction with locals (and the local economy) to a minimum:
“Cruise lines say they plan to contain passengers in ‘bubbles’ on and off shore” — KTOO.org (Alaska), October 15
Powerfuel’s cheery confidence that “shore power” from their ERF can “safeguard” the port’s cruise business and the area’s income from cruise tourism appears even further removed from reality.
Looking at the big picture, there’s one other real-world factor to take into account: the change of administration in the White House, and the shift towards tougher measures to crack down on Covid-19. Already, in light of the outbreak aboard SeaDream 1 in the Caribbean, there are moves within the US government to stop any sailings:
“Two Democratic members of Congress asked the Centers for Disease Control and Prevention to reinstate the no-sail order for cruise ships and reverse course on efforts to resume cruise operations.” — Sea Cruise News, November 14
In short, Powerfuel’s economic arguments for an ERF to provide shore power to the cruise industry are about as robust and watertight as a half-dismantled ocean liner. And the way Powerfuel have employed economic trickery, fact-dodging, unsourced statements and made multiple unfounded projections in this important area of the planning application should serve as a warning to anyone studying the application as a whole.
➤ FOOTNOTE: GILES FRAMPTON’S LETTER TO THE ECHO
Powerfuel director Giles Frampton attempted to address some of these issues in a letter to the Dorset Echo, but made precisely the same error in reasoning:
“Portland Port already has more cruise visits booked in for 2021 than it had for 2020, so all indications are that this important business for the local area will continue to expand post-Covid, and the ERF will help the Port to attract even more tourists to the area.” — Giles Frampton, Dorset Echo, November 15
He’s comparing the number of “bookings” between years, but in 2020 all the bookings were cancelled. The cruise ships never turned up. And the bookings in 2021 are for cruise visits that may well not happen. The fact is, bookings aren’t cruise ships. In other words, Frampton is comparing some possible future number of possible cruises in 2021 with the number of cruises in 2020 (which didn’t happen). Essentially he’s comparing zero with zero. Yet this forms the basis of his grand declaration of an expansion in business. The only thing that’s expanding here is the hot air.
In typical Powerfuel style, Frampton even upsells his one source for his claim that: “there is a clear expectation that the cruise business will come back, and expand further, once the pandemic is over.” His source for this is a “KPMG report” dated July 23. But in fact this isn’t a “report” at all. A “report” suggests a substantial piece of work. The “KPMG report” turns out to be a 1000-word blog post. You can find it online in the “blogs/home/posts/“ section of the KPMG website.
Frampton extracts from the blog post a reference to “a recent survey from CLIA (the global cruise industry trade association)” according to which “82 per cent of cruisers are likely to book a cruise for their next vacation.” So the cruise industry’s biggest lobby group produces a survey that shows how rosy the cruise industry’s future is. Not exactly something you’d want to hang your hat on.
The KPMG blog says that “people are still looking forward to future travel on cruises”. Which is obviously true: fans of cruising are looking forward to going on a cruise. Again, hardly a robust economic forecast: simply stating the obvious. Frampton goes on to quote this reference from the KPMG blog:
“The poll conducted by CruiseCritic.com shows 75 per cent of 4,600 cruise passengers are interested in cruising after COVID-19 ends.”
What’s odd about this statistic is what it actually shows is that a quarter of cruise passengers have given up the idea of going on cruise. If anything, it’s evidence of a 25% downturn, not evidence of a boom.
Finally, “after COVID-19 ends” is suspiciously fuzzy. Frampton tosses out a similar phrase: “once the pandemic is over.” For Powerfuel’s economic arguments to make any sense, he needs the pandemic to go quietly away, for everything go back to normal, and for the cruise business to “continue to expand”. However, the KPMG blog also points out, in a passage conveniently not quoted by Frampton, that:
“there is no clear timeline for cruise operations to start again.”
So maybe don’t bet on those 2021 bookings just yet…
TAKE ANOTHER DIP INTO POWERFUEL’S PLANNING APPLICATION HERE