Week 4 | December 2025

Four Navy unmanned surface vessels completed a five-month Pacific deployment from August 2023 to January 2024. They crossed the International Date Line, crossed the Equator, visited Japan and Australia. Sea Hunter and Sea Hawk ran autonomous nearly the entire time - human operators aboard for legal compliance and emergency override, not because the systems needed them.

Back in U.S. territorial waters, Ocean Rainforest operates an 86-acre kelp farm off Santa Barbara with a purpose-built crewed vessel, the Breiðbløðka. They partner with Blue Robotics for autonomous monitoring - sensors, cameras, data collection. The actual harvesting? Manual. Cutting, handling, transporting biomass - all human-operated.

This isn't a technology story. The autonomous navigation capability that defense has proven at scale exists commercially. L3Harris has delivered 500+ autonomous surface and undersea vehicles to defense, offshore energy, and scientific customers. Saildrone has deployed 20+ vehicles for recent Navy and NOAA operations, with over 100 manufactured and hundreds more in production. The systems work.

So why is Ghost Shark going into production while your kelp operation still requires a crew?

Three barriers block the transfer: regulations written for crewed vessels that defense bypasses through sovereign immunity, economics where thin-margin kelp harvesting can't absorb technology costs that defense subsidizes with billions in R&D, and an insurance market with exactly one willing underwriter for autonomous vessels - covering 72 ships total, all under 24 meters.

Defense autonomous vessels operate under UNCLOS Articles 29, 32, 95, and 96. Sovereign immunity. They're exempt from SOLAS, MARPOL, STCW, and virtually all IMO conventions. No minimum crew requirements. No port state inspections. Flag state oversight only.

Commercial operators face the full regulatory burden with zero clarity on how autonomous vessels actually comply. The IMO's Maritime Autonomous Surface Ships (MASS) Code - the first coherent international framework - becomes mandatory January 1, 2032. Non-mandatory Code adoption now targets May 2026 (revised from the original May 2025 timeline). Mandatory version gets adopted July 2030, enters force 18 months later.

Until then? Regulatory patchwork. U.S. Coast Guard evaluates autonomous vessels case-by-case under a 1987 statute with no specific autonomous regulations. The UK's Workboat Code Edition 3 covers remotely operated vessels under 24 meters. Norway leads with actual operational deployments - the Yara Birkeland has reduced crew from 5 to 3, with planned further reduction to 2 as remote operations expand, and a February 2024 contract for four fully autonomous ferries targets unmanned operation by 2028.

But Norway is exceptional. Most jurisdictions offer no clear path.

The binding constraint for U.S. operators: 46 U.S.C. § 10101 requires every vessel to have a master. Coast Guard cannot waive this outside narrow pilot programs. For offshore aquaculture specifically, the regulatory problem compounds - there's no explicit statutory authority under the Magnuson-Stevens Act for EEZ operations. Operators need Army Corps permits, EPA NPDES approvals, NOAA consultations. None of these frameworks anticipate autonomous support vessels.

Defense doesn't wait for civilian regulatory clarity. Navy autonomous vessels answer to naval command, operate from military facilities requiring no commercial port certificates, and face no cargo owners demanding proof of insurance. The regulatory divergence isn't accidental - it's structural.

The FY2026 Navy budget proposes $5.3 billion for autonomy programs, up $2.2 billion from last year, including $1.7 billion for autonomous surface vessels. For comparison, DARPA's ACTUV allocated $159 million for development (Sea Hunter prototype: $20 million), and L3Harris received $281 million for 9 MUSV vessels with options.

Meanwhile, ARPA-E MARINER program for macroalgae development received $25 million total - far less than even one Navy year's autonomy budget.

Defense autonomous vessels replace $700,000/day destroyer operations with $15,000-20,000/day USV alternatives - a 35-50:1 cost advantage. That math justifies any technology investment. Commercial kelp farming operates on fundamentally different economics. A 2025 Kelson Marine/UMaine study found baseline kelp production costs of $2,618/tonne fresh weight, reducible to $383/tonne through optimization. But that optimization comes from mechanized harvest and vessel sizing, not autonomy.

At current scales - most Maine farms are 60m×60m - labor costs for a 3-person crew operating a 10m vessel are manageable. Sea Machines claims its SM300 autonomy retrofit delivers ROI within a year for commercial vessels, but that's for cargo shipping with 24/7 utilization. Kelp operations are seasonal. The vessel sits idle half the year or more.

Autonomy becomes economically attractive at 1,000+ hectares. Ocean Rainforest's Santa Barbara operation - the largest U.S. commercial kelp farm - is 86 acres. That's 35 hectares. You'd need to scale 30x before the autonomy investment pencils out.

Running Tide's 2024 collapse shows the funding gap: no guaranteed offtake, no scale investment, no autonomy - despite having the technology. CEO Marty Odlin summed it up: "The voluntary carbon market is voluntary, and there simply isn't the demand."

Defense has guaranteed demand. Congress appropriates billions annually. Commercial kelp operators sell into spot markets with no long-term contracts.

The Shipowners' Club launched the world's first dedicated autonomous vessel P&I policy in 2018. They currently insure 72 autonomous vessels globally with zero claims to date. Coverage is "all risks" with limits up to $500 million, including cyber insurance.

But only for vessels under 24 meters.

No International Group P&I club offers a specific autonomous vessel product. Commercial operations needing larger vessels - exactly what scaled kelp farming would require - face custom placement requiring specialized brokers and accepting coverage gaps. Premiums run 20-30% higher for autonomous vessels due to untested technology and zero claims history to price against.

Defense vessels need no insurance. Sovereign immunity. Government indemnification under Public Law 85-804 allows DOD to indemnify contractors for "unusually hazardous risks" with no dollar ceiling. The Public Vessels Act waives sovereign immunity for negligent operation claims, but that's government self-insurance. Navy autonomous vessels operate from naval facilities, face no commercial port entry requirements, answer only to flag state.

The liability framework for commercial autonomous vessels remains undefined. Who is responsible when an autonomous kelp boat causes damage? The owner? Manufacturer? Software developer? Remote operator? Classification society? Under UK and Korean product liability laws, manufacturers can claim "development risk defense" - exemption if defects were undetectable at delivery. That transfers risk to operators who can't absorb it.

For aquaculture operations specifically, standard coverage from Sunderland Marine, AXA XL, and Miller Insurance assumes crewed operation. No dedicated autonomous aquaculture vessel product exists. Operators would need to combine Shipowners' Club autonomous coverage with traditional aquaculture policies - a custom solution most brokers won't touch.

The autonomous maritime technology that defense is deploying at scale - proven across 46,651 nautical miles, validated in Sea State 5, demonstrated for 30-day continuous operations - works. L3Harris reports 2,100+ hours at sea without human intervention. The Navy's Future USV program explicitly specifies vessels "built to commercial standards," indicating defense sees commercial technology as viable for non-exquisite applications.

The transfer barrier isn't technical. It's institutional.

For defense analysts: Technology transfer from Navy programs to commercial ocean materials is technically feasible right now. L3Harris, Leidos, Saildrone already serve both markets. What blocks deployment is market structure - voluntary carbon markets that collapsed on Running Tide, seasonal operations that don't maximize 24/7 autonomy advantages, thin margins that can't absorb 20-30% insurance premiums.

For climate investors: Scale investment sufficient to justify autonomy economics requires guaranteed offtake that voluntary markets don't provide. Running Tide's failure wasn't technical - it was demand. ARPA-E's $25 million MARINER program is orders of magnitude below necessary investment. Defense gets $5.3 billion annually because Congress appropriates it. Ocean materials needs equivalent commitment.

For procurement officers: If you're evaluating autonomous systems for ocean materials operations, Shipowners' Club offers the only proven insurance pathway for vessels under 24 meters. Anything larger requires custom placement or government risk assumption. The regulatory timeline is 2032 for mandatory international standards. U.S. operators face longer waits unless Coast Guard develops specific guidance or Congress creates statutory authority.

The paradox isn't sustainable. Defense is building autonomous maritime infrastructure at scale - persistent surveillance networks, distributed sensor grids, common operating systems for networked vessels. That infrastructure will exist. Ocean materials operations will eventually exploit it, whether through direct technology transfer, spin-off companies, or regulatory frameworks that finally catch up to operational reality.

The question is timeline. Eight years until mandatory MASS Code. Eight years until Navy LUSVs reach initial operational capability. Eight years is long enough for early movers with the right regulatory partnerships (Norway's approach), sufficient scale investment (1,000+ hectare farms), and risk tolerance for insurance gaps to establish market position before institutional barriers fall.

Or eight years is time wasted waiting for regulations while defense builds capability commercial operators should already be using.

We shift from barriers to opportunities with a comprehensive Deep Dive on the unmanned maritime systems startup landscape. Which companies are actually delivering operational capability vs. burning VC cash on prototypes? What does the procurement pipeline look like for the next 24 months? Where are the gaps defense isn't filling that commercial ocean materials could exploit?

If you're tracking the autonomous maritime buildout or betting on which companies win the Indo-Pacific naval competition, you won't want to miss it.

Since you have been, thanks for reading.

Cheers,

Mick