Abstract-Traditionally, model scale tests of ships are carried out without taking into account the dynamics of the shipboard systems that are involved in the operation under consideration. An example of this is the way that model scale free sailing tests in waves are carried out. The ship model is mounted with an electric motor, shaft and propeller and subsequently tests are carried out with constant propeller speed. In some cases constant shaft torque or constant power are employed. However, neither of these options reflects realistic behaviour of the drive system, because in waves and during manoeuvres the propeller speed, torque and power are in fact variable and their dynamic behaviour is governed by the drive train characteristics. The question arises to what extent, and in which cases, the dynamics of the shipboard systems affect the overall system behaviour. In this paper the application of Hardware-in-the-Loop (HIL) simulation in a ship model basin or towing tank is explored as a means to answering that question. The ambition is to develop an instrumented model scale ship of which the components of the drive train and its control are included by means of a correctly scaled time domain computer simulation model of the propulsion system. This simulation model is to run on a real-time processor which, via IO cards, provides electric power to an electric motor on-board the instrumented model scale ship, which in turn drives one or multiple shafts and propulsors. In this paper the role of scale effects on the test set-up is discussed. It is also shown that, in order to simulate realistic drive train dynamics in waves and during manoeuvres, it must be ensured that the combination of partial simulated drive train on the one hand and electric motor dynamics plus shaft and propeller inertia on the other hand should, as a total, represent the real dynamics of the drive train system.