Presentation at DG-Move Workshop Brussels 27/04/2010
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1 PRECONDITIONS FOR THE IMPLEMENTATION AND HARMONISATION OF NOISE-DIFFERENTIATED TRACK ACCESS CHARGES Presentation at DG-Move Workshop Brussels 27/04/2010
2 Content Overview 1. Introduction & Background of Analysis 2. Methodology and Sources of Research 3. Framework Conditions 4. Preferred Design Option: Results of the study 5. Further recommendations Slide 2
3 Introduction & Background of Analysis Introduction of the Consortium Study was commissioned to KCW - a Berlin based transport consultancy specialised on strategic and management advice for public services. Berlin University of Technology and Steer Davies Gleave were project partners of KCW. Slide 3
4 Introduction & Background of Analysis background & scope of the study An estimated 35 million citizens in the EU are exposed to rail-noise levels above 55 db(a) Increasing concerns of local residents have put pressure on municipal, regional and state governments to address the issue. It is generally agreed that national solutions will not be sufficient in order to solve the problem. The EC favours a coordinated approach on the European level involving all stakeholders (railway sector, competent authorities on national state level). Several technical and operational measures are available to reduce the level of rail noise, passive measures (noise barriers) or active measures (at source); and operational measures for rail freight (e.g. routing restrictions at specific times of the day). However, active measures such as improving the quality of wheels and rail surface have been found to have the highest cost-effectiveness and have hence been chosen to be regarded with highest priority by the Commission. Slide 4
5 Introduction & Background of Analysis background & scope of the study Of particular interest is the retrofitting of conventional cast-iron brake blocks with K- or LL- brake blocks as they achieve significant reduction of noise emitted by freight trains at relatively low costs (potential of minus 8 db(a) which corresponds with about 50% of the perceived rail noise level). Given the low profit-margin the rail-freight sector has experienced over the last decades it is unlikely that Railway Undertakings, Wagon Owners and Wagon Keepers will invest in retrofitting of the wagon fleet without external incentives. Any solutions must be practicable for newly procured as well as existing wagons due to relatively slow renewal rate. Scope of the study: Evaluating preconditions for a TAC which incentivises the retrofitting of freight wagons with silent brake blocks as well as freight wagons fulfilling requirements of TSI-Noise. Slide 5
6 Introduction & Background of Analysis further constraints of the study: All costs estimates collated as part of the KCW study had an editorial deadline in August Results of latterly published studies could not been considered but are believed not to change the general conclusion and recommendations of the study. Incorporate the major findings of the predecessor-study Impact Assessment Study on Rail Noise Abatement Measures (commissioned by EC to PWC/ Uni Rome) which concluded that: NDTAC is the preferred policy option to incentivise retrofitting of the fleet NDTAC more viable than direct funding from an economic viewpoint An estimated 370,000 freight wagons in Europe to be retrofitted (Several other cost estimates regarding retrofitting were inherited from the PWC study) Slide 6
7 Agenda Background and Introduction Methodology and Sources of Research Framework Conditions Preferred Design Option: Results of the study Further recommendations Slide 7
8 Methodology and Sources of research general approach: Review of existing academic approaches towards developing NDTAC Analysis of planned or existent NDTAC (Switzerland, Netherlands) Examination of framework conditions (economic, technical) under which NDTAC would have to operate. Evaluation of potential NDTAC and selection of preferred design option. Detailed development of preferred option. Recommendations Framework Conditions Intramodal/intermodal impacts Contractual relationships Costs Data entry TAC schemes/ Differentiation Brake block solution Further suitability Preferred NDTAC Constraints for the implementation of NDTAC Evaluation of the most preferred design option In-depth analysis Characteristics of charging Performance In-Depth Analysis Final recommendations Slide 8
9 Methodology and Sources of research general approach: All steps of the analysis were further supported by stakeholder consultations held with: Associations (e.g. UIC, CER, UNIFE, ERFA, VPI Hamburg, VDV) Authorities / Regulatory Bodies Infrastructure Managers (e.g. DB Netz, ProRail, RFF, ÖBB Infra) Railway Undertakings (e.g. DB Schenker, SNCF) Other experts (e.g. manufacturer, Silent Rhine working group etc.) Assumptions and results of the analysis were submitted to the review of selected experts when applicable. Slide 9
10 Agenda Background and Introduction Methodology and Sources of Research Framework Conditions Preferred Design Option: Results of the study Further recommendations Slide 10
11 Framework Conditions rail freight market In general positive growth rates in rail freight sector Risk of modal shift depends on several aspects (e.g. type of goods, price elasticity, availability of other modes of transport) Negative incentives could weaken the sector through higher TACs transport performance [bn tkm] Germany Poland France Italy United Kingdom Sweden Austria Czech Republic Switzerland Netherlands Slide 11
12 Framework Conditions contractual relationships Slide 12 freight wagon ownership structure Wagons are owned by RU (mostly incumbents), renting companies (increasing market share) or even clients Incentive system must take into account the complexity of rail freight market
13 Framework Conditions national track access charge systems (1/2) Observation Train based accounting systems IMs apply large range of pricelevels (level of cost-recovery) No differentiation by commodity group, time or route TACs mileage-related Process of charging: IM - RU Impact on NDTAC NDTAC require wagon basis Any incentive no percentage addition of existing charges but an absolute value per wagon-km No differentiation recommended in order to avoid unneeded complexity of the incentive system NDTAC require mileage-related,too Data required by NDTAC available at IM and RU Slide 13
14 Framework Conditions national track access charge systems (2/2) Impacts on NDTAC Price-level of national TAC s Level of cost recovery NDTAC (add-on; +/- absolute value) Train-based national TACs Differentiation (time & route) Process of charging IM - RU national TAC (remain uneffected) Mileage-related national TACs Slide 14
15 Framework Conditions data entry Precise recording of relevant data essential for any system as basis for accounting Upcoming TAF TSI is designed as an European-wide system which supersedes all national wagon-specific telematic systems (scheduled 2015) The TSI is an common interface for data exchange; if applicable modifications for needs of NDTAC have to be done Until implementation interim solution needed Alternative systems such as RFID, Video, GPS available, but most likely too expensive Self Declaration applied in Switzerland has proofed to be a pragmatic and simple system. RU applies for bonus at the state authority based on mileage performance. Slide 15
16 Framework Conditions brake block solution 1: K-block K-blocks are homologated, yet Usage requires complex modification of single wagon and if applicable for wheels Pneumatic braking system has to be changed and recalibrated Results in relatively high upfront costs Slide 16 brake block solution 2: LL-block LL-blocks are currently not homologated Date of homologation uncertain (UIC expects latest 2012) Composite and sintered LL-block brakes currently tested LL-blocks do not require technical modifications on the wagon (with only some exceptions) This means, no upfront cost (beside the new brake block) estimation of costs uncertain due to missing homologation
17 Framework Conditions cost structrure Upfront costs Retrofitting and modernisation of wagon Implementation of recording and accounting environment Operational costs Higher costs for brake blocks and shortened life cycle Higher wear and tear of the wheel (e.g. through equivalent conicity) Data recording and data exchange Additional costs During retrofitting/modernisation cannot be used New homologation of the wagon, if applicable Slide 17
18 Agenda Background and Introduction Methodology and Sources of Research Framework Conditions Preferred Design Option: Results of the study Further recommendations Slide 18
19 Preferred NDTAC Design Option recap: process of narrowing down the preferred design option initial design options looked at Ι academic approaches Ι applied & discussed national NDTAC Slide 19
20 Preferred NDTAC Design Option recap: process of narrowing down the preferred design option evaluation of NDTAC constraints Ι technical constraints Ι cost constraints Ι concerns of stakeholders involved Slide 20
21 Preferred NDTAC Design Option recap: process of narrowing down the preferred design option development of preferred design option Ι general characteristics of charging Ι functionality and institutional setup of the charging process Ι type and level of incentive Ι length of funding period Slide 21
22 Preferred NDTAC Design Option preferred design option : elements looked at general characteristics of charging of NDTAC functionality and institutional setup of the charging process charging process type and the level of incentive (bonus-level); length of funding period Slide 22
23 Preferred NDTAC Design Option general characteristics of charging of NDTAC feature NDTAC should only include a bonus (no malus) level of bonus predefined and fixed over funding period charging based on accounting of individual wagons incentive level should cover costs associated with retrofitting plus administrative costs for WK and RU rationale Ι sector should not be weakened Ι only silent wagons need to be recorded and adminnistered Ι self-declaration less likely to work Ι low risk of calculating amortisation Individual mileage performance should be the activating variable for bonus Neither overcompensation nor underccompensation of the sector (over fleet average) Slide 23
24 Preferred NDTAC Design Option functionality and institutional setup of the charging process feature Clearing Body: Infrastructure Manager Railway Undertaking claims for the bonus RU forwards the received bonus to the participating WK or WK factors bonus into rental charges respectively rationale Ι only IM and/or RU have data regarding train composition, train mileage and wagon mileage Ι IM can apply plausiblility tests in case self decleartation is used Ι none of these enteties need to obtain data from third parties Ι allows market to create its own accounting environment (e.g. WK can incorporate anticipated bonus payments into annual rental rate). Slide 24
25 Preferred NDTAC Design Option charging process (short term) feature rationale use of self declaration Ι IM invoices RU as part of TAC Ι invoice is basis for reimbursement-form listing all silent wagons per train/ day and registration number Ι RU passes bonus to WK or WK factors bonus into rental charges respectively Ι Control and Enforcement Body has full access to data from IM, RU and WK and undertakes spot tests Non-availability of efficient wagonrecording and accounting system Slide 25
26 Preferred NDTAC Design Option charging process (optional in the long term) feature rationale Use of TAF-TSI Ι Requires existence and full operation of central database including information on routing, mileage, train composition and technical characteristics of the wagon applicability for NDTAC in short term not secured Slide 26
27 Preferred NDTAC Design Option length of funding period feature rationale funding period predefined before NDTAC starts recommended 6 or 12 years high planning reliability for all involved parties multiple of revision cycle Slide 27
28 Preferred NDTAC Design Option level of bonus feature rationale K blocks Min Value Recommended Value Max Value Initial investment for a 4- axle wagon 6,000 8,000 10,000 Initial investment for a 2- axle wagon 3,000 4,000 6,000 LL-blocks Initial investment for a 4- axle wagon (s-traffic) 500 1,000 1,600 Initial investment for a 4- axle wagon (ss-traffic) 2,500 4,500 6,600 Averaged investment 4- axle (ss/s=20/80%) 900 1,700 2,600 Initial investment for a 2- axle wagon (s-traffic) Initial investment for a 2- axle wagon (ss-traffic) 2,250 3,500 4,800 Averaged investment 2- axle (ss/s=5/95%) ,000 Slide 28
29 Framework Conditions K blocks Min Value Recommended Value Max Value Initial investment for a 4- axle wagon 6,000 8,000 10,000 Initial investment for a 2- axle wagon 3,000 4,000 6,000 LL-blocks Initial investment for a 4- axle wagon (s-traffic) 500 1,000 1,600 Initial investment for a 4- axle wagon (ss-traffic) 2,500 4,500 6,600 Averaged investment 4- axle (ss/s=20/80%) 900 1,700 2,600 Initial investment for a 2- axle wagon (s-traffic) Initial investment for a 2- axle wagon (ss-traffic) 2,250 3,500 4,800 Averaged investment 2- axle (ss/s=5/95%) ,000 Slide 29
30 Framework Conditions costs: operational costs K-blocks Operating Costs for 4-axle Wagon: 5.3/1000 km LL-blocks Operating Costs for 4-axle Wagon: 5.4/1000 km Slide 30
31 Preferred NDTAC Design Option time and route dependent variation feature differentiation of bonus by time and route not recommend level of bonus predefined and fixed over funding period however, member states should consider additional bonus granted to trains fully equipped with retrofitted wagons rationale allocative effect limited due to operational constraints/price elasticity of routing assumed to be too small increases complexity and costs of the system Slide 31
32 Preferred NDTAC Design Option estimated economic performance of recommended system Model Inputs Model Scenarios Model Outputs Costs of Retrofitting Length of Funding Period Incentive Level Upfront costs LL blocks Upfront costs K blocks Vehicle mileage related costs LL blocks Vehicle mileage related costs LL blocks Fleet Configuration Scenario 1: funding period over 6 years Scenario 2: funding period over 12 years Annual Retrofitting Rate Bonus level K-Blocks Bonus Level LL-Blocks Fleet Evolution Fleet size Annual change in fleet size Age distribution Annual mileage distribution Administrative Costs low case: 30,000 wagons per year central case: 60,000 wagons per year Evolution of retrofitted wagons over funding period Evolution of retrofitted wagons over funding period Economic Costs Costs at RU Costs at WK/WO Costs at IM high case: 90,000 wagons per year Total bonus payments over funding period Slide 32
33 Preferred NDTAC Design Option estimated economic performance of recommended system: Fleet evolution (central case cenario) 700, , ,000 No. of Wagons 400, , , , Year Fleet Size Retrofitted Wagons New Wagons Silent Wagons Noisy Wagons Slide 33
34 Preferred NDTAC Design Option estimated economic performance of recommended NDTAC: Total Bonus Payments (6 year funding / 60k wagons per year retrofitting rate) Slide 34
35 Preferred NDTAC Design Option estimated economic performance of recommended NDTAC: Total Bonus Payments (12 year funding / 60k wagons per year retrofitting rate) Slide 35
36 Agenda Background and Introduction Methodology and Sources of Research Framework Conditions Preferred Design Option: Results of the study Further recommendations Slide 36
37 Preferred NDTAC Design Option Further recommendations Ι Cast Iron brakes may be banned after transition period Ι additional bonus for trains fully equipped with retrofitted wagons Ι System allows flexible approaches of funding: Both, memberstates (through compensating IM) or the sector (through general uplift in access charges) can contribute to fund NDTAC. Ι However, contribution by the sector should be predictable, while public sector should cover the risk of unstable fleet renewal rates. Ι Uncertainty of future availability and cost of LL-block most important determinant. Slide 37
38 contact details René Naumann KCW GmbH Fon: +49 (0) 30/ Büro Berlin Fax: +49 (0) 30/ Bernburger Str. 27 Mail: D Berlin Web: Study on the internet: Slide 38
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