Welcome to FCP’s regular e-newsletter, issued to our clients, partners and colleagues in the international transport sector. In this week’s edition we explore opportunities to drive recovery from, and the silver linings of, COVID-19, as well as the leading role rail can play in future decarbonisation of the transport industry.
We would like to extend our very best wishes to everyone receiving this email as we all deal with local quarantine and isolation requirements; we hope you and all your family and friends are riding out the COVID-19 challenge well and are fit and healthy.
As governments start to contemplate their medium and long-term responses to COVID-19, they will inevitably be facing the challenge of regaining control of public sector borrowing whiles also maximising economic stimuli, including transport infrastructure investments.
In the UK, the DfT has put significant effort into soliciting market-led enhancement proposals but, to date, there has been little sign of such proposals being accepted and implemented.
Strong proposals such as the Heathrow Southern Railway scheme have fallen foul of process and wider considerations such as competition, procurement and state aid regulations.
Now, surely, is the time to find our way past such obstacles and to unleash the potential of privately-developed and -funded proposals for investment in transport projects. In doing so, there is good learning to draw on. LA Metro’s Office of Extraordinary Innovation is a thought leader in this work with a clear policy on unsolicited proposals which forms a critical part of their plans to achieve a dramatic upgrade of public transportation ahead of the 2028 Olympics and Paralympics. The policy specifically sets out to “jump-start the traditional public procurement process” and to “more quickly realize the benefits of new opportunities to deliver services better, faster and more effectively”.
In the UK, there is a clear opportunity to revive the DfT’s market-led investment initiative that was intended as a mechanism for private sector investment in the rail network. This would allow contractors to develop Outline Strategic Business Cases for given schemes that are currently part of the authorisation process for work funded by Network Rail. Such measures really can help prevent a shortage of Government funds at precisely the moment when we need to avoid the cancellation of planned projects.
As New York’s TransitCenter team forecasts a financial impact on US Transit Authorities of up to $40bn and transit workers make up a significant proportion of COVID-19 deaths in places like New York and London, the search for good news is, understandably, under way.
Though almost all passenger rail operations are currently ramped right down, there are some signs that COVID-19 may yet yield some positive news for passenger rail.
Of course, the big news is likely to be financial, with transportation projects and investments being strong candidates for stimulus investments by national and provincial governments. In the USA, for instance, whilst the FTA has promised an initial $25bn allocation to Transit Authorities, the US government’s CARES Act and its Moving Forward Framework is shaping up to commit $160bn for additional transit routes, expansions of the US’s passenger rail network and investment in new higher-speed passenger rail corridors. House Speaker Nancy Pelosi has emphasised the need to “invest in our infrastructure to address some of the critical impact and vulnerabilities in America that have been laid bare by the coronavirus and to “lay the foundation for a strong recovery”. Whilst there are undoubtedly significant concerns and questions for the future of mass transit, now is the time to prepare for the inevitable injections of liquiditiy to global infrastructure.
In the UK, domestic airline travel is under serious threat, especially following the demise of the dominant regional carrier FlyBe. In 2019, there were in excess of 22 million passenger domestic trips made by air compared with 1.8bn by rail. Although, in volume terms, the air share is small, any transfer to long distance rail would generate significant revenue. The average rail fare in the UK for a return journey is under £12 but an off peak Edinburgh-London or Glasgow-London return fare (the busiest air flow to/from all London Airports at 4.5m and 2.3m respectively) are currently about £150. If the rail industry is able to access just 10% of the 22 million, it could generate at least a 1.5% increase in revenue. Developing a comprehensive strategy to promote passenger rail as a safe transport mode, while leaning on sustainability and financial benefits will be key for those looking to take advantage of struggles in the air transport industry.
To date, the attraction to passengers of rescheduling from a crowded train to an earlier or later train with lower load factors has been relatively limited. This may well change following social distancing. The COVID-19 experience will inevitably encourage some passengers to shy away from rail, in favour of solo travel modes (car, bike etc.), but we may well also see a greater acceptance of so-called “spreading” across train services, in order to achieve greater social distancing. This will provide opportunities to train operators to adapt traditional fare revenue models and optimise for lower, more extended peak load factors.
It will take some time for the transport industry to assess data on new trends and reliably to assign causation to changes in demand and revenue. Rigorous use of backcasting will be a key part of the required analysis.
Only then will we know the true extent to which there can be good news for passenger rail following the current pandemic.
The UK Government’s new policy paper Decarbonising Transport: Setting the Challenge explains how it intends to meet its target of net zero transport emissions by 2050. Whilst rail is already a lower-carbon transport mode, such decarbonisation initiatives across the world are an opportunity for the rail industry to underline its potential to transform carbon emissions.
In the UK, the statistics are a stark reminder. The only trains capable – currently – of meeting the 2050 zero emissions targets are electric, but only 42% of track in the UK is electrified and 29% of Britain’s current fleet is still run solely on diesel fuel.
In February 2018, the Government challenged the rail industry to deliver the removal of all diesel-only trains from the network by 2040, giving 22 years to meet the challenge. So far, the first 2 of the 22 years have seen some planning, report writing and a committee or two, but limited solid action.
Perhaps the dramatic emissions fall caused by COVID-19 will prompt more action as industry leaders realise the scale of change required. If the Government wants to actively lead the way in driving accelerated change, they may also consider attaching emissions related pre-conditions to stimulus payments for the transport industry.
As the landscape begins to shift, there are some key learnings we must draw on:
Further electrification is perhaps the stand-out solution to achieve decarbonisation targets
– and we should push on with it. However, electrification projects cost in the order of
£750,000 to £1m per single track kilometre and often take several years to deliver. Solutions based on discontinuous electrification and alternative rolling stock therefore continue to have a role to play. Electrification costs and delays have already driven investment and innovation in battery, hybrid, bi-mode, tri-mode, hydrogen-powered and even solar-powered traction.
Each alternative mode presents technical and logistical challenges. Hydrogen, for instance, has been making progress as a viable and safe means of transport, though still limited in its range due to onboard storage capacity requirements. The supply of hydrogen is also not yet plentiful in the UK, but in-depot hydrogen supply solutions (e.g. on site generation, delivery to site) are being evaluated and developed. The recent news about a hydrogen-powered fleet in the Tees Valley in North East England may well presage further reductions in the share of rolling stock running on diesel.
Rolling stock lifespan is a big issue in all this. Most fleets last around 40 years, although the design life may be less. Trains built today will only be “mid-life” by 2040. Although “re- tractioning” or modification may become an important tactic, the reality is that the trains that will help countries achieve zero-carbon rail in the 2040s and 50s should be ordered over the next 5 to 10 years.
Our progress to zero carbon rail need not be a single leap. Whilst diesel fleets will gradually be replaced with various appropriate solutions, interim emissions improvements can be achieved using synthetic fuel, as a direct replacement for diesel in existing fleets. As the leaders of North Jutland’s railways in the Netherlands have shown, careful development of synthetic fuel provides a solution which reduces emissions of particulate matter, NOx, carbon monoxide and hydrocarbons, and improves air quality, even when used in conventional, unmodified diesel engines. Particularly for mid-life diesel fleets, there are already viable synthetic fuel options to deploy – as they already have been in road haulage and shipping – until new and modern low emission traction can be swapped in.
Overall, the zero carbon rail target requires collective commitment and, in many cases, courageous though not reckless decision-makers and leaders. No traction solution fits all circumstances and careful business case work – looking at wider transport benefits not just narrow, formulaic government investment case models – will be an important step in enabling the brave decisions that are needed.