Wednesday, May 2, 2012

Why Freight Will Never Electrify


Since Conrail tore down its electrification in the 1980s, no major freight railroad in the United States has used electric traction to haul cars, relying instead on diesel locomotives, much to the consternation of environmentally focused railfans. Proposals such as that of the Steel Interstate Coalition, almost as a general rule, include overhead electrification of freight lines either to eliminate environmental emissions or reduce American oil use. The problem, however, is that the freight railroads simply will never electrify.

As with most things, the primary problem is one of money. With some exceptions, capital investment is made to either increase revenues or decreases costs. As publicly held company responsible to their shareholders, investment is ideally ranked according to return on investment, with those projects having the greatest returns on investment receiving a higher priority and thus more likely to receive the investment. This is also collective rather than singular; a project which may individually have the highest return on investment may have a lesser return on investment than several other projects combined, and so be deferred in their favor.

This is the problem which freight electrification faces. While electrification would represent a lessening in fuel expenses, especially as the price of oil is expected to rise another 20-30% over the long-term, this is a fairly minor savings for the railroads. Take, for example, Union Pacific, the largest freight railroad in the United States. Fuel expenses in 2011 came to 3.5 billion dollars, about one quarter of total expenses. At 6.5 gallons to the mile (a back calculation from 480-ton miles to the gallon and typical 3100 ton train) and $3.25 per gallon for a typical train vs 80 kilowatts per train mile (2 Class 92 locomotives) and 12 cents per kilowatt (LA Metro's cost of electricity), the cost would be halved, from $21.125 per train-mile to $9.6 per train-mile, resulting in a total annual savings of $2 billion, trending upwards as the price of oil rises faster than the price of electricity. However, this is actually less than the $2.243 billion which Union Pacific charged in freight surcharges. So long as the freight railroads are permitted to charge fuel surcharges, they have no economic incentive to electrify.

Even should we presume that the impediment of fuel surcharges is in some way overcome, the cost to electrify is a daunting one. The California High Speed Rail Authority estimates approximately 5.5 million dollars per route-mile for electric traction, a 30% premium over European examples of  electrification, but this is normal for American infrastructure projects. Applying this to Union Pacific’s 757-mile long Sunset Route, which they are finishing the process of double tracking, results in a cost of 4.1 billion dollars. For this, forty-nine trains per day would have reduced fuel expenses 156 million dollars annually. A twenty-six year period before financially breaking even does not endear a project to analysts.

Of course, the cost of electric traction supply is essentially a fixed cost and the Sunset Route is not the most highly trafficked route in America or even amongst Union Pacific’s routes. BNSF’s nearby Southern Transcon sees 120 trains per day, for instance, and is expected to reach 150 in the near future. Such corridors would see a relatively quicker break-even point. However, all of this is ignoring one crucial cost element: The locomotives themselves.

Electric traction is only of any use if there are electric motors available to utilize it and, as they are not possessed, they too must be purchased. For each daily train between Los Angeles and the Midwest, this means as many as sixteen locomotives would be required depending on the number of locomotives required per individual train, assuming in this case four days from initial departure until a locomotive has been “recycled” to make the journey in reverse. Although the freight railroads order in sufficiently large quantities that, unlike Amtrak, there is unlikely to be a price premium over the $2 million average currently paid for locomotives, this still adds a substantial additional burden to the price, further increasing the amount of time before the investment is paid back.

There are also major operational issues with the use of electric locomotives. Though a diesel locomotive may go wherever it wish, an electric locomotive must necessarily remain under wire. Not only does this necessitate the expense of electrifying branch lines or maintaining a diesel fleet in electrified areas to handle traffic not originating or terminating on the mainline, but it also points to the problem that electric locomotives are power limited based on external factors to a degree that diesel locomotives are not. While any number of diesel locomotives may use up to their full ratings in a given area, subject only to the physical capabilities of drawbars and car couplings, a given substation can only provide a certain amount of power, providing an additional constraint on train capacity which requires additional or larger substations to overcome, increasing the expense still further.

This leads to the one of the biggest issues with electrification for freight: It is a single point of failure for busy routes. Currently, severe weather and earthquakes resulting in washouts and landslides covering the line are the only significant single point of failure for the lines. Failure of electric traction, due to inclement weather, mechanical or electric failure, represents an additional single point of failure. As this would preferentially be installed upon the busiest and most critical routes, failure of the overhead catenary system has the potential to cause extremely severe and expensive congestion throughout the American rail network.

Congestion, as it happens, is the final reason why the freight railroads will not adopt mainline electrification. Electrification is a major endeavor which would soak up the available capital investment of any given railroad for some years. The opportunity cost involved here is major expansion of existing capacity upon American railroads, whether through double and triple tracking major routes as is the case with the Sunset and Southern Transcon, or major projects like the Crescent and Heartland Corridors. A study by the American Association of Railroads indicated that 148 billion dollars, 135 billion of which would come from the seven Class I railroads, is needed in upgrades to deal with expected gains in rail traffic by 2035, a figure nearly double the expected actual investment that can be afforded, and presuming that there is no mode shift, a dubious assumption in light of higher oil prices and a shortage of truck drivers. Money spent on electrifying, which we noted earlier doesn’t have a revenue advantage due to fuel surcharges, forgoes all the potential revenue and cost savings that additional track capacity provides. There is, as a result, no economic or operational justification for a major freight railroad to invest in electrification today.

All of this is why, today, only one common carrier railroad hauls freight with electric traction and that is the Iowa Traction Railroad, using the remnant of an old interurban to perform interchange work with 90 year old locomotives. Potentially one or two small Class III railroads may electrify with restored locomotives, but the major freight railroads will not electrify in the foreseeable future.

21 comments:

  1. ... unless we pay them to do it. If the federal government sold government bonds to fund an infrastructure bank for freight railroad electrification, offering loans at just above the low government rates, then many routes would be electrified. This sort of thing would have been great to do at the beginning of the recession.

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  2. The cost of maintaining an electric loco may be lower than that of maintaining a diesel loco. I don't have numbers, but the equivalent statement is true for buses - trolleybuses last longer than diesel buses, because diesel engines wear out quickly.

    The fuel surcharge is just run-of-the-mill passing the cost to the customer. The railroads can do that with anything - capacity, maintenance, what not. The point is that if railroads want to carry traffic that's not captive coal trains, they need to be competitive with trucks on both cost and travel time and punctuality.

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  3. ... unless we pay them to do it. If the federal government sold government bonds to fund an infrastructure bank for freight railroad electrification, offering loans at just above the low government rates, then many routes would be electrified. This sort of thing would have been great to do at the beginning of the recession.


    Eh. It's not just the cost of installation, there are some real operational issues for freight involved, I'm not sure it really would have been taken up all that much. On a pollution reduction basis, using those loans or grants for increased capacity and signaling (for velocity) and Tier 4 locomotives is more effective cost-wise.


    The cost of maintaining an electric loco may be lower than that of maintaining a diesel loco. I don't have numbers, but the equivalent statement is true for buses - trolleybuses last longer than diesel buses, because diesel engines wear out quickly.

    The fuel surcharge is just run-of-the-mill passing the cost to the customer. The railroads can do that with anything - capacity, maintenance, what not. The point is that if railroads want to carry traffic that's not captive coal trains, they need to be competitive with trucks on both cost and travel time and punctuality.


    According to the Brits, it is lower to maintain electric compared to diesel, but I suspect cost savings like that are washed out by the cost of maintaining overhead electrification.

    Electrification doesn't really add too much to travel time and punctuality except to make it cheaper to run at high throttle for longer. As best I can tell, it already is time competitive with trucking on long-haul traffic; it'll never be time-competitive on shorter hauls due to load times however.

    On the question of captive coal trains: If we assume an average of 1.5 containers per car, on a carload basis there's 25% more intermodal traffic than coal and intermodal makes up 36% of all railroad freight (compared to 27% coal). Coal is the largest single item for non-intermodal however (though it is also the least profitable; it simply has as large a revenue contribution as it does due to its sheer size). 1st quarter 2012 carload info is on page 6. Admittedly this may be somewhat overstated due to the major downturn in coal traffic this year.

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    1. there is a cap of per axle hp in diesel locomotive ie 1000 hp per axle which can be increase in electric loco to 1500-2000hp per locomotive.this means that one can haul and maintain train at higher speed in electric locomotives.one can regenerate 15%energy during braking.the throughput of existing line can be incrased by 15-20 %.the cost of maintaining electric locomotive is also lowere.it doesnt require frequent fuelling.it lks US is not signatory to KYTO PROTOCOL so there is no urge to use clean technology.electrification cost is 8to 12 percent of infrastructure cost.the electrification will increase faster turnround of assets and capacity increases with higher horsepower locomotives and better signallling system.

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  4. From studies I've seen of electrification (not freight specifically though), the maintenance costs of diesel locomotives or buses are higher than those of electric trains or trolleybuses plus the electrification system, assuming traffic density is high enough. Another argument in favor electrification is that electric locomotives are generally more powerful, with 8000 hp not being uncommon, while diesel locomotives are generally half that. So you need half as many locomotives to pull a given train, or you can pull a given train faster with the same number of locomotives. Having faster, more powerful trains adds capacity on single track lines and mountain routes. The problem is that the railroads in the US cut a lot of capacity while traffic was declining, or just plain never built enough capacity in the West, where the population density was too low during the heyday of railroad expansion. So the railroads have considerably more pressing capacity problems than the sort that electrification can fix.

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  5. Meh. None of this actually holds true; they'll electrify eventually. UP, which appears to be a property speculation company, with a lot of redundant and low-traffic rail lines, will be the last.

    (1) Adding the overhead as a single point of failure to the existing single points of failure of the track, subgrade, switches, and *signal system* is not significant. Batteries and coasting can get you past little things like a 20-foot-long failure.

    (2) Substations are not a significant limit, because railroads can install electricity generation, particularly in the west; it's not even that hard to add extra substations. You could just as well claim that availability of tanker trucks to supply diesel fuel was a limit; this is silliness.

    (3) At some point, fuel surcharges reduce the competitiveness of railroads' pricing vs. each other. At that point, it makes sense to electrify.

    (4) The BNSF studies made clear that whole-system electrification was the most reasonable option, so don't worry about "captive sections".

    (5) BNSF has some serious access to long-term finance.

    It is obvious that double-tracking all the trunk lines takes priority, though. So we shouldn't expect to see any consideration of electrification until that process is hitting its limit.

    --Nathanael

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  6. Electrifying a single line may be a cheaper option than doubling. Will reduce costs even with maintenance of OHLE & increase capacity. Could be the "Diesels 'R Us" mentality is stifling US rail freight like de-electrification of the Milwaukee Road's Rocky Mountain Division doubled it's maintenance charges, halved line speeds and bankrupted the line as it could no longer maintain the track!
    As for passing on fuel surcharges, sounds like a good way of giving interstate trucking business on a plate!

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  7. ok points, but ironic. railroads were built with big capital input and forward thinking.

    the fuel surcharge is just part of the price of transport. trucking uses them. The purpose is to charge the price of fuel at the time of transport, instead of getting stuck in a fuel price swing. So that is irrelevant. if there was no surcharge, they'd charge more, or charge less and move more freight.

    if it costs less (including the financing) to move via electric then you'll see people going that way. you're not considering the value of the transmission, and the rail r.o.w. as transmission asset. so it's a whole new revenue stream. & 20 yr wind contracts are going for less than $0.05/kwh. and the rail lines tap that. a twofer & brings down the fuel half again.

    in other words. it's a sure bet. check out Buffet.

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  8. What if there was an energy electrical storage system that would allow electric traction w/o overhead wires?

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    1. The built a prototype of a battery powered locomotive
      http://www.popsci.com/environment/article/2009-10/worlds-first-all-electric-locomotive-has-over-1000-batteries-can-run-24-hours-single-charge
      Maybe there is the possibility of running on batteries for certain sections and then back to overhead wires on others which recharge the batteries.

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    2. Electrification cannot be an answer when: 1. The additional land required for provision of masts and structures all along the routes costs are prohibitive as also the infrastructural cost itself is high and the recovery would be difficult. 2. Assumptions are made by those in favour of electrification that generation of electricity is not from petroleum products where several countries still have them. 3. The transmission losses along the lengthier routes with boosting transformers on line with maintenance are not being taken into account. 4. Fuel is being carried by the locos of diesel locomotives and generation of electricity is within and hence becomes cheaper as a electrical producing machinery and naturally it has to be maintained just like any other generation plant. 5. environmentalists should note that if generation with petroleum products even for electric locomotives, at the place of generation pollution is certain - many are naptha based plants. 6. Cost consideration without high infra structural facilities of electrification is in favour of diesel locomotives until alternates are found. 7. Tropical countries letting out into atmosphere the exhaust whether be at source of generation or by means of diesel locomotives, the problem caused is lesser than colder countries. 8. Alternate modes of energy source for locomotion is better like fuel cells and atomic energy for generation of electricity and until then, use of Diesel locomotives are a necessity with cost considerations.

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    3. 1. Experience from the large number of other countries that are electrifying rail corridors is that this assumption is false.

      2. Even when electricity is generated by natural gas (very little stationary electrical power is provided by "petroleum products"), a stationary generator is more efficient than a diesel generator on a locomotive.

      3. Transmission losses are factored in, so the claim that they are not taken into account is false.

      4. The fact that the fuel and generating plant is being carried by the locomotive makes it MORE expensive, since some of the power is required to haul the power generator, while the onboard electrical power generation is less efficient than combined cycle natural gas and consumes a non-renewable resource, unlike wind power.

      5. This is false, the share of power generated from various sources is available from the EIA and the share of electrical power from petroleum products is quite low.

      6. Private cost consideration places electrification as a break-even proposition on a commercial basis at present diesel prices and railroad cost of capital ... which is why they are not electrifying now ... but a corridor electrification publicly financed on a revenue bond basis would generate a surplus.

      7. This claim is incoherent. It appears to suggest a false belief that CO2 emissions from on-board diesel generation of electricity, combined cycle natural gas power plants, wind power and hydropower are somehow different in tropical and temperate countries, which is false.

      8. With full cost considerations, electrification is viable today, which is why so many countries are engaged in so much electrification ~ from China and Russia through a number of European countries through to Ethiopia. North America is the exception, not the rule, due to the way that we organize our railroads and the imposition of a much higher cost of capital on rail infrastructure investment than on road, air, or water transport.

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    4. Tend to agree with your positions. How about using pv solar farms as charging stations for battery operated locomotives? Feasible? Plenty of solar potential in the western states

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  9. I totally understand where you are coming from. It would be to hard to make trains run off electric power and it would be worth the money to switch them. I am wondering though if road freight trains would ever be switch to electric? There are way more of those driving around and they use a lot way more fuel than a traditional train.
    http://www.starfreightlines.com.au

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  10. What about dual mode electro-diesel locomotives, and selective electrification in difficult or sensitive areas, such as mountain crossings (energy density and regenerative braking) or urban areas (pollution concerns)?

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    1. You would think this would be the cost effective means. Considering all modern locomotives are already diesel-electrics this should only require the addition of some sort of electric pick-up and possibly a rectifier or transformer. That would allow areas of high traffic density and/or areas of high energy usage to be electrified while still doing nothing with branch lines and line in the middle of nowhere where infrastructure cost would be higher. Now include some method of energy storage and you could extend the effectiveness of the electrified lines.

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    2. I was thinking the same thing. The dual-modes could become more integrated into fleets that see use over both type of networks to avoid having to switch locomotives. Though at the same time, it can't be ignored that e.g. moving into LA Basin, they already add/remove locomotives anyway. I haven't yet heard a compelling argument as to why those can't include or all be electric instead of the current diesel-elecs .

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  11. Black Mesa and Lake Powell R.R. is still electrified. However, it does not interchange with the U.S. rail network, nor does it switch any industries. The point of the author that electric locomotives are limited to electrified tracks is a major factor for a more ordinary railroad which does more than haul long trains from A to B.

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  12. "But it also points to the problem that electric locomotives are power limited based on external factors to a degree that diesel locomotives are not. While any number of diesel locomotives may use up to their full ratings in a given area, subject only to the physical capabilities of drawbars and car couplings, a given substation can only provide a certain amount of power, providing an additional constraint on train capacity." Complete bullshit! Substations are massively more powerful than diesel engines. A typical diesel engine on a locomotive is in the 3.2 to 4.5 megawatt range (4,400 horsepower to 6,000 horsepower). However a single substation can put out 70 megawatts or more (equivalent to 93,872 horsepower). The DolWin beta substation is 916 megawatts (equivalent to 1,228,376 horsepower).

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    1. It's a problem for third rail though. And even overhead if not enough substations are provided (e.g. the electrification between Leeds and Skipton used to be insufficient even to supply an intercity train set).

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  13. Congestion is only mentioned once and then I see the paragraph that it's in go rambling on previous points.

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