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.