Examination of Witnesses (Questions 320
- 334)
WEDNESDAY 26 APRIL 2006
MR ADRIAN
LYONS AND
MRS LOUISE
SHAW
Q320 Joan Walley: Mr Lyons, I think
you touched on my question really, and it goes back to the Non-Road
Mobile Machinery Directive and in a way the way in which the introduction
of that Directive is perhaps at odds with the whole technical
issue about improved air quality and how we go about reducing
emissions from diesel trains. You mentioned the debate which there
needs to be had. How are the Department for Transport or Defra,
or both of them acting together, going to be given the lead to
the technical solutions which are now being forced through by
climate change?
Mr Lyons: I think Louise is right
in the middle of the NRMM debate.
Mrs Shaw: Since the Non-Road Mobile
Machinery Directive came into force we have been working with
particular individuals at DfT to try to work out firstly the effects
on the emissions from typical rail engines and also having to
take into account the fuel changes coming up as well, and they
are taking particular care to understand all the effects this
is going to have on the operations of the rail operator, whether
it is going to effectively require more fuel to achieve the same
output from the train, whether it is actually going to improve
the air quality or whether indirectly by improving emissions from
one particular direction you are actually going to drive up the
emissions of CO2. I credit the Department for actually
taking the whole thing with NRMM as seriously as they have done.
Where we have met difficulties is with Treasury. It looks like
we will be paying an increased amount for the rail traction fuel;
the ultra low sulphur diesel is effectively a road fuel rather
than a gas oil, as we use presently, it costs more[31].
So the base fuel costs could well go up and that is possibly as
big or bigger an effect of the Non-Road Mobile Machinery Directive
than the other effects which could come up.
Mr Lyons: We would argue very
strongly against any perverse incentives here. It is a very small
fleet of diesels that runs the railway. There are less than 4,000
prime movers compared with tens of millions of vehicles and getting
these solutions right with this very small fleet is very important.
The other point, of course, about non-road mobile machinery is,
I think, a philosophical point which the Railway Forum has, which
is that it really shows us the limit we are reaching on the diesel.
There is a point now coming where suppression of emissions, either
by treatment inside the engine or post-treatment, and engine efficiency
are beginning to come into conflict now and we are going to have
to think very seriously where the diesel train goes over the next
10 to 15 years. There would be significant advantages in having
a power unit which has less power but is actually controlling
emissions better but more expensive to run, rather than the advantage
we have at present, and these of course are the debates which
get into the electrification argument and on hydrogen power as
well, which I think shows in some ways we are at a cross-roads
and luckily I think we have now got a Department for Transport
which recognises this.
Q321 Joan Walley: What I really wanted
to cut through to was whether or not it is a question for the
Department for Transport or for Defra, or as you suggested, the
Treasury in terms of other perverse incentives. It is just that
I do not understand, sitting here, which department is calling
the tune, how these conflicting issues perhaps waiting for new
environmental technologies to come through are being resolved,
and the incentivisation is being driven from within Government.
Is it the green ministers who are trying to sort of thrash out
these unresolved conflicts? I do not understand how this is being
squared.
Mr Lyons: I could throw in two
other groups, of course. There is the Department for Trade and
Industry and of course our own Regulator is also involved in this.
Q322 Joan Walley: Has he had anything
to say on this?
Mr Lyons: He recognises that he
has not taken sufficient awareness of the sustainable development
arguments in what he has been doing. Of course, we do come from
this period when the railway has been extraordinarily focused
on cost and performance issues and it is only now that we have
reached a period of stability that the groups, if you like the
Regulator and the Rail Group in DfT, are beginning to look at
these long term strategic issues which we must address as an industry.
Q323 Joan Walley: I am just wondering
if there is any further information you have on that, because
in a similar inquiry this Committee has carried out we had a very
similar situation arising in respect of the energy industry, in
respect of the difficulties we had in getting the Regulator there
to take sustainable development into account. If you are suggesting
that there is a similar issue now in relation to transport and
the railways—
Mr Lyons: Yes.
Q324 Joan Walley: Is there any correspondence
or anything with the Regulator which could perhaps illuminate
or cast some light on this for us as to how it is preventing the
development you are looking for?
Mr Lyons: I think our relationship
is slightly less confrontational than, say, the energy industry
one, but I think we have still to draw the threads together in
Whitehall. There is relatively little correspondence, but I think
we could easily provide you with a brief, if you wanted us to,
on where the situation is now and what the views of the various
Government departments are and our Regulator in respect of the
changes caused by NRMM.
Joan Walley: I think that would be helpful
to us.
Q325 Colin Challen: Under the current
contractual arrangements, it is not possible for train operating
companies to purchase green electricity. Why is that?
Mrs Shaw: The electricity for
traction is procured by Network Rail for the train operators and
I think if we were to try to procure the electricity on a train
operator basis we would lose an amount of leverage that we have,
given the size of what Network Rail purchase. We would be quite
amenable to having Network Rail increase the amount of green electricity
in their procurement mix very happily. The one proviso would be
that we would not want any perverse incentives causing the traction
charge to go up as a result of doing so.
Q326 Colin Challen: Could you just
explain. There is not a sort of statutory or other problem with
that, it is purely a contractual issue?
Mrs Shaw: It is a contractual
issue through the regulators.
Mr Lyons: I think clearly one
would assume that any move to a renewable electricity sourcing
would actually potentially increase cost.
Q327 Joan Walley: In regard to the
sustainable development policy, is it?
Mr Lyons: Yes. We require the
Regulator to have a view. If Network Rail come to the Regulator
and said, "Look, I would like to get from my current mix
where I go for the cheapest option I can buy," which is clearly
energy sourced from nuclear, which seems to be the main source
that Network Rail is using, "but I would like to have a greener
mix as well for other sources. It is going to, however, increase
my energy costs by such-and-such. Are you, the Regulator, going
to be happy with this?" I think there would have to be a
decision made on that basis.
Q328 Colin Challen: Obviously costs
are clearly very important, but obviously if there was more green
energy it might come down in price anyway?
Mr Lyons: I think that would be
another advantage as well.
Q329 Colin Challen: Is it not something
that really train operators particularly ought to be, if not campaigning
for then arguing for, to try and boost not only their green credentials
themselves but in future to reduce carbon emissions?
Mrs Shaw: I think you will find
many of the operators already do so in their discussions at a
high level with Network Rail. Going back to what I said earlier
about the corporate social responsibility of people like First
Group and National Express, I shall be very surprised if that
sort of subject is not a topic of conversation between the chief
executives as it is.
Q330 Colin Challen: Are there any
reliable ways of reducing the cost of electrifying the network?
I can quote an example. I believe the East Coast electrification
tried to reduce the cost by employing cheaper wires, which now
cause enormous problems. Are there any ways in which it can be
reliably reduced?
Mrs Shaw: I think that is a slightly
unkind description of it. The East Coast mainline was very carefully
examined from an engineering point of view to find the most cost-effective
system. Yes, there are some spots where it has problems and Network
Rail are working on increasing the reliability of those particular
spots. Having said that, to go back to what I said earlier about
the signalling systems, there is a technical standardisation programme
ongoing throughout Europe which is rigorously examining the costs
of an electrification system. It will produce a standard specification
which the large suppliers, the likes of Siemens and Balfour Beatty,
can sell across the whole of Europe; it is also being designed
from the point of view of the railway undertakings and the infrastructure
managers, so that they have a much clearer understanding of just
which bits cost what, and to bring down the cost of electrification
equipment through the means of standardisation. Also, by not having
to demonstrate the compatibility between different trains and
different networks multiple times, to bring the costs down that
way. It is difficult to give you a figure of how much that would
bring costs down, but clearly there is a balance between slightly
beefier equipment such as you might see in France and Germany
which costs a little more in the first place but which actually
over the lifetime lasts much better, it is more reliable, it does
not have problems in severe weather, and the kind of lightweight
equipment which we have in the UK which had a lower capital cost
but which has perhaps more of a maintenance cost and a reliability
cost; somewhere there is a balance to be struck and I am confident
we will discover that balance.
Q331 Colin Challen: Yes, we have
a tendency to always go for the lower early capital costs in this
country. Is that not what we always do in the end?
Mrs Shaw: It seems so.
Mr Lyons: I think we have learned
a number of lessons from this and Network Rail are now in their
business plan fully committed to the whole life cost approach
to management of their assets. The idea that you start cheap and
then pile on costs later is bound to have significant problems.
So things have moved on. Network Rail clearly are strenuously
committed to bringing down costs, but the prices which has been
quoted in recent years for electrification projects were quite
frankly unsustainable and they are re-working a number of them.
There are some small-scale schemes currently under consideration
and there are some test beds for whether you can manage these
projects a lot cheaper. But one thing I must come back to, and
we have hit this a number of times with electrification schemes,
particularly when we upgraded the DC line south of the Thames
to the new bigger, heavier trains, that actually the National
Grid in itself has got significant capacity constraints and quite
a lot of the costs of electrification seem to lie with the National
Grid to beef up their system to allow sufficient power to get
to the railway power lines. So it is not just a railway issue,
it is part of the national power supply one which we have got
to address and consider the significant costs which might arise
if we have to expand that.
Q332 Colin Challen: Is that something
you have had the chance to input into the Energy Review which
has recently been completed?
Mr Lyons: Yes, we did, and our
submissions to Defra came back to some of it. The railways have
been here for 200 years and they are going to be here for another
200 years at least. We make long-term decisions every day in an
industry and we have got to do it in a strategic context and we
have got to do it in a very wide strategic context too.
Q333 Mr Caton: Following on from
that, can we look at reducing revenue costs and also carbon emissions
by capital investment in regenerative braking. Mr Lyons, you said
in your memo that 50% of the electric trains currently in service
are capable of using regenerative braking, which would mean up
to 20% reduction in the use of electricity but very few actually
use it. Why is this?
Mr Lyons: An increasing number
of trainsets are using it in fact on the West Coast and certainly
in East Anglia. The main area where a move to regenerative braking
would bring significant advantages is on lines south of the Thames.
There are some issues with DC electricity, a lot of technical
ones about putting power back into the rails, which is slightly
different from doing it with overhead AC lines. It does require
some modification of the DC system. It is going to cost money
to make sure a safe, reliable regenerative structure is put in
place and the debate is now on with Network Rail to introduce
that. Again, interestingly, because sustainable development was
not at the top of the agenda this was an issue which was not looked
at two or three years ago in any great detail. Now, of course,
we are getting into more stable times when the sheer pressures
of work on the network are beginning to ebb a bit and you can
now look at putting regenerative braking in, and I think we will
see some quite significant moves in the next few months over this.
It is probably in electric train operation terms the single biggest
step you can take to save energy.
Mrs Shaw: Yes, it is a win, win
situation for both the infrastructure manager and the train operators
in that if you use regenerated electricity it produces much less
wear on the trains themselves, so it saves money that way, but
also it has the benefit that if you are regenerating power back
into your supply line you do not have to put in quite so many
transformer stations or generation points as you would do if you
did not regenerate, because the trains themselves are putting
electricity back on the line so therefore they are supplying themselves.
So it is almost a win, win, win situation with regenerative braking.
To be fair to Network Rail, the standard equipment they are putting
in now does permit regenerative braking to take place, but there
was the problem with the power upgrade. It was done at such a
speed and with the focus that it just did not happen.
Q334 Mr Caton: You say the debate
is on now in Network Rail. Is the right message coming from the
Department for Transport on this?
Mrs Shaw: Yes, very firmly.
Mr Lyons: Yes, and the Regulator
as well. It is clear that the advantages are so significant that
this must be an issue which is to be taken forward.
Mrs Shaw: Yes.
Chairman: Thank you very much indeed.
We have kept you rather a long time, I am afraid. We have covered
a lot of very useful ground from our point of view and we are
very grateful to you for coming in.
31 Footnote inserted by witness 10.05.06: This is
due to increased refinery costs in reducing the sulphur content,
short term storage and distribution costs. The Oil industry is
waiting on a fuel strategy from the rail industry before they
will install the infrastructure to meet our demands. There are
also taxation issues and duty issues connected with "pink"
diesel and whether we will be able to continue to keep the "pink"
rates of duty. Back
| 
