Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 320 - 334)



  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

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