Resarch areas

The Government has commissioned VTI to analyze to what extent the proposed TEN-T corridors are consistent with the Swedish foreign trade flows and needs of the Swedish industry.
The suggested guidelines for the proposed Trans European Network – Transport (TEN-T) comprise two levels: a comprehensive-network and a core network. The purpose of the networks is amongst others to offer infrastructure services that support user needs, are efficient, safe and sustainable, support the introduction of new technologies and bring Europe together.
VTI has carried out the project by compiling foreign trade statistics and the transport flows generated by the foreign trade as well as transport forecasts that have been carried out for Sweden and the Baltic Sea region. Furthermore, companies with large export and/or import flows have been interviewed about their views on the TEN-T proposal. VTI has also used the referral responses that the Ministry of Enterprise, Energy and Communications received regarding the TEN-T proposal.
According to the analyses performed in the project, the majority of Swedish freight is transported on the TEN-T network. The flows through Sweden continue to follow largely the six freight corridors that the Freight Transport Delegation (Godstransport¬delegationen) identified in 2001. These corridors comprise about two-thirds of the Swedish freight transport and correspond well to the Swedish TEN-T network.
According to the interviews that have been carried out, the TEN-T proposal is apprecia¬ted by shippers, forwarders and carriers who believe that a concentrated effort on the main corridors is needed. However, shippers would like to be able to choose between alternative transport chains and routes, due to vulnerability and competition aspects. The industry representatives also emphasize that the quality of the infrastructure outside the corridors should not decrease. They express the need for good connections to the TEN-T network at national and international level.
The interviewed companies also mentioned the need to upgrade the rail tracks west of Lake Vänern and the need to improve the hinterland connections to the ports that the respective companies use.
Despite growing markets in Eastern Europe and Russia in the long term, the interviewed companies do not explicitly ask for more port capacity and land connections in Southeast Sweden. Three industry representatives mention the possibility of using the Trans-Siberian railway for transports to/from Asia either via a hub in Germany, via a ferry service to/from Karlshamn/Karlskrona-Klaipeda or via Narvik in Northern Sweden and Russia.
One corridor that is part of the TEN-T proposal but not requested explicitly by the industry representatives we have talked to is the North Bothnia Line (Norrbotniabanan). This line does not serve a demand today but can contribute to strengthen the northern region and may eventually be used for freight transports to/from Finland.
Another aspect that trade and industry highlight is that the TEN-T corridors mainly relate to the rail and road infrastructure and that sea transports are not integrated equally clear.
Another viewpoint is that the projects in the core network proposed by the European Union (EU) are mainly rail investments. The representatives stress also that the quality of road transport infrastructure has to be maintained.
In our interviews it became clear that the standard requirements proposed in the TEN-T guidelines facilitate the transports for trade and industry. The shippers are interested in efficient transports but do not have specific comments on how the infrastructure holders make sure that the TEN-T’s technical requirements are assured or what various measurements to assure them cost.
An interesting observation is that there are similar requests for maximum vehicle weight standards for road transports as for rail transports. These standards are though not specified in the TEN-T proposal.
Given that the funding of the core network part is a common concern within the EU, we emphasize the importance of socio-economic profitability in the selection of infrastructure projects and that projects are monitored systematically. It should also be analyzed how the proposed platforms influence the Swedish infrastructure planning process.

The EU Directive 91/440 has the goal to facilitate the adjustment of the railways to the requirements of the market and to improve effectiveness of the railways. The EU-member states implement the measures agreed on at different points of time rates and partly in different ways. Sweden, Germany, Great Britain and The Netherlands were among the first countries that deregulated their rail freight markets in the mid of the 1990s, in 2007 the international rail freight market within the EU was deregulated. The rail passenger transport markets are deregulated according to another time table.

This project addresses rail freight. Given that all EU-member states have committed themselves to deregulate their rail markets both the Swedish and the European perspectives are covered. The Swedish market is analyzed by evaluating research and investigation reports, official transports statistics, the annual reports of the rail operators and interviews with operators, shippers, agencies etc. The more limited review for the three other countries is based solely on literature reviews and analysis of statistics.

Sweden
Deregulation takes time, 15 years after deregulation in Sweden there are 15 operators on the rail freight market. There have been about 20 entries into the market and about 20 exits from the market. One aspect that is specific to Sweden is that the state mining company LKAB formed the subsidiary MTAB in 1996 for transporting iron ore on the rail track in the north of the country.

From about 2004, the market has become more international. Two privately owned Norwegian operators (Hector Rail and Rail Peterson) and an operator now owned by the Italian State Railways (TX Logistics) have entered the Swedish market. Between 2005 and 2010 the Swedish incumbent Green Cargo and the Norwegian State Railways jointly owned CargoNet (operator for combined rail road transport). Green Cargo and the German State Railways jointly own DB Schenker Rail Scandinavia.

The market is still dominated by the incumbents who are successor to the Swedish State Railways (SJ) or linked to the successor: Green Cargo, TGOJ (Green Cargo’s daughter company), CargoNet and DB Schenker Rail Scandinavia. These traditional operators produced in 2010 72% of all rail tonne-km, MTAB 16%, the four other operators with more than 20 employees (Hector Rail, TX Logistik, Peterson Rail and Tågåkeriet i Bergslagen) had 11% and the five operators with fewer than 20 employees 1%.

The market has been affected positively, although there are not several equal players. Threatening competition has contributed to improved efficiency and innovations. We do not share the assessment made by the Swedish Transport Agency that there is no effective competition on the Swedish rail freight market.

It is necessary to analyze trends in various submarkets. The newly established operators run exclusively combined (rail road) transports and system transports, which means that they run separated flows with a relatively low risk level. In 2010, the other operators had nearly one third of the traditional operators' volume in the submarket for combined and system transports excl. iron ore transports.

Green Cargo is the only wagon load operator. Green Cargo’s monopoly can be explained by the fact that the wagon load market requires a large cohesive network. Wagonload has decreased its share of the total Swedish rail freight market from 44% (1997) to 28% (2010).

Cost efficiency has increased; the rail freight operators produce more tonne-km with fewer employees and fewer wagons. Innovations have been realised both when it comes to transport solutions (i.e. cross-border trains operated by one operator) and rolling stock (more effective locomotives).

The fact that rail freight has become more competitive cannot solely be explained by the deregulation of the market, but deregulation has likely contributed to the largely positive development.

The profitability of the rail industry has been low; which may prevent new operators from entering the market. Solidity was lower for the newly established operators than for the incumbents and MTAB; which may indicate that the newly established operators are more vulnerable.

There are no major barriers to competition on the Swedish rail freight market. One problem that arises when a monopoly is terminated is the role of the state as owner of facilities. This is particularly true for the access to common functions and facilities in the terminals and marshaling yards. There is a need for further research and investigations in this field, also in relation to infrastructure planning.

Several obstacles are related to cross-border transports, such as interoperability, additional costs for locomotives that can be used in countries with different electricity- and signal systems, the approval of certificates outside the home country and driving and rest times for train drivers.

Questions related to track user charges, track capacity etc. are related to the internalization of the external costs and infrastructure policy. These are no specific barriers to the competition between rail freight operators.

Europe
The general analysis at the European level shows that rail tonne-km have increased more in Germany, Great Britain and The Netherlands than in the EU15 between 1995 and 2008. The relative growth in Sweden was lower than in the EU15; this might be explained by the fact that Sweden has high rail share, about twice the share for EU15 in 1995.

Despite the different conditions in terms of geographic location and size of the country, industrial structure, importance of the competing modes etc. there are similarities between the four countries. The market share of largest operator lies between 56% in Great Britain and 78% in Germany. The largest operator has 75% in The Netherlands and the “Green Cargo concern” comprising Green Cargo, TGOJ, CargoNet and DB Schenker Rail Scandinavia 76% has in Sweden.

Also in the other three countries the newly established operators compete in the sub-markets for combined transports and system transports that are easiest to implement and have the highest profitability.

In Great Britain there is no wagon load system anymore. In Sweden and Germany, where the sub-market for wagon load makes up about 30% resp. 40% of the market, the incumbents are the only wagon load operators.

More than a wagonload system does not seem to be profitable; this is the case on the Swedish market, the five times larger German market and possibly also on the European market.

In addition to the above mentioned barriers for international rail transports there are problems related to permits and rolling stock for some commodities in Germany. Most barriers on the German market are linked to the availability and pricing of the rail infrastructure and electricity. There is a potential for discrimination as infrastructure holder and operator belong to the same holding company. Many of the competition barriers in Germany do not exist in the other three countries that have legally, organizationally and institutionally independent infrastructure holders. In these countries issues related to the access to facilities in terminals and the connecting infrastructure and marshaling services etc. remain.

Development in other parts of the EU influences the development in Sweden. Within the rail freight sector an extensive consolidation has taken place and takes place. Private and state owned rail operators are active in several countries. This is also true for Sweden.

It is necessary to follow up the development on the rail freight market and in Sweden and Europe and, if necessary, implement to measures to avoid jeopardizing the hitherto positive development that has led to more cost effective and innovative rail freight transports.

Follow-up studies should not be limited to competition between rail operators but also include conditions on the market

A Memorandum has been elaborated following a commission by the Swedish Ministry of Enterprise, Energy and Communications. The Memorandum should primarily serve for preparations for the 2012 Summit of the OECD’s International Transport Forum in Leipzig, Germany.

The first section of this memorandum lists organizations, stakeholders, on-going projects etc. It is not intended to be exhaustive in any way since it was not a part of the original commission. Rather it tries to catch on-going activities and projects that still have not reached the publication and outreach phase.

The second section contains the selected references. They are sorted according to the six issues suggested by the Ministry as starting points for discussions at the summit. It should be pointed out though, that several references address more than one of the issues. Borders may create technology barriers; technology improvements may improve supply chains etc.

The use of market mechanisms for timetabling of trains is discussed in three different time perspectives in the report. Motives for charging for booking and de-registering trains in the upcoming time table is discussed, too. The point of departure is that a substantial number of trains in a timetable are never operated.
Three different time perspectives on the basic timetabling problem are discussed. The short term approach would be to use a bidding mechanism for solving remaining conflicts. It is suggested that a one shot, sealed bid second price procedure is developed. This means that bids from the two or more bidders for each conflict are submitted once and for all and that the highest bidder pays a price which equals the second highest bid. There are strong reasons to believe that this would work to guarantee a truth-revealing process resulting in an efficient allocation.
It is further recommended that posted prices for use of bottlenecks is developed in the medium term. In the long run, it is necessary to develop an optimization algorithm which is capable to solve the computationally challenging problem of establish a value maximizing solution to the allocation of competing demands for track access. As a complement, a mechanism for efficient bidding needs to be developed in order to provide incentives for operators to participate in the process with truth revealing bids.
The point of departure for the second document is that a substantial number of (freight) trains in a timetable are never operated. The reason may be that the service provider’s ex ante estimates of demand may turn out to be wrong, i.e. that actual demand is lower than the initial estimate. There is a simultaneous pressure for new slots which emerges after that a time table has been established. The document makes suggestions for a system of reservation charges and charges for cancelling trains on short notice.

The purpose of this paper is to answer the question of whether train delays are a price-relevant marginal cost. The question has been raised by the Swedish infrastructure manager (Trafikverket) which is responsible for setting track access charges. The charging of track access fees is regulated in the Railway Act and consists mainly of marginal cost pricing and fees for cost recovery above marginal cost.

The main reason for charging track fees according to the marginal cost principle is to give economic incentive in order to influence the market agents to take these externalities into account in their decision-making. When an externality is correctly priced this externality is no longer “external” on behalf of the market agents and, in this way, economic efficiency is achieved through a decentralized decision-making.

In order for a certain cost to be price-relevant, with respect to the marginal cost pricing principle, it is required that there are some externalities involved and also that there is a relationship between cost and traffic volume.

Rail services are conducted according to a detailed timetable where each train is regulated geographically with minute precision. Delays primarily occur through an incident, such as infrastructure failure or breakdown of vehicles, leading one or more trains to deviate from the time table. Subsequently this initial delay is spread in the system through the interaction between trains that is built into the timetable.

The total extent of train delays is due to the following:
• Number of faults (primary causes of delays)
• Capacity of infrastructure (number of tracks and siding, signaling system)
• Timetable (number of trains, distance in time between trains in the same direction, meeting between trains in the opposite directions etc.)

In the short run the capacity of the infrastructure is fixed. Train delays can therefore be influenced by the number of faults occurred and by the construction of the timetable (which is crucial for the spread of the initial disturbances to other trains).

Recently a new track fee, called “quality fee”, has been introduced which is aimed at influencing the number of faults occurring, both on behalf of train operating companies and the infrastructure manager. The fee is initially set at a rather low level and may be raised in the future if it will be considered necessary.

The process of constructing the time table that will be valid a certain year starts almost two years ahead by the publishing of the network statement, including track access fees. Based on these fees and other information in this network statement, train operating companies apply for capacity. The infrastructure manager then coordinates between these different applications in order to produce a final, functional, time table.

The secondary delays are due to several parameters in the time table simultaneously; the number of trains, time margins, meeting between trains, time-distance between trains in the same direction, circulation plans of vehicle and staff etc. The utilization of capacity, which describes the relationship between the infrastructure and the time table, is the crucial factor in determination of the spread of delays and therefore the extent of total delays. In order to influence total delays it is therefore crucial to influence the utilization of capacity. This can partly be done with track access charges with respect to capacity but it has to be observed that this is not a pricing of delays but instead a pricing of the underlying circumstances of total delays.

When establishing the final time table, the infrastructure manager also “decides” on total delays, since the latter is a function of the time table, given the infrastructure capacity. Since train delays are a large and increasing problem, it seems that this problem is not taken account of in a sufficient way

To summarize, our conclusion is that train delays are not a price-relevant marginal cost and therefore should not be included in the track fees based on marginal costs. This is mainly due to the fact that the secondary delays at a particular point in time depend on the construction of the timetable in effect at the same time. In addition, the extent to which delays are external a certain year depends on the market structure in this year, that is how many train operating companies are involved, which varies both geographically and over time.