Track & trackside
What are the costs of an extra service?
Dr Andrew Smith, Phill Wheat, Professor Simon Iwnicki and Kristofer Odolinski outline new approaches on estimating the damage and marginal cost of different vehicle types on rail infrastructure
E
uropean policy since the mid-1990’s has emphasised the promotion of within-mode competition as a way of revitalising the fortunes of Europe’s railways. Progressively freight and international passenger services have been opened up to competition, with the 4th Railway package now also proposing compulsory competitive tendering for domestic passenger services (under public service contracts). Vertical separation of infrastructure and operations or, at least,
fair access to infrastructure and transparent prices for access, is seen by the Commission as a key enabler of competition in the sector. The above developments mean that understanding the cost, and in particular, the marginal (infrastructure) cost, of running an extra service on the network has become more important than ever. Existing legislation requires that charges for access to the infrastructure must be based on ‘costs directly incurred as a result of operating the train service’. This can be interpreted as what economists would call the short-run marginal (or incremental) cost imposed on the infrastructure by the service running on the network. This article focuses on one element of short-run marginal cost,
namely the additional maintenance and renewal cost required to rectify the incremental damage caused a train service (the marginal wear and tear cost).
Of course, the need to estimate the marginal cost of
infrastructure use is not merely for the purpose of meeting EU legislation. It is important for the purpose of economic efficiency (in terms of making best use of the existing network) that train operators pay at least the short-run marginal cost of running trains on the network. Further, track access charges that vary according to the different damage and cost imposed by different vehicles, should ensure that the ‘right’ vehicles are run on the network and potentially that new rolling stock designs are developed that reduce whole system costs (operator and infrastructure managers’ costs).
This article briefly describes a range of new approaches being developed to better estimate marginal damage and cost, in particular with respect to how damage mechanisms and in turn costs differ by vehicle. The research is being undertaken as part of the EU FP7 project, SUSTRAIL , which is aimed at providing engineering innovations to improve the competitiveness of rail freight in the EU with a view of growing market share. A key element of this work is providing new research to better incentivise the use of track-friendly vehicles.
Existing approaches We first explain existing approaches to set the context. To summarise briefly, there are two methods for producing estimates of marginal costs. Top-down economic statistical / economic methods relate actual costs to traffic volumes, controlling for characteristics of the infrastructure. Bottom-up engineering
methods use an engineering model to estimate the damage inflicted by different types of vehicle on the network. Then assumptions can be made about the intervention required to deal with that damage, combined with estimates of unit costs of that intervention, to give the marginal cost estimates (see Box 1).
Box 1
• Method 1: engineering approach – Simulate damage done by traffic (engineering model) – Determine action need to remedy damage (e.g. tamping) – Activity volume * Unit cost of activity = (marginal) Cost
• Method 2: top down statistical approach – Relate actual costs to passenger and freight tonne-km (regression) – E.g. Log Cost = a + b* Log Passtonne + c * Freight tonne
– Compute marginal costs from the parameter estimates (the a and b) from that model
Both methods have strengths and weaknesses. The advantage
of top-down methods is that they use actual cost data. Their weakness is that it may be difficult to get any sensible estimates of the relative cost of passenger and freight vehicles. The bottom- up method is good at capturing complexity and it is possible to model and estimate the relative damage of different vehicle types. The problem is how then to translate these damage estimates into cost. In practice, one vehicle may cause more of one type of damage and less of another, thus meaning that information is needed on the relative cost of the different types of damage to obtain estimates of relative marginal cost. Further, assumptions are needed on what type of activity and how much of it, are needed to rectify the damage done. This requires a detailed model or alternatively simplifying assumptions are needed which might be wrong. Finally it is hard to estimate unit costs of activities as these will depend on, inter-alia, the location, the nature of the job and so on.
New methods Under the SUSTRAIL project a number of new approaches are being developed to address the above research challenges. The first, and the focus of this article, combines engineering simulation with a statistical model in a two stage approach (see Box 2). The first stage involves an engineering simulation exercise in which traffic (of different types) is run down a network of known characteristics (based on actual data for an actual track section), to produce estimates of the resulting damage types. The second stage involves establishing a statistical relationship
February 2014 Page 79
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