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Wednesday 17.07.2019 | Name days: Aleksejs, Aleksis

Opinion: no amount of speculation will make electrification project cost-effective

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU«For people working in the industry it is hard to spot even the slightest benefits of the electrification project and we believe there is no logic to back this mega project’s future development. Especially considering existing excessive project costs and the costs created by the need for locomotive replacement and that increased costs will make cargo freight in Riga’s direction all the more expensive. No amount of speculations regarding electricity and diesel fuel fluctuations will make this project cost-effective,» says AS Baltic Express board chairman Māris Bremze.

He comments: «Most Latvian residents have heard about the old government’s, Transport Ministry’s and Latvian Railway management’s actively lobbied railroad electrification project. The considerable EUR 441 million costs, 320 km of electrified railway between Rezekne, Daugavpils and Šķirotava station in Riga, the supposed increase of competitiveness of Latvia’s transit corridor in Riga port’s direction when compared to Lithuania’s Klaipeda port and new jobs in construction sector in Latgale – these are but some of the promises associated with this project. But what will this mega project truly mean for the country? What will be the real benefits after the project’s implementation for railway freight carriers – the main cargo carriers to Latvian Railway, which is only an infrastructure company?»

The answer is simple – cargo freight using the railway to Riga port will simply become more expensive. Moreover – traditional diesel-powered train freight in Latvian Railway network will become more expensive for all routes.

Of course, now is the time for lobbyists of the electrification project to be shocked about my claim. But let’s not condemn my opinion just yet. Here are my arguments.

First of all, private railway freight carriers transport 35% of all railway freight. The only reason why LDz subsidiary LDz Cargo transports 65% is that LDz has allowed lasting and blatant distortion of the freight market, illegally denying private carriers access to railway infrastructure along the border. Half of LDz Cargo’s carried volumes consist of coal. Baltic Express also carried coal. This is why it’s entirely possible that as soon as discrimination of private carriers along the border line has ended, the situation will have changed considerably and the share of LDz subsidiary will have reduced. However, there is no economic reason for private carriers to use electric trains, because we have never had enough cargoes to justify electric traction.

Secondly, electric locomotives are one and a half to two times more powerful than the diesel locomotives used on LDz railway line. However, the project does not provide for increasing maximum cargo train weight to 9,000 tonnes instead of the current 6,000 tonnes. Additionally, LDz management has intentionally not included the costs of railroad extension in the project, because it would make the actual price of the project much higher.

Thirdly, organization of train movement will change considerably in the direction of Riga port, because electric locomotives, unlike diesel trains, will be able to pull rolling stock only as far as Šķirotava station in Riga. To go further than that, it will be necessary to perform additional operations with locomotive and brigade switches to carry cargoes from Riga centre to Riga port terminals on the final 20-30 km stretch using ‘good old’ diesel trains.

Fourthly, it would be rather odd for LDz to pull containers using electric locomotives, because the weight of such trains does not exceed 1,800 tonnes. They may force the procurement of special low-power electric locomotives for this exact purpose.

In the end it is likely diesel trains will continue carrying cargoes under the new contact network and new substations, and the expensive LDz project will go unused for cargo freight.

It is hard for specialists working in the industry to spot even the slightest benefits from the electrification project. We believe there is no logic in the project’s implementation. Especially knowing that by putting the project’s costs and subsequent rolling stock replacement and cargo freight costs in Riga’s direction will make cargo freight all the more expensive as a result. No amount of speculations about future electricity and diesel fuel prices will make this project cost-effective.

It is likely the management of LDz, known for its monopolist views, will turn on its favourite ‘full cost’ coverage game, dividing electrification costs in Riga’s direction for all users of this network, which will undoubtedly make railway freight in Latvia even more expensive.

One can only marvel at the effort LDz management is putting into the implementation of this ruinous project that has no support from cargo carriers or port terminals – the main clients of LDz. I would like to remind that for at least ten years LDz as the body responsible for infrastructure maintenance should not be allowed to participate in railway freight business – it is prohibited by EU policy, and most EU member states respect it. The example of the electrification project shows that the free market principle does not work in Latvia, and following the electrification project LDz’s own customer-focused policy, cooperation and logistical excellence will end.

At the same time, LDz, as the institution responsible for maintaining infrastructure, is well-aware of the state of passenger transport segment, especially in Riga’s electrified zone. Substations and contact network irreparably outdated; maintenance of stations and platforms left unattended. This is also the only segment in which demand for railway transports and the number of carried passengers keeps increasing. AS Pasažieru vilciens ahd recently announced the new winners of the train procurement project. There may be new trains, but not appropriate infrastructure.

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