Rail moves approximately 40%1 of the overall freight task by weight in Australia. It is a stand-out performer for long-haul heavy movements of our valued export commodities, however rail struggles to be efficient and deliver high service levels in other areas.
To identify opportunities to increase rail’s share of the freight task, the Australasian Railway Association engaged us to better understand the impediments. Through a combination of qualitative and quantitative analysis we discovered that although rail faces a few impediments, none are insurmountable and merely require the right combination of tactics to convert them into opportunities. And there are several benefits in doing so, including increased environmental outcomes, improved amenity, increased safety, and decreased road congestion which are all valuable outcomes.
What are the main impediments to creating the optimum modal mix?
The ideal mode type is endlessly debated within the transport and logistics sector, particularly whether we have the correct balance of road, rail, air and sea.
A free-market economist would argue that as long as the price signals are right, then the most efficient combination of modes should be achieved. But, in a world of disparate taxes, uneven compliance costs, subsidies, rebates, near monopolies, no carbon pricing and distorting accounting methods, we are a long way from an unadulterated market delivering an efficient mode share outcome.
Innately, rail does have some real physical challenges and constraints, i.e. rail requires more handling than road - a supply chain that uses rail will likely have a first and last mile road move and associated re-handling whereas a truck can sometimes move direct. Having an efficient first and last mile essentially increases the rail catchment area potential, and therefore the more freight you have, the more viable your service will be. For example, if you can co-locate customers near your rail terminal and avoid last mile moves, you may be able to offer a ~30%2 lower cost than road.
From impediments to opportunities
The main opportunity for rail’s mode share to increase is in the short-haul sector. In particular, port rail shuttles where large point-to-point freight volumes lend themselves to a rail solution. Some success has been achieved in this area, albeit often through intervention.
It can be challenging to change embedded practices and introduce new technology in a highly complex and arduous compliance environment, particularly given the long life spans of current operational and infrastructure assets. Recently, we have been fortunate enough to be working on the early stages of a new port and logistics system design for the Westport project in Western Australia. It is set to be the largest container port development in the country, establishing a modern freight network that can adapt to future growth and technologies over time. Our involvement in planning this major port has enabled us to take a step back and identify the exact combination of strategies required for rail to be the most effective and productive it can be, particularly across shorter distances.
Under what conditions can rail be enabled to provide the best value and increase its overall share of the freight task?
Some things need to fundamentally change for rail to be competitive and achieve an optimal share:
| Impediment | Opportunity |
|---|---|
| Significant up-front fixed cost investments | Materials and equipment advances have led to longer life assets. These assets should be depreciated over 40-50 years as opposed to 20 years. Government seed funding should be considered to acknowledge economic and environmental benefits. |
| Trains sit idle for too long increasing costs | Adoption of new technology at rail terminals allowing rapid unloading/loading, rapid ‘click and collect’ locomotive to wagon operations, and new train and wagon automation technology. |
| Expensive rail infrastructure often doesn’t capture land value uplift effects | Intermodal terminals need to be developed as part of large industrial precincts whereby land value appreciation subsidises rail infrastructure investment. |
| For rail mode share to markedly increase, short-haul rail needs to be efficient | Our ports need to be designed and operated as integrated and optimised systems with high-capacity corridors and large points of volume consolidation in outer-metropolitan areas. |
| With the advent of electric vehicles rail will need to move quickly to stay ahead of the curve | Move to battery powered locomotives that charge en route via overhead wires or at intermodal terminals. Hydrogen used to power long-haul. |
The journey ahead involves systemic change and although it may be a challenging task, it is by no means impossible, and the benefits are most definitely worthwhile:
- Reducing carbon emissions – rail produces 16 times less carbon than road
- Reducing fatalities – accident costs associated with road freight are 20% higher than rail
- Providing a healthier choice – rail freight generates 92% less PM10 emissions than road freight
- Freeing up investment dollars – for every 1% of the national freight task that moves to rail, $72 million can be invested in other initiatives.3
To improve the future of rail and achieve a transformation, the transport industry and Government need to embrace technological advancements, integrated infrastructure development as well as financial and economic measures. Achieving an increase in rail’s share of the freight task should be a national priority given its ability to move us towards an optimal mode share mix, to better our cities, environment, and the economy.
About Tristan:
Tristan is an accomplished transport, logistics, infrastructure, property and finance professional with over 15 years’ experience. He has been an active member of the Australian freight and industry sector and held multiple positions within industry associations and industry groups who have been investigating and debating multiple aspects in the rail industry for many years.
Tristan Anderson
Executive Advisor, GHD Advisory
Australia
Tristan.Anderson@ghd.com
Explore our Logistics and Infrastructure Policy services here.
Get in touch to find out more or speak to one of our local specialists.
.References
[1] BITRE Information Sheet 34
[2] Percentage savings depend on multiple variables as outlined in the ARA report.
[3] ARA Value of Rail Report 2019?
