Coal Operation Study – Conclusions

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					Coal Operation Study –

           Strategic Rail Authority
                     Freight Team

                    February 2005
The purpose of this paper is to inform electricity generators and those who supply them of
the results of work done by the SRA on the rail network’s ability to provide capacity for coal
movement. The work relates purely to infrastructure capacity; it does not examine the
capability of train operators to operate services.

1.           Background

             1.1 During the course of 2003 the SRA commissioned a series of market studies into
                 the key commodities carried by rail and the industries served. The main purpose
                 of these studies was to identify significant potential changes in demand for rail
                 freight transport so that (inter alia) appropriate strategies could be developed to
                 address likely network impacts.

             1.2 As part of this programme and in consultation with the coal supply and electricity
                 generation industries a market study was produced by Arup for the SRA[1], in
                 September 2003. The study focused on the likely future role of coal in GB
                 electricity generation over a 15 year timescale. The conclusions reached were
                 then used to predict demand for the transport of coal by rail. A summary of the
                 findings of this study is also available on the SRA website

             1.3 Subsequent to receiving this report, the SRA commissioned a Coal Operations
                 study[2]. The aim of this paper was to examine the operational impact on the rail
                 network of the level and pattern of demand for electricity supply industry (ESI)
                 coal predicted by Arup.

             1.4 The key conclusion of the Coal Operations study was that the rail network could
                 continue to provide the capacity required by the ESI coal market provided that
                 the current broad supply parameters - particularly those involving import ports -
                 were maintained. If however these changed significantly, investment in rail
                 capability would almost certainly be required – investment which the sector itself
                 could reasonably be expected to fund.

             1.5 A qualitative summary follows of both the findings of the Coal Operations Study
                 and the further detailed work on the South Humberside line – key to serving
                 Immingham - completed by the SRA in December 2004.

2.           Overall Demand for Rail Services

             2.1 The Arup market study included a number of scenarios which between them
                 envisaged a decline in ESI coal burn from 53 million tonnes in 2003 to between
                 27.9 and 36.6 million tonnes in 2015. A number of factors make it difficult to
                 predict the precise rate of decline but it seems unlikely that significant change will
                 occur before the introduction of the EC Directive on Large Combustion Plant in

             2.2 Even assuming that current Government policies are maintained thereafter there
                 is unlikely to be an immediate step change. It is therefore reasonable to assume
                 that no significant decline in coal burn/rail volumes will occur before 2012 (and
                 possibly well beyond this), and it is on this basis that the SRA has undertaken its

      Arup Coal Market Study: September 2003
      Coal Operations Study. April 2004
     2.3 Unless therefore there is a change in transport costs adverse to rail, the
         generating industry and its suppliers are likely to seek provision of rail capacity at
         levels similar to the present to allow them to continue to meet their business
         objectives and generate sufficient electricity to meet requirements. The rail
         network can in principle meet this expectation as the required volumes are being
         handled now. Major supply sources and power stations are few and the
         capabilities of connecting routes well understood.

     2.4 It is considered unlikely that developments in the generating sector will
         themselves lead to significant changes in traffic volumes or flows and therefore
         use of infrastructure. However the dynamics of the supply market – in particular
         the balance between indigenous and imported coal supply, sourcing choices
         within import and domestic markets and the possibility of port expansions – have
         the potential to result in significantly changed demands on the rail network, some
         of which might be difficult to meet without appropriate increases being made in
         network capability.

     2.5 Matters are made more complex by the demise of the Selby coalfield, although it
         is important to note that this development need not of itself put pressure on rail
         capacity. It is the market response to the closure that has the potential to place
         demands on the network which it might not be able to meet without
         enhancement. These issues are discussed further below.

3.   The Balance Between Imports and Indigenous Production

     3.1 During the course of 2004, Selby mine ceased production. The mine had
         previously been producing up to 4.3 mt per annum of coal, mostly for the Aire
         Valley power stations. Some demand has been met by other domestic sources in
         Yorkshire, Warwickshire and Nottinghamshire. A review of present path
         availability in these areas has revealed these changes are unlikely to create
         significant rail capacity problems.

     3.2 There has also been a recent increase in rail movements between Scottish
         opencast sites and English power stations. The issues that may arise as a result
         are discussed later.

     3.3 Despite these developments, imports are also picking up an increased share
         of demand. Immingham’s position relatively close to the Aire and Trent Valley
         power stations gives it certain advantages and indeed a significant expansion in
         rail forwardings, particularly to the Aire Valley, has already occurred. The closure
         of Selby has given further impetus to a growth trend that began with the
         completion of the Humber International Terminal import facility (HIT 1) in 2002.
         The capacity and performance issues these developments are driving are
         detailed in section 5.

     3.4 Selby apart, it is difficult to make firm forecasts of the medium term stability of the
         UK’s deep mine and opencast industries. The Arup report assumes that domestic
         production of ESI coal is likely to decline gradually with a corresponding increase
         in imports. It is recognised that outputs from Scottish opencast facilities may not
         correspond with this projection.
4.           The Balance of Supply between Major Ports and Port Expansion

             4.1 At present total available port capacity is in excess of the levels of ESI coal
                 imports predicted by the Arup study for the long term. Despite such excess
                 supply at a national level, specific ports may choose to expand to try to take
                 advantage of market opportunities. If this happens then associated rail capacity
                 may come under pressure. Hunterston, Avonmouth and Immingham are the
                 major rail served ESI coal importing ports, with lesser quantities passing through
                 other major facilities at Redcar, Hull and Port Talbot.

             4.2 Current import volumes can generally be accommodated on the rail network,
                 although peak demand is already driving the need for some road transport from
                 Immingham to the Aire Valley. Section 5 lists the present situation port by port.

5.           Port by Port

             5.1 Hunterston

             5.1.1    This Ayrshire port supplies both Scottish and English power stations, using
                      routes which also serve opencast producers. The total ESI coal movement by
                      rail from Ayrshire to English stations, including opencast, is around 7m tpa at
                      present (approximately 2.5m tpa from Hunterston and the rest opencast).
                      Total weekly demand for train paths on all routes between Ayrshire and
                      English destinations is currently averaging 95 each way, with fluctuations up
                      to a high of 115. If volumes going to England were to rise (resulting either
                      from an increase in the proportion of existing imports serving that market or
                      an overall expansion of volume through the port) significant pressures on
                      Anglo-Scottish rail routes could result. These would arise in particular on the
                      Glasgow and South Western Line (GSW) which runs from Glasgow via
                      Kilmarnock and Dumfries to Carlisle.

             5.1.2    The GSW is the main route used by coal services and is shared by trains
                      from both Hunterston and opencast sites. Up to 19 trains per day can be
                      pathed on the route although this represents a maximum; 14 is accepted as a
                      more robust figure for every day operation. Capacity on the GSW is sufficient
                      to accommodate current fluctuations in coal import movements; although in
                      periods of peak demand there is effectively 100% utilisation of paths and
                      resultant constraints on forwardings.

             5.1.3    Only a step change in import and/or Scottish opencast volumes would
                      require infrastructure enhancement. Various minor infrastructure schemes
                      are possible to improve performance and capacity at the margins on the
                      GSW. The SRA has, for example, funded feasibility work for enhancements
                      at Mauchline Junction[3] near Kilmarnock, where the current layout constrains
                      capacity. Both this scheme and other small scale projects on the GSW would
                      deliver improvements in performance and capacity on the route. Private
                      sector beneficiaries have however so far not considered it cost effective to
                      implement these enhancements and it is difficult to justify Government
                      subvention in such circumstances even were funds available, which in
                      current circumstances is not the case.

      SRA G&SWR Capacity Study Report 2003. Timetable Study: Mauchline/Barony Remodelling 2004.
             5.2 Immingham

             5.2.1     This port is perhaps the most likely to seek to expand import activities
                       substantially in the short term through development of a new import terminal
                       known colloquially as the Humberside International Terminal 2 (HIT 2)
                       scheme. The closure of UK Coal’s Selby mine has left a shortfall in supply to
                       the Aire Valley power stations in the region of 4.3m tonnes

             5.2.2     The SRA and the port have both undertaken separate detailed examination
                       of the infrastructure constraints to further ESI import growth through the
                       port.[4] The major rail route serving Immingham is the South Humberside line
                       which is shared by a number of passenger and freight users. Coal is a major
                       traffic with both ESI customers (mainly in the Aire and Trent Valleys) and
                       Corus being served. Work undertaken by the SRA on the infrastructure and
                       performance impacts of increased ESI coal import services to the Aire and
                       Trent valleys has indicated that a port throughput of 8 to 8.5 mt per annum is
                       likely to be the maximum that could be accommodated on the present
                       railway. This level of activity would cater for proposed increases in volume of
                       Corus traffic but not allow significant growth in other traffics. Throughput for
                       2005 is projected by the port at around 7.5mt with further growth thereafter.
                       Peak season demand is already exposing constraints on rail capacity and
                       driving some use of road haulage throughout the year.

             5.2.3     The SRA has funded feasibility work[5] on several network enhancement
                       options that would improve capacity and performance on the routes to and
                       from the Aire and Trent Valley power stations. This includes an upgrade to a
                       route known as the Brigg line which could provide an alternative to the South
                       Humberside line for movements to the Trent Valley. As with improvements to
                       the GSW, the likelihood of Government funding for such schemes is low.

             5.3 Avonmouth

             5.3.1     Major increases in imports are considered unlikely in the near future. On that
                       assumption present infrastructure and routing from the port is capable of
                       handling likely demand.

             5.4 Port Talbot/Redcar

             5.4.1     It is possible that importers could seek to make more use of these ports in
                       the short to medium term. Should that happen (and dependent on
                       destinations) it appears that rail network capacity is adequate.

6.           Changes in the Balance of Supply from Domestic Mines

             6.1 No significant capacity or performance problems are likely to occur as a result of
                 fluctuations in supply from UK deep mines. The maximum critical mass that can
                 be supplied from any one single pit or group of nearby pits tends to generate
                 significantly fewer trains than a major import facility. Daw Mill may be the facility
                 most likely to generate large volumes of additional traffic in the short term. As
                 noted above this is unlikely to create rail capability difficulties.

      SRA Coal Operations Study: South Humberside: December 2004
      SRA Brigg line Upgrade study June 2004, SRA Shaftholme Junc feasibility studies, September 2003
         6.2 The main UK opencast facilities dispatching traffic by rail are in Lanarkshire and
             Ayrshire using the same Anglo Scottish rail routes as Hunterston imports.
             Demand for Scottish opencast coal from English power stations has increased
             over the last few years partly as a result of it having a lower sulphur content than
             English deep mined coal. A new rail connected site at Greenburn opened in
             2004, and a further site at Powharnel is expected to come on line shortly.

         6.3 As noted in section 5 the Anglo-Scottish rail routes are capable of dealing with
             the increase thus far, although it is accepted that constraints have been
             experienced at times of peak demand, leading to longer routing for some
             services via the East Coast Main Line to avoid the GSW bottleneck. Minor
             improvements to the GSW (detailed above) may be necessary to help alleviate
             these difficulties, although, as indicated elsewhere, public money is unlikely to be
             available to fund these. Introduction by the supply industry of measures to
             smooth demand might also provide alleviation.

7        Conclusions

         7.1 The ESI sector is going through a period of significant change and it is not
             possible to predict outcomes with any degree of certainty. The SRA’s analysis
             indicates that there is sufficient overall rail capacity from/to import facilities and
             domestic mines to meet the expected overall demand for coal from the electricity
             supply industry. Indeed much capacity is already allocated to coal movements
             through the track access contracts held by train operators.

         7.2 The SRA is however aware that there may be pressures, in part driven by
             competition between coal supply points, to create rail movement patterns which
             the rail network could not accommodate, either easily or at all, without
             infrastructure change. Although it is recognized that fluctuations in supply levels
             are inevitable, additional pressure could result were supply to be so managed
             that large peaks of demand occurred.

         7.3 It is unlikely that Government will fund enhancements to the rail network to
             facilitate changes in supply patterns or to improve the competitive position of one
             source over others. It is equally unlikely that the public purse will fund
             infrastructure to meet high peak requirements especially if the supply chain could
             reasonably be managed so as to smooth demand. Where any of these factors
             require rail network improvements it is the SRA’s view that the key beneficiaries
             of the switch in supply point should fund them.

         7.4 It is important therefore that the market understands that rail capacity is not
             unlimited and it is necessary to consider rail capability as an integral part of the
             development of plans for new supply patterns. These plans can then take
             account of availability of rail capacity and provide for rail enhancement schemes
             to be developed and funded where necessary. Anticipating the need, the SRA
             has itself funded feasibility and design work[6] on some of the areas of key
             constraint on the main import routes. It has made, and is happy to continue to
             make, the results of these studies available to private sector stakeholders.

  SRA Brigg line Upgrade study June 2004, SRA Shaftholme Junc feasibility studies, September 2003, SRA G&SWR Capacity
Study Report 2003. Timetable Study: Mauchline/Barony Remodelling 2004.

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