Coal Operation Study – Conclusions 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, 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. 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 2008. 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 analysis.  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 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. 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 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 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.