ERTMS Benchmarking: driving costs and their actual evolution

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Presentation transcript:

ERTMS Benchmarking: driving costs and their actual evolution Istanbul, 01-03 April 2014 Piero Petruccioli – UIC Rail System Department

ERTMS Benchmarking : purpose Cost evaluation (CAPEX, OPEX) as a function of all relevant factors. The later, the more precise (but less useful…) Early prediction Feasibility studies Regulatory benchmarking Late prediction Ex post analysis Costs Structure of purchasing company Key performance indicators Procurement strategies Maintenance strategies Project description Cost drivers Maintenance costs and upgrade costs were seldom provided on the basis of experience, and unavoidably have “educated guess” character. Late prediction and Ex post analysis is what ERTMS Benchmark currently does 2 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS Benchmark, UIC UIC project, 2008-2014 ; “late” or “ex post” flavour Geographic scope : EU, 19 companies, 32 projects (board, lines) Technical scope: ETCS + GSM-R extensions for L2 No comparison with other subsystems No global signaling system comparison, just Train Control Project view, not network(s) view Including share of R&D costs, but… …not considering migration strategies and their induced financial costs Costs : LCC (R&D, investment, op. & maintenance, disposal) 2014 complements Maintenance strategies and main cost drivers Putting costs in relation with performance (explanatory factors), in addition to technical complexity and purchasing strategies (sig = train detection, route protection, train control, central control) 3 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS in operation today in Europe Difficulties (1/2): A narrow scope ERTMS in operation today in Europe In Operation: L1 1870 L1 and L2 1920 L2 2165 Regional 134 TOTAL 6089 Contracted: 5267 Source : UIC ERTMS Database (status Oct 2013) 4 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli 4 4

Difficulties (2/2): An evolving market Top : ERTMS trackside contracts In percentage, by region Bottom left: ERTMS onboard units contracted Comparison September 2010 - September 2013 Bottom right: ERTMS trackside contracts In tracks km (excluding frame contracts), comparison September 2010 - September 2013 5 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS Commercial Operation - 2014 Top : ERTMS trackside contracts In percentage, by region Bottom left: ERTMS onboard units contracted Comparison September 2010 - September 2013 Bottom right: ERTMS trackside contracts In tracks km (excluding frame contracts), comparison September 2010 - September 2013 6 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS Commercial Operation – plan 2020 Top : ERTMS trackside contracts In percentage, by region Bottom left: ERTMS onboard units contracted Comparison September 2010 - September 2013 Bottom right: ERTMS trackside contracts In tracks km (excluding frame contracts), comparison September 2010 - September 2013 7 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS Commercial Operation – plan 2025 Top : ERTMS trackside contracts In percentage, by region Bottom left: ERTMS onboard units contracted Comparison September 2010 - September 2013 Bottom right: ERTMS trackside contracts In tracks km (excluding frame contracts), comparison September 2010 - September 2013 8 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS Commercial Operation – plan 2030 Top : ERTMS trackside contracts In percentage, by region Bottom left: ERTMS onboard units contracted Comparison September 2010 - September 2013 Bottom right: ERTMS trackside contracts In tracks km (excluding frame contracts), comparison September 2010 - September 2013 9 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS Operation and Maintenance IM and RU involved in ERTMS are primarily focused on time and costs for implementation and commercial exploitation O&M aspects tended to be passed over In many cases only a couple of years of O&M are contracted O&M phase has strong impact on the total LCC of ERTMS Railways can get into strong dependency of their industrial suppliers Highly recommended: manage the long term O&M early in the first / main tender 10 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS maintenance - main strategies OUTSOURCING - Main decision drivers: Price Control over maintenance costs Managing complexity, mostly for IM Mandated for SW updating/upgrading Timely with the tendering phase (to limit the vendor lock-in) IN-HOUSE - Main decision drivers Cost of the maintenance staff Technical Maturity of the staff Small or preventive maintenance of big series Flexibility to manage the Business Risk transfer, mostly for RU 11 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

ERTMS maintenance - main cost drivers Personnel costs (for in–house) Costs of man-hours (for outsource, higher than standard) Safety Software Updating / Upgrading Special equipment, Spare parts Storage costs for the components Training documentation 12 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

Result: ETCS Average Life cycle cost Phase Level 1 € / dtkm Level 2 € / dtkm On board € / OBU R&D 20 k€ 100 k€ 110 k€ Investment 90 k€ 400 k€ 340 k€ Total initial costs 500 k€ 450 k€ Range (observed) 35 – 140 k€ 140 – 940 k€ 120 – 800 k€ * Operation & Maintenance 15 k€ 130 k€ LCC, total 125 k€ 630 k€ 560 k€ LCC costs (2008 value) for 20 years lifetime and net present value (6% discount rate). Only includes GSM-R upgrade costs made necessary by ETCS dtkm: km of double track; OBU: on board unit Best data quality for R&D and Investments (CAPEX); operation and maintenance data analysis still to be refined * = normalized, assuming 50 OBUs. Batch size and retrofit are main cost drivers. According to other sources (ATOC, 2011), marginal cost is about 100k€ per unit, assuming large order size and new deliveries Source: UIC Benchmark project 13 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

Conclusions (1/2) Uncertain Economics due to: Deep Influence of pre-existing systems; Wide range of applications and expected performance; Transition costs; Comprehensive planning is difficult in a ‘shared’ system Market expansion and version management still have unfathomed effects RU- Business case vs. IM- Public Company Onboard: low flexibility, high costs, low direct benefits  put RUs in a difficult situation (direct subsidies are problematic); therefore: Importance of setting access charges right Importance of low cost developments, so IMs can pass substantial benefits to RUs. Version management is however under strict control of the European Railway Agency, with UIC participation, and subject to impact assessment. Key problem, specific to the European Union, is balance of costs and benefits between infrastructure managers and railway undertakings via track access charging. Indeed, the most recent baseline evolution (Baseline 3) is beneficial to infrastructure managers, while entailing costs on railway undertakings and rolling stock owners due to software upgrades. Track access charges, if properly regulated, should create a win-win situation. 14 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

Conclusion (2/2) Remaining works under UIC Benchmarking project: Integrate maintenance ROI Attempt to link costs with high level performance criteria 15 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

Thank you for your kind attention Piero Petruccioli, project manager Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli