A look at the key barriers to a sustainable modal shift from road to rail for freight

4 min read

"Collaboration and communication between stakeholders internationally will be key in decarbonising rail freight transport and ensuring it remains as a viable green alternative to other modes of freight transport."

There is no question that the world is facing a global climate crisis with pressure building on industries and businesses worldwide to do what they can to reduce emissions. Today, the transport sector accounts for around 21% of global greenhouse gas emissions and 23% of the world’s energy-related carbon dioxide emissions. As such, the transport sector globally is pivotal in a meaningful shift toward renewable energy and the fight against climate change.

Rail freight has been highlighted as a valuable tool in reducing road congestion and facilitating the mass transit of goods across the globe. In the United Kingdom alone current figures show that rail freight carries more than £30 billion of goods each year and crucially, railways have been identified as contributing only 2% of transport emissions. Rail freight can therefore be a means to greener transport services. 

Legal and regulatory incentives

Publications such as the Rail Environment Policy Statement indicate that governments globally are targeting rail freight as a key sector of reform as part of net zero carbon targets. Indeed, the UK’s Department for Transport (DoT) Rail Environment Policy Statement states that Network Rail and Great British Rail should coordinate with rail operators to engage in decarbonization programs to achieve net zero greenhouse gas emissions in rail networks by 2050. Notably, the DoT aims to remove all diesel-only trains from UK networks by 2040.  

Solutions and alternative options

Despite such commitments, according to the International Energy Agency, 55% of the energy consumed by the global rail industry in 2020 was generated by diesel (the burning of diesel accounts for around 300 million tons of greenhouse gas emissions annually).

Moreover, of the 15,935-kilometre route network across Great Britain, currently only around 38% is electrified with figures showing that in 2020-2021 only 179 track-km were electrified, which is less than half the 448km required to meet the target of a net zero railway by 2050. As such, the uptake of electrification of rail freight networks is likely to be slow.

The process of electrification is also not suitable for all routes. For example, for some rural routes, the cost of electrification cannot be justified. Further, the commercial challenges of operating electrified engines are linked to both conversion costs and the instability of energy prices. Already, in late 2021 we saw UK rail freight operators cease the use of electrified trains and revert to diesel engines as a result of rising energy prices.

With energy prices reaching record highs this year (UK natural gas prices rose nearly 96% in the year to July 2022, while electricity prices are up 54%) it is likely that the economic viability of electrification of rail networks will remain a challenge in the short to medium term.

Emerging technologies and investment in fuel efficiencies are therefore vital to ensure that rail freight maintains its position as a sustainable alternative to road freight.

Hydrogen is viewed as a viable alternative from traditional fuels and the European Union has set hydrogen as a key priority to achieve the European Green Deal, foreseeing its participation in Europe’s energy matrix growing from less than 2% currently to 13-14% by 2050.

Already we are seeing success stories for the use of hydrogen in rail transport. Germany recently inaugurated a railway line powered entirely by hydrogen, gradually replacing 15 diesel trains on the 100 kilometres of track connecting the cities of Cuxhaven, Bremerhaven, Bremervoerde and Buxtehude with a fleet of 14 hydrogen trains powered by fuel cell propulsion. Deutsche Bahn and Siemens are also aiming to create a new hydrogen-powered rail system comprising a newly built train refuelling station.

However, producing hydrogen via electrolysis (green hydrogen, which is currently the cleanest method of production and involves splitting hydrogen from oxygen in water with renewable electricity) is extremely energy-intensive, with typical commercial electrolysis units needing about 50 kilowatt-hours per kilogram. Unsurprisingly, the process is also expensive, costing between EUR2.5/kg and EUR5.5/kg. Despite confidence amongst experts and stakeholders, this process is unlikely to become cost-effective unless lower cost electricity becomes more readily available.

There is also scepticism over the use of hydrogen for heavy rail freight due to the potential lack of “pulling power”. There are also issues with storing enough hydrogen on board trains to fuel the hydrogen fuel cells for long periods of time, making longer-distance journeys unfeasible, which is particularly impractical for international rail freight transport. For example, the UK’s first train to be powered by hydrogen, the HydroFLEX stores about 20kg of hydrogen which is only enough to run the fuel cell for three hours.

Therefore, whilst there is evidence to suggest hydrogen could be the key to more sustainable rail transport, greater investment is required to develop hydrogen fuel technology for heavy freight and long-distance national / international journeys.  

Conclusion

Whilst the UK government has shown some commitment to revolutionising rail freight transport and there has been significant investment and innovation in the industry, there are still clear barriers to a sustainable modal shift to rail. The future may look bright for sustainable rail freight, but the transition path is likely to be rocky in the current volatile environment.

Ultimately, collaboration and communication between stakeholders internationally will be key in decarbonising rail freight transport and ensuring it remains as a viable green alternative to other modes of freight transport.  

HFW has a wealth of experience in the transport and logistics sector and can work with clients to achieve their sustainability goals by providing solutions for both sustainable transport and logistics in the entire life cycle of the sustainable transportation system.

About the author:

Amy is an associate in HFW’s London office in the Corporate Energy & Resources team. Her work focusses on complex corporate and commercial matters. Amy has experience advising clients on a range of transactions across the energy, shipping, and logistics sectors, including mergers and acquisitions, restructurings, and framework agreements.