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Energy management case study

Energy is essential for economic and social development, as well as for improving the quality of life. We could no longer imagine the modern world without access to energy. Ensuring energy security has become one of the fundamental tasks facing governments of individual countries. The increasing demand for energy on the one hand and dwindling resources of non-renewable energy sources on the other results in the need to acquire energy from alternative sources and to increase efficiency of energy consumption in various areas of the economy, agriculture and social life as well as appropriate energy management. Energy efficiency is defined broadly as the ratio between output, services, goods or energy and energy input (Directive 2006/32/EC) . Energy efficiency should be considered in the wider context of sustainable development. Global Action Agenda 21 (1992) —the basic document constituting the concept of sustainable development—defines major courses of action to improve energy efficiency in business, agriculture, transport and other areas of human activity.

One of the primary goals identified in Agenda 21 is to reduce the atmospheric impact of the energy sector by developing environmentally friendly and economically viable energy systems, based on renewable and clean energy sources, aimed at less pollution and more efficient generation, transmission and distribution of energy. The changes should be based on research into innovative green technologies and the transfer of environmentally friendly energy technologies to developing countries. Agenda 21 also envisages increased capacity for energy planning and management of an energy efficiency programme. Groundbreaking in its proposals to double prosperity while halving natural resource consumption was the report “Factor Four”, prepared for the Club of Rome . The authors of the report argued that the Factor Four revolution is necessary and technologically viable . Nowadays, many of the solutions described in the report have already been implemented, although we still have not achieved satisfactory results.

Another report prepared for the Club of Rome, entitled “Factor Five. Transforming the Global Economy through 80% Improvements in Resource Productivity”, was also developed by a team of specialists led by E. U. von Weizsäcker and published in London in 2009 . “Factor Five” is a certain complement and extension of “Factor Four”. Based on the assumptions of “Factor Four”, the authors show that there is a real possibility to achieve a five-fold improvement in resource productivity in key sectors of the economy, i.e., construction, transport, industry and agriculture.

The first decade of the new millennium brought various technological solutions that enabled the implementation of energy-efficient solutions. The awareness and approach of entrepreneurs to environmental protection issues has also changed. As indicated by the report entitled “The Business Case for the Green Economy. Sustainable Return on Investment” , the development of green economy sectors (renewable energy, increased energy efficiency, rational waste management, reforestation, development of integrated water management, reclamation of dry areas and sustainable agricultural development) has taken place. The report’s conclusion is that the green economy represents a business opportunity, and green investments not only pay for themselves but also enable them to succeed in the market. The report provides examples of positive rates of return on green economy investments and shows that green investments are not only financially profitable, but they also strengthen brand value and build a positive reputation of the company, which in turn translates into financial profits . The issue of energy efficiency is present in almost all documents constituting the concept of sustainable development and programme documents of the European Union. Attention is drawn to the issue of scientific advice to decision makers in the area of sustainable development management and implementation of energy-efficient technologies . Energy efficiency has also been the subject of research and scientific consideration for many years.

In the context of energy efficiency, numerous topics are addressed in the literature, such as: issues related to green energy , and renewable energy sources (including photovoltaics or the use of biofuels , clean technologies for obtaining energy from coal , optimization processes for obtaining energy from natural gas , a variety of chemical reactions in the combustion of heavy fuel oils , as well as processes for reducing CO2 and other greenhouse gases .

Compared to the previous research, in this article, we take a broader perspective and include the influence of regulatory framework of railways as well as organizational measures that can be implemented in railway undertakings in order to steer energy efficiency in this industry. The expected conclusion may be valuable for business as well as policy makers. The legislative perspective gains a special meaning nowadays, as the United Kingdom after having left the European Union is announcing revision of their regulatory framework and renationalization of railways.

There is also a growing number of articles that discuss the use of mathematical tools, numerical tools, artificial intelligence, and cognitive technologies to support energy efficiency improvement , energy management processes as well as the role of managers in the management of energy supply companies . Studies on energy management are quite numerous.

Railway companies are usually described in scientific literature from the perspective of economic efficiency , environmental efficiency , digital transformation of transport processes or railway transport safety . It is certainly a worthwhile idea to adopt solutions based on cognitive technologies and artificial intelligence in the management processes of railway enterprises and use them for energy efficiency programming.

There are only a few studies on energy efficient railway companies per se; nevertheless, the authors emphasize the need to use innovative solutions to increase energy efficiency. They point ut, for example, the need to add the topology of the electric system to the data considered when designing the train trajectory , to use more efficient thyristor control algorithms , to improve the performance of the train control system using artificial intelligence technologies, deep reinforcement learning and imitation learning , to identify the value of features that reduce energy consumption using Artificial Intelligence tools .

Rail is considered as a low-carbon transportation mode. Besides the high level of electrification, energy efficiency in rail transport is one of the main reasons for the low carbon footprint of rail . Railway infrastructure is perceived as a system good, constituting a natural monopoly. Therefore, to ensure market conditions for the use of this infrastructure, it is necessary to use at least partial mechanisms of regulation. Models of regulation, introduced in different countries, influence energy management in railway undertakings. The aim of this article is to show the limitations of energy management in railway companies, resulting from the adopted model of market regulation and to indicate the practical methods used by the participants in this market to improve their energy efficiency and to obtain a positive environmental effect.

The deregulation of railways in Europe was intended to eliminate monopoly and introduce market mechanisms. One of the main mechanisms of this deregulation, vertical separation, is the separation of infrastructure managers from carriers. In conjunction with the fragmentation of the railway system in Europe, it caused considerable complications in the accounting of traction energy supplied to individual operators in individual European Union countries. This hindered action aimed at improving the energy efficiency of railways and individual railway companies operating in the deregulated market. It also caused complications in the creation of a common European railway area, postulated by the European Union. Previous research in the field of railway energy efficiency has focused on technical aspects. The importance of activities related to the organization of the transport process and the rolling stock maintenance system was not revealed. We believe that such activities have a significant impact on improving the energy efficiency of the railway operator. The effects of the railway regulatory model and its implementation in the European Union countries on the energy efficiency of the railway system, as well as practical problems arising during the construction of a single European railway area, were also not revealed. This article, using the case study presented by DB Cargo Polska, contributes towards closing the research gap in this regard.

2. Materials and Methods

The issue of energy management in rail transport is presented using a case study due to its complexity and heterogeneity.

A case study is an empirical inference about a contemporary phenomenon in its natural context. The method allows answers to the research questions “how?” (e.g., how something is organized) and “why?” (e.g., why certain actions are taken). In-depth analyses also allow for a thorough understanding of the described phenomenon . A comprehensive approach was adopted, based on observation, analyses of internal documentation, statistical data and other available source materials. Desk research analyses were also conducted, referring to public statistics documents, reports, qualitative analyses and publications.

The case study is preceded by the analysis of the situation of the railway industry in the world, Europe and Poland, where the company being the object of this study operates. This analysis contains elements of comparison of conditions and the way the railway industry is organized in particular geographical regions. These factors are important for the differentiation of energy efficiency between particular regions. The taxonomy used by the UIC—International Union of Railways—is adopted. The UIC is an international professional association of railway companies, and its statistics enable comparison of data concerning railways in different regions of the world, where rail plays an important role in the economy.

The choice of UIC statistics provides an appropriate context for railway performance in Europe, which is a region where railways have their historical roots and have developed intensively since the beginning of the 19th century . The UIC data were obtained from UIC reports and studies available online. They mainly relate to operational parameters. UIC statistics are a valuable source of information due to the systematic presentation related to the importance of railways for the economy. For infrastructure data, publicly available data from Worldstat and Eurostat were used to show the level of development of the railway network. They better reflect the global diversity of the railway network.

Our analysis also includes a comparison of energy efficiency aspects of rail transport globally with its main competitor, road transport. UIC data were used in this regard, due to the operational nature of these data.

With respect to railways in Poland, the analysis presents the development path of the railway industry after the liberalization of the market in this country and the operating conditions of companies, which, like the case study subject, are engaged in rail freight transport. To conduct these analyses, a literature review was used.

3. Results

As we show in the analyses conducted in this chapter, rail is a mode of transportation whose global environmental impact is relatively small. The diversity of the rail network in global regions, the level of technological development, and specific market regulations result in significant variation in energy efficiency and energy management methods across regions.

3.1. Railways in Europe Compared to Other Regions

According to data published by the International Union of Railways (UIC) , rail transport globally accounts for less than 2% of transport energy consumption, which is about 0.5% of the total global energy consumption, with rail’s modal share being about 7%. Rail is in a much better position in terms of energy efficiency than road transport, which is its main competitor in land transport. Road transport accounts for more than 75% of the total energy used in transport and its modal share is only 35%. If we assume that the share of energy consumption represents the input and the modal share represents the output of the system, then the global energy efficiency of rail can be evaluated in this perspective as almost eight times higher than the efficiency of road transport. It should also be noted that rail transport has significantly improved its energy efficiency in recent decades, as indicated by data published by the UIC on decreasing unit energy consumption on rail . The density of the railway network in Europe is relatively high , as shown in Figure 1. This has several structural effects that affect how railways in Europe operate and how efficient they are. High network density results in numerous nodes and short line lengths . On the other hand, high network density favors the development of intermodal transport, in which rail can play an important role by offering easy access to transshipment terminals .

Figure 1. Density of railway network in km of railway lines per 1000 km². Own study based on data from .

In addition, the European railway area is divided by numerous national borders, which, given the diversity of infrastructure in terms of power supply to the catenary network as well as signaling and safety systems, and in some cases the rail gauge, generates additional constraints on railway traffic in Europe . Comparing Europe, based on data published by UIC, to other regions where rail plays a significant role in the transport system , some interesting conclusions can be drawn. The modal share of rail is relatively small in Europe. It amounts to 8% for passenger transport and 12% for freight transport. As can be seen in Figure 2, the modal share of freight rail transport in the Russian Federation is as high as 88%, and the modal share of passenger transport in Japan is 30%. On the other hand, in the USA, the modal share of railway for passenger transport is less than 1%.

Figure 2. Modal share of rail in selected regions in 2015. Own study based on data from .

An important distinguishing feature for railways in Europe is the share of renewable energy in its energy mix. Europe compares best with other regions in this regard. However, Figure 3 shows that the total share of electricity in the rail energy mix is the highest in Japan.

Figure 3. Share of energy sources in the energy mix of selected regions in 2015. Own study based on data from .

In 2011, the European Commission published a White Paper entitled “Roadmap to a Single European Transport Area” towards a competitive and resource-efficient transport system. The paper calls for the creation of a transport system that will enable a 60% reduction in greenhouse gas emissions by 2050 . According to the report “Electrification of the Transport System” published by the European Commission, one of the important factors enabling the achievement of environmental goals set by the White Paper is the reduction of unit energy consumption by rail transport by 30% by 2035 .

Commonly used measures of operational performance in rail transport are tonne-kilometers, abbreviated as tkm and calculated as the product of weight and distance of goods transport, and passenger-kilometers abbreviated as pkm and calculated analogously as the product of the number of passengers and transport distance. In relation to these performance units, expressing the output of rail transport, energy efficiency is calculated as the ratio of energy consumption in a given period to operational performance achieved in this period, expressed in tkm for freight transport, and for passenger transport, expressed in pkm. The summary below in Figure 4 shows how Europe is doing with its energy-efficient rail targets compared to the achievements of other regions.

Figure 4. Change of unit energy consumption in the rail industry in selected regions in 2015 vs. 2005. Own study based on data from .

The progress in railway energy efficiency achieved by Europe was on a par with the progress in the USA and Japan. A significant increase in specific energy consumption in rail passenger transport in China can be explained by the dynamic development of high-speed rail in that country.

The following factors can be a source of energy efficiency improvement on the railways within the existing network :

• reduction of the specific energy consumption of the traction vehicle while driving;
• reduction of the energy consumption of the traction vehicle during standstill;
• improvement of train driving technique by staff;
• optimization of the timetable on the electrified network in order to balance the network load;
• optimization of the rolling stock maintenance system, resulting in a reduction in energy consumption;
• reduction of energy used for the maintenance of the railway network and railway power network.

Improving energy efficiency in individual regions can be achieved with very different methods, due to the different energy sources used in these regions, which is shown in Figure 3. In the USA, diesel traction is dominant. Actions aimed at improving energy efficiency may include the technical development of the existing internal combustion engines and the improvement of the technique of driving a combustion traction vehicle . The importance of such activities for railways in Japan is marginal due to the dominant electric traction there . In turn, factors such as reducing energy consumption through regeneration or optimization of timetables aimed at equalizing power consumption will be of great importance in Japan . In this context, the railway in Japan is similar to the underground railway, which, operating in a closed system, allows the use of mathematical algorithms for optimizing the timetable to improve energy efficiency . The European rail network lacks the advantages of both American and Japanese railways. There is a large diversification in the field of energy sources, which means that sources of improving the energy efficiency of traction vehicles should be sought in the development of electric machines and internal combustion engines. Due to the high fragmentation of the infrastructure and the diversification of the power grid, optimization in terms of timetables is currently not a practical possibility.

The railway market in the European Union countries has been undergoing a process of deregulation since the 1990s. Previously, railway in individual European countries were organized as single monopolistic companies, controlling both infrastructure and railway transport. However, the deteriorating position of railway in inter-modal competition with road transport and the worsening financial condition of railway companies have led the European Commission to take action aimed at revitalizing the railway and to search for solutions introducing intra-modal competition in order to optimize use of the railway infrastructure in Europe . Elimination of the monopoly in railway transport turned out to be a challenging task. The applied solution assumes the existence of system goods, which are the subject of a natural monopoly . In the case of the railway, the infrastructure is considered to be such a goods system . European deregulation of the railway market is based on vertical separation, i.e., separation of operators (i.e., companies which operate railway transportation) from railway infrastructure managers and establishment of rules of free access of operators to infrastructure (still managed as a natural monopoly). In addition to vertical separation, the deregulation of the European rail market has resulted in a horizontal separation, which is based on separation of freight and passenger operators, for which the regulations that are introduced assume separate licensing of operations. The separation of infrastructure within the framework of vertical separation referred to track infrastructure, along with related signaling, command, control and safety systems. It also referred to the railway electrification system and its power supply system.

The Directive on Railway Vertical Separation was issued in 1991 . The first railway package, announced in 2001, gave guidelines for the allocation of railway network capacity and charges for access . Since then, rail market reforms have been successively implemented in the member states, and successive packages have introduced detailed regulations for rail transport in Europe, as shown in Figure 5 below .

Figure 5. European legal acts on the deregulation of the railway market. Own study based on .

By way of comparison, it should be added that the model of railway market deregulation adopted for restructuring in the U.S. does not include the vertical separation, which is the basic principle of European deregulation. The American model is based on geographical separation, separating individual segments of the railway network in such a way that they are operated essentially by one operator. This model assumes that a particular network is operated by a single operator and that competition occurs between alternative networks offering connections between different regions of the country . This choice was influenced by several factors that differentiate the American rail system from the European one. The lower network density, dominant private ownership of infrastructure, lack of the technical differentiation characteristics as well as the liberal approach of the governments in Europe resulted in the fact that rail regulation, introduced by the Railway Revitalization and Regulatory Reform Act of 1976 and the Staggers Rail Act of 1980, only concerns the obligation imposed on railway operators to treat shippers using their rail transport services in a non-discriminatory manner.

Taking into account the vertical and horizontal separation of the railways in Europe, the effects of which were deepened by the emergence of numerous new players on the railway market as well as the diversity of the systems of power supply to the railway network among the individual countries of the European Union and often also within those countries, the problem of accounting for the consumption of electric power supplying the railway network is not a trivial one. On the one hand, in a locomotive connected to a train, which travels between different power supply areas, the propulsion system must be switched. Thus, the locomotive sequentially receives power from different networks during a single journey. On the other hand, multiple locomotives belonging to different operators operate simultaneously in a homogeneous network area. The power consumption of the network has to be accounted for by multiple consumers. Furthermore, the decisions regarding the timetables are taken by the infrastructure manager, which limits the possibilities of the electric network manager to optimize energy consumption by balancing the power demand over time.

Before the deregulation of railways in Europe, this problem did not occur on such a large scale because monopolistic state-owned companies managed both the infrastructure (including the track system and the power supply network for trains) and operations on this network. Thus, there was no need to account for energy between sub-entities. Deregulation conducted according to the U.S. model avoids the problem of complex energy billing because the model still has only one operator on a segment of the network. Locomotives manufactured before the deregulation of railways in Europe were generally not designed for direct energy metering. Taking into account the life cycle of these vehicles, which is often 40 to 50 years, for the next few decades we can expect to see locomotives equipped both with and without metering devices on the European rail network. The issue of standardization of on-board devices, measuring the energy consumption on the locomotive and recognition of their measurements by individual managers of the railway power network, still remains the subject of efforts of both the European Railway Agency (ERA) and organizations associating managers of railway infrastructure .

3.2. Railways in Poland Compared to Other European Countries

The railway network in Poland, according to the Office of Railway Transport (UTK), which acts as the regulator in the country, had a length of 18,934 km in 2019, 61% of which are electrified lines . After Germany and France, Poland thus has the third largest rail network in Europe. The network density in Poland according to UTK data reaches the value of 62 km per thousand square kilometers. According to Eurostat data, the modal share of rail in Poland for passenger transport in 2017 was 7.7%. As Figure 6 below shows, this share places the Polish railway at a level close to the European average, which for the EU28 countries was 8% .

Figure 6. Modal share of railway transportation in passenger transport for selected European countries in 2017. Own study based on data from .

The modal share of rail in Poland for freight transport in 2017 was 26.8%. As Figure 7 below shows, this gives the railway in Poland a position well above the average for EU28 countries in this respect .

Figure 7. Modal share of railway transportation in freight transport for selected European countries in 2017. Own study based on data from .

Such a high modal share of rail transport in freight transport in Poland, compared to other EU28 countries, is mainly due to bulk coal transport in the country, which reflects the role of this raw material in the Polish energy mix. Given the scale of coal haulage in Poland, competition from road transport is limited in this respect. The negative dynamics of the modal share of rail in the freight market shown in Figure 8 below indicates that rail is not benefiting adequately from the economic development of the country. The effects of this development, in the form of an increase in freight transport, are consumed by other modes of transport, mainly road transport. The modal share of railway in passenger transport has remained constant during this period .

Figure 8. Dynamics of modal share of railway transportation in Poland. Own study based on data from .

The demonopolization of the rail market was introduced in Poland in 2003. The law governing the railway market was preceded by the Act on the Commercialization, Restructuring and Privatisation of the State Enterprise Polskie Koleje Państwowe (Polish National Railways—PKP), passed in 2000. On this basis, the former monopolist was restructured and adapted to the requirements of the European directives contained in the first railway package. In Poland, a holding model has been adopted, in which the infrastructure manager and the operators that formerly constituted the state monopoly are transformed into capitalized companies but remain integrated within the holding company, which exercises ownership functions over those companies. A similar model, but with varying levels of coordination within the holding company, was used in the deregulation of railways in Austria, France, Germany, Italy, Belgium, Slovenia and Latvia . In 2015, a decision was made to sell PKP Energetyka, a company belonging to the PKP holding, to the American fund CVC Capital Partners. After the approval of the European Commission, the transaction was finalized , and thus, the management of the power grid, supplying the railways in Poland, was entrusted to a private company. Competition on the Polish railways appeared as early as 2003. Even before deregulation, there were companies that operated railway transport on separate lines, not belonging to PKP. These companies, having obtained licences for railway transport, became fully-fledged market players . In subsequent years, new entrepreneurs appeared, obtained licences and started their transport activities. There were also companies, controlled by national carriers from other European countries, which started their business activity in Poland. According to the data of UTK, in 2020, 110 carriers in Poland were licensed to carry out railway freight transport . The emergence of new players in the rail freight market results in a loss of market share by the national carrier. However, intra-modal competition has not protected the freight railway in Poland from the progressive loss of rail market share in inter-modal competition with road transport.

3.3. Energy Management in DB Cargo Polska

DB Cargo Polska has been present on the Polish market under the DB brand for more than ten years and is one of the leading players in the rail freight market, but its roots go back to the 1950s. It was then that the mining industry in Upper Silesia decided to set up companies specializing in the rail transport of coal between mines, power plants and coking plants located in the Upper Silesian industrial region, as well as in the haulage of sand, which at that time was used to fill up depleted mine excavations. A separate railway infrastructure network, belonging to the mining industry at that time, covering the entire area of the Upper Silesian industrial region, was used for these transports. After the market liberalization in Poland in the 1990s, these companies were privatized through employee share ownership or investment funds. The development impulse for these companies was the deregulation of the railway market in Poland, which enabled them to obtain rail transport licences and freely develop their business using the national infrastructure, opened by the deregulation of the market also for alternative operators. These companies have grown organically and through acquisitions, expanding nationwide and building capital groups. Over time, these companies have also developed their management systems, using the experience and drawing on models from the industry of developed Western European economies . Building increasingly complex corporate structures, these companies also took steps to establish corporate governance tailored to the scale of their operations . At the beginning of the 21st century, attempts were made to consolidate these companies—initially internally and later with the help of external investors. Finally, at the end of 2009, they were purchased by Deutsche Bahn. At that time, a group of 31 companies was bought and consolidated through a series of mergers. Currently, DB Cargo Polska is part of the DB Cargo Group, which is a segment of Deutsche Bahn responsible for the development of the rail frei