Locomotives Are on Track for Greenness

The rail industry is steeped in tradition. So despite the current buzz surrounding more eco-friendly technology, it may surprise some to learn that railroads are making strides toward getting green.

Rail transportation, of late, has been recognized as a far more efficient way to move freight than the trucking industry. CSX and Norfolk Southern claim that a fully loaded train carries the equivalent of approximately 280 truckloads and that locomotives can pull 1 ton of freight nearly 500 miles on a single gallon of fuel.

As the United States pushes for more environmental stewardship from its corporate citizens, there is an effort afoot to move increasingly more freight by rail to help minimize our nation's carbon footprint.

As the United States pushes for more environmental stewardship from its corporate citizens, there is an effort afoot to move increasingly more freight by rail to help minimize our nation's carbon footprint.

The data supporting the green characteristics of rail transportation is based on statistics for the older conventional locomotives that are commonplace and abundant in the industry. However, manufacturers such as RailPower, National Railway Equipment and GE, among others, are producing new environmentally friendly locomotives that surpass the performance of conventional locomotives for lower emissions and greater fuel efficiency without sacrificing horsepower and productivity.

Conventional vs. Green Locomotives

To understand the allure of these new environmentally friendly locomotives, one must first understand the features that distinguish them from conventional locomotives.

A conventional locomotive operates from a single diesel engine that outputs between several hundred and several thousand horsepower depending on the unit. Conventional locomotives are either powered on or off; there is no in-between state.

There are two green technologies that exist in these environmentally friendly locomotives: hybrid and GenSet.

Hybrid Locomotives

Hybrid locomotives feature a bank of batteries and a small diesel engine that is used to recharge the batteries.

Beginning in 2000, RailPower began developing yard-switcher locomotives, called "Green Goats," based on this technology. The Green Goats sold well initially. However, a 2007 recall of 59 units as a result of an onboard fire, as well as the economic downturn, put a damper on this hybrid technology.

GE has been developing its own hybrid locomotive that captures the energy that is typically dissipated through braking and uses it to produce more horsepower, while reducing emissions and fuel consumption.

GE claims that this will result in 50% savings in nitrogen oxide over conventional models created 20 years ago. GE also claims that if all locomotives manufactured prior to 2001 were replaced with its new hybrid technology, the reduction in nitrogen oxide emissions would be the equivalent of removing one-third of all cars from U.S. roads.

GE has yet to take its hybrid locomotive to market.

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GenSet Locomotives

The other type of technology is GenSet locomotives, which have multiple engines operating in tandem as opposed to conventional locomotives that have a single engine. Mt. Vernon, Ill.-based National Railway Equipment (NRE) created this technology and offers one-, two- and three-engine models.

On an NRE GenSet unit that has three 700-horsepower engines, the locomotive has the intelligence programmed into it to determine how much power it needs, and will either power up or shut down the engines as required by the demands of speed, amperage or horsepower. The third engine will shut down within one minute if its power is not required; the second engine will shut down after five minutes if its power is not required; and the primary engine will enter a sleep mode after 15 minutes if its power is not required.

This scalable power system allows the minimum horsepower required for the job to be powered on, thus minimizing fuel consumption rather than having to power a 2,000-horsepower engine for a job that requires less than 700 horsepower.

GenSet locomotives also feature LED lights that draw less power than traditional lighting, reducing the need to power up an engine. As fuel is one of the largest costs for railroads, this can have a profound effect on their profit margins.

RailPower also produces GenSet locomotives. After the assets of RailPower were acquired in mid 2009 by Nicholasville, Ky.-based R.J. Corman Railroad Group, the new management stated its plans to focus on the GenSet technology.

R.J. Corman RailPower says its GenSet locomotives offer a 40% fuel savings and 80% reduction in nitrogen oxide emissions.

While other manufacturers such as Progress Rail, ElectroMotive, MotivePower and Brookville also produce GenSet locomotives, National Railway Equipment and RailPower appear to be the early leaders based on the number of GenSet locomotives ordered and delivered.

NRE has delivered orders of 73 units to BNSF Railway, 60 units to Union Pacific and smaller denominations of units to other U.S. railroads.

RailPower has delivered 98 to Union Pacific as well as smaller denominations of units to other U.S. railroads.

A Demand for Demand

One challenge manufacturers of these green locomotives and their components face is creating demand. Conventional locomotives have an amazingly long useful life, with many 30 years of age or older still in operation today. With the current state of the U.S. economy, companies are not making capital investments unless they are necessary.

However, as the economy improves in both the short and long term, freight transportation is expected to grow, with some estimates having the tonnage carried by the rail industry increase by 63% by 2035.

As the economy improves in both the short and long term, freight transportation is expected to grow, with some estimates having the tonnage carried by the rail industry increase by 63% by 2035.

Currently, the states of California and Texas offer incentives for railroads to swap out their conventional locomotives for the new environmentally friendly locomotives.

Through the Carl Moyer Air Standards Attainment Program, California's Air Resources Board will reimburse railroads between 50% and 85% of the cost for the retrofitting or replacement of older locomotives.

Texas has implemented the Texas Emissions Reduction Plan Program, which provides financial incentives of up to $5,000 per ton of nitrous oxide reduced or 80% of the incremental cost to upgrade or replace locomotives with over 1,000 horsepower, in an effort to reduce emissions of nitrous oxide.

Additionally, the federally funded Diesel Emissions Reduction Act (DERA) program, which was put into place by the Energy Policy Act of 2005, also provides funds to railroads for the re-powering or replacement of locomotives with the new clean technology discussed here.

The DERA program received an infusion of cash in the American Recovery and Reinvestment Act of 2009 when $300 million was earmarked for the reduction of diesel emissions. In the DERA program, funding is provided to states, nonprofit organizations or local, tribal and port authorities.

For-profit railroads may only be funded through partnerships with groups eligible for funding.

The confluence of increased awareness of environmental issues, the availability of green locomotive technology and incentives provided to railroads to update their locomotive fleets have caused an uptick in environmentally friendly locomotive sales. As requirements for reduced emissions become stricter over time, the market will see increased demand for these units.

Aaron Giles is the founder and managing principal of Ponte Vedra Beach, Fla.-based Agile Consulting Group Inc. Agile Consulting Group is a tax consulting firm that helps align clients' accounting systems with current tax laws in order to take advantage of exemptions that may be available to them.