Application of the Principles of Energy Exchanges to the Rail Freight Sector

Abstract

One of the major goals of the European Union's transport policy is to increase the market share of rail freight transports. With the Internet, globalization, and just-in-time production, the future of freight transport has moved to high-value and lightweight goods. Rail freight has had difficulty entering this market. Thus, a multipronged strategy is required for improving the rail freight market in which freight is consolidated and transported in Europe by encouraging new players to enter the market. A key pillar of this strategy is the introduction of freight exchanges that are based on principles similar to those of power exchanges. The latter are already well established and operational in the energy sector. This paper describes the market and operational requirements for efficient and reliable freight exchanges in the European freight market from which the rail sector can profit. Lessons learned from the energy sector were reviewed and applied in the context of the rail freight sector in this study. The analysis implies that for rail freight to function, as a pre requisite the freight exchanges would need to provide high liquidity in the market and be neutral to all parties, including shippers and forwarders. Furthermore, to facilitate competition, such exchanges would have to send price signals in the market like power exchanges do. The exchanges would allow automatic bidding, and the transaction process would be efficient and reliable. The rail freight operators would need to provide standardized indistinguishable products to serve as commodities on the freight exchanges.

Towards Rail-Road Online Exchange Platforms in EU-Freight Transportation Markets: An Analysis of Matching Supply and Demand in Multimodal Services

“…The first conclusion is that the earlier specified conceptual framework OEMF [10] appears very supportive in evaluating and comparing online exchanges in the freight transportation industry. The consequent use of the elaborated KPIs support the data collection and the evidence based in-depth assessment of various practices of online exchanges in freight transport.…”

“…The framework was based on a study of characteristics of various network industries (capacity management, transport services, infrastructural and market conditions, regulation, etc.) (see also [10]). Although the analysis focused on the coping with regulatory topics that can possibly improve rail freight integration in multimodal freight transport, among others it was also concluded that for multimodality the standardization of products is essential.…”

“…This research adopted the definition that an online exchange, operating as a third party, applies a matching mechanism to bring buyers (demand side) and sellers (supply side) together in a virtual place (platform). Here, they interactively negotiate an acceptable price for a product or service at a given time on a dynamic basis [12] and on finalization of the transaction a binding contract is organized by the online exchange based on this price discovery mechanism [10,11].…”

“…Both road and rail FTEs in the EU turned out to be less mature than online exchanges in other industries, as their current practices are limited to only connecting the two sides of the FTEs (e.g., shippers to carriers) for their respective modes. This does not fulfil the definition of an exchange, which assumes that the two sides come together for also a smooth process of price discovery [12] and contracting [10,11]. Consequently, the continuous and strong demand for low-cost mode integration in freight transportation [13,14], that is dynamically affected by changing external circumstances (e.g., pandemic crises, environmental restrictions, or geo-political tensions), is not satisfactorily fulfilled.…”

Towards rail-related multimodal freight exchange platforms: Exploring regulatory topics at EU level

“…Regarding freight transport, nowadays hundreds of road FTEs are used within Europe (Jain & Bruckmann, 2017). Recently launched exchanges additionally offer transport of partial loads on their platforms.…”