INNOVATION PROCESSES IN SURFACE TRANSPORT · compromise. The member states agreed to levy charges on heavy goods transportation vehicles starting from 3.5 tonnes. This compared to

INNOSUTRA – D4 Page 1/192

INNOVATION PROCESSES IN SURFACE TRANSPORT

Contract No. TREN/FP7TR/234076”INNOSUTRA

Deliverable: D4 and D5 - Topical Assessment of Innovative Successes and Not-yet-successes Volume3: Selected Not-yet-successful Cases

Project Start Date: January 1st 2010 End Date: December 31st 2011

Co-ordinator: UA

Deliverable No

WP No WP 3 WP Leader: TUDelft, CNRS

Due date: 31.03.2011

Submission date: 16.08.2011

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Document summary information

Authors and contributors

Initials Author Organisation

ML Michael Lloyd LCA Europe

HG Herbert Grootbod TUDelft

KF Koos Frouws TUDelft

CF Claudio Ferrari UGenova

GA Giulia Arduino UGenova

LG Laurent Guihery CNRS

FL Florent Laroche CNRS

YC Yves Crozet CNRS

AR Athena Rouboumtsos UAegean

SK Seraphim Kapros UAegean

TV Thierry Vanelslander UA

RA Raimonds Aronietis UA

Revision history

Rev. Who Date Comment

1 ML 14/07/2011 Revision of document following Internal Review Comments

2 RA 05/08/2011 Combined deliverable D4 and D5

2 RA 16/08/2011 Integrated comments of the Commission

3 RA 29/09/2011 Added missing information to Volume 2 and 3

4

Quality Control

Name Date

Checked by internal reviewer Heather Mclaughlin 4/72011

Checked by Task Leader N/A N/A

Checked by WP Leader

Disclaimer

The content of the publication herein is the sole responsibility of the publishers and it does not necessarily represent the views expressed by the European Commission or its services.

While the information contained in the documents is believed to be accurate, the authors(s) or any other participant in the INNOSUTRA consortium make no warranty of any kind with regard to this material including, but not limited to the implied warranties of merchantability and fitness for a particular purpose.

Neither the INNOSUTRA Consortium nor any of its members, their officers, employees or agents shall be responsible or liable in negligence or otherwise howsoever in respect of any inaccuracy or omission herein.

Without derogating from the generality of the foregoing neither the INNOSUTRA Consortium nor any of its members, their officers, employees or agents shall be liable for any direct or indirect or consequential loss or damage caused by or arising from any information advice or inaccuracy or omission herein.

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TABLE OF CONTENTS

1. SELECTED NOT-YET-A-SUCCESS CASES................................................................... 4 1.1. Road ............................................................................................................. 4 1.2. Rail.............................................................................................................. 13 1.3. Maritime ...................................................................................................... 29 1.4. Inland navigation......................................................................................... 42 1.5. Intermodal ................................................................................................. 127

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1. Selected Not-yet-a-success cases This document shows the detailed analyses of the first set of road, rail, inland navigation,

maritime and intermodal cases.

1.1. Road

Title Eurovignette directive

Domain road , rail , inland navigation , maritime , intermodal

, other_ _

success failure

Why do you consider it a success/failure?

Eurovignette directive allows EU memberstates to introduce road

pricing according to their policy goals, but also defindes the toll

rates and non-discrimination principles.

Type of innovation technological

managerial/organizational

logistical

cultural (including marketing)

policy initiative

Degree of development

according to product life

cycle classification

development , introduction , growth , maturity ,

saturation/decline

This innovation falls into the policy innovation category. Therefore the framework for

identification of key actors according to the stages of the innovation (WP3 and 4 Workplan,

section 4.1.3) is not applied here. A simple identification of key actors is performed according

to section 4.1.4 of the same document.

The key players identified are:

European Parliament

The Council of the European Union

European Commission

European Economic and Social Committee

Committee of the Regions

Court of Justice of the European Union

EU Member Sates

And others like:

IRU

International Tourism Alliance (AIT)

International Automobile Federation (FIA)

Community of European Railways (CER)

Gilles Savary MEP (PES, France)

Green Group (of the EP)

Page 5 of 192

T&E, the European Federation for Transport and the Environment

EU Committee of the International Association of Public Transport (UITP)

Introduction

The EU Eurovignette directive case is analysed in INNOSUTRA project. It is in the domain

of road transportation and in the preliminary innovation report of the INNOSUTRA project as

a success case of policy innovation.

Background and development

The aim of the Eurovignette directive is to lay down rules on how EU states may charge

heavy good vehicles for using the road infrastructure. It aims to ensure that road usage better

reflects its true impact on society and the environment by introducing “user pays” and

“polluter pays” principle. Modal shift is also declared as one of the goals of the directive.

Historically the realization of the importance of the vehicle taxation in the EU dates back to

the 1960s when a large scale investigation took place of the various aspects of charging for

the use of infrastructure. In 1968 the Commission made a proposal on a taxation system for

commercial vehicles. In 1978 the Council agreed in principle to the draft Directive, but it was

never adopted. In January 1988 a new proposal on the charging of road infrastructure costs for

heavy goods vehicles was put forward and later adopted as Directive 93/89/EEC. This

Directive was later annulled by the European Court of Justice on grounds of procedural

irregularities.

In 1993 the European Commission presented a proposal for a directive enabling countries to

introduce tolls on motorways in order to finance the cost of infrastructure deterioration caused

by heavy goods vehicle traffic. But it was not until 1999 when Directive 1999/62/EC of the

European Parliament and of the Council was signed and entered into force.

By 1 July 2000 the member states had to bring in force laws, regulations and administrative

provisions necessary to comply with this directive.

There were variations in the road charges and tolls on heavy commercial vehicles across

Europe. The amounts that were charged and the methods that the systems used to calculate the

charges differed substantially. The next version of the directive was proposed on 23 July 2003

to harmonize this situation and to extend the scope of the directive to more roads, vehicles and

costs.

In the proposal of 2003 the possibility to toll for some external costs was included

(environmental damage, congestion and accidents). The possibility to finance alternative

modes of transport, or so called cross financing, to promote the freight modal shift away from

road was included.

In reality, after the adoption of the directive in May 2006 the directive turned out to be a

compromise. The member states agreed to levy charges on heavy goods transportation

vehicles starting from 3.5 tonnes. This compared to the previous version of the directive

included an addition of substantial part of vehicles that the directive would apply to,

compared to previous 12 tonnes. However the actual coming into force of the threshold was

agreed to take place in 2012.

Page 6 of 192

The main goal of the directive was to introduce the possibility for the EU member states to

include “external costs” in their road transport pricing schemes. However, due to strong

disagreements between member states and Parliament the final text excluded this possibility

until a methodology for the calculation and internalization of external costs for all modes of

transport was agreed on. Commission promised to prepare a proposal of calculation method

two years after the directive comes into force.

On 8 July 2008 the commission published a proposal to revise the Eurovignette directive and

offered a common calculation method to internalize external costs all transport modes. Until

15 October 2010 when the Council reached political agreement on the draft directive on road

use charges for heavy goods vehicles the issue has been a source of disagreements and

discussions. The opposing member states have been those at the periphery of the EU like

Portugal, Estonia and Malta, but also those who suffer most from the high transit volumes like

Austria, France and Germany.

During the discussions several organizations and lobby groups expressed their opinions and

tried to influence the legislative process.

International Road Union’s main criticism to the proposal was that the money raised is not

fully reserved for the road transport sector and infrastructure improvements. The other

criticism was that member states cannot compensate hauliers for extra financial burden with

reductions of other levies like vehicle tax and fuel duties. International Tourism Alliance and

International Automobile Federation supported the IRU’s position and announced that already

the existing taxes easily cover the external costs of road usage.

A different opinion came from the Community of European Railways who saw this as a

chance to reduce the competition from the road sector. They called for even higher price

levels stating that it will not be possible to reflect all external costs in the current proposal.

The European Federation for Transport and the Environment said that the compromise

reached still does not cover enough external costs that will still be on the shoulders of the EU

inhabitants.

International Association of Public Transport called for further extension of the infrastructure

pricing policy to include private cars and urban areas. They said this would alleviate

congestion and reduce environmental degradation. The reasons for statements like this seem

obvious.

Current Situation

As described above, in the end of 2010 the Council reached political agreement on a draft of a

new directive that will allow the levying tolls that include the cost of air and noise pollution,

as well as congestion. This is a step forward in the direction of internalizing external costs for

road transport.

Once the text agreed upon by ministers in the Council has been checked by the legal and

linguistic experts, the Council will adopt its first-reading position on the draft directive and

send it to the European Parliament for a second reading.

The current proposal of the directive states that the revenues from road charges “should” be

allocated to the transport sector to contribute to its sustainability. This wording is a result of

Page 7 of 192

compromise in the council, but it will be a point of conflict with the European Parliament. EP

is in favour if mandatory allocation of revenues from road charges to sustainable transport.

The European Council is not itself unanimous on the question, because the countries like

Poland, Bulgaria, Slovakia, Romania, Italy, Slovenia, Portugal and Estonia could support the

principle of mandatory allocation.

Starting from 2012 Eurovignette directive allows EU member states to levy charges on heavy

goods transportation vehicles of more than 3.5 tonnes. This is a significant decrease from 12

tonnes in the previous version of the directive.

Analysis

Initiation period

In the EU the stimulus of the innovation, according to the legislative procedure, has to come

from the Commission. In this case in 1993 Commission was the initiator for a directive for

enabling tolls on the motorways. The proposal came in order to replace Directive 93/89/EEC,

which was annulled by the European Court of Justice on 5 July 1995 on grounds of

procedural irregularities.

We see that there are in fact two bodies that played role in the situation which lead to the

initiation process of this innovation. The official initiator was the European Commission, but

it was only because of the previous annulment of the directive 93/89/EEC, that the

commission initiated the policy innovation. This policy innovation case reveals that the

stimulus for a policy innovation case may lie outside the initiator of the innovation.

Development period

A compromise of European Parliament, the EU Council of Ministers and the European

Commission has been prerequisite for the successful adoption of the legislation. This is

defined in the legislative procedure of the EU, but it is also obvious that one of these three

actors could halt the process as well.

In the development period of this policy innovation there have been strong disagreements

between member states of the EU and European Parliament. There are views that this has lead

to the lack of clearness in the legislation produced.

The adoption process of the three directives for this innovation case has faced serious

lobbying from different sides. This included that of different member states of the EU and

industry associations representing both, road and competing modes of transport. Also,

countries from outside of the EU, like Norway, have tried to influence the process. This

shows the influence and importance of this policy innovation in the EU, but also outside.

The proposals of the initiation stage for the Eurovignette directive have faced opposition from

the road transport sector stating that the measures proposed will not actually be efficient in

reducing the external costs of the road transport. The competition of the road transport

industry, for example rail industry representatives, jumped the chance to use this as an

opportunity for gaining competitive edge in their business. The representatives for public

transport interest group tried to lobby to include passenger vehicles in the “vehicle” definition

of this directive, for their business reasons.

Page 8 of 192

The compromise that was reached at the council in October 2010 for the latest a draft

directive on road use charges for heavy goods vehicles ("Eurovignette" directive) will be the

reason for discussions between the European Parliament and the Council. The Council agreed

that the allocation of the money is not obligatory to the transport sector, but the European

Parliaments position is that there should be mandatory allocation of the revenues to

sustainable transport. This position is also supported by several member states.

Implementation period

The implementation of the Eurovignette directive in the legal systems of the member states is

done when an appropriate law is adopted in a member state. Occasionally laws already

comply with the requirements of the directive, but in some cases additional legislative

procedures in the member states are required.

The implementation of the Eurovignette directive in the road pricing schemes of different EU

member states differs. Some have chosen to apply it fully, but others countries have applied

the directive partially. The countries that have not applied the directive like are in ongoing

discussions about the topic.

The implementation of the Eurovignette directives has resulted in substantial changes in

behaviour of the road transport operators. This seems to have mostly influenced the decisions

of the companies on the renewal of their fleets of trucks – companies tend to buy cleaner

trucks. This shows that some of the measures allowed in the legislation seem to have more

effect than others.

Although the policy of the directive is placed there with best intentions, there are possible

unwanted effects in the implementation period of Eurovignette directive. A negative

phenomenon of detours is observed in the cases where pricing is applied only to motorway

network. There is also incentive to reduce vehicle size in the fleet to fall below the cargo

vehicle threshold of 3.5 tonnes (previously 12 tonnes) set by the directive. Therefore a careful

analysis of the impacts of the measures is important.

Conclusions In this EU level policy innovation case we conclude that a combination of circumstances has

lead to the initiation of the process. In this case the annulment of a previous directive was the

spark to start the innovation process and produce a directive of an improved quality. We see

that the actions of the European Court of Justice were important. Of course in an EU level

policy innovation a combination of the will to initiate from the Commission’s side and the

support of the EU member states is crucial, but a stimulus from another party was needed in

this case.

In the development phase of the policy innovation different stakeholders have shown a lot of

interest and efforts to influence the decisions taken. The actors that played role are not only

the European Commission, EU member states and the European Parliament, but also different

interest groups and non-EU countries, which consider the impacts of the directive important

to them.

The Eurovignette innovation case is currently undergoing a new development period, as a

compromise was reached at the council in October 2010 for the latest a draft directive.

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The implementation of the Eurovignette directive has impacted the behaviour of road

transport operators. The impacts have mostly been in line with the policy intended, but there

are some unwanted impacts observed. We see that the next iteration of the directive might

solve this.

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Appendix

Policy intervention

Type of policy

analysis

Key

points

or not

(ranked

1 – 5

Level of

government

involved (and

public/privat

e

partnership ?)

Influence

during

the

initiation

period

Influence

during the

development

period

Influence during the

implementation/terminatio

n period

Standardisation

Stimulation of

R&D

Knowledge

management

Infrastructure

development

Regulation and

planning

5 5 5 3

Legislation

5 5 5 3

Pilots and

demonstrations

Networking

Financial

resources and

incentives

Niche

management

National

security/strategie

s issues

Environment

issues

2 2

Source : adapted from the methodology of Zuylen and Weber (2002)

Page 11 of 192

Actor and their roles

Type of actors

involved

Key points or

not

(ranked 1 – 5

Involved in

which level of

government

involved (and

public/private

partnership?)

Influence

during the

initiation

period

Influence

during the

development

period

Influence during

the

implementation/

termination

period

State experts,

State

administration

5 5 5 3

Monitoring

agents

2 2

R&D Agent

Regulator 5

Innovation

agent

5 5 5 5

Implementer 4 4 5

Developer 5 5 5 3

Lobby group 3 3 3

Inventors

Industrialists,

VIP in

Business

5 3 1

Politicians 5 5 5 5

International

organization

(or E.U.)

5 5 5 5

Source: adapted from the methodology of Zuylen and Weber (2002)

Page 12 of 192

Factors contributing to the transport innovation

Category of

factor

Sub-category Initiation

(ranked 1-5)

Development/

Spread (1-5)

Implement

ation (1-5)

knowledge and expertise

available

availability of technologies 4 4 4

Technological

compliance with standards

legislative guidelines 2 5

Adm partners available

Administrative

and legal

(lack of) clarity about

division of responsibilities

support, relay in local,

regional assemblies

4

the role of interests groups 1 5 5

Political and

process-related

cross boundaries effects 5

incentives, motivation,

spirit of entrepreneurship

2 2 5

involvement in the project

on the part of the

stakeholders

1 5 3

Socio-cultural

and

psychological

link

universities/research/innov

ation

1 4 4

net benefits for actors 1 4 4

revenues for actors 1 2 4

Economic and

financial

availability of subsidies

Source: adapted from Banister (2004), and Van den Bergh et al. (2007)

Page 13 of 192

1.2. Rail

ERTMS

Introduction

In 2010, rail operation in Europe remains linked with a fragmented network where the

locomotives have still difficulties to cross national borders although they are “opened” since

the Rome Treaty. However, the European Commission has decided, at the beginning of the

90s, to initiate a great standardization program of the rail networks based on the key concept

of “interoperability”. Designed to strengthen the European integration, the interoperability

defines the aptitude of the Trans-European Railway Network to allow a “reliable and

continuing traffic of the trains”1. Among the interoperability factors, the most important is the

command-control and signaling subsystem. Up to the 90s, this system follows the national

rules defined by the national operator and the signaling industry is strongly linked to the

national system. In this situation, the EC has made the choice of a radical innovation rather

than promoting the extension of a existing system.

The signaling domain is composed of two parts: the control system of trains (block system)

and the track protection (post trigger). The innovation concerns the block system which is the

easiest and the less cost part of the signaling system to change. It proposes a unique European

system to replace the national systems: ERTMS2. ERTMS is composed of two big parts.

Firstly, the ETCS3, composed of two “modules” (track-train), allows the data transmission in

the cab from the rail signaling system, and their processing by the board computer. Secondly,

the GSM-R radio system, developed from the GSM technology, allows to exchange

informations between the track and the train. There are three ETCS levels: first level, the data

transmission is made from the “eurobalises” positioned on the tracks. Board computer

receives simple information about speed and priorities. Second level, the transmission is made

by GSM - R radio. The “eurobalises” and the signalling become useless (investment and

maintenance savings). Finally, third level, the trains send themselves their informations,

allowing to follow them in real time on the track and to increase the capacity of a line. These

functionalities are defined by Technical Specifications for Interoperability (TSI) on the

European scale and assure a common base of development for the European industrials.

However, our objective is not to study the technical and operational characteristics of the

ERTMS system but rather to analyze the innovation process and then identify the factors of

success on the base of the INNOSUTRA project.

According to the methodology proposed by the WP3 and WP4, we will identify, in a first time,

the actors and their role in the innovation process. Next, we will describe the historic of the

innovation in distinguishing the major periods of its evolution (gestation, development and

adoption). Lastly, we will analyze the policy intervention and the economical cost of the

ERTMS system. At this time of research ([draft version nr.1], we have not enough elements to

start a stress test analysis as expressed in the methodology of WP 3.4 and 4.4.

1 Definition of the interoperability in the Maastricht Treaty (1992) 2 European Rail Traffic Manager System 3 European Rail Signaling System

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Identification of key actors and their role:

Started at a European scale, the EC and its institutions have played an essential role in the

ERTMS development on an economical and political perspective. The technical and

operational development has been made by the rail signaling industries, the network managers

and the network operators.

The European Commission is existing in every steps of the innovation process. From the 90s,

it was clear to mobilize financial and legislative tools to develop the idea of a rail

interoperability in EU and to allow its development. The EC has several roles in the

innovation process. Firstly, it finances the research in the initiation and development phases,

then provides loans and aids to the managers and network operators to allow the adoption

phase. Secondly, it uses its legislator power by passing mainly three guidelines for the

interoperability, the European networks opening and ERTMS: the Guidelines 91/440 (specific

to the community rail development), the Guideline 96/48 (specific to the high speed rail

system interoperability) and the Guideline 2001/16 (specific to the conventional rail system

interoperability). Finally, based on its financial and legislative power, the EC adopts the role

of general supervisor for the project. It defines and shares the tasks and missions between the

different actors. In 2004, it sets up the European Railway Agency (ERA) in Valenciennes

(France) to supervise the interoperability and security questions in Europe. Bruxelles has

therefore two ERTMS project managers: The ERA and the ERTMS deployment coordinator.

So, thanks to its central role, the EC is trying to make ERTMS a tool benefiting to European

member states.

The AEIF4 and the UNISIG

5 groups represent important actors in the technical and

operational development of ERTMS.

The AEIF precedes UNISIG. Founded in 1995, as a European Economic Interest Grouping

(EEIG), The AEIF is the result of the initiative from three networks: France (SNCF),

Germany (DB) and Italy (FS). At the beginning, this “User’s Group” is set up to accelerated

the ERTMS development. But after the Guideline 96/48 in 1996, the EC extends its

prerogatives. It has to drafting the specifications, to manage the test bases, and to supervise

and coordinate the experimentation of the systems and components. End 1997, the AEIF has

three new members: Netherlands (NS), Great-Britain (Railtrack) and Spain (RENFE).

In the same time, the first involvement of the signaling industries is minor. The EC gives

them secondary tasks in the innovation process: build the test sites. Three industrials are

concerned by these tasks (Alcatel, Ansaldo and Siemens) and they constitute the “Winners

Group”. This group is the first industrial grouping for the ERTMS project. Its objective is to

manage the coordination between the industrials and the rail administrations. But, the role of

this group changes in 1998 when it becomes the UNISIG group within the UNIFE6 in reaction

to the difficulties of the AEIF to elaborate the interoperability specifications (gaps in the

specifications, lot of interpretation possibilities etc.). The EC asks therefore to UNISIG to

take back the elaborated specifications by the AEIF, to improve the TSI and propose a

common technical denominator allowing the compatibility of the systems. So, the EC imposes

a new task share in 1998 between the AEIF and UNISIG. The mission of the AEIF is to

4 European Association for Railway Interoperability 5 Union industry of signaling; it groups together the European rail industries: Alcatel, Alstom, Ansaldo, Bombardier,

Invensys and Siemens 6 Association of the European Rail Industry

Page 15 of 192

define the rules of an operational interoperability (draft an operating regulation) whereas the

UNISIG has to define the interoperability on a technical plan (a board equipment provided by

A must be compatible with a track equipment provided by B).

We have therefore mainly three actor groups involved in the innovation process of

ERTMS: the EC (supervisor), the UNISIG (industrials/producers) and the AEIF (managers

and network operators/users).

The actors of second plan are easiest to identify by their punctual involvements in each step of

the innovation process: initiation, development and adoption phases.

The ERTMS project is the result of a period of great emulation in the rail signaling domain at

the end of the 80s. Several actors are involved in this process. Firstly, the UIC has played a

pioneer role in the emergence of a European system unified, in committing the European

Railway Research Institute (ERRI) to draft the specifications of an universal system in

adequacy with the needs of existing systems. The UIC identifies the need of a new signaling

system able to work in superimposition with the national systems and able to substitute them.

It products with the ERRI the first specifications of the ETCS project. Secondly, the SNCF

studies on the Astrée7 project, at the end of 80s, inspire the ETCS project. This research

program concerns the possibility to follow the trains in real time and to develop the concept of

“virtual block” that would permit to eliminate the classical signaling for the traffic

management. Finally, the DB develops also a similar project named Dibmof8. The both

operators (SNCF and DB) decide to put in common their research in a Franco-German

cooperation (DEUFRAKO9) in which the work done, associated to the UIC results,

constitutes the base of the ERTMS project piloted by the EC. In this context, ERTMS appears

as an aggregate of different national projects transformed in a big European project.

The development period reveals the technical actors. The test centers are put in contribution to

realize ERTMS test common platforms and to assure a global view of the system (put in

common of test means of the Rail Test Centers from Valenciennes and Eurailtest). The

notified organisms play also an important role by advising applicable rules for the rail

interoperability.

Finally, the adoption period reveals essentially the low investment of European States in the

innovation process. Part of a European project, the Member-States, as most networks, wait to

see that this systems is really working. So, we observe that the small Member-States or

associated States, as Switzerland or Luxembourg, develop national policies of investment in

ERTMS and that the bigger States, such France or Germany, stay on wait positions.

To conclude on the question of the actors in the innovation process of ERTMS, several

difficulties in the actor game have been identified. Firstly, we note a multitude of actors with

diverged interests making the management delicate. Secondly, a European project can lead of

schizophrenic comportments between national and European interests. Finally, there is an

inefficacity risk in the hyper-division of the tasks and the multiplication of the control organs.

Analysis of the Innovation process

7 Automation of the train followed in real time (idea of the « virtual » block). 8 Mobile rail radio at integration of services based on the GSM technology 9 Deutsche Französische Kooperation ; Franco-German scientifical and technological cooperation in the surface transport

domain set up in 1978

Page 16 of 192

The objective of this second part is to describe the innovation process and to identify the key

steps: period of initiation, development and adoption of the innovation by the market10.

The initiation period of the ERTMS project is to be found between the 80s and the 90s. Two

factors initiate the movement toward this project: the necessity in the 80s, for several

networks to think back their control-command systems (in particular because of the high

speed development in Europe) and the emergence on the market of new technologies

(information technologies).

The process initiators have been the SNCF with Astrée in 1986 and the DB with the Dibmof

project. These actors realize an important step in 1989 when they decide to put in common

their researches to make compatibles the two competitor systems (Artémis project). From

national, the research on the command-control becomes international through the

DEUFRAKO cooperation. In the same time, the UIC initiates an approach more normative by

drafting the first specifications of the future European system of command-control (ETCS).

Benefiting of this emulation, the EC gives in 198911 a European and political dimension at

this project. The idee was to relaunch the rail in Europe and to assure international traffics

efficient and less restrains by the European past.

At the beginning of the 90s, the project is quickly structured and transformed, by the EC

action, in a European project of command-control system unique for the European networks

in the name of the interoperability. Several key dates confirm this movement. The Council of

transport ministries asks in 1990 the establishment of a European Guideline project in view to

initiate the harmonization of the train command-control systems. This guideline is formalized

in 1996 (Guideline 96/4812). So, the AEIF is charged by the EC to develop the technical

specifications of interoperability on the basis of the UIC works. Meantime, the EC decides to

open the national rail networks to Europe by the Guideline 91/440 and defines in 1992 the

interoperability concept in the Maastricht Treaty.

So, the beginning of the 90s is the initiation of a great “cultural revolution” in the European

railways on the base of a project whose particularity is to be an aggregate of plenty small

national projects. The EC has reacted at the good time as a catalyst whereas France and

Germany begun to share their knowledge and the UIC developed a project of European

command-control.

We consider the beginning of the development period with the formalization of the Guideline

96/48. This date seems to be arbitrary. Indeed, the UIC works already to the specification

development since the beginning of the 90s and the EEIG (of the ERTMS users) is created in

1995 to accelerate the innovation development. However, it is from 1996 that a clear

objective is determined (interoperability for European high speed network) and that specific

instructions are given by the EC to the AEIF to develop reliable TSI for a next adoption of the

system by the market.

10 Cf. appendix 1.4, p.21 11 The Council of the Transport Ministries asks the set up of a work group on the railway technical harmonization question to

make a good use of the high speed. 12 Guideline 96/48/CE: defines this concept as « the capacity of the high speed transeuropean rail system to

allow the traffic reliable and continue in high speed […].This capacity is established on regulation, technical and

operational conditions which must be accomplished to satisfy to the essential requirements”.

Page 17 of 192

In 1998, the UNISIG obtains the responsibility to draft the interoperability specifications face

to the difficulties of the User’s Group. After the tests realized in Spain in 1999 on the

fundamental functionalities of ERTMS (prototypes), UNISIG gives its first results the April

25th 2000 in Madrid named “delivered of ERTMS specifications” (version 2.0.0). This

version is officially adopted in 2001 and sets the beginning of the adoption phase by the

market. The year 2001 is also marked by a new step in the interoperability concept. The

Guideline 2001/16 extends the interoperability from the high speed to the conventional

European network announcing the development plan of the six freight rail corridors equipped

in ERTMS (2005). Finally, 2001 marks the multiplication of the “change requests” delivered

by the users to the coordination services of the ERTMS project. So, the development period

continues and takes a new aspect with the multiplication of the updates whose the risk is to

make incompatible versions.

From 2002, a new version (2.2.2) is adopted whereas the EC imposes to the Member-States

(Decision 2002/731) to define an implementation national plan of the TSI. A new version is

promulgated in 2004 (version 2.2.3). But in this instability context of the versions, the

Member-States and the networks are reluctant to adopt the system. Consequently, to give trust

in ERTMS, the EC engages it to elaborate a coherent plan for ERTMS implementation and

gives this mission to promote ERTMS at its new agency – the ERA- created the same year.

The ERA task is delicate. Firstly, it must be recognized as a reliable institution in the rail

sector. Secondly, it has to resolve the difficult problem of the version instabilities and the

incompatibility risks (incompatibility of the versions between them and incompatibility of the

version with the system already implemented). A new version is adopted in 2005, 2.3.0 while

a sub-version, 2.3.0.b, is adopted in 2008 to the demand of the industrials. Currently, the

networks wait for a version 3.0.0, destined to stay stable during at least five years, in 2012-

2013.

This development period shows the complexity of the ERTMS project and the needs of

political support. While the system is already proposed in different product ranges (range

ATLAS by Alstom), the ERA must answer to the “change requests” required by the users. So,

this innovation presents important risks for the investor : explanation may be its low reception

by the European networks.

The ERTMS adoption by the actors from the rail sector begins in 2002 after a test period of

two years. The investment of the European networks is progressive and fragmented. In 2010,

it is still impossible to speak about ERTMS network in Europe with only 10 000km of lines

equipped.

The first commercial implementations take place on the Vienna-Budapest transborder axis in

2001 (level 1) and in Switzerland between Olten and Lucerne in 2002 (level 2). But these

realizations are based on temporary versions and no totally interoperables. In this context, bit

of other networks are disposed to follow their example especially that the system installation

costs in Switzerland have been superior to the forecasts. It must wait 2004 to see emerge

equipment projects of new lines in Europe. This multiplication of projects is the result of the

EC involvement in 2004 to elaborate an implementation coherent plan of ERTMS. However,

the results of this initiative are moderates. A lot of delays are observed in 2006 on the lines

Madrid-Barcelona, Rome-Naples, Mattstetten-Rothrist (Switzerland), etc.

Add to these delays, another problem appears in the ERTMS process adoption. The operators

conceive the migration toward ERTMS as an additional cost. It results from a difference made

by the EC between operators and network managers: subsidy plans have been put in place by

the EC for helping the network managers but the EC is studying still, in 2005, the possibility

to subsidize the operators without to be accused to subsidize the operating. The Thalys

example illustrates very well the difficulties presented by ERTMS for the operators. As long

Page 18 of 192

as the whole of the itinerary travelled by the Thalys trains will not equipped only in ERTMS,

the ERTMS system will be for Thalys a simple command-control system to be added to the

others national command-control systems (about ten) already boarded in the trains.

So, the ERTMS adoption is realized very progressively and it risks to require again many

years. Several projects are planned for 2020 on high speed lines and freight corridors but the

implementation of a real European network is still far away. Two questions ask: Could we go

faster? Is the system that will be put into action not already obsolete on the functional plan

and especially on the technical plan ? It is the risk taken by small networks, as Switzerland,

Luxembourg or Denmark, by equipping integrally their network in ERTMS and by doing the

bet that the big networks, as French or German, will end by follow them.

To conclude this part, we can say that the extension of the development period on the

adoption period can be a major risk for the project success (incompatibility risk between the

versions, trust crisis etc.). Once again, the EC role in this innovation seems to be a crucial

element. However, its action has been very criticized by the specialized European press since

the beginning of the 00s. So, we propose to complete this study a focus on the support policy

led by the EC for ERTMS with a special outlook on the economical conditions of the

innovation.

Economic cost and policy intervention

This last part is dedicated to the analysis of the policy intervention in the innovation process.

We will describe the EC governance of the project and then we will present succinctly the

economical cost of ERTMS to conclude on the subsidy policy.

The European policy has been quickly realistic. The development of this project in a

European rail network scale could result only from a strong policy on long term perspective.

But, in spite of this realism, the enforcement of two guidelines, the support of the research and

the buying and the constitution of work groups charged of tasks well defined, the critics about

the EC governance have been important during the innovation process13.

The recriminations have essentially concerned the incapacity of the EC to assure fully its

manager role and its repulsion to privilege an industrial among the six of the UNISIG group

by designating a master-builder. In a first time, the actors have criticized its interventionism

too important in the drafting of the technical specifications. Its “obsessional” will to respect

the interoperability principle in the drafting of the specifications has had a tendency to delay

the drafting and the first tests. But, in a second time, as a consequences from its refusal to

privilege an industrial as master-builder, it has been criticized to not apply the rules of a true

management and to let too freedoms to the networks and industrials which have each

developed their own conception of the system (multiplication of the costs and delays).

However, in 2006, the EC appears as a key actor in the ERTMS development because,

beyond the governance of the project, the EC subsidizes the ERTMS implementation. But,

this problematic asks a grave dilemma to the EC: if it subsidizes, it risks to be accused to aid

the transport operators but if it does not move, it risks to spark off operators discontent. Yet,

the transport operator involvement in the system is a key element for the future success

of the innovation.

Finally, the EC is confronted in 2010 to a new barrier: the migration of the European

networks towards the new system. The challenge is important because ERTMS needs, to be a

13 Cf. appendix 1.1, p.18

Page 19 of 192

success, a minimal number of line kilometers equipped to form a true network. As long as this

critical point will not be reached, the ERTMS project will not be interoperable and will be a

net extra-cost for the operators and network managers. So, it is essential to assure a quick

implementation of ERTMS on the base of a coherent action plan for the formation of a true

European network and the compatibility of the different commercialized systems.

The EC had therefore to adapt its strategy to the innovation process evolution and to improve

its knowledge about the good governance of a project to the European scale.

We have developed the political and historical aspects of the innovation. We ask now the

question about its economical interest and its constraints.

A first debate is appeared about the question of the implementation cost of ERTMS. The

EC, by the K. Vinck14 voice, defends the ERTMS profitability while the most actors of

the rail sector are skeptical about its economical benefits. In general, concerning the cost

of the system, a responsibility can be shared between the EC (lack of authority) and the

industrials which, by lack of authority from the EC, have each developed their products and

have proposed lot of amendments to ask for more subsidies, to increase the costs of the test

bases and consequently the price of the ERTMS equipments. However, concerning the cost of

the "track" system, A. Veider from Alcatel TAS (Austrian), who has led the equipment of the

Vienne-Budapest line, considers that this trial is biased in part. The implementation cost of

the level 1 superposed to the existing system, has been to 25 000€/km what is competitive

with a classical system. The level 2 cost, without classical signaling, has been to 200 000€/km.

But the ¾ of this sum have been in reality destined to the signal box modernization etc. With

or without ERTMS, these investments were become necessaries. The costs of ERTMS

implementation on the networks are therefore moderates for A. Vieder. However, he admits

that the situation is different for the adaptation cost of the locomotives. Fault to the industrials,

according A. Veider, which validate their locomotives for « all traffics on all lines” including

long and costly tests.

But beyond the cost of the system (first issues), the question of the interest to migrate toward

ERTMS is asked (second issues). ERTMS is a radical innovation : there is an important

problem about the adaptation question of the new system with the old. Consequently, in a

context of no-stabilized versions and of austerity measure for the Member-States as the firms,

it is understandable that rail transport operators have little equipped their rolling material. By

example, Thalys has invested 60M€ to adapt its park with no advantages assured for the

moment. So, as long as a true European network will not be constituted, the operators will

consider the ERTMS as an additional system allowing a very relative interoperability. We

count in 2005 only 1600 vehicles equipped for 10 000km of line.

To conclude, the EC is aware that beyond the regulation, the principle declarations and the

specifications, it is necessary to play the financier role to encourage the rail networks to begin

the migration.

This last point is a focus on the subsidy policy led by the EC and on the divergent strategies

of the national Member-States facing the ERTMS implementation.

Take two opposed cases: Switzerland and France. Switzerland, no EU member, has decided to

take up the challenge to implement ERTMS on its network. The example of the Mattstetten-

Rothrist line equipment in 2007 shows a strong policy will in Switzerland to gain knowledge

about the ERTMS technology. For the adaptation of the rolling material, estimated to 300M

CHF, the Parliament has allocated a loan of 130M CHF. This aid should permit the equipment

14 Charged since 2005 to coordinate the different ERTMS projects : ERTMS coordinator

Page 20 of 192

of 660 trains and to encourage the operators to continue the migration. Conversely, France

adopts an attitude more reserved regarding ERTMS. It asks specification modifications, is

opposed to the setting up of delays to realize the migration and calls for financial aids from

the EC to put at the level its network. So, we have two various strategies. However, it must

not be considered Switzerland as a State convinced by ERTMS. Indeed, the obsolescence of

the Swiss traffic management system (ZUB) is well known while the French system (TVM

400) works very well on the high speed lines. Consequently, the interest to adopt ERTMS is

less important for France than for Switzerland.

In spite of the lack of European Member-State mobilization for ERTMS, the EC is closely

implicated in the innovation process. From the initiation period, it promotes the

interoperability concept with financial aids to allow its development. In 1995, in the

framework of the Fourth Framework Programme for Research and Development (FP4), the

EC allocates for the project a financial support of 12M€. In 1998, in the framework of the 5th

Framework Programme (FP5), the EC allocates a new aid of 38M€ to support the finalization

and the certification of the system. From the 00s, the EC changes of strategy and develops an

aid system for the ERTMS implementation. The network managers are the first subsidized.

Every project of modernization or new line building receives, from the EC, an aid for the

ERTMS implementation. In 2008, 271M€ have been allocated in the RTE 2007-2013 budget

framework for the ERTMS equipment. The operators have to wait more time because of the

juridical problem asked by their statute. In 2005, K. Vinck worked on the possibility to

subsidize them for the buying or the put at level of ERTMS locomotives in the framework of

the 2007-2013 budget. The proposed subsidy was, at this time, approximately of 100 000€ per

locomotive.

So, the EC has a key role in this innovation by the allocation of aids for the research, for

the implementation and for its will to make of ERTMS a tool for the European railways. The challenge for the project success is important, because as said C. Faure from the DG

tren15: “Only one link in the chain no equipped can to be enough to cancel the equipment

advantages”.

Conclusion ERTMS is a complex innovation. Its complexity results from its European scale and its nature.

As network innovation, its success depends on one condition: that the whole of European

networks adopts the system as soon as possible. Because, the interest of ERTMS is in the

network and continuity concept. If an actor refuses the migration, so there is a network

discontinuity. The EC challenge for innovation success is therefore to support the migration

conditions from the old national networks to the new system. It is also linked with the idea

that the small Member-States (Switzerland, Luxembourg etc.) have defined their strategy in

adopting national plans to equip their network by hoping to take the big neighbor networks in

their wake.

In this framework, the necessity of a rigorous management and a strict calendar is obvious to

put in trust the actors and to guarantee them a quick investment return. Without this dynamic,

nobody has interest to invest the first.

Finally, it remains the problem of the progressive character of the innovation which

contributes more to reduce the trust of the rail actors. Consequently, the problem concerns not

15 Directorate-General for Mobility and Transport (European Commission)

Page 21 of 192

only the investment return question but also the development of the system which can make

the previous versions incompatibles with the old and call for new investments.

So, we have an innovation where the success rate is measurable with difficulties. Few

statistics are available, the projects stay isolated and the wait for a new specifications for 2012

contributes to develop a climate of wait and see about ERTMS.

Identification of the barriers16:

- Complex management because of the actor multiplicities and the divergent interests,

- Maybe “Schizophrenic” behaviors from certain actors between national and European

interests,

- Lack of strict calendar and multiplication of the tasks : inefficacity risks,

- Confusion between the development and the adoption periods: obsolescence and

incompatibility risks between versions,

- Lack of a master-builder among the UNISIG group.

But, if this innovation is, at this time, between potential failure and success on the spectrum

success in its implementation, some success factors can be identified for its future

developments17:

- European and common project very open on the political side,

- Strong involvement of the EC in a complex innovation,

- Set up of a specialized agency – ERA – to manage the interoperability questions in

Europe and manage the ERTMS project.

- Success in a long term perspective ; attractivity of European rail sector and

experiences to be shared with the rest of the world.

Bibliography

Publication:

- WINTER P., Compendium on ERTMS: European Rail Traffic Management System,

UIC, 2009, 260p. Articles:

- BARROT J., L'ERTMS, un bond technologique indispensable, Ville et transports, n°447, 07/05/2008

16 Cf. appendix 1.3, p.20 17 Cf. appendix 1.2, p.19

Page 22 of 192

- PELLEGRIN J., ERTMS : une gouvernance européenne déplorable, Transports, n°448, 01/03/2008

- DANCRE J-F., En Suisse, ERTMS sort du tunnel, Le rail, n°139, 01/09/2007

- CHARLANNE J.-P., ERTMS : où en est-on en 2007 ?, Revue Générale des Chemins de fer, n°163, 01/07/2007

- DANCRE J.-F., L’interopérabilité : mythe ou réalité ?, Le Rail, n°125, 01/04/2006

- DANCRE J.-F., ERTMS : qui fait quoi ?, Le Rail, n°125, 01/04/2006

- FRERICHS C., Premier déploiement d’un système ETCS niveau 1 en Espagne, Le Rail, n°125, 01/04/2006

- PIEDNOIR F., ERTMS : le rêve de l'interopérabilité, Le Rail, n°125, 01/04/2006

- LEBORGNE G., L'Europe de la grande vitesse : l'ERTMS, talon d'Achille des Lignes grande vitesse, Ville et transports, n°387, 09/11/2005

- VINCK K., « Il faut voir plus loin que les bénéfices à court terme », Ville et Transports, n°387, 09/11/2005

- CASTAN P., Principes du contrôle commande en mode ERTMS : Aspects

techniques, organisationnels et humains, Revue Générale des Chemins de fer, n°5, 05/05/2004

- LACOTE F., PORE J., La signalisation ferroviaire européenne « ERTMS/ETCS » devient une réalité, Revue Générale des Chemins de fer, n°5, 05/05/2004

- LANCIEN D., La genèse du projet ERTMS, Revue Générale des Chemins de fer, n°5,

05/05/2004

- OTTEBORN D., Le rôle d’UNISIG dan le développement d’ERTMS, Revue Générale des Chemins de fer, n°5, 05/05/2004

- VINOIS J.-A., ERTMS, une opportunité sans précédent pour concrétiser

l'interopérabilité du réseau ferroviaire communautaire, Revue Générale des Chemins de fer, n°5, 05/05/2004

- RIBEIL G., D'Astrée à l'ERTMS : un long parcours, Le Rail, n°90, 16/12/2001

- BATISSE F., ERTMS : le futur système européen de gestion du trafic ferroviaire, Le Rail, n°83, 16/12/2000

Interview:

Page 23 of 192

MAGNIEN A., Retour sur les spécifications techniques du système ERTMS et son

développement, Valenciennes, le 16/09/2010

Web sites:

www.ertms.com

www.uic.org

www.transports.equipement.gouv.fr

www.transport.alstom.com

www.rff.fr

www.railneteurope.at

www.developpement-durable.gouv.fr

www.europa.eu

www.eurailtest.com

www.ertmssolutions.com

www.belrail.be

Page 24 of 192

Appendix

Type of policy analysis

Type of policy

analysis

Key

points or

not

(ranked

1–5)

Level of

government

involved (and

public/private

partnership?)

Influence

during the

initiation

period

(ranked 1-5)

Influence

during the

development

period

(ranked 1-5)


implementation

/termination period

(ranked 1-5)

Standardisation 4 EC 4 4 4

Stimulation of

R&D 4 EC 4 4 2

Knowledge

management 3 EC 2 4 1

Infrastructure

development 3 EC 1 1 4

Regulation and

planning 4 EC 2 4 4

Legislation 4 EC 2 4 4

Pilots and

demonstrations 3 EC 1 4 2

Networking - - - - -

Financial

resources and

incentives

4 EC 4 4 4

Niche

management - - - - -

National

security/strategie

s issues

- - - - -

Environment

issues - - - - -

Comments:

ERTMS is essentially a European project supported by the EC. The national states are less involved.

Three types of policy intervention:

1 Technical intervention by the EC during the development period to allow the interoperability,

2 Legislative and administrative intervention in the whole process by guidelines, Decisions etc.,

3 Financial intervention for aid the research and the tests during the development period and

aid to the implementation.

Page 25 of 192

Factors contributing to the transport innovation

Category of

factor Sub-category

Initiation

(ranked 1-5)

Development/

Spread (1-5)

Implementatio

n (1-5)


available 4 4 4

availability of

technologies - - -

Technological

compliance with standards 1 1 1

legislative guidelines 2 4 4

Adm partners available 4 4 4 Administrativ

e and legal (lack of) clarity about

division of responsibilities 1 2 2


regional assemblies 1 1 1


Political and

process-

related cross boundaries effects 1 1 1


spirit of entrepreneurship 4 2 2


on the part of the

stakeholders

- - - Socio-cultural

and

psychological link

universities/research/inno

vation

- - -



Economic and

financial

availability of subsidies 3 3 3

Comments:

- Technological: ERTMS is an innovation of technician specialized in control-command,

- Administrative: the EC legislates to support and develop the project but has difficulties to

clarify the division of responsibilities.

- Political: The lobby groups are very important to represent their interests. But the political

sphere is less present; it is not a popular innovation.

- Cultural: The spirit of entrepreneurship was important at the beginning when the national

networks have developed themselves the control-command. It has been lowered by

European scale given by the EC.

- Economic: for the moment, ERTMS is not profitable. The system has needed a lot of

subsidies.

Source: adapted from Banister (2004), and Van den Bergh et al. (2007)

Page 26 of 192

Barrier table

Category of

barrier Sub-category

Initiation

(ranked 1-

5)

Development/

Spread (1-5)

Implementatio

n (1-5)

Lack of information on

information 1 1 1

Lack of information on markets 2 2 2

Available

information

(knowledge) Lack of qualified personnel 1 1 1

Lack of interoperability 1 1 4

Lack of standardisation and

certification 1 4 4

Technical

Difficult adaptation to a new

technology 1 1 4

Legislation, regulations, taxation 1 1 1

Administrative barriers 1 1 1 Legal and

regulatory Weakness of property rights 1 1 1

High costs (too high costs) 1 1 4

Lack of funds within the

enterprise and subsidies from

outside

1 2 3 Financial

and

economic Lack of competition in the

market - - -

Scarce acceptability 1 2 3

Scarce attitude of personnel

towards change 1 2 3 Cultural and

societal Inability to devote staff to

innovation activity 1 1 1

Lack of cooperation among

partners (public, private…) 1 2 2

Fragmentation of decision levels 1 4 4 Decision

making Lack of Vision and Policy

Growth 2 4 4

Comments:

The main barrier of the ERTMS system is its nature: it is a network innovation. So, to work, it need of

a critical network equipped.

- Technical: ERTMS must be an interoperable innovation but its difficulties to adapt at the old

technology make the system not interoperable,

- Financial: ERTMS is a net overcost for the networks because it is for the moment a system in

more to load in the locomotive,

- Cultural: The ERTMS system does not the unanimity in the network personnel because it will

allow a best competition between the networks and can put back in cause the knowledge of

some networks.

Source: adapted from Comtesse et al. 2002, and OECD 2005

Page 27 of 192

Project story

Project story

1989 - Connection of the Astree project (French) to the Dibmof project(German) in the

DEUFRAKO cooperation

- The UIC develops an European command-control system project - The EC asks the set up of a work group on the railway technical harmonization

question.

1991 : Guideline 91/440 (open the national rail networks to Europe)

1992 : Maastricht Treaty and interoperability concept definition

1995 : Set up of an EEIG (of the ERTMS users)

1996 : Guideline 96/48 (project formalisation for the high speed)

1998 : The “Winners Group” becomes UNISIG

2000 : “delivered of ERTMS specifications” in Madrid by UNISIG

2001 : Guideline 2001/16 (project extension to the classical network)

2002 - Decision 2002/731 (the EC imposes to the States to define an implementation national

plan of the TSI)

- New version 2.2.2

2004

- New version 2.2.3

- the EC engages it to elaborate a coherent plan for ERTMS implementation

- ERA creation

2005 : New version 2.3.0

2012 – 2013 : New version 3.0.0

Page 28 of 192

Acronym

AEIF: European Association for Railway Interoperability

Astrée: Automation of the train followed in real time

DEUFRAKO: Deutsche Französische Kooperation

EC: European Commission

EEIG: European Economic Interest Grouping

ERA: European Railway Agency

ERRI: European Railway Research Institute

ERTMS: European Rail Traffic Manager System

ETCS: European Rail Signaling System

EU: European Union

FP: Framework Programme

TSI: Technical Specifications for Interoperability

UIC: International Union of Railways

UNIFE: Association of the European Rail Industry

UNISIG: Union Industry of Signaling

Page 29 of 192

1.3. Maritime

INDENTED BERTH

Introduction

The indented berth is a particular berth capable of serving ships from both sides. The Ceres

Paragon Terminal in Amsterdam is the first terminal in the world to have an indented berth, where

post-Panamax ships can be served can be loaded and unloaded on both sides simultaneously,

whereby the turnaround time is almost halved in comparison to other global port terminals. It was

considered a managerial/organizational innovation in the preliminary innovation report stage of the

INNOSUTRA investigation, and it was considered “not yet a success” because it is the unique case

of indented berth all over the world, and also due to the fact that it has been developed quite

recently to evaluate its impacts in the long-run.

The background of this innovation will first be described, including the reasons for launching it,

and its development since 10 years ago. The current position of the innovation will be examined,

followed by an analysis of the development process, including its impact and potential spread

across the maritime transport sector. The penultimate section of the report then concerns what

lessons may be learned from the analysis of this innovative case. In the final part there some general

remarks and conclusions are drawn.

In three Annexes, the Policy Intervention Template for WP3/4 is provided, and some extracts from

the initial analysis in the Preliminary Innovation Report (PIR) are also provided, followed by some

references.

Background and Development

The Ceres Paragon Terminal has been realized as a joint-project of the American terminal operator

Ceres Inc. from Wheehawken (USA) and Amsterdam Port Authority (on behalf of the Amsterdam

Municipality). The main reason was to increment the container traffic in the Port of Amsterdam,

whose throughput mainly consisted of various types of bulk (coal, iron ore, agribulk, neobulk)

cocoa and mineral oil products. In the Lease Agreement between APA and Ceres it was stated that

APA would develop the civil engineering infrastructure of the terminal, and that APA and Ceres

would jointly purchase the cranes and the terminal equipment (APA invested € 128.5 million and

Ceres € 43.5 million).

In 1996 Ceres and APA decided to develop this new container terminal along the

Amerikahaven/Noordzeekanaal of the Port of Amsterdam. According to the contract between them

the project was to be completed within 24 months after approval by the City Council. A fast track

approach was necessary to achieve this. A special Project Team was set up by APA, comprising

technical, financial and legal specialists, to manage the overall project, including design,

construction and procurement. The tender procedure followed the European Commission rules, but

was dovetailed into the design process in such way that there was hardly any discontinuity. The

Page 30 of 192

construction contract was awarded to the combination ComPACT (comprising Van Oord ACZ, De

Klerk Werkendam, Ooms Avenhorn, GTI and BemoRail) and the construction period was only 14

months. It was very successful as all partners had their own specialism and there were no

discussions who was responsible on the various parts of the contract. The final contract value was

approximately € 50 million, divided as follows over the key components of the contract

(Ligteringen et al. 2002): quaywalls 34% of the costs; dredging and bottomprotection 8%; drainage

and pavement 41%; powers supply and utilities 8%; crane rails and rail terminal 9%.

In the year 2001 the terminal was delivered after 2 years of work on design, construction and

installation. In September 2002, the Japanese shipping and transport company, Nippon Yusen

Kaisha (NYK) acquired the American Ceres Terminals Inc. along with 50 percent of the shares in

the Ceres Paragon Terminal. Three years later its start up, in 2005, the terminal has not served a

single contract client since it became operable.

At the end of 2008 Hutchison Port Holdings (HPH), the world’s largest container terminal operator,

acquired the control of the Ceres Paragon Container Terminal in return for giving NYK a minority

stake in its ECT terminal in Rotterdam.

Current State of the Art

The current state of the art – in relation to the technical aspects – can be described as follows. The

terminal has a surface area of about 54ha, designed to have a maximum capacity of 950,000

TEU/annum. It has a 2 berths along the Amerikahaven of 635 metres of length, and a 400 metres-

long indented berth, which enables post-Panamax vessels to be served by a maximum of 9 ship-to-

shore cranes. These cranes are among the biggest and the fastest container cranes at global level;

each crane has an outreach of 61 metres, capable of serving 22 TEU wide container ships, and a lift

capacity of 65 metric tons under the spreader and 100 metric tons under the cargo beam. The gantry

frame of the crane leans back 6 m toward landside in order to clear the long boom from the other

side of the slip. Since there are cranes operating on both sides of the ship, booms from opposite

cranes may be within 10 m of each other. A double redundant safety system is provided in order to

prevent boom-to-boom and spreader-to-spreader collision.

A further element is that these cranes are subjected to a noise abatement requirement because the

Port of Amsterdam is located within close proximity of a residential neighbourhood. This

requirement resulted in some design changes for cranes, such as the trolley design was changed

from machinery trolley to rope-towed trolley. The techniques used to reduce noise are (Bhimani and

Hsieh, 2001): insulated machinery house (insulated walls and roof, second floor with noise

insulation panels, special vents with sound absorbing material, plugs for the hatch opening, narrow

insulated rope opening covers, isolation pads for machinery); trolley: rope-towed instead of

machinery trolley, with eight wheels with buffers to reduce trolley wheel load and noise;

polyurethane festoon trolley wheels. Isolate festoon supports; merford cab: less than 70 dB(A)

inside the cab.

The technical aspects above described could be successful elements in term of Ceres terminal’s

competitive potential regarding terminal performance. Although not fully proven in practice (some

Page 31 of 192

trials were conducted) the Ceres Paragon Terminal has a very competitive status when productivity

level is compared to its main competitors: Rotterdam’s Delta-terminal (operated by ECT) and

Antwerp’s North Sea-terminal (operated by Hesse Noord Natie). With an average capacity of 25

movements per hour for one gantry crane, the capacity to load or discharge a container vessel with

five cranes can theoretically lead to 125 movements per hour. With the introduction of the indented

berth concept productivity of the Ceres Paragon terminal was to be doubled to at least 250 picks per

hour. The cranes work independently from to the transport process regarding supply and evacuation

of containers, as straddle carriers are deployed. Turnaround times (and with that, costs) could be

reduced to a considerable extent this way, estimated to be in the range of 30-50 percent (Kroon and

Vis 2005).

There are also many barriers that affect the current situation of Ceres Terminal. First of all

economic barriers due to high competition with the port of Rotterdam and the port of Antwerp,

mainly based on handling costs of containers. The Ceres Paragon Terminal was not able to attract

carriers on a contractual basis since its start-up. Consequently, fixed costs added up in absence of a

frequent and considerable income. As a final means to attract customers and to cover a fraction of

the costs, the terminal has decided to offer their services for relatively low handling costs. The

tariffs charged by the terminal formed only a marginal part of those of competing terminals.

However these low handling tariffs have had no effect on attracting carriers.

Other barriers to this innovation are related to the infrastructural conditions of the port of

Amsterdam. Indeed, in case of increasing inbound and outbound flows of cargo, some different

kind of bottlenecks might be encountered with Amsterdam’s lock complex (Kroon and Vis 2005):

the vulnerability of the lock system including the risk of encountering damage upon entering the

large North-lock that depends on a combination of wind force and direction, and unexpected jams

in the lock complex, in particular jams in the North lock; the dimensions of the vessels calling the

port of Amsterdam which can only accommodate of well below Panamax dimensions; the lock

process which could lead to difficult vessel planning and possible additional waiting times for liner

shipping: liner vessels plan port calls as far as three months ahead, while bulk carriers usually make

an unannounced call only 12 to 24 hours before arrival.

To solve the vulnerable lock problem, a solution could be the construction of an extra lock for the

future success of the container ambitions of Amsterdam and the Ceres Paragon Terminal. Although

it will not offer a solution to all the problems described above, an additional new lock would have

the following significant benefits (Drewry Shipping Consultants 2003):

• It allows the port of Amsterdam to grow its traffic volume as cargo projections indicate negative

growth with the current infrastructure.

• Increase of the number of usable locks (i.e. usable by modern commercial Deep-Sea vessels) from

two to three, which would provide sufficient capacity to accommodate increasing cargo volumes

and associated vessel activity.

• It permits two or even three vessels to transit simultaneously in the new lock, thus helping to

constrain lock operating costs, and further increase lock capacity.

• It makes the capture of significant container traffic volumes more feasible by reducing or even

eliminating potential congestion at the locks.

Analysis/Discussion

Page 32 of 192

From the previous indications it emerges that the unsuccessful case of the indented berth derives

from the combination of many different key factors and barriers, mainly due to some economic and

infrastructural conditions of the port of Amsterdam where this berth has been localized, and not

directly linked to innovative technological aspects which partly could have lead to a potential case

of success.

First of all it is to consider as a factor of failure the choice of the port of Amsterdam, established

internationally as a bulk port. With a trend of decreasing bulk cargoes at the expense of increasing

amounts of containerised trade, the port of Amsterdam has made a disputed and risky attempt, with

the realisation of the Ceres Paragon Terminal, to enter the container market. Indeed the position of

the competitive container port of Rotterdam, established nearly four decades ago and massive in

size, has been underestimated. Moreover, the port of Amsterdam has a vulnerable lock system

which implies potential jams and bottlenecks and not able to accommodate new generation vessels.

Another unsuccessful factor connected to the previous one has been the management of the

terminal operator NYK, then substituted by Hutchison Port Holdings (HPH) the same terminal

operator controlling ECT Rotterdam. In the latest years the take-over by ECT has become real with

the use of the Ceres Paragon Terminal as an overflow for ECT’s terminal operations. A striking

example is formed by a situation encountered in October 2005 (Kroon and Vis 2005): carrier APL,

frequently calling the port of Rotterdam, chose to call the port of Amsterdam as waiting times at

ECT, at that moment in time, were not acceptable. The Ceres Paragon Terminal discharged 2,300

containers that were transported back, by train, to the port of Rotterdam. Due to contractual

agreements ECT eventually summoned APL to still moor at the port of Rotterdam, even with the all

containers destined for Rotterdam already being discharged in Amsterdam.

However, according to an expert from DP Word interviewed (DP World 2010), there are also

technical elements which could have lead to the development of an unsuccessful indented berth.

These aspects are: lower driving distances around indented locks; difficulties at time of starting and

time of finishing with quay cranes, as it is not possible to use cranes for other vessels till last one

finished the bay; difficulties for bunker operation of vessel; expensive quay wall; and safety wise,

when lashing people are on board they have to expect containers from two sides.

Lessons to be Learned

The indented berth can be evaluated as a revolutionary concept of highly productive terminal which

has been developed only 10 years ago. Thus it is characterized by a short period of development and

growth still in progress, meaning there are still some potential opportunities to become a success.

With a revolutionary equipment, fast vessel turnaround time, working at the 2 bays next to each

other, higher berth utilisation at terminals with limited quay length, stack of containers in bay that

are lifted over every time, and low handling costs, a number of important (success) factors

presented Ceres Paragon Terminal to make things work.

However, the Ceres Paragon Terminal was not able to position itself in the North-West container

port range. A first reason could be identified in relation to the technological factors above described,

that can represent advantages only for the single ship served at the indented berth but not even for

the port cycle including also the management of the gates and yards, and planning for serving other

Page 33 of 192

ships. Therefore this innovation can be evaluated as a success if referred to the ship-berth operations

but not if considering the efficiency of the terminal as a whole.

Furthermore, the previous analysis reveals the presence of several barriers associated to the failure

of innovative indented berth in the port of Amsterdam. These barriers are mainly economic, related

to the economical and political power of the leading parties in the massive container port of

Rotterdam, that can be considered involved, directly or indirectly, in the failure of the Ceres

Paragon Terminal. Lobbying attempts by NYK, to draw attention to the Amsterdam based terminal,

were tempered by P&O Nedlloyd veto rights, in order to protect its interests with the port of

Rotterdam. Moreover, there are also infrastructural and technical problems such as the lock

complex, the access canal and hinterland connectivity which should be solved. A potential solution

might be represented by the construction of additional lock for providing sufficient capacity to

accommodate the latest generations of vessels.

Summary and Conclusions

The case of the innovative indented berth has been evaluated as “not yet a success” according to

the identification of the following barriers, that are economic/managerial, infrastructural, and

technical/organizational:

Economic and managerial factors: high competition with the port of Rotterdam and the port of

Antwerp, mainly based on container handling costs, due to the inability of the Ceres Paragon

Terminal to attract carriers on a contractual basis. As a final means to attract customers the Dutch

terminal decided to offer their services for relatively low handling costs. Furthermore, the

management of global operators (NYK and HPH) which has led the Ceres Paragon to be used as an

overflow for ECT Rotterdam’s terminal operations.

Infrastructural factors: the vulnerability of the lock system which often generates jams and

bottlenecks, the access canal with longer times (waiting times) at passing and only for limited sizes

of vessels, and some further difficulties in hinterland connectivity of the Port of Amsterdam.

Technical and organizational: the optimal productivity is reached only when the indented berth is

fully serviced by nine cranes, otherwise productivity levels become lower than other terminals;

lower driving distances around indented locks; difficulties at time of starting and time of finishing

with quay cranes, as it is not possible to use cranes for other vessels till last one finished the bay;

difficulties for bunker operation of vessel; expensive quay wall; and safety wise, when lashing

people are on board they have to expect containers from two sides. Finally, there is the risk of

collision of booms and difficulties in vessel’s planning in case of loading from both sides.

There are three main conclusive remarks that can be drawn from the analysis and discussion of

indented berth, launched about 10 years ago and still in the phase of slow growth according to a

life-cycle concept.

First, it is clear the strategic role played by some actors at port politics’ level. The support from

global operators has been fundamental in promoting the Port of Rotterdam and consequently

Page 34 of 192

penalizing the competitive position of the Port of Amsterdam. It has become an overflow of

Rotterdam and this form of cooperation has emphasized only the market power of Rotterdam.

Second, it has been evaluated as “not yet a success” even if there many positive key factors,

especially technological, such as high productivity due to nine ultra modern post-Panamax gantry

cranes (rated by port technicians as the fastest, most efficient and quietest cranes in the world, able

to serve container vessels of all sizes, including the ‘post-Panamax plus’ container vessels),

turnaround times and costs considerably reduced (30-50 percent), higher berth utilization, less

issues with walls meaning that stack of containers are lifted over every time, and finally lower

handling costs.

Third, it can not be excluded a successful future development of the Ceres Paragon Terminal with

greater competitive power on the long term, even if some barriers have to be overcome, starting

from the economic and infrastructural ones. Or maybe this revolutionary concept of indented berth

could be successfully applied in another port, even if global terminal operators are quite sceptical

about this due to the Dutch current failure.

ANNEXES

Policy Intervention Template

Partner short name UNIGE

Title Indented berth

Domain Road – rail – inland navigation – maritime –

intermodal – other ______

Type of innovation in success – in failure – in debate

Nationality of case National - Dutch

General national framework of policy intervention

1. Actors support (Public Administration, parapublic institutions, private partners, etc.)

- Private partner: the terminal operator (Ceres Inc. from Wheehawken, USA)

- Amsterdam Port Authority (APA)

2. Which level of government ? (European Commission, central, regional, local, etc.)

- Regional and local level

3. Role of competent authority?

- Private partner: purchased the cranes and the terminal equipment jointly with APA

(Ceres invested € 43.5 million)

Page 35 of 192

- Amsterdam Port Authority (APA): investment in the civil engineering infrastructure

of the terminal and mostly in the equipment (€ 128.5 million)

Applicated study of policy intervention

Summary description (max 1 page)

In literature, the indented berth refers to a particular berth capable of serving ships from both

sides. Operating cranes on both sides of the ship introduces the risk of collision of cranes and

boxes over the ship, so that special requirements and challenges for the cranes are necessary,

such as a reliable collision avoidance system.

The Ceres Paragon Terminal in Amsterdam, realized as a joint-project of the American

terminal operator Ceres and Amsterdam Port Authority (on behalf of the Amsterdam

Municipality, is the first and unique terminal in the world to have an indented berth where

ships can be loaded and unloaded on both sides simultaneously, whereby the turnaround time

is almost halved in comparison to other terminals.

The terminal has a surface area of about 54ha, designed to handle 950,000 TEU/annum. It

has a 2 berths along the Amerikahaven (635 metres quay length) and a 400 metres-long

indented berth, which enables post-Panamax vessels to be serviced by a maximum of 9 ship-

to-shore cranes, made by ZPMC. These cranes are among the biggest and the fastest

container cranes; each crane has an outreach of 61m, capable of serving 22 TEU wide

container ships, and a lift capacity of 65 metric tons under the spreader and 100 metric tons

under the cargo beam.

A significant element is that the cranes are subjected to a noise abatement requirement

because the Port of Amsterdam is located within close proximity of a residential

neighbourhood. This requirement resulted in some design changes for cranes, such as the

trolley design was changed from machinery trolley to rope-towed trolley.

The Ceres Paragon Terminal was realised and completed in time and in accordance with the

conditions of the contract between APA and Ceres. In 2001 the terminal was delivered after

2 years of intensive work on design, construction and installation. In September 2002 the

Japanese shipping and transport company, Nippon Yusen Kaisha (NYK) acquired the

American Ceres Terminals Inc. along with 50 percent of the shares in the Ceres Paragon

Terminal. Three years later its start up, in 2005, the terminal has not served a single contract

client since it became operable. At the end of 2008 Hutchison Port Holdings (HPH), the

world’s largest container terminal operator, acquired the control of the Ceres Paragon

Container Terminal in return for giving NYK a minority stake in its ECT terminal in

Rotterdam.

Factor roles

1. Type of factors Identification of factors associated to the innovation emergence (technological;

administrative and legal; political and process related; socio-cultural and psychological;

economic; international; environmental, etc.)

- Technological factors: availability of new technologies like a double redundant safety

system because nine cranes from opposite sides of the ship operate on adjacent holds.

Also noise reduction techniques are used to meet stringent noise abatement requirements

due to the proximity of the terminal to a residential neighborhood.

- Administrative and legal factors: availability of Amsterdam Port Authority (on behalf

of the Amsterdam Municipality) during all the phases of the project.

Page 36 of 192

- Socio-cultural and psychological: involvement in the project of stakeholders such as

Amsterdam Municipality and Amsterdam Port Authority.

Category of

factor


(ranked

1-5)

Developme

nt/Spread

(1-5)

Implement

ation (1-5)


available 5 5 5


Technological



adm. partners available 5 5 5

Administrative

and legal


division of responsibilities 3 3 3


regional assemblies 5 5 5


Political and

process-related

cross boundaries effects 4 4 4

incentives, motivation, spirit

of entrepreneurship 5 5 5

involvement in the project on

the part of the stakeholders 5 5 5

Socio-cultural

and

psychological

link

universities/research/innovati

on

3 3 3



Economic and

financial

subsidies available 5 5 5

2. Innovation barriers Identification of the barriers to the innovation process (Lack of awareness of available

information; Regulatory and legal barriers; Technical barriers; Financial and commercial

barriers; Societal barrier; Decision making barriers)

- Available information: lack of information on markets, in particular regarding the

powerful position of ECT, the leading terminal operator in Rotterdam, which basically

handles all the major carriers and binds them through contracts (although Maersk Line

has its own dedicated terminal). The power that is gained through these contracts might

be stronger than suspected. In 2004 the carrier APL, frequently calling the port of

Rotterdam, chose to call the port of Amsterdam as waiting times at ECT, at that moment

in time, were not acceptable. The Ceres Paragon Terminal discharged 2,300 containers

that were transported back, by train, to the port of Rotterdam. Due to contractual

agreements ECT eventually summoned APL to still moor at the port of Rotterdam, even

with the all containers destined to Rotterdam already being discharged in Amsterdam.

- Economic and financial barriers: High competition with the port of Rotterdam and the

port of Antwerp, mainly based on handling costs of containers. The Ceres Paragon

Terminal was not able to attract carriers on a contractual basis. Consequently, fixed costs

added up in absence of a frequent and considerable income. As a final means to attract

customers and to cover a fraction of the costs, the terminal decided to offer their services

Page 37 of 192

for relatively low handling costs. The tariffs charged by the terminal formed only a

marginal part of those of competing terminals. However, these low handling tariffs had

no effect on attracting carriers.

- Technical/infrastructural barriers: Amsterdam port infrastructural condition of the

lock complex and of the North Sea canal having its effect on the port’s nautical access

with potential jams bottlenecks in case of increasing inbound and outbound flows of

cargo (Kroon and Vis, 2005).

- Another technical barrier is represented by some problems in hinterland connectivity,

especially considering that port of Amsterdam connects to the Rhine-river through the

‘Amsterdam-Rhine’-canal which only in absence of current leads to efficiency.

Category of

barrier


(ranked 1-5)

Development

/Spread (1-5)

Implem

entation

(1-5)

Lack of awareness on

information 1 1 1

Lack of information

on markets 5 5 5

Available

information

(knowledge)

Lack of qualified

personnel 1 1 1

Lack of

interoperability 5 5 5

Lack of lack of

standardisation and

certification

1 1 1

Technical

Difficult adaptation to a

new technology 1 1 1

Legislation,

regulations, taxation 1 1 1

Administrative barriers 1 1 1

Legal and

regulatory

Weakness of property

rights 1 1 1

High costs (too high

costs) 3 2 1

Lack of funds within

the enterprise and

subsidies from outside

1 1 1

Financial and

economic

Lack of competition

in the market 5 5 5


Scarce attitude of

personnel towards

change

1 1 1

Cultural and

societal

Inability to devote staff

to innovation activity 1 1 1

Policy intervention

Type of policy

analysis

Key

points

Level of

government

Influence

during the

Influence

during the

Influence

during the

Page 38 of 192

or not

(rank

ed 1–

5)

involved (and

public/privat

e

partnership ?

)

initiation

period

development

period

implementa

tion/termin

ation

period

Standardisation 3 Industrial 3 3 3

Stimulation of

R&D 3 Industrial 4 3 3

Knowledge

management 2 Industrial 3 2 2

Infrastructure

development 3 Global 3 3 3

Regulation and

planning 1 - 1 1 1

Legislation 2 European 2 2 2

Pilots and

demonstrations 2 - 2 2 2

Networking 3 Global 4 3 3

Financial

resources and

incentives

3 State (Dutch) 4 3 3

Niche

management 2 Industrial 3 2 2

National

security/strategie

s issues

1 - 1 1 1

Environment

issues 3 State (Dutch) 3 3 3

Actors and their roles

Type of

actors

involved

Key points

or not

(ranked 1–5)

Which level of

government

involved (and

public/private

partnership?)

Influence

during the

initiation

period

Influence

during the

development

period

Influence

during the

implementa

tion/termin

ation

period

State experts,

State

administration

2 State (Dutch)

Monitoring

agents 1 - - -

R&D Agent 1 - - -

Regulator 1 - - -

Innovation

agent 2 Industry 2 2 2

Implementer 1 - 1 - -

Developer 3 - - 3 3

Lobby group 4 Industrial 4 4 5

Inventors 1 Industrial 1 1 1

Page 39 of 192

Industrialists,

VIP in

Business

5 Industrial 4 4 5

Politicians 1 State (Dutch) 1 1 1

International

organization

(or E.U.)

1 EU 1 1 1

Stress test

Stress tests for transport

innovation

Estimated results (forecast,

planning, projected data)

Real operation, up to date

data

Traffic, revenues from traffic

and operation

950,000 TEU

203,000 TEU (2009)

Security issues, injuries,

accidents - -

Extension needed,

complementary infrastructure

needed,

Construction of a new lock.

Costs estimated to be

between 450 and 550 million

Euro

This project has been

postponed by the central

government due to the high

costs

Public/Private money

invested Public: 128.5€ / Private 43.5€

Idem

Return on investment - -

Neighbourhood approval - -

Public debate, opinion of

politicians and experts

Public and opinion of

politicians : good/ opinion of

expert: good

Idem

Idea, project exported? No

Comments: Innovation objectives achieved or not? At the end, who are the winners and the losers?

Can we see underground strategies of some actors after long time of innovation?

Although the revolutionary concept of indented berth and its advanced equipment, this terminal has

not yet achieved the expected objectives of container traffic. In 2009 the throughput was equal to

200,000 TEU that means the terminal remains under-utilised (it has a full capacity of 950,000

TEU).

1. Extracts from Initial Analysis Template (PIR)

Summary

In literature, the indented berth is a revolutionary concept among container terminal facilities: it is a

particular berth capable of serving ships from both sides. As many as nine cranes can operate on the

ship in the slip at one time. Operating cranes on both sides of the ship introduces the potential of

collision of cranes and boxes over the ship. This requires a reliable collision avoidance system.

The Ceres Paragon Terminal in Amsterdam, realized as a joint-project of Ceres Terminal and the

Amsterdam Port Authority, is the first terminal in the world to have an indented berth, which

Page 40 of 192

enables Post-Panamax vessels to be serviced by a maximum of nine gantry cranes, having a reach

up to twenty-two containers across deck from both sides of the vessel.

Adoption barriers (ranking: 7/10)

High barriers to adoption due to high investments in infrastructure and cranes.

Adoption rate and spread (ranking: 2/10)

Very low spread level. After some years of construction, the terminal has been operable since July

2005 and only functioning on a small percentage of its capacity.

Implementation barriers (ranking: 8/10)

High implementation barriers that are: high competition with the port of Rotterdam and the port of

Antwerp, mainly based on container handling costs; the vulnerability of the lock system which

implies potential jams and bottlenecks.

Negative effects (ranking: 5/10)

Logistical: longer lockage times (waiting times) at passing.

Technical: the optimal productivity is reached only when the indented berth is fully serviced by

nine cranes, otherwise productivity levels become lower than other terminals.

Positive effects (ranking: 5/10)

Economic: turnaround times and costs could be reduced in the range of 30%-50%, and economies

of scale at ports (due to higher berth productivity).

Technical: productivity could be enhanced to a high standard. The total berth time of the indented

berth is accepted to be within 15 minutes. Theoretically, the productivity of Ceres should be at least

250-300 movements per hour.

It has been finally stated that is the unique case all over the world so it can be considered not yet a

success, and also because it has been developed quite recently to evaluate the impacts. That is why

the experts have suggested to analyse this case in depth, in order to investigate if the extrapolability

in other ports may be high or it will remain the only case at global level.

References

Bhimani, A.K. and Hsieh, J.K. (2001), “Cranes to serve ship in the slip Ceres Paragon Terminal,

Amsterdam”, reprinted from Ports ’01 Proceedings of the Conference American Society of Civil

Engineers, April 29-May 2, 2001, Norfolk, VA

DP World (2010) Interview with D. Lockefeer, Intermodal Business Development Manager, Nieuw

Namen, the Netherlands.

Drewry Shipping Consultants (2003), The annual review of global container Terminal

Operators. Drewry: London, U.K.

Heseler, H. (2000), “New strategies of port enterprises and their effects on the structures in the

seaports”, published online: maritim.uni-bremen.de.

Page 41 of 192

Imai, A., Nishimura, E., Hattori, M., and Papadimitriou, S. (2007), “Berth allocation at indented

berths for mega-containerships”, European Journal of Operational Research 179, 579–593.

Kroon, R. and Vis, I. (2005), “Seriously Ceres?”, Serie Research Memoranda / Vrije Universiteit

Amsterdam, Faculteit der Economische Wetenschappen en Econometrie.

Kroon, R. (2004), "Seriously Ceres: the port of Amsterdam positioned in the competitive North-

west European container port", MSc thesis, Vrije Universiteit Amsterdam, the Netherlands.

Ligteringen H., Winkel Buiter, T.H., and Vermeer, A.B. (2002), Ceres-Paragon Container Terminal

in the Port of Amsterdam: design and realization of a high-productivity terminal, PIANC 2002, 30th

International Navigation Congress, Sydney, September 2002.

Page 42 of 192

1.4. Inland navigation

ANALYSIS OF INNOVATION PROCESS AIR LUBRICATION IN THE INLAND NAVIGATION INDUSTRY

Introduction Many projects try to realize air lubrication of vessels. Japanese, American and European consortiums are actively involved in the development of air lubrication. The projects studied in INNOSUTRA will be European related projects. In the Netherlands and European Union there are four important projects studying the possibilities of air lubrication called SMOOTH (Sustainable Methods for Optimal design and Operation of ship with air lubricaTed Hulls, European consortium), PELS 1 (Project Energy-saving air-Lubricated Ships, Dutch consortium), PELS 2 (Dutch consortium) and drag reduction by air lubrication (Dutch research consortium).

Key actors The PELS 1 project consists of the following partners,

Scientific participants - MARIN is a Dutch maritime knowledge institution and coordinated PELS 1. The

management of the project has been performed by BOS in commission of MARIN.

Industrial participants - VNSI, is the Netherlands’ Shipbuilding Industry Association. A supporting company for the

entire Dutch shipbuilding industry. One of their main tasks is to stimulate the development of new knowledge and innovations because it will strengthen the competitive position of the industry. That includes initiating the development of innovations and mediation between the industry and required knowledge institutions. They initiated PELS 1.

- Damen Shipyard Group as dockyard and operator of tug boats willing to participate and study the feasibility of air lubrication.

- DK Group NL is owned by a Danish enterprise specialised in developing techniques for fast vessels and fuel saving vessels. DK Group NL is supplier of air cavity designs to the shipping industry.

- Bodewes Millingen is an inland shipbuilding yard. They are owned by Damen. - Van der Giessen-de Noord, is a shipyard and supported the project. - Scheepswerf Grave is a shipyard and supported the project.

Funding participants: - Agentschap NL former Senter Novem, is an organization of the Dutch government to

develop and manage funding programs. The PELS 2 project consists of the following partners,

Scientific participants: - MARIN - Spaarnwater is a maritime consultancy company and attracted in the project to study air

bubbles.

Industrial participants: - Damen Shipyard Group coordinated PELS 2 in cooperation with VNSI. - VNSI coordinated PELS 2 in cooperation with DAMEN. - Ketting Atlas Copco, is a compressor manufacturing company. Their knowledge about

compressors is needed to develop an air lubrication concept. - Akzo nobel paint international, is a paint manufacturing company. They were attracted to

develop hydrophobic paint. - Marinvention, owns the patent of a trapezoidal profile in combination with air cavities.

Page 43 of 192

- Interstreambarging former Van der sluijs supported the project.

Funding participants: - Provincie Gelderland is a Dutch province willing to fund projects related to the reduction of

environmental impact in Gelderland. - Agentschap NL, former Senter Novem.

The SMOOTH project consists of the following partners and their roles according to C.Thill, 2010:

Scientific participants: - Development centre for Ship technology and Transport systems (DST) as towing tank

institute specialised in shallow water hydrodynamics. - Istanbul Technical University as scientific partner. - Maritime Research Institute the Netherlands (MARIN) as towing tank institute with unique

test facilities for testing gas dynamics such as compressibility effects at model scale and coordinated the project.

- SSPA as further towing tank institute operating dedicated facilities required in SMOOTH. Industrial participants: - Akzo Nobel International paint as developer and provider of marine coatings, here in

particular to develop super water repellent (SWR) coatings. - Atlas Copco as deliverer of marine compressors and blowers. - Bureau Veritas as classification society for surveying the possible risks of this new

technique. - Damen Shipyard Group as dockyard and operator of tug boats for full scale testing of

barges. - Imtech as developer of bridge- and control systems. - New logistics, providing air lubricated full scale ships and their lines. - Thyssen Krupp Veerhaven as operator of inland pusher barge fleet. Funding participants - SMOOTH is supported with funding from the European Commission Sixth Framework

Programme. Supervisory board - Fincantieri, Italian Dockyard. - Thyssen Krupp Marine Systems, German shipping company. - National Technical University Athens, Greece University. - British Petroleum (BP), United Kingdom.

Drag reduction by air lubrication is a fundamental research study, the consortium exists of: Scientific participants: - Technical University Delft. - Twente University. - MARIN

Funding participant: - STW (applied science foundation), is an organization of the Dutch government to develop

and manage funding programs.

Innovation process

Initiation period

Page 44 of 192

The initiation period consists of two important steps. The generation of ideas is the first step and the second step is the so called shock (the awareness/trigger of the need to develop the innovation).

Generate ideas Fuel consumption of vessels is directly related to the resistance of vessels, if the resistance of vessels can be reduced, fuel consumption will reduce. William Froude demonstrated that there are three types of resistance: frictional, wave and form resistance. Nowadays designers focus on the reduction of wave and form resistance by optimizing the hull form, while they look at the frictional resistance as a fixed number, depending on the wetted surface and the speed of the vessel. The maximum frictional resistance of a vessel can incur till 80% of the total resistance. Reducing frictional resistance could be an attractive option to reduce the total resistance, as a consequence fuel consumption and emissions will be reduced. Frictional resistance arises due to water passing the hull of the vessel, if air will pass the hull of the vessel instead of water the resistance will decrease (air resistance is significantly smaller than water resistance). William Froude already thought about this back in the 19th century. Back in the 20th century some initiatives to realize air lubrication failed.

Around 1970 inland vessels equipped with air cavities beneath the vessel have been tested in Russia, results were promising. The system reduces the frictional resistance if it functions properly, if it dysfunctions the resistance of the vessel will increase. This is identified as the main problem using this technique and mainly the reason why it did not breakthrough. Around 1990 in the Netherlands the same problems were observed in case of an inland vessel: Myriam. The vessel was equipped with air cavities that were not integrated with the hull, they were add-on beneath the vessel. If the air cavity dysfunctions, if expected results were not achieved, it could be easily disassembled because it was not integrated with the hull. The model scale tests of Myriam (integrated air cavities) demonstrated a 40% resistance reduction. Because of the add-on air cavities on the full scale vessel the flow around the vessel was negatively influenced and the concept did not demonstrate an energy reduction, the air cavities were disassembled. After these disappointing experiments no one was willing to implement air lubrication.

Shocks Shipyard de Hoop (Lobith, the Netherlands), claims to be inventor of a trapezoidal profile combined with air lubrication (air cavities) to be applied on push barges back in the 1994. At that time there was a low demand for push barges, as a consequence the invention could not be implemented. They did not apply for a patent on the concept in 1994, as a consequence it is not proved whether they are or they are not the inventor. Around 2000 the president of VNSI (Netherlands' Shipbuilding Industry Association) asked the inland navigation industry members to propose ideas for fundamental research. There were resources available for fundamental research at MARIN. DAMEN and Shipyard de Hoop proposed to study trapezoidal constructions in combination with air lubrication. MARIN accepted this proposal and extended the study with more possible applications of air lubrication. MARIN and VNSI developed a project proposal and VNSI searched for interesting valuable partners to participate in PELS 1. Partners were interested in the project, there was a strong potential of a significant fuel consumption reduction. A reduction of fuel consumption results in economic advantages while on the other hand the environmental impact of the shipping industry will be reduced.

Development period

Evaluation of ideas Shipyard de Hoop and Damen proposed to study one application of air lubrication, air cavities in a trapezoidal bottom construction. Fundamental knowledge about air lubrication was insufficient to

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implement air lubrication in the maritime industry according to MARIN at that time, therefore they proposed to extent the study. They initiated PELS 1 to obtain missing knowledge and transform this knowledge into reliable simulations models. MARIN, DAMEN and VNSI initiated the project and found Van der Giessen- de Noord, Shipyard Grave, DK group NL and a daughter company of Damen called Bodewes Millingen (inland vessel shipyard) to participate in the project. These partners were all member of VNSI and therefore easily found and attracted to the project. The Dutch government funded the project with 1,2 million Euro, it had to be a fundamental research study. If a practical application would be possible after finishing the project it would not have been funded by the Dutch government, the government wants to stimulate knowledge development but is not able to assist entrepreneurs in achieving direct profits. Therefore PELS 1 should be a fundamental research study without the practical application of air lubrication. The goal was to obtain scientific and technical knowledge about the impact of air lubrication on the behaviour of vessels. The influence of water, current and waves on the air lubrication were unknown. The impact of air lubrication on the buoyancy, stability, speed, manoeuvrability and waving required more research. The project was believed to be required to implement air lubrication in the maritime industry in 5 to 10 years. PELS 1 started with a literature study to find out about initiatives related to air lubrication and obtain already developed knowledge in former projects. After finalizing this literature study it seemed that no suitable knowledge has been published in the past. The project consortium decided to get rid of all the old information and start a project on air lubrication without any knowledge from former projects. Three methods to reduce frictional resistance were believed to be suitable for vessels: micro-bubbles, air cavities and air films.

Design and development of innovation

PELS 1 Phase two of PELS consisted of experimental and numerical research of air cavities and air bubbles. The mechanisms of air bubbles reducing the resistance were studied by means of experimental research, knowing this mechanism enables the possibility to adjust the air lubrication by means of air bubbles. After the experimental research numerical models were developed to calculate the path of a micro bubble in a boundary layer. The numerical model was able to calculate the path of micro bubbles and the resistance reduction. A numerical model, in case of air cavities, has been developed. This numerical model was able to calculate the wave patterns in the cavities and estimate the quality of the design. The model is able to calculate the effects of air cavities on movements of the vessel and calculate the losses of air volume caused by waves and movements of vessels. The generated knowledge is used in experimental research on a scale model. Because of type of funding (with a high percentage) the scale model should not look like a vessel, therefore the research team developed some kind of ship alike body (consisting of elementary shapes only). The obtained knowledge was used to determine the effect of air lubrication on resistance and propulsion characteristics of vessels in calm water. The effect was determined using three kinds of experiments: first fundamental research of micro bubbles on a flat plate, drag and propulsion tests, and an open water test to determine the effect of air/water mixture on the propeller efficiency. Two ship alike bodies (with identical geometrics, but different scales) were built and the experiments demonstrated significant drag reductions. It seemed that energy consumption does not reduce proportional to resistance reduction because air bubbles have to be injected beneath the vessel. An air compressor consumes some of the saved energy to pressurize the required air. The first results of numerical and experimental research were:

- Micro bubbles reduce the energy consumption up to 4,6%. - Air films reduce the energy consumption up to 5,7%. - Air cavities reduce the energy consumption up to 6,7%.

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Because of the obtained knowledge the energy reduction could be increased even further. Propeller efficiency using scale models has not significantly reduced, on real scale it is expected to. The second part of phase two consisted of determining the effect of air lubrication, in this case air cavities and micro bubbles, on the manoeuvring and the behaviour in seaway of the vessel. The following results have been obtained during the model experiments:

- Air lubrication does not significantly influence the manoeuvring characteristics of the vessel. Air lubrication does slightly influence the characteristics of the vessel in seaway except the use of air cavities: they do influence rolling of the vessel in case of transverse waves. Air cavities do influence the stability of the vessel, this could be prevented by adjusting the design of the vessel. Air cavities seem more sensitive to waves and vessel movements, air could leave the air cavity in case of vessel movements, this could be solved by injecting more air into the cavity and has negative effects on the energy reduction.

- The flow of air bubbles remains stable under influence of waves and vessel movements. - Scale effects should be expected, air is more compressible on real scale compared to

model scale. These scale effects could not be measured during these experiments.

The results in phase two of the project should be validated by means of real scale experiments. The project participants developed design guidelines to optimize an air lubricated vessel. In the validation phase of the project a real scale vessel or barge should be equipped with air lubrication, this has not been done as the study should be a theoretical study without any practical application. Instead of the proposed validation tests the consortium decided to test scale effects (difference between model and real vessel) in a cavitation tunnel in Germany. They simulated air lubrication on real scale by using a plate of 4 by 6 meters. These experiments demonstrated similar results as results obtained during the model scale tests, because of the limited space in the cavitation tunnel the results can be applied and are reliable on vessels smaller than 30 meters. The last phase of PELS 1 was an economic evaluation of the concept. The consortium chose to evaluate the economic performance of the concept using inland vessels. The participants chose an inland vessel ( 110m.*11,4m.*3,2m. sailing 20km/h) because air lubrication could be implemented in inland vessels more easily than merchant vessels because:

- The advantages of air lubrication can be demonstrated using an inland vessel more easily, because of the environmental effects.

- Seaway on inland waterways is relative calm compared to the ocean, as a consequence air will not escape the air cavities because of the vessel movement.

- Merchant vessels do have more depth than inland vessels, therefore more compressor power is needed to get air beneath the vessel. As a consequence the energy reduction of merchant vessels is smaller compared to inland vessels.

- To reduce the energy consumption on merchant vessels more research is required. The results of this economic evaluation are showed in table 1.

no air lubrication air lubrication

Engine power 740 kW 535kW

Compressor power 75kW

Total power 740kW 610kW

Power reduction 130kW (17,5%)

Fuel reduction 130 ton/year (17,5%)

Payback time 2 years

Table 1: economic evaluation of air lubrication on inland vessels (BOS, 2005)

Air cavities and air bubbles result in a drag reduction of the vessel, but air bubbles need more energy to be kept beneath the vessel. As a consequence air cavities seem to be the most suitable

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to be implemented in the near future. The efficiency of air bubbles can be increased by using a special type of hydrophobic paint (currently too expensive, around 200 euro/litre), air bubbles will stick to the vessel and finally the air bubbles will come together and transform into an air film. Inland vessels operate in shallow water and their hull is damaged by sandy water, as a consequence the paint will be damaged and the characteristics will get lost. After finalizing PELS 1 in December 2004 air lubrication was not ready to be implemented, because real scale validation is missing. To implement air lubrication in vessels a gap between the theoretical study PELS 1 and practical applications should be closed. PELS 1 studied air lubrication using a non-realistic vessel model and performed computer simulations. As a consequence another study was required. VNSI and MARIN developed two project proposals for a second study, called PELS 2 (again a Dutch project) and SMOOTH (European). Both projects were related to bridge the gap between theoretical development and practical application. Both proposals were approved by the Dutch (Agentschap NL) and European governments (6th framework). It is not approved to get funded on the same project on European and national level, therefore the studies had to be differ. The project consortiums decided that SMOOTH would focus on the development of air bubbles and air films and PELS 2 would focus on air cavities and air films. PELS 2 The goal of PELS 2 is to overcome existing knowledge gaps related to air lubrications. PELS 1 was a theoretical study (fundamental research) without a practical application, the project participants choose for this kind of research to maximize the use of funding by the Dutch Government. PELS 2 was a different kind of project funded partly by the province of Gelderland and the Dutch Government (Agentschap NL). This project focused on air cavities, air films and air bubbles. The study should be finalized with design, building and operational procedures when implementing air lubrication at inland and coastal vessels. Air cavities were the main focus, as a consequence they tried to design a full scale vessel with air cavities. A push barge was chosen because of the relative easy construction and the amount of existing push barges, comparison of a barge with and without air lubrication should be relative easy. Small air cavities are easier to keep filled with air than big air cavities. Using big air cavities the vessel only needs a small inclination to lose a lot of air. Using a trapezoidal profile beneath the vessel will result in small air cavities. A trapezoidal profile at the bottom of a vessel is relatively cheap compared to integrating air cavities in a conventional bottom. The price of a vessel using a trapezoidal bottom and air lubrication will not differ compared to a conventional inland vessel. Another advantage of using this construction is that this construction is patented by a Dutch company (MarInvention). In 2006 a scale model of a pushed barge with air cavities in a trapezoidal profile was tested. After finishing, with demonstrated positive results, the experimental period the participants were supposed to modify a full scale push barge. The numerical simulation studies demonstrated satisfying results. After the numerical experiments model scale experiments were planned, the results of these experiments were disappointing. The model scale experiments of the push barge demonstrated a lousy pressure distribution at the ship’s bottom and wave resistance caused by the hull form of these barges. The experiments demonstrated, after testing different hull forms, that air cavities increased the resistance of the push barge likely because of a wave pattern growth. Using a specific developed bow installed at the push barge would reduce these problems. On the other hand in the full scale tests forces which were delivered by the push tug to propel the push barge seemed not measurable. The measuring problem could be solved by using an expensive (1 million euro) construction between the push tug and push barge. The increased resistance (solved by using a special developed expensive bow) and measuring problems (solved by an expensive construction) made the consortium decide to terminate the full scale experiments with a push barge. Because of these problems the project has been delayed. The participants decided to proceed the full scale experimental phase of the project with an inland vessel instead of a push barge. Bodewes Millingen bought a second hand vessel called the

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“Kraichgau I”, it was modified with a trapezoidal profile and integrated air cavities in the hull figure 1. The trapezoidal profile strengthens the vessel in longitudinal direction and will replace the longitudinal girders. In transverse direction the trapezoidal bottom needs to be strengthened, at the same time the cavities need to be interrupted at longitudinal direction with transverse construction to shorten the length of the air cavity. If the cavities are not interrupted in longitudinal direction waves will grow and hit the bottom of the vessel or the back of the air cavity, as a consequence the resistance will increase. Full scale experiments with the inland vessel demonstrated positive results on deep water. The funding of the project ended and no resources were left to perform more experiments. As a consequence the results of the experiments with the inland vessel and the inland vessel itself have been transferred to SMOOTH. Air bubbles were studied in PELS 2 as well, fundamental knowledge required to develop an air bubble concept was still missing. Therefore fundamental studies related to air bubbles in combination with special paint have been performed. During these studies the effect of special paint was tested, it seemed that the roughness of the surface was the most important aspect of resistance. A hull surface will be rough, unless a special paint is used that ensures a “clean” hull. More research was required to develop an air bubbles concept in combination with special paints. Therefore a study is initiated: “drag reduction by air lubrication”. SMOOTH The goal of SMOOTH was to bridge the gap between the theoretical knowledge and the practical application of air lubrication in inland and coastal vessels. The SMOOTH project was focused on air bubbles and air films. Because of the similar goals, between PELS 2 and SMOOTH, results and progress of the projects were communicated. The main question of SMOOTH is how to keep the air as long as possible beneath the vessel. The first method is air cavities, the design of the cavities has to be optimized to keep air beneath the vessel. The second method is injecting micro bubbles beneath the vessel. The third method is air bubbles combined with hydrophobic paint, bubbles will attach to the some kind of special paint and stay beneath the vessel as long as possible. These subjects will be dealt with using model and full scale experiments. Two full scale experiments are planned: air bubbles (Futura carrier) and hydrophobic paint in combination with air bubbles (push barge). After validating model scale experiments and demonstration of energy reduction at full scale tests, the economics and risk of the concept was evaluated. Finally the results of the study were supposed to be disseminated. Stable air films could be generated when using hydrophobic paint and air bubble injection. The air film separates hull and water and will reduce the frictional resistance of the vessel. The hydrophobic paint in PELS 1 was not suitable to use in real applications, the paint is too expensive, therefore new paint had to be developed. Stability, scale effects and the behaviour of air films in case of seaway and vessel movements had not been studied in PELS 1, therefore it will be studied in SMOOTH by means of model scale experiments. Also air cavities and air bubbles were tested on model scale in SMOOTH, mainly due to the reason that the mechanisms behind reducing the frictional resistance by use of air cavities or air bubbles was not fully understood. International paint was supposed to develop some kind of hydrophobic paint, however they did not succeed in developing an economic reasonable hydrophobic paint. Experiments with a push barge of Thyssen Krupp Veerhaven equipped with air lubrication and hydrophobic paint were planned. However, because of the disadvantageous findings with the Futura Carrier, the push barge has never been modified to a push barge with air lubrication. In SMOOTH the participants wanted to determine the scale effects of air bubble lubrication between a model scale and full scale vessel. New logistics at that time developed a vessel, Futura Carrier figure 2, with air bubbles, this vessel was going to be tested. The vessel is an innovative vessel with more implemented innovations, all related to the environmental impact of shipping. Air is pushed through some kind of porous material and air bubbles are formed beneath the vessel. After full scale experiments model scale experiments should validate the full scale experiments. Equal experiments between full and model scale were going to be performed, as a consequence

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scale effects could be determined. Both experiments demonstrated the same performance. The results were disappointing, the expected energy reduction was not realized. The experimental phase in SMOOTH was finalized with the conclusion that air lubrication by means of air bubbles is not possible (yet). Because of the cancelled full scale push barge experiments, money funded by the European commission was not utilized. Resources were available to carry the finalized project of PELS 2 on. In 2009 the work plan of SMOOTH has been adjusted, allowed by the EC, to fit in the missing experiments in PELS 2. At first SMOOTH focused on air bubbles and air films, since 2009 SMOOTH focuses on air cavities, the probability of implementing air cavities in the near future seems much higher than the probability of implementing air bubbles or air films in the near future. The mechanisms leading to reduction of frictional resistance of air films and bubbles are not fully understood, more research is required before a full scale experiment could be performed. The vessel used in full scale tests of PELS 2 has been transferred to SMOOTH and they continued experiments performed in PELS 2. They were supposed to perform experiments with the inland vessel related in shallow water. Because of these additional experiments the project was delayed, the delay was approved by the EC. The risk and economic advantage of implementing air lubrication had to be studied by Bureau Veritas and was supposed to be finished. The project has been delayed because of the continuation of PELS 2 in this project. The project is planned to be finalized in May 2011. PhD program: Ship drag reduction by air lubrication The mechanisms leading to reduction of frictional resistance by air bubbles and air films are not theoretically understood in PELS 1, PELS 2 and SMOOTH. As a consequence a Dutch consortium, TU Delft, MARIN and Twente University, decided to start a PhD program funded by STW (Stichting Toegepaste Wetenschappen, Applied Science Foundation) called: “drag reduction by air lubrication”. The project is studying mechanisms of resistance reduction and scaling rules to transfer scale model experiments to full scale experiments. The study is not related to one of the air lubrication concepts but to all of them: injecting a lot of air bubbles can result in an air film and injecting more air will result in an air cavity. The mechanisms responsible for drag reduction using air lubrication are still unknown. There are a lot of forces acting on air below the water surface that need to be scaled when transferring the model scale results to full scale results. Forces related to the air bubbles are e.g.: frictional forces, buoyancy forces and tension on the air bubbles (deformation of the air bubble and how important is this deformation). Forces related to the stability of air cavities and air films are e.g.: shear stress, surface stress, gravity (waves in the air cavity). These stresses and forces should all be scaled in relation to each other, that is not possible due to conflicts between Reynolds and Froude numbers, taking into account surface stresses does increase the complexity of the problem. If everything is scaled except air pressure than the stiffness of the air bubble will be too high. This summary of forces, stresses, mechanisms and scaling rules demonstrates the complexity of air lubrication. The participants in this project try to determine the mechanisms responsible for drag reductions and the relevant forces and stresses. If these are known, relevant scaling rules can be determined and scale model results can be transferred to full scale results. The project is still carrying on.

Evaluation of prototype

PELS 2 PELS 2 demonstrated energy reduction using air cavities in a trapezoidal profile integrated in the hull, Kraichgau I. There are differences between experiments using a push barge or a conventional vessel. A push barge with air lubrication compared to a push barge without air lubrication is relative easy compared to conventional vessels. The purchased tanker vessel was tested without air lubrication to create a reference for the following experiments. After these reference experiments,

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the tank installation had been disassembled, the air cavities were installed and the vessel was loaded with sand to achieve an equal depth with the reference experiment. Using this vessel experiments with air cavities, air compressors and a relative simple air control system have been performed. Experiments demonstrated a 15% net energy reduction compared to the reference experiments, as a consequence a fuel consumption reduction of 15% was demonstrated. The vessel was tested in deep water conditions, more experiments were required to validate the energy reduction. The resources were exhausted while experiments were required related to shallow water, waves in the air cavities, the effect of passing objects with an air lubricated vessel, the effect of waves on the concept, etc.

Figure 1: trapezoidal profile combined with air cavities (www.bodewes-millingen.nl)

SMOOTH After transferring the Kraichgau 1 from PELS 2 to SMOOTH they demonstrated a fuel consumption reduction of 15% in shallow water, too. The normal sequence of these kind of experiments is: scale model experiments and after these experiments full scale experiments to validate the scale model results. The sequence in SMOOTH conscious changed to avoid any impurity. Constrains in a laboratory can be adjusted, constrains in a full scale experimental environment cannot be adjusted. Adjusting constrains in the laboratory environment to meet constrains observed in the full scale experimental environment will assist in achieving reliable results. Another reason for changing the sequence of experiments is funding of the EC, they distinguish between research and demonstrations. Demonstration is to prove that a concept is functioning; you will use a developed concept to demonstrate advantages. The rate of funding between these two differs, less funding is reserved for demonstrations than it is for research. The experimental program using the Kraichgau 1 could not be funded if the experiments were characterized as demonstrations, therefore the experiments were used to study air lubrication on full scale, no scale model experiments were available that demonstrated the functioning of the concept. Experiments on full and model scale with the Futura Carrier, figure 2, were executed. The results of these tests were disappointing, it seemed that the bubbles were at the wrong distance from the hull to reduce the frictional resistance. This wrong distance could be caused by the wrong bubble size or the location of air injection. The energy reduction caused by the system, including the power of the compressors used for the air injection, was even negative, the system did require

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more power than a system without air lubrication. As a consequence the SMOOTH consortium decided to quit studying air lubrication by means of air bubbles. It seemed that the mechanisms behind air bubbles reducing the frictional resistance were not yet understood, as a consequence a new research project has been initiated: Ship drag reduction by air lubrication.

Figure 2: Futura Carrier with air bubble injection (www.new-logistics.biz)


Impact of the air cavities

Economics and environmental impact Air cavities can be implemented in the inland navigation industry. The experiments demonstrated a fuel consumption reduction of 15%. A fuel consumption reduction on one hand results in economic advantages for the inland navigation industry, on the other hand the environmental impact will decrease. Air cavities can be used in combination with almost any other kind of fuel reducing matters. The air control system and the design of air cavities have to be optimized. If the air system dysfunctions the resistance of the vessel will increase, a 40% increase of resistance is expected. Therefore the system has to be designed in such a way that a dysfunctional air lubrication system is not possible. The air cavities can be optimized when a design of a vessel is developed, knowledge to optimize the cavities has been generated by the project partners (especially by MARIN and Damen). Implementing air lubrication by means of air cavities requires an investment. This investment is believed to be paid back in two years, demonstrated by calculation of MARIN. Safety In shipping regulations a maximum stopping distance, in case of an emergency stop, is prescribed. As a consequence the regulations demand a certain power requirement. A vessel equipped with air lubrication is able to switch off the air injection and therefore increase the resistance by 40%, the stopping distance will significant reduce. Regulatory authorities need to adopt this and change the power requirement of vessels. Image

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Air cavities do decrease the environmental impact of the shipping industry, a “green” image of entrepreneurs implementing air lubrication is an advantage. Market position of the Western European shipbuilding industry The Western European shipbuilding industry is specialised in designing, developing and building complex vessels. This industry is too expensive for non-complex vessels. Therefore this industry is obligatory to itself to keep finding new advantageous technology. Air cavities are ready to be implemented in the inland navigation industry. At the moment an air cavity concept is the only working and (reliable) proven air lubrication concept. The developed concept is patented by a Dutch company (MarInvention) and the exclusive user rights are in hands of Damen Shipyards. As a consequence everyone requiring a (reliable) proven air lubrication of that concept needs to pass the Dutch shipbuilding industry. With generated knowledge about such a complex concept the Western European shipbuilding industry is leading in air lubrication concepts. The spin-off from extensive projects like PELS 1, PELS 2 and SMOOTH is huge. Three spin-offs will be mentioned in this report. The first spin off is: in the air lubrication projects many problems were solved, problems like: measuring resistance, which path is followed by air bubbles, effects of air/water mixture to propeller efficiency etc. These problems were successfully solved, they are spin-offs and the new generated knowledge can be used in other projects. The generated knowledge is not limited to air lubrication, the experiments can be used in future developments. The second spin off is: cooperation of companies in the shipping industry enables a chance to get to know the specialities, possibilities and capabilities of other companies. Trust and dedication between one and other can be a breeding ground for follow-up projects. The third spin-off is: other companies, not participating in the projects, do think about air lubrication as well and develop their own ideas.

Dissemination

In PELS 1 some publications have been released, like the finalized report on the entire project PELS 1. Some other publications have been released, there are not many publications about the results. SMOOTH should be finalized by disseminating all the fundamental knowledge required to understand air lubrication and implement it. Because of the history of air lubrication the dissemination is really important. The implementation of air lubrication failed in the past, a careful approach of potential adopters is needed to convince people about the advantages of air lubrication. In 2010 a SMOOTH ship conference was organised in Istanbul (Turkey) where the results of the study have been presented. Papers and presentation about the project results have been released. In 2011 more publications about the results are planned. MARIN is planning to write a publication about the hydrodynamic aspects of air lubrication, commercial papers will follow. Potential adopters are interested in the advantages of implementing air lubrication Newspaper articles about the experiments with the Kraichgau (PELS 2 and SMOOTH) are published. Without knowing the results of the experiments it is difficult to write about the projects in newspapers. DK group NL, participant in PELS 1, built a demonstrator with air cavities. About the demonstrator many articles can be found. Germanischer Lloyd performed experiments with this vessel. SSPA Sweden disseminated the knowledge locally, interested parties contacted SSPA and proposed to cooperate in order to build an air cavity vessel.

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Adoption Thyssen Krupp Veerhaven participated in SMOOTH, they own a fleet of push units. They were interested in implementing air lubrication in their fleet because of the expected fuel consumption reduction. They were especially interested in air bubble injection because:

- Implementing air bubble injection on a push barge requires a small modification. - Injected air can escape between the push barge and the push tug, therefore the propeller

efficiency will not be effected. - Special paint on a push barge is a waste of the investment because of the rough handling

of barges and the paint is not suitable for inland waterways (sand in the water will damage the paint).

- Air cavities used on push barges is not useful, push barges are used forward and backward sailing, while the cavities can only be optimized for one way sailing.

After the disappointing results of air bubble injection at Futura Carrier the consortium decided to quit developing air bubble injection and Thyssen Krupp Veerhaven stopped any related activities. A Dutch shipping company, Interstreambarging (former van der Sluijs group), was interested in PELS 2. They were not formally participating in the project but willing to assist in the project. They were convinced about the advantages of an air lubrication system and thought that it could be very valuable for their company. The concept of air lubrication by means of air cavities using a trapezoidal profile beneath the vessel is ready to be implemented. Results have not been released yet, therefore not many people are informed about them. Not many inland entrepreneurs adopted the concept (yet), it is expected to change after the dissemination of results. At the moment of writing this report some parties are discussing the possibilities of implementing this concept, shipyard Bodewes Millingen is able to build a vessel with air cavities. A vessel with air bubble injection, Futura Carrier, designed by New Logistics went into service in 2008. Futura Carrier is a new developed sea-river vessel equipped with some innovations, air lubrication can be installed on this vessel (required by the ship owner). They adopted air lubrication, before PELS 2 and SMOOTH started, after observing research studies of Japanese and American consortiums. Stena line (Sweden) in cooperation with SSPA Sweden (partner in SMOOTH) and the university of Chalmers (Sweden) developed a tanker with air lubrication since 2005. An air cavity can be implemented in the design of the vessel. Stena Line initiated the development of an “environmental friendly” tanker which is expected to reduce the energy consumption between 20-30%. The vessel will be equipped with LNG engines, air cavities and a skysail. After dissemination of SSPA’s knowledge in Sweden Stena Line got interested and contacted SSPA to cooperate in the development of this tanker. Air lubrication is studied by a Japanese consortium, they developed the Winged Air Induction Pipe (WAIP) system. This system has been adopted by a Dutch designer (ASD Ship Design) and a Dutch ship owner (Filia Shipping CV).

Implementation The generated knowledge related to air lubrication enables the participants of these projects to develop a solution for many vessels to implement air lubrication. On the other hand it ensures the ability of the participants to estimate which application is suitable or not suitable for air lubrication. Air bubbles inland shipping industry New Logistics designed the Futura Carrier, a vessel that could be installed with air lubrication (air bubbles). The hull of the vessel is adjusted for air bubble injection, but the system does not influence the depth of the vessel. A failing system does not influence the transport performance of the vessel, the fuel consumption of the vessel will be the same as fuel consumption of a

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conventional vessel. The possibility to install air lubrication is of additional value, but it is not necessary. The additional investment required when air lubrication is implemented is less than 5% of the building costs, it is expected to be paid back within three to four years. The experiments with this vessel demonstrated an energy consumption instead of a reduction. As a consequence the air lubrication of this vessel is disassembled. Air cavities inland shipping industry One experimental vessel is equipped with air cavities, Kraichgau I, the experiments demonstrated a 15% fuel consumption reduction. Therefore there is a great potential in implementing this concept. Negotiations between potential implementers and Bodewes Millingen take place at this time. This air cavity concept integrated in the hull is patented by a Dutch company, MarInvention, Damen (owner of Bodewes Millingen) owns exclusive user rights. If the concept will be implemented Bodewes Millingen is the only shipyard able to deliver this type of air cavity vessel. This is (still) the only (full scale) proven air lubrication technology that reduces the fuel consumption. The market for air cavities is unclear at the moment, the participants in SMOOTH are studying air lubrication in seaway. The most suitable vessels to implement this concept are vessels with a medium speed, minimized depth and a relative flat hull. At relative high speeds waves will rise in the air cavity, waves are able to negatively influence the energy reduction of air lubrication. The air has to be injected beneath the vessel, therefore the more depth of a vessel the more air pressure is required. A flat hull is required to be able to implement air cavities, otherwise the concept is not able to keep the air beneath the vessel. The effect of seaway on air cavities is still unclear and needs more research. For now the concept is suitable for the inland navigation industry. The suitability to implement air cavities in short sea vessels and merchant vessel is uncertain. At this moment, air cavities are mainly suitable for the inland navigation industry. New building vessels and vessels that need a hull rebuild could be suitable to equip with air cavities. The single hull tanker fleet is phased out, therefore single hull vessels need to be modified, during the modification of the hull air cavities could be installed easily. As a consequence the out phasing of single hull vessels could be an opportunity to implement air cavities. Air cavities merchant shipping industry DK group NL participated in PELS 1. They did not participate in PELS 2 or SMOOTH, they developed their own air cavity system, figure 3, for big merchant vessels. The vessels suitable for this type of air lubrication are vessels that will not move in seaway, heavy and big vessels. They expect that the concept will reduce the fuel consumption by 5-15%. In 2007 they equipped a coaster with air lubrication, called demonstrator. The results of these experiments were a fuel consumption reduction of 5-15% and a required compressor power of 0.5-1%. After the experiments the concept has not been implemented in any other vessel.

Figure 3: how air cavity works (www.dkgroup.eu)

In 2010 Stena Bulk build a small tanker (scale 1:12, 15 meter) with air lubrication to test it. If the vessel meets the expectations (fuel reduction of 30%) Stena will order tankers using this design. The energy reduction will be realised using an unconventional width hull, air lubrication, a new type

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of bulb and a skysail. The emissions will be reduced because of the fuel consumption reduction and a gas engine (LNG). Conventional model scale experiments are performed with smaller scale models (1:40) in a closed environment with the ability to adjust constrains. With these conventional experiments SSPA and Stena Line fear that they will not approach reality, therefore they decided to use a bigger vessel and experiment with it in an unprotected environment (open water). The experiments carried on for one year. The results of these experiments have not been published (yet).

Figure 4: Stena bulk E-maxair (www.stenabulk.com)

Air lubrication concepts in the merchant shipping industry There is a pressure difference if air has to be transported 3 meters or 13 meters below the water surface. Therefore the required compressor power differs as well, at a merchant vessel the energy reduction will be smaller. More studies are needed to implement an air lubrication concept in the merchant shipping fleet. E.g. a study could be related to air recycling: The air is injected in the front of the vessel, collected at the back and transported at the same depth to the front again, as a consequence there will not be pressure losses form free surface to draught. As a consequence no new air has to be pressurized and therefore less compressor power is required. At this moment Damen is studying which concepts of air lubrication are the most suitable for the merchant shipping fleet. Maybe air films will be suitable, a subject studied by the University of Michigan. Two seagoing vessels (coasters) got into service in 2008 owned by Filia Shipping CV, Filia Ariea and Filia Nettie, managed by Werkendam Shipping Company. ASD ship design designed these two vessels. They decided to use a concept of air lubrication, the winged air induction pipe (waip, developed by a Japanese consortium, figure 5), in the design of Filia Ariea. After testing these two vessels, it was demonstrated that Filia Ariea required 10% less fuel than the Filia Nettie (without air lubrication). During the experiments it did not seem to matter whether the injection of air is switched on or off, the speed did not change whether the system is switched on or off while the same propeller power is generated. Studies to understand the mechanisms that reduce the resistance of the vessel are still carried on. This system does not seem profitable for the inland navigation industry because it is only advantageous at relative high speed, greater than 20 km/hour. After this vessel no vessels were equipped with WAIP.

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Figure 5: WAIP (Yoshiaki Takahashi, 2008)

Analysis of the innovation process

Key actors and their relationships

Initiation

PELS 1 VNSI asked members to propose research studies, Damen and Shipyard de Hoop proposed to study air lubrication. They proposed to study air cavities integrated in a trapezoidal profile integrated in the hull. VNSI contacted MARIN to cooperate in this project, together they proposed the project structure and content. The proposed content was not suitable for shipyard de Hoop to cooperate and they did not participate. The initial proposed concept by DAMEN was believed to be suitable for the inland navigation industry, therefore they contacted a daughter company specialised in this industry, Bodewes Millingen. VNSI searched for companies supporting the project, they found two shipyard willing to support PELS 1: Van der Giessen-de Noord and Shipyard Grave. The project costs could be financed by the government, therefor the consortium proposed the study to Agentschap NL (organization of Dutch government), they approved the proposal and were willing to fund the project. When the project was approved by the Dutch government, it had to be managed, VNSI fulfilled this task. The technical coordination of the project was fulfilled by MARIN. DK group, Danish company, was already developing a concept equipped with air cavities by itself. A project related to these cavities could assist them in developing the concept, as a consequence they contacted the consortium to participate in the project. After PELS 1 was finished there were a lot of unanswered questions and air lubrication could not be applied. Therefore new projects should be initiated to cover the gap between these theoretical knowledge and a practical application. MARIN and VNSI were both willing to continue studying air lubrication. They initiated two project proposals, SMOOTH (European) and PELS 2 (Dutch), to cover the risk of disapproval of one of the projects. SMOOTH MARIN (Dutch) initiated an European project and therefore they needed to find European participating partners, they coordinated the European project. Akzo Nobel International paint

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(Dutch) is attracted to the consortium to develop a special hydrophobic paint. This paint was used in PELS 1, but was way to expensive to use in a practical application, therefore developing an economic feasible hydrophobic paint was required. MARIN attracted Akzo Nobel International paint because they are one of the largest players in this industry, a large player is desirable because of the resources they own. Imtech (Dutch) specialised in the development of control systems, a well-developed air control system was required to use in a practical application. They were attracted by MARIN to cooperate in SMOOTH. Air compressors will be required using air lubrication, a company specialised in air compressors therefore is attracted to the consortium called Ketting compressors (Dutch). Because of the following requirement of the EC more European partners had to be found. “the minimum number of participants established by the work programmes shall not be fewer than three independent legal entities established in three different Member States or associated States, of which at least two shall be Member States or associated candidate countries” (REGULATION (EC) No 2321/2002 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 December 2002) To expand the European support of the studies, research institutions were attracted to the consortium, SSPA (Sweden) and DST (Germany). These institutions are specialised in the maritime industry. Istanbul teknik university (Turkey) was attracted to find support of Southern Europe and disseminate the knowledge in Southern Europe. Economic and risk evaluation of the project was important to demonstrate the advantages of air lubrication concepts. A reliable partner that is able to demonstrate this was required. On the other hand if air lubrication is applied classification societies should adopt the concept as well. Therefore Bureau Veritas (French) was attracted. A goal of SMOOTH was to find a practical application of air lubrication and experiment with a full scale vessel. New logistics (German) already developed an air lubricated vessel, Futura Carrier. This vessel was tested in SMOOTH. On the other hand the consortium tried to develop an optimal air lubrication concept, therefore they attracted a partner willing to implement the developed concept, Thyssen Krupp Veerhaven (German). In cooperation with all mentioned participants a project proposal to study air bubble and air film lubrication was handed to the European Commission. The European Commission approved the proposal and funded the study. PELS 2 This goal of this project was equal to the goal of SMOOTH. There had to be a difference between the project to get funded by the European commission and the Dutch government, as a consequence PELS focused on air cavities and air films, SMOOTH focused on air bubbles and air films. MARIN, VNSI and Damen would initiate PELS 2, because MARIN already coordinated SMOOTH, Damen decided to technical coordinate PELS 2. The consortium. Ketting compressors and Akzo Nobel International paint have been attracted to this project because of the same reasons as they were attracted in SMOOTH. MARINVENTION owns the patent of the trapezoidal profile in combination with air cavities. Participating in this project with this patent will assist in adoption of this concept in the industry, as a consequence they participated in the project. Interstream barging (former Van der Sluijs) is not an official participant of the project. They just liked to assist in the project and were interested in air lubrication. If the concept would be advantageous it could be suitable for their own fleet.

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The Dutch government, Agentschap NL, approved the project proposal and funded the study. The province of Gelderland funded the project because they would improve the environmental impact of shipping in their province. Spaarnwater took part in a design contest, they designed a vessel without the need to ballast, this vessel was equipped with air lubrication. They won the contest and were able to develop the vessel, the vessel was equipped with two innovations: air lubrication and no ballast. The developers did not want to implement two innovations at the same time and decided to terminate the development of air lubrication. After the development they proposed to develop air lubrication by funding of the Dutch Government (Agentschap NL). Agentschap NL observed their idea and proposed to carry on with the development of air lubrication in cooperation with PELS 2.

Development

PELS 1 This project was all about fundamental research, fundamental research was mainly performed by MARIN. The project was not supposed to find a pratical application, therefore the dedication of the industrial participants reduced. One industrial participant in this project got bankrupt. VNSI managed the project and the project was executed by MARIN and Damen. The other participants supported the development of air lubrication. The relationships during the development phase of PELS 1 did not alter significantly. SMOOTH and PELS 2 The relationships during the development phase of PELS 2 and SMOOTH did alter. Atlas Copco is a compressor manufacturer who was approached by the consortiums before the initiation of the projects. They were not willing to participate in the project. Therefore Ketting compressors was approached, they were willing to participate. During the development phase of the project Atlas Copco took over Ketting compressors. They were willing to finish the project while on the other hand they were less dedicated to the project compared to Ketting compressors. After the full scale and model scale experiments with the Futura Carrier the consortium decided to quit studying air bubbles and air films. Akzo Nobel did participate in the project to develop hydrophobic paint which could be used in combination with air bubbles. It was clear, after the disappointing experiments, that air bubbles would not find a practical application. Therefore the paint, developed by Akzo Nobel, would not be implemented in any kind of air lubrication concept, as a consequence their R&D investment would not be paid back. As a consequence they were not willing to supply large amounts of paint for acceptable prices. The disappointing results made the consortium decide to terminate the full scale experiments with push barges of Thyssen Krupp Veerhaven. Thyssen Krupp Veerhaven agreed to terminate these full scale experiments because the air bubble injection was not (yet) ready to be implemented. The reserved money for these full scale experiments was saved and therefore other experiments could be performed. At the same time the participants of PELS 2 decided to terminate the full scale tests with push barges as well. They bought a second hand inland vessel to perform full scale experiments. The experiments with the inland vessel required a higher investment and therefore the resources were finalized before the experimental phase was ended. The project officer of the European Commission and the consortium decided to try to transfer the full scale experimental vessel of PELS 2 to SMOOTH. Transferring this vessel was not enough to perform missing experiments, therefore knowledge had to be transferred as well. At this point commercial interest played a significant role. Bureau Veritas was asked to mediate between the participants of SMOOTH and PELS 2, they did and assured the participants of PELS 2 to protect their generated knowledge and the developed concept

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Implementation

During the implementation process relationships had not significantly changed (yet). The dissemination/adoption/implementation process is still carried on.

Adoption rate and spread of the innovation

There are many research consortiums studying the application of air lubrication like: WAIP (Japanese consortium) and air films (American consortium). The possibility of fuel consumption reduction is adopted, but not one concept is adopted (yet) by the market. WAIP and air cavities are implemented for experiments. PELS 1 was a fundamental research project. PELS 2 and SMOOTH were supposed to find a practical application of air lubrication. PELS 2 found a practical application but was not able to finalize the planned experiments, SMOOTH took over the experiments and just finished the full scale experiments. The results of these experiments still have to be disseminated, after this the adoption process will start. At this time some inland entrepreneurs are discussing the possibilities of implementing air lubrication with Bodewes Millingen, they are the early adopters of the air cavity concept developed in PELS 2.

Success factors during the innovation process

Initiation

Cooperation (project consortiums) Participants in maritime related projects are cooperating in many maritime projects, the shipping industry is a relative “small world” and participants know each other as a consequence cooperation is relative easy in this industry. Participants trust each other and know that they will cooperate in future projects, therefore dedication to each other is high. Air lubrication requires some specific knowledge owned by industrial members and knowledge institutions. Developing a project consortium which is able to develop all the required knowledge is a challenge. The industrial association and knowledge institution tried to plan the development of air lubrication and map the required knowledge. As a consequence they were able to attract the required partners to develop air lubrication. A combination of scientific and industrial participants is important for these kinds of projects. Without the practical knowledge of industrial members the transformation of theoretical knowledge, developed by scientific partners, to a practical application was quite hard. Cooperation (European project consortia) The European project, SMOOTH, was executed and supported by different members of the European shipbuilding industry. The potential market that could be reached by these participants is huge. Cooperation (project coordination) The industrial association (PELS 1 and PELS 2), knowledge institutions (PELS 1 and SMOOTH) and industrial members (PELS 2) coordinated the different projects. Because of the dedication of these project coordinators participants were willing to invest in the projects. Therefore they were able to keep every participant interested and dedicated to the project because of the common interest. Even participants who were not able to achieve profit in developing air lubrication kept dedicated to the project because of the common interest (e.g. Thyssen Krupp Veerhaven).

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The project coordination was performed by employees of the industrial association, they were dedicated to successfully finalize the project because they initiated the project and were convinced about great advantages related to air lubrication. Dedicated project coordination is able to keep participants interested and dedicated to the project. One of the tasks of the industrial association is supporting the development of knowledge and innovation, they own resources to perform these tasks. One dedicated project coordinator was supplied by this association. Incentives (common interest) The development of air lubrication could be profitable for members of the shipbuilding industry. The development of air lubrication by means of air bubbles could be profitable for e.g. air compressor manufacturers, paint developers, ship yards and control system developers. Air cavity development could be profitable for e.g. shipyards, air compressor manufacturers and control system developers. The generated knowledge can be profitable for e.g. industrial knowledge institutions in developing air lubrication concepts for future vessels. Therefore there is common interest of the participant in developing a successful air lubrication concept. This common interest ensures a dedication of all the participating partners in the projects. Strengthening the market position of European shipyards and the European shipping industry is very important to stay lead in the maritime industry, related to complex shipbuilding. Therefore developing new innovative concept and generate new knowledge is a common interest of the entire European shipbuilding industry. Therefore maritime members are dedicated to fulfil potential profitable concepts. This common interest ensures the initiation of required projects. Fundamental knowledge related to air bubbles and air films is still required. At this time a new project consortium decided to generate this required knowledge. Every new project is able to apply for government funding to cover the required resources. Incentives (industrial interest) The development of air lubrication was initiated by the industrial associations, with support of industrial members. As a consequence industrial members were willing to participate. Without participation of industrial members the project could not perform full scale experiments. In PELS 2 Interstream barging was not an official participant, but interested and willing to assist in developing air lubrication. Their practical knowledge was very welcome during the innovation process. Industry research organisations Knowledge institutions (DST, SSPA and MARIN) were willing to cooperate in SMOOTH, therefore a huge potential European market could be reached with the development of air lubrication. This cooperation is quite unusual, knowledge institutions developing a concept together instead of developing concepts internally. In cooperation with the industrial association, VNSI, MARIN coordinated the project. One of the main tasks of MARIN is to generate new knowledge and develop innovations. Therefore they are able to supply dedicated employees for innovation projects.

Development

Cooperation (realistic, creative and flexible project consortiums) The development of air lubrication has been an iterative process, still not finished. The project participants were a few times close to the market implementation of air lubrication, but more fundamental research was required. Accept that an innovation process is an iterative process is really important for the successful implementation of an innovation. If a participant is impatience

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and wants to implement a concept of air lubrication without the required knowledge it will fail. This is proven by concepts in the past, Russian implementation of air cavities, air cavities add-on at the Myriam and air bubble injection at Futura Carrier. “Implementing an innovation without knowledge about the mechanisms behind the functioning of the innovation, will be a fiasco” (M.Goldan, 2010). The consortiums decided to implement well understood concepts, they did not implement concept with air bubbles or air films because the mechanisms of resistance reduction were not fully understood. The consortiums understood the mechanisms of air cavities and therefore implemented the air cavities in a full scale vessel. They were convinced if they implemented a not well understood concept which would fail they would not be able to explain why the concept failed. It was demonstrated in the past, that if you are not able to explain a failed concept, that no one is willing to develop or implement air lubrication for the following years. The project consortiums terminated the development of an air lubricated concept if the concept could not be successfully developed. In PELS 2 the project consortium terminated the experiments with air bubbles used on a push barge. They terminated these experiments because the full and model scale experiments using Futura Carrier (equipped with air bubbles) resulted in disappointing energy reductions. By terminating these experiments resources were not fully utilized, finally these resources were used to demonstrate advantages of a successful concept (air cavities). The consortiums were realistic related to their generated knowledge, they accepted that missing knowledge still had to be developed. If a concept seems not profitable they did not try to develop it at all cost, they terminated the concept and tried to develop new concept or new knowledge to implement the initial idea. The consortiums were quite creative in finding solutions for problems, they tried to use a skysail to pull the push barge to overcome the problem with measuring forces supplied by the push tug. The development of some concepts was terminated, the consortiums accepted delays to improve their initial idea or develop a new idea. They were patient to implement a concept and did not want to implement a not well-developed concept. Therefore the flexibility of the consortiums was demonstrated. Government funding (of risky projects) Project proposals without any risk do not strengthen the competitive position of the Western European shipbuilding industry, using existing knowledge does not give these industries a lead. Projects to generate new knowledge will give these industries a lead, therefore it is important to fund risky projects. Projects related to air lubrication require a lot of fundamental knowledge, while there are a lot of uncertainties about the outcome of such a project. EC and the Dutch Government were willing to fund such risky projects and are therefore willing to support in strengthening the competitive position of the Western European shipbuilding industries. Government funding Maximization of government funding in these projects have been a success factor, according to the project participants the projects could not have been finalized if the resources were not sufficient. To obtain all the required knowledge, perform computer simulations, perform scale model tests and full scale tests a lot of resources were required. Own resources were not sufficient to finalize the project, therefore government funding was required, maximization of these funding was desirable, both European and Dutch. The Dutch funding program according to published regulations (“regulation support intensity”, 2010 and “funding regulations strength in innovations”, 2010) is:

- General funding: � Fundamental research 75% � Industrial research performed by: small enterprises 70%, medium enterprises 60% and

huge enterprises 50%.

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� Experimental development performed by: small enterprises 45%, medium enterprises 35% and huge enterprises 25%.

� Feasibility studies performed by: small enterprises 75%, medium enterprises 75% and huge enterprises 35%.

- Funding for a maritime innovation project differs from the general funding regulations: � Industrial research 50 %. � Industrial research performed by an entrepreneur 35%, raised by 10% if it is performed

SME’s. � Experimental development 25%, raised by 10 % if it is performed by SME’s.

With the following definitions used (EU support framework definitions, 2006): - Fundamental research: conducted experimental or theoretical activities to obtain new

knowledge related to fundamental aspects of phenomenon and observable facts, without the objective of direct practical application or use.

- Industrial research: planned or critical research focused on obtaining new knowledge to develop new products, processes or services, or to improve existing products, processes or services. This includes manufacturing of parts of complex systems, necessary for industrial research, particularly to valid technologies with the exception of prototypes.

- Experimental development: obtain, combine, design and use of existing scientific, technical, business and other related knowledge and skills to plan, schemes or design of new, modified or improved products, processes or services. Including the conceptual formulations and design of alternative products, processes or services. These activities could include conducting designs, drawings, plans and other documentation, as long as it is not used for commercial use. Development of commercial usable prototypes and pilot projects is included if the prototype is the commercial product and the manufacturing is too expensive for only demonstration or validation phases. Incomes obtained by using this product will be reduced on funding. Costs of experimental development and tests of products, processes and services do account for funding if they cannot be industrial applied or commercial exploited.

PELS 1 and PELS 2 have been executed with Dutch government funding. In PELS 1 the government funding has been maximized using a non-realistic scale model, a so called ship alike body (non-realistic width length ratio). Therefore the project could not be practical applied and was defined as a fundamental research project. The goal of PELS 2 was to cover the gap between theoretical knowledge and a practical application. The consortium decided to execute full scale experiments to obtain knowledge and validate these tests by model scale experiments, therefore the full scale tests were not defined as prototype vessels (experimental research), but they were defined as industrial research. In both projects the Dutch governmental funding was maximized. PELS 2 was also funded by the province of Gelderland, they funded to achieve less environmental impact of the inland navigation industry on the waterways of Gelderland (many companies of the province of Gelderland participated in the project). The European commission funding percentage according to published regulations (classification FP 6 instruments, 2004) is depending on the cost model used:

- research and technological development and innovation-related activities: � 50% for those participants applying the “full cost” or “full cost, flat rate” cost models � 100% of “additional costs” for those participants applying the “additional cost model”

- demonstration activities � 35%for those participants applying the “full cost” or “full cost, flat rate” cost models � 100% of “additional costs” for those participants applying the “additional cost model”

- training activities � 100% for those participants applying the “full cost” or “full cost flat rate” cost models � 100% of “additional costs” for those participants applying the “additional costs model”

- management of the consortium:

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� 100% of costs with a maximum of 7% of the EU contribution (management costs exceeding this ceiling will be covered up to the rate applying to the activities they relate to)

� participants applying the “additional cost model” may charge direct recurring costs within the 7% limit.

SMOOTH has been supported by European funding. Two vessels, Futura Carrier and Kraichgau I, were used to execute full scale experiments. These experiments could be defined as demonstrations or research. Both vessels were tested through full scale experiments and afterwards validated by model scale experiments. If they reversed the sequence of testing they would have demonstrated the obtained results during model scale tests with full scale tests. Now they demonstrated the results obtained during full scale tests by model scale tests. Therefore full scale tests were defined as research and not as demonstration activities, resulting in maximum funding. Government funding (flexibility of European Commission) The officer of the EC was willing to adjust the work plan of SMOOTH to perform full scale experiments with the vessel designed in PELS 2 and to postpone the end date of the project with 21 months. If the project officer did not allow SMOOTH to take over the vessel and knowledge of PELS 2 none of the projects would be able to present reliable results. Knowledge protection The project consortiums decided to careful disseminate proven knowledge and concepts, they did not disseminate knowledge that was not fully understood. They were informed about failed attempts to implement air lubrication and the publicity related to these failed attempts. Two examples demonstrated how important a careful dissemination of knowledge and results of concepts are:

- The developers of WAIP disseminated their concept without fully understanding the mechanisms reducing the resistance of the vessel. They disseminated the knowledge and afterwards tested the concept at full scale. The full scale results were disappointing, they had to explain these results while the explanation required a large investment.

- A vessel in the Netherlands was equipped with air cavities in 90’s, the maritime industry was curious about the results of this concept. After a short period the air cavities were disassembled and everybody was informed about the disappointing results of the concept. Therefore the industry was very reluctant and sceptic to develop air lubrication again.

Another reason for careful dissemination is the protection of generated knowledge and developed concepts. Generated knowledge and developed concepts can be disseminated with the risk that everyone is able to copy the concept. The generated knowledge and concepts required an investment from the European shipbuilding industry, the pay back of this investment can only be realized if the knowledge and concept is protected. The developed concept in PELS 2 was transferred to SMOOTH. The participants of PELS 2 invested resources to develop the concept, they would try to commercially implement the concept and obtain profit by implementing the concept. By transferring the knowledge and concept, the participants of SMOOTH were also able to commercially implement the concept, therefore the participants protected the developed concept using a patent. The participants of SMOOTH could only use the knowledge and concept for scientific purpose, they were not able to commercially implement the concept. Both consortiums were willing to agree on these conditions.

Implementation

Economical and environment (demonstrate advantages) During the development phase of the projects, one air lubricated concept was successfully developed. The full scale tests, using Kraichgau I, demonstrated the fuel consumption reduction.

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Therefore the (economical) advantages have been demonstrated in the project, there are proves advantages when air lubrication will be implemented. The economic advantages of the concepts are demonstrated by cost benefit analysis. Support (Launching costumer) The air bubble injection was implemented in Futura Carrier, the results were disappointing, therefore no one implemented the concept. Results of these tests were disseminated in the industry, if they would have been positive they would have been disseminated as well. The start of adoption of the concept would have been realized. A prototype enables the possibility to easily disseminated achieved results with that prototype.

Policy contribution and intervention

Management intervention

In SMOOTH the project participants decided to implement go/no go decision points. E.g. the termination of the full scale push barge experiment is decided at a go/no go decision point. In these decisions management teams of companies were involved. During the development phase in PELS 2 the management of Damen Shipyards was involved to decide to proceed with the project after terminating full scale push barge experiments. There were a lot of resources invested and no concept was and would be developed, the management of Damen decided to proceed with the project if a new concept was developed. Transferring the generated knowledge and developed concept from PELS 2 to SMOOTH was decided by management of involved participants. They agreed in transferring the generated knowledge and developed concept if the SMOOTH participants would not be able to practical apply the concept.

Policy contribution and intervention PELS 1 and PELS 2 were both Dutch projects. PELS 1 and PELS 2 have been funded by Agentschap NL (Dutch government). And PELS 2 is also funded by the province of Gelderland. The Dutch government did not intervene during the project development. “Drag reduction by air lubrication” has been funded by STW (Dutch government) The European project, SMOOTH, is funded by the European commission. The project officer of SMOOTH was flexible and willing to adjust the project plan when this was needed. Termination of the full scale experiments was not a problem while on the other hand missing experiments in PELS 2 could be executed with the remaining resources owned by the SMOOTH consortium. The willingness of the project officer to successfully finalize SMOOTH contributed to a well-developed concept of air lubrication. Without funding of the governments (policy contribution) the projects could not have been performed because of insufficient resources according to the project participants.

Barriers

Initiation

Support barrier Implementing a complex concept like air lubrication requires a well-developed design, a design performed with fundamental knowledge of the mechanisms about why air lubrication can reduce

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the resistance of the vessel. If a design is not well-developed there is a change of a failed application of air lubrication, as a consequence air lubrication is negatively published. This has happened in the past a lot of times, because of this negative publicity no one in the near future is willing to invest in this concept. For this reason initiating PELS 1 in 2000 was very difficult, approached potential adopters were still hard to convince because of the problems with Myriam in 1990. Financial barrier The projects could not be funded by private money because: the required investment was relatively high and the risk of this investment was relatively high. PELS 1, PELS 2 and “drag reduction by air lubrication” have been funded partly by the Dutch government, the remaining required resources were funded by the project participants or other interested parties. SMOOTH is partly funded by the European commission, the remaining required resources were funded by the project participants. In all the projects funding was desired from the participants, they would only fund the project if their investment was paid back or they generated valuable knowledge. The generation of valuable knowledge was ensured by the project plan. This valuable knowledge can be used at e.g. MARIN when they execute designs, computer simulations and towing tests for air lubrication concepts. During the development period the practical application was patented, this ensured a benefit for the patent owning participants (MarInvention and user rights Damen). To receive any governmental funding you will need to apply for this. E.g. PELS 1 has been funded by the Dutch government using the EET (Economics, Ecologic en Technology) program. Goals of this program are to: promote sustainable economic growth, find substantial environmental improvements of products and processes, adjust fundamental and industrial knowledge development to the market application, and to strengthen the market and knowledge position of participating companies and knowledge institutions. PELS contributes to these goals. The reduction of fuel consumption of vessels ensures lower fuel costs, therefore the transport costs could be reduced. Application of air lubrication at inland vessels and merchant vessels will reduce the emissions. There is a connection between PELS and a market application of air lubrication, as a consequence there is a connection between fundamental and industrial knowledge development. The connection between knowledge development and the market application is shown by the involvement of shipyards in the project. A new profitable concept strengthens the position of participating companies in PELS. To apply for European funding you need to hand in a project proposal. The proposal is too extensive according to the project participants. E.g. a project proposal is difficult to compose in case of developing an innovation. An innovation is about a new product or service, developing a new project is about entering an unknown area. Expectations related to resources and budgets are very difficult. This project proposal should be followed during the development of an innovation. Even if the advantages of certain phases of the project are not clear, they should be fulfilled most of the time. Therefore flexibility and dedication of the funding parties is important. A deadline should be postponed if the participants are not finished, otherwise there is a risk of bungle the project to realize a deadline. Inland shipping entrepreneurs, most of the time, own one vessel at which they are the captain. If the captain is not on board of the vessel the company dysfunctions. Initiating a project with these entrepreneurs is almost impossible, they are not able to participate in meetings or what so ever. In research projects bigger companies do participate because dedicating one person to a project is relatively cheaper compared to dedicating one person of a smaller company. EC projects do demand a certain percentage of entrepreneurs participating in projects. This demand could not always be satisfied in the inland navigation industry, because of the small companies. As a consequence some projects in the inland navigation industry cannot be initiated because a consortium cannot be found.

Development

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Knowledge barrier The fundamental knowledge to develop air lubrication was missing at the start of PELS 1, therefore the project consortium of PELS 1 decided to start by developing fundamental knowledge related to: air cavities, air bubbles and air films. The fundamental knowledge about the flow of air bubbles and the flow of air when using air cavities was insufficient in PELS 2 and SMOOTH. This fundamental knowledge has been obtained by numerical model simulations and scale model experiments. Still the mechanisms behind resistance reduction by air lubrication are not fully understood, as a consequence a new study has been initiated: “drag reduction by air lubrication”. Technical barriers Resistance on a full scale vessel behaves differently compared to the resistance on a scale model vessel. Therefore participants in all projects were afraid that results on scale model and full scale model differed. As a consequence the participants in PELS 2 and SMOOTH decided to change the sequence of experiments, first performing full scale experiments and validate these experiments in a protected environment. The design of an air lubrication concept used on the Futura Carrier was not optimized. The vessel was equipped with air lubrication by New Logistics, they participated in the project and supplied their vessel to test it. In full and model scale tests the vessel demonstrated disappointing results. Therefore the development of air bubbles was terminated. Implementing a not fully optimized and understood concept is dangerous for future developments, e.g. Myriam and the Futura Carrier were not successful. Implementing a concept as soon as possible to the market to repay the investments is right if the concept is fully understood. If the concept fails, it will be published and that could be very negative for a high potential concept. As a consequence, the consortiums decided to extensively test the air cavity concept and made sure the results were reliable before published. Cooperation barriers Problems, delays and failed concepts were observed during the development period of PELS 2 and SMOOTH. Because of these problems participant did lose interest and were not dedicated to the project anymore. Keeping these participants interested and dedicated to the project was quite a challenge. The coordination of these projects was executed by an industrial association, an industrial research institute and an industrial member. They were all able to allocate dedicated employees to these projects. These people were able to invest resources to keep the participants interested, because it was their main task. To receive funding of the EC all the project participants have to hand in their administrative reports. If one participant, caused by a loss of interest, is not willing to participate anymore and does not hand in their administrative reports no one is able to receive payments. In SMOOTH this happened, as a consequence payments of the EC were delayed. Some participants need that payment to keep functioning. This barrier could not overcome by the consortium. Ketting compressors was a participant in PELS 2 and was dedicated to assist in developing an air lubrication concept. At the start of the project Atlas Copco was asked to participate in the project, they were not willing to participate. Atlas Copco took over Ketting and they had to participate in the project, their dedication deteriorated. They were not convinced that air lubrication was going to be a successful innovation. Paint should be developed during the development period of PELS 2. During the project it was clear that air lubrication by means of air bubbles was not going to be tested at full scale, as a consequence it will not be implemented in the inland navigation industry. At that time the paint developer lost his interest in the project, paint was used in combination air bubbles. So their

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developed paint was not going to be implemented in the inland navigation sector, therefore they were not willing to invest in the project and supplied only a small amount of paint. SMOOTH has been delayed, once with 6 months and once with 9 months, because of the continuation of experiments with Kraichgau. This had to do with the trust between the participants of SMOOTH and the participants of PELS 2. The participants of PELS 2 developed a patented working air lubricated vessel ready to be commercialized, releasing that concept was a difficult process. In SMOOTH there are participants interested in implementing air lubrication as well. Bureau Veritas mediated between the participants. In SMOOTH scientific use of the concept is approved and the commercial use is prohibited. They both agreed to transfer knowledge and the vessel on these conditions. Financial barriers The modification of the inland vessel to an air lubricated inland vessel was expensive and therefore quite risky. Beforehand it was not clear whether the concept was advantageous and therefore it was not clear if the concept would repay itself. The financial risk of this modification was carried by the shipyard, Bodewes Millingen. A modified push barge was supposed to be used in PELS 2, after scale model experiments a push barge seemed not suitable. Therefore another full scale experiment should be developed. The project participants decided to use a conventional vessel. A conventional vessel required a higher investment to purchase than an existing push barge. Finally DAMEN found an amortized vessel in good technical condition, as a consequence the vessel could be purchased for a reasonable price. Administrative barrier The administrative tasks related to European project are hampering project participants to focus on their main task. In SMOOTH the industrial association dealt with all the administrative matters, as a consequence participants could focus on their main task: development of air lubrication. In smaller projects, without an administrative partner, the administration of European projects could be a barrier.

Implementation

Technical barrier The concept of air cavities (in a trapezoidal bottom) still has to be optimized. Air cavities, design of an air supply system and the control system are not optimized. During normal operation the system should not be able to dysfunction, because of the increased resistance at a dysfunctional air cavity. At the first implementation, the systems will be optimized for that specific case. Cultural barriers The conservative attitude of the shipping industry is a barrier that is hard to overcome. On the other hand this attitude can be explained very well. There is a great difference in industries. E.g. if a car manufacturer delivers one car that is not working correctly, it is only one of many cars, that does not have a great impact. On the other hand if a shipyard delivers one vessel that is not working correctly, it is one of few vessels, the impact on the shipyard is huge. The barrier could be found in the value of a company compared to the value of the product. The value of a car is small compared to the value of a car manufacturer, the value of a vessel compared to the value of a shipyard is huge. If an inland shipping entrepreneur purchases a vessel which is not working, his income is lost. At small inland companies the vessel is not only a company property but the vessel is also the home of an inland shipping entrepreneur. As a consequence the entrepreneur is not willing to take a risk of implementing maybe a dysfunctional vessel. If they purchase one dysfunctional vessel they take a risk of bankruptcy.

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Financial barriers The current economic situation of the inland navigation industry is a barrier for not implementing air lubrication at this moment. There has been a lot of research invested in the inland navigation industry to improve the performance of this industry. The transport volume is severely reduced and has not been restored (yet), thanks to the economic crisis. In the economic peak years a lot of inland vessels were ordered and these vessels are still being introduced to the market. As a consequence no one is willing to order a new vessel with new innovations. On the other hand banks are reluctant to finance inland shipping entrepreneurs. Dissemination barriers It is very important to careful disseminate generated knowledge, experimental results and developed concepts. E.g. a Japanese consortium published their results about air bubble injection on scale model experiments. They tried to validate these experiments by performing full scale experiments, these experiment demonstrated a significant increase of the fuel consumption. Explaining and publishing these disappointing results required a significant research investment. Publicity about air lubrication assists in disseminating the knowledge between members of the industry. On the other hand disseminating the knowledge generated in developing air lubrication disseminates the knowledge about developing an energy reducing air lubrication concept. As a consequence every shipbuilding industry is able to develop air lubrication concepts. The Western European shipbuilding industry loses the lead they created by successfully developing an air lubricated application. On the other hand the project participants invested in the concept and would like a pay back of this investment. Therefore keeping the generated knowledge internally could be commercially interesting. Adoption barriers A careful dissemination of knowledge may be required while on the other hand extensive dissemination can result in finding the launching costumer. The launching costumer has not been found (yet), therefore planned publications are being developed, commercial and scientific papers will be published. One conference on drag reduction has been organized in Istanbul (Turkey). The developed concept is mainly suitable for inland vessels at this time, therefore the inland navigation industry has to be reached by disseminating. The potential adopters of air cavities are the Western European inland shipping entrepreneurs. It would have been wise to organize a conference in Western Europe. A launching costumer is able to demonstrate the advantages of a concept to the industry, this will speed-up the adoption of the concept. In the development of air lubrication a launching costumer has not been found. The project consortiums decided to demonstrate full scale advantages by implementing a vessel with air cavities. Regulatory barriers The regulatory authorities have to adopt air cavities (in a trapezoidal bottom). The prescribed stopping distance of a vessel, in case of an emergency, requires a certain engine power. Therefore they have to adopt that air lubrication can be switched off and will increase the resistance of the vessel, resulting in a shorter stopping distance with less engine power. If they keep prescribing a power demand, vessels will be overpowered, as a consequence the engine is not efficiently used during normal operation. The regulatory bodies have to adopt this change. Classification societies have to adopt the concept as well. At this moment Bureau Veritas and Damen shipyards are studying the possibilities of adjusting the regulations.

Lessons to be learned and recommendations

Lessons to be learned from success factors

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Cooperation The composition of a project consortium should be deliberately considered, the required knowledge to fulfil the project should be identified and the participants should be able to generate this knowledge. Industrial members were required to fulfil full scale experiments, industrial research institutions were required to generate and disseminate their developed knowledge. The industry needs to adopt and implement the concept at the end, therefore knowledge institutions should assist projects initiated by the industry. Industrial research institutions own an image of reliability, therefore results and knowledge generated by them will be adopted more easy than results and knowledge generate by industrial members. A realistic, creative and flexible project consortium is required. A realistic vision is needed to trade-off between continue or terminate specific concepts. In the development phase of air lubrication some concepts required more fundamental knowledge, the participants decided to generate this knowledge or terminate the concept instead of pushing the concept through to the implementation phase (without the required knowledge). A creative consortium is needed to generate solutions for emerged problems. And a flexible consortium is needed to accept delays, adjustments etc. to generate more knowledge or develop a new concept. An innovation process is an iterative process with uncertainties of how many iterative steps are needed. To keep a project consortium dedicated to the project, dedicated project coordination is required. A project coordinator should have resources enough (time and money) to be dedicated. In the air lubrication projects, project coordination was one of the main tasks of some employees. Their main task was: support and guide the project participants. If project coordination is one of many other tasks, the dedication will be significant less. Incentives Development of a concept should be initiated by industrial members, in the end they will adopt and implement the concept. If they initiated the project, they are convinced about the profitability of the concept. Industrial members willing to participate need an incentive to do so, profitability for them is one of the main incentives. Strengthening the West-European shipbuilding industry is a common interest which will be profitable for the entire shipping industry. These incentives ensure the willingness of the industry to support the development of an innovation. Governmental funding Implementation of air lubrication was and is uncertain, beforehand it was proven that the mentioned projects were risky. There are a number of projects that failed in the past, because of the complexity of air lubrication. Fund such risky project ensures that new knowledge will be generated. The competitive position of the West European shipping industry will be improved compared to industries without the generated knowledge. New knowledge has to be generated continuously by this industry to keep their lead related to complex shipbuilding. Only by funding uncertain projects, with unknown outcomes, new knowledge will be generated. Funding programmes are quite complex, e.g. they differ between industries, differ between types of research, differ between the size of companies and so on. Knowledge about these programmes ensures an optimal funding for a project. E.g. in SMOOTH the sequence of testing was reversed compared to conventional experimental sequences and therefore their funding percentage was higher. Adjusting project plans, to cover the current needs, during the development phase is required. SMOOTH and PELS 2 would not be able to generate a practical application of air lubrication if SMOOTH was not able to adjust the project plan and continue performing missing experiments in PELS 2. The project officer of EC accepted these changes and ensured a positive outcome of the project. This flexibility is required to ensure positive outcomes of innovative projects.

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Economic and environmental The inland navigation is a conservative industry, therefore advantages of new developed concepts have to be demonstrated before they will be adopted. The economic and environmental advantages of air cavities integrated in a trapezoidal bottom are demonstrated by means of a full scale experiment. However these advantages have not been disseminated yet and therefore the concept is not implemented yet. Knowledge protection In all the mentioned projects the generated knowledge and generated results were kept internally. As a consequence failed concepts were kept internally as well. A failed concept will negatively influence the support of the project by the industry. Published explanations about this failure do not contribute to the development of an air lubrication concept, while it requires large investments (e.g. Japanese WAIP system). On the other hand protecting generated knowledge and concepts ensures that other shipbuilding industries are not able to copy the concept. Implementing a new developed concept is advantageous for the West-European shipbuilding industry compared to other shipbuilding industries. Support A launching costumer is able to demonstrate the advantages of implementing a developed concept. In air lubrication projects a launching costumer was not found, therefore the project participants needed to demonstrate the advantages by means of a full scale experiment. A launching costumer invests in the air cavities concept by implementing it, at the mentioned projects the participants and the governments were required to invest in the implementation of air lubrication. A launching costumer for the air bubble concept was found, New Logistics, testing the concept and demonstrate potential advantages required a small investment. In the end this concept was not profitable and therefore not implemented. Support a launching costumer is desired to demonstrate the advantages.

Lessons to be learned from policy contribution and intervention

Management intervention The management of participating companies was involved at the go/no go decision points in the projects. Management teams were forced to think about the potential impact of the concept when they had to decide about the continuation of the development process. Therefore management teams were supporting the development of air lubrication. Funding The participants of PELS 1, PELS 2, SMOOTH and drag reduction by air lubrication admitted that development of air lubrication could not be privately financed, as a consequence they needed governmental funding. Because of the risks and uncertainties in the project they were not willing to privately fund the project. Risky projects need some kind of governmental funding to be initiated. Policy intervention The EC project officer approved and assisted in adjusting the work plan of SMOOTH. The flexibility, demonstrated by that project officer, was required to fulfil the project.

Lessons to be learned from barriers

Financial barriers The project is an industrial initiative and they were convinced that if successful concepts were developed they would benefit from it. For this reason they were willing to invest in the project, but they were not willing to finance the entire project because of the great risks in developing air lubrication. Therefore they applied for governmental funding. The application for Dutch

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governmental funding was not a barrier according to the participants, while the European application was. If a project consortium applies for funding they need to hand in a project plan. This project plan should include all the planned phases of the project, a budget estimation and a planning. A project consortium willing to take the risk of generating new knowledge and developing a new innovation is not able to capture beforehand all the problems that need to be solved. On the other hand they are entering a new area of knowledge, the required specific fundamental knowledge is uncertain. Every development process is an iterative process, a consortium reaches the point of implementing and finds out some knowledge is still missing, they need to develop this before implementing the concept. Because of this process, writing a project plan is difficult, stick to the initial plan is unacceptable, room to adjust the project plan is desired. The European commission demand a certain project consortium composition, they demand a certain amount of industrial members. Most inland navigation industrial members are not able to participate in the projects, therefore it is rather difficult, sometimes impossible, to compose the demanded project consortium. They are not able to participate in the projects because they own a small company at which they have to be present. The composition requirement of the EC has to be flexible in the inland navigation industry. European projects demand the composition of a broad international consortium. As a consequence the level of knowledge between participants can differ. With a broad international consortium it is possible to generate fundamental knowledge in some projects, but the development of a concrete concept is difficult with differing knowledge. In many projects the EC demands a practical application after the development period, a project consortium should be free to decide to develop fundamental knowledge or a practical application. Some Dutch companies decided to stop participating in European projects because of this, their knowledge is used and they are not able to generate new knowledge. Knowledge barrier The project participants did not rush implementation of an air lubrication concept. They accepted that missing knowledge should be generated before the implementation phase could be initiated. They admitted that implementing a not fully understood concept could result in a fiasco, as a consequence they were patient in developing the required fundamental knowledge. Technical barriers Technical barriers were observed in this innovation process, they were overcome by a realistic, creative and flexible consortium. The project participants decided to implement fully understood concepts of air lubrication. It has been demonstrated in the past (Myriam, WAIP, Futura Carrier) that implementing a not fully understood concept could result in a fiasco. Cooperation Due to delays, problems and dysfunctional concepts some project participants lost interest in the project. The dedicated project coordination dealt with this problem, they were able to stimulate and motivate participants to keep participating in the project. It would be a problem if one participant is not interested anymore and decides to stop participating in the project. Periodic administrative reports have to be handed to the European commission to receive any payment. If one participant does not hand in this report, the European Commission does not pay any participant. As a consequence payments of the European commission can be delayed. Small participating companies need the payments to keep operational. The European commission could be more flexible in their payments. If one participant meets the demands they could pay this participant instead of waiting until all participants meet the demands. Administrative barrier

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Administration related to a European project hampers the project participant to focus on their main task, according to the project participants. They overcame this barrier by dedicating one party responsible for all the administrative matters. Project administration should not hamper the innovation development in a project. The administrative requirement, by the European commission, could be revised. Cultural barrier It has been mentioned a few times: the conservative attitude of the inland navigation industry. The reason behind this conservativeness is quite clear, however it is a great barrier. Shipyards cannot afford to build one dysfunctional vessel and shipping entrepreneurs cannot afford to purchase one dysfunctional vessel. As a consequence the inland shipping industry is very reluctant to adopt new developments. The inland shipping industry and other industries differ, while the projects related to inland shipping are determined as transportation projects by the European commission. E.g. the car manufacturing industry and the inland shipping industry are equally approached by the EC, while these industries significantly differ. Earlier mentioned lessons to be learned by the European commission were: flexibility of consortium composition, flexibility in adjusting work plans, revise the required administration, revise the required project plan to apply for funding and approach individual participants related to their payments. These changes do not deal with the conservative attitude of the industry. Implementation of new developments is risky, entrepreneurs in the inland navigation industry mentioned that these risk are too big. They are not willing to risk their company by implementing an innovation, these risks should be covered. Therefore governments should stimulate the innovation implementation in the inland navigation industry. The risk could be covered by the following measure:

- The investment required to implement an innovation is financed by the government by means of a loan. A functional and advantageous innovation has to be repaid in a certain period, a dysfunctional and disadvantageous innovation does not have to be repaid.

- If an inland navigation entrepreneur implements an innovation that is dysfunctional and he wants to disassemble the innovation, the costs related to disassembling and converting the vessel to a functional vessel are covered by governments.

More measures could be thought of, but the main lesson in this part is: the risk for inland navigation entrepreneur is too big to implement innovations. Therefore innovation development relating to the inland navigation industry is useless, unless there are measures to cover the risk for the first implementer. For this reason the inland navigation industry requires a different governmental approach than other industries. Adoption barrier The conservative inland navigation industry needs to observe advantages related to an innovation before they adopt the concept. One shipping entrepreneur said: “I do believe some of your innovations are functional, but I do not own the knowledge to assess the innovations, therefore advantages related to the innovation need to be demonstrated”. A full scale vessel in the development or air lubrication is able to demonstrate these advantages, however the advantages have not been disseminated yet. Protection of knowledge is important for the developers of a concept. While on the other hand protection could result in an unknown concept. Some kind of compromise is required between protecting and disseminating knowledge. The project participants of SMOOTH organized a conference on drag reduction by air lubrication in Istanbul, Turkey. While eventually they aim at the West-European inland navigation industry to start implementing, therefore it would have been wise to disseminate the generated knowledge on a conference in a West-European country.

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Templates The type of policy analysis template is filled out with numbers, 1 is of minor importance and 5 is of big

importance.

1) comments on financial intervention:

- R&D is stimulated by governments to strengthen the market position of the Wes-European

shipping industry compared to other shipping industries. Funding programmes of governments are

focused to stimulate R&D.

- Funding of the project included the funding of demonstration, called experiments.

2) Policy/administrative intervention

- Management of the project is executed by dedicated project coordinators, they strictly managed

the project by means of regulations and planning.

- The EC project officer was flexible in carrying out the project proposal (including planning and

budget).


Key points or not (ranked 1–5)

Level of government involved (and public/private partnership?)

Influence during the initiation period (ranked 1-5)

Influence during the development period (ranked 1-5)

Influence during the implementation /termination period (ranked 1-5)

Standardisation - - - - -

Stimulation of R&D

2 European/state/private

4 1 1

Knowledge management

- - - - -

Infrastructure development

- - - - -

Regulation and planning

3 Private 1 3 1

Legislation - - - - -

Pilots and demonstrations


1 4 4


Financial resources and incentives


1 4 4

Niche management

- - - - -

National security/strategies issues


2 2 1

Environment issues


4 2 4

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- The Dutch government funded the projects because they were contributing to sustainable

development of the shipping industry.

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The type of actors involved template is filled out with numbers, 1 is of minor importance and 5 is of big

importance.

Type of actors involved

Key points or not (ranked 1 – 5)

Involved in which level of government involved (and public/private partnership?)

Influence during the initiation period

Influence during the development period

Influence during the implementation/termination period

State experts, State administration 2 State 2 1 1

Monitoring agents - - - - -

R&D Agent - - - - -

Regulator 2 State/Private - - 2

Innovation agent - - - - -

Implementer 2 Private 2 3 1

Developer 4 Private 2 4 4

Lobby group 3 Private/State 4 1 2

Inventors 2 Private 3 - -

Industrialists, VIP in Business 4 Private 4 4 2

Politicians 2 State 2 - 2

International organization (or E.U.) 4 European 3 3 1

Comment: actors have been extensively described in the innovation process analysis, but some comments

are:

- State administration was involved because of the governmental funding.

- Regulator bodies have to adopt the concept of air lubrication.

- One implementer during the development phase was important, New Logistics with the Futura

Carrier.

- Developers developed the concept.

- Lobbying has been performed by the industrial association and some politicians.

- Air lubrication concepts have been invented and developed for many times, these concepts have

been studied beforehand.

- Industrialists initiated and developed this innovation process.

- The EU funded SMOOTH.

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The key success factor template is filled out with numbers, 1 is of minor importance and 5 is of big

importance. If the key success factor was not present we should leave the cell empty.

Category of factor

Sub-category Initiation (ranked 1-5)

Development/Spread (1-5)

Implementation (1-5)

knowledge and expertise available

2 4 3

availability of technologies

1 4 3

Technological


- - -

legislative guidelines - - 2

Adm. partners available 3 4 1

Administrative and legal

(lack of) clarity about division of responsibilities

1 4 1

support, relay in local, regional assemblies

3 3 1

the role of interests groups

1 2 2

Political and process-related

cross boundaries effects - - -

incentives, motivation, spirit of entrepreneurship

4 4 2

involvement in the project on the part of the stakeholders

4 3 2

Socio-cultural and psychological

link universities/research/ innovation

4 4 1



Economic and financial availability of subsidies 4 4 1

Comment: success factors have been extensively described in the innovation process analysis, but some

comments are:

- Technological: participants with the required expertise to execute these projects were attracted.

- Administrative: coordinating partners dealt with administrative issues. Responsibilities in these

projects were clear.

- Political: the projects were supported by industrial members and governments.

- Cultural: the incentives to develop air lubrication are clear, economic and environmental benefits.

- Economic: funding was available during the projects, otherwise the projects would not have been

executed.

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The barrier template should be filled out using numbers, 1 is of minor importance and 5 is of big

importance. If the barrier is not present we should leave the cell empty.

Category of barrier




Lack of information on information

3 4 4

Lack of information on markets

1 1 1

Available information (knowledge)

Lack of qualified personnel 1 1 1

Lack of interoperability - - -

Lack of standardisation and certification

- - 2

Technical

Difficult adaptation to a new technology

1 4 4

Legislation, regulations, taxation

- - 2


Legal and regulatory

Weakness of property rights 2 4 1


Lack of funds within the enterprise and subsidies from outside

3 1 1

Financial and economic

Lack of competition in the market

- - -


Scarce attitude of personnel towards change

- - 3

-Cultural and societal

Inability to devote staff to innovation activity

- - -

Lack of cooperation among partners (public, private,…)

1 2 1

Fragmentation of decision levels

- - -

Decision making

Lack of Vision and Policy Growth

- - 5

Comment: barriers have been extensively described in the innovation process analysis, some comment are:

- Information: at the start of PELS 1 no suitable information was found that could be used to develop

air lubrication.

- Technical: these barriers have all been solved and were part of the mentioned projects, the

projects were started to overcome technical barriers. Adaption of this new technology seems quite

hard.

- Legal: the regulatory bodies and classification societies have to adopt the concept before it can be

implemented.

- Financial: the development of air lubrication requires high investments. Implementation requires a

high investment of the implementer.

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- Cultural: the acceptability of the inland navigation industry is the main barrier in this innovation

process. The inland navigation industry is reluctant to implement innovations.

- Decision making: the inland navigation industry is (still) not willing to implement air lubrication,

while the economic and environmental advantages are clear.

Page 79 of 192

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ANALYSIS OF INNOVATION PROCESS INTENSIFY THE USAGE OF SMALL WATERWAYS

Introduction To assess the innovation process of intensify the usage of small inland waterways we needed to collect data about the innovation process. To collect data of this innovation we were able to question the key players involved in this innovation process and study published material. The key players are described in the following chapter, chapter two. In chapter three the innovation process is described, the analysis is performed in chapter 4 finalized with conclusion on this innovation process.

Key actors

Distri Shipping NDL is a Dutch organisation, NDL is the abbreviation for “Nederland Distributieland” (Dutch) or Holland International Distribution Council. NDL is an association with 400 members like: logistical service providers, finance companies, consultants, human resource service providers, ICT providers, regional and local governments, knowledge institutions and universities. All of them are involved in all types of modalities in the logistical industry. They try to promote the logistical industry and consult members. Prof. Vermunt, the initiator of Distri Shipping, was employed at NDL at the time of the innovation process. TNO is a Dutch organisation, TNO is the abbreviation for: “toegepast natuurwetenschappelijk onderzoek” (Dutch) or “applied scientific research”. On the website of TNO they mention the following mission. TNO is an independent research organisation whose expertise and research make an important contribution to the competitiveness of companies and organisations, to the economy and to the quality of society as a whole. TNO’s unique position is to attributable to its versatility and capacity to integrate this knowledge. Innovation with purpose is what TNO stands for. We develop knowledge not for its sake but for practical application. To create new products that make life more pleasant and valuable and help companies innovate. Mercurius shipping group is a project developer and investor in the inland navigation industry. They try to connect the inland navigation industry with other transport modalities by using innovative projects. Van Heezik is a logistical service provider and participated in the first phase of the pilot project. Vos logistics is a logistical service provider an participated in the second phase of the pilot project. Ministry of Economic Affairs financed the Distri Shipping project using a co-financing program of TNO and Agentschap NL (former Senter Novem). Ministry of waterway management partly financed the project by using the program “Nederland innovatieland”. Connekt is an independent network of companies and governments willing to improve the mobility of the Netherlands. Connecting members, sharing knowledge and initiatives are the central goals of Connekt. Connekt was the main financer of Distri Shipping because they were convinced about the improved sustainable mobility caused by Distri Shipping. Involved Producers: Interbrew, Bavaria, Grolsch, Heineken and Coca Cola. Involved retailers:

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Schuitema, Albert Heijn, Laurus, Super de Boer and Aldi. Barge Truck The working group of the Barge Truck consisted of: DLD, MARIN, DST, Gaastmeer engineering. Since 1999 DLD (Dutch Logistic Development) operates as project coordinator in different types of innovation processes in the inland navigation industry. DLD is known for their expertise in the conceptual design of vessel and logistical knowledge. MARIN (Maritime Research Institute of the Netherlands) took over DLD at the beginning of 2009 to strengthen their inland navigation industry expertise. The ambition of both companies is to contribute to innovations and development in the inland navigation industry. DST (Development centre for Ship technology and Transport systems) website mentioned: “DST provides consulting services in respect of all technical and economic questions regarding the development and implementation of market-orientated transport concepts that include inland and coastal navigation for transport service providers, the industrial sector and policy makers”. Gaastmeer engineering delivers detailed technical designs of all kind of vessels. The steering group of the Barge Truck project consisted of: HVC, MCS, Inland terminal Verghel, Hendrix bv, EVO and Thyssen Krupp Veerhaven. EVO represents the logistical interests of 30000 companies transporting goods. Their consultants assist companies in developing solutions for complex problems. Their areas of expertise are: transport, warehouse facilities, network logistics and cost development. With their expertise they try to assist companies at increasing their efficiency. HVC (Huis Vuil Centrale) in Alkmaar, the Netherlands, is an energy and garbage handling company. This company is owned by 52 communities and 5 water communities. This company focuses on garbage handling, commodity management and sustainability of the energy facilities in the participating communities. MCS (Meppel container services) delivers full service container logistics. They deal with the transport logistics of HVC. Hendrix bv is a company that produces silage. The raw materials of this silage arrive in the Netherlands by seagoing vessel, Rotterdam or Amsterdam. They use different transport modalities (mainly small inland vessels) to transport the raw materials to their production facility in Helmond. Thyssen Krupp Veerhaven is a shipping company specialised in push towing on the Rhine. They are one of the biggest companies in the inland navigation industry in the Netherlands. The Barge Truck is a push unit and therefore their expertise could assist in the development of the Barge Truck. Dutch Government They initiated the Small Business Innovation Research (SBIR) program. In this program a call was opened to intensify the usage of small waterways.

Innovation process

Introduction The European inland waterways are divided in six CEMT (Conférence Européenne des Ministres de Transport) classes, these classes are based on existing ship types. Table 1 shows the

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classification of the European inland waterways. In the grey area the small inland waterways of Western Europe (the western part of the Elbe) are shown.

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The available capacity on small inland waterways is not fully utilized. There is enough infrastructure on these small inland waterways to increase the transportation capacity unlike the

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overloaded road infrastructure, there are business opportunities on these small inland waterways. As a consequence a lot of projects are initiated to utilize the available capacity of the inland waterways. Arbitrarily we will sum up some of the projects to utilize the available capacity on small inland waterways:

- Waterslag (Netherlands and Belgium) - Inlanav (Netherlands and Belgium) - Q-barge (Netherlands) - Barge truck (Netherlands) - Water truck (Belgium) - De kleine binnenvaart (Netherlands) - Small ships on small trajects (Netherlands) - Mokum Mariteam (Netherlands) - AMS Barge (Netherlands) - Distrishipping (Netherlands) - River Shuttle (Germany) - Nova-Kemp (Netherlands) - Amsterdam Barge Shuttle (Netherlands)

Two of these applications will be described and analysed: Bargetruck and Distrishipping.

Initiation period

Generate ideas

Use of the small waterways At the start of 18th century the inland waterways dealt with the transportation of goods and passengers. The economic centres in the Netherlands were connected by use of channels. In the first half of the 19th century the road truck was developed, a lot of cargo switched from the inland navigation industry to the road industry. As a consequence the economic interest in these small inland waterways declined. The reasons for the modal shift from small inland waterways to the road are:

- Door-to-door transportation by vessel is most of the time not possible without using another transport modality. As a consequence for some cargo flows the small inland waterway transport cannot economically compete with the road transport.

- The financing companies are not willing to finance the small inland waterway industry because of the bad competitiveness with the road transport.

- Inland entrepreneurs choose, most of the time, to operate relatively large vessels which are not suitable for the small inland waterways. They enter this market because of the economic and emotional aspects. As a consequence the fleet and the personnel involved are aging, the entire small inland waterway industry is aging. For this reason no one is willing to innovate in this sector.

- The demand for transport increases and will increase even further in the near future, the supply of inland vessels able to navigate on small inland waterways is decreasing, as a consequence transporters shift from waterways to road and rail. As a consequence the small inland waterway industry will lose market share.

- Because of the decreasing economic interest in the small inland waterway industry there is no attention for well-developed connections between the small inland waterways and the hinterland transport.

It is clear that these causes for a decreasing demand in transport using small waterways enters some kind of vicious circle. If the circle is not interrupted the small inland waterway industry will decrease even further. This industry definitely needs new transportation concepts if the industry wants to compete with road transport. Nowadays the Dutch road infrastructure is overloaded and road trucks are delayed by congestion. It is important to keep a sufficient fleet of small inland vessels to meet the transport demand

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otherwise the road transport industry has to increase even further. The problems with all these trucks on the roads are:

- There is not a sufficient amount of roads in the Netherlands to handle the increase in road transport, the road infrastructure is overloaded.

- The increasing emission of exhaust gases caused by road rucks should be reduced because of the environmental impact and the social unacceptability.

A modal shift from road to small inland waterways can reduce the problems caused by increasing transport demand. Distri Shipping NDL (Prof. Vermunt) developed the initial idea of Distri Shipping. The inland transport of cargo demands high frequent and reliable transport of goods in relative small amounts, as a consequence this transport is handled by road transport. Their idea was to develop a multimodal distribution network, in which the inland navigation industry is used together with the road transport to fulfil the transportation of fast moving consumer goods (FMCG). FMCG have never been transported before by inland vessels, the inland navigation industry was focused on containers and bulk transport. The concept of Distri Shipping is about vessels sailing with stocks (floating stocks), these stocks can be called for by a customer and the vessel will sail to the distribution location from where a road truck transports the goods to their final destination. Around 2000, relatively big vessels were built and small vessels were not built. Mercurius shipping saw an opportunity because of the declined attention for the small inland waterways. If everyone is investing in large vessels and there are no more small vessels left, while there is still demand for small vessels, then there will be an untouched market. They started building smaller vessels suitable for class three waterways, 63 meters by 7,2 meters with a cargo capacity of 800 – 900 tonnes. Barge Truck DLD studied solutions for HVC to decrease the transportation costs of garbage, decrease the environmental impact of this transport and be prepared for future problems in the road transport of garbage. The initial solution was to transport the garbage by means of inland vessels instead of road trucks. They thought about a push unit, scale increase of push units was applied in the inland navigation industry before but what about scale decrease.

Shocks

Distri Shipping Transportation of palletized goods by means of the inland navigation industry is not a new idea, there have been initiatives to implement pallet transportation in the inland navigation industry. These initiatives failed. The critical factors in these previous projects seemed to be the utilization degree of the vessels and the cargo handling equipment. The amount of cargo one shipper transports is not big enough to ensure a reliable and cost efficient transportation. The main conclusion after finalizing these former projects was the need for clustering cargo between different shippers. Developing a distribution network (with cooperating shippers) could result in a profitable network. The 1st of Januar 2000 Prof. Vermunt was employed at NDL to be vice president. He did not have the resources until that time to initiate a major project like Distri Shipping. At the start of 2000 TNO, NDL and NIM (Nederlands Instituut voor Maritiem onderzoek) initiated the project to study possibilities to transport pallets by inland vessels. They started the study by answering: where are the potential producers and their customers? At the same time they thought about some kind of network to transport pallets with inland vessels. In the same period Bavaria was thinking to ship

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their beer by inland vessels. Finally this lead to a search for more beer brewers in the project “promising inland network” (kansrijke binnenvaartnetwerken) and this project lead to the project called “Distri Shipping”. NDL contacted Mercurius shipping to participate in the project and come up with a dedicated pallet vessel. That vessel should cover the need for a vessel that had to serve an inland network like the developed Distri Shipping network. They were already building smaller vessels which could be suitable for this task. These vessels were small container vessels but could be modified to carry pallets. Mercurius shipping decided to start up a company dedicated to design, build and operate a vessel for this project, River hopper bv. Barge Truck In 2004 the Dutch government started a funding program called SBIR (Small Business Innovation Research). The goal of this program is to increase the innovativeness and competitiveness of the SME (small and medium enterprises), and contribute to solve social problems with innovative products and services. Using this program the Dutch government outsourced solving social relevant problems to the business. Companies can subscribe a tender in the SBIR program with their proposal of an innovative product or service to solve the problem. This way companies are offered a chance to develop, with government funding, new innovative products, processes and services. The SBIR program distinguished between three phases:

- Companies need to hand in a tender to perform a feasibility study on their solution for the described problem. This tender should include a global description of the solution and include a budget planning to realize the solution. If the tender is approved the cost of the feasibility study were covered by the Dutch government.

- After the feasibility study, the most promising solutions should be designed and developed in commission of the Dutch government. The costs of the design and development phase were covered by the Dutch government.

- The third phase is the commercialization phase which will not be funded, but the government could be the first adopter of the solution.

In this program the government opened calls with a relevant social research problem. A call named: “the small inland waterways and small vessels” was closed at the 4th of September 2007. The Dutch government would increase the utilization of small inland waterways. Meeuwis van Wirdum coordinated the SBIR and is a former employee of Dutch Logistic Development (DLD), he asked the owner of DLD to apply for funding. DLD applied for funding of their solution: the Barge Truck. The tender to perform a feasibility study was approved by the Dutch government. At the same time DLD was already developing a solution for HVC to transport garbage by inland vessels, this development could be used in developing a Barge Truck.

Development period

Evaluation of ideas

Distri Shipping In the project “promising inland network” four beer brewers and four retailers were found willing to participate in the project. The possibilities to use inland shipping for these beer brewers were studied. The inland shipping industry was suitable for the beer brewers, the study demonstrated that transportation on inland waterways reduced the cost of transport compared to road transport. Problems in previous projects with the utilization degree of the vessels and cargo handling equipment could be overcome by the clustering of cargo from producers. The project “promising inland network II” called Distri Shipping is a follow up project in which the logistical performance of the palletized inland navigation transport is tested. Every producer and

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retailer participating in the project was supposed to hand in requirements for the transportation: frequency of transportation, amount of cargo, window times and reliability. These projects demonstrated that palletized transport in the inland navigation industry could be successful. The rate of success is depending on: transport cost reduction and if the requirements are satisfied. The individual participants do not transport enough cargo to realize cost reduction and meet the requirements at the same time. As a consequence the participants need to cooperate with each other to make sure the transportation of palletized goods, on a cost effective way which meets the requirements, can be realized. The participating companies were convinced about the advantages of Distri Shipping and willing to participate in a follow up project: Distrivaart II (including realization of a prototype). Barge Truck To hand in a tender for the SBIR program they first had to design and develop an initial solution. The barge truck figure 1 is a logistical concept consisting of relatively small clean pusher tugs in combination with linkable push barges. These push units should be cost effective and environmental friendly. The smallest push unit should be able to operate in the small waterways in the Netherlands. These push barge should be able to operate, without a pusher tug, locally self-propelled by use of e.g. a pump jet propeller. This self-propelled push barge is able to pass a lock or shift alongside on its own. The size of the linked units can be adjusted to the size of the waterways, as a consequence these units are able to operate on small waterways in the Netherlands. The advantages of this concept are:

- Logistical advantages because of the uncoupling between the loading/discharging process and sailing. The size of the push unit can be adjusted to the maximum possible size of the local infrastructure.

- Exploitation advantages because of the limited waiting time of the pusher tugs. - The vessels will be hydrodynamic optimized, as a consequence the push units will operate

with a relative low fuel consumption.

Figure 6: The Barge Truck concept (Naiades, 2010)

The Barge Truck was not the first project performed by DLD, as a consequence they already discovered the need for members of the industry to participate in the project. The initial design of the Barge Truck was assessed by a steering group. A steering group was composed in which members of the industry were able to discuss about the requirements and the problems of the Barge Truck. The steering group was able to discuss with the working group of the project. The working group of the project consisted of participants in developing the Barge Truck. DLD was asked to perform a feasibility study related to the Barge truck in commission of the SBIR program, the Dutch government. The initial solution of the Barge Truck has been evaluated using these feasibility studies. When the results of the feasibility study were satisfying the barge truck should be designed and developed. As a consequence the development phase of the Barge Truck has been split into two parts: feasibility studies and design and development. DLD attracted EVO to find potential adopters of the Barge Truck and assist in performing the feasibility studies.

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The feasibility studies were performed using the exploitation model of MARIN (Maritime Research Institute Netherlands) for inland vessels. This door-to-door model takes the economics and environmental impact into account. With this model there is an opportunity to develop a CO2 optimal transport network. Two potential adopters were found to perform the feasibility study: Huis Vuil Centrale (HVC, Alkmaar) and Hendrix Helmond. Before the SBIR program DLD was already developing a solution for the transportation problems at HVC. Hendrix Helmond was found by EVO and was interested in the Barge Truck. The first performed study by DLD was about transportation of garbage and industrial waste from Flevoland (province in the Netherlands) and Noord Holland (province in the Netherlands) to HVC in Alkmaar (city in Noord Holland). This study was performed in cooperation with HVC and Meppel Container Services (MCS). First, they mapped the existing transport of garbage and industrial waste to Alkmaar, calculated the cost and environmental impact of this existing transport. Second the virtually used the Barge Truck, calculated the cost and environmental impact. The results of this feasibility study seemed satisfying, as a consequence the partners decided in May 2008 to extent the calculations. The extended calculations, financed by HVC and MCS, demonstrated that it is feasible to transport containers filled with garbage with three push barges and one push tug. The chosen dimensions were: length of 50 m, width of 6,7 m and a maximum depth of 2,8 m. The dimensions of the push tugs were: Length of 13 m and a width of 6,7 m. The second feasibility study by DLD was about transportation of raw materials to produce silage in Helmond. These raw materials arrive in the port of Amsterdam and should be transported to Helmond. Nowadays transport of these raw materials is performed by so called: Spitsen en small Kempenaars. Due to the decrease in the small vessels fleet, Hendrix expects a problem in continuation of the transport, as a consequence they are searching for new transport methods, the Barge Truck could be suitable. The maximum depth on this transport route is 1,9 meters due to a lock on the route. The barges should be able to pass the lock individually and moor after the lock at the discharge location. On one part of the route the push tug should operate with one push barge and one part of the route the push tug is able to operate with two push barges. After finalizing this feasibility study it was clear that using a barge truck for Hendrix is not a feasible solution, the amount of transported goods is insufficient to transport the goods economically efficient. Hendrix is part of Nutreco, Nutreco owns more production locations, transporting the raw materials for all production locations seems feasible. The same dimensions of the push units were chosen as in the previous feasibility study. The third and last feasibility study by DLD and EVO was to study the use of the Barge Truck in the urban distribution in Amsterdam. This feasibility study resulted in an unfeasible solution. The feasibility studies in cooperation with the interested companies are finalized with a positive result in 2008. Based on the findings, the organizers of the SBIR program decided to continue the study of the Barge Truck with phase two, design and development (technical optimization) of the barge truck.

Design and Development of the innovation

Distri Shipping NDL, NIM and TNO took the initiative in the beginning of 2000 to study the potential of palletized transport by inland vessels in the project: “promising inland waterways network”. They concluded that there is potential to start transporting palletized goods by inland vessels, a cost reduction compared to road transport was possible. The following step in this project was to find out if this concept is feasible when the numbers are based on real inland cargo flows. They had to search participants willing to participate in the

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project. Sustainable fast moving consumer goods seemed the most suitable to transport because of the cargo characteristics: high frequent deliveries of voluminous goods, the huge market and the cargo flow between producers and costumers are concentrated. An example of this concentration is beer brewers: Bavaria, Heineken, Grolsch and Interbrew supply 97% of the entire beer market in the Netherlands. These brewers and four retailers (Albert Heijn, Schuitema, Laurus and Aldi) were willing to participate in the project. Transporting beer means transporting full bottles of beer and empty bottles of beer, the vessel will always be used. The willingness of the participants, concentration of cargo flow and characteristics of the transport made the transportation of beer between producers and retailers suitable for a pilot project. The project followed, Distrivaart II, was supposed to bridge the gap between a theoretical project and a practical application. This project is divided between five sub project which were supposed to be performed simultaneously and exchange knowledge:

- Logistic planning and control development. - Economics: in this sub-project economic advantages using Distri Shipping are

demonstrated. - Network development: in this sub-project the participants try to extent the transportation

network to a distribution network and finally to a collaborative network. - Technique: in this sub-project solutions are developed for technical challenges. - Pilot: this sub-project tries to realize a pilot project (prototype).

Logistics planning and control should be developed to ensure a reliable concept. A control system should be developed for: the planning of loading and discharging and optimization of the routes. Economics about the introduction and development of the network are crucial for the success of Distri Shipping. All the required investments for implementation of the concept should be mapped. Finally the pay-back time needs to be calculated. Network development, in the initial situation a transportation network was used. The focus of this project is the transportation of pallets from the production facilities to the distribution centres of retail organizations. The trucks transport the cargo from production location to trans-shipment location. After the trans-shipment on the inland vessels the vessels sail to the following trans-shipment location to load and discharge. After the trans-shipment trucks drive the cargo to the distribution centre. The concept sailed according to a fixed timetable. In the first pilot phase the inland vessel operates as a transportation mode (not floating stock, order picking or what so ever). Using this concept does require minimal adjustments at the production facilities and the distribution centres. The required technical innovations are inside of the pallet vessel, the trans-shipment techniques and the control system. After the pilot project the Distri Shipping network should be expanded to an optimal distribution network and finally to a collaborative network. TNO developed the optimal network, figure 2. In this figure the inland waterway route (blue) trans-shipment and terminal road service is illustrated. A minimum of 21 vessels (with a capacity between 600 and 1100 pallets) should serve this network of 11 (big S) inland terminals to ensure a minimum delivery frequency of once/day. The approximately 25 served distribution centres will be reached by road truck using the road infrastructure (yellow). Using this network ensure a transportation of 8 million pallets each year, 22% of the fast moving consumer goods. Using this distribution network will reduce the total amount of transportation costs by approximately 20% compared to full transportation by road. This distribution network can be implemented step-by-step.

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Figure 7: optimal distribution network (TNO Inro, 2001)

Finally a pilot project has been performed were all the technical challenges will emerge and solved. A vessel, figure 3, has been designed, supplied and operated by River Hopper according to all the requirements of the pilot route: frequency and capacity (650 pallets). They did not have the resources to start serving the entire developed network with more vessels, as a consequence they decided to start with one vessel and expand the project during the years. The vessel has a length of 63 m, width of 7,2 m and depth of 2,75 m. As a consequence the vessel is suitable for small inland waterways (CEMT class III). The main innovation related to the vessel is the full automatic pallet handling system, to reduce the trans-shipment times and pick orders on board of the vessel. Products inside of the vessel are automatically ordered in the sequence of discharging. The ordering system is not new but it has never been applied on a vessel. The vessel is installed with a shore-ship interface to automatically load and discharge the vessel. By use of roller conveyors and elevators inside of the vessel the products were shifted towards an opening in the side of the vessel. On shore there was some kind of table with a roller conveyor on it, at exactly the same height as the elevators inside of the vessel, the products automatically were pushed out of the vessel onto the roller conveyor outside of the vessel. On both sides of the table trucks could be parked with roller conveyors inside of their trucks, the products were pushed from the table onto the roller conveyor inside of the truck and the products were shifted to the desired location inside of the truck. The truck could drive to the retailer or the distribution centre of the retailer and deliver the pallets.

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Figure 8: Final design River Hopper (Mercurius Shipping, 2004)

Barge Truck Gaastmeer Design was asked by DLD to design the Barge Truck. DLD composed a list of requirements which had to be met and asked to design a realistic concept of small push units. The requirements were: Main Dimensions:

- 50 m*6,7 m and a maximum depth of 2,7 m for all barges. - 110 m*6,70 m for the push unit in the inland waterways of Brabant (Southern province of

the Netherlands). - 115*6,70m for the push units on other inland waterways.

Capacity: - Container barge with a capacity of 28 TEU. - Barges should be possible to use for bulk and container transport. - A container barge should be easily adjusted to transport bulk. - A bulk barge should have a maximum volume.

Propulsion: - Barges are able to operate independently, limited. - The push tug can be delivered with different power plants.

Operational: - Take into account the risk of operation for crew. - The design should look like high-tech design to promote the small inland waterway industry

and attract crew for this industry. Building:

- Should be simple and cheap. This initial design was required to produce a tender for the feasibility study and it was needed to perform the feasibility study (SBIR phase one). Finally the initial design should be the base for the redesign and development of the Barge Truck (SBIR phase two).

Evaluation of prototype

Distri Shipping NDL attracted Mercurius shipping early in the development process to participate in the project and supply a vessel suitable for this network. They attracted them because they are an innovative shipping company building small inland vessels to serve the small inland waterways. To serve the smallest developed Dutch network they needed 7 vessels. Mercurius shipping was not able to deliver 7 vessels on one hand because of the huge investment needed and on the other hand the risk of putting 7 vessels into service was too high. They were willing to put one vessel into service to serve a small network of beer brewers and retailers.

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The pilot project consisted of two different phases. The first phase was to serve a small distribution network with a dedicated pallet vessel and the second phase was to serve the small distribution network with a dedicated pallet vessel and an full automatic pallet handling system. The first vessel was delivered September 2002. The vessel was only transporting goods and the pallets were shifted inside of the vessel by means of a forklift. The vessel operated on a weekly service of beer and empty bottles between Drachten, Zwolle, Den Bosch and Dongen. Four beer brewers and four retailers participated in the pilot. The first phase of the pilot was finalized in June 2003. The second phase of the pilot project was about operating the same service with an automatic pallet handling system. The start of the installation of the automatic pallet handling system was in Oktober 2003 and in Januar 2004 the second phase of the pilot project was started. The vessel did not operate between June 2003 and Januar 2004, because of a delay in installing the automatic handling system. River Hopper bv. decided to put the vessel back into service because participants in the project lost attention. At the start of the second phase the automatic pallet handling system was not sufficiently operating, as a consequence installers had to sail with the vessel to solve problems. The pilot project ended in December 2004 after a meeting at Interbrew. River Hopper bv. and Vos logistics calculated the cost price of the transportation of pallets on this route. The cost price was calculated assuming that 90% of the cargo capacity was utilized. Soon after the start of the second phase 50% of the cargo disappeared and the exploitation of the vessel was not covering the costs anymore. They called for a meeting to discuss the possibilities of sharing the loss of the project between the participants. Not one participant was willing to invest in the concept, as a consequence River Hopper bv. decided to uninstall the automatic pallet handling system and modify the vessel to operate on a container line. Barge Truck A prototype of the Barge Truck has not (yet) been built. The initial design was not a detailed design of the Barge Truck, therefore the second phase of the SBIR program was called the development and design phase. In this phase the detailed technical design should be delivered.

Redesign

Distri Shipping The prototype used in the pilot project has not been redesigned after termination of the project. During the pilot phase of the project the automatic pallet handling system was modified. In the pilot phase the network was a transportation network, in this transportation network Distri Shipping does not seem very profitable. The network will be more profitable if it is expanded like demonstrated by TNO Inro: more vessels and realizing a distribution network. The last phase was supposed to be the realization of a collaborative network. Figure 4 shows the design of a transportation network in the Distri Shipping project. In this network the retailers order the goods directly at the producer. The producers buy transportation capacity together from the inland waterway shipping companies and the road transport companies. In this network the inland vessels are just transportation modes.

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Figure 9: Transportation network

Figure 5 shows a distribution network in the Distri Shipping project. The retailers order the goods directly at the producer. The third party logistics provider (3PL) coordinates the transportation of the goods supplied by the producers. In this network the vessel operates as a cross-docking centre, goods will be sorted inside of the vessel.

Figure 10: Distribution network

Figure 6 shows a collaborative network in the Distri Shipping project. The retailers order at the fourth party logistics service provider (4PL). The producers hand in their sales and production expectations at 4PL. 4PL is now able to combine supply and demand and coordinate the transportation of the goods. In this collaborative network the vessels are able to sail with stocks, so called floating stocks. The vessel should be able by means of the automatic pallet handling system to pick orders during sailing.

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Retailers Producers

Road

transport

Inland

waterway

transport

Logistical Service

provider (4PL)

Figure 11: Collaborative network

When the optimal network is developed the concept will be reliable due to the amount of vessels and flexible because there is always a vessel around with the right stocks. The collaborative network will reduce the total transportation cost according to TNO Inro. Barge Truck After positive feasibility studies MARIN (DLD has been taken over by MARIN) was commissioned by the Dutch government (SBIR program) to design and develop the Barge Truck. Four other partners were attracted to participate in this phase of the project. DST (Development centre for Ship technology and Transport Systems) was attracted to, in cooperation with MARIN, optimize the hydrodynamics of the push tug and push barges. MSN (Marine Service Noord) was attracted to deal with the engine room and energy management of the push tugs. IMC (International Maritime Consultants) was attracted to deal with the coupling of the barges and tug. Finally Gaastmeer engineering was attracted to design the entire concept. The goal of the design and development of the Barge Truck was:

- The concept should be attractive enough for implementation. - The energy consumption should be as low as possible. - The emission should be minimized. - The push barges should be self-propelled and well manoeuvrable to operate independent

locally. - The push units should be well manoeuvrable. - Linking of barges should be relatively easy and safe. - The developed concept should be economically feasible.

The design and development has been divided in four sub-studies and is coordinated by MARIN. The first sub-study of this project was about the hydrodynamics (resistance, propulsion, manoeuvring and propeller). The goal of the resistance and propulsion part was to optimize the hull form and perform predictions about the calm water performance of the barge truck. This part of the project is performed by DST and MARIN. The main conclusions on this phase of the project are:

- The optimization of the hull form resulted in a drag reduction of 18%. Part of these improvements is achieved by adjustments of the general plan of the push barges.

- The barge truck, a push tug and two barges, should achieve a speed of 7 knots during the trials using a design draught of 2,5 meters, a water depth of 3,5 meters at a 85% maximum continuous rating. The power predictions should be achieved by the Barge Truck because of the sufficient marge in the predictions. The researchers recommended a ducted propeller because of a relatively heavy load on the propellers. But an azimuth could be possible for an improved manoeuvrability.

The goal of the manoeuvring part of these studies was to ensure safe and smooth operations of the Barge Truck. In achieving this goal the research team needed to map the routes of the Barge

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Truck, environmental conditions and the manoeuvring properties of the Barge Truck. Three routes have been selected to test the manoeuvrability of the Barge Truck, these three route are the routes mentioned in the feasibility studies. The main conclusions are:

- There are no critical locations on the route to operate with the selected design. Nearby the discharge location the barges need to be uncoupled to pass locks or small bends independently.

- The barges need to be equipped with a bow thruster to operate safely in coastal areas. - The path wide of the barge truck (two barges in a row and a push barge) varies from 11

meters to 21 meters in bends. The second sub-study of the project was to design a coupling between the barges and push tug. The goal was to design: a safe and easy operable coupling between the barges and the push tug, a coupling with sufficient wave resistance to pass one the biggest lake of the Netherlands (Ijsselmeer) and a coupling who is able to link the barges and tug with different heights. The coupling system has been designed by IMC. The third sub-study was about the energy consumption and performed by MSN. The objective was to select a power plant with the highest possible efficiency and minimum of emissions. After a case study it seemed suitable to install a power plant with gas (LNG) engines and generator sets. The performance of the Barge Truck has been compared to the performance of road trucks. A 31% reduction of CO2 emissions can be achieved while the emissions of NoX, SoX and PM will be zero. If bio diesel can be used the emissions will decrease much further, CO2 will be reduced by 93% compared to road transport. Using gas in the inland navigation industry is not (yet) approved, as a consequence anyone intending to use gas will need to apply for a temporarily licence. The infrastructure to bunker gas has not been developed yet, as a consequence a solution is needed to bunker gas. A push tug with a diesel engine is possible, it will be less environmental friendly while it will be cheaper. The steering group required a vessel with a low environmental impact, as a consequence the project partners decided to implement a gas engine instead of a diesel engine. The fourth and last sub-study of the Barge Truck project was to produce an optimal design of this concept. Gaastmeer Engineering implemented the results from the previous described sub-studies to modify the initial design:

- The bow of the barges has been modified according to the optimization of the barges, as a consequence the resistance of the barges significantly reduced. The barges need to be able to operate independently in some areas, therefore the barges need to be installed with a propulsion system and a bow thruster.

- The push tug of 10 meters is installed with diesel generators. - The push tug of 13 meters is installed with gas generators.

The design of the Barge Truck (figure 7) is finalized and ready to build. The mentioned design is the most optimal design. The design of the Barge Truck meets the initial requirements of the steering group. Every owner is able to modify the Barge Truck concept to meet their own requirements.

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Figure 12: Final artist impression of the Barge Truck (MARIN, 2010)


Impact

Distri Shipping The goal of NDL is to attract foreign companies in using the Netherlands as a distribution node. The main goal of Distri Shipping was to decrease the pressure on the Dutch road infrastructure by using the small inland waterway infrastructure. If Distri Shipping is used in an optimal distribution network there are three major impacts:

- Using the inland waterways more intensively for the transportation of palletized goods will result in less utilization of road infrastructure. The productivity of road shipping companies will increase by a decreasing waiting time caused by congestion. Partly shifting the cargo from road to inland waterway will reduce the environmental impact from the transportation of pallets.

- The transportation of goods will be flexible, reliable and frequent. - The transportation of palletized goods using the inland waterways will reduce the total

amount of transportation costs. The attention for the small inland waterways will increase when projects related to these waterways are being successful. As a consequence more projects will follow and more people are attracted to operate in this industry. The realization of a distribution network proposed in the Distri Shipping project requires some big changes in the transportation sector. TNO proposed to start with a transportation network, expand to a distribution network and finally realize a collaborative network. To realize a collaborative network a cultural change in the logistical industry is required. Not one actor in the Netherlands has enough cargo to realize cost reduction and ensure the required logistical performance. As a consequence the producers have to cooperate in the shipment of their cargo. If shippers are willing

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to cooperate they could significantly reduce the transportation costs. While on the other hand they will be ready for future problems with the road transport (the pressure on the road infrastructure and therefore congestion). Barge Truck The design of the Barge Truck has been optimized in SBIR phase two, as a consequence the exploitation of the Barge Truck is improved. The resistance of the Barge Truck has been reduced and the energy consumption on board of the vessel has been optimized, as a consequence the fuel consumption has been minimized. The coupling system between the barges and the push tug has been optimized, the system is easy and safe to handle. The barges and push tugs can be uncoupled. This ensures big advantages of this concept compared to the conventional small inland waterway navigation:

- The barges can be left at the terminal while the push tug continues operating. As a consequence the terminal organisation can plan the loading and discharging more efficient. The push tug does not have to wait while the cargo operations proceed, as a consequence the waiting time for the push tug can be minimized.

- Transportation of cargo by use of the Barge Truck results in a relatively large cargo capacity with one push tug. A relative small amount of push tugs is required to transport a large amount of cargo. Therefore the investment in a push tug is relatively small, as a consequence the investment for the power plant could be higher. With a large investment in the power plant the owner is able to invest in an efficient reduction of the environmental impact.

- The barges can be used as floating stock units. - The size of the Barge Truck can be adjusted to the maximum local waterway capacity. It

could be an advantage to develop barge-hubs along the small inland waterways where barges can be temporarily parked.

The Barge Truck could be used on the small inland waterways, this is a niche market. The feasibility studies demonstrated the ability to transport a large amount of cargo with just one push tug. To ensure a competitive Barge Truck concept compared to the road transport you will need a relative big amount of cargo. Because of the niche market shippers need to cooperate to supply an amount of cargo that makes the transport of cargo by Barge Truck more competitive compared to road transport. The push tugs can deliver push barges and sail away. Push barges are left unattended at some locations, who is responsible for the push barges and the cargo is a question that is still not answered. One push barge is not very expensive, but to receive all the benefits of the concept you will need an amount of push barges to keep the push tug sailing all the time. As a consequence a relative high investment, compared to the purchase prices of a push tug, is needed to start transporting with the Barge Truck concept.

Dissemination

Distri Shipping In 2001 Prof. Vermunt presented the concept of Distri Shipping after studying the possibilities of inland navigation in the transport of palletized goods in cooperation with TNO Inro. Half a year later the project should be started. In commission of NDL TNO Inro studied possibilities to transport pallets by inland vessels. They developed an inland waterway network between producers and distribution centres. This study and more related studies have been published. The Distri Shipping project had a lot of attention by the Dutch media, therefore the project was well known in the logistical industry of the Netherlands.

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Barge Truck The initial idea of the Barge Truck has been developed by DLD/MARIN in commission of a member in the logistical industry. After applying for funding (SBIR) by the Dutch government, EVO was attracted to the project. EVO is a transportation association, they searched for media and disseminated the information about the Barge Truck concept between their members. Interested parties contacted DLD and participated in a feasibility study. A summary of these feasibility studies has been published. After the feasibility studies MARIN searched for participants to develop the concept. They did develop the concept and now the concept could be built. The development of the concept has been published. Because of the SBIR program some media was interested in the project and published about it. Nowadays the media does not publish about the Barge Truck anymore because the development is stopped, there is no one who implements the concept.

Adoption

Distri Shipping NLD was able to convince some big producers and retailers to participate in the project. Four beer brewers and four retailers were willing to participate in the first and second phase of the pilot project. They ensured the cargo flow needed to operate without money losses. They were able to transport their cargo by Distri Shipping while paying prices that were conform to the market. As a consequence they did not have to invest in the concept. After the reduction of the amount of cargo an investment from all participants was needed and nobody was willing to invest. Did they adopt the Distri Shipping concept? They took part in the project to see the impact of the Distri Shipping concept without willingness to invest in the project. The suitable market for palletized transport by inland vessels is huge. 295 Million pallets are transported in the Netherlands each year (in 2003), 43 million pallets carry FMCG. These pallets with FMCG could be transported by Distri Shipping. Barge Truck Two interested parties have been found during the Barge Truck project, they were willing to cooperate and participate in the project: HVC and Hendrix. A feasibility study for HVC demonstrated a more profitable garbage transport and an environmental friendlier transport by use of the Barge Truck. The feasibility study performed in the Hendrix case demonstrated a less profitable transport using the Barge Truck. If Hendrix is able to work together with the other location of Nutreco and cluster the transport of raw materials the concept could be profitable. Another feasibility study, performed by EVO, demonstrated that Overdie Ferro bv. can use the Barge Truck for container transport from Alkmaar to Rotterdam. The feasibility study demonstrated that this transport concept is only profitable if Overdie Ferro bv. is willing to cluster their cargo with other cargo on the same route. EVO performed computer simulations, MARIN’s exploitation model, for the transport of containers on this route. They transport 800 containers each year, as a consequence the Barge Truck has a utility rate of 34%. The simulation showed that if the Barge Truck has a utilization rate of 100% it is very profitable. In that case the cost/container reduce by 33%, the emissions of CO2 reduce by 47%, SOx reduce by 50%, CO reduce by 47%, HC reduce by 50%, NOx reduce by 38% and PM increase by 50%. To be able to operate the Barge Truck with a utility degree of 100% Ferro Overdie needs to attract other players willing to transport their cargo by Barge Truck. A utility degree of 100% is not feasible due to maintenance, congestion etc., as a consequence the advantages in real life will be smaller.

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In Belgium a project is started called water truck, this project seems a continuation of the Barge Truck project. They adopted the idea of scale decrease of push units to utilize the small inland waterways. The only difference between the Barge Truck and Watertruck is that in the second project a technical optimal push unit will not be developed. The market suitable in using the Barge Truck is the transportation of bulk and containers on small inland waterways, CEMT class two and more.

Implementation

Distri Shipping The 21st of Januar 2004 after finishing the first phase of the pilot project Vos logistics and River Hopper bv. would try to implement the Distri Shipping concept in the market, the second phase of the pilot project. Vos logistics organised the logistical planning of the door-to-door transportation of cargo (3PL). River Hopper bv. handled the transportation of cargo on the inland waterways. They were supposed to transport the cargo of Bavaria, Coca Cola, Grolsch and Interbrew with tariffs according to the market. At the beginning of Januar 2004 the automatic pallet handling system was tested, this system was operating according the requirements. The next step was to improve the reliability of moving the pallets inside of the vessel. After a few months 50% of the cargo amount was lost. As a consequence River Hopper lost money every day they were operational. After a meeting with the participants it was clear that no participant was willing to invest, this was for River Hopper the incentive to terminate the project. The market that is tried to be reached is the transport of palletized fast moving consumer goods. These goods are transported by road truck at the moment, a switch of road to small inland waterways is aimed for. Barge Truck The Barge Truck has not been implemented yet. HVC outsourced the transportation of garbage to MCS. If they were willing to implement the Barge Truck they would commission MCS to transport the garbage by Barge Trucks. After finalizing the Barge Truck project it is ready to be implemented, the design is finalized. Nowadays different types of garbage are being separated e.g. paper and plastic are being separated from other garbage. As a consequence the caloric value of the garbage has significantly reduced and the amount of garbage has reduced. HVC produced electricity and that was their main source of income, but the production of electricity has decreased because of the decrease in the amount of garbage and the caloric value. The profit of HVC has significantly decreased and with this the attention for the Barge Truck has decreased. Solving their main problem, decreasing production of electricity, has priority over other smaller problems which include the modal shift. Hendrix required transportation cost of 8 euro per ton if they implemented the Barge Truck. The feasibility study demonstrated that this price was not reasonable. A solution to lower the price was to attract cargo of all other production locations of Nutreco (owner of Hendrix). As a consequence the amount of cargo would increase significantly and the price of the transport per ton would decrease. At this time the transportation of cargo is performed by small inland vessels, there is no need to switch to other vessels yet. Clustering of cargo between different companies should make the Barge Truck profitable in case of Overdie Ferro. Cooperation between different shippers seems a solution to implement the Barge Truck. But this cooperation is not (yet) established. The market that is tried to be reached is the transport bulk of containers. These goods are transported by road truck or small inland vessels at the moment, the amount of small inland

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vessels is decreasing and the road infrastructure is believed to be overloaded, shifting the cargo to the Barge Truck is believed to be a suitable solution.

Analysis of the innovation process

Key actors and their relationships

Initiation

Distri shipping The industrial association, NDL, represents the Dutch logistical industry. They try to attract foreign companies to use the Netherlands as a gateway to enter Europe. As a consequence they try to strengthen the Dutch logistical industry. The inland navigation industry could be strengthened to attract foreign companies, therefore they focused on the inland navigation industry when they employed Prof. Vermunt. Together with the practical approach of Netherlands Institute for Maritime Research (NIM) and the theoretical approach of network development of NDL they thought about the development of network possibilities for the inland navigation industry. Feasibility studies to find out what network could be developed and which products could be transported by an inland navigation network were required. NDL and NIM were not able to execute these feasibility studies alone, therefore they attracted TNO Inro (because of expertise and funding possibilities). They initiated a project to study possibilities of palletized transport by inland navigation vessels, it seemed that FMCG were suitable. To execute realistic feasibility studies they searched for shippers willing to transport their FMCG by inland vessels in a network. Interbrew, Bavaria, Grolsch, Heineken and Coca Cola were willing to participate in these feasibility studies. As a consequence the retailers served by these companies were willing to participate as well: Schuitema, Albert Heijn, Laurus, Super de Boer and Aldi. The shippers and retailers did only inform the project participants about the flow of cargo, at that point they did not actively participate or invest. This first project was funded by NDL, Connekt and ministry of economic affairs. Connekt tries to develop sustainable transport of goods. Therefore they decided to support the development of Distri Shipping, they participated in the development and partly funded the project. TNO manages a funding program of the Dutch ministry of economic affairs and is able to use this funding in suitable projects. Agentschap NL manages funding programs of the Dutch ministry of economic affairs and they also funded the project. The Dutch ministry of waterway management funded the project by using an innovation program. Barge Truck DLD commissioned by HVC developed a sustainable transportation mode to transport garbage to a garbage processing facility. They thought a small push unit could be suitable for this transport. The Dutch ministry of waterway management initiated a funding program, managed by Agentschap NL, to stimulate the utilization of small inland waterways. An employee of Agentschap NL was a former employee of DLD and asked them to hand in a tender. They thought of a small push unit for small inland waterways to solve problems of HVC. Therefore they handed in a tender to perform feasibility studies funded by the Dutch government. The tender was approved by the government and they were commissioned to execute feasibility studies. To be able to hand in a tender, an initial solution to intensify the usage of small waterways had to be included. Gaastmeer engineering was attracted to deliver an initial design.

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Development

Distri shipping In the first project, called Distrivaart I, feasibility studies have been executed. The second project, Distrivaart II, was initiated to develop the required knowledge to successfully operate a Distri Shipping network, while at the same time a pilot project should be executed. Distrivaart II was coordinated by NDL, the same funding parties were involved, and the amount of participating companies was extended to execute the knowledge development. To execute the pilot phase a shipping company and a logistical service provider were required: Mercurius shipping (Riverhopper) had built, supplied and operate the dedicated pallet vessel and van Heezik logistics executed the logistical service. Feasibility studies demonstrated great advantages in using Distri Shipping, 20% transport costs reduction could be realized. Therefore participants in this feasibility studies were willing to take part in Distrivaart II. Knowledge development was required to profitable operate the distribution network and the collaborative network. An intensive relationship with the participants of the pilot phase was required to communicate about the findings of this knowledge development phase. The communication was running not smooth enough to be able to assist each other, the phases turned out to be two separate projects. The pilot phase was initiated parallel with the knowledge development phase. The phases were initiated at the same time because the project coordination feared a loss of interest if knowledge would be developed and afterwards a pilot phase was initiated. The pilot phase initiated as a transportation network with a vessel as transport modality. Instead of road transport, transport was shifted to the inland waterway transport. The main investment required to initiate the pilot phase was purchasing the vessel, it was purchased and operated by Mercurius Shipping. The funding intended to use in the pilot phase has been used to develop the automatic pallet handling system. No money was left to execute the pilot project, as a consequence the participants of the project had to finance the pilot project. This investment should cover the costs of the pilot phase when 90% of the cargo capacity of the vessel was utilized. The shippers supplied their cargo to the logistical service provider, they dealt with the terminal road haulage and Riverhopper dealt with the inland waterway transport. A profitable pilot phase was not aimed for, because the Distrishipping network was only going to be profitable if it was extended to a daily delivery of products. However the pilot phase was initiated to develop the desired network that was believed to be profitable. The first pilot phase was finalized in May 2003. Before the vessel could be commercially implemented, and the network could be developed, an automatic pallet handling system was required. The development of this system was difficult and therefore severe delayed. The interest of the pilot phase participants declined and therefore the vessel was forced back into service, by Mercurius, without an optimal functional automatic pallet handling system. Barge Truck DLD searched for companies willing to participate in a feasibility study. HVC was already willing to participate before the project started. DLD asked the industrial association, EVO, to search for participants willing to cooperate. They found Hendrix Helmond to participate in the project. Since EVO was attracted they were convinced that the Barge Truck could be a profitable concept, they supported the project. To execute feasibility studies the transport by Barge Truck was supposed to be compared with the transport by road. A door-to-door simulation model would assist in comparing and assessing the performance of the Barge Truck. MARIN owns door-to-door models, they were asked to participate. Because outcomes of these feasibility studies were promising, DLD was commissioned

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to develop and design a detailed concept, again funded by the Dutch government. HVC and MCS funded additional feasibility studies for their specific case, they would ensure a profitable transport by Barge Truck. A steering group to steer the project was required, members of the inland navigation industry were found willing to participate. It is important to be supported by industrial members on one hand and on the other hand they could mention the requirement of the industry when the Barge Truck was going to be implemented. The steering group could communicate with the working group and steer them if they were heading for the wrong direction. In the beginning of 2009, the start of the development and design of the Barge Truck, DLD was sold to MARIN. MARIN carried on with the Barge Truck development using the same project coordinator Mr Blaauw (former owner of DLD). More participants were required: a participant to optimize the hull of the Barge Truck (DST in cooperation with MARIN), engine room design and energy management (MSN) and a coupling between push barge and push tug should be developed (IMC). These different sub projects should be input for a final design carried out by Gaastmeer engineering.

Implementation

Distri Shipping After the first phase of the pilot project without an automatic pallet handling system the second phase of the pilot project should be executed. The second phase of the pilot project included the implementation of the automatic pallet handling system and implementation of the vessel in a practical application. The logistical service, door-to-door service, was executed by Vos Logistics, operating the vessel was executed by Riverhopper (Mercurius Shipping). Vos logistics and Riverhopper agreed with shippers to transport their goods at transport costs according to the road market price, if the shippers supplied a certain amount of goods (90% of the cargo capacity of the vessel). At the initiation of the commercially implementation phase the automatic pallet handling system should still be improved. As a consequence the vessel was delayed sometimes and the network was not reliable enough to be utilized, according to the shippers and retailers. After a few months (halfway 2004), one participant was not able to supply the agreed amount of goods, the amount of goods declined by 50%. After that, every day the vessel was operational, Riverhopper was losing money. During the following months Riverhopper asked the participants to find a solution. In December 2004 no one came up with a solution, as a consequence Riverhopper proposed to carry the money losses together. No participant was willing to carry losses together, therefore Riverhopper decided to stop operating the vessel on this service. They modified the vessel to make it suitable for container transport. Barge Truck The Dutch government does support the implementation of the Barge Truck, but they did only finance the feasibility studies and the development and design of the Barge Truck. The SBIR program is composed in a way that everything before implementation is fully financed. The implementation phase should be privately funded. The interested parties in the development phase of the Barge Truck did not implement the Barge Truck because: HVC had to solve internal problems before they were willing to implement the Barge Truck and the feasibility study for Hendrix demonstrated a profitable transport if they cooperated with other production facilities (clustering of cargo).

Adoption rate and spread of the innovation

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Distri Shipping The participants in the Distrivaart II were willing to participate in a pilot test, after the first phase they were willing to participate in the second phase, commercial implementation. They did adopt the concept, but after a failed second pilot phase they did not implement the concept. The shippers and retailers were called innovators (according to Rogers, 1962). Because no one did implement the concept after the second pilot phase the rate of adoption and spread is uncertain. The participants were not willing to invest and continue the service after the losses of Riverhopper, that raised the following question: “did they really adopt the concept at the first place?”. It has been demonstrated that a distribution network using Distri Shipping could be profitable, the development of this network takes some time and investments. The participants were not willing to invest these resources and develop the profitable network, therefore the answer is: no they did not (yet) adopt the concept. To use another transport modality instead of road trucks could be required if: transport cost are reduced compared to road transport, environmental impact of road transport is unacceptable or when road trucks are too expensive or not reliable anymore because of the overload of the Dutch road infrastructure. None of these incentives are an issue at the time of implementation. Barge Truck The Barge Truck concept has been adopted by: the logistical industry association, EVO, HVC (Alkmaar, the Netherlands) and Hendrix (Nutreco, Helmond, the Netherlands). The feasibility studies demonstrated: increased transport efficiency (therefore reduction of transport costs) and less environmental impact. The modal shift of road to the inland waterways for the participating companies is not necessary (yet). To adopt the concept most companies have to cooperate with other companies (maybe competitive) to ensure an amount of cargo that is profitable to transport with the Barge Truck. After the Barge Truck project a similar project has been initiated in Belgium, they try to develop a similar concept without optimized barges. No one did implement the concept yet, therefore the rate of adoption and spread is uncertain.

Success factors during the innovation process

Initiation

Incentives (common interest) Both initiatives try to realize a modal shift form road to small inland waterways. Therefore the current road infrastructure overload will significantly reduce, while on the other hand the use of small inland waterways will be intensified. To solve future problems with cargo capacity and congestion of road infrastructure these initiatives can be great solutions. Stimulation of the use of small inland waterways brings great benefits to the entire supply chain. To be prepared to solve these future problems actors in the logistical industry are willing to cooperate in developing solutions. Incentive (Industrial interest, Distri Shipping) Around 2000 many big vessels were purchased, small vessels were not purchased at all. As a consequence Mercurius Shipping decided to purchase small vessels to serve the small inland waterways. The small inland waterway fleet is decreasing, as a consequence the cargo capacity of the fleet will be insufficient to meet the transportation demand. Investing in this niche market, while no one else is willing to invest in this market, could bring great future benefits. Mercurius Shipping was willing to participate in Distri Shipping because there is a great potential in transporting pallets using the small inland waterways. Millions of pallets are being transported, while not one of them is transported by inland waterways. Mercurius Shipping was willing to

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purchase, modify and operate the dedicated pallet vessel. This dedicated vessel was a small vessel purchased by Mercurius Shipping before the start of the project, the vessel was meant to transport containers, but could be modified to serve as dedicated pallet vessel. Project coordination (Distri Shipping) Prof. Vermunt, employed at NDL, was able to attract important participants. Until the pilot phase he coordinated the project, he was able to motivate and stimulate the project participants. Incentive (Industrial interest, Barge Truck) The development of the Barge Truck is initiated by a scientific member commissioned by an industrial member. HVC asked DLD to develop a transport solution to reduce the environmental impact and solve future road transportation problems. DLD developed a small push unit that was believed to be suitable for the transport of garbage to the processing facility. Governmental initiative (Barge Truck) The Dutch government developed a program (SBIR) that should realize solutions to social relevant problems. One problem that should be solved: “intensify the usage of small waterways”. The Barge Truck was a suitable solution according to DLD and therefore they handed in a tender to participate in 2007. They were commissioned by the Dutch government to execute feasibility studies about the Barge Truck, these studies were 100% funded by the Dutch government. Therefore a private investment was not required, as a consequence the risk to participate is nil. Industry research organisation (Barge Truck) MARIN was attracted to participate in feasibility studies, they own knowledge and computer simulation models suitable to compare the performance of different transport modalities. They own a door-to-door transportation simulation model, that is able to accurately predict the economic and environmental performance of the simulated transport modality. MARIN is a leading maritime research institution with a well-developed image. Their expertise used in a project will bring the project a reliable image.

Development

Economic and environmental (Demonstrate advantages) Feasibilty studies demonstrated the economic and environmental advantages using the Barge Truck and Distri Shipping. The feasibility studies included cost benefit analysis. The main benefit in using the Barge Truck is reduction of the environmental impact using a cost efficient concept. The main benefit of Distri Shipping is using a cost efficient reliable transport mode instead of road transport. Cooperation (Distri Shipping) The development of a dedicated pallet vessel has been executed by Mercurius Shipping, one company was involved to develop the automatic pallet handling systems. The amount of project participants that had to execute the technical part of the project was rather small, therefore communication and cooperation is rather simple. Shippers and logistical service providers were needed to execute a pilot project within Distri Shipping, both parties were willing to invest resources in the pilot phase. There was a smooth cooperation caused by agreements, the shippers were only supposed to supply a certain amount of cargo and two logistical service providers ensured the delivery of cargo to the final destination. Industrial initiative (Distri Shipping) The pilot phase was initiated and executed by industrial members. Shippers (beer brewers) were willing to cooperate in this phase, they paid the logistical service providers for the transport of their cargo. The shippers were able to ensure a certain amount of cargo transported to the retailers and back from the retailers to the producers. Together the beer producers own 80% of the entire beer

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market, if they were willing to shift the cargo of road to the small inland waterways it would be a great incentive to develop the concept even further, develop a distribution network and eventually a collaborative network. Without the willingness of beer brewers in the pilot phase of Distri Shipping the concept could not have been tested. Financial (Distri Shipping) Mercurius Shipping was willing to modify a small vessel and operate it in the pilot project of Distri Shipping. Mercurius Shipping in cooperation with the logistical service provider calculated the cost price and based the transport price on this cost price. They were willing to operate a vessel without any profit. The development of the Distri Shipping I and partly Distri Shipping II is funded by Connekt. New knowledge development and development of required techniques have been funded. Support (Distri Shipping) There was a lot of industrial support, shippers, inland entrepreneurs, industrial associations and even the government invested resources in the project. The Dutch government clearly supported the project by politically involvement during the pilot phase of the project. Technical (Distri Shipping) An efficient and effective method to handle cargo has been developed in the Distri Shipping project. To handle cargo shore equipment is not required, the automatic pallet handling system on board of the vessel ensures the possibility to load and discharge at every inland terminal. Because of the developed system the cargo handling takes a relative short period and only an financial investment on board of the vessel. Therefore costs and time related to cargo handling activities will be reduced. Time and costs related to cargo handling activities should be reduced because that is the main barrier for the implementation of small inland vessels. Government funding (Barge Truck) The outcome of the feasibility studies were handed to the management of the SBIR program after the execution of these studies. Promising outcomes of the feasibility studies were an incentive for the government to decide that the Barge Truck should be designed and developed detailed. Therefore DLD was commissioned by the management of the SBIR program (Dutch government) to proceed with the design and development phase. Project coordination (Barge Truck) DLD was able to execute the management of the Barge Truck project, because this was their only task they were able to dedicate to this task. They did outsource the technical development of the Barge Truck to other participants and paid these participants by using the governmental funding of the SBIR program. Cooperation (Barge Truck) Expertise of different companies was attracted to optimize the design and development of the concept, every participant was specialised in a part of the project and executed that part. Cooperation was easy because every company had to execute their part of the project commissioned by MARIN. Private investments were not required because the project was financed by the Dutch government, as a consequence every participant got paid to execute their work. This project is business as usual for participating companies. Support (Barge Truck) DLD composed an industrial steering group to steer the project participants, they did actively participate in the project. They consulted the members of the working group about industry

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requirements. As a consequence the project had been adjusted to meet industrial requirements. The industrial support of a project is important, the support can result in early adopters of the concept. The logistical industrial association supported the project, therefore members of this association could easily be convinced to support the project. One member was found willing to participate in executing feasibility studies, Hendrix (member of Nutreco). HVC did support the project before it was initiated, they commissioned DLD to find an alternative to transport garbage. Policy support (Barge Truck) The project is commissioned by the Dutch government, however they did not intervene with the development. The budget of the project was almost free to spend, DLD could attract other participants and pay them. As a consequence DLD was able to manage the project, coordinate and assist the project participants in developing the required technical solutions.

Implementation

Infrastructure A vessel in Distri Shipping and a push barge in Barge Truck can be used as floating stock, therefore the concept can increase the transport flexibility. Without both concepts, stocks will be stored at the producer or the distribution facility. With the concepts stocks can be transported while they are not ordered (yet). When a retailer orders, these ordered goods are already being transported. Support (launching costumer, Distri Shipping) The first phase of the pilot project was executed by industrial members. The second phase of the pilot project was the commercial implementation of Distri Shipping. Mercurius Shipping did execute this phase in cooperation with a logistical service provider. They did transport cargo for the shippers participating in the first phase of the pilot project and eventually demonstrated a cost efficient reliable transport modality. By demonstrating the well-functioning transport modality they tried to attract other shippers to participate as well. Modal shift (Distri Shipping) Pallets are usually being transported by road, the road infrastructure is overloaded and road trucks often are being delayed because of road congestions, there is a certain amount of pallets that serve a fixed network, this fixed network could be served by inland vessels instead of road truck. Therefore the road infrastructure will be less overloaded, road trucks are being delayed less often and road trucks will become more reliable. This way the entire supply chain will be more reliable and efficient. Investment (Barge Truck) The proposed concept of the Barge Truck can be implemented, a detailed design of the concept is available. The proposed concept can be adjusted to meet the requirement of the owner e.g. an owner can implement fixed propeller or diesel engines. Because the entire concept is developed and designed an investment to design the vessel will be a small investment depending on the ship owner’s requirements. Environmental (Barge Truck) The Barge Truck aimed for an environmental friendly transportation alternative. The Barge Truck, depending on ship owner’s requirements, can be environmental friendly. Therefore ship owners willing to use the concept are able to claim their business is environmental friendly. Shippers which aim at a sustainable transport of their cargo will be attracted by an environmental friendly ship owner. The interest in environmental friendliness transport is increasing. The developers therefore claim that the Barge Truck will be a profitable transport modality in the near future.

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Management intervention

In the Distri Shipping project the management intervened with the project two times, the first time they

intervened when the implementation of the automatic pallet handling system was severe delayed and the

second time after the transported amount of cargo was significantly reduced.

The development and implementation of the automatic pallet handling system was difficult. They needed

to develop and implement a system without any reference system, a similar system is used in warehouses,

but it is never implemented in a sailing vessel. A vessel is continuously moving and therefore this phase was

difficult. Due to delays in this phase industrial interest was declining. The management of Mercurius

Shipping decided to force the vessel back into service without a functional automatic pallet handling

system, therefore the vessel was delayed during operations because the system had to be improved during

the operational phase.

During the first half of the commercial implementation phase one participant did not honour the cargo

amount agreement. He did not supply any cargo an therefore the amount of transported cargo was

reduced by 50%. Thereafter every operational day Mercurius Shipping was losing money. The developed

concept was profitable for them and shippers, therefore the management asked other participants to carry

the loss together. The director of Mercurius asked the participants for 12.500 Euro and he would invest

25.000 Euro in some kind of fund, this fund should cover the loss. Not one participant was willing to invest

in this fund and therefore the management of Mercurius Shipping decided to quit participating. They did

retreat the dedicated pallet vessel and disassembled the automatic pallet handling system.


Distri Shipping

The project has been funded by Connekt, NDL, the ministry of Economic affairs and the ministry of

waterway management. The funding of the ministry of economic affairs is partly managed by TNO, they are

able to fund projects without policy intervention. The ministry of waterway management funded the

project using a program called: “Netherlands innovation land”.

Funding intended for the pilot project has been used to develop the automatic pallet handling system.

Therefore no funding was available to execute the pilot project itself, the investment needed to execute

the pilot project had to be a private investment.

Barge Truck

The barge truck has been fully funded by the Dutch government to intensify the usage of small waterways.

The government did not intervene with the project, they did support the project.

The Dutch government did not fund any kind of implementation of the Barge Truck. They were willing to be

the first adopter if the concept is suitable for governmental tasks, but the concept is not suitable for any of

these tasks. They do support the implementation of a Barge Truck, but not financially.

Barriers

Initiation

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Knowledge barrier (Distri Shipping) Distri Shipping aimed to develop an extensive transportation network, distribution network and finally a collaborative network. The development of such an extensive network requires new knowledge. Possible markets suitable for such extensive networks had to be found, therefore a study has been executed called Distri Shipping I. That project did study possibilities and the outcomes were optimal distribution networks. The main question in the following project (Distri Shipping II) was: how to develop such an optimal network. At the same time a pilot project should be started to keep participants interested in the concept. Scientific initiative barrier (Distri Shipping) Development of a Distri shipping network is initiated by scientific members and has been supported by industrial members. An industrial initiative will be developed because of industrial requirements, to meet these requirement industrial members are willing to invest in the development of that initiative. This initiative was believed to be a great solution for future problems but not initiated by industrial members, the participants were less willing to invest in the development. Support barrier (Distri Shipping) Some projects about the transport of palletized goods by inland vessels have been executed in the past and did not succeed. As a consequence this transport modality owns a negative image. Attract participants to develop such a project is hard. In Distri Shipping NDL, prof. Vermunt, initiated the project. He is a respected in the logistical industry, if he proposes some kind of solution companies are more willing to participate. Financial barrier (Distri Shipping) This initiative was initiated by NDL, NDL was not able to execute the project and finance the project. As a consequence they searched for partners willing to invest and execute the first project. TNO Inro was willing to cooperate and finance the project by using governmental funding they managed. Financial barrier (Barge Truck) The Barge Truck project is funded by the Dutch government in the SBIR program. To apply for funding an applicant needs to hand in a global solution to solve the problem, a project planning and budget estimations. This global solution needs to be developed by a company and therefore an investment is required. The Barge Truck was already developed by DLD commissioned by HVC, therefore the investment needed to apply for funding was relative small.

Development

Cooperation barrier (project consortiums) Potential adopters and implementers of these innovations are ship owners. One ship owner (Mercurius Shipping) joined the project Distri Shipping, in the Barge Truck project there were no ship owners participating. Without the support of ship owners you will never be able to implement an innovative vessel to serve the small inland waterways. Cooperation barrier (Distri Shipping) Participants of this innovation process mentioned the absence of dedicated project coordination. It was hard to keep participants motivated and stimulated to keep participating in the project. Participants had doubts about the project when the implementation of the automatic pallet handling system was delayed. During the first operational period the vessel was often delayed because of needed improvements using the automatic pallet handling system. Dedicated project coordination was needed to keep participants dedicated to the project after some setbacks, but the needed

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coordination was not present. Therefore the negative attitude of participants during the pilot initiation period could not be turned. Communication barrier (Distri Shipping) The participants of the knowledge development phase and the pilot project phase were supposed to communicate. The pilot project should be developed with the assistance of knowledge development. The developed knowledge was required because the pilot phase used a transportation network that should be extended to a profitable distribution network. The participants did not sufficiently communicate and the project seemed like two separate projects. Technical barrier (Distri Shipping) The competitive position of the small inland waterways transport compared to the road transport is bad, mainly because of the costs related to cargo handling. Reduction of the cargo handling costs was one of the main objectives during the development of Distri Shipping. One participant developed an automatic pallet handling system, which enables the vessel to perform cargo operations at every inland terminal, without the need for shore equipment. The development of an automatic pallet handling system took more time than expected. As a consequence participants interest in the project declined, Mercurius Shipping decided to implement the vessel without an optimal functioning automatic pallet handling system. During the operational phase of the pilot project the system still had to be improved, as a consequence the vessel was delayed sometimes and not reliable according to the participants. The development of a network using dedicated pallet vessels required new knowledge, this knowledge was being developed simultaneously with the pilot project. Due to communication problems the pilot project participants were not informed about how to develop a network. If a not well-developed concept is implemented there is a great risk that participants are not able to solve emerged problems during the implementation of a concept. Financial barrier (Distri Shipping) To serve the entire network developed in Distri Shipping I, at least 7 vessels were required. To purchase and modify 7 vessels an investment was required on one hand, on the other hand the risk of implementing this amount of vessels at once is quite high. One ship owner is not willing to take that risk, as a consequence one vessel was implemented to initiate the development of a Distri Shipping network. The first phase of the pilot project was financed by project participants. Economic barrier (demonstrate advantages, Distri Shipping) Using one vessel does not demonstrate the advantages of the proposed Distri Shipping network. The advantages demonstrated by one vessel are not sufficient to attract entrepreneurs willing to implement a dedicated pallet vessel. The network is believed to be advantageous, therefore a number of ship owners are needed to take the risk and implement a vessel without certain benefits. Economic barrier (demonstrate advantages, Barge Truck) Possible advantages by using a Barge Truck are demonstrated by feasibility studies. The advantages by implementing a Barge Truck therefore are uncertain. A ship owner is reluctant to implement an innovation without being sure about the profitability.

Implementation

Cultural barrier Inland ship owners are dedicated to their companies and proud of their vessel. The bigger the vessel, the more proud they are. Purchasing a bigger vessel ensures the possibility to build more living space on the vessel. The exploitation cost of small vessels is relatively high compared to big vessels: the required investment to purchase a small vessel is relative high compared to purchase

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a big vessel e.g. the RADAR equipment requires an equal investment on a big and small vessel, maintenance costs are relative high, wages are relative high etc. As a consequence the inland ship owners focused on purchasing bigger vessels for the last decades. On the other hand they focus on their own vessel, while they should focus on serving the entire supply chain. They do not adjust to their environment, the entire supply chain, while this is the main success factor to keep the industry alive. To optimally serve the entire supply chain, small and big vessels are needed. If ship owners were willing to develop some kind of organisation in which they participate they would be able to develop an inland shipping industry strategy.

The Dutch inland navigation ambassador, Prof. Verberk (2010) mentioned: “the industry has to bear in mind that they need to adjust to market requirements e.g.: cooperative partnerships, transparent information, adjust operational methods to the entire supply chain, etc. Individual operating can result in a deceptive feeling of freedom: cooperation between ship owners can ensure a smooth execution of obligations e.g. cargo could be transported by a colleague in a holiday period of a ship owner. Ship owners need to solve the problems by adjusting their own business. Ship owners need to cooperate and share information instead of focus on their individualistic company”. Cooperation is one of the main barriers in the inland navigation industry, overcoming this barrier requires a cultural change of the ship owners and actors in the supply chain. Cultural barrier (reluctance to implementation) Inland shipping entrepreneurs are reluctant to implement an innovation. They are not willing to implement a vessel that is not proven to be functional and profitable. This conservative attitude of inland shipping entrepreneurs can be very well explained, mentioned in the analysis of air lubrication. But it is a barrier that hampers modification of the inland navigation industry. Cultural barrier (actors in the market) The need to modal shift between road to inland waterways is still too small for shipping companies to invest in this modal shift. Some companies are willing to invest to make sure future problems with road transport can be solved by them. But for now it does not seem necessary to them to shift cargo. Utilization of the small inland waterways is a niche market. Using this niche market does not seem profitable enough for shipping companies, producers and inland shipping entrepreneurs. Another advantage like reducing the road infrastructure overload does not seem an incentive at the moment. Reducing the environmental impact of transport by using the inland waterways instead of road transport seems an incentive, due to a bad economic situation companies are not willing to invest in this environmental advantage at the moment. The required modal shift between road an small inland waterways requires more focus on the use of these small waterways. The small inland waterway fleet needs to be sufficient to serve the market that is going to be shifted. Ship owners are not willing to invest in these required small vessels, as a consequence shipping companies are not willing to shift, this is some kind of viscous circle that needs to be interrupted. Cultural barrier (financing companies) Because of many reasons ship owners are not willing to invest and therefore shipping companies are not willing to shift the cargo. The amount of cargo supplied to the small inland waterway market is small and therefore the freight rates are bad, as a consequence financing companies are not willing to finance a new small vessel. Again, this is a viscous circle that needs to be interrupted. Cultural barrier (infrastructure) Companies are not necessarily located near small waterways. In the last decades it was not desired to locate near waterways but it was desired to locate near the road infrastructure. As a

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consequence when small waterways are used, terminal road haulage is needed. Door-to-door transportation of cargo by inland vessels requires two more cargo handlings compared t road transport. Therefore cargo handling costs are high compared to the transportation costs, and as a consequence using small inland waterways does have a bad competitive position compared to road. Most companies located near waterways are focused on road transport, their docking stations are located at the road side of the company. If they decide to use inland vessel they need to internally transport the cargo between the waterway and the docking station. This demonstrates the barriers that have to be overcome before a shift of road to inland waterways is possible: economics of the transport, locations of companies and the focus of companies. Cultural barrier (clustering cargo) To use a Distri Shipping network or a Barge Truck a certain amount of cargo is required to profitable use the concept. Shipping companies need to cluster their cargo and transport it together using one transportation mode. There is a great lack of trust between shippers and between inland shipping entrepreneurs to cooperate. Both project seemed profitable, demonstrated by feasibility studies and a pilot project, if cargo is clustered. Until now no companies were willing to cooperate with other (competitive) companies. Dissemination barrier After the development of the pilot project in Distri Shipping a lot of bad publicity is disseminated. There have been project trying to implement transportation of palletized goods in the past, they all failed. There were some significant problems in the pilot project and as a consequence newspapers published articles about Distri Shipping and compared it to past failed projects. The Barge Truck is a developed concept and not implemented (yet). As a consequence there is not much to disseminate at the moment. Publishers want to write about the outcomes of a project, about possible advantages. The advantages demonstrated by feasibility studies are not interesting enough for them. Cooperation barrier (Distri Shipping) Some participating companies were not interested in the Distri Shipping project, they were interested in the contact they could gain by participation. They were not dedicated to the project and not willing to invest or develop the proposed network, they did not support the implementation of Distri Shipping. Financial barrier (Distri Shipping) One of the participating shippers did not supply the agreed amount of cargo, as a consequence the project was losing money every operational day. Mercurius Shipping proposed to carry the losses together, but no one was willing to carry the loss. As a consequence Mercurius Shipping quit serving the network with the dedicated pallet vessel. Economic barrier (demonstrate advantages, Distri Shipping) To demonstrate advantages using the dedicated pallet vessel a distribution network was required. More vessels were required to serve this entire network and demonstrate that a reliable and cost efficient inland shipping network could be developed. The pilot project was not believed to be profitable, but after the development period of the distribution network the concept was believed to be profitable. Therefore the concept required a huge investment to overcome the non-profitable period. There were no participants willing to invest in the development of a distribution network. The required knowledge to develop a distribution and collaborative network is developed in Distri Shipping II. The outcomes were not communicated with participants in the pilot project. These participants did not know if a developed network was profitable and how they had to develop a

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profitable network. This could have been the reason that participants were unwilling to invest in the project. And again, implementing a not well-developed concept is a great risk. Financial barrier (Barge Truck) The Barge Truck aimed on reducing the environmental impact of transportation. Transportation cost advantages are not aimed for and are not observed, transportation by use of the Barge Truck is cost efficient. Transportation costs depend on the route of the Barge Truck or road truck. In case of HVC transportation of garbage could be performed in a cost effective way. In case of Nutreco, they had to cluster their cargo to transport the raw materials in a cost effective way. The first implementer of the Barge Truck needs to invest in the concept, a concept that is not proven to be profitable. The push barges are relative expensive compared to the push tug (push barge +/- 300.000 euro and push tug +/- 800.000 euro). Advantages of the concept can only be demonstrated if the push barge is able to deliver the barge and immediately transport another barge to another destination. Therefore, if the concept is implemented a push tug needs to be purchased and a certain amount of push barges are needed. The investment is quite high, while the concept is not proven to be profitable. Technical infrastructure barrier (Barge Truck) The proposed engine in the Barge Truck is a gas engine (LNG), while there is no infrastructure to bunker LNG in the inland navigation industry. This barrier still has to be solved or the ship owner needs to implement another engine. Regulations barrier (Barge Truck) A LNG engine in the inland navigation industry is not (yet) approved by regulatory authorities. DLD discussed possibilities with Lloyd’s Register and the Dutch shipping inspection. They guaranteed DLD that if someone applies for a gas engine, they would provide a temporarily permit. The temporarily permit is given if someone is able to demonstrate a safe system and an equal risk between a conventional system (diesel engine) and the gas engine. Demonstrating this equivalence will require an additional investment.

Lessons to be learned and recommendations

Lessons to be learned from success factors

Incentives An industrial initiative is initiated by industrial members, they initiated an initiative to meet industrial requirements. Industrial members initiated the Barge Truck project to develop an alternative transportation mode, preparing solutions for future problems with the overloaded road infrastructure and the environmental impact of transportation. Distri Shipping is initiated by scientific members, participants believed that it would be a great solution to solve future problems and therefore participated in the project. On the other hand they were not willing to invest sufficient resources to develop the proposed network. If the project was an industrial initiative they would initiate the project if they were able to fund the entire project (by use of internal or external funding). Mercurius Shipping did believe in the Distri Shipping network and therefore was willing to invest, but they were not able to fund the network development. At some point funding of other participants was required, but they were not willing to fund. If it would have been clear that they were not willing to invest at the initiation of the project than the project would have never been initiated. Initiate an industrial initiative will have a higher chance of being successful compared to initiation of a scientific initiative. Industrial members initiating a project are willing to invest resources to develop and implement the concept. Industrial members participating in a scientific initiative do not have to invest at the initiation of the project, therefore the dedication of that participant is uncertain.

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As a consequence industrial members should initiate a project and scientific members should support the project or scientific members should be asked to solve an industrial problem. Industrial research organisation A reliable industrial research institution is an (non-profit) independent organization. Therefore generated outcomes by them are reliable and will be adopted more easily compared to outcomes of industrial participants. Industrial participants do benefit if they disseminate positive outcomes of studies, industrial research institutions do not (necessarily) benefit by disseminating positive outcomes. Reliable research institutions do participate in projects if they think the project has great potential. Inland navigation entrepreneurs believe that if reliable research institutions support the project it has great potential. Support of an industrial research organisation will make the adoption process by inland navigation entrepreneurs more easy, for these reasons. Cooperation The composition of a project consortium should be deliberately considered. To develop a concept and new knowledge specific expertise is required. This specific expertise should be owned by participating companies. Development of the Barge Truck is a great example: the project was divided in sub projects which all required certain expertise, participants owning this expertise were attracted to develop the Barge Truck. Composing a project consortium in case of the Barge Truck was quite easy, participants got paid for their participation. In case of the Distri Shipping project participants did not get paid and therefore their participation was voluntary, they even had to invest resources to develop the project. The expertise required in Distri Shipping was attracted as well, development of an automatic pallet handling system was executed by a specialised company, the vessel was purchased and operated by a specialised company and the logistical service provider planned the transportation of cargo. Project coordination should be able to keep participants dedicated to the project, especially in a non-paid project. One dedicated project coordination participant should execute the management of the entire project. They should be able to use required resources to keep participants interested and motivated. Distri Shipping was managed by NDL, they were dedicated to the development of a Distri Shipping network, as a consequence they were dedicated to the development of new knowledge in Distri Shipping II and they were not dedicated enough to the pilot project. Therefore the pilot project was not managed by one specific participant. Eventually Mercurius Shipping tried to manage the project while on the other hand they had to operate vessels. The Barge Truck project was managed by DLD, they only managed the project and did not participate in the technical development and therefore they could be dedicated to the project management and keep all the participants dedicated to the project. The lesson learned is: deliberately consider the project consortium. And dedicated project coordination is required, this participant should only manage the project and not participate in the technical development. Governmental funding Some project need governmental funding to cover the risk of developing a concept. Innovation development can be quite risky, beforehand no one is sure about the outcomes of the innovation process. The willingness of participants to invest in a project is related to the risk of the project. Participating in Distri Shipping was a great risk, because the project is only partly funded. Eventually participants were asked to invest and carry losses of the pilot project together, not one participant was willing to take more risk, as a consequence the project is terminated. The development of the Barge Truck has been funded by the Dutch government, therefore participants were willing to participate, they did not had to cover any risk.

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All innovation projects differ, therefore the risk that needs to be covered differs as well. As a consequence every innovation process should deserve an individual approach related to governmental funding. 100% Funding of innovation projects covers all the risk carried by participants, the outcome of the project financially does not matter. If participants (partly) privately invest to develop an innovation they will be motivated to succeed in developing a profitable concept and pay back their investment. Innovation development should be initiated by motivated participants, participants are motivated if they believe the concept could be profitable. When all the risk for a participant is covered they do not have to believe in the concept, they will get paid anyway. Summarizing: governmental funding is necessary in developing innovation, but 100% funding is not desired. Economic and environmental (demonstrate advantages) Inland navigation entrepreneurs are conservative, due to explainable reasons, they need to be fully convinced about the profitability of a concept before they will implement it. There is not a better method to demonstrate profitability by a prototype that demonstrates the economic and environmental advantages. Distri Shipping implemented a prototype, a dedicated pallet vessel with an automatic pallet handling system. However the innovation is not about one vessel, the innovation is about developing a distribution network. Inland entrepreneurs and shippers were not convinced by one vessel, because it did not demonstrate the advantages of a network. The Barge Truck project demonstrated profitability of the concept using feasibility studies. Not one actor did implement the concept because they were not able to observe the advantages using the concept. A project consortium developing an innovation, intended to use in the inland navigation industry, should be able to clearly demonstrate advantages and convince the inland entrepreneurs with these demonstrations about advantages of the concept. Many entrepreneurs argue about the willingness of implementing a so called “paper innovation”. Support When an initiated project is able to meet industrial requirements, industrial members will support the development of an innovation. Distri Shipping was able to meet industrial requirements, as a consequence project participants supported the development. The development of a Barge Truck was able to meet industrial requirements, an alternative transportation mode to transport cargo, therefore participants and a steering group supported the innovation development. A social relevant problem could be solved, therefore the Dutch government supported the development of the Barge Truck. The industrial and policy support in both projects enables the development of the concept. A launching costumer supporting the project is able to demonstrate advantages and disseminate outcomes of the project. Mercurius Shipping launched the dedicated pallet vessel, this vessel did not demonstrate the advantages of the entire proposed network. However the prototype ensured dissemination of the concept. The Barge Truck has never been implemented, therefore less dissemination of the outcomes of the project was observed compared to Distri Shipping. Industrial and policy support should be ensured by meeting industrial and policy requirements. The support is needed to be able to fund, develop and implement the innovation. A launching costumer demonstrates advantages of the concept and disseminates outcomes of an innovation process. Research and Development The ability to research and develop new concept ensures the development of innovations and generation of new knowledge. Therefore available resources are required. Governments and companies need to ensure a certain budget to meet the resource requirement.

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Mercurius Shipping made resources available to purchase, modify and operate a dedicated pallet vessel. The development of the Barge Truck is initiated by HVC, they made a budget available to develop alternative transportation modes to solve future problems.

Lessons to be learned from policy contribution and intervention Management intervention The management of Mercurius Shipping forced the dedicated pallet vessel back into services without solving known problems with the automatic pallet handling system. The vessel was delayed because of these problems before it was forced back into service, but afterwards it was delayed because the system had to be improved during the operational period. Because of severe delays the vessel was not reliable and companies doubted the use of the concept. Doubts about the concept were started when the implementation of the vessel was severe delayed and these doubts were strengthened by the unreliability of the vessel. If a concept is not fully understood or fully developed it should not be implemented. If it is implemented you will not be able to explain the dysfunctional concept. Therefore other companies have reasonable doubts about the concept which cannot be taken away. If an implementer tries to explain a dysfunctional concept he will need to invest to develop an explanation. It will be much easier to fully understand a concept and implement it afterwards, even when interest of participants is declined because of delays. Shippers did agree to supply certain amounts of cargo in Distri Shipping, but they did not honour this agreement. If an implementer is dependent on this agreement they should ensure that this agreement is honoured. An implementer can demand some securities of other participants e.g. a penalty when the agreement is not honoured. Policy contribution The governmental funding rate should depend on the risk of the project, therefore an individual approach for every project is desired. Most innovation project hampered at the transition point between the development process and the implementation process. Apparently the risk of implementing an innovation is sufficient to terminate the project at that stage.

Lessons to be learned from barriers

Cultural barrier The cultural barrier in the innovation process related to the inland navigation industry is observed to be the main barrier that has to be removed before implementation is possible. Some cultural barriers are related to the inland navigation entrepreneurs and some are related to the shippers. A cultural shift is required, the conservative industry should be changed to remain competitive in the near future. Inland shipping entrepreneurs do not focus on serving the entire supply chain, they focus on their own vessel without taking into account the environment. They should focus on the supply chain and purchase a vessel which is able to serve this supply chain. Inland shipping entrepreneurs do not purchase small vessels because of emotional and exploitation reasons. However, small vessels are demanded and a threatening overcapacity of big vessels does not support purchasing big vessels. Improving the service of the inland navigation industry will strengthen the competitive position of the inland navigation industry. The service of the sector can be improved by cooperation between ship owners, together they should develop an inland navigation strategy to improve the market position. Together they will be able to improve the service level of the industry, e.g. if one ship owner is not able to transport cargo, due to a holiday period, another one is able to transport

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the cargo. This cooperation is required to improve the transport efficiency of the inland navigation industry, be competitive and complementary with other industries. Road transport and inland waterway transport could serve each other and strengthen the entire supply chain. The conservativeness of inland shipping entrepreneurs ensures a reluctant attitude to implement innovations. The risk to implement an innovation, without any certainties, is too high. As a consequence they operate the usual way, this usual way worked for years, why change? They should be convinced about certain advantages of the innovative concept and the risk of implementing an innovation should be covered. Because inland shipping entrepreneurs focus on big vessels the fleet of small vessels is declining. As a consequence the last decades small vessels were less used and cargo shifted to road transport, the demand for small vessels reduced significantly. The interest in the small inland waterway navigation industry has declined. Shippers do not use the industry, demand declined and as a consequence freight rates declined. Financing companies are not willing to finance small vessels because of this reason. Therefore new inland shipping entrepreneurs are not able to purchase a small vessel while they are able to purchase a big vessels. This attitude is maintained by all actors in the sector, the viscous circle needs to be interrupted. The focus shifted from small vessels to big vessels and road trucks, as a consequence companies did not locate near small waterways anymore but near roads and bigger waterways. Therefore door-to-door transportation using small vessels requires road terminal haulage. The cargo handling costs are sufficient to decrease the competitive position of the small inland waterway industry compared to the road industry. Distri Shipping and the Barge Truck can be cost efficient, reliable and more environmental friendly compared to road transport if cargo between shippers will be clustered. They demonstrated significant advantages in clustering cargo. Cooperation between shippers is required but not (yet) realized. Possible barriers to cooperate between shippers are (van der Ham et al., 2006): insufficient trust, insufficient vision on advantages, sharing the benefits, competition between partners and problems in adjustment of logistical systems (e.g. ICT applications). Studies to remove these barriers have been conducted, e.g. TNO Inro, guidelines of shippers cooperation. Distri Shipping was terminated because the development of a distribution network required too many resources. The development of a network will take a long period, but it would be advantageous if it is developed. There is a lack of long term strategies, most inland entrepreneurs operate using a short term strategy. “They are interested in profits that could be earned tomorrow” (R.F. Zimmerman, 2011). The small inland waterways is a niche market, the profits in a niche market are believed to be too small to invest in the development of this market according to shippers and inland entrepreneurs. They are not able to observe the advantages to serve the entire supply chain and shift cargo from road to the small inland waterways. Some of these cultural problems and how they could be solved are also described by the Dutch inland navigation ambassador (A. Verberk, 2010). The main lessons that could be learned from this cultural barrier is: implementation of innovations should be funded (financed by means of an advantageous loan, or what so ever) to cover the risk for inland entrepreneurs, cooperation should be stimulated and managed by an organization between shippers and between inland entrepreneurs (industrial association?), long term strategies should be developed by cooperating inland entrepreneurs, and entrepreneurs should be forced to focus on small inland waterways. Cooperation The composition of a project consortium should be deliberately considered. Potential adopters of the concept should be attracted to inform participants about the industrial requirements of a concept. In Distri Shipping shippers and one ship owner participated, in the Barge Truck project only shippers were attracted. Eventually the concepts have not been implemented. Therefore a

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wider support is needed, the potential adopters of both concepts are mainly ship owners and shippers. Therefore they were needed in the innovation process. Due to cultural reasons it is difficult to attract small companies acting in the inland navigation industry, however it is necessary that they support the concept because they are the potential adopters of the concept. When a project consortium is composed project management should try to argue with potential participants about the reason why they would like to participate. In Distri Shipping one participant participated to contact the entire network of Prof. Vermunt, while they were not motivated to implement Distri Shipping. The logistical providers did not think about strengthening the supply chain with this concept, but they thought of it as a threat to the road transport. For this reason project coordination should find participants who do believe the concept can strengthen the supply chain and are willing to invest (take a risk) in the development of the concept. This willingness demonstrates the motivation of participants. Dedicated project coordination is required in every project, the managing party should be able to utilize required resources to keep participants interested and motivated. One participant should fulfil this task and not be involved in the technical development of an innovation. Communication of outcomes and other information between participants is required and should be ensured by project management. They need to disseminate outcomes and make sure non-participating parties support the project. During the Distri Shipping project there was a lack of project coordination, especially during Distri Shipping II, which evolved in two separate projects. The Barge Truck project is coordinated by DLD, this was the main task of DLD and therefore they could execute dedicated project coordination. Financial barriers The development of an extensive network, proposed in Distri Shipping, requires a large amount of resources and development time, the benefit of using a proposed network are not clear by implementing one vessel. The pilot project was initiated using one dedicated pallet vessel because implementing more vessels would require a huge investment and therefore a great risk should be taken. Participants of such extensive projects should be willing to invest time and money to develop the network, they should be patient in paying back their investments. A distribution network like proposed will not emerge in a few months, this will take some years. The development of the entire network requires great resources, but it is necessary to utilize the profitable network and demonstrate the advantages of the network. No other shippers, except the beer brewers, were willing to adopt and implement the network. If the advantages of a network would be demonstrated they would probably adopt the network. The financial barriers are directly related to the cultural barriers: long term strategy and demonstration of advantages before entrepreneurs are willing to adopt and implement the concept. If the cultural barriers are removed, these financial barriers will lower. The commercial implementation phase requires, in some cases, big investments and relative long development periods. The commercial implementation is risky and therefore the implementers should be assisted at the initiation of the commercial application until the concept is possible to be profitable. Knowledge barrier During the pilot project of Distri Shipping a vessel is forced back into service without a functional and reliable cargo handling system. Because of the problems with the cargo handling systems the vessel was often delayed and not reliable, according to some shippers. The pilot project is executed while the knowledge to develop a network was still not generated. Therefore it was not clear how a network should be developed. After an operational period one shipper did not supply the agreed amount of cargo, therefore other shippers should be attracted or the existing shippers needed to invest. Because they did not know how to develop an entire network (and other already mentioned reasons) they were not willing to invest.

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The problems in the pilot project ensured negative publicity about the concept. Thanks to the conservativeness and this negative publicity new shippers were not willing to cooperate during the commercial implementation. The concept has been forced into service without significant knowledge about the concept and the development of the proposed network. As a consequence: participants doubted, negative publicity was disseminated and new shippers were not willing to participate. Therefore the project has been terminated. A not fully understood and not fully developed concept should not be implemented. Initiative barrier Scientific initiatives are not initiated by industrial members, industrial members will probably support a great scientific initiative, but their dedication will never be the same compared to an industrial initiative. An industrial initiative is developed because industrial members required the development to solve industrial problems, a scientific initiative is not required by the industry while it may be advantageous. Therefore scientific members should support industrial initiatives and not initiate innovation processes by themselves unless they are asked by the industry to solve an industrial problem. Technical barrier The main barrier to implement inland vessels in the supply chain is cargo handling costs. There is an industrial requirement to solve this problem. Therefore participants in Distri Shipping developed an automatic pallet handling system, they were able to handle cargo without shore equipment. The cargo handling efficiency is increased by using the Barge Truck, push barges can be left at the terminal and terminal management can optimal plan the cargo handling operation. With these solutions industrial requirement are met. Therefore it is useful to argue with industrial members about an innovative concept, remove their barriers and meet their requirements. If the proposed Barge Truck is implemented there are still some problems. In the Dutch inland waterway infrastructure you are not able to bunker LNG. The concept is not fully developed according to inland entrepreneurs, this problem and other problems related to the LNG installation should be solved before anyone is willing to adopt the developed concept. Economic barrier Inland navigation entrepreneurs argue about the reasons why an innovative concept should demonstrate advantages on full scale, their main reason: “I do believe some of your innovations are functional, but I do not own the knowledge to assess them, therefore you will need to demonstrate the advantages”. If a project consortium intents to implement an innovation, they should be willing to invest in developing a prototype and demonstrate advantages. Regulatory barrier LNG engines are not (yet) approved by the Dutch government, a temporarily approval will be provided if someone implements the concept. There are many uncertainties about the LNG installation when the concept is implemented. The more uncertainties, the more reluctant inland navigation entrepreneurs will be. If the concept is fully developed it will be adopted more easily: approval of the government to use LNG and possibilities to bunker LNG. Therefore again, trying to implement a not fully understood or fully developed concept will not be successful. The inland industry will not adopt a not full understand/developed concept, the risk of the concept is believed to be too high.

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Templates The type of policy analysis template is filled out with numbers, 1 is of minor importance and 5 is of big

importance.

3) comments on financial intervention:

- R&D is stimulated by the Dutch government to intensify the usage of small inland waterways since

2007.

- The Dutch government tries to stimulate the development of a small inland waterway

infrastructure since 2007.

- The pilot period and demonstration of Distri Shipping is partly funded by the Dutch government.

4) Policy/administrative intervention

- Project participants stimulated the R&D by investing in alternative transport modes.

- NDL aims at improving the logistical industry of the Netherlands to use the Netherlands as gateway

to Europe, therefore the inland navigation industry has to improve as well. The national strategy is

to improve the entire inland transport efficiency.


Key points or not (ranked 1–5)

Level of government involved (and public/private partnership?)

Influence during the initiation period (ranked 1-5)

Influence during the development period (ranked 1-5)

Influence during the implementation /termination period (ranked 1-5)

Standardisation - - - - -

Stimulation of R&D

4 State/Private 4 2 -

Knowledge management

- - - - -

Infrastructure development

3 State/Private 3 3 2

Regulation and planning

- - - - -

Legislation - - - - -

Pilots and demonstrations

3 State/Private - 3 -


Financial resources and incentives


Niche management

- - - - -

National security/strategies issues


Environment issues


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- The Dutch government tries to stimulate usage of small inland waterways, they try to solve future

road infrastructure problems.

- Using the inland waterways instead of roads does reduce the environmental impact of the supply

chain. Especially the Barge Truck aimed to reduce the environmental impact.

The type of actors involved template is filled out with numbers, 1 is of minor importance and 5 is of big

importance.

Type of actors involved

Key points or not (ranked 1 – 5)

Involved in which level of government involved (and public/private partnership?)

Influence during the initiation period

Influence during the development period

Influence during the implementation/termination period

State experts, State administration 3 State 3 3 -

Monitoring agents - - - - -

R&D Agent - - - - -

Regulator - - - - -

Innovation agent - - - - -

Implementer 4 Private 4 4 4

Developer 4 Private 4 4 2

Lobby group 2 Private/State 3 2 1

Inventors - - - - -

Industrialists, VIP in Business 4 Private 3 4 2

Politicians 2 State - 2 2

International organization (or E.U.) - - - - -

Comment: actors have been extensively described in the innovation process analysis, but some comments

are:

- State administration was involved because of the governmental funding.

- Implementers were involved during the entire innovation process. Distri Shipping was implemented

by Mercurius Shipping, Vos logistics, shippers and retailers. They did participate in the entire

project. The Barge Truck was initiated by a company that would implement the concept.

- Developers developed the concept.

- Lobby groups were used especially in Distri Shipping, coordinated by Prof. Vermunt.

- Members of the logistical industry were participating in Distri Shipping and Barge Truck. The beer

brewers together are the main player in the beer market.

- Politicians were interested in Distri Shipping and attended important activities in the project to

show their support.

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The key success factor template is filled out with numbers, 1 is of minor importance and 5 is of big

importance. If the key success factor was not present we should leave the cell empty.

Category of factor




knowledge and expertise available

4 2 2

availability of technologies

2 4 3

Technological


- - -

legislative guidelines - - -

Adm. partners available 2 2 1

Administrative and legal

(lack of) clarity about division of responsibilities

3 1 1

support, relay in local, regional assemblies

4 4 2

the role of interests groups

2 4 2

Political and process-related

cross boundaries effects - - -

incentives, motivation, spirit of entrepreneurship

4 4 2

involvement in the project on the part of the stakeholders

4 4 2

Socio-cultural and psychological

link universities/research/ innovation

3 2 -



Economic and financial availability of subsidies 4 4 1

Comment: success factors have been extensively described in the innovation process analysis, but some

comments are:

- Technological: participants with the required expertise were attracted to execute Distri Shipping

and Barge Truck. The required technologies have been developed during the innovation processes.

- Administrative: administrative partners were available in both projects. Responsibility in Distri

Shipping was unclear, there was not a dedicated project coordination, while in the Barge Truck

project there was.

- Political: both projects were governmental supported. Interest groups attended both projects,

during Distri Shipping shippers were interested and during Barge Truck a steering group was

composed.

- Cultural: clear incentives to initiate both projects are mentioned, stakeholders were involved

during the innovation process, as well as research institutions and industrial members.

- Economic: long-term benefits to implement small vessels are present, the development of a

network using Distri Shipping takes a high investment and therefore terminated. Short-term

revenues could not be expected. While the use of the Barge Truck is mainly advantageous related

to the environmental impact. Both project stimulate the usage of small waterways and therefore

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solve future problems with the road infrastructure. Subsidies were sufficient available for the

development, to implement the concepts more investments were required.

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The barrier template should be filled out using numbers, 1 is of minor importance and 5 is of big

importance. If the barrier is not present we should leave the cell empty.

Category of barrier




Lack of information on information

3 4 3

Lack of information on markets - - -

Available information (knowledge)

Lack of qualified personnel - - -

Lack of interoperability - - -

Lack of standardisation and certification

- - -

Technical

Difficult adaptation to a new technology

1 5 5

Legislation, regulations, taxation

- - -

Administrative barriers - - -

Legal and regulatory

Weakness of property rights - - -


Lack of funds within the enterprise and subsidies from outside

3 1 4

Financial and economic

Lack of competition in the market

- - 3

Scarce acceptability 2 - 5

Scarce attitude of personnel towards change

- - 5

-Cultural and societal

Inability to devote staff to innovation activity

2 3 5

Lack of cooperation among partners (public, private,…)

1 3 2

Fragmentation of decision levels

1 3 3

Decision making

Lack of Vision and Policy Growth

1 1 4

Comment: barriers have been extensively described in the innovation process analysis, some comment are:

- Information: projects have been initiated to develop the required concept and knowledge. The

Distri Shipping concept is implemented without the required knowledge to develop a network.

- Technical: adaption to a new technology seems the main barrier.

- Financial: the initiation and development processes have been funded by governmental funding or

funds within companies. The implementation process to develop a network using Distri Shipping

and the Barge Truck required a high investment. Not enough companies were willing to invest in

the commercial implementation. The usage of small waterways is declining, therefore interest in

the industry has declined.

- Cultural: palletized transportation of cargo has been implemented in the past and failed, as a

consequence participants were hard to find. Finally no one accepted the change of transportation

mode. There was a lack of dedicated project coordination during Distri Shipping.

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- Decision making: there was a lack of cooperation in Distri Shipping between two phase in Distri

SHipping II. In Distri Shipping logistical managers argued that they were not able to invest without

approval of the top management. At the implementation phase there is a lack of vision, no one

implemented the concepts while on the long term they are believed to be advantageous

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References

Agentschap NL, binnenvaart op kleine vaarwegen, September 2007

Anon., Te vroeg voor initiatieven als distrivaart, logistiek krant, 4 Februar 2005.

Anon., Tonnen voor innovatieve ideeën, Schuttevear, 10 december 2008

Anon., Huisvuilverwerker en veevoederfabrikant investeren in Barge Truck concept, Schuttevear, 9 January

2010

Anon., Robert Zimmerman en Henk Blaauw krijgen steun voor hun innovatieve plannen, de

binnenvaartkrant, 16 December 2008

Blaauw, H., Interview 14 February 2011

Blaauw, H., Samenvatting Barge Truck, December 2010

Blaauw, H., Barge Truck, December 2010

Buck cosultants, Toekomst klein schip in de binnenvaart, visie en actieplan, September 2008

Den Bakker, F., Met consolidatiecentra wil het maar niet vlotten, logistiek krant, 5 Oktober 2007.

European conference of ministers of transport, resolution No 92/2 on new classification of inland

waterways, June 1992

EVO, Staatssecretaris kent EVO innovatieprijs binnenvaart toe, 1 November 2007

EVO, Haalbaarheidsonderzoek “Barge Truck”-concept, December 2010

Expertise en InovatieCentrum Binnenvart, Watertruck

Groothedde, B. And Rustenburg, M., Distrivaart netwerkontwikkeling, de weg naar een volwaardig

binnenvaartnetwerk, TNO Inro, 2003.

Drs. Iding, M., Innovaties in logistieke netwerken in de praktijk, praktijkboek transport en logistiek, 2005.

MARIN, MARIN en DLD samen sterk in de binnenvaart, 19 January 2009

Promotie binnenvaart vlaanderen, palletvervoer inventaris van lopende Europese initiatieven, September

2003

Ten Voorde, G., Nieuwe revolutie in de binnenvaart, 13 June 2001

TNO Inro, Pallets via de binnenvaart, January 2001

Van Amstel, W.P., Distrivaart herleeft: pallets via de binnenvaart, 2008

Van der Ham, A., Huijsman, M., Rustenburg, M. and Verweij, K., Handboek generieke procesaanpak

Vreladers samenwerking, November 2006

Page 126 of 192

Van der Meer, T., Project distrivaart gaat aan koudwatervrees ten onder, logistiek krant, 21 Januar 2005.

Van Steijn, A., veel innovatieprojecten mislukken, nieuwsblad transport, 19 December 2007

Verberk, A., Advies binnenvaart ambassadeur, September 2010

Wiegmans, B.W. and Konings, R., Strategies and innovations to improve the performance of barge

transport, EJTIR 7 no.2, 2007

Zimmerman, R.F., interview 14 February 2011

Zimmerman, R.F., Ondernemersgeest, 2008

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1.5. Intermodal

INTERNALISATION OF EXTERNAL COSTS

Introduction

The history of the attempts by the European Commission to gain agreement for a policy to

internalize all external costs across the surface transport sector and the airline transport sector goes

back for a number of decades, culminating in 1995 with the first concrete Commission proposal

(EC Recommendation on Marginal Costs, 1971). The latest set of proposals is contained in COM

(2008) 435, on which this analysis is based.

Essentially the issue involved is that of assessing, and allocating appropriately, the costs of the

provision and maintenance, over time, of transport infrastructures and linked expenditures (i.e. info-

structures and services) and other costs such as associated environmental damages. Put in this way

the problem appears simple enough. However, the complex and dynamic nature of the problem

once detailed analysis begins is soon evident.

This paper documents the background and reviews current the public policy

initiative/innovation/intervention to internalise the above costs, not already internalised (private),

across the surface transport sector via the establishment of common principles and a common

methodology to gain acceptance across all modes and in all Member States. In so doing the paper

reviews the various attempt to explain why the European Commission’s policy initiatives, based on

social marginal cost charging, have so far failed to gain universal acceptance and to suggest how a

different approach may be more fruitful.

Following the review in the main document, the first two annexes assess the policy intervention

against the INNOSUTRA methodology, via completion of the WP3/4 template and via the results

of the pre-specified hypotheses tests. For reference purposes, and to avoid repeating material in this

detailed analysis paper, key extracts from the initial review of the internalisation of external costs

(made for the Preliminary Innovation Report, PIR) is provided in a third annex, Annex 3.

The conclusion of the more detailed analysis confirms the position of the initial review that the

‘policy intervention’ has to be considered a ‘failure’. However, in line with the INNOSUTRA

consortium general view on the nomenclature, it is preferable to consider the intervention/initiative

(despite a long-standing attempt to move the policy forward) as ‘work-in-progress’. Indeed the

conclusion of the detailed analysis is that a more successful way forward may be found if the

Commission is willing to consider some changes in its approach, in line with the argumentation

presented. Finally, Annex 4 provides a list of the main references.

Current Position

The current position of the European Commission is best represented by its Communication COM

(2008) 435 final, published on July 8, 2008. This document sets out a “Strategy for the

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internalisation of external costs” and in a technical annex suggests a common framework

(establishing common principles and a common methodology) for calculating external costs. The

document was produced in response to the request from the European Parliament (EP) in 2006. The

EP had requested “a generally applicable, transparent and comprehensible model” for the

assessment of external costs.

The Commission’s response indicates its commitment to the “general principle” of “social marginal

cost charging” to internalise external costs. The (textbook) approach is set out clearly in the

following paragraph taken from the Communication.

“According to this approach, transport prices should correspond to the additional short-term cost

created by one extra person using the infrastructure. In theory, this additional cost should include

the costs to the user and the external costs. Social marginal cost charging would therefore lead to

efficient use of the existing infrastructure. Furthermore, as users would pay for the additional costs

they generate for society, it would also help ensure fair treatment of both transport users and non-

users and would create a direct link between the use of shared resources and payment on the basis

of the “polluter pays” and “user pays” principles. This approach is only possible if the “polluter”

does not benefit from any compensation that would cancel out the possible effects of

internalisation”.

However, notwithstanding its espousal of the general principle, the Commission admits that there

are significant practical problems. Moreover, as it suggests “it is difficult to imagine an

internalisation mechanism that would be generally applicable to all forms of transport”. Instead it

argues that “the same (general) principle should be applied using different instruments”. In

attempting to cling to the general principle, the Commission – though recognising economic and

commercial reality – does not recognise the more general arguments against attempting to pursue

social marginal cost approach. (See discussion under section 4 below)

The Commission, in the Communication, sets out three main areas that are involved in shaping the

approach to internalisation. In summary these cover:

What is expected.

Under this area of work the Commission identifies three aims:

• Taking account the various costs generated by transport. In so doing the Commission stresses

that “only a price based on the total social costs (i.e. private and external) generated by the

transport user will he\lp give the right price signal and take account of the services used and the

consumption of scarce resources”. The Commission also recognises that in order to reduce

external costs the strategy should include, in addition to internalisation, “elements such as

providing infrastructure, encouraging technological innovation, competition policy. Legislation,

and setting standards”.

• Choosing the right economic instrument for each external cost. Here the Commission argues

that for congestion, air pollution, noise, and accidents, which vary with time and place,

differentiated charging (i.e. social marginal cost charging) is the best way of taking account of

these external costs. On the other hand as climate change impacts from transport do not vary

according to time and place then other policy instruments are more appropriate, e.g. fuel taxes

or emissions trading.

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• Ensuring that the internal market continues to function properly. Here the Commission argues

that setting common principles and a common methodology should prevent any discrimination

and ensure market transparency and ensure that “disproportionate” (in relation to existing

external costs) charges do not occur.

General principles

Under this heading the Commission sets out the basis of its commitment to the general principle of

“social marginal cost charging”. The Commission points out, however, that this approach, as

recommended in economics literature, has limitations. For instance, and importantly as will be

argued later in this paper, the SRMC approach “does not necessarily make it possible to include

infrastructure costs”, and “in general (because judging the exact level of marginal costs is difficult

in practice) the marginal costs can be said to correspond to the average of variable costs”.

The strategy

Under this area of work the Commission identifies four aims::

• Making internalisation possible in the road haulage sector. Here the Commission proposes a) to

revise Directive 1999/62/EC to allow charges applying to heavy goods vehicles to include

external costs, and b) to implement the interoperability of electronic toll systems, as provide for

in Directive 2004/52/EC. The first proposal – which the Commission claims is backed by the

results of public consultation – will take account of the external costs of congestion, air

pollution, and noise pollution; will set up Community coordination mechanisms for the

calculation of charges, and will allocate revenue to the transport sector’

• Encouraging more sustainable car use. Here the Commission is introducing an Urban Mobility

Action Plan accompanied by a proposed Directive (COM(2005) 261) relating to the taxation of

private cars.

• Towards internalising external costs for other modes of transport. Here the Commission

indicates a limited movement, concentrating on CO2 emissions from waterborne transport and

air transport. In relation to rail the position is that Directive 2001/14/EC allows internalisation

of external costs only if there is an equivalent increase for compe\ting modes of traffic.

• Using the revenue generated by internalisation to make transport sustainable. Here the

Commission insists that “the revenue generated by the internalisation should be earmarked for

the transport sector and the reduction in external costs should guarantee (based on cost-benefit

or similar analyses) that the chosen uses maximise the net benefits to society”.

The next steps for the policy development are:

• To encourage Member States to use the proposed common framework’ initially for road

transport.

• An evaluation of the measures taken to be carried out in 2013, and the evaluation of external

costs will be updated to take account of research and scientific work in the field.

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Discussion

The discussion that follows is based partly on a 2001 paper by Werner Rothengatter (University of

Karlsruhe) and on the 2009 paper by Peter Cerwenta and Olaf Meyer-Ruhle (University of Vienna).

There are a number of issues to be considered:

• The general proposition that external costs should be internalised is correct from an economic

perspective (this proposition is different from the proposition, often linked with it by the

European Commission, namely, the ‘polluter pays principle’)

• It is critical to define external costs and their coverage correctly, this is particularly the case

with congestion costs a substantial proportion of which should not be classified as external costs

• The mechanism (s) for internalisation need to be carefully specified, particularly if it is hoped to

internalise costs across all transport modes

• Whatever the theoretical strength and correctness of the position reached on the above issues,

there will be practical (e.g. data acquisition) and political (e.g. public antipathy) constraints on

the application of the policy

The case for internalisation. There is little doubt that the theoretical case for internalisation is

accepted by most economists, transport experts, and politicians. However, the general public has to

be convinced. There is also the concern that, whatever, the general theoretical merits, the issues

raised in relation by internalisation for taxation policy are difficult to resolve, even in theoretical

terms, e.g. choices between direct and indirect taxes, changes in taxation from existing structures,

hypothecation (‘earmarking’) issues for governments, etc. These issues, of political economy, are

not easy to resolve. However, from the perspective of the INNOSUTRA project they are not ‘first

order’ issues for us. It is simply that they lie in the background and cannot be ignored. For

INNOSUTRA, the key first order issues surround the issue of what are the external costs.

The definition of external costs.* The general definition of external costs is unproblematic. External

costs are those costs, in this case relating to transport, that are not borne by the users of the transport

system, i.e. are not internalised. The problems, in relation to external costs, arise once we move

beyond the general definition to consideration of what cost categories are to be included in the

definition of external costs and how to measure accurately these various costs. The discussion of

inclusion and measurement, including the use of short-run marginal costs as the appropriate

measure of external costs, tends to have been centred on the road transport sector. Hence, we will

discuss the issues in road transport context; though noting that the general discussion is relevant to

all modes.

What external costs should be included?

Can a number of these costs be accurately measured?

Is the use of short-run marginal external costs the appropriate measure?

Inclusion. It may plausibly be argued (see Cerwenta and Meyer-Rhuel, 2009) that transport costs

should be classified as follows:

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Infrastructure costs

Time costs

Operating costs

Accident costs

Environmental costs

In road transport, infrastructure costs arise from the construction, maintenance and operation of

publicly accessible roads by State institutions or in some cases private concession holders. Vehicle

taxes, fuel taxes and usage charges (tolls) are raised to cover the infrastructure costs. However, the

full amount of infrastructure costs is not automatically covered by such taxes and charges.

In road transport, time costs arise from the use of transport infrastructure. They are incurred by

drivers and passengers, vehicles, and transported goods. In all of these cases the costs are not only

incurred by the users, but they are also borne by the users, individually (a small part) or as a group.

In the case of freight transport the time costs are business costs which are borne partly by the

transport operator, part by the consignor, and part by the consignee.

In road transport, operating costs arise from the costs of the vehicle (depreciation and interest), fuel,

maintenance and repairs. These costs are, in general, borne by the private owner/operator of the

vehicle. In public road transport, the operating costs of vehicles that are not fully covered by fares

are covered out of general taxation (e.g. subsidised pensioner travel). Insurance contributions are

treated as part of vehicle operating costs.

In road transport, accident costs arise from the costs associated with vehicle collision costs and

personal accident injury costs. They include the costs of police and the legal system costs. They are

partly covered by accident insurance costs.

In road transport, environmental costs arise from damage to the human and natural environments

from a number of causes, e.g. air pollution, natural habitats, and impacts on climate change.

It should be noted that congestion costs, as such, do not appear in this categorisation. The reason is

that the costs that are often classified separately as congestion costs, in fact, fall into the above cost

categories, principally in time costs. It is estimated that some 85% to 90% of so-called ‘congestion

costs’ are time costs; the remainder of congestion-related cost fall under the headings of

environmental or accident costs (the part not covered by insurance costs). These are genuine

external costs as they are not internalised. The congestion-related time costs, on the other hand are

not external costs as they are already internalised, either by individual transport users or by

transport users as a group.

It should be said this view of congestion costs is not the Commission’s current position, which is

based on the position taken in the CE Delft Handbook (Deliverable 3 of the EU IMPACT project.

The CE Delft position is to ignore long-run marginal costs as a relevant variable for internalisation.

In support of this position it states, in a key passage that “The distinction between short and long-

run marginal costs requires a clear statement on how to treat existing fixed and variable

infrastructure cost and related financing schemes such as transport related taxes and charges. Thus it

is useful to separate infrastructure costs, taxes, and charges from other external cost components”.

This somewhat arbitrary statement does not stand up to close scrutiny. It ignores an increasingly

common practice of the construction and maintenance of trunk roads being placed in the hands of

private concessionaires, with tolls (i.e. user charges) financing the construction and maintenance of

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these roads. Moreover, it is not justifiable simply to assume way the underlying problem of whether

transport infrastructure is a public good (properly financed, at least substantially, by taxation) or a

‘club’ good (properly financed by user charges). Finally, again it ignores the point made by

Cerwenta and Rhuel, and argued above, that congestion costs are not a separate category of external

costs. The appropriate category of time costs is already very substantially internalised to road

transport users.

It is interesting in the context of this discussion to note that the Belgian Presidency compromise on

the modified Eurovignette Directive excludes congestion from the charging scheme. It is not cleat

whether this arose from intellectual conviction or political necessity; it is, however. Welcome. This

point has been noticed in the latest lobbying group position, adopted by CLECAT (the largest

European organisation covering freight forwarders) in October, 2010. (See Annex 1 for details of

their position).

N.B. The issue of congestion is not confined to road transport, but with the partial exception of rail

transport, other methods than the SRMC approach seem to be preferred, e.g. slot auctioning in air

transport, and to a far lesser, but perhaps, growing, extent in sea transport in relation to access to

ports.

Measurement. Some external cost may be directly measured, but most are based on estimates from

models (see CE Delft Handbook), particularly environmental costs such as climate change.

Estimates of external costs are notoriously difficult to make and studies have varied considerably in

their figures, even using the same methodology, e.g. impact pathway. Data capture will always be a

problem, particularly when pan-European measurements are concerned and when cross-modal

measurements are required.

Short run marginal cost valuations. The adoption of congestion costs as external costs by the

Commission has led to the use of a neo-classical, micro-economic approach to the problem of how

to measure them, and hence how to value them for the purposes on internalisation. The approach is

to measure the area between the short run marginal cost (SRMC) curve* and the assumed lower,

average cost curve, for transport infrastructure provision (see Rottengatter, Fig.3). The existence of

this area implies a budget deficit to be financed, This deficit is then assumed to be external costs, i.e.

private transport costs not internalised by the transport users. In fact, congestion costs, as argued

above, are not, strictly, external costs at all. Though not necessarily attributable to the individual

transport user they are attributable to the group/club of transport users.

• It should be noted that short run marginal costs (SRMC) are only those costs that vary with

minor changes in use. All other costs are assumed to be fixed. These include not only, obviously,

construction costs, cost of capital, and administrative costs. (Though wear and tear costs are

included, by the Commission, in practice it is sometimes an arbitrary judgement as to whether a

cost is maintenance (variable) or construction (fixed).

As we can see, therefore, the Commission is committed to defining congestion costs as external

costs and to measuring congestion costs/external cost using SRMC, as the preferred general method

of pursuing internalisation. Having already argued that congestion costs should not be classified as

external costs, it is now time to examine the case for SMRC as a general approach.

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The use of SRMC as the basis for transport pricing has had a long, but inconsistent, history in terms

of Commission endorsement; going back five decades to 1965 (see Rothengatter, 2001). From

1965 to 1975 the SRMC view prevailed; from 1975 to 1990 the view fell out of favour and

approaches such as multi-part tariffs and the transport users’ club were explored and practised.

However, from 1990 until 2008 the pendulum gradually swung back and the Commission again

endorsed SMRC in the Transport White Paper of 1998. From 2008, questions have again been

being asked about the SMRC approach. Indeed since 2006 the term ‘social marginal cost-based’

approach has tended to be used, rather than SRMC.

The basis of the objection to SMRC is that once the assumptions of neo-classical welfare theory are

relaxed even the theoretical argument for marginal cost pricing collapses. The various EU projects

which have been funded over the past two decades, and particularly latterly, have recognised this

problem. (Hence the use of terms such as social marginal cost-based pricing). However, there has

been a reluctance to abandon the approach. (The reasons for this reluctance go beyond the use of

this theoretical neo-classical micro-economic approach in relation to EU transport pricing policy.

Neo-classical micro-economics, notwithstanding its many flaws, has become embedded in the

teaching of economics. This is not the occasion to conduct a philosophical debate on this issue.

Here the concern is to examine the approach of the European Commission to the internalisation of

external costs and transport pricing; to suggest why the public policy initiative has not so far

succeeded, and what advice may be provided on a potentially more successful public policy

initiative/innovation). The problem is that a general, unified, theoretically ‘proven’ approach is

what many transport economists want. It is not necessarily the correct prescription for the pragmatic

approach required by the Commission in terms of a successful policy initiative/innovation. One

problem that has again surfaced, as it did in the early 1970s is that there is always going to be a

need (recognised in the case of railways, and more generally by the Commission in COM(2008)435,

via the introduction of mark-ups on SMRC) for fixed costs recovery in any practical marginal cost-

based scheme.

Rotthengatter makes the point strongly and persuasively in his 2001 paper that, in the context of

transport pricing, SMRC has too many serious flaws to be considered as an approach to transport

pricing, even as a general principle.

Essentially, there are four theoretical conditions to be met from neo-classical welfare theory for

SRMC to be applicable. These are, as indicated by Rothengatter: “If the transport technology were

convex then marginal costs would increase with traffic and an equilibrium would be achieved with

full cost recovery. If transport investments were perfectly divisible then a clear rule for the network

extension could be developed: The savings of marginal user costs should exceed or at least be equal

to the increase of marginal infrastructure costs. If there were perfect markets outside the transport

market then the pricing/ investment strategy based on the marginal costs were also optimal for the

whole market system. And if there were perfect information and foresight then the transport system

could be optimally controlled by one authority”. None of these conditions is met in practice. In

relation to transport infrastructure generally, and in road transport particularly, long-run marginal

costs are below average costs.

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Finally, Rothengatter points out that “optimal pricing” according to SRMC completely abstracts

from institutional aspects. According to neo-classical theory the revenues are given to the general

public budget and budget spending is decided on the base of optimal public choice, which yields

under perfect conditions the golden benefit-cost rule for transport investments. In practice this leads

to four fundamental problems: imperfect information, missing acceptability, missing incentives to

announce correct infrastructure needs and missing procurement for the right institutions considering

all transaction costs.

Rothengatter also points out that proposals, endorsed by the Commission (see para 2.4 above), to

transfer revenue generated from SRMC charges applied to road to other transport sectors,

particularly to rail, is inappropriate for the following reasons: it is not clear that, in the urban areas

where congestion mostly occurs, an efficient, comparable rail service could be offered; once cross-

subsidisation was established there would be no incentive to improve the rail service, and it is not

clear that in the long-run the public would accept such a transfer of revenue.

The Commission’s position on the internalisation of external costs (certainly in relation to

congestion costs and some other external costs) rests on two premises: a) the acceptance of

congestion costs as the principal measurable category of external costs, and b) the use of SMRC as

a general principle for the internalisation of these external costs, justified by academic research**.

However, as we have seen above, this position appears untenable as neither of these premises is

valid. To a large extent this weakness explains and justifies the opposition of the road transport

lobbying groups. Where the Commission proposes other measures, e.g. the EU emissions trading

scheme, there are also practical problems, e.g. mixing a hitherto land-based scheme with a mobile

maritime scheme.

** It may be argued that several EU projects and studies, subsequent to Rothengatter’s paper have

substantiated the social marginal costs approach to transport pricing. A number of these are listed

in a 2006 review by the Scottish Executive and more recently by the Transport Research Knowledge

Centre. Notable among the EU studies was the development (and its subsequent frequent use by

others) of the TRENEN partial equilibrium model of Proost and van Denden (2004). In 2007 a

more sophisticated LUSTRE general equilibrium model was developed in the US by Safirova et al

to cover the Washington Dc region. However, without going into detail, it may be argued that both

of these models – while well-developed on their own terms – are still open to the challenge that they

rely on assumptions based on neo-classical, equilibrium economics that signally fails to relate to

the real world.

For instance, the Proost and van Denden model incorporates a number of features that do not

describe sufficiently well the transport system situation in the European areas to which they apply

the model. The model is multi-modal and describes the market equilibrium for all transportation

markets simultaneously. It is also is a non-network aggregative model in which all travel is

aggregated on a single transport link, and is a medium-run static (as opposed to dynamic) model in

which there is only one type of representative household/agent.

However, the Safirova spatially disaggregated general equilibrium model, though more

sophisticated, is still open to criticism on similar grounds. The model is an equilibrium model so

that all markets clear, but it is not a dynamic model, hence, the evaluation of various policies is

achieved by comparison of long-run equilibrium positions. Though the model integrates at the level

of individual (representative) agents, rather than at an aggregate level, the agents are the typical

solely profit-maximising individuals familiar to all neo-classical micro-economic models, that are

Page 135 of 192

unreal abstractions from the real world. Finally, these models are essentially static equilibrium

models, whereas what is required are dynamic dis-equilibrium models.

N.B. This rather summary critique of these transportation models is not meant to suggest that

models and modelling is of no value, simply that, in agreement with Rothengatter, these models use

assumptions that are almost certain to cast doubt on the propositions, supporting social marginal

costing pricing, derived from them. Models can be used for guidance, but it is important to ensure

that they are realistic abstractions from the everyday institutional world.

Notwithstanding the criticisms above – which relate principally to the issues of road traffic

congestion and the optimum development of infrastructure – the other relevant external costs, noise,

air pollution, accidents, and the impacts of climate change (mostly CO2 emissions) do need, if

possible, to be internalised. However, as we have seen, and confirmed by studies, e.g. the annual

EEA TERM reports and various EU projects, the positions on each of these external costs are

problematic, and, in particular, may not always be candidates for social marginal costs charging.

The Commission itself argues that climate change impacts, because of their various characteristics

(i.e. not varying with time or place) should more appropriately dealt with by fuel taxes and/or by

emissions trading schemes; and, as the EEA suggests also by technology, land used planning, and

traffic management measures..

In relation to noise, Directive 2002/49/EC requires noise maps to be drawn up with increasing

coverage between 2007 and the next year of publication IN 20O3. Most noise impact is created by

road transport though a fewer number of people are adversely affected by rail transport. However,

mitigation measures have been slow to emerge in Member States. Again it would seem that

technology, land use planning, and traffic management measures are more likely to be effective and

used than transport pricing.

Air pollution, principally from nitrous oxides (NOx) and particulate matter (PM) – the largest part

of external costs once congestion costs are eliminated – are governed by two air quality Directives,

Directive 1999/30/EC and the revised Directive 2008/50/EC. Most Member States do not comply

with the PM10 li9mit values (ETC/ACC,2009a) and there is exceedance of the NO2 limit value in

urban areas (ETC/ACC,2009a). Again mitigation measures used – principally the same measures as

to improve air quality – do not include transport pricing.

Accidents costs are rather difficult to estimate as a) the concern is with those costs that are not

covered by insurance (e.g. police costs), and b) when linke\d to congestion the issue is whether the

consequent slowing of traffic may actually reduce the likelihood of high cost accidents, though

lower cost accidents may be increased. Ther Commission suggests that these cost could be passed

trough insurance premiums, but this requires much further research and needs to take account of

diffefring insurance systems in Member States. Again it is not clear that a social marginal cost

charging approach is relevant or appropriate.


The approach to the internalisation of external costs has been subject to two main problems, as

indicated in the above section. The first has been the unsatisfactory definition of congestion costs as

external costs, and the fact that these costs are the largest contributor to external costs as defined by

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the Commission. The second has been the commitment to the general principle of social marginal

cost charging as the suggested approach to internalisation, particularly as far as congestion costs are

concerned.

The Commission has attempted, from its early initiative in 1971, to be pragmatic. It has recognised

from the outset that whatever value there was in the social marginal cost charging principle there

were severe practical problems associated with its application in the real world of transport.

However, it has not attempted to challenge the theoretical underpinning of the principle.

As has been discussed above even within the neo-classical micro-economic paradigm (and with

evidence from real world tariff practices in other sectors, e.g. energy) the emphasis on short-run

marginal cost charging was always suspect. The Commission has been persuaded of the value of a

general theoretical model of transport pricing that was not only unlikely to commend itself to

transport practitioners, and to be problematic in practice (as the Commission has always

recognised), but whose theoretical foundations are themselves open to serous challenge..

Clearly, the Commission is in a difficult position when a large number, but not all, of the transport

economists it consults and who have input to the various research projects and studies have come

forward with recommendations that are based on conventional (neo-classical) theoretical economic

reasoning. However, as in the past, the Commission can free itself from a position that is now open

to serious practical and theoretical criticism and move to the position it adopted in the fifteen year

period between 1975 and 1990.

Finally, it should be recognised (as the Commission does, see para 2.4 above) that pricing is not the

only way to influence behaviour. Regulation is used in the transport sector and should continue to

be developed in an intelligent manner, with the ability to be revised as circumstances change or it is

seen to be less than fully effective. Taxation (and public subsidies) affecting transport system

behaviour also exists in current circumstances and should be taken account of when any pricing

system is being developed or introduced (this point is also relevant to the debate about earmarking;

though this issue is made clearer if we assume that earmarking is not appropriate for taxation per se,

but where user charges are involved then it is). The same point made above in respect of regulation

also applies to pricing schemes; learning from experience should be incorporated into the

management of any scheme. Finally, the encouragement and development of technology is a key

component of any strategy.

Conclusions and a Way Forward

There are three main conclusions that may be drawn from examination of the long-running attempts

by the European Commission to establish policy initiatives based on the general principle of social

marginal cost charging to achieve the internalization of various external costs, including notably

congestion costs, across the transport sectors.

It is probably futile to attempt to provide a comprehensive and accurate assessment of the external

costs involved to be internalised. There are data capture problems, particularly where measurement

across countries and modes is concerned. There is also the major problem that congestion costs are

not, in fact, external costs. Once congestion costs are not defined as external cost much of the

opposition to internalisation from the road lobbyists collapses. However, the issue of the optimum

Page 137 of 192

pricing system to deal with the problem of congestion for the transport system users remains.

However, it is imperative to take a longer view of how to fund, at least partly via charging transport

users, both the construction and maintenance of transport infrastructure so as to avoid congestion,

particularly on roads. A more appropriate starting point, to cover all transport modes, would seem

to be to move away from SRMC, even with mark-ups (Ramsey pricing). Two possible more

efficient and equitable solutions are to move either to multi-part tariffs and/or to a transport users

‘club’ approach to pricing.

It is important to recognise that, though it may be appropriate to remove congestion costs from

external costs, there is still a case for internalising other costs, and, specifically environmental costs

such as air pollution or noise. However, it may be that SMRC is not necessarily the most

appropriate approach even here. This is particularly the case with environmental costs attributable

to postulated climate change impacts. Such costs are uncertain in terms of the magnitude of the

impacts and even more uncertain in terms of the time profile of their occurrence. The Commission –

who take the more general view that greenhouse gas emissions do ot vary at all with time or place,

but are lin ked to fuel consumption – does not, in fact, envisage using a social marginal cost

charging approach to climate change impacts, rather does it recommend fuel taxes or emissions

charging systems. The issue then becomes one of deciding how useful is the use of SMRC as a

charging mechanism, even as a general principle. It would seem on the balance of argument that

social marginal cost charging is neither effective nor appropriate mechanism for internalising

external costs.

In practical political terms the way forward – for internalisation as a public policy initiative – would

appear to be argue for the use of transport pricing (though not based on SRMC, but on a multi-part

tariff or modified club approaches) as merely one policy instrument, complementary with taxation

and regulation and other policy measures. It seems doubtful whether promotion of social marginal

cost charging – mainly targeted, at least in the first instance, on road transport – is either soundly

based on theoretical grounds or on practical grounds, and, in pragmatic political terms, is subject to

intense negative lobbying by the road transport operators and other less directly interested groups

such as shippers and freight forwarders. Hence, while it may be true that the passage of the

Eurovignette compromise revised Directive allows Member States to increase charges up to 300%,

it is not clear that this will happen, or in so far as it does it may introduce competitive and social

distortions within the EU.

ANNEXES

Hypotheses Testing

The impact of lobbying by industrial/commercial representative organisations against the

proposals is an inhibiting factor in relation to public policy innovations/initiatives.

Position of key lobbying groups

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The groups against internalisation of external costs (particularly congestion costs) are the road

lobby groups and associated organisations involved in freight transport. These groups in relation to

these Commission proposals tend to have been backed by Member States, mainly to protect

subsidiarity.

IRU: The IRU (International Road Union) is implacably opposed to the internalisation proposals of

the Commission (see their web-site) and has commissioned research to attack the Commission’s

position, arguing against the ‘polluter pays’ principle and favouring instead the ‘.cheapest cost

avoider’ principle (an economic approach developed, albeit for different situations, by Ronald

Coase an Economics Nobel Laureate).

European Shippers Council (ESC): supports the IRU, some of whose members are members of

both organisations. The ESC argues that the road transport companies are already paying part of the

external costs directly and that the proposal will only create a different way of paying the external

financial costs and not a better one. Piecyk and McKinnon (Heriot-Watt University) are quoted as

concluding that “two-thirds of the external costs for road transport is already covered by taxes and

when congestion is not taken into account 99 % of the externalities are already internalised”.

CLECAT (European Freight Forwarders Organisation): The CLECAT position is the most

recent to be established, following publication of an internal research paper. The main points being

made by CLECAT are: that congestion appears correctly in their view) to have been excluded from

the Belgian Council compromise position on the Eurovignette; that the abandonment of earmarking

at the same Council meeting was done in an arbitrary and unjustified fashion; that the current

taxation position impacting on transport in the various Member States has not been taken into

account; that any increase in road transport charges as a result of the 300% pass-through external

cost ability to increase the current charges on HGVs may lead to unreasonable charges being levied,

and that it may lead to distortions of competition and discriminate against the EU peripheral

countries who will bear a greater proportionate financial burden..

Conclusions

So far these important and well-funded lobby groups have been more successful than the groups in

favour of the internalisation proposals of the Commission; perhaps because in this case their

‘natural’ oppositional stance is backed up with sound argumentation. Unless these groups can be

convinced of the need to internalise costs in the current manner proposed by the Commission then it

seems unlikely that the proposals will succeed, beyond that agreed at the Belgian Council. A more

successful approach may be that suggested in Section 5 of the paper above, particularly on the main

issue of the infrastructure funding and associated congestion issue, accompanied by the far less

contentious, other proposed routes (e.g. regulation) to dealing with specific external cost issues,

such as air pollution and noise.

Support of industrial/commercial representative organizations plays a role in the adoption

process of public policy initiatives.


In general, the support of lobby groups in favour is likely to be a strong positive influence. In this

specific case, though the Commission position is supported by some influential industry groups (see

the Joint Position Paper) and environmental groups their position may be seen as generally

beneficial in terms of their overall objectives.

Page 139 of 192

Industrial Groups

Joint Position Paper (CER, EIA, EIM, UNIFE, ERFA, IBS, EFRTC) This grouping of lobbying

groups expresses the view in the joint position paper that the opening of the Eurovignette to allow

governments to apply internalisation to road freight transport, arguing that currently internalisation

of external costs is open to member States for the other modes of transport, including private cars. It

is not clear whether this group distinguishes between congestion costs and other, valid, external

costs, e.g. air pollution, noise, CO2.

Environmental Groups

TEF (this specialist transport environmental group is taken as broadly representative of the

various environmental groups) TEF rejects the argument that transport is already heavily taxed,

saying that total taxes for transport, which it estimates at less than €400 billion, "only recoup about

half of the total social costs", which include external costs and subsidies received by each transport

mode, and are estimated at as much as €923 billion or 9% of EU GDP. "The use of Market Based

Instruments is necessary to close the baffling €500bn gap between social costs on the one hand, and

taxes and charges of the other hand," it insisted.

Conclusions

Notwithstanding the support of these groups, it seems unlikely that their views will prevail beyond

the Eurovignette compromise position; though it remains to be seen whether or not Memebr States

will avail themselves of the opportunity to increase road charges in this manner. The position of the

groups against the Commission’s proposals is that of defending a position where they see the

Commission’s proposals as damaging to their specific interest. Their lobbying is hence stronger and

tends to be backed by Member States, who have their own reasons for preferring policy subsidiarity

to be maintained in this area.

However, the varied views of the lobbying groups on the internalisation issue does indicate its

complexity. It is perhaps also the case that the increasing concern about environmental issues since

the 1970s and the rise of environmental lo0bbying groups has assisted the Commission to maintain

a strong commitment to the internalisation issue over a long period, despite having limited success

(see 1.5 below).

That regulatory intervention by public agencies and governments may lead to the adoption of

sector-wide innovations.

Nature of regulatory interventions. In this area of policy, for the reasons advanced in the above

paper it seems likely that regulatory interventions, in policy areas relating to environmental

externalities, may well be successful in pursuing the case for internalisation of these costs; rather

than short run, marginal social cost charging approaches. Through relevant and appropriate

legislation a sector-wide adoption may weel be enhanced, though there may still be variations

across Member States.

Conclusions

In a number of areas of externalities, and associated costs, regulation appears to be a successful

mode of intervention , even if it is not always rapid in its implementation. This is particularly the

case in relation to air pollution, noise, and latterly climate change impacts.

Page 140 of 192

That improved cost-benefit estimations of public policy initiatives will improve the chances of

adoption.

Use of cost-benefit studies. Such studies do suffer from a number of familiar quantification and

statistical problems, and a major issue of selecting the appropriate test discount rate (e.g. see major

disagreements on this issue arising from the UK Stern Report on Climate Change). However, as a

tool to provide an objective framework for comparing costs and benefits of proposed actions or

policy interventions they are valuable (they may also be supplemented by Multi-Criteria Analysis

that provides an easier to appreciate, particularly for the lay person, objective framework for

incorporating subjective judgements. They have been used in the context of internalisation, to test

the outcomes of various policy options in the various transport models.

Conclusions

By providing an objective framework for comparison the use of such models may have been useful

in formulating policy. However, for convincing lobbyists and the general public they have been less

successful, and their inevitably contentious assumptions and procedural operations make their use

less than successful as promotional instruments. It also appears to be the case that lobbyists seem to

regard the benefits claimed to be larger than is the case. Care therefore needs to be taken in the

preparation of the studies and in their dissemination. Given the various problems associated with

cost-benefit studies it appears unlikely that should extra care will have more than a marginal

positive influence on adoption, certainly this would seem to be the case with the internalisation

issue.

Implementation timing and transition periods play a role in successful adoption of policy

innovations.

Timing issues. In this area of policy, despite the fact that a common transport policy is one of the

only two specific industrial policies mentioned in the original EEC Treaty. Progress has been very

slow. The successive enlargement of the EU has obviously played a part in this slow progress.

However, almost from the inception of the EEC, the issue of transport pricing and the

internalisation of transport costs has been on the agenda. As indicated in the main text, ‘economics

fashion’ has varied during this period and with it the popularity of a short-run marginal cost (SRMC)

approach to internalisation, particularly aimed at the road transport sector that developed strongly

for freight transport and car travel during the 1960s and early 1970s.

Interestingly between 1975 and 1990 the SRMC approach lost favour, as a more institutional and

less theoretic approach became to be taken to the issue. It may be that fashion is again changing

with the increase in concern over the external costs of climate change impacts that are to be treated

in other ways than an SRMC approach, together with regulatory, traffic management, and

technological mechanisms used in relation to other impacts such as noise and air pollution in and

around urban areas.

This still leaves the issue of transport pricing as it relates to the financing of the most expensive

surface transport network modes of rail and road, and the associated issue of congestion,

particularly, but not uniquely, on roads around urban areas and on motorways. But here it is

suggested in the main text that the SRMC approach is not necessarily the correct way forward. To

be fair the key issue is whether we see transport, principally, as a public good or as one where the

‘club’ of transport users should bear the main share of internalising costs. This is an important issue

of political economy in welfare terms that, in a sense, underlies the transport centred discussion.

Conclusions

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This particular policy intervention/initiative case, which is not entirely unique, shows that when

agreement cannot be reached rapidly – usually for a combination of reasons; political,

technical/economic, and administrative – then it may be necessary to analyse carefully the technical

and economic issues from more than a single theoretic perspective. It will also be essential, as the

Commission has shown, to be pragmatic and tackle individual elements of the perceived problem

and tacle these by whatever means are available, e.g. fuel taxation, regulation, and urban planning..


Partner short name LCA

Title




Nationality of case European Union


Directives and Regulations in support of Common Transport Policy

4. Actors support

(Public Administration, parapublic institutions, private partners, etc.)

N/A 5. Which level of government ?

(European Commission, central, regional, local, etc.)

European Commission


Proposer of legislation

Applied study of policy intervention

Latest Communication of 2008 (COM 2008 435 final)


1.1 The current position of the European Commission is best represented by its

Communication COM (2008) 435 final, published on July 8, 2008. This document

sets out a “Strategy for the internalisation of external costs” and in a technical annex

suggests a common framework (establishing common principles and a common

methodology) for calculating external costs. The document was produced in

response to the request from the European Parliament (EP) in 2006. The EP had

requested “a generally applicable, transparent and comprehensible model” for the

assessment of external costs.

1.2 The Commission’s response indicates its commitment to the “general principle” of

“social marginal cost charging” to internalise external costs. The (textbook)

approach is set out clearly in the following paragraph taken from the

Communication.

Page 142 of 192

“According to this approach, transport prices should correspond to the additional

short-term cost created by one extra person using the infrastructure. In theory, this

additional cost should include the costs to the user and the external costs. Social

marginal cost charging would therefore lead to efficient use of the existing

infrastructure. Furthermore, as users would pay for the additional costs they generate

for society, it would also help ensure fair treatment of both transport users and non-

users and would create a direct link between the use of shared resources and payment

on the basis of the “polluter pays” and “user pays” principles. This approach is only

possible if the “polluter” does not benefit from any compensation that would cancel

out the possible effects of internalisation”.

Factor roles

3. Type of factors

Identification of factors associated to the innovation emergence (technological;



The two main factors are economic and environmental 4. Innovation barriers

Identification of the barriers to the innovation process (Lack of awareness of available



The main barriers to the innovation is the opposition of significant road transport-related

lobbying groups, backed for reasons of protecting subsidiarity by a number of Member

States. Ther is also opposition from the maritime sector to the tackling of CO2 emissions by

bringing in the maritime sector to the EU Emissions Trading Scheme. In both of the

opposition positions there are strong arguments (se main text) supporting them.

Policy roles

Type of policy

analysis

Key

points or

not

(ranked

1–5)

Level of

government

involved (and

public/private

partnership ?)

Influence

during the

initiation

period

Influence

during the

development

period


implementation

/termination period

Standardisation 5

EU and

Member

States

Strong Strong Strong

Stimulation of

R&D N/A

Knowledge

management N/A

Infrastructure

development 3

EU and

Member

States


Regulation and

planning 3

EU and

Member

States


Legislation 5

EU and

Member

States


Pilots and

Page 143 of 192

demonstrations

Networking

Financial

resources and

incentives

Niche

management

National

security/strategie

s issues

4

EU and

Member

States


Environment

issues 5

Actor roles

Type of actors

involved

Key

points or

not

(ranked

1–5)

Which level of

government

involved (and

public/private

partnership?)

Influence

during the

initiation period

Influence

during the

development

period


implementation

/termination period

State experts, State

administration 5

EU and Member

States


Monitoring agents

R&D Agent

Regulator

Innovation agent

Implementer

Developer

Lobby group 5 Private and

NGOs


Inventors

Industrialists, VIP in

Business 5 Private

Marginal Marginal Marginal

Politicians 5 EU and Member

States


International

organization (or

E.U.)

5 EU and Member

States


Page 144 of 192

Stress test



Indicators

selected

Before

(existin

g

infrastr

ucture)

Estimated

results

(forecast,

planning,

projected

data) from

experts /

advisors/

planning

agencies

Real

operation

, up to

date data

EVALUATIO

N of

IMPACTS of a

50 % traffic

reduction

EVALUATIO

N of

IMPACTS of a

20 % traffic

reduction

EVALUATIO

N of

IMPACTS of a

50 % traffic

increase

EVALUA

TION of

IMPACTS

of a 20 %

traffic

increase

Level of

traffic

X Optimum

levels

N/A - 50 % - 20 % + 50 % + 20 %

Level of

Demand

Level of

Subsidies

X Reduction N/A

Revenues

from

operations

X Increase N/A

Return on

investment

X High N/A

Public/Priv

ate money

invested

Security

issues,

injuries,

accident

Extension

needed,

complemen

tary

infrastructu

re needed,

Neighbourh

ood

approval

Public

debate,

opinion of

politicians

and experts

X

project

exported?

Page 145 of 192

Innovation objectives not yet achieved. However, the debate on the Commission proposal for

internalisation of external cost is an instructive one for the development of future policy by the

European Commission (and the other European Institutions) and by Member States.

Key Extracts from PRI Initial Template

The "internalisation of external cost" is considered to be a failure since there is no EU uniform

policy that will force road transport to internalise its external cost. Up to now road trasnport is still

cheaper than SSS and rail, mainly due to this fact.

Transport activities give rise to environmental impacts, accidents and congestion.In contrast to the

benefits, the costs of these effects of transport are generally not borne by the transport users. The

internalisation of external costs means making such effects part of the decision making process of

transport users. Internalisation of external cost of transport has been an important issue for transport

research and policy development for many years in Europe and worldwide. However, studies on the

external impacts of transport by different modes are divergent.

In general, few measures have yet been taken to internalise costs of CO2 emissions, rail and road

noise and congestion. Commitment for pricing policies seems to be growing among EU. Several

Member States and regions have implemented road charging schemes or have plans to implement

them in the coming years. In addition, in some Member States, specific transport modes, already

pay a market price for certain services today, such as port services. However, it should be also noted

that these solutions are partial, mostly target one mode of transport, and have limited effects.

The required level of transport taxes and charges under a fair and efficient pricing regime following

the user and polluter pays principle depends on local and temporal circumstances; it is hard to

reflect externalities always exactly in charge levels. In practice, it is more common that existing

taxes and charges are differentiated based on environmental characteristics such as the level of air

pollution in the road freight sector, tax reductions for fuel efficient and hybrid passenger cars, noise

in the aviation sector and scarcity in rail infrastructure charges (EEA, 2006). (Countries that most

frequently apply environmentally differentiated taxing and charging schemes are United Kingdom,

Germany, France, Italy and Poland).

For the road sector, in the amendment of Directive 1999/62/EC (Eurovignette Directive) on road

charges, adopted on 27 March 2006, the European Union allows Member States to levy tolls on all

roads. This Directive is a significant step towards the implementation of a European road charging

policy. One constraint of the current Directive is the requirement that revenues may not exceed

related Infrastructure costs. The Directive only allows a limited differentiation of charges according

to capacity or environmental criteria. Only for mountainous areas, a mark up (up to 25%) is

possible, considering the higher level of Infrastructure costs.

Moreover, charging mechanisms designed to incentivise the use of less noisy road and rail vehicles

are rarely implemented. In June 2008, the Commission proposed to amend road charging legislation

in order notably to enable noise and other externalities of heavy duty vehicles to be subjected to

charges and to allow revenues derived there from to be earmarked for implementing noise action

plans (EC, 2008b). It also promoted the implementation of noise-related track access charging

across Europe to incentivise retrofitting of wagons with low-noise break blocks.

The implementation of distance based charging in numerous EU countries was a required

internalisation initiative. However,, according to the European Environmental Agency (EEA)

(2006), distance-related charges (fuel taxes and infrastructure charges) on road transport are still

below the minimum estimates of marginal external cost in all EU states.

Several countries have been trying through transport pricing to internalize, to an extent, their

external costs in relation to road transport. For instance, Austria successfully introduced a kilometre

charge on its motorways in 2004, varying from € 0.13 to € 0.27, depending on the number of axles,

but without any environmental differentiation. The German kilometre charging for HDV on

motorways got underway in 2005. Charges per vehicle-kilometre depend on the number of axles

Page 146 of 192

and the Euro emission class. The Czech government decided to introduce electronically calculated

tolls on main roads from 2006, charging vehicles over 12 tonnes initially. Slovakia has similar

intensions. In many other countries public private partnerships have been an important means to

fund infrastructure. In France, Spain, Portugal, Italy and Greece on large parts of the motorway

network distance related toll charges apply. On the A1 motorway near Paris an additional

congestion tariff is levied. During these hours, there are 4 to 10 percent less passages (EEA,2006).

The introduction of market-based instruments for internalisation of external cost has also been

discussed for the different transport modes. (see also the IMPACT project) To some extent it is also

been substantiated in EU Directives, particularly related to Infrastructure cost pricing. The ‘fair and

efficient pricing’ policy promoted by the European Commission (EC, 2001 and 2006) aims to

ensure that all external damage caused by road traffic is fully internalised in the price of transport. It

argues that pricing should be fair, meaning that ‘polluters’ are obliged to pay the marginal social

cost of their activities, and efficient, giving them an economic incentive to reduce the negative

effects of these activities (EEA, 2006). At an EU level, freight movement by all modes is

responsible for a third of the total external costs of transport, with the movement of people

accounting for the rest (INFRAS, 2004). Within the rail sector, the marginal cost oriented pricing

approach is considered as a basis for track pricing (Directive 2001/14/EC). Charges may be

differentiated with respect to environmental impacts as long as this does not lead to additional

revenues for the Infrastructure manager. Additional revenues are only allowed if in competing

modes a comparable level of charging of environmental costs takes place.

In 2002 the average value of the full external cost of road freight traffic was estimated to be 0.26

Euro per truck kilometre. More than 80% of these external costs in Europe were related to accidents,

climate change and air pollution. Noise and congestion were also included in the calculation and

were a substantial proportion of external costs in urban areas (EEA, 2006).

The negative implications of the internalization of the external cost is on the society, since the

increased prices for the transhipment of goods, due to social marginal cost transport pricing (in so

far as competition does not enforce absorption by transport operators) will be eventually moved to

the final customers. Even if this is the casae it can be argued that as the final consumer of the goods

is the ultimate ‘user’ of the transport services, this is not unreasonable. (N.B. Notes in italics added)

Internalization of external cost, through transport pricing has a positive impact in the society and

the environment, since it promotes the use of cleaner, quieter and more fuel-efficient vehicles.

References

EU Projects and Studies

Projects: UNITE, Externe, REcordit

IMPACT (CE Delft, 2007 – “Internalisation Measures and Policy for the External Cost of

Transport” (Deliverable 3 of IMPACT: The Handbook)

Commission Documents

Directive 1999/62/EC

Directive 2004/52/EC

COM (2008) 435 final

COM (2004) 261

Green Paper “Towards a new culture for urban mobility”

European Commission (2001), White paper- European transport policy for 2010: time to decide,

Luxembourg

European Commission (2006), Keep Europe Moving, Sustainable mobility for our continent,

Luxembourg

European Environmental Agency (2006), Transport and environment: facing a dilemma; Term

2005: indicators tracking transport and environment in the European Union, Copenhagen

Page 147 of 192

European Environmental Agency (2009), Transport at a crossroads; Term 2008: indicators tracking

transport and environment in the European Union

European Environmental Agency (2010), Toards a resource-efficient transport system; Term 2009:

indicators tracking transport and environment in the European Union

Other References W. Rothengatter, 2001

Peter Cerwenta.and Olaf Meyer-Rhuel, 2009

Various Lobbying Groupos Position Papers

Page 148 of 192

EUROPEAN INTERMODAL LOADING UNIT (EILU)

Introduction

The Intermodal Loading Unit (EILU) was considered in the preliminary innovation report stage of

the INNOSUTRA investigation of a number of public policy initiatives (innovations). It was

considered to be a ‘failure’ in the terms defined by the project. We now require to provide a more

detailed analysis of the genesis of the EILU proposal; its development by its proposer, the European

Commission; its current progress and likelihood of success, and the lessons to be learned from the

exercise.

The background to the initiative will first be examined, including the apparent motivation of the

European Commission in launching it, and its development from the initial proposal. The current

position of the initiative will then be summarised, followed by an analysis of the development

process, including its impact and spread across the intermodal transport sector in the EU. The

penultimate section of the report then considers what lessons may be learned from the manner in

which the initiative has been handled. Finally, a section summarising the discussion and drawing

some conclusions is provided.

In three Annexes, the hypotheses to be tested are set out; the detailed analysis, Policy Intervention

Template for WP3/4 is provided, and extracts from the initial analysis in the Preliminary Innovation

Report is also provided.

Background and Development

The EILU Initiative

The EILU initiative was first launched in 2003 by DG Tren and was introduced partly to establish a

common European standard and partly to encourage the market to develop its own formal or

informal standards. The European Commission proposal was first promulgated in the Promotion

Programme for Short Sea Shipping (COM/2003/Final) published on 7.4.2004. Consultations on the

initial proposal led to considerable criticism and confusion about its interaction with the

international (ISO) standard for containers, particularly from the maritime transport players. The

Commission argued that its proposal was effectively to create a standard applying to swap bodies

for circulation within the EILU. It would thus be parallel to, and not competitive with, the already

established ISO standard sea transported container in use for global trade. But this was not made

clear at the outset.

It was a pity that this position was not made clear in the initial proposal as the initiative was seen by

the maritime community as yet another attempt by the Commission to ‘usurp’ the role of the IMO

and to ignore the global nature of sea transport. However, it could be argued that this was a

convenient position for the maritime transport lobbyists to take up. Dr Seidelmann (see below) had

already observed that “Ocean carriers and sea port terminals must adapt to this development (a

standard 45’ pallet-wide container). They must develop concepts how to operate these European

containers and ISO containers from deep sea trade in parallel”.

The consultation with the various surface transport bodies in the EU continued and the Commission

deliberated whether or not to issue a CEN mandate to attempt to establish a European standard

Page 149 of 192

based on a modified version of the original proposal, supported by, among other organisations the

European Intermodal Association (EIA). The modified proposal clarified the position that what was

sought was a European swap body standard that would be used in parallel with the ISO container

for the deep sea trades. The suggested loading unit would have the following suggested

characteristics and dimensions.

The EILU would have three main characteristics distinguishing it from the various current swap

body standards already implemented. First, -------

The subsequent CEN mandate issued and consideration to the suggested standard was given by the

appropriate CEN Technical Committee TC 119. In fact there were already two CEN standards for

swap bodies, TS 13853 and TS 14993. The aim of these standards was viewed by the Committee to

be the same as that of the EILU proposed standard, namely to ensure rigid sided, stackable swap

bodies to enable rail and short sea shipping transport of them. TC 119 therefore concentrated its

discussions on the need for safe handling and operation and the interoperability in all three surface

transport modes.

The conclusions of the Committee noted that the willingness of the industry (particularly the

operators) to contribute to the standardization process “had reduced in recent years”. It further

observed that the current situation was that of “container and swap body manufacturers being asked

more and more to produce equipment to individual owner specifications”. Hence, “the

manufacturers were no longer interested to invest time and money in the preparation of standards.”

“In addition standard equipment is most likely to be produced outside Europe.” The CEN

Committee concluded that without “public support” (money and resources) it was unlikely that an

EILU standard would be produced”. Without such a standard the EILU could not be developed and

operated.

These conclusions were hardly welcome to the European Commission. Nor was the pessimism of

the Technical Committee, however understandable from their viewpoint, entirely justified. New

standards are rarely perceived as essential by operators, unless there is some urgent commercial or

public policy imperative to seek the standard, over and above the current market position. From the

manufacturers’ (though not all) viewpoint the desire of operators to request bespoke (and hence

limited market) solutions provided useful revenue. This revenue source might well be threatened if

the introduction of a standard led to non-European manufacturers, particularly in China (China

produces the vast majority of ISO containers), taking a strong market position in European loading

unit manufacture.

Previous Industry Initiatives

Dr Christoph Seidelmann, in his article (Ref), summarising early attempts at developing an

optimum European loading unit, dates the initiatives to the 1970s. The discussion below is partly

based on Dr Seidelmann’s valuable summary of the evolution of intermodal freight transport and

the various loading units available to the various surface transport modes.

Initially, the concern related to combined transport, usually meant to refer to combined road and rail

transport. The aim was to emulate the US position whereby laden semi-trailers were put on to

railcars, travelling long distances to maximise the high volume transport efficiency of rail and then

Page 150 of 192

taken by truck to the final customer destination. The difficulty here was that in Europe the

limitations of the rail gauge in the various different rail systems across Europe prevented the US

solution of wheeled road semi-trailers being transferred to rail cars. The ‘solution’, adopted in the

mid 1970s, was to remove the wheels from the semi-trailers; hence evolving the European ‘swap

body ‘.

Following this development, but keen to emulate the successful ISO standard sea containers

approach, in the mid-1980s the CEN European Standardisation Committee 119 was founded to

ensure that the individual national concepts were merged into a European standard. In the period to

follow, some 70 % of intra-European combined transport road/rail was using standard swap bodies.

The new Committee (TC 119) was immediately faced with a series of problems. The standard swap

body was a fine tool for road rail/intermodal transport, but it was not fit for sea transport. And a

considerable part of European freight corridors include a sea leg, such as

all traffic to Great Britain and Ireland,

most traffic from Scandinavia to Central Europe,

the trade movements of many Mediterranean States between their mainland and their islands.

Swap bodies on these trade routes had to use the ‘Roll on/Roll off’ (RoRo) technique that had been

developed for road transport and that was mainly efficient when combining two road legs of a

journey, but not an intermodal road/rail operation.

But for these routes, the growth of international trade and the use of the ISO sea container, led to

the development of an alternative transport system, avoiding the change of loading units, the sea

freight containers (the ISO standard containers used for deep sea carriage) were distributed via

feeder ships to medium-size, and even small, destination ports, from where they were dispatched by

road (mainly) or by rail and in some cases barge to the final customer. The feeder ships involved

were able to take double the load as a RoRo vessel of the equivalent size. The volume of traffic

justified investment at these feeder ports in carnage, stacking areas, and rail-yards. Hence, the

European swap bodies became redundant on these routes. The loading units required here had to be

stackable and have top corner fittings that enabled them to be lifted by cranes.

At the same time as this development was taking place another innovation was emerging: the

introduction of gateway terminals. These terminals altered the loading systems applied at terminals,

whether these were ports, rail terminals, or road terminals. The loaded intermodal train came in, and

the crane lifted all loading units off and set them on the ground. Later, some of them with final

destination at a local premise will be lifted on to a local delivery truck, others will wait for the next

empty block train set up in the terminal for the long distance operation. The larger the number of

intermodal loading units in such gateway operation becomes, the more empty stacking area is

needed for this intermediate transfer. And many traditional terminals had not been conceived to

offer that much space. This development led to intermodal operators urging clients to use stackable

units to permit more efficient use of the stacking space available.

Page 151 of 192

These two developments placed a premium on the development, for intermodal transfer, of

stackable loading units. The response was of European TC 119 was to initiate a standardisation

program for stackable intermodal transport units; i.e. Stackable Swap Bodies or European Domestic

Containers. These boxes were to be rather similar to ISO containers, but according to European

dimensions and possibly the lower strength needs of European sea crossings.

Current Position

The current position – in relation to the establishment of a European Intermodal Loading Unit

standard – appears to have reached a position of ‘stalemate’. This is not to say that work is not

continuing, but it may be that any finalisation of the standardisation work of CEN will have to await

further moves by the operating industry to develop a new intermodal loading unit. This unit can

itself then become, with whatever amendments are introduced during the standardisation process

will fulfil the Commission’s de\sire to see a genuine European Intermodal Loading unit capable of

‘seamless’ transfer between modes: road, rail, short sea shipping, and inland waterway.

One promising initiative is the ‘Tellibox’. This has been the subject of an EU research and

development project, due to conclude in April 2011. Essentially the project looks at the range

operator requirements and assesses the current offerings in terms of containers, swap boxes, and

semi-trailers to see how closely they match the requirements. Not surprisingly they all fall short of a

full complement of matching requirements. The conclusion is that a new ‘box’ is required, the

‘MegaSwapBox’. The problem is that the 45’ pallet wide container meets the majority of the key

requirements and is favoured by the various transport modes and operators (e.g. CLECAT

representing European freight forwarders). Moreover, the standardization process of the 45’

container is fairly well-advanced. This probably means that, however close to ‘perfection’ the

MegaswapBox comes, it seems unlikely that it will succeed.

However, the 45’ container does have one essential drawback. It exceeds, albeit by a small margin

the length restrictions imposed on trucks by Directive 96/53.

Nonetheless, the shortsea transport operators needed the 45’ pallet wide container to be competitive

with road transport using semi-trailers that could accommodate 33 pallets. An answer was found by

Bell Lines and Geest’s Wout Pronk in the form of a patented 45’ container with chamfered corners

that fell within the parameters of the Directive 96/53.

However, although this solution works it has a number of drawbacks. The construction cost is

higher than the standard 45’ container; patent fees are required, and the chamfered container is

weakened at the key corner points.

As far as the EILU is concerned the European Commission abandoned the initiative in 2008. Its

reasons are not clear, but it appears that as the CEN mandate appeared to have ‘run into the sand’

there appeared to be little likelihood of further progress. Moreover, industry-wide discussions,

involving also the Commission, were taking place on the 45’ pallet-wide container, specified in the

technical standard TS 14993, as indicated above.

Page 152 of 192

Employment of the 45’ container is also linked to the European Modular System (EMS) of road

carriage. For operators/shippers the ‘holy grail’ is to extend the use of the EMS operating in

Sweden and Finland, via their accession derogation – to be permitted across the EU.

One problem here is that the low density of and physical geography of Sweden and Finland is

suitable for the EMS concept. Other more densely populated countries may have more difficulty in

accepting the EMS. However, the Netherlands has trialled the system, apparently without serious

adverse consequences. A further study, economic and technical, of Directive 96/53 is being

undertaken under the auspices of the European Commission.

Having now indicated the current position reached in relation to the EILU we may now move to

analysing and discussing the initiative and its failure so far to reach any satisfactory resolution.

Analysis/Discussion

From the outset the indications were that the European Commission’s main concern in launching

the initiative – given its awareness of previous attempts to secure agreement on a standard European

container that could be used by all surface transport modes – was to push the industry into moving

forward on the issue. That was the impression (see discussion at the ECSC meeting on the issue in

2004) given by the Commission. Clearly, in an ideal world, it would be economically advantageous

and logistically efficient to have a loading unit that could be handled efficiently and at optimum

cost by all transport modes and transport nodes, i.e. transfer points, across Europe.

Road is dominant mode, partly, of course, because of the ‘last mile’ syndrome, where final delivery

to the customer is almost always by road. But also the flexibility of road transport is the key to its

success, once we have eliminated the carriage of bulk products.

Nonetheless, despite the dominance of road short sea transport (including for this purpose all feeder

traffic) and inland waterway transport still have a good proportion of that freight traffic which is

open to competition. Of course rail transport is also competitive but suffers from capacity problems

and is perhaps most competitive for bulk freight. On the other hand the real success of rail in the

intermodal field has been in the growth of combined transport with road. Even here, however, one

weakness has tended to be the relative lack of the use of swap boxes on rail transport.

However, the current (since 2006) position of the European Commission is to stress not so much the

competitiveness of the various modes, but rather their complementarity. Hence, the stress on co-

modality. To achieve the optimum (in terms of socio-economic and environmental net benefits)

carriage it is clearly necessary to have a genuine intermodal unit that does not favour one mode over

another, and is capable of being used by all three surface transport modes. This was the essential

motivation behind the Commission’s EILU initiative. But there have been significant barriers in the

way of achieving such a desideratum. These can be enumerated as follows.

Intra-European trade is intrinsically linked to global trade, the vast majority of which is transported

by sea, principally in standard ISO containers. There are a number of types of containers. The most

used in the ISO A container, but its capacity in terms of pallets (the common basic freight load unit)

carried Recently, to increase the capacity, the so-called ‘high cube’ ISO containers are increasingly

being used. The problem is that these containers cannot be transferred directly to other transport

Page 153 of 192

modes, particularly road transport (without some modification of Directive 96/53). The problem has

been got round by the chamfered corner modification, but this is inelegant.

A further barrier to rapid agreement has been the fact that, though well-endowed with rail networks,

the recent Eastern European members of the EU have tended to expand their road networks and

hence the amount of road transport. This has put less of a premium on developing a genuine

intermodal freight network across Europe. Based on an acceptable (to the industry sectors involved)

intermodal loading unit.

More generally though it might be pointed out that pallet sizes vary across the world and are

different in the US than in Europe where the 800x1200 Euro pallet is a widely used standard size.

Also the development of the 45’ pallet-wide, high cube container is likely to become, with perhaps

some modifications, a de facto European standard. In relation to the proposed EILU, the 45’ box is

not very different in its internal dimensions, stackabilty, etc, from that proposed by the Commission,

at least following the various size modifications that took place from the initial EILU specification.

Interestingly, the Tellibox project has taken a broader perspective on the problem and has started

from the viewpoint of the operators. This development project has incorporated a ‘requirements

specification’ based on the views of manufacturers, freight forwarders, logistics companies, and

combined transport operators (i.e. road/rail). In all cases the two major requirements seem to be

high volume and standard interoperability.

The main distinctive characteristics of the Tellibox, conceptualised and tested MegaSwapBox, are:

• Stackability

• Inside height of 3 metres

• Length of 45'

• Loading capacity of 100³

• Openable on 3 sites

• Top-handable

• Pilfer and theft-proof

These characteristics could be said to be a combination of the main features of the EILU and the

high-cube, 45’ pallet-wide container that is currently the subject of on-going discussion at EU level

between transport industry and the Commission. It remains to be seen whether or not this targeted

EU research- based approach to the development of an intermodal loading unit will be successful.

But it has the merit of involving industry and of exploring, in a comparative analysis manner the

various existing and potential options.

It is to be hoped that the various technical barriers to achieving an agreed high capacity intermodal

loading unit for freight transport across Europe and the creation of a trans-Europe intermodal freight

transport network. The Commission’s good intentions in this respect have not been achieved via the

EILU standards approach, but the initiative may have, at least, kept open the debate.


Any measure of success must start from the objectives of the public policy initiative. If we assume

that the objective of the Commission initiative was partly to stimulate the industry, both the

Page 154 of 192

operators and the manufacturers, to continue work on securing a degree of standardization in the

field then the initiative may be regarded as a limited success.

However, it was predictable that the idiosyncratic nature of the transport logistics sector would be

likely to be difficult to approach from the viewpoint of standardisation. There are too many

operators requiring, as they see it, different loading unit requirements and handing at transfer points.

To view the ‘problem’, i.e. of non-standard loading units, from the perspective of the box itself was

perhaps to invite failure of the initiative. Moreover, the link between global sea-based freight

transport and intra-European freight transport, and the lack of clarity on how this aspect was going

to be handled in the initial proposal created unnecessary debate.

Hence, there were general objections from the transport industry lobbyists (e.g. ECSA, CLECAT)

to ‘regional’ European standardisation initiatives in what they regard as an international transport

industry. To an extent this position is understandable and justifiable. However, there are contrary

arguments that can be deployed to, at least, reduce the effectiveness of this argument. Indeed the

subsequent modification of the Commission’s proposal, to present the EILU more clearly as an

attempt to standardise only swap bodies, already in circulation in the EU, did partly negate the

initial opposition from these bodies.

However, it is not clear that this ‘political’ strategy of using a ‘standards-based’ initiative to move

the discussion and development forward on a European intermodal loading unit, however desirable,,

was a sound one; particularly when related standards work in CEN was already on-going. It seemed,

in the case of the EILU, to place the Commission in an ambiguous position, i.e. supporting the

notion of a new standard that it really believed would not be adopted, as such, but hoping that it

may stimulate an industry-led approach to developing an acceptable European-wide intermodal

loading unit.

Finally, even if this was going to be the ‘evolutionary’ approach adopted by the Commission, there

was a flawed design in the plan. The first proposal seemed to suggest that the Commission was

proposing a unit that would take over the role, in Europe, for sea transport, of the globally-used ISO

container. As indicated above, this was subsequently clarified, but the clarification – of the aim to

establish a rigid, stackable ‘European swap body – then encountered the second problem, the

standards work in CEN, which also as indicated above, had already been going for some time on

establishing such a standard/standards.

The Commission may, eventually, be able to claim – assuming the problems associated with the 45’

pallet-wide container are resolved (probably the case in the relatively near future) – that its initiative

was a partial, success and a European wide unit, similar in concept to the EILU, may indeed be

introduced, in the relatively near future. Nonetheless, it is not clear that a less contentious, and time-

consuming approach, eventually abandoned, was the correct way forward. In this type of area the

EU research project approach (e.g. as with Tellibox) may well have been a better option...

Summary and Conclusions

The EILU initiative itself cannot be said to have been a ‘failure’. It has clearly not succeeded in the

widespread adoption and utilization of the standard loading unit as originally specified in the EILU

Page 155 of 192

proposal, but, as indicated in Para 5.8 above, it is eventually leading to the development that it

wished to see. The objective – to stimulate further commercial action to establish a viable market

acceptable intermodal loading unit that could be used across all modes – has borne fruit.

There are three main conclusions that may be drawn from the fate of the EILU initiative, launched

by the European Commission in 2004.

First, it is not clear that the ‘political’ strategy of using a ‘standards-based’ initiative simply to

‘push’ the industry to move forward, is a sound one; particularly when related standards work in

CEN is already on-going. It seems to place the Commission in an ambiguous position, i.e.

supporting the notion of a new standard that it really believed would not be adopted, as such, but

hoping that it may stimulate an industry-led approach to developing an acceptable European-wide

intermodal loading unit. The leverage from the Commission could have been achieved by the

publication of a ‘Communication’.

Second, if such an approach is to be used again then more care should be taken to establish not only

what are the practical and communication problems, but also what work is going on in CEN on the

issue. It is true that Commission officials do attend plenary meetings of CEN, but closer

cooperation is required, from both sides.

Third, notwithstanding the above criticisms, the role of standards and standards-setting is extremely

important in promoting and establishing innovation. A more vigorous approach – in conjunction

with the operating and manufacturing industries represented in CEN (perhaps with some funding

attached) – to developing standards could inject a degree of dynamism in the approach to the sector-

wide adoption of innovation by the surface transport sector. It would also be valuable if the industry

lobbying groups themselves took more of an interest in what work is going on in CEN, e.g. via the

MIF (Marine Industries Federation).

ANNEXES

Hypotheses Testing

The impact of lobbying by industrial/commercial representative organisations against the

proposals is an inhibiting factor in relation to public policy innovations/initiatives.


The groups against the EILU proposal were concerned, essentially, about two issues: first, the

Commission appeared not to be paying sufficient attention to the difficulties posed by the link

between the international sea freight trade and intra-European freight transport (in effect ECSA

(representing European ship-owners), for instance, seem to believe that the Commission was

attempting to set a European standard which would challenge the long-standing, global ISO

container standard); second, CLECAT (representing European freight forwarders) was concerned

that the Commission’s proposal would damage the efficiency of road transport and to attempt to

introduce another standard, beyond the attempted work being done in CEN on swap bodies was

unnecessary. These three groups, including also the IRU (representing international rail transport

operators) are chosen as representative of groups opposing or critical of the EILU initiative.

Page 156 of 192

ECSA (supported by ESPO for Ports) The ECSA negative position was principally based on the

potential problems (not clarified in the first EC proposal), i.e. potential conflict between the ISO

container used in international sea transport and any proposed, conflicting, European standard unit.

The preference from ECSA was for international standards to be observed, particularly in relation to

outside dimensions. The other linked, general view was the same as that of CLECAT, namely that

the market should decide what level of standardisation was required, rather than an intervention by

the public authorities.

CLECAT The CLECAT position (2007), although in favour of initiatives to promote intermodal

transport was concerned that: a regional standard could compromise international standards already

used by the market; that there would be problems associated with the standard, even as amended by

the European Parliament (height reductions), for rail transport (tunnels) and river crossings (bridges)

across the wider European transport space. CLECAT’s preference is for an ISO stackable solution

to avoid regional fragmentation.

IRU The IRU position was that container standards should be left to Industry to decide, wherever

agreement can be reached. Industry, through the European Standard CEN, had decided to have three

different lengths of swap body for combined road-rail transport. The Commission should not

interfere.

There are also other real problems caused by the multiplication of maritime container standards, and

the Commission proposal omits practical measures to promote combined transport, such as

increasing the maximum weight of trucks carrying containers to 44 tonnes - as the Commission has

already recommended.

Conclusions

The lobbying of these groups has – though opposing the Commission EILU initiative – has not been

entirely negative. Insofar as the discussion of the development of a European intermodal loading

unit, acceptable to the various interested commercial/industrial sectors involved, has proceeded (on

the basis of the 45’ high-cube container). The principal concerns of these groups, not necessarily

entirely valid, are that international standards should take precedence over regional EU standards

and that the market always knows best. The Commission can assist best at this stage by attempting

to persuade all EU countries to accept the slight modification of Directive 96/53 to legalise the

45’container for road carriage.

Support of industrial/commercial representative organizations plays a role in the adoption

process of public policy initiatives.


The support of the groups in favour of the EILU proposal, principally the EIA (European

Intermodal Association) and the EIRAC (European Intermodal Research Advisory Council), has

been based on their perceived need to develop intermodal transport and recognition of the key role

to be played in this endeavour by a European intermodal loading unit. They have been less

concerned with the problems encountered by the nature of the Commission’s intervention than the

positive aspects of the discussion. The two groups are selected as being typicalof the groups

supporting the EILU initiative. These groups are now in favour of the approach to providing an

intermodal loading unit via the 45’ container approach, even if, as the Tellibox project appears to

show, that this is not a perfect solution to the overall requirements of the various interested

commercial/industrial sectors.

Page 157 of 192

EIA The EIA position has been supportive of the Commission and downplaying the objections

from ECSA, IRU, and CLECAT, arguing that it was the principle of an European intermodal

loading unit transferrable across all modes that mattered.

EIRAC The EIRAC position has been similar to that of the EIA, arguing that more important than

the precise nature of the standard was the urgent need for a stackable and transferable intermodal

loading unit able to operate across all modes and across a wide European transport space.

Conclusions

This case illustrates the role that positive support may play in supporting continuing discussions on

the underlying issue (even when there are other important groups opposed) particularly when the

opposition is targeted on technical or commercial problems, rather than any principled objection to

the Commission initiative.

That regulatory intervention by public agencies and governments may lead to the adoption

of sector-wide innovations.

Nature of regulatory interventions

As the setting of standards is a useful form of regulatory action that may be initiated by the

European Commission, and progressed via the issuing of a mandate to CEN (as in this case), it does

appear, whatever the mistakes in the nature of the Commissions initial proposals and preparation in

relation to the EILU, to be able to influence, albeit with a time delay, the adoption of sector-wide

innovations.

Conclusions

Providing there is better communication, with CEN (and between CEN and the various lobbying

groups) prior to any initiative being launched by the Commission, this avenue for promoting sector-

wide innovations is a valuable and progressive modus operandi.

That improved cost-benefit estimations of public policy initiatives will improve the chances

of adoption.

Use of cost-benefit studies The launch of the EILU initiative appears to have pre-dated the formal procedures now in place to

ensure that, via an external ‘impact studies’, a cost-benefit assessment of any legislative proposal is

carried out. This procedure, well-made, should have indicated the problems with the initial EILU

proposal and its chances of succeeding. It is possible that, though amended, a variant of the actual

EILU proposal would still have been launched, in order to drive the discussion forward. Such a

‘declamatory’ action is not necessarily to be avoided where industry appears to be making slow

progress on an issue (the development of intermodal transport, via the development of an innovative

intermodal loading unit) which apart from efficiency arguments has considerable overall socio-

economic and environmental net benefits.

Conclusions

As indicated above, in this case, despite failings, the Commission initiative on the EILU has had a

positive impact, indirectly, on promoting innovation in the surface transport sector.

Page 158 of 192

Implementation timing and transition periods play a role in successful adoption of policy

innovations.

Timing issues

There are often long lags between the launch of an initiative and any resulting action to secure

sector-wide application of the innovation concerned. In the case of the EILU the lags were

considerable, but not exceptional. Moreover, when eventually the CEN mandate was cancelled

progress on the underlying conceptualisation had been made. The period cannot be said to have

been a transitional period, but it is possible to argue that the launch of the idea in 2003 was timely

in drawing attention to the need to remove one of the barriers to developing intermodal transport

across the EU.

Conclusions

The EILU initiative of the Commission, whatever its failings was launched at a time when it was

useful to draw attention to the need to develop intermodal European freight transport, via the

introduction of a European intermodal loading unit.


Partner short name LCA

Title

Domain Intermodal

Type of innovation Failure – in debate

Nationality of case European Union


Directives and Regulations in support of Common Transport Policy

7. Actors support


N/A 8. Which level of government ?


European Commission


Proposer of legislative action to introduce a standard



Factor roles 5. Type of factors




The main motivating factors are the political and socio-economic drive to expand intermodal

freight transport across the EU. However, there are both economic, legal. and technological

factors influencing the willingness and ability of both industry to accept and the EU

Page 159 of 192

Institutions to implement the innovation. 6. Innovation barriers




The main barriers to the innovation have been technological, legal, and political. However,

these have not completely blocked progress on the innovative process. It is hoped that the

discussion engendered by the EILU initiative will eventually ‘bear fruit’ in the form of the

extended use of the 45’ pallet-wide container cross the EU; thus stimulating the expansion of

intermodal freight transport.

ANNEX III- Factors contributing to the transport innovation

Category of

factor


(ranked 1-5)

Development/

Spread (1-5)

Implement

ation (1-5)


available

4 2 1


Technological



Adm partners available 3 2 1

Administrative

and legal


division of responsibilities

1 1 1


regional assemblies

1 1 1


Political and

process-related

cross boundaries effects 5 5 1


spirit of entrepreneurship

3 3 1


on the part of the

stakeholders

3 2 1

Socio-cultural

and

psychological

link

universities/research/innov

ation

3 2 1



Economic and

financial

availability of subsidies 1 1 1

ANNEX IV Barrier table

Category of

barrier


(ranked 1-

5)

Developm

ent/Spread

(1-5)

Implement

ation (1-5)

Available Lack of information on 5 3 1

Page 160 of 192

information

Lack of information on markets 2 2 1

information

(knowledge)

Lack of qualified personnel n/a n/a n/a

Lack of interoperability 4 3 1

Lack of lack of standardisation

and certification

4 3 1

Technical

Difficult adaptation to a new

technology

1 1 1

Legislation, regulations, taxation 4 3 1


Legal and

regulatory

Weakness of property rights 2 2 1


Lack of funds within the

enterprise and subsidies from

outside

4 2 1

Financial and

economic

Lack of competition in the

market

3 3 1


Scarce attitude of personnel

towards change

2 1 1

Cultural and

societal

Inability to devote staff to

innovation activity

2 1 1

Lack of cooperation among

partners (public, private,…)

2 1 1

Fragmentation of decision levels 1 1 1

Decision

making

Lack of Vision and Policy

Growth

2 1 1

Annex 5. Key Actors European Commission

CEN

Other EU Institutions

• ESC

• Europen Parliament

• Council of Ministers

Transport Lobbying Groups

Manufacturing Lobbying Groups

Annex 6. References Commission Documents

COM/2003/Final (published on 7.4.2004

Other References

CEN Technical Committe TC 119 Report

CEN standards for swap bodies: TS 13853 and TS 14993.

Page 161 of 192


EU RTD ‘Tellibox’ project

Policy roles

Type of policy

analysis

Key

points

or not

(ranked

1–5)

Level of

government

involved

(and

public/privat

e

partnership

?)

Influence

during the

initiation

period

Influence

during the

development

period


implementation

/termination period

Standardisation 5 EU and

Industry

Strong Moderate N/A

Stimulation of R&D 5

EU,

Industry,

and

Research

Moderate Strong Moderate

Knowledge

management N/A

Infrastructure

development 1

EU and

Member

States

Weak Weak Weak

Regulation and

planning 5

EU,

Industry,

and Member

States

Strong Moderate N/A

Legislation 5

EU,

Industry,

and Member

States

Strong Moderate N/A

Pilots and

demonstrations 5

EU and

Industry

Weak Strong N/A

Networking

Financial resources

and incentives

Niche management

National

security/strategies

issues

Environment issues 5 EU Strong Strong N/A

Actor roles

Type of actors

involved

Key

points or

Which level of

government

Influence

during the

Influence

during the


implementation

Page 162 of 192

not

(ranked

1–5)

involved (and

public/private

partnership?)

initiation period development

period

/termination period

State experts, State

administration 5

EU and Member

States


Monitoring agents

R&D Agent 5 EU and Industry Weak Strong N/A

Regulator 5 CEN Strong Moderate N/A

Innovation agent

Implementer

Developer

Lobby group 5

Industry

confederation

lobbyists


Inventors 5 Industry Strong Strong N/A

Industrialists, VIP in

Business 5 Industry


Politicians 5 EU and Member

States

Weak Weak N/A

International

organization (or

E.U.)

N/A

Page 163 of 192

Stress test

N/A

Comments:

Indicators

selected

Before

(existin

g

infrastr

ucture)

Estimated

results

(forecast,

planning,

projected

data) from

experts /

advisors/

planning

agencies

Real

operation

, up to

date data

EVALUATIO

N of

IMPACTS of a

50 % traffic

reduction

EVALUATIO

N of

IMPACTS of a

20 % traffic

reduction

EVALUATIO

N of

IMPACTS of a

50 % traffic

increase

EVALUA

TION of

IMPACTS

of a 20 %

traffic

increase

Level of

traffic

X Optimum

levels

N/A

Level of

Demand

Level of

Subsidies

N/A

Revenues

from

operations

N/A

Return on

investment

X Modest N/A

Public/Priv

ate money

invested

X Private

Security

issues,

injuries,

accident

Extension

needed,

complemen

tary

infrastructu

re needed,

X

Neighbourh

ood

approval

Public

debate,

opinion of

politicians

and experts

project

exported?

Page 164 of 192

Innovation objectives not yet achieved. However, the on-going discussions between industry and

the European Commission on the 45’ high-cube pallet-wide container – together with amendment

of Directive 93/56 – should enable the extended introduction of a genuine European intermodal

loading unit across all surface transport modes.

Extracts from Initial Analysis Template (PIR)

Summary

The EILU was introduced partly to establish a common European standard and partly to encourage

the market to develop its own informal standards. The European Commission proposal was first

promulgated in the Promotion Programme for Short Sea Shipping (COM/2003/Final published on

7.4.2004. Consultations on the initial proposal led to considerable criticism and confusion about its

interaction with the international (ISO) standard for containers. The Commission argued that its

proposal was effectively for a standard applying to swap bodies for circulation within the EILU.

The subsequent CEN mandate issued and consideration to the suggested standard was given by the

appropriate CEN Technical Committee TC 119. In fact there were already two CEN standards for

swap bodies, TS 13853 and TS 14993. The aim of these standards was the same as that of the EILU

proposed standard, namely to ensure rigid sided, stackable swap bodies to enable rail and short sea

shipping transport of them. TC 119 therefore concentrated its discussions on the need for safe

handling and operation and the interoperability in all three surface transport modes.

It conclusions noted that the willingness of the industry (particularly the operators) to contribute to

the standardization process “had reduced in recent years”. It further observed that the current

situation was that of “container and swap body manufacturers being asked more and more to

produce equipment to individual owner specifications”. Hence, “the manufacturers were no longer

interested to invest time and money in the preparation of standards” “In addition standard

equipment is most likely to be produced outside Europe.” The CEN Committee concluded that

without “public support” (money and resources) it was unlikely that an EILU standard would be

produced”. Without such a standard the EILU could not be developed and operated.

Adoption barriers

There was opposition to the adoption of the proposal from European maritime transport lobbying

groups from the outset.

Adoption rate and spread (ranking:1/10)

Proposal has not progressed.

Implementation barriers (ranking::7/10)

Inability of CEN mandate from the European Commission to lead to development of a standard.

Competing swap body standards already implemented.

Negative effects (ranking: 6/10)

May create problems for feedering at the port interface with the use of ISO standard containers.

Industry not interested in working on a CEN standard.

Positive effects (ranking: 6/10)

Enables rigid, stackable swap bodies to be used in European short sea shipping with enhancement

of intermodal transport. With accompanying CEN standard would reduce manufacturing costs

References


EU RTD ‘Tellibox’ project

Commission Documents

Page 165 of 192

COM/2003/Final (published on 7.4.2004

Other References

CEN Technical Committe TC 119 Report

CEN standards for swap bodies: TS 13853 and TS 14993.

Page 166 of 192

MOTORWAYS OF THE SEA – SOUTH EAST EUROPE

INTRODUCTION

The present document corresponds to the analysis of the Policy Initiative Case “Motorways of the

Sea” under the Intermodal Sector. During the 1st consultation (Antwerp, April 2010) it was advised

within the wider topic of Short Sea Shipping, cases of particular interest should be identified. The

partner responsible for the specific topic (UAegean) decided to purse one case under WP4 and one

under WP3.

The present Case focuses on the South- Europe Motorway of the Sea, which is, in general,

considered as a “not-yet-success”.

The analysis is based on desk research, tacit knowledge within the UAegean and findings from a

focus group conducted on the subject on December 3rd, 2010 at the Hellenic Chamber of Shipping.

The focus group included representatives from all key actors. The identity of representatives

participating in the focus group is confidential.

The “Motorways of the Sea” (MoS) are a policy initiative and the first section following the

introduction describes the Concept and Policy Intervention since its introduction. Following this,

the official positions of the key actors are presented. These positions are supplemented by key

conclusions from the focus group. Conclusions following the table

CONCEPT-DEFINITION

There are many different definitions of Short Sea Shipping (SSS) but officially the European

Commission defines short sea shipping as “... the movement of cargo and passengers by sea

between ports situated in geographical Europe or between those ports situated in non-European

countries having a coastline on the enclosed seas bordering Europe.” SSS is also regarded by the

EU Commission as the only freight mode that offers a realistic prospect of substantial modal shift

from road, as well as being able to improve competitiveness and reduce environmental damage,

which largely explains the strong emphasis by the EU in developing its ‘Motorways of the Sea’

(MoS) policy.

The motorway18 of the sea concept goes back to June 1992 when Viamare S.p.A. started to operate

one of the first road-to-sea initiatives between Genoa Voltri and Termini Imeresi in Sicily. In

November 1992, Bagchus and Kuipers (1993) applied the Viamare’s ‘autostrada del mare’ con-

cept to illustrate the shift of cargo from road to sea in the Netherlands and Portugal corridor. This

same year witnessed the International Association of Turkish hauliers introducing a roll-on–roll- off

(ro–ro) service between Turkey and Trieste (UND Ro-Ro) and in 1993 Grimaldi introduced the

Grandi Navi Veloci service along the Genoa – Palermo route. In 1994, Garratt would approach the

motorways of the sea concept again and used the ‘European maritime highway’ expression to

describe shipping channels that are capable of delivering an environmentally sound transport

solution (Garratt 2004). To meet the Adriatic market demands, Superfast Ferries started to operate,

in 1995, a ropax service in the Patras-Ancona route and in 1996 they inaugurated their

Patras/Igoumenitsa-Bari service; their success led them to establish operations in the North Sea

(2000) and in Baltic (2001). Today, Superfast Ferries operates other routes in the Mediterranean.

Between 1996–1998, the Commission funded the ‘European Marine Motorways’ project under the

18 Extract from Paixao Casaca, A.C. (2008)

Page 167 of 192

Transport Research and Technological Development Programme of the 4th Framework. The project

investigated the commercial viability of conventional, fast-conventional, and high-speed ro–ro ferry

services as an alternative to long distance freight road transport in three routes, namely Gothenburg-

Zeebrugge, Plymouth-Bilbao, and Genoa-Barcelona. The project identified freight rates and fuel

costs as the two key factors that affect fast sea transport profitability.

Starting19 in 1992, the EU Commission Green and White papers dedicated discussion to the

increasingly deleterious effects of transport on the environment. As a result, the EU Commission

has actively promoted SSS as an important component in TEN-T. The first Communication on SSS

was published in 1995, and stated that the development of SSS would be of European interest. Prior

to 1995, intra-European freight transport had been dominated by unimodal road transport (Ng,

2009).

The predominance of road transport has also continued largely unabated because of administrative

complexity and technical obstacles related to the transfer of cargo between modes – but especially

port inefficiency, which raises the cost of using SSS – as well as the existence of complicated

regulations, cabotage restrictions and protectionism, and the fact of the concentration of port

activity at a few selected ports due to containerisation (Chlomoudis and Pallis, 2002).

To meet the goal set by the EU Commission to promote multimodal transport solutions, the EU

Commission proposed an 18-measure action plan. Several subsequent communications (EU

Commission 1997, 1999, and 2004a) discuss the present state of SSS relative to other transport

modes, outline the achievements reached by this mode, and draw attention to the existing

bottlenecks needing to be overcome (Paixao-Casaca and Marlow, 2007).

At the same time the White paper of 2001 (EU Commission, 2001) has proposed the development

of MoS to promote intermodal transport and therefore make greater use of the sea. MoS will thus

improve access to markets throughout Europe and bring relief to the over-stretched European road

system. As a consequence, the EU Commission has recommended that MoS be developed as a

competitive alternative to land transport and that MoS be integrated into the Trans-European

Transport Network (TEN-T). According to the EU Commission (2001), this chain will be more

sustainable and should be commercially more efficient than road-only transport.

As the objective of promoting MoS is to integrate shipping and European ports into TEN-T, the EU

Commission (2002) has made clear that the SSS image must transform from its slow, worn-out,

poor quality, low-value cargo transport role, into an efficient, environmentally-friendly and high

profile part of an integrated and sustainable European transportation system (Ng, 2009). In order to

strengthen its image, the EU Commission, (2002) has included SSS as a TEN-T project that reflects

European interests, and in so doing prioritising SSS in terms of financial support.

Moreover, because it has been observed that MoS sea corridors carry fast, competitive and efficient

SSS transport, SSS will for this reason the be an intrinsic part of the MoS framework. These MoS

will concentrate flows of freight on specific sea routes with the aim to establish new viable, regular

and frequent maritime links between Member States, reduce road congestion, and improve access to

peripheral EU countries (Psaraftis, 2005).

From this standpoint, the MoS could remove substantial volumes of goods traffic from congested

European roads thereby easing major road bottlenecks (EU Commission, 2006c). The next logical

19 Extract from Trujillo & Medda (2009)

Page 168 of 192

steps entail the application of the MoS concept to SSS operations and the definition of maritime

corridors; by so doing, the participating ports will comply with a set of requirements that can ensure

efficient SSS practice. By overcoming all service and administrative barriers, shippers will be

assured that bottlenecks will no longer hamper the transport chain. In effect, the MoS are maritime

corridors where the SSS meets a number of conditions such as frequency, regularity and quality of

service.

Through the TEN-T, the EU is supporting the development of MoS in four key corridors around

European coasts: the Baltic Sea (linking the Baltic Sea Member States with Member States in

Central and Western Europe, including the route through the North Sea/Baltic Sea Canal), Western

Europe (leading from Portugal and Spain via the Atlantic Arc to the North Sea and the Irish Sea),

South-Eastern Europe (connecting the Adriatic Sea to the Ionian Sea and the Eastern

Mediterranean, including Cyprus) and South-Western Europe (western Mediterranean, connecting

Spain, France, Italy and including Malta and linking with the MoS of south-east Europe and

including links to the Black Sea) (EU Commission, 2006a). By 2020, a fully fledged network of

motorways of the sea should be established throughout Europe on the corridors just mentioned.

According to the EU Commission (2006a), these corridors provide an essential part of the projects:

the “floating infrastructures” of the European seas.

Page 169 of 192

Figure 1: Motorways of the Sea

(http://ec.europa.eu/transport/maritime/doc/motorways_sea_2004_07_30_map.pdf)

As briefly discussed above, the EU Commission White Paper (2001) states that in order to help

these lines develop, European funds should be made available. The EU Commission (2004b), the

Council and the European Parliament therefore adopted a revision of the TEN-T, which provides a

legal framework for funding of MoS projects and defines the three main objectives of projects:

concentrate freight flows on sea-based logistical routes; increase cohesion; and reduce road

congestion through modal shift.

To fund the MoS project the Marco Polo programmes were created. The EU-sponsored Marco Polo

programme funds projects that shift freight transport off the road and onto the sea, rail and inland

waterways; this means fewer trucks on the road and, in its wake, less congestion, less pollution, and

increasingly reliable and efficient transport of goods. The first Marco Polo programme (EU

Commission, 2003) ran from 2004 to 2007. The Marco Polo and Marco Polo II programmes, with

their average annual budget of 18.75 million Euros, aims to shift 12 billion tonne-kilometres a year

of road freight to Short Sea Shipping, rail and inland waterways.

Page 170 of 192

The current, second Marco Polo programme (EU Commission, 2006) runs from 2007 to 2013 and

features:

• More money: The programme budget is €450 million Euros.

• More themes: This programme includes “motorways of the sea” and “traffic

• avoidance” projects.

• More countries: Countries bordering the EU are now also eligible for funding.

To guarantee the success of motorways of the sea, three conditions must be present for each project:

1. In order to obtain the necessary concentration of freight flows, choices have to be made

concerning ports and intermodal corridors and services.

2. All actors in the supply chain have to be committed to these projects.

3. MoS need to feature the best available quality throughout the chain in order to be attractive

for users.

THE SOUTH- EAST MEDITERREAN MoS - CURRENT POSITION

However, the development of SSS has not yet achieved the level of expansion expected by the EU

Commission.

More specifically, latest available transport statistics show a definite decrease in the sea share of

European freight transport as depicted in Table 1 and Figure 2 below.

Table 1: Modal Split, EU-27 (source: European Commission, DG-TREN, 2009)

Page 171 of 192

Figure 2: Modal performance, EU-27 (billions of tonne-km) (source: European Commission, DG-

TREN, 2009)

Page 172 of 192

It is noted that the above figures correspond to the pre-crisis period (2007). However, while the

overall objectives of the MoS were not efficiently met, for the South-East MoS the picture lags

behind as it may be appreciated through the following Tables 2 and 3, describing in the first instance

the creation of new lines and the latter freight shift.

Region New/

Ceased

Routes

2005 200

6

2007 TL Notes

New 1

3

7 7 27 New market opportunities related to

the automotive industry and the

development of logistics

Overall growth in exports from

Northern Europe to Russia

Ceased 9 5 6 20 The level of service provided by the

ship-owner on the routes (e.g. small

size of Ro-Ro vessel, frequency, etc)

was no longer competitive with

overland connections and other

maritime operators.

High level of competitiveness on

specific routes characterised by a

limited market

Balt

ic

Net

New

Lines

+4 +2 +1 7 In the 2005 – 2007 period, maritime

operators showed a strong will to

achieve new market opportunities.

More specifically, they have started

many new services (27). However, a

great number of routes have been also

ceased (20).

The overall balance between new and

ceased routes is positive, even if the

market looks “mature” and

characterised by a high level of

competition.

New 6 6 8 20 New market opportunities due to the

build up to the 2012 Olympics and

the huge Thames Gateway. Huge

volumes of raw materials are

expected to be transported between

Belgium and UK in the next five

years.

Replacing the business of a

bankrupted ferry company

Ceased 5 2 6 13 End of not profitable services

Ferry company bankrupt (high level

of port fees)

Nort

h

Sea

Net

New

Lines

+1 +4 +2 7 In the 2005 – 2007 period, maritime

operators have started several new

services (20). However, a great

number of routes have been ceased

Page 173 of 192

(13).

The overall balance between new and

ceased routes is positive, even if there

is a great competition among

operators.

New 1 2 2 5 New services operated by a road

haulier company to achieve the

market needs with an adequate level

of service

New market opportunities due to the

opening of new rail-ferry berths

Ceased 0 1 2 3 Lower level of demand than expected

East

Med

Net

New

Lines

+1 +1 0 2 In the 2005 – 2007 period, maritime

operators did not provide a great

number of new services. Only 5 new

routes were started while 3 routes

were ceased in the same period.

The market appears to have a high

level of maturity even if it does not

show a great competition among

operators.

New

Lines

1 4 3 8 New opportunities related to a

growing demand between Italy and

Spain and new markets (e.g.

Morocco, Tunisia)

Ceased 2 1 0 3 The low level of service on specific

routes (e.g. frequency, vessel speed,

etc) did not allow to achieve the

market needs

Wes

t

Med

Net

New

-1 +3 +3 5 In the 2005 – 2007 period, maritime

operators did not provide a great

number of new services. Only 8 new

routes were started while 3 routes

were ceased in the same period.

The market appears to have a high

level of maturity even if it does not

show a great degree of competition

among operators.

Table 2: Maritime routes established and ceased in the 2005 – 2007 period (Market reports &

outlook for ferry, cruise, Ro-Ro and high speed shipping, ShipPax 2008, 2007 and 2006)

Table 2 indicates that while other MoS show significant efforts for the development of new lines,

such activity is less obvious in the East Med. The lesser performance of the South-East MoS is also

evident in the following Table 3.

F

MoS European Freight Corridors % of ton-km saved on total

European road network

Baltic Southern Jutland (DK) and German Baltic

Sea coast to Baltic States

0.24%

0.44%

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Poland - East Sweden 0.08%

German Baltic Sea coast– Finland 0.12%

Ireland - Spain/ Portugal 0.33%

French north coast - Spanish north coast 0.49%

French Atlantic coast - Spanish north

coast

0.96%

Western

Europe

Belgium/ Netherlands - Portugal 0.54%

2.42%

Spain - northern Italy 0.1% SW

Med France – Italy 0.1%

0.20%

SE Med Trieste/Slovenia - Greece 0.15% 0.15%

Table 3: Saved ton-km in % on total European road transport network through the utilisation of

motorways of the sea (EC Publication, 2006, MoS Modernising European Short Sea Shipping)

ANALYSIS

The present analysis follows the Template under ANNEX I of the present document which is

proposed in the WP3 & 4 workplan.

Actors

While, the notion of the MoS started as a private initiative on routes where commercial viability

was identified, the European Commission considered it an environmental solution to the continuous

growth of land transport. To foster short sea shipping growth within the European Union waters, to

promote a more balanced usage of transport modes and to focus on intermodality development, the

motorway of the sea concept was reborn as a policy option in 2001 by the Commission, and the

white paper on transport policy set out some principles regarding their implementation.

“The motorways of the sea should be seen as cross-border projects at transport level between

Member-States that required hinterland access and simplification of goods transit (European

Commission 2001), which relied on intra-community trade and on the maritime and inland

waterway transport elements.”

The above statement explains why the motorways of the sea concept differs from the short sea

shipping one; while the former has an international character, the latter also includes coastal

domestic connections and connections from mainland to islands areas.

The MoS is an intermodal alternative to pure land (or road) transport and therefore includes all

actors involved in the intermodal chain such as shippers, forwarders, shipping companies, ports &

port authorities and principally public authorities of all levels involved in the transportation of

goods.

The Commission also highlighted that the biggest disadvantage were missing links between sea and

land, and ever since there has been considerable debate on the topic of ports and bottlenecks in ports.

The first workshop about the motorways of the sea took place in January 2003 and the concept

raised much debate. It was the opinion of most participants that motorways of the sea should be

developed on a commercial basis to give short sea shipping an attractive place in the supply chain

rather than adopting a public service concept philosophy; the latter would be counter-productive for

the promotion of short sea shipping services. The participants also recognised that the concept was

yet to be defined and that it was a complex issue that went beyond a simple connection between two

ports. Nevertheless, the concept was one of the measures presented by the Commission in the 2003

action programme for the promotion of short sea shipping (European Commission 2003a).

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The study carried out by the High Level Group, chaired by Karel van Miert and presented in June

2003, defined the four motorways of the sea. According to this study, the potential of maritime

transport on intra-Community routes needed to be covered by innovative cooperative relationships

between public authorities and the private sector. The High Level Group defined motorways of the

sea as “floating infrastructures” that move goods by sea from one Member State to another which

aim at substituting motorways of land to avoid congestioned land corridors, give access to countries

separated from the European Union mainland and enable a better integration of waterborne

transport with surface modes.

The High Level Group proposed that the mostly suited vessels for these services would be ro–ro

vessels although lift-on–lift-off (lo–lo) vessels could be considered at a later stage, whenever their

usage were appropriate, but in connection with feedering dispatching schemes. Three explanations

can be identified for this proposal. The first one may be due to historical reasons; the first

motorways of the sea considered ro–ro cargo. The second one relates to ro–ro flexibility in catering

for any and all wheeled cargo, plus containers, heavy lifts, and so on. Finally, the third reason may

be due to geographical reasons; the concept is most adequate to the Baltic and North Sea areas

where the Group envisaged a short-medium term concept application, and where there is already an

intensive ferry operation.

The High Level Group also stressed that the successful launch of the motorways of the sea much

depended upon the performance of numerous parallel actions that eventually will lead to

concentrate freight on certain maritime routes; these include convincing hauliers, shippers, and

forwarders that transport chains comprising waterborne legs offer logistics benefits, eliminating

systematic customs checks, and other administrative burdens through the implementation of

electronic reporting for port authorities, offering a direct access to ports and dedicated port facilities,

respecting competition rules, assuring all year round navigability, obliging the payment of tolls by

the road sector, the internalisation of external costs by road and rail modes, and making use of the

most up-to-date available shipping and port technology to deliver faster and reliable shipping

services.

To implement the motorways of the sea concept through Article 12a of the trans-European transport

network guidelines, the Commission released a consultation document in July 2004 (European

Commission 2004b). Through this consultation, the Commission sought the views of the parties (i.e.

Member-States National and Regional Administrations, European and National Associations, Ports,

Transporters, Consultants, Carriers) concerning the implementation of motorways of the sea

projects. The key concerns of this consultation are presented in Table 4. One of the principals

concerns as may be recognized in Table 4 is the threat of distortion of market competition.

1. Motorways of the sea projects will be launched without sufficient preliminary investigation in

relation to the network and investments aspects of the project.

2. Motorways of the sea can only be commercially sustainable, if they offer a competitive

advantage with self-drive road transport.

3. Motorways of the sea guarantee the same quality level as road transport (in terms of

efficiency, reliability, frequency, cost-benefit, and so on), but also offer a competitive

alternative from a geographical point of view.

4. After the initial period, assisted by public funds, motorways of the sea must run commercially

viable services and must compete on a free access market, contributing to an effective

enhancement of the European Union mobility.

5. Motorways of the sea should not be artificially developed as this would give ports not linked

to such motorways a disadvantage status and lead to distortions of competitions.

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6. Public financing should be approved with care especially where investments in facilities,

ships, and services are concerned. Public funding should only be allocated if a genuine modal

shift can be demonstrated.

7. Each individual project to be assessed on its own costs and benefits. 8. Motorways of the sea should be driven by the industry for a market-oriented commercial

approach.

9. The effect of the concentration thinking proposed by the European Commission may bring

congestion in ports and hinterland transport.

10. The proposals for investment in new port facilities or new shipping services should be market

driven.

11. Eligible ports should not be limited to category A ports.

12. Strong emphasis on prevention of distortion of competition and tendering procedures.

Table 4: Motorways of the sea concerns expressed by the interested parties (2004 Public

Consultation - Adapted from the comments received by the European Commission in the sequence

of the consultation carried out on the ‘Motorways of the Sea – Implementation through Article 12a

TEN-T’ paper.

Port Operators/ Authorities

Ports became a focal point in the MoS discussion as they were (are) viewed as the major bottleneck

in the procedure. More specifically, the EC-DG for Transport and Energy (position as of July 2006)

identified 39 “bottlenecks” in the development of SSS & MoS in Europe categorised under image

(1 bottleneck); administrative (7); door-to-door (5); ports (12); member state specific (14).

Paixao Casaca (2008) presented a survey of Ports views/positions on MoS. The study concluded

that port authorities consider MoS an opportunity to meet their present challenges. Most successful

ports will be those that have drawn attention to the prerequisites presented in Table 5 (see below)

and which are able to handle both ro–ro and containerised cargoes. This potential falls on port

authorities that handle large volumes of cargo (i.e. Rotterdam, Hamburg, Antwerp,

Bremen/Bremenhaven, Gioia Tauro, Felixstowe, Valencia, Le Havre, and Barcelona).

Most important criteria in addressing MoS were considered to be infrastructure and superstructure

aspects in the first place and hinterland connections in the second one. The criteria that followed

were in descending order of importance operations, strategy, infostructure, human resource, and

administrative aspects.

While, MoS shipping services will be provided by shipping lines/transport operators, ports will be

interfaces along a transport chain, in other words, suppliers of port services to shipping

lines/transport operators. Despite this, ports participating in the motorways of the sea are expected

to perform a very active role in finding ways to improve their operational performance. In terms of

modal shift, the key factor is the sea transport service itself, which largely relates to the quality and

suitability of the shipping service provided, though this will depend on adequate cost-effective and

efficient ports.

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Table 5: The aggregation of motorways of the sea interfaces prerequisites (Source: Paixao Casaca

(2008)

Shipping Lines

If SSS is to penetrate this market, then the challenge is to be able to offer the same overall service

package as road transport.

Baird (2005) makes the case that the seaway-equivalent infrastructure of the roadway or the railway

is the deck of a ship. The seaway is not the sea, and not dissimilar to land in that sense (i.e. if one

visualises land as it is, or would be in its raw state, in the absence of roadway or railway

infrastructure). As the seaway is the deck of a ship (and perhaps most vividly the garage deck of a

RoRo ship, on which trucks, trailers, and other intermodal units can be driven on and off, rather

similar to a roadway), it therefore seems indefensible of decision-makers (or transport economists,

for that matter) to maintain that somehow or other roadways and railways are deserving of public

‘investment’ whereas seaways are not.

This ‘institutionalised’ bias in favour of subsidy applied towards land transport infrastructure,

which has strengthened in Europe over the last five or six decades, has inevitably weakened the

relative competitiveness of sea transport during that same period. Given the reality of the situation,

it seems logical that if sea transport is to become an effective ‘alternative’ to long-distance land

transport, and to publicly financed roadways in particular, then that will require some form of

public intervention in order to counteract market distortions.

In terms of vessels, Mediterranean shortsea shipping is understood to cover all sea transport in the

region (including the Black Sea), which does not require ocean-crossing voyage. Thus, Short-sea

ships are sea-going cargo-carrying of less than 5000 GT2. Ships of less than 100 GT, non-propelled

vessels, and harbour or inland waterway service vessels are not included. It may include a voyage

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leg on rivers, lakes or canals.

Trade in the Mediterranean has been in low value products, once shipped in bulk, but now treated as

containerisable. It is the low value of these products that has been instrumental in making freight

rates, at best, stable. It is this reduction in prices that has lessened the competition of trailer

operators, whose transit times are marginally better, but whose rates are significantly higher than

shipping lines. However, the just –in-time model of production has a great impact on the feasibility

of the shipping lines as while on the one hand low rates of shipment of low value products have

restricted investments in vessels, this in turn has limited the potential of these vessels to provide

regular and fast services.

The European Short Sea fleet is in a dismal state. According to a study by Wijnolst and Waals

(2005), 55% of the fleet is older than 20 years, 38% is older than 25 years, 21% older than 30 years

and 10% of the ships is older than 35 years. This fleet has an average age in excess of thirty years,

despite hasty recent orders of double skin tankers (Psraftis, 2009). Profit margins of short sea

operators, as previously described, have been slim, the banks have been unwilling to extend credit

to them and the construction of ships in the EU has been expensive. The urgent replacement of the

EU fleet will soon call for new ideas and fast implementation (Corres and Psaraftis, 2005).

Shippers and Forwarders

The integration of shortsea shipping into more sophisticated just-in-time systems remains a

permanent problem in the Mediterranean Sea. Transit times may be inaccurate and delivery times

from port to importer premises are subject to lengthy delays in customs clearance.

A growing interdependence marks the relationship between shippers and shipowners. As chain

transportation implies a series of operations frequently supplied by different modes, the emphasis is

not just on the operation of each link but the coordination between the various stages as well.

Several shipowners attempt to keep in pace trough their transformation to multimodal operators. To

compete successfully they have their own road haulage, establish schedule cooperation with rail

networks, or operate port terminals. The objective is to control the complete chain and offer

profitable, integrated to the inland network, services.

However, successful cases in MoS have been achieved by Shippers or associations of producers.

For example the Turkey – Greece – Italy line and the Israel – Cyprus/Greece – Italy line.

Public/ Government Authorities As a policy initiative it is expected that Government and respective Public Authorities would have

an important involvement. In many ways the strategic involvement of public authorities has played

an important role either by supporting the MoS by providing other supportive measures or by their

not involvement creating greater imbalances in the South – East Med MoS.

Innovation Barriers

As described in Kapros (2010), with respect to the implementation of the MoS Initiative, the

following main barriers exist:

Regulatory and legal barriers

In general, the maritime transport operators, mainly ship-owners, appear not so favorable to

participate in the MoS program. The main reasons are listed following:

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1. The benefits of formulating a MoS route, in regard to the competition existing in the sector,

are doubtful in several corridors

2. According to the MoS institutional framework, the one who takes all the risk (operator) to

establish the new line is not protected against competition. That is new players may appear

once the line is established.

3. The financial incentives are small compared to the risks, which hinder their participation in a

call. The way the subsidy is calculated results in a very small amount compared to what the

ports are getting and compared to what the investment needed for a new vessel is today

4. There are many commitments that have to be made to participate in the current East

Mediterranean MoS call and in respect to the future Ten-T and Marco Polo II calls.

5. These issues are combined with the complexity of applying an early exit strategy if the line is

not successful. It is not uncommon in the sector that competitors enter a line developed by

another operator who could not withstand the significant financial burden of developing the

line and exits it with a loss.

In general, the incentives and terms regarding the Marco Polo program were considered onerous

regarding transport operators, compared to the risks that they might undertake. This is the reason

that very few proposals were in any case submitted in Marco Polo I.

Technical barriers

1. European Intermodal Loading Units (EILU)

On 10 April 2003, the European Commission adopted 14 actions to promote SSS. One of these

actions was to standardize the loading units to combine the stack ability of a container with the

pallet wide cargo space of a swap body. The diversity of loading units is a major logistical

barrier requiring special handling equipment and adaptation and creating frictional costs and

delays during modal transfer. Though the EILU provides some advantages, there are major risks

and costs for transport companies. EILU loading units would have to gain market share from

existing containers and swap bodies until the latter are disposed away at the end of their life

cycle. Vehicle units especially, cellular ships and barges would require adjustment to their cell

guides to accommodate the EILU units. Transport companies and owners of the presently used

loading units expect the market forces to reach a decision on the ideal standard for loading unit

instead of authorities to enforce standards. Whatever the reason, the diversity of loading units

poses a significant barrier to MoS.

2. Lack of suitable handling equipment at the seaports

Harmonization of loading units coupled with standard handling equipment would ensure a

smooth transfer of cargo between the modes (road/rail to shipping and vice versa). Excluding the

major hub ports, few regional ports have suitable equipment for unloading and loading trains (or

their wagons) to/from vessels. This clearly restricts the feasibility of developing new intermodal

services. Finding the right type of equipment for the local port needs and obtaining the required

funding would constitute a technical barrier.

3. Lack of road/rail connections to ports

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Road access interfaces of the seaports present in most of the Greek cases insufficient capacity.

In terms of connections to the road network all ports can be considered to have adequate if not

always congested free connections. In addition, rail links to many ports (particularly in the

Greece-Italy corridor) do not have a suitable rail connection to the port (within some cases gauge

differences).

4. Outdated information systems

Modern communications and information technology can yield benefits not only to the sea

operators but also to inland transport operators. Improved co-ordination therefore benefits the

whole supply chain through the reduction of time and costs. Adequate information and

communication networks and a ‘working in a real time’ philosophy make possible to integrate

shipping with inland connections as an integral part of the logistics chain. Unless most of the

European category ´A´ ports (especially the small and medium sized) move towards greater use

of ‘best practice’ telematics solutions, then this subject will still represent a barrier to more

efficient and effective new intermodal services.

Financial and commercial barriers (internal-external market competition)

The commercial barriers are inter-related with some operational aspects of maritime transport

and flow patterns as well. They have been already mentioned in previous paragraphs and can be

summarised as following:

1. Speed of ships

The speed is a critical barrier that inhibits the attractiveness of MoS to time sensitive cargoes.

Sailing speed is of more concern to ferry passengers rather than freight traffic. Higher speeds

make better use of assets with faster turnaround times, but, on the other hand, speed is bought at

greater cost particularly in terms of higher energy consumption per km and to a lesser extent

higher capital costs of motive equipment or ship redesign. Higher speed will not therefore

overcome cost barriers that might exist on lightly used routes (as it increases the cost for

individual shipments) or lengthy routes (compared with for instance the more direct road

alternative). The right mix of speed and cost will depend on individual circumstances and the

availability of transport alternatives.

2. Diffuse traffic

Concentration of cargoes is a pre-requisite to ensure the optimization and viability of MoS.

Many regional markets in the Eastern Mediterranean are not able to provide the required

volumes and concentration due to nature and value of cargoes, location of industries and/or

markets, logistics structures, etc. resulting in diffused cargo traffic and low volumes. This will

remain a significant barrier to many ports, especially the ones in the peripheral regions of Europe

reducing their options to be a part of the MoS network therefore losing public investment

opportunities.

i. Market complexity and lack of transparency

The involvement of many intermediaries (freight and transport brokers, administrations,

commercial acquisition, expeditors, stevedoring companies etc.) makes difficult to obtain

complete overall cost structures of MoS routes. Moreover the involvement of intermediaries

varies from port to port creating difficulties in obtaining representative cost figures for the

different logistical and administrative processes blurring the transparency of the cost factors.

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ii. Pre/End haulage costs

Pre-haulage and end-haulage together constitutes almost half the cost of a door to door

delivery network employing a “short” sea route. This could be attributed to two primary

reasons: salaries and road congestion in the port vicinity. Salaries of the drivers vary

considerably from one Member State to the other (the hourly rate of an Italian driver is about

45% higher as compared to a Greek driver). Presently, road congestion around ports is a

significant problem that is going to grow with the potential increase in port traffic with

establishment of new MoS networks, at least in the few selected ports.

iii. Shipping costs

Cost analysis discovered that type/size of vessels used in an origin-destination pair has a

large effect on the total costs of a maritime connection. On several routes, the optimal vessel

(in terms of capacity, engine sizes/power) is seldom used. Consequently, the vessel may be

overqualified for the service employed. In addition to fixed capital costs, the variables in the

vessel operating costs determine the price and consequently the profits of the shipping

companies. Other variable costs are mainly crewing, fuel costs and maintenance costs. By

introducing foreign crews, shipping companies have been able to squeeze out further profits

from their operations. The first attempt to tackle the situation has been to subsidise national

crew labour costs (through tax reductions) to ensure that the national labour cost is

competitive with the international crews. Other methods have been to start different forms of

international registers and capital subsidies for ship procurement.

Decision making barriers

The decision-making process in choosing a transport mode –or an intermodal chain alternative

solution- is a complicated process. The attitude of actors towards intermodal transportation

results from both “objective” characteristics and individual perceptions. Taking into account the

multiplicity of decision variables and contexts, as mentioned previously, there is no standard

approach. Each user proceeds to decisions in an individual way, in relation to both his particular

requirements and the respective supply characteristics. However, without neglecting this fact, in

each region some common patterns in the decision-making process of transportation users exist.

Geographical barriers

The geographical configuration of the East Mediterranean region, including two insular member

states (Cyprus, Malta) creates a number of limits for the MoS development. The perspective of

application of the general MoS concept in the Eastern Mediterranean faces with an institutional

paradox: a large part of eventual connections concerns maritime flows between islands (Cyprus,

Malta) and the continent (Italy, Greece, Slovenia), or between islands.

Thus:

• These flows represent a “captive” market segment, without modal alternatives for a

“modal shift”.

• It can be assumed that the market has already covered the needs

• Maritime transport being the only solution, the relevant transport demand is not expected

to spectacularly increase in order to justify additional business developments; this,

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because it purely depend on demographic and socio-economic parameters of the insular

countries.

• Considering the population parameters in the insular member states, it appears quite

difficult to consolidate important quantities of goods to reach sufficient productivity in

order to develop new services.

• On the contrary, there are significant potential flows on corridors between the EU

member states of the Eastern Mediterranean and third “Mediterranean Partner

Countries”20.However, the MoS framework does not include financial instruments for

such maritime links. Eventual incentives for developing such maritime routes would

possibly ensure to potential operators the viability of a wider network, balancing with

uncertainty of other purely European links. Excluding these business opportunities from

the institutional framework might discourage a number of market actors in the region.

• In addition, business perspectives on the potential of the route Turkey – Greece – Italy

faces with the current limitations set from the Ministry of Transport & the EU regarding

the number of trucks that can come from Turkey annually21.

Market Competition barriers

1. Barriers related to internal maritime market competition

There are several ways to examine the internal maritime market competition in the region.

Firstly, it can be considered in relation to existing services. Relevant actors activated for

different maritime market segments in the Eastern Mediterranean region, are listed following

[7]:

• Operators offering “regional” Short Sea Shipping (Lo-Lo) services

• Short Sea services resulting from hub and spoke operations (transshipment from deep

sea)

• Existing ferry operators (pre-existing MoS)

Compared to the two first, the existing MoS segment represents a limited number of

connections in the market, essentially in the Adriatic-Ionia corridor.

Basically, the traditional SSS services do not exercise real competition to potential MoS

services since they are not addressed to the same commodities. MoS is mainly addressed to

commodities with high requirement in travel time and reliability while SSS is more addressed

to economies of scale and extended consolidation of flows. Therefore, possible new MoS

services face mainly with their own economic viability. It is not surprising that in other than

the Adriatic corridors of the study area no MoS services are established. Looking at the

regional trade flows, the possibilities of critical flow concentration is often limited [8].

20 For example the route Turkey- Italy shows a great deal of potential.

21 The truck operators from Turkey have already requested from the Greek operators to establish new maritime links.

The association has conducted discussions with the Greek authorities regarding this problem but nothing has been

resolved.

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Finally, a strong competition might appear from the existing lines, as they are already well

established in the market. The existing Ro-Ro lines are expected to be an important barrier for

new comers in the Adriatic MoS corridor.

Beyond this intra-sectorial approach of market competition, it must be noticed that the

container segments (SSS and intercontinental) are very attractive and lucrative at this time for

ship owners and potential investments in the shipping industry. The same is not true for the

Ro-Ro and Ro-Pax segment that currently has limited potential and low margins. It is a niche

market that focus on freight that has to be transported faster than what can be achieved

through conventional container ships, where operating costs are very sensitive in speed while

speed would be the competitive advantage of Ro-Ro. It is not surprising that most of the

traditional Greek operators in this segment are slowly exiting the market because of its small

potential. Those that remain have to do special agreements with truck operators in order to

survive (e.g Minoan Lines).

2. Barriers related to external market competition: competition from the road

Reminding that, in the principle, MoS refers to services between continental ports, the “real”

competition is expected from road transport. Therefore:

• The average distance, for which road transport is relevant, is significantly increasing [9],

contesting new market shares;

• Due to the extremely strong competition within the road transport market, important

pressures lead the road transport companies to offer very low fares;

• Road transport is completely flexible as far as schedules of departures and arrivals are

concerned. Flexibility in schedules is confirmed as a crucial modal choice criterion for

the users;

• Road transport is entirely based on a door-to-door uninterrupted process that does not

necessarily involve other partners; the chain organization and control become simpler

and more transparent for the decision-maker;

• Road transport is further favoured by the fact that the percentage of fixed cost within the

total operating costs is lower that in the other modes.

Other barriers in general

The European Union included the concept of MoS within TEN-T through its extension in 2004,

giving a legal framework for funding port infrastructure projects. This happened because of the

lack of adequate funding coupled with unacceptable delays in completion of the priority TEN-T

projects, stated by the review of the “Van Miert Group”.

Reconciliation of policy-oriented and strategic plans of infrastructures with demand-oriented

provision of transport and logistics services in a competitive environment is the challenge of the

matter. Also, while transport system is strictly interrelated with many dimensions (economic,

social, industrial, environmental, institutional and governance issues), the planning and

execution of policies has often been independent from other relevant dimensions, originating

conflicts and confusion with the result that policy objectives are rarely accomplished.

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Moreover, stakeholders and different infrastructure standards operate in mutually exclusive

economic, regulatory, fiscal, administrative, liability regimes and social structures making more

complicated the achievement of policy’s objectives. In this framework, a number of crucial

issues and questions arise in view of a successful development of MoS projects in the Eastern

Mediterranean region:

• If the financial instruments of the EU, limited to a starting phase as far as operators are

concerned, are sufficient for guaranteeing the viability of services as if they would be

"market driven"

• If this policy can avoid possible distortions of competition while creating the proposed

MoS

• The MoS concept aims at creating or reinforcing a new market segment, for which Ro-

Ro and ferries are more suitable than the Short Sea Shipping traditional market.

Therefore, it should directly compete to road transport, avoiding any "internal" maritime

competition. It should be examined if the EU policy provisions are in strong relevance

with it

• The fact that many connections among continental ports of the Eastern Mediterranean do

not exist indirectly reveals economic viability constraints. It should be examined if MoS

projects must focus just on the improvement of existing lines

• It should be investigated if the regional responsible authorities are well prepared to

specify financial measures and selection criteria according to the specific needs of the

Eastern Mediterranean

Finally, the framework for financial State Aid to maritime transport is described by the relevant

Community guidelines in 2004 [6]. The guidelines recognized that launching Short Sea Shipping

and hence MoS services may be accompanied by substantial financial difficulties which the

Member States may wish to attenuate in a bid to ensure the promotion of intermodal services.

FOCUS GROUP INPUT

The present section contains information derived from the focus group. The section contains only

new information, that is information not found in mainstream literature or other publically available

studies.

“Motorways of the Sea” is a term, which on its own does not support the idea of modal shift. Its

construct stems from policies in land transport which for many years were solely or principally

operated by the public sector.

Actors

The MoS initiative is a Policy pursued by public actors while the Maritime Market and the SSS

Market is principally private sector driven and a very competitive market. Subsidies of any short

may lead to market distortion and favourism, as it may be pursued by various lobbies.

Port competition is also a negative factor in absorbing support funds, as these too may distort

competition.

Market

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The shipping/Trade market during the last decade has undergone significant changes following

international economic and production changes. Hence:

• While in the beginning of the decade, there were few international trading companies (eg.

Spain and Italy) and subsequent trading was conducted with these initial importers, then

most whole sales deciding to import on their known reducing intra-European Trade.

• The inclusion of new member states has made road haulage easier and what has been

observed is that the sea leg, if not eliminated, has become smaller. This, also, applies to

products, which are traditionally transferred by sea.

• Only heavy products, which may not be transferred by land due to truck load restrictions are

finding their way to sea transport. It is roughly estimated that 90% of light-weight products

are transported by trucks.

The above have lead to a general decrease in total trade in the East Med.

Recently, due to an increase in petrol prices and, therefore, the inevitable application of “extra slow

steaming” is leading to a shift from Just –in-Time production and manufactures are stocking. This is

being presented as an increase in volumes but it is only due to the change in the supply model.

Technology, Organisational and Managerial Factors

Short Sea Shipping should be viewed as the sea leg of the entire door-to-door transport chain. This

means that transfer from one means of transport to the other should be seemless.

This inevitably is translated to:

1. Loading units its may be transferred from ship to truck. It may be that EILU may provide

solutions. However, it will also incur costs, which the SSS industry is not able to undertake.

2. Free zone pass for shipments arriving from EU countries. This is not the case for many ports.

This does not have to do only with the country (customs) but with the regulations imposed

by each independent port authority. To this effect, there are conflicting estimations

concerning the expected effectiveness of the directive on Common Maritime Space. There

was agreement on the principal but concerns on the impact lobbies were having on its final

form.

3. Vessels in the SSS market are old and, thus, do not have new technology piloting equipment.

This does not necessarily mean that they need obligatory pilot services.

4. In addition, most SSS vessels sail under EU-flags, which should allow for access to EU

ports but they are burden by the cost of more expensive crews.

5. The concept of MoS can only be driven by forwarders or companies providing logistics

services. The shipping line is not always aware of the implications or the needs of the

costumer.

Business Culture

Page 186 of 192

The MoS was developed bearing in mind specific business culture and institutional framework.

This is not the case in the Mediterranean.

Finally, any funding should be assigned very carefully as it may lead to distortion of competition or

abuse by beneficiaries, as it has happened in the past.

CONCLUSIONS

MoS is a policy initiative and as such it is important to take into account the individualities of the

various regions of application. It is implied in some reports and it was verified in the focus group

that the initiative did not take into account:

• The fact that the SE MoS includes two island countries (Malta and Cyprus) and one multi –

island country (Greece), where trade can only be accomplished through the sea and therefore,

modal shift is partially possible

• With the exception of Italy, the SE MoS involves small countries with numerous ports with

no single origins/destinations prevailing as stronger and therefore any support may distort

competition

• Trade in the SE MoS is conducted between Member States and Non-Member States

The application of the MoS is, in many ways, considered to coincide with Short Sea Shipping

instead of the sea-leg in an intermodal transport chain. In this sense emphasis for its promotion is

placed on actors, who cannot be process drivers. On the contrary, exceptional best practice may be

identified when producers or forwarders combined interests (and consolidated quantities) and

developed the appropriate intermodal chain including the respective sea leg.

Finally, the numerous existing barriers intensify the issue.

Page 187 of 192

ANNEX I - Policy intervention template

Partner short name UAegean

Title Motorways of the Sea (MoS)

South East Med




Nationality of case (applied) South East Europe

General national framework of policy intervention 1. Actors support


• Public Sector Authorities, Local, national and European Commission

• Social Partners

• Stakeholders such as port authorities, SSS operators and potential users of MoS

services (shippers, forwarders, road hauliers) 2. Which level of government ?


Initiated by the EC, it support mechanism lies in central government (respective government

ministry of agency). However, port authorities operating independently may off-set any

efforts made by government.

3. Role of competent authority? Regulator and Funder



The “motorways of the sea” concept aims at introducing new intermodal maritime-based

logistics chains in Europe, which should bring about a structural change in our transport

organisation within the next years to come. These chains will be more sustainable, and

should be commercially more efficient, than road-only transport. Motorways of the sea will

thus improve access to markets throughout Europe, and bring relief to our over-stretched

European road system. For this purpose, fuller use will have to be made not only of our

maritime transport resources, but also of our potential in rail and inland waterway, as part of

an integrated transport chain. This is the Community added-value of motorways of the sea.

In its Transport White Paper of September 2001, the Commission proposed the development

of “Motorways of the Sea” as a “real competitive alternative to land transport.” To help these

lines develop, the White Paper states that European funds should be made available. These

"motorways of the sea" should be part of the Trans-European network (TEN-T).

The adoption of Article 12a of the TEN-T Guidelines of 29 April 2004 (“TEN-T” - Official

Journal L 167, 30/04/2004 P.0001 - 0038, COM(2004)0884 ) by Council and European

Parliement gives a legal framework for funding the “motorways of the sea”. Article 12a

TEN-T gives three main objectives for the sea motorways projects:

(1) freight flow concentration on sea-based logistical routes;

(2) increasing cohesion;

(3) reducing road congestion through modal shift.

The Motorway of the Sea of south-east Europe is foreseen to connect the Adriatic Sea to the

Page 188 of 192

Ionian Sea and the Eastern Mediterranean, including Cyprus.

Factor roles 7. Type of factors




Technological:

New, integrated intermodal maritime-based logistics chains/

potential rail and inland waterways

Administrative and legal:

Various legislations: Directive 2002/6/EC on certain reporting formalities for ships; Marco

Polo; Intermodal loading units; Guidelines of TEN-T

Political and process related:

The MoS is a policy driven initiative aiming at establishing modal shift.

Socio-cultural and psychological: Modal Shift

Economic

o The development of MoS is essentially a “policy driven” procedure, aiming at

creating-or enforcing- new market niches that the market itself has not done.

o European funds and state aids

International:

South-Eastern Mediterranean Sea

Environmental:

Policy of MoS decreases the environmental impact of freight transport and reduces the

external costs of Transport.

8. Innovation barriers




• Regulatory and legal barriers

• Technical barriers

• Financial and commercial barriers

• Decision making barriers

• Geographical barriers

• Market Competition barriers (internal-external market competition)

• Other barriers in general

Page 189 of 192

Policy roles

Type of policy

analysis

Key

points

or not

(ranked

1–5)

Level of

government

involved (and

public/private

partnership ?)

Influence

during the

initiation

period

Influence

during the

development

period


implementation

/termination period

Standardisation N/A* N/A N/A N/A N/A

Stimulation of

R&D

TYPES

OF

VESSE

LS,

PORTS

MARCO

POLO

I&II/TEN-T

4 4 4

Knowledge

management NO

Infrastructure

development YES

MARCO

POLO

I&II/TEN-T

5 5 5

Regulation and

planning

SHIPS,

CREW

S,

PORT

AUTH

ORITIE

S

5 5 5 5

Legislation ALL 5 5 5 5

Pilots and

demonstrations N/A

Networking

FOCAL

POINT

S

5 5 5 5

Financial

resources and

incentives

YES,

BUT

NOT

FOR

VSLS

3 3 3 3

Niche

management N/A

National

security/strategies

issues

YES

Environment

issues

EXTER

NAL

COSTS

N/A = Non Applicable

Page 190 of 192

Actor roles

Type of actors

involved

Key points

or not

(ranked 1–

5)

Which level

of

government

involved (and

public/private

partnership?)

Influence

during the

initiation period

Influence

during the

development

period

Influence

during the

implementation

/termination

period

State experts,

State

administration

YES 5 5 5 5

Monitoring agents Ton-km

R&D Agent NO

Regulator NO, ton-

km

Innovation agent

OPERATO

RS/ EU/

SSS

Implementer SSS

Developer N/A

Lobby group Many 5 5 5

Inventors N/A

Industrialists, VIP

in Business Yes 5 5 5

Politicians YES 5 5 5

International

organization (or

E.U.)

YES 5 5 5

Page 191 of 192

Stress test

Indicators

selected

Before

(existing

infrastruct

ure)

Estimated

results

(forecast,

planning,

projected

data) from

experts /

advisors/

planning

agencies

Real

operation,

up to date

data

EVALUATIO

N of

IMPACTS of

a 50 % traffic

reduction

EVALUATIO

N of

IMPACTS of

a 20 % traffic

reduction

EVALUA

TION of

IMPACTS

of a 50 %

traffic

increase

EVALUA

TION of

IMPACTS

of a 20 %

traffic

increase

Level of

traffic

- 50 % - 20 % + 50 % + 20 %

Level of

Demand

Level of

Subsidies

Revenues

from

operations

Return on

investment

Public/Priv

ate money

invested

Security

issues,

injuries,

accident

Extension

needed,

complemen

tary

infrastructu

re needed,

Page 192 of 192



Neighbourh

ood

approval

Public

debate,

opinion of

politicians

and experts

project

exported?