Note 5                                                                

European Vector: Railroad Electrification
by Tatiana Kovalenok, Oleg Petrov / CISR

Moldova needs large projects. It is these projects that, in opinion of the Government and Central Bank made public at the invest-forum in September 2005, can ensure a breakthrough in attracting investments, raising employment and revenues of the population and state budget, and, ultimately, in changing the country for the better, Europeanizing it.  

In order to do this, Moldova, first, has to reconstruct its infrastructure – energy, transport and highways, communications and water supply sectors. Partially, this task has been already done. The examples are construction of the port and oil terminal at the Danube (Giurgiulesti), Revaca – Cainari branch line, reconstruction of Chisinau’s airport and railway station. Next go the construction of the “North – South” highway within the framework of IX European transport corridor, creation of a hub (international trans-shipment point for airmail and goods) in Marculesti, reconstruction of the large-scale irrigation and, of course, railroad electrification. 

Railroad Electrification, %

Now, our territory is a “blank spot” on the map of the European network of electrified railroads. Romania is quite Europeanized in this regard, while in the east, a traction substation has already been constructed and railway poles have been installed from Razdelnaya to Varnitsa. 

It still was Soviet times when the electrification project was elaborated, but the collapse of the Union slowed down its realization. Today, Government doesn’t consider the issue of railroad electrification and the departmental opinion that it’s expensive and can’t offset the costs is one of the causes for that. In the meantime, factors affecting the efficiency of electrification – unlike conservatism of opinions – change depending on both the situation in the country and outside – in other countries that Moldova is linked to by economic, energy and transport ties.

Thus, the main factors affecting the efficiency of the railroad electrification are flow of traffic, cost of construction and electricity rate. The electrified Moldovan railroad requires, first of all, increasing of the flow of traffic, which will very likely occur once borders of the European Union get closer to Moldova, the Giurgiulesti seaport is put into operation, as well as marketing aimed at attraction of transit traffic to the Balkans direction starts developing. It is clear that the later it is done, the more expensive cost of construction will get. And the delay here is fraught with the rise in the cost of construction. However, the main argument in favor of electrification is economy of energy resources.  

The main thing is that only railway transport – like no other type of transport – can replace large quantities of diesel and motor oil imported to Moldova mainly from Russia for locomotives used now, by electric power.  

Dynamics of prices for these energy resources in the Russian market during the last decade is as follows: the cost of electric power rose 3 times, while diesel oil – 6 times and natural gas – 30 times. The cost of diesel oil which is currently the principle energy carrier used by locomotives at Moldovan railroads is 8700 MDL per ton. The cost of power that Moldova imports from Ukraine increased up to 2,50 cents per 1 kW/h. Distribution and sale of electric power to Moldovan consumers is done by Union Fenosa that sells electric power to legal persons at the price of 7,52 cents, including VAT. Given such prices, electrification is in clear advantage. Assessments show that the costs of a tractive effort made by an electric locomotive based on 1 kW/h of electric power equals to those of a diesel locomotive consuming 340 gram/h of diesel oil. Converted to money, savings are threefold. 

According to our estimates, the expected savings from the conversion of the Moldovan railroad to electric traction will amount to 17,2 mil USD per year. But it could be even more as the railroad could buy electric power wholesale, since traction stations can be connected up the 110/220 distribution networks. If that’s the case, the expected savings from the conversion to electric traction will amount to no less than 20,0 mil USD. Given such savings, if we exchange our diesel locomotives for the electric ones in CIS and start orienting ourselves to the electrification cost for 100 km of railway lines with the alternating current (as for Russia, it’s about 7 mil USD), the pay-back period of the electrification costs for 1292 km of Moldovan railway lines will not exceed 5 years just thanks to saving of fuel even under the current flow of traffic. 

These are overall estimates. Next, follow factors that both reduce the costs (many things can be manufactured in Moldova – concrete poles, cross-arms and other armature, for instance) and raise the costs (overhead contact lines, insulators, traction-feeding transformers and relay equipment have to be purchased abroad). 

The final conclusion on the expediency of electrification of the Moldovan railroad should be made based on the complex assessment of the investment project’s efficiency in two stages. The first stage would include assessment of the public efficiency, quality of the designed solutions and creation of acceptable conditions for investors. At the second stage, participants and the organizational and economic mechanism of the project’s implementation are established. 

If Moldova doesn’t want to miss the opportunity to use advantages of its geographical and transport location, which can happen if transit railway traffics redirect northward and southward of Moldova, it should immediately turn to the railroad electrification project and recalculate it taking into account the real costs of works and rates for competing energy resources. And invite investors. 

As for investment, it is reconstruction of the infrastructure that the new EU countries obtained the most part of credits and grants for. Moreover, according to the President of the NBM, Leonid Tolmaci “the country has enough financial resources – the problem is in the lack of viable projects. That’s why Moldovan banks accumulated 2 bil MDL (more than 150 mil USD!) – the money that the banks can’t find any use for”.