Proposal to establish a Shift 2 Rail Joint

Proposal to establish a Shift 2 Rail Joint Undertaking European Commission - DG MOVE Council Land Transport Working Party - Brussels 22 January 2014

AGENDA • Background and EU Policy context • Objectives and key elements of the Regulation

Key challenges of the rail sector • Insufficient growth of rail markets • Poor consumer satisfaction • Fragmentation of rail markets and diversity of national standards • Low profitability due to product customisation, capital-intensity of investments, long product lifecycles, and long and costly authorisation procedures • Reliance on public subsidies • Increasing global competition in the rail industry • Technical know-how in decline with 30% of sector workforce retiring within next 10 years

What are we doing about it? White paper on transport Fourth Railway Package Single European Railway Area

White Paper – a vision for rail transport 2050 Freight Passenger Shift 50% of road freight over 300 km to other modes Triple length of high-speed rail network Double rail freight volumes Majority of medium-distance passenger transport by rail Connect all seaports to the rail freight system Connect all core network airports to the rail network Rail Freight Corridors Deploy ERTMS

EU Policy context White paper on transport Fourth Railway Package Single European Railway Area

Fourth Railway Package Improve competitiveness of rail Spend public money more efficiently Remove administrative and technical barriers to improve interoperability and safety Open domestic rail passenger transport to competition Better governance of rail infrastructure Innovation pillar of the Single European Railway Area

Why an Innovation pillar? • Measures contained in the Fourth Railway Package will be important but not sufficient. • The rail sector needs major and coordinated investments in R&I that respond to market needs and contribute to completing EU transport policy objectives: • To reduce the costs of public service obligations • To optimise traffic management • To reduce the costs of infrastructure maintenance & renewal • To increase demand for rail passenger services • To increase demand for rail freight services • To ensure provision of adequate competence and skilled human resources

Why Technology Demonstrators? • Close the gap in the innovation chain (from ideas to market) • Support market uptake and impact by enabling the testing of innovative solutions under real-world conditions • Ensure strong involvement of all stakeholders thanks to collaborative nature of demonstrators • Strengthen the European dimension with cross-border demonstrators • Quantify the impact of the introduction of each new technology and of different combinations of technologies • Provide increased visibility and generate interest in the rail industry to attract top graduates from across Europe

Key priority areas for rail R&I Activities to focus around five areas or "Innovation Programmes": • New generation of high-quality, reliable rolling stock that substantially reduces the cost of rail services, drastically improves the quality of rail services and facilitates the use of trains throughout various Member States; • Intelligent traffic management and control systems, beyond signalling, building on current ERTMS, to optimise capacity, reliability and minimise life-cycle cost; • New railway infrastructure system that will radically improve capacity and performance and reduce costs related to development, maintenance and renewals;

Key priority areas for rail R&I • Innovative IT solutions and services to make railway services more attractive; • Sustainable and attractive freight solutions, helping rail to enter into new market segments and become an integrated part of advanced logistic solutions. Estimated needs to cover all 5 IPs = 1. 2 to 1. 4 billion € Based on draft industry technical proposals

What's already been done? FP 7 rail research (2007 to 2013): • 155 M€ for rail research = 3. 7% of total Transport Research budget • Around 50 rail projects (excluding cross-cutting projects) • Insufficient project coordination risk of overlaps and/or of generating uncoordinated or redundant technologies • Lack of system-wide approach with limited or uncoordinated participation of actors from the full rail value chain • Limited market uptake of innovations with EU funding focused on pre-competitive innovation at low Technology Readiness Levels and "estranged" from market needs • Limited leverage effect (30% of private funding on average) • SMEs = 16% of funding

What needs to be improved? ü Focus and coordination of research efforts: Reduce fragmentation of R&I efforts and focus them on areas with high EU added value (SERA and competitiveness) ü Leverage of EU rail R&I funding: Ensure long-term commitment from all partners and to leverage additional resources for R&I ü Broad stakeholder participation and sustained networks: Gather all the key players across Europe in partnerships to ensure a system-wide approach to innovation in rail and eventually better integrate infrastructure, rolling stock, signalling and other subsystems of the rail system

What needs to be improved? ü Market uptake: Close the gap in the innovation chain and support close-to-market projects that meet business and end-user needs ü Mitigation of innovation risks: Implement appropriate risksharing mechanisms taking into account capital-intensity of investments, long product lifecycles, and long and costly authorisation procedures ü Operational performance and cost-effectiveness: Provide a simple, efficient and cost-effective framework for granting R&I

Framework for EU intervention: H 2020 White paper on transport Fourth Railway Package Single European Railway Area Horizon 2020

Horizon 2020 Funding Horizon 2020 77 028 M€ Excellent Science Industrial leadership Societal challenges 24 441 M€ 17 016 M€ 29 679 M€ ~7% Rail 450 M€ Air Smart, green and integrated transport 6 339 M€ Road Waterborne … … … Urban … … … Crosscutting

Horizon 2020 – A new approach to R&I • Linking research to innovation by providing coherent funding from idea to market • Simplified access for businesses, all EU countries and beyond seamless universities, and institutes in • More support for activities close to the market, including technical demonstrators, leading to a direct economic stimulus • Partnerships on the basis of Articles 185 and 187 of the Treaty to be continued and strengthened further

Horizon 2020 Partnerships – Criteria Article 19 of the Horizon 2020 Regulation: PPPs (institutional or contractual) may be established on the basis of strict criteria: • • added value of action at Union level; • long-term commitment from all partners based on a shared vision and clearly defined objectives; • scale of the resources involved and the ability to leverage additional investments in research and innovation; • clear definition of roles for each of the partners and agreed key performance indicators over the period chosen. scale of impact on industrial competitiveness, sustainable growth and socio-economic issues;

AGENDA • Background and EU Policy context • Objectives and key elements of the Regulation

General objectives • Achieve a step change in the way rail research and innovation funds are gathered and distributed… • … with a view to stimulating the development of breakthrough innovations that… • … contribute to a faster and cheaper transition to a more attractive, competitive, efficient, integrated and sustainable European rail system… • … thereby supporting EU transport policy goals, such as achievement of the Single European Railway Area and the competitiveness of the rail sector.

Specific objectives Develop, integrate, demonstrate and validate innovative technologies and solutions that contribute to… ü reduce life-cycle costs of the railway transport system; ü increase capacity of the railway transport system; ü increase reliability and punctuality of rail services; ü a more attractive service profile, providing users with an integrated end-to-end solution for their transport needs; ü remove remaining technical obstacles to interoperability and efficiency; ü reduce negative externalities such as noise, vibrations, emissions and other environmental impacts; … While upholding the strictest safety standards!

Key principles Joint vision and holistic approach Tailor-made governance model with strong leverage Strong role for public authorities Openness and broad stakeholder involvement Efficient implementing framework

Joint vision and holistic approach • Joint priority setting in a Strategic Master Plan developed jointly by the Commission and the rail sector in the Joint Undertaking • Create the link between R&I activities and EU policy goals (SERA, competitiveness) • Create the link between R&I activities and business needs in the rail sector • Holistic view of the rail system taking into account all railway subsystems and their interactions • Integration and coordination of all rail R&I activities to ensure continuity and avoid fragmentation

Key principles Joint vision and holistic approach Tailor-made governance model with strong leverage Strong role for public authorities Openness and broad stakeholder involvement Efficient implementing framework

Tailor-made governance model JOINT UNDERTAKING GOVERNING BOARD Contributions to S 2 R work plan Additional activities in support to S 2 R Master Plan 8 FOUNDING MEMBERS Min. 270 M€ 200 M€ 70 M€ ASSOCIATED MEMBERS Min. 200 M€ 150 M€ Commission (50% votes) 8 Founding Members Max. 10 Associated Members + Observers (ERA, MS Group) UNION Max. 450 M€ (H 2020) Min. 920 M€

Key principles Joint vision and holistic approach Tailor-made governance model with strong leverage Strong role for public authorities Openness and broad stakeholder involvement Efficient implementing framework

Strong role for public authorities • Strong role for public authorities given the core objective of contributing to EU transport policy objectives and the Single European Railway Area: • Commission to chair the Governing Board and have final say on membership and composition of Board • Master Plan to be endorsed by Council • European Railway Agency to have observer status on the Board and act as advisor on interoperability, standardisation and safety • States Representative Group to advise on strategic orientation and ensure link with national and regional programmes and priorities

Key principles Joint vision and holistic approach Tailor-made governance model with strong leverage Strong role for public authorities Openness and broad stakeholder involvement Efficient implementing framework

Openness and stakeholder involvement • Balanced participation of all relevant actors thanks to a three-tier system: • Identification of a core group of Founding Members, including the largest private and public players, to secure substantial industry co-funding from the outset • Selection of Associated Members in a second stage to open up membership to a broad range of actors from the entire rail value chain and from other innovative sectors, including SMEs, research organisations, universities, etc. • Allocation of part of the Union contribution through fully open calls, including funds for broader collaborative research

Implementation of Union funding Max 30% ASSOCIATED MEMBERS Max. 135 M€ Min 30% FULLY OPEN CALLS Min. 135 M€ UNION Max. 450 M€ (H 2020) SMEs = Min. 20% 90 M€ Max 40% FOUNDING MEMBERS Max. 180 M€

Openness and stakeholder involvement • Eight Founding Members • Consultative process with hundreds of stakeholders from EU 28, led by UNIFE, based on Commission criteria: • Financially sound single legal entities with headquarter (or HQ of rail sector division) in EU member state • Individual own financial contribution, reflected in a concrete technical proposal, of at least EUR 30 million for the full duration of Shift 2 Rail • 8 entities fulfilling the criteria: 6 rail equipment manufacturers (Alstom, Ansaldo STS, Bombardier, Siemens, Thales, CAF) and 2 infrastructure managers (Trafikverket, Network Rail) • Automatic representation in the Governing Board

Openness and stakeholder involvement • Associated Members • To be selected via open call • Can be a grouping or consortium of legal entities • Individual own financial contribution of at least 2. 5% of the budget of the Innovation Programme in which it participates (~ € 2 to € 6 million depending on the IP) • Maximum 70 Associated Members based on available budget, although closer to 30 expected • Participation of SMEs and actors from the entire rail value chain encouraged • At least one Associated Member per IP represented in the Governing Board

Openness and stakeholder involvement Entities can participate via 4 different mechanisms: • as an associated member (individually or consortium) • as a subcontractor, consultant or other arrangements • through the fully open calls • through dedicated working groups € 90 million for SMEs over 7 years • >< In FP 7, approx. € 22 million for SMEs out of a total of € 155 million • Subject to regular quantitative and qualitative assessments

Key principles Joint vision and holistic approach Tailor-made governance model with strong leverage Strong role for public authorities Openness and broad stakeholder involvement Efficient implementing framework

Efficient implementing framework • Integration of Horizon 2020 major simplifications: • Single set of participation rules • New balance between trust and control • Just two funding rates • Single flat rate for «indirect costs» • Shorter time-to-grant

Efficient implementing framework • Standard provisions shared with the five Joint Technology Initiative (JTI) joint undertakings proposed in July 2013 • Integration of operational improvements following evaluation of existing Joint Undertakings: • • Streamlining of reporting requirements and simplification of budgetary procedures • Possibility of resource-sharing with the Commission and other Joint Undertakings or Agencies Running costs limited to EUR 27 million (<3% of total budget) and shared 50 -50 by the Commission and other partners

Expected timeframe Presentation by EC to Council 20/01/2014 TTE Council informal position 14/03/2014 Draft report in ITRE 12/02/2014 Vote in EP 02/04/2014 Vote in ITRE 18/03/2014 Formal establishmen t of S 2 R JU 25/06/2014 Adoption in TTE Council 05/06/2014 Legislative adoption procedure Launch recruitment procedure for Executive Director 01/07/2014 Appoint Interim Establish Director Governing 01/07/2014 Board Stakeholder seminar End April 2014 Appoint Executive Director 01/01/2015 Appoint Endorsement Governing of S 2 R Master Board Plan Members 1 st Qtr 2015 Initiate negotiations with Associated Members 4 th Qtr 2014 Setting up of S 2 R JU Consultative process for Strategic Master Plan EC to present preliminary draft Master Plan 01/04/2014 Launch call for Associated Members (based on draft Master Plan) Summer 2014 Adopt rules of procedure, financial rules, budget, staff establishment plan, offices, work programme, etc.

Thank you for your attention!