Proposal to establish a Shift2Rail Joint Undertaking

1. Proposal to establish a Shift2Rail Joint Undertaking European Commission - DG MOVE Council Land Transport Working Party - Brussels 22 January 2014

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

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

4. 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

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

6. White Paper – a vision for rail transport 2050

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

8. Fourth Railway Package • Improve competitiveness of rail • Spend public money more efficiently Remove administrative and technicalbarriers to improveinteroperability and safety Innovation pillar of the Single European Railway Area Open domestic rail passenger transport to competition Better governance of rail infrastructure

9. 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

10. 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

11. 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;

12. 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

13. What's already been done? • FP7 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 leverageeffect(30% of privatefunding on average) • SMEs= 16% of funding

14. What needs to be improved? • Focus and coordination of research efforts: Reduce fragmentation of R&I efforts and focus themon areas with high EU added value (SERA and competitiveness) • Leverage of EU rail R&I funding:Ensure long-term commitment from all partners and to leverage additional resourcesfor R&I • 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

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

16. Framework for EU intervention: H2020 White paper on transport Fourth Railway Package Single European Railway Area Horizon 2020

17. Horizon 2020 Funding ~7%

18. Horizon 2020 – A new approach to R&I • Linking research to innovation by providing seamless and coherent funding from idea to market • Simplified access for businesses, universities, institutes inall EU countries and beyond • 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 becontinued and strengthened further

19. 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; • scale of impact on industrial competitiveness, sustainable growth and socio-economic issues; • 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.

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

21. 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.

22. Specific objectives • Develop, integrate, demonstrate and validateinnovative technologies and solutions thatcontribute to… • reduce life-cycle costs of the railway transport system; • increase capacity of the railway transport system; • increase reliability and punctuality of rail services; • a more attractive service profile, providing users with an integrated end-to-end solution for their transport needs; • remove remaining technical obstacles to interoperability and efficiency; • reduce negative externalities such as noise, vibrations, emissions and other environmental impacts; • … Whileupholding the strictestsafety standards!

23. 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

24. 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

25. 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

26. Tailor-made governance model JOINT UNDERTAKING Min. 920 M€ GOVERNING BOARD Commission (50% votes) 8 FoundingMembers Max. 10 AssociatedMembers + Observers (ERA, MS Group) Additionalactivities in support to S2R Master Plan Contributions to S2R work plan UNION Max. 450 M€ (H2020) 8 FOUNDING MEMBERS Min. 270 M€ 200M€ 70 M€ ASSOCIATED MEMBERS Min. 200 M€ 150 M€ 50 M€

27. 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

28. 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 ensurelinkwith national and regional programmes and priorities

29. 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

30. 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 Membersin 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

31. Implementation of Union funding SMEs = Min. 20%  90 M€ FOUNDING MEMBERS Max. 180 M€ Max 40% UNION Max. 450 M€ (H2020) ASSOCIATED MEMBERS Max. 135 M€ Max 30% FULLY OPEN CALLS Min. 135 M€ Min 30%

32. Openness and stakeholder involvement • Eight Founding Members • Consultative process with hundreds of stakeholders from EU28, 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 Shift2Rail • 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

33. Openness and stakeholder involvement • Associated Members • To beselected 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

34. 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 FP7, approx. €22 million for SMEs out of a total of €155 million • Subject to regular quantitative and qualitative assessments

35. 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

36. Efficient implementingframework • 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

37. Efficient implementingframework • 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

38. Expected timeframe Launch call for AssociatedMembers (based on draft Master Plan) Summer 2014 Appoint ExecutiveDirector 01/01/2015 Appoint GoverningBoardMembers 1st Qtr2015 Endorsement of S2R Master Plan Launchrecruitmentprocedure for ExecutiveDirector 01/07/2014 Formal establishment of S2R JU 25/06/2014 Presentation by EC to Council 20/01/2014 TTE Council informal position 14/03/2014 Vote in EP 02/04/2014 InitiatenegotiationswithAssociatedMembers 4th Qtr 2014 Adoptrules of procedure, financialrules, budget, staff establishment plan, offices, work programme, etc. Adoption in TTE Council 05/06/2014 Appoint InterimDirector 01/07/2014 Draft report in ITRE 12/02/2014 Vote in ITRE 18/03/2014 EstablishGoverningBoard Legislative adoption procedure Setting up of S2R JU Consultative process for Strategic Master Plan EC to presentpreliminarydraft Master Plan 01/04/2014 Stakeholderseminar End April 2014

39. Thank you for your attention!