Creator: Maxinomics · Published: 2024-07-12 · Length: 9:38 · Watch on YouTube

Railroads are about to be forced to buy zero-emission locomotives. With this potential adoption of clean transportation technologies across the United States, train manufacturers have moved into hot competition to develop and supply these new technologies. With one company leading the pack, who stands to reap the potential of skyrocketing sales that will come from being the primary supplier of clean tech locomotives to North American railroads? (video description)

1) Detailed outline

[0:00] California's freight network

• About 8 million train cars move through California, the world's fifth-largest economy, every year: roughly $70 billion of freight, or 20,000 train cars a day.
• Fourteen sections of track carry trains across the state line, hauling oil, iron ore, and shipping containers.
• Example: two Union Pacific express trains leave Southern California each day carrying hundreds of containers from the Port of Los Angeles, arrive in Chicago's rail yard three days later, unload, reload, and head back. They link the Great Lakes manufacturing centers to the LA ports.
• The problem is that in a few years these trains won't be allowed back into California.

[0:35] New emission legislation

• California passed a law that, starting in 2030, bans locomotives more than 23 years old, which targets diesel engines built before 2007.
• By 2035, all new locomotive engines must be zero emission.
• The median age of the US locomotive fleet (37,528 locomotives) is 23.8 years, so within six years almost half of them won't be allowed into California.
• Because California is the gateway for Asian imports and exports, most locomotives cross into the state at some point each year, and US freight rail carries more than a quarter of all US freight. The impact reaches far beyond the state.

[1:32] California's regulatory power

• The video frames the question as a railroad CEO shopping for new locomotives would: can California even do this? Yes, because it has a power the other 49 states don't.
• In the 1960s California's air quality was among the worst in the world, which put the state at the front of the environmental movement.
• 1963: the federal Clean Air Act gave the federal government power to set nationwide air pollution standards, covering things like car emissions, ozone-depleting chemicals, and the utility emissions behind acid rain.
• Amendments around the 1970 Clean Air Act barred every state except California from setting standards stricter than the federal ones.
• Since anything sold in California must meet its rules, California's standards become de facto national standards. It set the first tailpipe standards, drove catalytic converters (which in turn got lead taken out of gasoline), and forced onboard diagnostic computers into cars.
• Many people detest this power and have challenged it in court several times, but it still stands, so the locomotive rule is likely to hold.

[2:55] Battery-powered locomotives

• Replacing these engines will cost tens of billions of dollars. Locomotives can't be swapped at the border, since places for a train to stop and change locomotives are few and far between and there's no rail yard at every crossing.
• A new diesel locomotive costs about $3.5 million, makes 4,500 horsepower, and runs thousands of miles between refuels.
• The leading diesel locomotive makers are Westinghouse Air Brake (Wabtec) and, second, Progress Rail, a Caterpillar company. Both are racing to build zero-emission replacements that match their diesels.
• Two technologies are on the table: batteries and hydrogen.
• Batteries' problems are range and cost. The best battery models can run up to about 800 miles in the best case, against thousands for diesel, and charging takes hours instead of minutes.
• Regenerative braking helps: the force of slowing a very heavy train turns a generator that puts electricity back into the battery.
• Because of the range and charging limits, the video expects battery tender cars, like a portable phone battery for the train, to come onto the market. EVs have solved similar problems, so these pain points are probably solvable.

[4:28] Costs of battery trains

• Manufacturers don't like to talk prices, but there are clues. Last year Union Pacific announced it was buying 20 small battery locomotives for about $90 million, nearly $4.5 million each.
• Those engines have batteries about one-third the size most locomotives will need. Scaling up, a battery locomotive comes to at least $7.5 million, more than twice a diesel, and still not comparable in power or range.
• A battery engine that could pull a train from Los Angeles to Denver would be closer to $10 million.

[5:12] Hydrogen-powered locomotives

• Hydrogen has been a long-shot fuel for decades, but it's under serious development. Wabtec is working with General Motors on it, and a real hydrogen train runs in Germany.
• The appeal is that a hydrogen fuel cell train could run fully loaded for thousands of miles with only a little water as emission.
• A fuel cell combines hydrogen gas with oxygen to generate electricity, producing water as the byproduct.
• The big challenge is making the fuel. Most hydrogen comes from electrolysis, which uses lots of electricity to split water. It needs renewable or nuclear power to be emission free; with fossil fuels, it's back to square one.
• Storing and transporting hydrogen, and how it interacts with metal, are further challenges.
• Germany's hydrogen train (the captions say "kadia island," which is Alstom's Coradia iLint) runs daily, but at maybe 15 passenger cars it's tiny next to miles-long freight trains.
• Railroads and locomotive makers broadly agree hydrogen is the future, but not within 5 or even 10 years without a major breakthrough.

[6:11] Industry leaders and testing

• So for now, the industry says batteries are up. Wabtec has its FLXdrive technology (captions say "Flex Drive") and Progress Rail has its Joule technology (captions say "Jewel").
• After buying General Electric's railroad division in 2018, Wabtec is the undisputed leader in North American locomotives. Progress Rail sued it in Delaware in 2023, accusing it of being a monopoly.
• Wabtec is also the only one with a battery locomotive about to enter service, in Australia, on the Roy Hill railway.
• Roy Hill hauls iron ore 344 km from the Roy Hill mine to Port Hedland in Western Australia. It averages about 100°F in summer, good for testing batteries under heat, and has a long downhill loaded leg that suits regenerative braking.
• But it isn't even running yet.

[7:29] The economic impact

• That's the railroads' irritating problem and the manufacturers' potential windfall: railroads must replace engines over 23 years old within six years and go fully zero emission by 2035, yet there's no clear technology to buy right now.
• For now they're retrofitting older engines, sending them to Wabtec or Caterpillar for newer diesel technology and putting them back in service while waiting to see which zero-emission tech wins.
• So the engine makers win twice: first on diesel upgrades, then on replacing huge parts of fleets much sooner than railroads otherwise would.
• Of the 15,000-plus engines that would need zero-emission replacements, maybe only a few thousand would have been replaced in the next 10 years without the California rule.
• 15,000 engines at $7.5 million each is about $112 billion, around 11 times Wabtec's annual revenue, and the video calls that conservative.

[8:28] Infrastructure challenges

• The batteries in one electric locomotive equal those in about 120 Tesla Model 3s.
• Because a train's batteries are drained and charged far more often than an EV's, the grid impact is closer to adding 6 or 7 million Teslas, more than three times what Tesla sold last year.
• Copper is another question: the electric versions take hundreds more pounds than diesel ones.
• These trains are a new, very hungry entrant in the competition for lithium and rare earth metals, whose supply chains have been tight for years.
• A final ruling on California's rule isn't expected before year end, but if markets are predictive, the rise in Wabtec's stock suggests it will go through.
• The energy transition creates big opportunities for some, here the locomotive makers, and big headaches for others, the railroads, which are fighting this with everything they have.

2) Things mentioned

Economics and numbers

• California rail freight: about 8 million train cars a year, about $70 billion of freight, about 20,000 cars a day, across 14 border crossings.
• US locomotive fleet: 37,528 locomotives with a median age of 23.8 years; almost half would be barred from California within six years.
• US freight share: rail carries more than a quarter of US freight.
• Diesel locomotive: about $3.5 million, 4,500 horsepower, thousands of miles per refuel.
• Battery locomotive: up to about 800 miles in the best case; Union Pacific's 20 small units for about $90 million (about $4.5 million each); a full-size one at least $7.5 million, and closer to $10 million for an LA-to-Denver run.
• Replacement bill: 15,000-plus engines at $7.5 million each, about $112 billion, around 11 times Wabtec's annual revenue.
• Battery scale: one locomotive's batteries equal about 120 Tesla Model 3s; grid impact like 6 to 7 million extra Teslas.

Companies and organizations

• Union Pacific: the railroad whose LA-to-Chicago container trains open the video, and buyer of 20 battery locomotives.
• Wabtec (Westinghouse Air Brake Technologies): the market leader after buying GE's rail division, maker of FLXdrive.
• Progress Rail (Caterpillar): the second-place maker, with Joule battery locomotives, and plaintiff in the 2023 antitrust suit against Wabtec.
• General Electric: sold its railroad division to Wabtec.
• General Motors: working with Wabtec on hydrogen fuel cells.
• Tesla: the Model 3 comparison for battery size and grid load.
• Roy Hill: the Western Australian iron ore mine and railway testing Wabtec's battery locomotive.
• Port of Los Angeles: the source of the containers.

Markets and supply chains

• Locomotive market: a near-duopoly in North America, about to see a forced replacement cycle.
• Diesel retrofits: the stopgap revenue stream for engine makers.
• Critical minerals: lithium, rare earth metals, and copper, already in tight supply.
• Electric grid demand: frequent locomotive charging adds large new load.
• Wabtec stock: its rise is read as the market betting the rule will hold.

Policy and regulation

• California's locomotive rule: bans locomotives over 23 years old from 2030 and requires zero-emission new engines from 2035.
• Clean Air Act (1963) and the 1970 amendments: let California alone set stricter-than-federal standards.
• California's past standards: first tailpipe standards, catalytic converters, removal of lead from gasoline, onboard diagnostics.
• Legal challenges: repeated court fights over California's authority, plus the railroads' opposition to this rule.
• Antitrust: Progress Rail's 2023 Delaware suit calling Wabtec a monopoly.

Products and technologies

• Battery-electric locomotives: Wabtec FLXdrive and Progress Rail Joule.
• Battery tender cars: expected add-on cars that carry extra batteries.
• Regenerative braking: recovers braking energy into the battery.
• Hydrogen fuel cells and electrolysis: zero-emission in principle, but with fuel production, storage, transport, and metal problems.
• Alstom Coradia iLint: the German hydrogen passenger train.

Places

• California, Los Angeles, Chicago, the Great Lakes, Denver: the freight network in the examples.
• Germany: where the hydrogen passenger train runs daily.
• Roy Hill mine and Port Hedland, Western Australia: the 344 km battery test line.
• Delaware: where the antitrust suit was filed.

3) Biographies

Phil Andrews (presenter)

Phil Andrews is the producer and on-camera host of Maxinomics, Morning Brew's YouTube channel that explains economics, business, and geopolitics through stories. The narrator isn't named in this video; the attribution follows the channel's other notes. Here he walks through California's locomotive rule and who profits from it.

Wabtec (subject company)

Westinghouse Air Brake Technologies, based in Pittsburgh, traces back to George Westinghouse's 1869 air brake company. It completed its merger with GE Transportation in early 2019, which made it the dominant North American locomotive maker, and it builds the FLXdrive battery locomotive.

Progress Rail (subject company)

A Caterpillar subsidiary based in Alabama that owns Electro-Motive Diesel (EMD), the longtime rival to GE in locomotives. Its battery-electric line is called EMD Joule.

Union Pacific (railroad)

One of the largest US freight railroads, based in Omaha, serving 23 western states. It's the example railroad in the video and an early buyer of battery locomotives.

California Air Resources Board (regulator)

CARB is the California agency behind the state's vehicle and engine standards and the In-Use Locomotive Regulation adopted in 2023 that this video describes. In January 2025, after this video, California withdrew its request for the federal approval the rule needed. That's context, not something the video says.