Guidance

Forthcoming change: operating cost parameters

Updated 28 November 2024

Description: Updates to fleet assumptions and vehicle efficiencies, introduction of non-variable costs to appraisal and updates to marginal external costs

Unit: TAG data book, A1.3 (user and provider impacts) and active mode appraisal toolkit (AMAT)

Change announced: November 2024

Expected release date: May 2025

Description 

This forthcoming change sets out updates to the TAG data book and TAG unit A1.3 – user and provider impacts, to reflect updates to modelling and appraisal parameters and the introduction of non-variable costs (NVCs) into appraisal. Additionally, given updates to marginal external costs to reflect these changes, the active mode appraisal toolkit (AMAT) will be aligned with the latest evidence in TAG.

All updates to the data book and guidance will become definitive in May 2025. All updates to the data book and appraisal software will be combined with the concurrent forthcoming change relating to the updated default base year, which will also become definitive guidance in May 2025. A forthcoming change version of TUBA will be made available imminently to reflect the updated fleet assumptions and concurrent base year update, with a further update to include NVCs in spring 2025.

Detail 

Fleet assumptions and vehicle efficiencies 

As advised in TAG unit A1.3 (user and provider impacts), fuel consumption is a function of defined fuel consumption parameters, the proportions of vehicles using different fuel types (‘fleet shares’) and fuel efficiency, the amount of fuel or energy consumed per kilometre. Forecasts for these parameters, produced by the DfT’s Environmental Analysis team, are contained in TAG data book tables A1.3.8, A1.3.9 and A1.3.10.  

An update to these tables, to become definitive in May 2025, reflects the introduction in January 2024 of the zero emission vehicle (ZEV) mandate, which sets out the percentage of new zero emission cars and vans manufacturers will be required to produce each year up to 2030. The update additionally reflects the latest consumer choice modelling, sales data and updated assumptions on the use of plug-in hybrid vehicles. It also assumes a continuation of current taxation policy. The update will ensure analysts have the most unbiased and realistic set of assumptions available to inform decision making. 

The key updates to forecasts include: 

• an increase in the electric share of car vehicle kilometres (vkm) by 2050, driven by the introduction of the ZEV mandate
• however this includes a reduction in the electric share to 2032, due in part to a decreased assumption on the share of mileage that plug-in hybrids spend in electric mode, based on the latest data. The latest sales data, including a higher-than-previously-expected proportion of new hybrids sold compared to battery electric vehicles, also reduces the electric share, and minorly impacts historic (pre-2024) figures
• an increase in the electric share of van vkm by 2050, due to the expected effect of the ZEV mandate
• a decrease in the electric share of public service vehicle (PSV; buses/coaches) vkm, owing to updated cost modelling vs diesel buses 
• a minor improvement in electric car efficiency, but a worsening in petrol and diesel car and van efficiency related to the CO2 regulatory framework that accompanied the ZEV mandate

The following updates will be made to the TAG data book to account for the updated fleet assumptions. For more details of the changes please refer to the tables and charts below. 

• table A1.3.8: updated base year electric vehicle consumption factors, for cars and LGVs
• table A1.3.9: updated proportions of car, LGV and PSV vkm using petrol, diesel and electricity, with projections to 2050
• table A1.3.10: updated forecast fuel efficiency change for car, LGV, HGV and PSV, to 2050
• table M4.2.2: updated forecast car cost series for rail demand forecasting, to 2060 (automatic calculations based on above tables; no change to methodology)

The changes will be implemented in v2.0FC of the data book, which will contain other forthcoming changes, including the updated default base year detailed separately. A forthcoming change version of TUBA will also be published imminently. Scheme promoters should follow the TAG proportionate update process when deciding how to apply the update fleet assumptions in modelling and appraisal.

Changes to A1.3.8 

Electricity consumption, kWh per km, 2015 

	Previous value (kWh/km)	Updated value (kWh/km)
Car	0.2207	0.2238
LGV	0.2590	0.2579
PSV	1.1798	1.1798

Changes to A1.3.9 

Car vkm split (TAG data book v1.23 (previous) vs v2.0FC (updated))

A line chart showing the shares of petrol, diesel and electric car vehicle kilometres over the period 2005 to 2050. The most notable change is an increase in the electric share vs previous from 2030 onwards.

LGV vkm split (TAG data book v1.23 (previous) vs v2.0FC (updated))

A line chart showing the shares of petrol, diesel and electric van vehicle kilometres over the period 2005 to 2050. The most notable change is an increase in the electric share vs previous from 2025 onwards, with a decrease in diesel share.

PSV vkm split (TAG data book v1.23 (previous) vs v2.0FC (updated))

A line chart showing the shares of diesel and electric PSV vehicle kilometres over the period 2005 to 2050. The most notable change is an increase in the diesel share vs previous from 2020 onwards, with a decrease in electric share.

Changes to A1.3.10

Car fuel consumption forecasts (TAG data book v1.23 (previous) vs v2.0FC (updated))

A line chart showing the fuel consumption of petrol, diesel and electric cars over the period 2010 to 2050, indexed to 2015. The most notable change is a decrease in the electric cumulative change indexed to 2015 vs previous.

LGV fuel consumption forecasts (TAG data book v1.23 (previous) vs v2.0FC (updated))

A line chart showing the fuel consumption of petrol, diesel and electric LGVs over the period 2010 to 2050, indexed to 2015. The most notable change is an increase in all cumulative changes indexed to 2015 vs previous.

HGV fuel consumption forecasts (TAG data book v1.23 (previous) vs v2.0FC (updated))

A line chart showing the fuel consumption of diesel HGVs over the period 2010 to 2050, indexed to 2015. The most notable change is a slight decrease in the cumulative change of OGV1s and OGV2s indexed to 2015 vs previous.

PSV fuel consumption forecasts (TAG data book v1.23 (previous) vs v2.0FC (updated))

A line chart showing the fuel consumption of diesel and electric PSVs over the period 2010 to 2050, indexed to 2015. The most notable change is a slight increase in the cumulative change of electric PSVs indexed to 2015 vs previous.

Changes to M4.2.2

CPI-based car cost index (TAG data book v1.23 (previous) vs version including updated fleet assumptions)

A line chart showing the CPI-based, All GB car cost index over the period 2010 to 2060. The most notable change is a moderate decrease in the index from the period after 2032 vs previous.

Non-variable costs

TAG unit A1.3 – user and provider impacts recommends that analysts should value changes in fuel and energy use in line with supplementary guidance from the Department for Energy Security and Net Zero (DESNZ). DESNZ in turn recommend that changes in energy consumption should be valued using the long-run variable cost (LRVC) of energy supply. An update to TAG, to become definitive in May 2025, will reflect this advice in guidance, alongside recommended values representing the non-variable costs of travel in v2.0FC of the TAG data book. As detailed below however, there is no expectation to start using this guidance until an updated version of TUBA with the NVC impact calculations is made available, in spring 2025.

The LRVC captures the net change in social welfare from a unit of energy consumption, whereas retail energy prices (as currently applied in appraisals following TAG advice) additionally contain:

• components accruing to other agents in society as transfers (taxes and profits) and;
• an allowance for fixed costs (which do not change in the long run with a small, sustained change in energy use)

Therefore for a marginal change in energy use, the difference between the retail price and LRVC will accrue as either taxation to government or additional profit to firms.

Retail prices are however required for the accurate calculation of the rule of a half, given consumers perceive the total price paid, inclusive of these superfluous elements. Therefore, to ensure that appraisals accurately reflect the final social welfare impacts of changes in energy use, a 2 stage process is required to accurately calculate user benefits arising from energy use. Firstly, to calculate fuel costs as perceived, and secondly to ‘add back in’ the residual components of the retail price which are not resource costs, leaving the LRVC as the final measure of the change in social welfare.

The forecast series of NVCs for use in appraisal, derived from DESNZ estimates of the LRVC, has been added to table A1.3.7 of the TAG data book, in p/litre (for petrol, diesel and gas oil) or p/kWh (for electricity) terms, and is displayed below for convenience.

Non-variable cost columns additional to table A1.3.7

Non-variable costs (2023 prices)

Year	Petrol (p/litre)	Diesel (p/litre)	Gas oil (p/litre)	Electricity (p/kWh) road	Electricity (p/kWh) rail
2010	4.19	4.71	3.41	7.97	3.60
2011	4.20	4.72	3.40	8.30	2.88
2012	4.19	4.71	3.40	10.01	3.86
2013	4.18	4.69	3.40	9.79	4.22
2014	4.24	4.75	3.39	13.06	6.01
2015	4.27	4.78	3.40	11.91	6.89
2016	4.31	4.84	3.39	10.81	5.88
2017	4.29	4.81	3.39	11.46	5.26
2018	4.21	4.73	3.40	10.76	2.97
2019	4.24	4.75	3.40	14.92	6.20
2020	4.17	4.67	3.43	13.77	6.87
2021	4.26	4.78	3.14	1.74	-1.14
2022	4.45	4.98	2.97	3.25	-3.95
2023	0.91	1.38	3.56	19.19	3.51
2024	0.96	1.43	3.28	17.01	3.78
2025	0.71	1.17	3.18	14.98	4.16
2026	0.22	0.69	3.14	14.77	3.76
2027	0.21	0.68	3.15	13.73	3.67
2028	0.46	0.93	3.14	13.67	3.23
2029	0.51	0.97	3.14	12.89	3.34
2030	0.59	1.06	3.18	12.26	3.22
2031	0.59	1.06	3.18	10.90	3.19
2032	0.59	1.06	3.18	10.58	3.02
2033	0.59	1.06	3.18	10.25	2.95
2034	0.59	1.06	3.18	10.18	2.98
2035	0.59	1.06	3.18	10.05	2.83
2036	0.59	1.06	3.18	9.32	2.76
2037	0.59	1.06	3.18	9.67	2.87
2038	0.59	1.06	3.18	9.69	2.88
2039	0.59	1.06	3.18	9.63	2.83
2040	0.59	1.06	3.18	9.35	2.76
2041	0.59	1.06	3.18	9.46	2.77
2042	0.59	1.06	3.18	9.00	2.73
2043	0.59	1.06	3.18	9.06	2.79
2044	0.59	1.06	3.18	9.03	2.85
2045	0.59	1.06	3.18	8.97	2.89
2046	0.59	1.06	3.18	8.80	2.90
2047	0.59	1.06	3.18	9.00	3.00
2048	0.59	1.06	3.18	8.35	2.91
2049	0.59	1.06	3.19	8.27	2.90
2050	0.59	1.06	3.19	8.94	3.08
2051	0.59	1.06	3.19	8.92	3.06
2052	0.59	1.06	3.19	8.92	3.06
2053	0.59	1.06	3.19	8.92	3.06
2054	0.59	1.06	3.19	8.92	3.06
2055	0.59	1.06	3.19	8.92	3.06
2056	0.59	1.06	3.19	8.92	3.06
2057	0.59	1.06	3.19	8.92	3.06
2058	0.59	1.06	3.19	8.92	3.06
2059	0.59	1.06	3.19	8.92	3.06
2060	0.59	1.06	3.19	8.92	3.06
2061	0.59	1.06	3.19	8.92	3.06
2062	0.59	1.06	3.19	8.92	3.05
2063	0.59	1.06	3.19	8.92	3.05
2064	0.59	1.06	3.19	8.92	3.05
2065	0.59	1.06	3.19	8.91	3.05
2066	0.59	1.06	3.19	8.91	3.05
2067	0.59	1.06	3.19	8.91	3.05
2068	0.59	1.06	3.19	8.91	3.05
2069	0.59	1.06	3.19	8.91	3.05
2070	0.59	1.06	3.19	8.91	3.05
2071	0.59	1.06	3.20	8.91	3.05
2072	0.59	1.06	3.20	8.91	3.05
2073	0.59	1.06	3.20	8.91	3.05
2074	0.59	1.06	3.20	8.91	3.05
2075	0.59	1.06	3.20	8.91	3.04
2076	0.59	1.06	3.20	8.91	3.04
2077	0.59	1.06	3.20	8.90	3.04
2078	0.59	1.06	3.20	8.90	3.04
2079	0.59	1.06	3.20	8.90	3.04
2080	0.59	1.06	3.20	8.90	3.04
2081	0.59	1.06	3.20	8.90	3.04
2082	0.59	1.06	3.20	8.90	3.04
2083	0.59	1.06	3.20	8.90	3.04
2084	0.59	1.06	3.20	8.90	3.04
2085	0.59	1.06	3.20	8.90	3.04
2086	0.59	1.06	3.20	8.90	3.03
2087	0.59	1.06	3.20	8.89	3.03
2088	0.59	1.06	3.20	8.89	3.03
2089	0.59	1.06	3.20	8.89	3.03
2090	0.59	1.06	3.20	8.89	3.03
2091	0.59	1.06	3.20	8.89	3.03
2092	0.59	1.06	3.20	8.89	3.03
2093	0.59	1.06	3.20	8.89	3.03
2094	0.59	1.06	3.21	8.89	3.03
2095	0.59	1.06	3.21	8.89	3.02
2096	0.59	1.06	3.21	8.88	3.02
2097	0.59	1.06	3.21	8.88	3.02
2098	0.59	1.06	3.21	8.88	3.02
2099	0.59	1.06	3.21	8.88	3.02
2100	0.59	1.06	3.21	8.88	3.02

NVCs are added back into the appraisal as an offset to the perceived fuel benefit (which is calculated using retail prices as per current TAG guidance in unit A1.3, appendix A).

Specifically:

NVC impact = ((T1 x C1) - (T0 x C0)) x NVC x MarketPriceAdjustment

where:

T represents the number of trips in either do-something (1) or do-minimum (0);

C represents the fuel consumption per trip (in litres or kWh) in a given scenario, year and fuel type;

‘NVC’ represents the per unit NVC value, and;

‘MarketPriceAdjustment’ is applied given the NVC saving term arises in the factor cost unit of account to businesses (such as energy suppliers), and hence should be converted to market prices for appraisal.

The total fuel benefit is hence the sum of the (retail price) fuel cost benefits and the NVC impacts. By calculating NVCs appropriately (i.e. following the above 2 stage process), traded carbon costs (e.g. relating to the consumption of electricity) are left within the perceived fuel benefit calculation, because only the NVC (which excludes carbon) is deducted from the full retail price. The valuation of traded carbon in appraisal should continue to follow guidance set out in TAG unit A3 – environmental impact appraisal, including applying an appropriate ‘double-counting’ adjustment. For petrol and diesel, non-traded carbon values are used to value changes in greenhouse gas emissions.

Given NVCs represent a larger share of electricity retail prices than the equivalents for petrol and diesel^{[footnote 1]}, there will be a greater offsetting effect on the original fuel benefit where electricity consumption is higher, than in cases where petrol or diesel consumption is high. In cases where there is a move from petrol or diesel consumption towards electricity consumption between do-minimum and do-something scenarios, the inclusion of NVC impacts will typically result in a lump-sum benefit, representing the move away from a source of energy with a higher share of LRVCs (lower share of NVCs) to one with lower social costs; an increase in social welfare.

Implementation in appraisal

This update to guidance should be applied to all appraisals that involve the consumption of fuel and energy, across all modes of transport, where proportionate to do so. It should impact the calculation of user benefits only, and NVCs should not be incorporated into the calculation of perceived fuel costs in transport modelling. The above outlined mechanism will be included in a future version of TUBA, expected to be published in spring 2025 and will be carried out as part of appraisals using that software. As a result, while users may start using the guidance contained in this forthcoming change to appraise NVC impacts, there is no expectation to do so until the updated version of TUBA is made available.

These changes will be implemented in TAG unit A1.3 – user and provider impacts, as well as v2.0FC of the data book, which will contain other forthcoming changes, including the updated default base year. Scheme promoters should follow the TAG proportionate update process when deciding how to apply NVCs in appraisal.

Marginal external costs (MECs)

TAG unit A5.4 (marginal external costs) provides information on the marginal external costs method, which is used to estimate the benefits of reducing congestion in the absence of a multi-modal model. To assist this, TAG provides estimated MEC values for a range of modelled years, vehicle types and MEC categories, based upon modelling from the National Transport Model (NTMv2R)

MECs have been updated to reflect updated economic evidence and appraisal guidance. The updates are:

• the inclusion of the latest economic data from the TAG data book v1.23 (May 2024)
• updated fuel and energy retail prices from table A1.3.7
• fleet assumptions (fleet share and vehicle efficiencies) aligned with above outlined changes, as implemented in v2.0FC of the TAG data book
• inclusion of explicit traded carbon valuation, in line with TAG unit A3

Table A5.4.2 in v2.0FC of the TAG data book has been updated accordingly, and the core MECs have been implemented in the forthcoming change version of the active mode appraisal toolkit (AMAT).

The resulting changes in the updated core MECs are focused on air quality and indirect taxation, as set out below. Relative to the November 2023 release, all MECs excluding air quality and indirect taxation have changed by <3% due to the update in economic parameters. Air quality values have decreased 2 to 3% for car and up to 20% for LGV, while indirect tax values have increased in absolute terms (more positive for cars, less negative for LGVs) by ~60% (albeit from a low base) driven by the updated fleet assumptions. PSV values for these 2 MEC categories have moved in the opposite direction to car and LGV, due to a reduced forecast uptake of electric PSVs.

The introduction of explicit traded carbon valuation has only a minor (<1%) impact on greenhouse gas (GHG) values, but these magnitudes do not include the effect of the updated fleet assumptions, which will be incorporated into the MECs with the next update to the underlying modelling. The total MEC values have typically increased by up to 5%.

Selected changes to A5.4.2

Air quality MEC in current data book (v1.23) vs new data book (v2.0FC)

A bar chart showing the air quality MEC by year and vehicle type, across current and new data books. The most notable change is a decrease for cars and LGVs, from current to new data book.

Indirect tax MEC in current data book (v1.23) vs new data book (v2.0FC)

A bar chart showing the indirect tax MEC by year and vehicle type, across current and new data books. The most notable change is an increase in absolute terms for cars and LGVs, from current to new data book.

Overall MEC in current data book (v1.23) vs new data book (v2.0FC)

A bar chart showing the total MEC by year and vehicle type, across current and new data books. The most notable change is a minor increase from current to new data book.

Contact

For further information on this guidance update, please contact:

Transport Appraisal and Strategic Modelling (TASM) division
Department for Transport
Zone 2/25 Great Minster House
33 Horseferry Road
London
SW1P 4DR

tasm@dft.gov.uk

1. For example, the road electricity NVC represents 40 to 50% of the electricity resource cost, whereas the petrol NVC represents <5% of the petrol resource cost. ↩