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The benefit of running the tram on electricity is that opportunity to pool multiple renewable sources of electricity.
However, even in the burn carbon for electricity case, if there is an opportunity to build from the ground up for energy efficiency, it will normally make more energy sense to generate electricity and distribute it to the trams than to burn it on the tram and convert it to electricity there. It will be the same electric motors in any event, since they are more energy efficient than internal combustion engines, and the fixed central generator can be made more efficient, since for one, not being part of the load carried by the tram it does not have a weight/efficiency trade-off, and for two, being at a fixed site makes it far simpler to re-use the exhaust heat.
If its a cold weather climate, the heat can be used for district heating, and if its a tropical country, the exhaust heat can be used as an input into a production process that consumes heat, such as production of ethanol.
I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
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