This paper evaluates the capacity effect of ERTMS/ETCS Hybrid Level 3 (HL3, also known as Hybrid Train Detection, HTD) on a conceptual level by looking at a scenario with two trains and on a network level. Key performance indicators help evaluate the results of implementing HL3: headway for the conceptual model and capacity utilization and punctuality for the network level. The study uses the simulation tool RailSys for both levels. A case study on the interaction between two trains examines how various lengths of virtual blocks affect the performance indicator headway. The network scale simulations use a real-world infrastructure and a complete timetable. Two cases examine how the performance indicators capacity utilization and punctuality are affected by the share of Level 2 and Level 3 trains in a HL3 system. Results from the conceptual two-train interaction show that HL3 slightly improves the headway, but it is similar for varying virtual block lengths. The results from the network model indicate the share of Level 2 and Level 3 trains has minimal effect on punctuality and capacity utilization. However, we identified some factors influencing the HL3 capacity evaluation, like stations and switches on the line, that affect the potential capacity gains.