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When is high speed rail economically justified?

When is high speed rail economically justified?. Chris Nash C.A.Nash@its.leeds.ac.uk. Outline. Motivation behind high speed rail investment Costs and benefits of high speed rail Examples of appraisals Conclusions. Origins and objectives of HSR (new lines 250km per hour or more).

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When is high speed rail economically justified?

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  1. When is high speed rail economically justified? Chris Nash C.A.Nash@its.leeds.ac.uk

  2. Outline • Motivation behind high speed rail investment • Costs and benefits of high speed rail • Examples of appraisals • Conclusions

  3. Origins and objectives of HSR (new lines 250km per hour or more)  1964 Tokaido Line 1981 Paris-Lyon 1981 Rome-Florence (1st section) 1988 Fulda-Wurzberg 1992 Madrid-Seville 2012 European total 6900km (Spain 2144; France 2036) World 13000km (China 3426; Japan 2087) Source: UIC

  4. Japan • New Tokaido line opened 1964 (at 210kmph; later raised to 270) • Previous line narrow gauge, slow and very congested • By 2007 2176km of Shinkansen built; 4000km more in basic plan • 27% of passenger km rail (dominates on trips of 300-800km) • Lines built by a government agency (Japan Railway Construction, Transport and Technology Agency); leased to private operators on a charge based on ability to pay

  5. Japan – why rail so successful? • 127m people mainly in large cites along the coastal strip • Very high population densities • Car transport expensive (toll motorways) • New Tokaido line now carries well over 100m passengers p.a.; fully profitable • Later lines serving much lower population and require high subsidies

  6. HSR – strategy and objectives in Europe France , Germany, Belgium, Netherlands, Britain - Speed and capacity on key routes Italy, Spain - New network linking all major cities

  7. Costs and Benefits COSTS • Capital costs • Net Operating costs • Net External costs (environment, safety) BENEFITS • Time savings and improved reliability • Additional capacity • Diversion from other modes (reducing congestion and environmental impact) • Generated traffic • Wider economic benefits

  8. Typical costs of HSR in Europe (m2004 euros) Capital costs Infrastructure Construction (per km) 12-40 HS1 – 70 per km HS2 - 95 per km Operating costs depend mainly on rolling stock requirements, staff, energy, wear and tear – note very high utilisation of assets may offset high energy costs

  9. Value of Time Savings for rail Passengers in the UK Source: DfT: WEBTAG Unit 3.5.6 (www.webtag.org)

  10. Value of time - issues • Should we have different values of leisure time by mode? • How should time spent waiting and interchanging at airports be valued ? • Is the business value of time lower if time spent travelling can be usefully employed? • What if journeys start and finish out of normal working hours? • Do savings in labour cost lead to equivalent increases in GDP?

  11. Capacity benefits • Increased traffic on hsr route • Increased traffic on other routes • Reduced overcrowding • Improved reliability

  12. Benefits of diversion from car or air • Reduced congestion • Environmental pollution • Accidents • Release of airport capacity for long distance flights

  13. Before and After High Speed Market Shares Source: COST318 (1996).

  14. CO2 emission by mode (kg per 100 pass km) • Car (fleet average) with occupancy of 2 0.075 • Car (best) with occupancy of 2 0.057 • Double deck motorway coach at 60% load factor 0.030 • Air (500km flight) at 75% load 0.100 • High speed train at 70% load factor 0.050 (British mean electricity mix) Source: derived from CILT (2011) transport use of carbon report Appendix C.

  15. Generated traffic(valued at half the benefits to existing traffic) • Leisure • Commuting • Business Does this reflect relocation of business or net expansion?

  16. Wider economic benefitsfrom generated traffic • Causes? • labour supply • agglomeration externalities • Imperfect competition Within HS2, no labour supply impact assumed Agglomeration benefits solely from commuter journeys up to 75km on conventional rail and road Longer journeys have little impact because of distance decay and small rail market share (but isn’t rail important for precisely those journeys most likely to produce WEBs?)

  17. Ex post appraisal of French high speed line construction Source: Conseil Général des Pont et Chaussées (2006) Annex 1

  18. CBA of Madrid-Seville high-speed rail in Spain (billions of 2010 euros) Demand in 1993 2.8m trips

  19. CBA of Madrid-Barcelona high-speed rail in Spain (billions of 2010 euros) Demand in 2009 5.5m trips

  20. First year demand required for breakeven(α = 0.2 θ = 3%) High Low Low High

  21. Conclusions Case for HSR depends on: • Construction cost • Value of time savings • Demand Typically requires 10-12m passengers per annum Maybe less if there are strong network benefits Maybe more in a country with low values of time.

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