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May 3, 2010

Do the numbers support the Very Fast Train?

At first glance a VFT looks unpromising, since I estimate the capital cost of constructing and maintaining a VFT line from Sydney to Melbourne at about $1.5 billion per year. This is

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I’ve run some numbers on how a Very Fast Train in the Sydney-Melbourne corridor would stack up against planes in order to flesh out the questions I posed last week (Is the VFT all huff and no puff?).  I used a simple “back of the envelope” methodology adapted from that used by Harvard’s Edward Glaeser to evaluate high speed rail projects in the US (here).

I estimate the economic and environmental benefits of carrying all current Sydney-Melbourne air traffic by VFT rather than plane at around $840 million p.a. (although this does not include the cost of GHG emissions from construction of a rail line  – this would be large).

Table by Booz Allen

At first glance a VFT looks unpromising, since I estimate the capital cost of constructing and maintaining a VFT line from Sydney to Melbourne at about $1.5 billion per year. This is well in excess of the benefits.

However this assumes Sydney can accommodate passenger growth by using larger planes. It quite possibly can, but if it can’t and a second Sydney airport has to be built, a VFT starts to look viable if the cost of the airport were to come in at around $15 billion.

Let me emphasise that this is a simple analysis. I’ve left out many complications, including Canberra passengers and car traffic on the Hume.

The only environmental issue I’ve included is (operating) GHG. And of course I’ve made assumptions on things like construction costs and future interest rates.

Starting with capital costs, estimates of the cost to acquire land and construct a VFT line range from $14 to $82 million per km in Europe and the US (Japan is much higher because of earthquake risks). I assume a middling cost of $30 million per km, giving a total cost of $27 billion to build a 900 km line (the existing Sydney-Melbourne rail line is 950 km). I’ve assumed an interest rate of 5% p.a. and annual track maintenance cost of $124,000 per km. These assumptions give a total capital cost for the line of $1.5 billion per annum.

Turning to operating costs, I assume the purchase of rolling stock, operations and maintenance total 15c per passenger km or $140 per one-way passenger trip. I’ve used a slightly lower figure than Glaeser to reflect the longer distance involved here.

To estimate the benefits of travelling by VFT rather than flying, I assume $250 per passenger per trip, calculated as the sum of $200 for a premium one-way economy air fare plus $50 for time saved by not having to travel from the airport to do business in the city centre.

These assumptions could be criticised for being too generous to rail. It is, for example, arguable if high speed rail could reliably sustain an average speed in service of 300 kmh including stops and loading/unloading – the average speed of most existing high speed rail services is below this figure. The air fare I’ve assumed is probably quite a bit higher than the corporate rate, but I’ll let that reflect the greater “comfort” of a train.

On the basis of these assumptions, the net benefit per passenger of train over plane is thus a very healthy $110 per (one-way) trip. Now I have to multiply that per passenger benefit by the total number of passengers carried by VFT.

There are currently around 7 million passenger trips p.a. by plane on the Sydney-Melbourne corridor. This is one of the busiest city-pair routes in the world. Making an assumption about what share a VFT might win is a fraught business. On some short routes in Europe with high population density, high speed rail’s share is apparently as high as 80%. On the other hand, the proposed California High Speed Rail connecting San Diego, Los Angeles and San Francisco assumes it will win only one third share of all traffic in the corridor (including road passenger traffic).

Rather than assume what share the VFT might win, I simply compare the costs and benefits of carrying all 7 million trips by VFT as against carrying them all by plane. I ignore the question of whether that many passengers could even technically be carried by a VFT (it’s equivalent to an average of over 70 planes per day).

President Obama's vision for high speed rail

Thus I calculate the benefit of transporting 7 million trips by VFT rather than by plane is $770 million p.a. This is a substantial number, but it is still much lower than the capital cost I estimated earlier i.e. $1.5 billion p.a. Of course I haven’t yet factored in the environmental benefits, which many people think is the key point of the whole exercise.

Following Glaeser, CO2 emissions per passenger trip are assumed to be 142 kg for air and 34 kg for rail, giving a net advantage to train of 108 kg for each passenger. If this saving is valued (very generously, I think) at $100 per tonne, the benefit of the VFT compared to planes is $74 million p.a., or $844 million p.a. in total (i.e. $770 million p.a. plus $74 million p.a.). However this is still well short of the gap between capital costs and benefits identified earlier.

If it is assumed instead that there are no GHG emissions whatsoever associated with the operations of the VFT (however unrealistically), the benefit increases to $97 million p.a., or $867 million p.a. in total. This is still considerably lower than the capital cost of $1.5 billion p.a.

None of this even looks at the GHG emissions from construction of the track. These are sizeable. This British study by Booz Allen estimates that a fast rail line from London to Manchester would emit more GHG than it could recover from lower air travel over the 60 year time horizon adopted for the analysis.

That however is a relatively short line compared to Sydney-Melbourne. Booz Allen also analysed a longer line proposed to link London and Glasgow. They found that parity of GHG emissions between air and rail from construction and operations combined would only be achieved if rail could capture a 62% market share (note that this is parity, not a reduction in GHG).

Airbus A380

This all looks pretty unpromising for high speed rail. However the Australian situation differs from Glaeser’s US analysis in that Sydney airport is approaching capacity. Hence the cost of expanding capacity needs to be included in the analysis. There are two approaches – either increase the size of planes or construct a second airport. Unfortunately as of this moment I don’t have much that indicates the feasibility or cost of either of these options.

The need for a second airport in Sydney was identified in the 1970s when the MANS study was undertaken. Yet Kingsford Smith staggered on with construction of a third runway and larger planes. Passenger numbers at Sydney airport are forecast by BITRE to increase by 127% between now and 2029 but the number of flights is expected to increase by only 62%. I don’t know the likely cost of developing this strategy further (e.g using the Airbus A380) but would expect it to be substantially lower than building a VFT.

The cost of a second Sydney airport at Badgery’s Creek was estimatedat between $6 to 8 billion dollars in 1999.  Clearly the viability of a VFT will be greatly influenced by how much a new airport and associated transport links cost. If it were to cost around $15 billion and emit similar levels of GHG during construction then a VFT would be competitive on the assumptions I’ve made here.

Alan Davies — Editor of The Urbanist

Alan Davies

Editor of The Urbanist

The Urbanist is edited by Dr Alan Davies, a principal of Melbourne-based economic and planning consultancy, Pollard Davies Consulting.

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17 thoughts on “Do the numbers support the Very Fast Train?

  1. Alan, much of what you say here makes sense, but it seems odd to leave out the revenue generated from high speed freight, such as that currently shipped via air between cities (not heavy freight as this is often incompatible on HSR lines due to the increased wear on the tracks and necessary slower speeds).

    1. Don’t have any idea what the quantity of high value freight would be (although I was surprised to learn about eight years ago that only one dedicated freight aircraft flew out of Melbourne overseas each week!). This is a highly stylised evaluation. I think the easiest approach is to assume it’s not going to earn much more than an equal number of passengers of comparable weight and volume – hence I’ve covered it. 🙂

  2. “I’ve assumed … annual track maintenance cost of $124,000 per km.” – My faith in VHST and SWSR has been shattered. WHHHHHHYYYYYY???????

      1. We’re getting into engineering here, so I might be asking the wrong person but if you spent enough in capital costs on the tracks could you get annual track maintenance down to something sensible like $1,000/km?

        I’m into BIG capital costs, things that last a hell of a long time (centuries, millenia) and have a very low maintenance cost.

        Or perhaps I should just visit a psychiatrist to get treatment for OCD?

      2. Benno, I’m not an engineer (not that that would stop me), but I expect tolerances must be very high given that max speeds are well over 300 kph. This is a fragile technology – it’s not like an old Roman road (though I wonder what they cost to maintain?)

        You could undoubtedly lower maintenance costs e.g. put the entire track underground, use low corrosion metals for the tracks (like gold!), etc. 🙂 Obviously the capital cost would go up and I imagine the law of diminishing returns would be very, very savage.

        Everything needs maintenance