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HSR High Speed Rail

Apr 15, 2014

High Speed Rail: too good to be true?

A new report contends an 1800 km Brisbane-Sydney-Melbourne High Speed Rail line could be operating in 10 years. Moreover it would cover all its operating and capital costs. Fact or fiction?

BZE's assumptions for non-business fare price structure. Surveyed air fare range (2013 fares) is shown by bars. The low end is internet discount and the high end is flexible economy

After 30 years of reports on High Speed Rail (HSR), it’s hard to believe the country needs yet another one. After all, only last year we got the second volume of Anthony Albanese’s exhaustive $20 million study by AECOM into the viability of HSR from Brisbane to Melbourne.

But last Wednesday a consortium of HSR advocates led by think tank Beyond Zero Emissions (BZE) published a new report titled Zero Carbon Australia: High Speed Rail. I’m surprised only The Guardian and the ABC appear to have picked up the story, because the report has a number of extraordinary propositions.

Claims

The first claim is especially interesting; BZE estimates the entire HSR system from Brisbane to Melbourne could be constructed for $79 Billion (excluding rolling stock). Costs would be limited by smart design e.g. sharing corridors with urban services in some locations. Even so, the express travel time between Sydney and Melbourne CBDs would still be “less than three hours”.

In contrast, AECOM estimated the capital cost of the system at $114 Billion i.e. 44% more than BZE. AECOM assumed a higher level of service (e.g. 144 km of tunnel compared to BZE’s 81 km) and calculated the express trip from Sydney to Melbourne would take two hours forty five minutes.

The second proposition is astonishing; BZE reckons the entire 1800 km network could be built and operating by 2025 i.e. in ten years.

That optimism contrasts sharply with AECOM, who concluded the network would need to be staged to keep economic benefits positive and wouldn’t be fully complete until 2060 (i.e. for 45 years), although the more promising routes would be operational earlier i.e. Sydney-Canberra in 2035 and Sydney-Melbourne in 2040.

Indeed, AECOM recommended construction shouldn’t start until 2027 to allow for planning, consultation and environmental approvals, as well as pre-construction and procurement activities. In other words, BZE’s timetable envisages its network would be fully built and operational well before AECOM’s sees the first sod turned! (1)

Just as astounding is BZE’s claim that HSR would be profitable within five years of commencement (i.e. by 2030) and would earn enough to repay both its operating and capital costs from revenue (essentially ticket sales). It assumes average business and leisure ticket prices would be significantly lower than the current air fares (see exhibit).

AECOM, on the other hand, assumed ticket prices would be the same as current air fares. Revenue would cover operating costs but virtually all of the capital cost – $98 Billion – would have to come from taxpayers.

Scepticism

BZE’s contentions seem breathtaking given the conclusions of the AECOM study. Unfortunately, it’s very difficult to evaluate them because the numbers lack transparency; there’re supposedly various technical appendices that support the calculations, but they aren’t available to the public.

The different time frames for construction also mean it’s hard to compare important numbers like patronage. That’s not helped though by BZE making little effort to facilitate meaningful assessments against the obvious comparator i.e. the AECOM study.

Nevertheless some assumptions invite scepticism; for example, BZE’s conclusion that “HSR will pay for itself financially” is based on a 4% discount rate. I’d like to see some explanation for how costs can be limited by lowering speeds (e.g. by sharing existing rail corridors) yet the project will ostensibly still deliver a trip time that’s reliably and consistently “less than three hours”.

The claim that patronage will be 68 Billion in 2030 also requires explanation given AECOM’s estimate is for only 84 Billion in 2065 (35 years later!), notwithstanding a near doubling of total travel demand in the corridor over the intervening period.

Both estimates refer to patronage five years after commissioning of the complete system, but under AECOM’s timetable the  most productive elements of the network would’ve already been operating for many years by 2065 i.e. Sydney-Canberra for 30 years and Sydney-Melbourne for 25 years).

The notion that 1,800 kms of high speed rail line and 21 stations could be designed, built and start operating commercially in ten years is probably the hardest of all to swallow. Especially as it’s assumed there’ll be no implications for construction cost due to factors like potential skilled labour shortages.

The failure to plan properly in advance is one of the key reasons major infrastructure projects exceed estimated costs by nearly 50% on average, with overruns of 100% not uncommon. A technology like HSR that’s new to Australia is likely to be at the upper end of the risk curve and hence demands very careful pre-planning. (2)

Flexibility

What really incites scepticism though is that BZE has “form”; it has shown a willingness in the past to be “flexible” with the facts.

For example, I pointed out last September (Infrastructure: does getting the facts right matter anymore?) that the organisation’s assertion that Melbourne Metro could be built for a mere $3-4 billion is way below the accepted estimate of  at least $9 billion for this project.

BZE arrived at that figure by grossly under-estimating many costs. Here’s part of what I said about its methodology in a follow-up article (What does urban rail really cost to build?):

Nothing has been allowed for Land Acquisition; just $1.6 million for Earthworks and Substructure; $30.6 million for Superstructure; and a mere $9 million for Signalling and Communications…The estimates also make no provision for train maintenance and stabling facilities, for design and contractors overheads, or for provision of a train control centre.

The explanation for this “flexibility” was captured succinctly by a commenter on the first article, who described BZE as “the flip-side of the propaganda outfits of the extreme right.” The organisation seems quite happy to pick and choose the facts in pursuit of its mission.

Credibility

So I think the credibility of this report is beyond zero. It’s a marketing exercise and isn’t intended to be open to critical analysis; it’s purpose is political.

It doesn’t change the key facts about HSR i.e. that it would cost taxpayers a fortune; overwhelmingly benefit capital city business and regional leisure travellers; replace one form of public transport with another; and facilitate regional sprawl. It would also be a very expensive way of dealing with GHGs.

As I’ve noted before (High Speed Rail: would it run down Australia?):

There are many other ways that public funds on this scale could be applied for a bigger social, economic and environmental pay-off and a fairer outcome than HSR would provide. For example, just looking at infrastructure, public subsidies could be directed at improving public transport in the nation’s cities or shifting electricity generation to renewable sources.

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  1. AECOM says an accelerated program could see a start on construction by 2022 (although the economic benefits would be lower and, presumably, the risks would be higher). Sydney-Canberra would commence in 2030 and Sydney-Melbourne in 2035.
  2. There are other issues that require further explanation too e.g. assuming 100% renewable energy as a “free” benefit; assuming HSR would substantially weaken the case for a second Sydney airport.

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12 thoughts on “High Speed Rail: too good to be true?

  1. IkaInk

    @Alan… hmm indeed. I was obviously tired and rushed yesterday (I didn’t actually try and read anything). It seems the links don’t match the URLs in the document, and furthermore the URLs in the document take you to 404 pages.

    I’ve contacted BZE through their contact us form for comment. They may not be monitoring the comments section of this article.

  2. Alan Davies

    IkaInk #10:

    No, when I click on the list of appendices in my copy of the BZE report (p 96) I’m still getting taken to the unrelated residential energy guff. Still can’t see an obvious link to the appendices on the BZE site either. They should’ve been available when the report was released as they explain the assumptions etc; there’s no excuse for that, much less their continued non-appearance.

  3. IkaInk

    @Alan #9 – I’ve been short on time, so this is the first time I’ve had a quick look at the report (and I’ve had no time to do anything akin to actually reading it), but it does seem the links the Appendices work fine now. My guess is that when you read the document the hyperlinks were still “dummy links” and hadn’t been updated to reflect the real URLs. Obviously you have also been in contact with BZE a bit, as they’re just published their guest piece.

  4. Alan Davies

    Stephen Bygrave #8:

    We believe in transparency and are willing to make all technical and economic analysis available to anyone who inquires

    Then why aren’t the technical reports available on your web site? Why weren’t they released with the main report? Why didn’t you include working links to the appendices in your reply above? Why not correct the oversight and post them here now? (when I published the article all the links in the report led nowhere; now they link to some document on residential energy modelling which is unrelated to HSR).

    The “flip side of the extreme right” remark clearly referred only to BZE.

  5. Stephen Bygrave

    Alan,
    I see from reading your various articles that you are unsupportive of high speed rail generally so I will keep my comments short and to the point.
    1. The report was produced by Beyond Zero Emissions in collaboration with the University of Melbourne’s Energy Institute and the German Aerospace Centre. The report was launched in Melbourne last week with John Alexander, MP providing the keynote presentation. Tim Fischer, former Deputy Prime Minister, has provided commentary on the front pages. None of these organisations or individuals are “the flip-side of the extreme right” as your article infers.
    2. The report is a contribution to the debate regarding high speed rail in Australia. The report, like any other, uses assumptions and methods to determine reasonable estimates. Estimates from other reports should not be misconstrued as “facts” as indicated in your article.
    3. We believe in transparency and are willing to make all technical and economic analysis available to anyone who inquires, and are available to meet and discuss the report’s findings and conclusions at any time.
    4. We have produced a short followup paper to the report that responds in detail to various points and clarifies a number of issues that have been raised.
    5. We are conducting the Sydney launch of the high speed rail report on 30 April and would be happy to answer any questions at that event.
    Stephen Bygrave, CEO Beyond Zero Emissions

  6. Anthony Daniele

    I volunteer with BZE and have forwarded your article – hopefully one of the researchers will respond.

    Obviously the perceived urgency of decarbonizing the economy would be a key difference in our perceptions of HSR, but I lament a culture where nation-building projects get knocked back because they fail on grounds of narrow financial analysis. It reminds me of this article I read recently in the NYT:
    http://www.nytimes.com/2012/11/04/business/a-capitalists-dilemma-whoever-becomes-president.html?pagewanted=all

    HSR is a classic empowering innovation that fails the financial analysis test because the development it enables, and the future risk it offsets, are never taken into account. It goes something like this:

    Opponent: “HSR won’t work in Australia because there isn’t enough population between centres.”
    Proponent: “HSR will boost population between the centres, relieving property and infrastructure pressures in those centres. It will unlock cheap land and give impetus for business and government to relocate.”
    Opponent: “HSR won’t work in Australia because there isn’t enough population between centres.”

    It seems to me that other countries have HSR because they built lines when financial returns weren’t paramount. Development then happened around them, which now makes the numbers stack up.

    Why does Australia not get HSR just because the need for it emerged after vision exited the political landscape? Why do we have to wait for things to be falling apart for key infrastructure to be built, and then when it is, have to pay over the odds for bad decisions made in the past (tunneling, land purchase etc.)?

    Supporters of high speed rail take a top down approach:
    1. Melbourne – Sydney is the 5th busiest air route in the world, and the busiest over land without an HSR option (and Brisbane not far behind)
    2. Both centres have top 10 house prices and creaking infrastructure (and Brisbane not far behind)
    3. Air travel will be very difficult to decarbonise in comparison with surface modes of transport
    4. Given the experience elsewhere, HSR would take a significant share of passengers given inner-city to inner-city connection times
    5. Money is cheap and Australia is a rich, growing country

    Why does a narrow financial analysis trump all that each and every time? It’s framed as serious and sober, but I fear it leads to a culture of incremental quick-fixes that never address the true, long-term issues we face.

    I’ve read your blog for a few years, and while I find it very informative and you make good arguments, this niggling fear remains.

  7. Aidan Stanger

    Robert #1
    On what basis do you think their costs for renewable energy were absurdly low?

  8. Aidan Stanger

    Jaob #4
    No, they mean Central station. Much better suburban rail connectins than Parramatta, and probably cheaper to build too (as they can flog some of the existing platforms).

    What would be more expensive, though, is their plan to tunnel under the Harbour.

  9. Jacob HSR

    By Sydney, do BZE actually mean Parramatta?

    It would be cheaper to build Sydney’s HSR station in Parramatta than in postcode 2000, not to mention the journey time from Parramatta to Melbourne would be quicker than from postcode 2000. And Parramatta is closer to Badgerys Creek Airport than Postcode 2000. And more people live closer to Parramatta than to postcode 2000.

    They should build a shuttle railway from Sydney 2000 to Parramatta for the minority that live closer the Opera house than to Parramatta.

  10. Alan Davies

    James #2:

    I think the “regional development” rationale for HSR is one of the least compelling arguments for it; see Will HSR save the cities and develop the regions? That article is fairly old; here’s what I said when AECOM’s second report was released a year ago (Would HSR make Australians better off?):

    The report doesn’t measure the regional development impacts of HSR, arguing they’re too uncertain. In some cases they might also be negative e.g. small towns might lose out to regional centres served by HSR. What others call regional development I think should more properly be labelled regional sprawl. Give people faster transport and they’ll take the opportunity to live further away in bigger houses, especially if it’s heavily subsidised.

  11. James

    Alan,

    Whilst the basis of the report may be shaky as you say, I don’t think that the BCR appraisal methodology nor the funding issue should be the final word.

    At the launch of the report the keynote speaker was John Alexander (Liberal MP) and he made a very good case for HSR as the catalyst to develop our regional cities.

    His main argument was that we cannot hope to accommodate future population growth in our big cities without extreme pressure mounting on their poorly planned transport networks and exacerbating housing affordability. A HSR network would allow a pressure valve on these cities and would really develop regional centres along the route like Albury, Shepparton etc. Areas of the east coast that may struggle to sustain their communities in the future without diversifying their economies (encouraging commuters to move to these cities because of easy trips to Melbourne and Sydney, bringing in businesses and professional services, etc.).

    You can’t do this with air travel and I don’t think you get the same effect with road – not to the same extent anyway.

    P.S. They suggested that the whole cost of the project *could be* funded privately by overseas parties.

  12. Robert Merkel

    BZE are known for *highly* optimistic assumptions in their analyses. They did one for switching to 100% renewable energy which assumed absurdly low capital costs, and absurdly low construction costs for large-scale solar thermal power stations with energy storage.