Enhancing the Cost Benefit Analysis of High Speed Rail

1
Enhancing the Cost Benefit Analysis of High Speed
Rail

• Chris Nash
• Research Professor
• C.A.Nash_at_its.leeds.ac.uk

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Outline

1. History and Objectives
2. Costs and benefits
3. Examples
4. Conclusions

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Origins and objectives of HSR

• (HSR speeds of 250 km per hour or more)
•  
• 1964 Tokaido Line Speed and Capacity
• 1981 Paris-Lyon Speed and capacity
• 1981 Rome-Florence (1st section) Speed
• 1988 Fulda-Wurzberg Relief of
  bottlenecks
• 1992 Madrid-Seville Speed
•   
• 2008 European total 5558km
• World 10034
• Source UIC

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Motivation for HSR

• Speed
• Capacity
• Reliability
• Economic Development
• Environment
• Supply industries
• Prestige
• Political integration

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Costs and Benefits

• COSTS
• Capital costs
• Net Operating costs
• Net External costs (environment, safety)
• BENEFITS
• Time savings
• Additional capacity
• Diversion from other modes
• Generated traffic
• Wider economic benefits

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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 note very high utilisation

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Value of Time Savings for rail Passengers in the
UK
Standard Valuations ( per hour, 2002 market prices)
Leisure 4.46
Commuting 5.04
Business 39.96
Source DfT WEBTAG Unit 3.5.6
(www.webtag.org)
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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?
• Does marginal productivity theory work at this
  level of detail?
• Do savings in labour cost lead to equivalent
  increases in GDP?

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Capacity benefits

• Increased traffic on hsr route
• Increased traffic on other routes
• Reduced overcrowding
• Improved reliability
• NB For HS2
• Estimated underlying growth in rail traffic 3.6
  per annum
• WCML long distance trips per day 2008
  45000
• HS2 in 2033 145000

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Benefits of diversion from car or air

• Reduced congestion
• Environmental pollution
• Accidents
• Release of airport capacity for long distance
  flights

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Before and After High Speed Market Shares
TGV Sud-Est TGV Sud-Est AVE Madrid-Seville AVE Madrid-Seville
Before After Before After
Plane 31 7 40 13
Train 40 72 16 51
Car and Bus 29 21 44 36
Source COST318 (1996).
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Energy consumption by mode (MJ per pass km)

• Inter city train at 44 load 0.5
• High speed train at 49 load 1.08
• High speed train at 70 load 0.76
• Air (500km flight) at 70 load 2.57
• Diesel car on motorway at 36 load 0.94
• Source CE Delft (2003)

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External Costs (eurocents per km)
External Cost Charge
Car peak 16.1 24.4 7.8 15.6
Off peak 4.4 5.6 7.8 15.6


Benefits come largely from reduced congestion
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Generated traffic(valued at half the benefits to
existing traffic)

• Leisure
• Commuting
• Business
• Does this reflect relocation of business or net
  expansion?

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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

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Figure 1.1
High Speed Rail in Britain
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HS2 Costs and Benefits (b2009PV)
Transport Benefits 28.7
Wider Economic Benefits 3.6
Total Benefits 32.3
Capital Costs 17.8
Operating Costs 7.6
Total Costs 25.5
Revenues 15.0
Indirect Taxes 1.5
Net Cost to Government 11.9
BCR 2.7
(excluding WEB 2.4)
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Ex post appraisal of French high speed line
construction
Sud Est Atlantique Nord Inter Connection Alpes Meditarranean
Passengers in first year (m) 15.8 26.7 19.2 16.6 18.6 19.2
Social return () 30 12 5 13.8 n.a. n.a.
Source Conseil Général des Pont et Chaussées
(2006) Annex 1
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CBA of Madrid-Seville high-speed train in Spain
(millions of 1987 pesetas)
Social benefit of HST
COSTS
Infrastructure -237.761
Residual Value 17.636
Trains -58.128
Maintenance -41.410
Operation -135.265
Net present value of HST -258.329
Project life (30 years), GDP growth (2.5),
social discount rate (6)
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First year demand required for breakeven(a 0.2
? 3)
High
Low
Low High
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Research needs

• Case for HS2 looks strong but research needed
• Cost benchmarking why are British costs so high
  and can they be reduced?
• Demand forecasting what are the long run
  prospects for demand?
• Treatment of Risk and Uncertainty in Appraisal
• Impact of yield management systems
• Value of time Mode specific values? Business
  travel time? Time spent at airports?
• Environmental costs and benefits?
• Wider economic benefits