Institute for Transport Studies
FACULTY OF EARTH AND ENVIRONMENT

When to invest in high speed rail - introduction

Chris Nash

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

Origins (new lines 250km per hour ormore)
1964 Tokaido Line
1981 Paris-Lyon
1981 Rome-Florence (1st section)
1988 Fulda-Wurzberg
1992 Madrid-Seville2012 European total

6900km (Spain 2144; France 2036)

World

13000km (China 3426; Japan 2087)

Source: UIC

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

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 environmentalimpact)• Generated traffic• Wider economic benefits

Typical costs of HSR in Europe (m2004euros)
Capital costs
Infrastructure
Construction (per km)

12-40
Operating costs depend mainly on rolling stock requirements, staff,energy, wear and tear – note very high utilisation of assets may offset
high energy costs

Values of time used in British rail appraisals(£ per hour, 2010 prices and values)
Source: DfT (2013)

Business
CommutingLeisure

31.96
6.81
6.04

Value of time - issues• Should we have different values of leisure time by mode?
• How should time spent waiting and interchanging atairports 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 inGDP?

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

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

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

Wider economic benefits
from generated traffic• Causes?
- labour supply- agglomeration externalities- Imperfect competition
Agglomeration benefits solely from commuter journeys up
to 75km on conventional rail and road
Longer journeys have little impact because of distancedecay and small rail market share (but isn’t rail important for
precisely those journeys most likely to produce WEBs?)Ex post appraisal of French LGV

Sud Est AtlantiquePassengers infirst year (m)Social return (%)

Nord

15.8

26.7

19.2

Inter
Connection
16.6

30

125

13.8

Alpes
18.6

Meditarranean
19.2

n.a.

n.a.

CBA of Madrid-Seville high-speed rail in Spain(billions of 2010 euros)

COSTS

6.8

BENEFITS

4.5

Of which Time savings

1.6

Generated traffic

0.8

Costs saved on other modes

1.9

External costs saved

0.2

Net present value of HST-2.3

Demand in 1993 2.8m trips

CBA of Madrid-Barcelona high-speed rail in
Spain (billions of 2010 euros)

COSTS

12.4

BENEFITS

7.2

Of which Time savings

2.8

Generated traffic

1.1

Costs saved on other modes

2.9

External costs saved

0.4

Net present value of HSR

Demand in 2009 5.5m trips-5.3

First year demand required for breakeven(α = 0.2 θ = 3%)40
α = 0.2
θ = 3%35

HighLow

Investment Cost / Km.
(€ millions)

Q d = 12 (Q t = 14.4)

30
Q d = 10 (Q t = 12)25
Q d = 8 (Q t =9.6)

20
Q d = 6 (Q t = 7.2)

15
10507,59 10,5 12 13,5 15 16,5 18 19,5 21 22,5 24 25,5 27 28,5 30 31,5 33 34,5 36 37,5 39 40,5 42 43,5 45

First year vΔt (€)

Low

High

Conclusions
HSR only justified when volumes high (construction costalso crucial)
Typically needs around 9m passengers per annum density
on social cost benefit terms (much higher for commercialviability)
Can enhance a whole network when associated with
upgraded conventional lines
But many uncertainties:• Costs• Demand forecasting• Value of time
• Wider economic benefits