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Geoffrey Styles's picture
GSW Strategy Group, LLC

Geoffrey Styles is Managing Director of GSW Strategy Group, LLC, an energy and environmental strategy consulting firm. Since 2002 he has served as a consultant and advisor, helping organizations...

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Is High-Speed Rail Worth Its Cost?

The editors of the Washington Post have expressed serious reservations concerning the administration’s plans for investing up to $53 billion in new high-speed rail systems, with the goal of linking 80% of the US population by a new fast rail network. If the facts they cite concerning the ongoing subsidies such systems require in other countries are correct–including countries with more suitable geography for high-speed trains–then attempting to follow their lead here could amount to buying a gigantic money pit. While I certainly see the benefits of high-speed rail as part of an upgraded US transportation infrastructure, I’d like to see the architects of the current proposals provide some hard numbers on how high speed rail compares to our alternatives.

This is a hard subject for me to approach objectively, because I love trains. Access to convenient and reliable rail service was one of the great joys of the two years I spent living in the UK and traveling on the Continent of Europe. I now routinely take Amtrak’s Acela service in preference to flying between D.C. and New York, particularly in light of the hassle that air travel has become, especially for short distances. Yet as much as the thought of sleek 200 mile-per-hour trains running on a network of smooth high speed tracks and connecting most major US cities appeals to me as a train fan and futurist, I’m also acutely aware of the cost and risk of such endeavors. For example, despite carrying more than 9 million passengers a year the channel tunnel system connecting London and Paris, which impressed me greatly when I rode it in the late 1990s, declared bankruptcy in 2006. It is now just barely profitable, earning a negligible (negative?) return on its original investment. The UK recently sold off its portion of the line to pay down government debt.

The World Bank report on high-speed rail cited by the Post was generally positive concerning developments in China and elsewhere, though also full of red flags: “The demographic and economic conditions that can support the financial or economic viability of high-speed rail are limited.” “The established lines with greatest demand are in East Asia…” “Nevertheless, high-speed rail projects have rarely met the full ridership forecasts asserted by their promoters and in some cases have fallen far short.” “Governments contemplating the benefits of a new high-speed railway… should also contemplate the near-certainty of copious and continuing support for the debt.” It also explains why high-speed rail is attractive in China, attributing it to, “The combination of supportive features that exist on the eastern plains of China including very high population density, rapidly growing disposable incomes, and the prevalence of many large cities in reasonable proximity to one another…” To that I might add the relative lack of competition from underdeveloped road and air infrastructure. Yet even in China its high cost is drawing criticism.

I’m also not clear on the non-transportation economic benefits for the US, particularly if the core train technology for systems like California’s current high-speed rail project is likely to come from Japan, France or Germany. And while the California project cites greenhouse gas savings of 6 million tons per year, that doesn’t sound quite so impressive in the context of its $10 billion initial cost. And the total is sure to go much higher, considering that the cost of the first leg, the so-called “train to nowhere” in the Central Valley, is over $4 billion and includes neither rolling stock nor power supply.

So here are some basic questions I’d like to see answered, in lieu of the largely aspirational rhetoric we’ve heard so far, before I’d be pleased to see my tax dollars spent on this initiative:

  • What is the projected return on capital and net present value of the investment?
  • What is the effective cost per barrel of achieving the oil and other energy savings projected for the first 20 years of operation?
  • What is the implied cost per ton of the resulting emissions reductions, assuming that the system is powered by the average US grid mix, and how does that compare to other ways to reduce emissions?
  • How do these results compare to the same metrics for other transportation investments that could be made with these funds, including modernization of US airports and air traffic control systems, key highway segment upgrades, and electric vehicle recharging infrastructure?
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Robin Carey's picture
Robin Carey on Feb 19, 2011

Florida’s governor Scott just this week pulled the plug on Florida’s high-speed rail system, and those federal dollars may be going to California instead.

Expensive though high-speed rail is, all modes of modern transportation are uniformally expensive, require public funding and rarely, if ever, recover their costs, particularly if those costs include future costs associated with ever-increasing green-house gases.

Further, the “core train technologies” that you refer to, Geoff, come from companies and/or countries that invest in American workers and have extensive technology sharing.  For more on high-speed rail and its benefits, I refer you to our recent “e-book,” on the same subject: http://sustainablecitiescollective.com/high-speed-rail-ebook

 

Geoffrey Styles's picture
Geoffrey Styles on Feb 21, 2011

John,

The Interstate Highway system was never intended to turn a profit; it was built in large part as a Cold War defense-related initiative.  And while I’m sympathetic to the argument that these are very long-term investments, saying they should only be evaluated over a 50-100 year horizon is tantamount to admitting that their return on capital is likely to be either zero or negative. 

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Geoffrey Styles on Feb 21, 2011

Willem,

The question isn’t whether the money is there; of course it is.  The question is whether it should be spent on this or something else, and how we make such decisions.  It’s doubtful that we have the public capital to invest in the kind of high-speed rail the President envisions, compared to our other priorities–which must be inferred since we never seem to be able to set them formally (everything is the highest priority, so nothing is).  And absent a centrally-planned economy, guiding private capital to such low-performing investments would require significant inducements: higher interest rates, guaranteed minimum returns, tax benefits, or some other means of bringing the expected return up to the level of comparable investment opportunities or substantially reducing the risk. 

Geoffrey Styles's picture
Geoffrey Styles on Feb 21, 2011

Robin,

The current budget environment is a zero sum game, or worse.  Am I wrong to see building a new high-speed rail system, with its high initial cost and very long payout on almost any criteria we can use (congestion, emissions, energy, financial) competing with repairing crumbling existing infrastructure, with immediate benefits? 

Geoffrey Styles's picture
Geoffrey Styles on Feb 21, 2011

Willem,

I was definitely looking at the US context.  Re the Netherlands, it’s not a coincidence that it has a population density of over 1,000/sq.mi., a level matched in the US only by New Jersey and Rhode Island, with only a handful of others anywhere near that level.  For comparison, CA comes in at 237, though it’s clearly higher in the coastal strip from San Francisco to San Diego.  In any case, I agree that it comes down to priorities.

Bill Woods's picture
Bill Woods on Feb 22, 2011

The population densities of the Netherlands, Belgium, Japan, UK, Germany, Italy, France and Japan, are 1039, 919, 873, 660, 593, 518, 295 and 236, respectively.

Spain?

 

Geoffrey Styles's picture
Geoffrey Styles on Apr 25, 2011

China’s recent experience with high-speed rail seems instructive:

http://www.washingtonpost.com/opinions/chinas-train-wreck/2011/04/21/AFqjRWRE_story.html

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