Realism about high-speed rail

Super-high-speed version: Australia has better things to do with $100 billion than building a high-speed rail line. It’s all summed up in this exchange from the ABC TV series Utopia:

A new high speed rail proposal is being put to Malcolm Turnbull, and already Rhonda is excited #UtopiaABC pic.twitter.com/8UcsXL3lZG

— Working Dog (@workingdogprod) March 17, 2016

The fundamental point made in this clip is exactly right: the engineers, economists, and transport and logistics experts who study this issue – in Rhonda’s words, the lunatic fringe – all tend to wind up finding that Australian HSR doesn’t make sense.

Now here’s the non-express version …

In looking at high-speed rail (HSR) at various times since the Hawke years, you can make a few fairly defensible conclusions:

• High-speed rail is economical for certain routes, but right now Australia is probably not one of them. The “sweet spot” for HSR trips is between two and three hours. (The fastest Tokyo-Osaka bullet train takes just over two-and-a-half hours; a Paris to Lyon HSR takes just under two. These are the ideal HSR routes.)
• Benefit-cost calculations for Australian high-speed rail almost always show a Sydney-Melbourne or Brisbane-Sydney-Melbourne high-speed line would struggle to deliver net economic benefits.
• That may change in the future, if you can get Sydney-Melbourne travel times below three hours.
• You should assume these routes would actually cost more than currently projected; research by people like Danish economic geographer Bent Flyjberg shows this is the norm for such projects.
• The proposed Australian HSR would probably bring about a net increase in emissions. This is counter-intuitive until you consider the knock-on effects. For instance, Sydney Airport’s limitations currently mean there’s pent-up demand for Sydney flights; a new train connection will not mean less flights out of Sydney Airport, but rather will mean different flights. Building the line would also use a lot of emissions-intensive concrete and steel.
• There is not a huge obvious inherent value in a decentralisation project that effectively makes Albury-Wodonga or Canberra or Shepparton into an outer suburb of Melbourne or Sydney. On the contrary, in many ways, crowded is good and decentralisation is bad.
• To quote Spanish high-speed rail expert Daniel Albalate, the opportunity costs of building uneconomic high-speed rail can be huge, because the projects cost so much. That’s what happened in Spain,where the high-speed rail network cost an estimated €40 billion. $100 billion on HSR is $100 billion you can’t spend on other things.

If you’re not bored yet, here’s even more analysis:

• My original 2013 criticisms of high-speed rail, eagerly greeted by Club Troppo commenters with plaudits such as “very unconvincing”, “I reckon you’re on weak ground” and “how about fast inter-urban type trains?”
• INTHEBLACK magazine’s global survey of high-speed rail, written by the admirable Susan Muldowney and including comments from Daniel Albalate and David Hensher and much other insight besides.
• INTHEBLACK’s survey of megaproject costs and benefits, also by Susan Muldowney and including Bent Flyjberg’s comments.

The Australian high-speed rail proposal comes up every few years and the reasons why it’s currently a bad idea haven’t changed that much.

But the latest proposal is accompanied by a bunch of talk about a new thing – “value capture”. The Prime Minister is quoted as saying this week that “that’s how railways were financed in the 19th century, actually”.

The PM is right: value capture is a real thing. However, it’s a thing that in the past mostly worked around suburban railway stations at greenfields sites, usually with free or cheap land donated by the government. The line itself is not the source of the value; the stations are. My guess is that a high-speed rail project will get much of its value capture not from greenfields sites or small cities like Shepparton or Bowral or Canberra but from real estate development right next to the big-city stations. (Feel free to make an opposing case in the comments.) But I’m not sure how big this value will be, or how it can be measured.

As it happens, there have been a lot of high-speed rail lines built in the past couple of decades, which means there is now a bit of a literature on the value added to various locations by the arrival of high-speed rail. At first glance, the short version of this seems to be that it’s really hard to measure the value, it doesn’t seem to be huge, and in some cases it may be negative because of the disruption associated with putting a big new station in the middle of a busy city.

One of the best studies to date seems to be the 2012 study by the University of Sydney’s David Hensher and two co-authors. Its findings suggest that “HSR does not always lead to (or is positively correlated with) the growth in property or land values in the short term (one to three years after the HSR project); and longer run evidence is not available.” For instance, as best anyone can can tell – and it’s hard to tell – HSR seems to have pushed property prices up in London but down in Paris, while having no effect in Strasbourg. If the changes in value are uncertain and unpredictable, “capturing value” starts to look like a pretty hopeless task. (Again, feel free to comment.)

As usual, Alan Davies at The Urbanist is worth reading on these issues too. And by “is worth reading” I mean, of course, “comes to the same conclusions as me”.

God help me, I’m getting as cynical as the Utopia crew.

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1. Side note: I don’t know who Working Dog had advising them on Utopia or its predecessor, The Hollow Men, but those advisers had certainly spent some quality time at that ugly point where well-informed policy collides with the worst type of media spin. This Utopia episode even finds time to make the heretical point that the Snowy Mountains Scheme may not have been a very good idea.[↩]