hsh-research-report.pdf

The benefits of high-speed rail in comparative perspective

2 : Invensys | The benefits of high-speed rail in comparative perspective

The benefits of high-speed rail in comparative perspective | Invensys : 3

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ContentsINTRODUCTION: HIGH-SPEED RAIL IN A SHIFTING GLOBAL CONTEXT 4 Diverse paths toward the future of HSR 6

EXECUTIVE SUMMARY 7 The benefits of HSR 7 HSR success factors 9

SPAIN 10 Key attributes 10 Context 10 Anticipated benefits 11 High-speed rail network 11 Challenges 12 Financing 12 Track gauge 12 Competition and Market Share 12 Freight and Short Lines 13 Signalling 13 Realised benefits 14 Economic impact 15

GERMANY 16 Key attributes 16 Context 16 Anticipated benefits 17 High-speed rail network 17 Challenges 18 Financing 18 Local environmental objections 18 Signalling 19 Realised benefits 19 Hannover - Berlin 19 Cologne - Frankfurt 19 Impact on intermediate towns:

Montabaur and Limburg 19

THE ‘EUROSTAR NETWORK’: LONDON TO PARIS AND BRUSSELS 20 Key attributes 20 Context 20 Anticipated benefits 21 High-speed rail network 21 Challenges 21 Interoperability 22 Environmental objections 22 Financing of HS1 22 Operator Organisation 23 Competition 23 Realised benefits 24 Traffic and journey time benefits 25 Environment 25 Lille and regeneration 25

JAPAN 26 Key attributes 26 Context 26 Anticipated benefits 27 High-speed rail network 27 Challenges 28 Land acquisition 28 Financing 28 Safety and training 28 Signalling 28 Realised benefits 29

CHINA 30Key attributes 30Context 30Anticipated benefit 31High-speed rail network 31Challenges 32 Financing 32 Signalling 32 Competitiveness 32Realised benefits 33

CONCLUSION 34

ABOUT THE AUTHORS 35 Invensys Rail 35 Oxford Analytica 35


Introduction:high-speed rail in a shifting global context

Transportation infrastructures around the world are being challenged by shifts in demographics, fluctuating fuel prices, and public concern over climate change and environmental protection. Growing populations have created new travel demand, while urbanisation has concentrated this demand within expanding cities. Aging transportation networks have been stretched well past their intended capacities, and the rising price of fuel has made conventional forms of travel more expensive than ever for the consumer. Meanwhile, public concerns over climate change have increased pressure on policymakers to improve energy efficiency in spite of increasing requirements for safe, efficient, and affordable transport.


This study shows how high-speed rail (HSR) has played an important role in addressing these and other transportation challenges across five case studies: Spain; Germany; the ‘Channel Tunnel’ network connecting London with Paris and Brussels; Japan; and China. Its goal is to inform future HSR development by highlighting past achievements, pointing to factors that enable success, and identifying strategies for overcoming an array of policy and planning challenges.

Each case study is presented in the following format:

> Key attributes. Summarises vital statistics, strategies utilised, and benefits accrued.

> Context. Establishes the political, economic, or demographic context in which the decision to develop an HSR network was taken.

> Anticipated benefits. Summarises the anticipated benefits of HSR development as articulated in the planning stages.

> High-speed rail network. Describes the nature of the resulting rail network, drawing attention to contrasts with other national strategies.

> Challenges. Examines the major challenges confronted by policymakers (and in some cases their private sector partners) and identifies the often unique strategies employed to match the capabilities of HSR technology with varying constraints of geography, demographics, funding, and politics.

> Realised benefits. Establishes the economic, social, environmental and other benefits realised by the adoption of HSR and compares these to the original rationale for HSR investment.


Diverse paths toward the future of HSR

The case studies explored in this report were chosen to highlight a contrasting set of strategies used to realise the benefits of HSR, each taking into account national policy priorities and unique constraints of funding, geography, demographics and politics. Some countries, for example, have invested in high-speed rolling stock for partial use on conventional rail networks, sacrificing top speeds for the decreased cost and complexity of operating and maintaining a single network. Others have entered into public-private partnerships, dispersing risk across multiple levels of government and private operators. The diversity of HSR networks in the case studies below indicates that defining ‘success’ in HSR development should be done with an eye toward the national context, and in reference to national goals, rather than against a set of generic priorities.

Yet on the broadest level, global trends in transportation requirements are likely to make HSR an increasingly important part of the policy toolbox. As growing populations and expanding cities strain existing transport networks, and as improving technologies yield increases in speed and efficiency per dollar of investment, we expect HSR’s competitive advantage over other modes of transport to grow. The case studies below paint a picture that will allow future investors to take advantage of improving technologies while ensuring that their planning leverages the collective experience of current and past generations of HSR practitioners.

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High speed rail distance by country (km)

Before 2000 2001 to 2005 2006 to April 2010


While the benefits of HSR vary in different contexts, the achievements identified in the case studies below can be synthesised into a number of categories spanning a broad set of transport and economic development policy challenges.

HSR investment has commonly resulted in:

> reduced travel times;

> reduced congestion on established modes of transport;

> improved access to markets and commerce;

> decreased carbon footprint in comparison to road and air transport;

> and creating industry growth and export opportunities.

Similarly, while challenges vary greatly by country, HSR investment experiences reveal a number of factors that define both the technology’s potential and its limitations in a global context. Examining the diverse challenges faced by governments and their private-sector partners across each of the case studies yields a number of lessons for ‘best practices’ in future development. From the studies below, we can conclude that:

> successful HSR can adapt to a variety of geographic and demographic layouts – within limits;

> financial sustainability of HSR relies on existing capacity constraint within the low-speed rail network;

> maximum speed should not always be the goal;

> HSR succeeds as part of a holistic transportation policy;

> and HSR’s excellent safety record reflects sufficient investment in training and safety infrastructure.

Each of these benefits and success factors is now divided into component parts based on experiences from the case studies below.

Executive summary

The benefits of HSR

Reduced travel times.

> HSR offers faster net travel times than conventional road, rail and air travel between distances of approximately 150 kilometres (km) and 800 km.

> For distances shorter than 150 km, the competitive advantage of HSR over conventional rail is decreased drastically by station processing time and travel to and from stations.

> For distances longer than 800 km, the higher speed of air travel compensates for slow airport processing times and long trips to and from airports.

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Journey times v. distance for rail (HS and conventional lines) and air transport

High-speed rail fastest

High-speed necessary for rail to be fastest

Distance (km)

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Source High-speed rail: International comparisons, Steer Davies Gleave, Commission for Integrated Transport, London, 2004


Reduced congestion on established modes of transport.

> Within the parameters above, HSR reduces bottlenecks on conventional rail routes, improving their reliability, increasing efficiency, reducing wear-and-tear on the conventional network, and increasing capacity for freight traffic on conventional lines.

> As air travellers move to HSR, short-haul flights are discontinued, increasing runway capacity for longer flights on which air travel maintains a competitive advantage over HSR.

> As drivers shift to HSR, motorways become less congested, reducing maintenance costs and in some cases lowering the number of traffic fatalities.

Improved access to markets and commerce.

> Through reduced travel times, HSR reduces the opportunity cost -and commonly the expense- of inter-city commerce and tourism.

> This increases the reach of small businesses, improves the operational efficiency of larger ones, and enables commuting over longer distances while maintaining quality of life.

> Stations in underdeveloped communities attract new retail and hospitality investment, while businesses can take advantage of comparatively low property values and easy access to major city centres.

> This in turn can reduce regional disparities, as has been the case in Spain and on certain parts of the Eurostar network.

Decreased carbon footprint in comparison to road and air transport.

> Comparative CO2 emissions between HSR development and the continued use of conventional transport vary significantly case-by-case, but on a per-passenger, per-kilometre basis, HSR is a distinctly more climate-friendly mode of transport than either road or air travel.

> While HSR emits more CO2 on this basis than conventional rail networks, the greater potential for HSR to challenge road and air travel often makes it the ‘greener’ option within the distance parameters above when considering new investment.

Creating industry growth and export opportunities.

> Many countries have sought to maximise the long-term economic benefit of HSR investment by developing indigenous HSR technology and manufacturing sectors.

> Many of these have gained reputations for quality and innovation and have created export industries that contribute significantly to the national economy. This is particularly visible in signalling, where European manufacturers have leveraged the successful construction and operation of an international control system to create business opportunities in new markets.


HSR success factors

Successful HSR can adapt to a variety of geographic and demographic layouts – within limits.

> HSR planning strategies can accommodate the ‘scattered’ major cities of Germany as well as the ‘linear’ or ‘spoked’ arrangements centred on the capital cities of Japan and Spain.

> Similarly, technological innovation has made HSR appropriate for a variety of topographies and has increased opportunities for minimising environmental impact.

> Maximising revenue on HSR lines requires connecting cities with sufficient population size and density to ensure a significant customer base with good access to stations.

> Investing in HSR links between two cities beyond the 800 km threshold described above is unlikely to provide a sustainable addition to the transportation infrastructure.

Financial sustainability of HSR relies on existing capacity constraint within the low-speed rail network.

> HSR networks that cover costs with revenue do so most often because they serve an existing travel market that challenges the capacity of existing infrastructure.

> While immediate cost covering is commonly a secondary concern to governments investing in HSR, matching HSR services with existing capacity constraints lowers the financial risk of investment considerably and shows taxpayers -- including those who continue to favour other forms of transport -- a clear return on investment.

Maximum speed should not always be the goal.

> HSR has fared poorly when planning prioritises maximum speed at all costs. While increasing speeds on the longest HSR lines can narrow the gap with air travel in terms of journey time, settling for lower speeds often enables higher revenue with minimal effects on competitiveness with other modes of transport.

> Placing intermediate cities on long high-speed lines increases revenue across the line and allows the growth benefits of HSR to accrue to smaller cities.

> Many of the countries examined below have lowered costs and increased the customer base by incorporating varied services with a range of maximum speeds into their HSR networks.

> Instead of focussing on achieving top speeds over limited distances, the adoption of advanced signalling systems can increase average speeds across the line while lowering long-run operational costs.

HSR succeeds as part of a holistic transportation policy.

> Planners can maximise the benefits of HSR by streamlining linkages with other forms of transportation, and by utilising ‘mixed use’ technologies that can operate on either high-speed or conventional track. This enables HSR rolling stock to serve wider markets that pay a smaller premium for moderate reductions in travel time.

> Station placement should seek to balance the necessities of efficient operation and urban planning priorities. Strategic station placement is a principal enabler of HSR-related growth in underdeveloped communities.

> Introducing ‘yield management’ pricing strategies enables dynamic competition with regularly shifting airfares, increases revenue on high-speed lines with remaining capacity, and allows access to HSR services by customers with varying travel budgets.

HSR’s excellent safety record reflects sufficient investment in training and safety infrastructure.

> HSR’s global safety record is impressive, matching that of air travel and beating road travel by a wide margin.

> The few HSR incidents to date reveal not a problem intrinsic to the technologies employed, but attempts to cut construction and management costs by under-investing in infrastructure and training.

> Where countries new to HSR have attempted to indigenise technologies such as signalling, in which established companies have created a track record of quality construction and operational best practices, safety may compromised.


Spain

Key attributes

First year of operation

1992

Length of track 2,057 km

Top speed 305 km/h

Cost per kilometre 12 million euros

Strategies employed > Adoption of centralised, cross-platform signalling technology

> Allowing freight on high-speed lines> Lower speed services on less-travelled

routes

Key benefits > Dramatic reduction in travel times> Large modal shift from air travel> Increased access to large economies

from intermediate cities

Context

Before investment in HSR, Spain’s conventional rail system had played a minor role in the transportation network. Lower than average speeds on the rail system reflected extreme topography on popular routes, necessitating sharply curved tracks and climbs on steep gradients. The network was limited to single-track lines, which constrained capacity on the most popular routes. The use of tilting rolling stock was of some help in raising speeds, but both speeds and capacity were still inadequate to capture a significant portion of transportation demand. Railways therefore played only a limited role in intercity passenger transport, which was dominated by the road network.

By the 1980s, Spain’s rail system was in desperate need of modernisation, and the hosting of the 1992 World Expo in Seville provided the spark for the country’s first investment in HSR. Strained capacity on the conventional track between Seville and Madrid threatened to decrease local revenue from the Expo, and Spain’s accession to the EU in 1986 opened funding opportunities for transportation reform in underdeveloped regions such as Andalucia, where Seville is located.

The distribution of cities in Spain falls well within the established distance parameters to ensure a competitive advantage in travel time against other modes of transport. Madrid, with a population of three million in the metropolitan area, is located in the centre of the country some 400-700 km from most other major cities. This includes the major cities of Barcelona (population 1.6 million), a commercial and industrial centre and capital of Spain’s richest province, Valencia (population 0.8 million), Seville and Zaragoza (both population 0.7 million).

Spain’s high population density presented the prospect of easy access to rail stations by a large percentage of the urban population, which made HSR planners confident that travel time to and from centrally-located train stations would not be significant enough to nullify HSR’s competitive speed advantage over other modes of transport. The average density of the five largest cities in Spain is 6,200 inhabitants per square kilometre -- twice the density of the five largest German cities. This density reflects continuing trends toward urbanisation, and rural population densities remain low with an average of only 81 inhabitants per square kilometre.

The Spanish high-speed rail network in 2011

Source International Union of Railways


Anticipated benefits

The main objectives of Spain’s HSR development were to reduce travel times and increase capacity on the rail network in order to improve access to large economies from smaller cities and to help mitigate regional disparities and tensions that had persisted since the 19th century. In particular, policy makers sought to encourage growth in cities other than Madrid and Barcelona, which had developed at a significantly faster rate than other cities with smaller industrial and service-based economies. Other objectives were to provide employment opportunities through construction and maintenance outside of the major cities, to increase development opportunities for the domestic rail industry, and to reduce the environmental impact of travel by encouraging shifts from road and air transport. Efficiency in conventional freight traffic was also expected to benefit from capacity made available as passenger services moved to high-speed lines.

The government decided early on that to compete with other modes of transport, HSR would have to ensure travel times from regional capitals of less than four hours by train to Madrid and six hours to Barcelona. In addition, the government’s current transport plan aims to bring 90% of the Spanish population within 50 km of an HSR station by 2020.

Spanish HSR development has received significant assistance from the EU as part of its Trans-European Networks initiative (TENs), which seeks to use transportation policy to improve environmental sustainability through modal shifts away from air travel, to improve economic integration under a ‘single market’ concept, and to address regional disparities across the Union. In the early days of HSR, the EU hoped in particular that the Madrid–Barcelona HSR line would largely replace air travel between the two cities, freeing capacity at both airports for longer journeys. EU priorities for Spanish HSR development also included connecting the network to the French TGV system, in the hopes of further reducing the necessity for air travel and encouraging regional integration.

High-speed rail network

To reduce the cost of construction and to avoid public opposition to new construction in city centres, planners opted to run HSR services through existing rail stations. In rural areas, lines were built with a minimum of tunnels and earthworks (in contrast to Japan as described later in the report).

This often resulted in steep gradients, which are viable for passenger-only high-speed lines providing the rolling stock is designed with adequate power and low weight. Notably, HSR construction in Spain demonstrates that in mountainous areas, high-speed lines can in fact represent a cheaper solution for capacity problems than conventional lines due to the possibility of using direct alignments.

Since the opening of Spain’s first high-speed line in 1992, the network has expanded considerably, enabling travel between Madrid and Barcelona via cities such as Zaragosa, and now offers access to cities off the principal southwest-to-northeast line such as Valladolid and Valencia. High-speed networks now represent 14% of total rail kilometres in Spain. The line connecting Barcelona to the French border will be opened in 2012, and will allow the first passenger services between Spain and France without change of gauge.

Three types of passenger train services now operate on high-speed lines:

> Since 1992, AVE trains with top speeds of 300-350 kilometres-per hour (km/h) have operated over long distances, only on high-speed lines.

> Since 2004, Avant trains with top speeds of 250 km/h have operated over shorter distances, again only on high-speed lines.

> Since 2006, dual gauge Alvia trains with top speeds of 250 km/h have operated over long distances on both high speed and conventional lines.

Spanish HSR has thus identified a balance of speed and pricing on individual routes allowing it to rely less heavily on the most popular high-speed routes to subsidise operations elsewhere. The introduction of Avant and Alvia services, in addition to the AVE, has led to greater traffic volumes and revenue on the HSR network as a whole. This division of services has become common practice for successful HSR investment.


Challenges

FINANCING

High-speed lines in Spain are cheaper to build than elsewhere in Europe, with an average cost of 12 million euros per kilometre compared to over 30 million euros in Germany. This is because low rural population densities reduce the cost of acquiring land for track construction, and reduce the number of objections to the construction of high-speed lines, which in other countries have necessitated costly mitigation measures. Wages are also relatively low in Spain, lowering the cost of construction. Despite these relative benefits, Spanish HSR has necessitated considerable government investment. In 2005, the government set out plans to build a further 9,000 km of high-speed lines between 2006 and 2020 at an anticipated cost of 83 billion euros.

While a precarious economic environment has compelled the government to moderate its HSR development targets somewhat, continued investment has been made possible by extensive use of public-private partnerships (PPPs). The Spanish government now has a goal of funding 19% of HSR investment from ‘outside the budget’ until at least 2015.

PPPs initiated by Adif, the public infrastructure management company, have attracted numerous bidders, thus enabling the government to negotiate favourable distributions of risk between public and private actors.Competition for private involvement in PPPs has also ensured considerably more efficient management of HSR networks than had been achieved in the past, and has, in general, allowed the network to use a deep pool of private capital to replace re-allocated government funding. The new line leading into France from Figueras was built under a 50-year contract between the French and Spanish governments and a special-purpose company, T.P. Ferro. Two new PPPs are now in the planning stages.

TRACK GAUGE

Spain’s conventional track uses gauges that differ from the European standard. The government decided to use the standard European gauge on the high-speed lines, ensuring interoperability with the rest of Europe with which the Spanish network will soon connect. To ensure connectivity with existing conventional lines in Spain, Renfe, the state-owned rail operator, has introduced locomotive-hauled Talgo trains (branded Alvia), which use gauge changers to alter the width of the wheels to and from the Spanish standard.

COMPETITION AND MARKET SHARE

High-speed rail faces considerable competition in Spain. Coaches have historically been the main mode for short/medium distance public transport.

Over longer distances, air is the still the main competitor to high-speed rail, and private road transport is important at all distances. A key challenge for high-speed rail in Spain, as in the majority of cases, is to match air in terms of journey times while ensuring a cost advantage. Spanish HSR has succeeded in doing this by achieving travel time between city centres of 2 ½ hours (well within the 3-4 hours generally thought necessary for rail to compete with air on overall journey time), and fares that are generally lower than the price of air travel. Renfe is currently planning to introduce yield management techniques (differentiated pricing based on number of seats available or travel dates) in order to leverage spare capacity and ensure that opportunities to take advantage of HSR are available to customers in a variety of income brackets.


FREIGHT AND SHORT LINES

While domestic freight has benefitted from HSR through the freeing of capacity on conventional lines, international freight, which has greater potential as a driver of economic growth, was initially hampered by the proprietary Spanish track gauge. To take better advantage of growth opportunities in international freight, the Spanish government’s HSR strategy now includes development of hybrid passenger/freight lines operating on European standard gauge for routes that cross borders. In combination with the phasing out of HSR services in areas of particularly low demand, this decision constitutes a narrowing of the HSR focus to routes that ensure a balance between social and economic benefits and sustainable revenue.

SIGNALLING

The expansion of Spain’s HSR network has posed a challenge for signalling systems, which normally differ considerably between conventional and high-speed networks, and between higher- and lower-speed services offered on the AVE, Alvia, and Avant lines. The efficient functioning of these varied systems is ensured by advances in signalling control technologies that have enabled the regulation of all networks from centralised locations. Spain was the first adopter of this technology, which now regulates HSR operations across Europe as the European Rail Traffic Management System (ERTMS). Aside from ensuring safety and efficiency across various rail services, this has removed the necessity of building expensive signalling centres across the network, thereby lowering the cost of HSR investment.


Realised benefits

Because of the poor state of Spain’s conventional rail system, high-speed rail has reduced travel times by an average of 60-70%. Reliability is exceptional with 99.8% of AVE trains between Madrid and Sevilla arriving within three minutes of schedule. Improvements in speed and reliability have enabled economic development in cities that were previously poorly connected to the network.

Since the opening of the Madrid-Seville line, ridership has increased from three million to five million per year. While this level of traffic and the rate of growth (around 3% annually) are relatively low by comparison to other high-speed lines around the world, HSR growth has induced a significant modal shift away from air travel -- one of the government’s key objectives. The following tables show that air travel’s share of traffic fell from 40% to 13% during a period of major HSR network expansion between 1991 and 1994. By 2009, five times more passengers were carried by rail than by air between the two cities. These modal shifts have substantially reduced CO2 emissions from transport, and reduced congestion at both airports.

Even greater reductions in travel times were achieved on the line between Madrid and Barcelona, initially to 2.75 hours. Following the introduction of ERTMS in 2011, travel times between Madrid and Barcelona were further reduced to only 2.5 hours. Traffic on this line now exceeds seven million passengers per year, some of whom travel to intermediate cities on the corridor. Between Madrid and Barcelona, rail market share has increased from 12% to 49%. Renfe, the national rail operator, estimates that by providing a fast and cost-effective alternative to road travel, this line alone saves 250,000 tonnes of carbon emissions and 144,000 tonnes of oil, and reduces road fatalities by an average of 68 incidents annually.

After AVE (1993)

Airplane 4%

Conventional train 2%

Bus 8%

Car 34%

AVE 52%

Before AVE (1991)

Airplane 11%

Conventional train 14%

Bus 15%

Car 60%


1 Todorovich, Schned and Lane (2011). ‘High-speed rail: international lessons for U.S. policy makers’. Lincoln Institute of Land Policy.

ECONOMIC IMPACT

In addition, HSR has had a significant impact on the economies of Spain’s smaller cities. Residents of Ciudad Real and Puertollano, each with a population of approximately 50,000 and located about 200 km from Madrid, can now access the capital city in one hour. These cities had previously been isolated from the main transport routes but, as result of the high-speed line to Seville, are now better integrated into the wider economy. New residents have moved in to take advantage of cheap property, commuting to Madrid has become common, and property values have increased as a result of the line. Economic growth has also been promoted by urban revitalisation around stations, particularly when stations have been placed close to city centres. In Lleida, for instance, planners have attributed a 15% growth in tourism and a 20% rise in business conventions to the strategic construction of a station between the historic and newer centres of the city.1 In general, the effects of HSR on Spanish economic and social life have been such that, despite the difficulty in ensuring sustainable revenue on less-travelled lines, the Spanish government has continued to prioritise HSR investment in these places.

With the completion of several new lines over the past few years, total high-speed rail traffic more than quadrupled to 11.5 billion passenger kilometres in 2009. Although this is less than the high-speed rail traffic in France and Germany, it represents half of all rail passenger kilometres in Spain. HSR has been such a popular success in Spain that Renfe’s high-speed division is now the only one for which revenue covers operating cost.

The reduced costs of construction and the unusually low speeds and inadequate capacity of the conventional rail network make Spanish HSR highly successful on a benefit-per-passenger basis. Spanish HSR planners have leveraged the strengths of HSR while minimising its cost by: running services which go off the high-speed line using gauge changing techniques; allowing freight on some high-speed lines (especially those to France to take advantage of the gauge); limiting the construction of high-speed lines to longer distances where the time advantages are more significant; and introducing ERTMS to further reduce journey times.


GermanyKey attributes


1991

Length of track 1,284 km

Top speed 305 km/h


Strategies employed > Emphasis on intermodal transit: HSR stations at airports, code-sharing with airlines

> High speed rolling stock operating on conventional lines

> Lower average speeds to suit a polycentric distribution pattern

Key benefits > Improved reliability, particularly in the east

> Eased transfer of capital back to Berlin> Modal shift from road/air travel> Significant growth in intermediate cities

Context

Germany’s urban population is polycentric and widely dispersed. Berlin has 3.4 million inhabitants, Hamburg 1.8 million, Munich 1.3 million and Cologne 1.0 million. There are eight cities with populations between 500,000 and 1 million. This is in contrast to countries such as Spain, where the urban population is concentrated in two major cities. The average population density of the five largest cities in Germany is only 3,000 inhabitants per square kilometre, meaning that much of the population of these cities often must travel significant distances to reach a railway station. Population densities in the countryside are higher than in Spain, though lower than in Japan.

Long-distance trains in Germany have therefore always passed through many major cities, often operating frequent services with many stops. Rail lines also run in a variety of directions in a ‘web-like’ formation rather than converging on the capital in a hub-and-spoke arrangement as in many other countries. This makes for a particularly complex rail network. A large population divided amongst a significant number of major cities, combined with the fact that German manufacturing has historically generated considerable freight transport volumes, led Germany to develop Europe’s largest conventional rail network.

Germany’s HSR investment was designed to address a capacity shortage on an aging and slow rail network in the face of growing demand, with specific bottlenecks that inhibited the growth of commerce and tourism. Continuing development of the air and road infrastructure also compelled government to search for new approaches to ensuring rail’s overall competitiveness. HSR was also seen in the immediate post-Cold War era as a means of improving transport links between the newly united east and west, supporting the economic and social objectives of re-unification.


The German high-speed rail network in 2011



While planning for HSR in the 1960s sought principally to accommodate new demand for rail and relieve an aging conventional network in West Germany, the opportunity to improve connections with Berlin after re-unification in 1990 injected significant new political capital into the push for extending HSR in a new round of investment. This would represent a marquee element of a broader push for transportation reform in eastern Germany, which found its infrastructure in disrepair after the end of the Cold War.

The German public’s enthusiasm for environmental sustainability further built political support for investment in HSR as it offered a compelling alternative to air and road travel. A major feature of HSR planning was an emphasis on the construction of stations at airports to increase the accessibility of HSR to those transferring to or from international flights, and to provide a station within reach of the many residents of areas close to major airports. A station built at Frankfurt airport -- Germany’s largest airport and the third-largest in Europe -- was viewed as particularly important because some 35 million people live within 200 km, giving it a larger catchment population than any other European airport.


High-speed rail investment in Germany has focused less on new high-speed lines than on the purchase of special high-speed rolling stock operating mainly on conventional lines (Inter-City Express [ICE] trains). In Germany, less distinction is made than in other countries between conventional and high-speed systems in the eye of the consumer, with both high-speed and conventional trains able to operate on high-speed and conventional track.

The polycentric distribution of German cities did not lend itself to the development of a few new high capacity rail lines converging on the capital as was constructed in Spain. Instead, new sections of track were constructed where there were particular bottlenecks on the network. These were designed for both freight and passenger traffic, although their use by freight has been limited and more recent lines have been constructed for passengers only. This is in contrast to Spain, where passenger-only lines gave way to dual purpose ones as planners sought new sources of revenue.

Operations began on the first high speed line between Hannover and Wurzburg in 1991. The line was built using extensive tunnels and bridges to reduce gradients in order to allow freight as well as passenger services, and to mitigate environmental damage. The German approach later incorporated passenger-only high-speed lines that would allow for steeper gradients. This culminated in the passenger-only line opened in 2002 between Frankfurt and Cologne via Frankfurt airport. Lines to Berlin were also improved over the course of the decades following reunification, including the introduction of HSR services to Hannover in 1998 and to Hamburg in 2004. A further high speed line between Berlin and Nuremberg is expected to be complete in 2017 and will allow travel from Berlin to Munich in four hours, partly on high speed lines, compared to eight hours before construction began.

German HSR constitutes only 1.6% of Germany’s rail network, far less than in Spain. Yet because high-speed ICE trains run extensively on conventional tracks that have often undergone upgrades and at a cost far less than the construction of new high-speed lines, these services account for 30% of total rail passenger kilometres in Germany, and about two thirds of passenger kilometres on intercity services. ICE services also carry twice as many passenger kilometres as high-speed services in Spain thanks to their ability to operate off of high-speed lines.


Challenges

FINANCING

High rural population densities in Germany have increased the cost and difficulty of acquiring land for construction of new lines, and this has been a principal factor in Germany’s emphasis on using high-speed rolling stock at reduced speeds on conventional networks. Objections to the construction of these lines are common and costly mitigation measures such as tunnelling and the use of noise barriers have had to be taken to increase the acceptability of new construction to local residents. This has meant that HSR construction in Germany typically costs 32 million euros per kilometre more than double that in Spain. High-speed rail in Germany faces competition from low cost airlines over distances at the top end of the HSR range. It has also faced competition from road travel over the relatively short distances between most German cities, which is exacerbated by the absence of tolls and speed limits.

Deutsche Bahn (DB) has found it difficult to compete in some markets because its fares are not based on yield management – most passengers simply turn up and travel at a fixed cost. This has resulted in overcrowding on some trains but low overall load factors (50% compared to 70% for most other European high speed rail systems which have reservation-based ticketing systems). This traditional pricing structure reduces both traffic and total revenue.

This combination of relatively high costs and low revenue encouraged a selective approach to investment by the federal government as well as shrewd marketing strategies. ICE trains are marketed as a premium service in their own right, and thus are commonly used on low-speed lines at an increased cost.

LOCAL ENVIRONMENTAL OBJECTIONS

Despite strong political and public support for high-speed rail, mainly on environmental grounds, there have been objections from those living near routes about noise and blight. Mitigation measures, such as construction near motorways and in tunnels and cuttings, have helped reduce these objections but have often delayed and increased the costs of construction.

SIGNALLING

East and West German railways operated a variety of signalling systems that slowed the integration of German rail immediately after reunification. The investments in new signalling technology that came alongside HSR development have allowed increased synchronisation across various regions, a process which has been aided by the progression of ERTMS across the continent. The use of ERTMS level 2 on some lines, which enables in-cab signalling, has further reduced the operating costs of HSR on new lines.


2 Ahlfeldt, Gabriel M and Feddersen, Arne (2010). ‘From periphery to core: economic adjustments to high-speed rail’. London School of Economics & University of Hamburg (unpublished).

Realised benefits

The combined effect of high-speed investment, including both rolling stock and high-speed line, has been to reduce travel times by around 50% compared to conventional rail. Additionally, high-speed rolling stock now carries 30% of passenger kilometres by rail in Germany and two thirds of intercity traffic.

HANNOVER – BERLIN

The 185 km high-speed link between Hannover and Berlin was designed largely as a symbol of east-west cooperation after reunification and in preparation for a significant increase in demand given the lowering of political barriers to business and leisure travel. In combination with the Würzburg-Hannover high-speed line, it now provides a corridor of access to the national capital for significant segments of the population throughout western Germany. Travel time between Hannover and Berlin was reduced from four hours to 1.5 hours.

COLOGNE – FRANKFURT

The line between Cologne and Frankfurt is part of the Trans-European Network, which is designated by the EU for all network infrastructure, especially in the transport sector, which has a European rather than just a national role. The line’s construction reduced travel times between these cities to one hour, a 55% reduction from the old railway and 35% faster than by road. Even before high-speed rail, the classic rail line carried most travellers between the two cities. With the adoption of high-speed rail, however, rail has come to account for 97% of the air/rail market share between the two cities. This leveraging of an existing and growing rail market represents a particularly low-risk, high-return form of HSR investment. The success of the Cologne-Frankfurt line has also been bolstered by the high-speed rail station at Frankfurt airport, which allows international air passengers to access the airport by rail. Airlines agreed to code share for ICE trains from Cologne and Stuttgart (as if they were airline tickets). In order to free slots for international flights, Frankfurt airport helped fund the airport station and encouraged local traffic to shift to rail.

IMPACT ON INTERMEDIATE TOWNS: MONTABAUR AND LIMBURG

The small towns of Montabaur and Limburg offer a unique case with which to challenge the common criticism that economic impacts of HSR development are impossible to isolate. This line of logic assumes that stations are generally built to expose pre-existing growth in urban areas to new markets elsewhere on the line. Yet these two towns, placed just 20 km apart, were able to secure stations on the HSR route between Cologne and Frankfurt purely as a result of heavy lobbying by state governments rather than by virtue of pre-existing economic potential. Their inclusion on the line was opposed by most HSR planners, who saw the price of station construction and the concomitant increase to travel times on through-going journeys as unacceptable compromises given the tiny populations in question: 12,500 in Montabaur and 34,000 in Limburg.

Cologne and Frankfurt can now be reached from Montabaur and Limburg in www.oxan.com about 40 minutes, providing these towns with access to two major cities. Because the placement of these stations reflected local political priorities rather than attempts by HSR planners to leverage existing economic potential, researchers have succeeded in isolating the economic impact achieved by access to HSR. They conclude that the access to larger markets and increased labour mobility provided by the HSR line has had a striking and permanent effect in both towns, increasing GDP by an average of 2.7%. Unsurprisingly, this was facilitated by a combination of low property values in the small towns combined with a willingness by local authorities to zone areas close to ICE stations for industrial and commercial use.2


The ‘Eurostar network’: London to Paris and BrusselsKey attributes


1994

Length of track 531 kilometres (London - Paris – Brussels)

Top speed 300 km/h


Strategies employed > Unique bureaucratic model streamlines international travel.

> Building close to motorways and pre existing track to minimise environmental degradation.

> Shifting funding strategies in United Kingdom to match shifting economic situation.

> Yield management pricing structure.> Competition expected to lower prices,

improve service.

Key benefits > Particularly acute reduction in travel time. Almost completely replaced other modes of travel on this corridor.

> Regeneration of Lille.

Context

Before the adoption of HSR, travel between London, Paris and Brussels had relied on air or land transport combined with ferries. The construction of a direct link between London and cities of continental Europe, which had proponents as early as 1802, had been largely sidelined by the growth in ferry traffic and the advent of commercial air travel. A rail link had long been thought to offer opportunities for regional integration and improved access to markets for both Paris and London, and by the 1970s, improvements in tunnelling technology lowered the cost of construction to the point necessary to attract investment interest from the private sector. The construction of the Channel Tunnel began in 1988 and sought to take advantage of high-speed technology, which had been implemented since 1981 on France’s popular TGV service. The present-day HSR connection between London, Paris and Brussels is referred to for the purposes of this paper as the ‘Eurostar network’, reflecting Eurostar International’s status as the only operator utilising the Channel Tunnel. This will change in coming years due to recent liberalisation of the European HSR service market.

The ‘Eurostar network’ in 2011




The governments in the countries served by the Eurostar network, (United Kingdom, France and Belgium) anticipated rather different benefits from high-speed rail. To the French, services through the Channel Tunnel were a logical next step for the export of France’s model for high-speed rail services (light rolling stock with high power-to-weight ratios operating over steep gradients) and of promoting its railway manufacturing industry. High-speed rail had the advantage of promoting the development of post-industrial areas in northeast France, including the city of Lille, which would be served by the Eurostar network as well as domestic French TGV services.

For the British, the Eurostar network would provide a direct rail connection with Paris, the largest metropolitan area in continental Europe; with Brussels, the administrative capital of the European Union; and eventually with other cities. The British government saw an opportunity to route the line through the underdeveloped eastern sections of London and built a station at Ashford to encourage development of that area. Spurring growth in the poorer areas of Kent was an additional goal. Both the British and French governments also anticipated a significant reduction in congestion at London and Paris airports.

The Belgian government’s support for the Paris – Brussels HSR link was part of a broader push for regional integration that included both Eurostar services to Paris and London and Thalys services running between Paris, Brussels, Cologne and Amsterdam. Service was extended to both Bruges and Ghent to spur growth in these mid-sized cities, though they lack the strategic placement on main corridors enjoyed by Lille.


Eurostar services are in essence an extension of the French TGV system, using French technology and design standards. Overhead line electrification in the United Kingdom is licensed from the French, the signalling system is French in origin, and current rolling stock is a modified TGV design. The infrastructure has been developed in stages. The Channel Tunnel itself and the line from Paris to the tunnel were opened in 1993-1994, shortening travel times from London to Paris to three hours. Next, the line from the French border to Brussels was opened in 1997. The section of track connecting the Channel Tunnel to London (known as ‘High-Speed 1’ [HS1]) was opened in two stages, in 2003 and 2007, further shortening travel times from London to Paris to 2 hours and 16 minutes non-stop. High-speed domestic trains within Southern England share this line with Eurostar services, providing an improved commuter service between London and Kent. The network also carries significant freight traffic running between the United Kingdom and continental Europe.


Challenges

INTEROPERABILITY

Establishing effective international governance of services on the Eurostar network was a significant bureaucratic challenge. To avoid stopping at borders to change crew, accommodations had to be found regarding train crew training and certification. A common set of vocabulary was agreed between French, Belgian and British rail authorities so that specially trained drivers could conduct services over the entire journey.

The Eurostar network uses a variety of different signalling systems across the line, which reflects varying levels of new investment in signalling technologies by the nations involved. While ensuring operability across signalling systems presented a challenge in planning stages, in practice strict operational guidelines have prevented serious problems. As national governments prepared to allow competition among service providers on the network, ensuring a coherent signalling system became a renewed priority, and a goal has now been set to implement the first phase of ERTMS by 2014.

ENVIRONMENTAL OBJECTIONS

Across the network, impact was reduced considerably by building HSR track as close to motorways as possible, which limits the necessity to disturb previously pristine areas and prevents the ‘islanding’ of communities between motorways and rail lines. In Southern England, planners took the decision to tunnel under the heavily populated area of London near the St. Pancras terminus. They also pursued extensive noise mitigation measures, such as tunnels and deep cuttings, in attractive rural areas between London and the Channel Tunnel. Overall, 25% of the Eurostar network is built in tunnel.

FINANCING OF HS1

Financing of the British section of the network highlights both the challenges and the diverse possibilities of PPPs as a tool of HSR investment, and supports the conclusion that construction and management of HSR will always involve an element of government capitalisation.

HS1 financing presented a particular challenge for the British government, which has advertised the line as the first stage of a wider HSR program expanding into the northern regions. Cost per kilometre on HS1 has been more than 60 million euros per kilometre, far more than anywhere else in Europe. The high proportion of the line in tunnel partly explains the high construction cost, as does the decision to build four stations in smaller urban areas between London and the southern coast.

Although the British government would have preferred to build HS1 as a privately funded project, comparatively low initial traffic volumes meant that the line would require public funding. A contract for design, build, finance and maintenance (DBFM) of the link and the operation of HS1 services were therefore put out to tender and awarded in 1996 to London and Continental Railways (LCR), a private consortium. It was envisaged that the consortium’s primary sources of funds during the construction phase would be profits from travel on HS1.

In 2009, when LCR debt had increased to 5.2 billion pounds, the government took over full and direct ownership of LCR for a nominal price. This restructuring relieved LCR’s high-speed infrastructure subsidiary, HS1 Ltd, and the train operator, Eurostar (UK), of their financial liabilities. In 2010 the government then sold HS1 Ltd, which has a 30-year concession to manage the high-speed line for 2.1 billion pounds, to a private consortium. The government will continue to own the HSR network itself and monitor the private consortium, while HS1 Ltd can sell access to the track and stations on a commercial basis.


OPERATOR ORGANISATION

Eurostar services were originally separated into three national entities, posing significant challenges for coordinated marketing. British marketing strategies were significantly more aggressive than those pursued in France and Belgium, and the British eventually sought to entrench their marketing strategy by restructuring the management contract. In 2000, LCR established a management contract to run Eurostar (UK) through a consortium, which included the National Corporation of French Railways (SNCF) and the National Railway Company of Belgium (SNCB) as shareholders. This arrangement improved the alignment of objectives between the British, French and Belgian partners, and this ran until 2010. In September 2010, after complex negotiation with regulators, Eurostar became a single, unified corporate entity owned by three shareholders: SNCF, SNCB and LCR. These successive structural changes have largely relieved the governance and management problems that have impeded Eurostar’s otherwise considerable growth since its inception.

COMPETITION

European law now requires Eurotunnel (which operates the cross channel rail link through the tunnel), and the governments involved to open up access to infrastructure to competition. Eurostar will soon be competing with Deutsche Bahn (from 2013) and possibly other open access operators. To match this competition, Eurostar has to reduce costs and is buying trains with higher capacity (900 seats instead of 750) and lower per-unit costs from Siemens, ending its previous relationship with Alstom. Both Deutsche Bahn and the new Eurostar trains will use modified German ICEs with distributed power. These trains will be interoperable in order to allow service to more destinations in the future, which is seen as a principal benefit of increased competition.


Realised benefits

Although traffic has been less than originally envisioned on the Eurostar network as a whole, the line has revolutionised travel from London to Paris, Brussels and Lille. Eurostar now carries 81% of the total air and rail traffic from Paris to London, a far higher proportion than HSR in other European countries. HSR has also had considerable effects on local economies in those smaller urban areas that have successfully leveraged increased accessibility with conducive urban planning policies.

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Eurostar network yearly passengers (millions)

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TRAFFIC AND JOURNEY TIME BENEFITS

The Eurostar network has almost completely replaced ‘rail-sea-rail’ travel, which took 6-8 hours from London to Paris or Brussels, reducing the time to 2-2.5 hours. This is a greater reduction than is usual for high-speed lines over land because changes between modes are avoided. The ease of HSR travel has proven a boon to the significant tourist traffic between the areas served by Eurostar, and HSR has largely replaced air travel between these cities.

While LCR forecast that by 2004-2005 nearly 24 million passengers would use the Eurostar network, the actual figure was only 9.1 million in 2008, the first year after line was fully operational. By 2010, traffic had reached 9.5 million, the level LCR forecast for 1996-1997. It appears unlikely that it will reach 24 million for many years, if ever, although competition among service providers could provide a boost to overall traffic numbers. This shortfall is partly a consequence of the rise of low cost air carriers competing with the Eurostar network, though not usually for the same destinations (Eurostar sees itself competing for leisure travellers with London-Berlin by air, for instance). Eurostar is also hampered by the fact that it must pay 15 pounds to Eurotunnel for every passenger passing through the Channel Tunnel. However, it has improved connections between the three capitals, and the Eurostar network has permitted the number of air services to be reduced between London and the near continent, freeing slots for long distance flights.

ENVIRONMENT

Despite objections from Kent residents to the construction or alignment of HS1, neither Eurostar nor Kent County Council has received noise complaints since the line was opened. This reflects the use of many of the costly mitigation techniques described in the German case, which explains in part the extraordinary cost of HSR construction in southern England.

LILLE AND REGENERATION

There is strong evidence that the Eurostar network has had a significant impact on development in a variety of small and mid-sized cities along the line. This is particularly visible in Lille, France, which had floundered economically as industry moved away from the region and local planners sought new growth in the service sector. The arrival of HSR placed the city as the nodal point between Paris, Brussels and London. Urban planning around HSR stations has sought to maximise the local economic impact of both Eurostar and TGV, encouraging the development of a variety of services for both tourists and commuters in close proximity to the station. Lille used the arrival of HSR to undertake a large-scale shift in urban planning, centring its service industry in the area between the historic district and the station while installing when possible in abandoned buildings to reduce build-out costs and remove blight.3 Development in Lille shows how economic benefits are more likely when the sweeping changes in accessibility brought by HSR are complemented by supportive planning policies, which explains in part the significant difference in economic benefits accrued in Lille and across communities in Kent.

Carbon emissions from different modes: London to Paris (kg CO2)

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3 Nuworsoo and Deakin (2009). ‘Transforming high-speed rail stations to major activity hubs: lessons for California’. Transportation Research Board.


JapanKey attributes


1964

Length of track 2,663 kilometres

Top speed 305 km/h

Cost per kilometre 5.4 million euros for Tokyo-Osaka

Strategies employed > Effective spreading of risk through PPPs, reflecting lowered expectations for government funding.

> Strategic station placement adapting to high land prices.

> Concentration on cities with highest population density.

Key benefits > Huge reductions in travel times on main business arteries.

> Tokyo-Osaka covers costs through revenue.

> Revitalisation of small communities.> Establishing Japan as a world leader

in technology.

Context

Japan’s rail system in the 1960s faced geographical challenges similar to those in Spain. Rail travel was slow due to mountainous terrain, which required tight curves in conventional track and either steep gradients or the construction of expensive tunnels. Capacity was also limited and demand was increasing quickly in line with Japan’s rapid economic growth. Even in 1960, conventional rail accounted for 51% of passenger transport in the country, making the relief of capacity constraints a priority goal for transportation policy.

Population densities and layout in Japan are particularly suitable for HSR. Tokyo has over eight million inhabitants (the population of the wider Tokyo area is 35 million) and is located some 400-700 km from most other major cities, an ideal distance for obtaining a competitive advantage over other forms of transport. Other major cities are Osaka (population 2.5 million), and Nagoya (population 2.2 million). The average density of the five largest cities in Japan is 8,000 inhabitants square kilometre, nearly three times that in Germany; this has meant that the majority of city inhabitants have relatively easy access to railway stations. In addition, cities are placed in a roughly linear manner across the country, enabling a ‘hub and spoke’ configuration similar to that in Spain.


The Japanese high-speed rail network in 2011



After early development starting in the 1950s, the first high speed line between Tokyo and Osaka via Nagoya began operations in 1964 (and soon gained international recognition as the ‘bullet train’). The principal rationale for this investment was to relieve the overcrowded, narrow-gauge Tokaido line, which was then carrying 24% of all Japanese National Railways (JNR) passengers.

A secondary objective was to reduce the journey time between Tokyo and Osaka, which sat at 6.5 hours. This was to be achieved mainly through faster speeds but also through a more direct alignment -- the new high-speed Tokaido line sheared 41 kilometres off the length of the existing line.

The decision to build the first line was controversial. There was considerable resistance from both politicians and rail officials, who saw HSR as a risky investment given the unproven nature of HSR technology at the time.

Opposition to the line was overcome through force of will on the part of a small number of advocates, who portrayed the continued reliance on conventional rail as a greater risk to the economy than potential losses from HSR investment. They also built significant support through the argument that a Japanese HSR network would help establish the country as a leader in the technology field in general. However, such was the success of the first high-speed line that scepticism was replaced by strong desires from local and regional politicians for new HSR connecting their areas to Tokyo and its growing economy.


High-speed lines in Japan are built to standard European track gauge, wider than the conventional lines in Japan to provide the stability required for high speeds. The Shinkansen relies on distributed power rolling stock (electrical multiple units), an automatic train control (ATC) signalling system, and centralised traffic control designed with duplication to protect the system in case of earthquakes. Although the maximum gradients are only 1.5%, Shinkansen lines are not designed for freight, which, in contrast to Germany, never constituted a major portion of Japanese railway traffic. On the main Shinkansen lines (Tokaido, Tohoku, and Sanyo), which run the length of Honshu, Japan’s main island, there is heavy demand. Typically, 14 trains per hour operate in each direction on the Tokaido line, among the highest rate of service in HSR networks worldwide. Trains have up to 1320 seats in 16 cars, compared to 900 seats for the new Eurostar trains (which have yet to be put in service). In the 1990s, ‘Mini-Shinkansens’ were introduced, operating at 130 km/h as a ‘hybrid’ HSR and conventional system. These trains service smaller markets, decreasing travel time between those cities and larger ones without incurring the full cost of HSR development.


Challenges

LAND ACQUISITION

Land acquisition has been a major problem because of the very high population densities in Japan and soaring property and land values. About 50,000 households had to be relocated for the construction of the original Tokaido line. Japan has a compulsory purchase law, but authorities are often reluctant use it as doing so can be politically dangerous. Residents have commonly held out for more compensation, which is often quite generous in comparison to what is offered in other countries. Land acquisition issues have also affected the location of stations. Yokohama, near Tokyo, had to be bypassed because of land purchase problems, resulting in the construction of a station far enough from the city centre to provide a significant disincentive for HSR travel. Efforts to balance the extreme cost of station construction in city centres with accessibility requirements have been handled differently in other cases. In Tokyo, for instance, the potential decrease in revenue from placing the station outside the city centre was seen as more costly than incurring the exorbitant costs of construction in a more central location.

FINANCING

The cost per kilometre (excluding land costs) for the Tokyo-Osaka Shinkansen was relatively low (5.4 million euros in 2005 values), but in all the projects carried out since, this figure tripled or quadrupled. This is mainly because whereas the Tokaido line had less than 50% of its length in tunnels, bridges or elevated track, for the recent Kyushu line, the combined proportion was nearly 90% (70% in tunnel). Costs have also increased because of insistence by landowners on more compensation and because of greater efforts to reduce noise and vibration as the HSR system expands. Unlike in Europe, the Japanese public does not instinctively assume that the state will bear primary responsibility for rail infrastructure investment. When JNR was restructured in 1987 in preparation for privatisation, the Shinkansen Holding Company was created to own the infrastructure assets of the Shinkansen network. These assets were operated and maintained by the three main island companies, which paid lease charges for their use.

However, the lease charges paid by each of the companies did not reflect the value of the assets they operated. Lease charges were ‘adjusted’ so that Japanese Railways (JR) Central, which operated the profitable Tokaido Shinkansen, paid a much higher share than JR East and JR West, which operated the more lightly used and newer Shinkansen lines. The

Shinkansen Holding Company lasted only four years before it was disbanded and converted into the Railway Development Fund in 1991. The Shinkansen assets were then sold to the three companies. New lines are now being built by the state-owned Japanese Railway Construction Public Corporation (JRCC) and leased to the operating companies on completion, again to avoid burdening the privatised operating companies with too much debt.

This has enabled unique financing and management strategies. Federal and local government provide 80% of financing for HSR, and carry risk for planning, regulation, construction cost and right-of-way acquisition, reflecting an understanding that government is best placed to define and manage these. The operating companies carry infrastructure maintenance cost risk, as well as rolling stock ownership and maintenance risks. Demand risk is carried by JRCC if higher-than-expected demand requires new infrastructure construction, while the operating companies carry the demand risk if demand falls below expectation and rolling stock capacity is too great. Within this broad financing conception, government and the private sector have remained flexible in devising partnerships for the construction of individual lines. For the extension to Nagano, for instance, a balance of 50% funding from JR, 35% from central government and 15% from local government was used. The funding scheme was revised in 1996 so that JR would bear the investment cost only to a level that would ensure minimum profitability.

SAFETY AND TRAINING

Incidents in the 1950s and 1960s raised concerns about safety while the Tokaido line was under construction. Rail officials responded quickly to these concerns by employing a new vibration-reducing bogie design, which had been identified as the cause of derailments in the past. Adoption of this new technology combined with the creation of a rigorous training regimen for operators and controllers has ensured an exemplary safety record in subsequent decades.

SIGNALLING

As the first country to construct dedicated high-speed lines, Japan was a pioneer in addressing the considerable technological challenges facing signalling at high speeds. The ATC system developed as part of the original Shinkansen project in 1964 all but eliminated safety hazards emanating from driver error in speed correction, and have played a vital role in ensuring Japanese HSR’s exemplary safety record. As


ATC has evolved, it has increased average speeds by automating the braking process for each of the many rolling stock types employed in Japanese HSR.

Realised benefits

The Shinkansen has been a remarkable technical success, and has realised the goals of its proponents to establish Japan as a centre of technological innovation. By 1992, the journey time between Tokyo and Osaka had been cut from 6.5 hours to 2.5 hours, and similar reductions have been achieved on other lines. No passenger fatalities have been experienced in nearly 50 years of operation, and punctuality is remarkable with average delays of only 36 seconds.

Shinkansen services carried 295 million passengers per year in 1993 and 350 million passengers per year in 2007. While this indicates a relatively slow growth rate of 1.2% per year, this may be explained by the slow rate of growth of the Japanese economy over the period as a whole, as well as a conservative outlook toward the construction of new lines on less-travelled routes. The Tokaido line, connecting Japan’s first- and third-most populous cities, still accounts for nearly half of Shinkansen passengers. The first high-speed line between Tokyo and Osaka was also a great commercial success. In only its third year of operation, its revenue covered its costs, including interest and depreciation.

The Tokaido Shinkansen originally included twelve station stops, but due to local pressure and the willingness of smaller city governments to fund station construction, the number has now increased to 18. There are now both through (super express) and stopping (express) trains to ensure fast journeys over long distances, maximising the competitive advantage of HSR over long distances while improving access between smaller and larger urban areas.

The spectacular growth experienced by Shinkansen services in Japan during its initial years later slowed as the market matured and the high-speed network was extended to smaller communities. This slowing in growth should not be understood as a failure in its own right; while the key to commercial success of high-speed rail is to limit its construction to corridors of high demand, there may often be economic, social, and political reasons to build high-speed lines that are not commercially viable in themselves. This is equally true for countries such as Japan, in which the private sector plays a particularly strong role in investment.


ChinaKey attributes


2003

Length of track 4,500 kilometres

Top speed 350 km/h

Cost per kilometre 21.4 million euros

Strategies employed > Centralised planning and regulation.> High maximum speeds for

long distances.> Strong emphasis on technology

indigenisation.

Key benefits > Freeing capacity for freight transport on conventional lines.

> Dramatic reduction in journey times.

Context

China’s geography for the most part favours high-speed rail transport, as it features long corridors throughout the eastern plains with large urban clusters located every few hundred kilometres. China also has a high and growing population density and rapidly increasing disposable incomes. This growing purchasing power has increased travel demand, resulting in some of the most intense inter-city passenger flows in the world. Increasing disposal income has also led to heavy demand for suburban and regional travel within larger conurbations. In recent decades, the average passenger distance travelled has nearly doubled on the national railway system, from 275 kilometres per journey in 1990 to 534 kilometres in 2008.

Despite the rapid expansion of the conventional rail network since the late 1990s, China’s railways remain under immense pressure. China’s economy depends heavily upon the transport of minerals, petroleum products, grain, fertilizers and other bulk products that are transported most economically by rail, and by 2007, only one-third of demand for rail freight for coal and other bulk commodities was met. There is also increasing pressure on passenger capacity, especially during peak holiday seasons when migrant workers travel from urban centres to visit their families in rural areas.



China began serious investment in high-speed rail in 2003, in order to relieve the extreme capacity constraints on both passenger and freight transport, which the government viewed as inhibiting growth. Chinese investment in high-speed rail also reflects the newest generation of a long tradition of rail investment as tool of regional integration -- a perennial challenge for a massive country with diverse cultures and local economies. This rationale helped drive the construction of China’s conventional rail network in the early 20th century, and its status as an imperative of Chinese politics is largely responsible for the considerable sway held historically by the Railways Ministry.

Given the pace of China’s economic expansion, the government favours investing in infrastructure well in advance, before resource shortages become more acute, land acquisition costlier and labour costs higher. This tendency, combined with existing capacity constraints, has encouraged investment in HSR technology at an unprecedented pace.

Like Spain and Japan, the Chinese government has incorporated the goal of technology indigenisation into its HSR planning, and has already made strides in turning its recent investments in HSR into an export industry that competes with established players in the field.

In addition, investment in high-speed rail has been viewed as a means to spur job creation, and the government has pointed to the 100,000 workers engaged in construction of the Beijing-Shanghai line. The government has seen this job creation as a robust tool for growth; when the global recession hit at the end of 2008, for instance, China ramped up its high-speed rail spending -- which doubled each year until 2009, and reached 100 billion dollars in 2010 -- and brought forward the timetable for completion from 2020 to 2012. Current Chinese HSR planning includes the construction of 42 additional high-speed rail lines.


China currently operates around 4,500 kilometres of high-speed line, 3,400 of which were constructed between 2005 and 2010. This is augmented by high-speed rolling stock operating since 2007 on 6,000 kilometres of conventional line at increased speeds of around 150 kilometres per hour.

China’s high-speed line is already the world’s largest, almost double the length of the 2,665 kilometres of high-speed track in Spain, and is growing at an unprecedented rate. China expects to lay 13,000 km of high-speed rail by January 2013 more than the combined rail network installed across all western countries over the past half-century. By 2020, 50,000 km of freight and passenger lines are planned, to reach 90% of the population. The network is intended to cover a wide swath of China’s eastern plains, necessitating a layout more akin to the German ‘web’ model than to the Spanish ‘hub and spoke’. Construction has thus far favoured the creation of direct alignments, enabling high-speed trains to run at close to maximum speed for longer periods than is common for HSR in other countries.

This reflects a general willingness to accept trade-offs of higher ticket prices and decreased environmental sustainability in exchange for maximising speed. On the rail network as a whole between 1990 and 2010, average passenger speeds increased more than 50 percent. Planners have also favoured the construction of high-capacity trains to pre-empt future congestion.

In partnership with international manufacturers, the Chinese rail industry has produced high-speed rolling stock that sets the global standard for operational speed. Since January 2010, the 961-kilometre Wuhan – Guangzhou route has utilised state-of-the-art trains capable of speeds over 350 kilometres per hour. In 2007, electrical multiple unit (EMU) trains operating at 200-250 km/h were introduced on several routes. In August 2008, a 300km/h EMU train service opened between Beijing and Tianjin.

Cooperation with international manufacturers has enabled the Chinese rail industry to indigenise cutting-edge technological knowledge, which planners see as vital to establishing China as the premier exporter of rail technology. This includes rolling stock itself, which China now operates under the ‘China High-Speed Rail’ brand, as well as a suite of infrastructure technologies ranging from track to signalling.


Challenges

FINANCING

A breakneck pace of construction has resulted in a rapid accumulation of debt, which has been exacerbated by significant cost overruns. Each high-speed line completed has cost far more than initially estimated. The cost of Beijing-Tainjin line ballooned to 185 million renminbi (29 million dollars) per kilometre, roughly double what was anticipated. Spending on rail capacity doubled each year between 2007 and 2009, and reached 700 billion renminbi last year.

This cost overrun is explained in part by the Railway Ministry’s premium on achieving the highest-possible speeds, which both increases the journey time competitiveness of rail at the longest distances and serves as a point of national pride. Passenger demand has also been lower than expected, a reflection of ticket prices for HSR that are commonly triple the cost of a standard ticket. While yield management systems with graduated pricing schemes are said to be under development, demand for HSR travel in China has proven highly price elastic, and the current static pricing structure generally excludes poor travellers from the benefits of HSR.

SIGNALLING

In July 2011, two high-speed trains collided on a viaduct in the suburbs of Wenzhou, killing 40 people and injuring 192. Initial findings into the accident highlighted design flaws in signalling equipment and problems in safety management.

The Wenzhou accident makes clear the importance of sufficient investment in quality signalling systems, which control traffic and serve as the first line of defence against accidents. The accident also highlights the importance of adopting sound operational procedures through the indigenisation of new technology.

The Chinese Rail Traffic System (CRTS) has appeared more vulnerable to power failure as a result of extreme weather than its counterparts from Europe and Japan, which may be reflected in differing levels of both equipment quality and of investment in lightning rods and surge protection at key junctures. While CRTS was developed in cooperation with European and Japanese firms, the operational issues underline the importance knowledge transfer and operational experience as much as the relatively simple transfer of technology.

Another contributing factor in the accident was the confusion regarding signalling operation procedures, which in more established systems, such as ERTMS, incorporate strict protocols for continued operation in the event of failure.

Ensuring an excellent safety record in HSR relies equally on sufficient investment in infrastructure development, contingency planning, and personnel training.

COMPETITIVENESS

At 1,318 kilometres, the Shanghai-Beijing rail link sits well outside HSR’s competitiveness threshold against air travel. Low demand for many current Chinese HSR services indicates that investments in routes such as these have been made with an eye toward the very long-term, when the government expects increasing HSR speeds, growing population, continued urbanisation, and expanding disposable incomes to change the prevailing competition dynamics. Negative public and government reaction to revenue shortfalls within the Railways Ministry thus far do not bode well for the ability of HSR planners to run these lines on extreme revenue shortfalls indefinitely.

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The effects of an emphasis on speed and depressed demand are countered somewhat by low labour costs and the economies of scale enabled by the sheer size of China’s HSR investment program. HSR investment has also been said to have freed capacity on some conventional rail lines for freight transport, though this has yet to be quantified. Regardless, frustration within government regarding extreme cost overruns has compelled the Railway Ministry to lower its targets for rail investment from 700 billion renminbi to 600 billion this year.


Realised benefits

China’s high-speed rail network has resulted in stark improvements in journey times and reliability in comparison to the conventional network. On the longest routes, such as that between Wuhan and Guangzhou, travel times have been reduced from ten hours to three. Frequency of services is increasing on the most popular routes, matching the range of services per day common on the HSR systems of countries such as Spain.

Despite the Railways Ministry’s sometimes questionable investment priorities, the existence of a centralised institution for planning, investment and regulation of rail policy has streamlined the HSR development process drastically in comparison to that of other countries, enabling construction to proceed quickly when a damaging capacity constraint on the conventional line is identified.

Additionally, despite overconfidence in international manufacturing partnerships, Chinese engineers have boosted their design experience and technical knowledge considerably over the last decade. This has stimulated rapid technological transfer to the point at which China’s rail technology is now on the cusp of legitimately competing in developed markets. Taking advantage of this new capability in international markets is likely to rely on the cultivation of a strong Chinese HSR safety record to calm foreign fears about the quality of indigenous technology.

China’s willingness to invest in future HSR demand represents a gamble of the sort that is less palatable to Western policy makers who rely on short-term returns on investment to ensure political support for infrastructure spending. While it is impossible to say whether this gamble will pay off in light of continuing challenges in safety and persistently high ticket prices, China’s investment strategy could appear prudent in retrospect if demographics and disposable incomes continue to grow in the manner they predict.


Investment in HSR has revolutionised the nature of transportation in each of the five case studies above. Reduced travel times on key routes have facilitated drastic shifts from congested and polluting road and air networks, meeting growing transportation demand in a manner that increases efficiency and furthers the goals of environmental protection and curbing climate change. The decreased opportunity costs of travel on HSR have provided opportunities for growth in large, mid-sized and small cities with access to the line, and have helped mitigate economic disparities between both individual cities and larger regions. Business and commerce have benefitted from access to widened labour markets and more efficient freight transport on both HSR and less-congested conventional rail. Aside from creating jobs related to infrastructure construction and management, HSR has spurred the development of national rail industries, creating a competitive global economy that continues to drive down prices while further improving travel times and ensuring safe operations.

ConclusionNone of these benefits has accrued automatically. Countries that have benefitted significantly from HSR have done so through careful planning that views HSR as a vital part of a wider transportation infrastructure. This means using HSR where it has the greatest competitive advantage over other modes of travel, carefully balancing the goal of high speeds with the imperatives of cost minimisation, and creating a pricing structure that allows the broadest-possible demographic to benefit from decreased journey times.

Realising opportunities for economic growth in mid-sized or small cities relies on coordinating the goals of federal transportation officials with local and regional urban planners to ensure that track and station placement are practiced with an eye toward local development -- not just the achievement of highest speeds across the line. Additionally, the most sustainable implementations of HSR have relied on PPPs, spreading both the risks and the benefits of HSR investment and enabling governments to improve their transportation networks when competing funding priorities would otherwise make reform impossible.

Debates over new HSR investment have commonly focused on cases in which best practices have been abandoned in favour of other priorities. In these scenarios, the significant costs of HSR have at times outweighed its benefits. Yet with transportation policy challenges growing under the weight of global demographic trends and growing fears over climate change, the task at hand is to leverage experiences from the past to ensure that future investment in HSR maximises the technology’s transformative potential.


About the authorsInvensys Rail

Invensys Rail is a multinational leader in delivering state of the art railway signalling and control. We enable the world’s railways to help meet the ever increasing demand for rail services by providing a range of solutions that safely increase the capacity of their networks by increasing frequency and maximising operational effectiveness.

www.invensysrail.com

Oxford Analytica

Oxford Analytica is a global analysis and advisory firm which draws on a worldwide network of experts to advise its clients on their strategy and performance. Our insights and judgements on global issues enable our clients to succeed in a world where the nexus of politics and economics, state and business is critical.

www.oxan.com

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