Tuesday, August 13, 2013

Hyperloop and High Speed Rail in California

High-speed rail (HSR) is in the news this week, not because they've broken ground this summer, but because Tesla Motors founder Elon Musk has released a report on a superior form of transportation, the Hyperloop.

The Hyperloop will get you from San Francisco to Los Angeles in 30 minutes by placing you in a capsule and shooting you through a tube at high speed.  I'm excited about the Hyperloop concept.  It is both an example of innovation that I hope will infect people with the entrepreneurial spirit, and also as a reminder to consider the economics of massive transportation investments. 

What about the economics of the California HSR project?  Consultants hired by the CHSR Authority published a cost-benefit analysis of the previous version of the project (the current version is referred to as the "blended-system" because it will share track with commuter rail in San Francisco and Los Angeles.)  They found the net benefits were positive.  This semester I will try to read the full version of this study with my graduate class, and explore whether this conclusion would still hold given the lower ridership estimates that will likely result from the blended approach, and the newer cost estimates, which were increased since this study was published.

A third factor, working in the opposite direction, could be faster completion.  If the blended system is built sooner, this could have a positive impact on the net present value (given the key role played by discounting.)

What about the economics of the Hyperloop idea?  There is so much uncertainty around this new technology that the range of NPV values would be very wide.  (This blog post argues, fairly convincingly, that Hyperloop speeds are vastly overstated and the costs vastly understated.)

I do hope, however, that Elon Musk's Hyperloop idea gets people thinking more seriously about alternatives.  I know the current HSR plan has evolved over decades, but given HSR will not be built in a year or even a decade, I see no reason why current plans shouldn't be subject reconsideration--from the technology we use to complete the objective (rail versus pod versus self-driving electric car) to the details of the rail plan, including routes (e.g. the route from Bakersfield to the San Fernando Valley.)  It is important to never fall prey to the sunk cost fallacy!

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