Why is new rail infrastructure so expensive?
A look at the complexities of building comprehensive high-speed rail links, through the lens of HS2 and the Chinese high-speed rail network
It’s been a little while since my last longer-form post, so here I am again. I’ve been wanting to write about high-speed rail for a while, but it’s such a complex topic that I’ve struggled to find a way to cover it effectively. However, after diving into the UK’s HS2 rail project recently, I thought it might be a useful lens through which to look at some of the challenges of high-speed rail.
Why high-speed rail?
First, a quick introduction – why am I talking about high-speed rail here, in a newsletter about climate change? Aside from my personal love of trains, high-speed rail is perhaps one of the few meaningful alternatives to air travel over shorter distances, and comes in at a fraction of the carbon dioxide impact.
However, high-speed rail often suffers from huge infrastructure costs and high ticket prices, slowing expansion and adoption versus flying, whose growth (until the pandemic at least) was more or less unchecked. Today I’m going to be looking at the infrastructure side, given the ballooning costs of a number of high-profile high-speed rail projects in the West, including California’s infamous LA-SF link and the UK’s HS2.
In particular, I want to look at HS2’s skyrocketing costs, and compare it to the expansion of high-speed rail in China, notable for its huge speed, scale and relatively low cost. Without comparing apples to oranges, I’d like to understand two nominally similar projects can end up with such disparate outcomes.
What is HS2?
High Speed 2, or HS2 as it is often called, is a proposed high-speed rail link in the UK, joining the capital city of London up to major cities in the north of England – Birmingham, Manchester and Leeds. It is the second true high-speed line in the country, following on from the imaginatively-named High Speed 1, which linked London to the Channel Tunnel and thus to Europe. A big driver of the project is closing the gap between London and the rest of the country, making travelling to and from the north much quicker and easier, and thus funnelling people and investment to the northern cities.
The planned route has evolved steadily over time since it was first proposed in 2009, with the current plan involving two phases: the first will link London to Birmingham and Crewe, and the second will join that section to Manchester and Leeds. It has been designed for 200+mph operation, in theory nearly halving travel times between London and major northern cities. However, of late the project has become known more for its endless delays, cost overruns and strident opposition than for its potential benefits.
Cost creep
It’s worth talking for a moment about cost. Initial DfT estimates put the price of the entire project at between £30.9-36bn, which would yield a cost per mile of £92-107m, already on the high end of high-speed rail projects. However, in the years since, estimated costs have skyrocketed, with the Oakervee Review in 2019 concluding the project would cost at least £109bn, and one senior figure suggesting it could rise as high as £170bn. This would put the price per mile at over half a billion pounds. In addition, revisions to the plans have removed a link to Liverpool (the city has even asked to fund the final stretch itself) as well as a connection to HS1, meaning the two high-speed rail lines in the UK won’t even make a unified network upon completion!
Various reviews and checks on the project have concluded that not only has the cost ballooned, but both phases are at risk of failure, with the second phase in particular given an ‘unachievable’ rating by the government’s own Infrastructure and Projects Authority.
Given the vast costs and increasingly unlikely completion of this project, let’s now take a brief look at the Chinese high-speed rail network. Direct comparisons may not be possible, but how has the Chinese network grown so fast and kept costs so low where HS2 and other similar schemes have floundered?
Economies of Scale
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Scale is an apt word to use when describing the Chinese high-speed rail system. As of 2020, the network consists of some 37,900km of lines running trains at between 200 and 350km/h – doubly impressive when you consider that the first dedicated high-speed line only opened in 2008! The network has expanded around 20% per year for close to 15 years, a phenomenal expansion rate.
A recent study by the Paulson Institute puts the economic benefits of the network at $2.36tn versus costs of around $1.98tn, including construction costs of around $602bn. These are huge numbers, but compared to the scale of the network, it’s surprisingly cheap, with a rough construction cost of $25.5m per mile (~$84m per mile including all costs). Notably the study suggests that overall it has provided a net economic benefit for the country.
Passenger growth has been steady, and now there are lines making significant profits – a relative rarity in the often loss-making world of HSR. The 800mi Beijing to Shanghai line brought in $1.8bn in profit in 2019 whilst transporting some 215m passengers, carrying around half a million people on an average day. However, there are still lines, particularly in the west of the country, which make losses due to lower ridership and high maintenance costs.
How do they do it?
The biggest overarching theme of the project is state ownership and a massive, overarching vision. HSR in China has expanded in phases, but always with key goals in mind – creating a domestic HSR industry, linking major cities with HSR, boosting average rail speeds, and fuelling economic growth and providing jobs. Everything has been planned and executed consistently over long periods of time, in lock-step with other elements of the country’s Five Year Plans.
Throughout the network, there are generally relatively few, giant state-owned or controlled entities involved – almost all rolling stock is produced by the state-owned China Railway Rolling Stock Corporation, and construction has been financed by a combination of loans from government-owned banks and financial institutions, as well as bonds issued by the state-owned Ministry of Railways. Everything from track construction to rolling stock, signalling, software and more has been standardised wherever possible to increase economies of scale and reduce costs.
The immense project has not been without issues – several senior officials have been arrested for corruption, and the network saw a major accident in 2011 which prompted a significant safety review and temporary suspension of new construction. Precise tracking of issues in construction has proved tricky with such a vast project, and public opinion has waxed and waned on the network, with questions about its economic efficiency and efficacy being raised.
What can we learn?
Many comparisons, favourable and otherwise, have been made between Chinese rail and western systems. Much often hinges on the political differences between the two worlds – China is, after all, an authoritarian single-party state, which creates a very distinct environment and makes direct juxtaposition tricky. However, I think even discounting that key difference, there are still lessons to be learnt in the Chinese approach to HSR which could be applied to projects in the West.
One of the immediate differences looking back at HS2 is the isolated nature of the project. HS2 is by no means a small scheme, but it stands in isolation, even compared to HS1, the other major high-speed line in the UK. Each was designed, planned and implemented separately, from line speeds to signalling to rolling stock. This results in less learnings being shared between projects, and the result is a patchwork mess that fails to work as a unified whole.
The Chinese network shares many design features, with decisions on rolling stock, signalling and more applying across the whole network, meaning that the individual choices are larger, but once made, are not repeated. Similarly, knowing that they planned to make a vast, country-wide network, the Chinese government set up technology transfer deals to ramp up a domestic HSR industry. This has dramatically lowered costs, allowed the development of custom equipment, and taken the Chinese HSR industry from nothing to being the largest such company in the world. This huge cost would not be worth it for a few isolated lines, but the larger the network grows, the more those benefits stack up.
Getting political
Ultimately though, at some point, we need to consider the role of politics in projects such as this. The UK, much like many democracies, holds general elections every few years, and even between those the ruling party can change the Prime Minister, often inducing radical differences in leadership approach. A large project such as HS2 is a long-term commitment, and constant leadership changes make it into a political football – something for opponents to attack, and for each leader to reshape, to make their own. In addition, if a project is unlikely to finish within their time in power, there’s less incentive to facilitate its progress.
This means projects are rarely truly secure – even once construction commences there’s no guarantee the project won’t be halted or radically changed. Contracts for various elements are often renegotiated, whether to secure improved value or simple nepotism, meaning extra costs and delays even if the scope of the work has not changed. All of these delays and changes slow momentum, increase costs, and provide more opportunities for opposition to mount. Similar themes have been described in the US, where infrastructure costs for major projects have risen even more sharply than the UK.
To destroy is easier than to create
In contrast to decades past, it is now much easier to raise your voice in opposition to the inevitable harms a major infrastructure project creates. This gives a much-needed voice to citizens to oppose government if needed. However, despite the best of intentions, these channels are far from egalitarian.
Money is power, and power in this case is often the ability to endlessly delay projects. This is especially true in the US, where well-intentioned environmental legislation is weaponised by those looking to delay or cancel projects. It is far harder to mobilise those who might benefit from the project’s completion versus those experiencing tangible harms right now, even if those affected in the latter case are a far smaller group.
Practice makes perfect
Another factor is those economies of scale. I highlighted building an entire domestic HSR industry earlier, but similar effects scale across all aspects of a project. If projects are decades apart, expertise in planning and executing atrophies – people move to other industries, retrain, or simply retire. That knowledge needs to be learned anew, or bought in at great expense from elsewhere.
No silver bullets here
Ultimately, there are no magic solutions to making major public infrastructure cheaper and easier, but we can at least start to see where the issues lie. In many ways, the battle to build infrastructure like high-speed rail is a close analogue to the wider climate crisis, and the solutions similar. There is no magic win sitting just out of sight, but rather a need for old-fashioned political impetus and a whole lot of money flowing in the right direction. However, the benefits are huge – comprehensive, low-carbon infrastructure that benefits the many rather than the few.
This is, of course, just one way to look at the issues of building infrastructure like high-speed rail. It’s an immensely complex issue with many competing priorities and potential approaches. As always, I’d love to know what you think – are there places that have managed to get the balance right when building public transport infrastructure? What could make the process smoother? Let me know!