Every weekend we dig into the archives. This post by Stu was first published in January 2017.
If you’ve been reading TransportBlog for a while, then you may have noticed that the term “dwell-times” crops up relatively frequently. The term describes the average time that trains are stopped at stations. In several previous posts, we’ve discussed how average dwell-times on Auckland’s new electric trains are approximately 50-60 seconds per stop. In contrast, best-practice dwell-times on rail systems overseas are in the order of 20-30 seconds per stop, so 20 – 40 seconds faster than ours.
In this recent post, I suggested something “had to be done” to shorten dwell-times, to which one commenter (quite reasonably) asked “why“. I was surprised by their question, because to me the benefits of reducing travel-times by 30 seconds per stop seemed obvious. It means that we take Auckland’s trains out of the steam age and into the electric age.
Upon reflection, however, I realised that it wasn’t immediately obvious how apparently small delays of 30 seconds per stop would incur economic costs that warranted action. This realisation motivated me to write this post, in which I attempt to estimate some of the economic benefits of shorter dwell-times on Auckland’s train.
Note that this post does not consider how we might go about reducing dwell-times, and I’d like to ask people who comment not to de-rail the post with such technical matters. The point I’m trying to convey, and which I am interested in discussing, is the economic benefits that flow from running trains faster. Similar arguments apply to efforts to close small intermediate stations, such as Westfield and Te Mahia.
When I think about reducing dwell-times, four obvious sources of economic benefits spring to mind: 1) Reduced costs; 2) Existing user benefits; 3) New User Benefits; and 4) Decongestion benefits. Let’s now dive into the data (hand-waving?) ….
Cost savings: The total cost of running Auckland’s rail services is likely to be in the order of $125 million p.a. Various factors contribute to these costs, but major componenets are likely to be:
- Staff, including drivers and train managers;
- Operating costs, such as fuel, mainenance, and track access charges;
- Asset depreciation, especially on the rolling stock, electrified infrastructure, and depots; and
- Station operations, such as ticketing and security services.
Different places account for these costs in different ways, which can end up making things quite complex. To simplify things, it’s common to analyse public transport costs in terms of three underlying drivers: 1) vehicle-kilometres; 2) vehicle-hours; and 3) peak fleet requirements. These cost drivers are, more-or-less and to varying degrees, what determine the costs of the services that we operate. Shorter dwell-times won’t, of course, affect the distance that trains travel, even if they will reduce vehicle-hours and/or peak fleet requirements.
To estimate the cost savings from shorter dwell-times, I assumed that measures are taken to reduce dwell-times by 30 seconds per station. If I assume there are 15 stations on the average rail run from Swanson/Papakura/Manukau to the City, then this saves 7.5 minutes on every 55 minute run, or ~14%. I then assume that one-third of this 14% reduction in (in-service) vehicle-hours flows through to the operating cost bottom-line, that is, shorter dwell-times reduce total costs by 4.5%.
Given a total annual spend of $125 million p.a. on operating rail services in Auckland, normal practice dwell-times would reduce costs by $5.68 million p.a. If I then assume an 8% discount rate over 30 years, then this has an NPV of $69.1 million.
That’s the first example of how an apparently small number can lead to a large number when you take a network-wide, long-run perspective …
Existing user benefits: The second effect of shorter dwell-times is to expedite journeys by rail. That us, existing rail users will also benefit from faster travel-times. Current rail patronage is about 18 million journeys p.a., which is predicted to grow to 40 million in a post-CRL world. For the sake of simplicity, let us assume that Auckland averages 30 million rail passengers per year over the next 30 years.
Moreover, I now assume these passengers travel an average of 15km per rail journey. If I assume rail stations are spaced, on average, at one station per 3km, then this implies there are 4 intermediate stations per journey (NB: Remember that users will not benefit from faster dwell-times for the last station). Saving 30 seconds over 4 stations equates to a time saving of 2 minutes per journey. If I assume a value-of-time of $10 per hour, then we can monetize the value of these time savings as follows: (2/60) hours per journey x $10 per hour x 30 million journeys per year = $10 million p.a. This has an NPV of $121.6 million. Happy train users are valuable train users.
New User Benefits: Faster trains will, of course, also attract new users. Let’s assume the elasticty of demand with respect to in-vehicle travel time is -0.50. That is, a doubling in travel-time leads to a 50% decline in patronage. In turn, this means that the 14% reduction in travel-time associated from shorter dwell-times would be associated with a 7.0% increase in patronage, or an additional 2.1 million journeys p.a. If I now apply the rule-of-half, that is 2.1 million x (2/60) x $10 per hour x 0.5 = $0.35 million p.a. Or $4.3 million over 30 years.
Decongestion benefits: Some of the additional rail journeys undertaken as a consequence of faster travel-times would have otherwise been loaded onto the road network. This in turn means congestion would be higher. If I assume that 60% of new rail journeys occur in peak periods, and that 25% of these journeys would have otherwise been placed on the road network, then this suggests faster dwell-times diverts 315,000 vehicles off congested roads every year. If we again assume the average rail journey is 15km long, and that decongestion benefits are valued at $0.40 per kilometre, then I find that decongestion benefits are valued at $1.8 million p.a., or $23.0 million over a thirty year period.
Let’s summarize the estimated economic benefits of faster dwell-times:
- Cost savings of $69.1 million
- Existing user benefits of $121.6 million
- New user benefits of $4.3 million
- Decongestion benefits of $23.0 million.
Yielding a total of $217.9 million. I must acknowledge these are extremely rough and ready estimates and I could well be wrong and/or out by a decent margin of say +-50%. So don’t anyone go quoting me to the decimal point.
Notwithstanding their approximate nature, the order of magnitude of the estimate is significant. To put it in context, an economic benefit of $217.9 million is equivalent to approximately $7.3 million for every second we cut from average dwell-times. Another way to look at it: I understand the total cost of Auckland’s new trains was in the order of $500 million. Cutting 30 seconds per stop is then worth approximately half of the cost of buying completely new trains. This seems plausible to me; I suspect that a large component of the anticipated benefits of electrification would stem from faster journey times, which have not as yet materialized (NB: In some ways you could argue it’s impressive Auckland has achieved so much patronage growth despite the slow travel-times.
Anyway, the main point is to demonstrate how small time savings can quickly add-up to large dollar values when you take a network-wide, long-run perspective. This is why we harp on about dwell-times and why it’s heartening to see Council putting pressure on AT to sort this mess out. Indeed, cost savings of $69 million above would go straight to Council’s bottom-line, as would approximately $100 million in additional fare revenue over 30 years (NB: This is not an economic benefit per se at it’s simply a transfer from passengers to Council — even if it is of course a fiscal benefit). These fiscal cost savings would result in either lower rates and/or improved services.
In our increasingly resource-constrained world, I consider frugality to be not just prudent, but indeed relatively noble. This is especially true when it comes to other people’s time and money. On this topic, Benjamin Franklin, once said “The way to wealth … depends chiefly on two words, industry and frugality: that is, waste neither time nor money, but make the best use of both.” Confucius put it even more succintly when he said “he who will not economize will have to agonize”.
Or, if you prefer the words of Bruce Lee.
On that note, I suspect my marginal utility of spending more time on this post is by now lower than my next best alternative option.
Have a good ‘un.