High Speed Rail - Transport Committee Contents

Further written evidence from HS2 Ltd (HSR 169A)


Thank you for your letter of 18 July in which you enclosed a number of questions. I attach our responses to these.

The Committee asked a question on the proposed 18 trains per hour service level. We are aware that this has also been raised during the consultation and we have begun further work in this area. The answers here reflect this work.

There were a few questions which we considered would be best answered by the Department for Transport. The Department will provide responses to questions 5, 6 and 16. I hope our responses to the remaining questions are of assistance.

In addition, I also attach responses to the questions raised by Oxera in its review of the Economic Case for HS2. As with the questions put to us by the Committee, we agreed with the Department for Transport that they would be best placed to answer some of these. The Department will provide responses to questions 1-4, 6-8, 14, 19, 20, 31, 32 and 34 from the Oxera review.

The Committee should note that while these answers reflect the evidence base and analysis that has underpinned our advice to Government, they do not take into account any new evidence presented via the recently completed public consultation, as the analysis of the responses is still at an early stage. Clearly, no final decisions will be taken by Ministers until that process has been completed.

1.  Without HS2 or a strategic alternative, when will capacity on WCML be exhausted? Please give details of projected load factors by year, section of the route and time of day; and explain what assumptions they make about pricing, including possible measures to smooth demand

The attached maps show HS2 Ltd's forecasts of demand (daily trips) and load factors (proportion of passengers to seats) on the WCML for the Intercity West Coast Train Operator only (currently Virgin Trains) in 2008, 2021 and 2043.

The demand forecasts underpinning these maps show that the total number of long distance rail trips over 100 miles will grow by 95% between 2008 and 2043, or around 2% per year on average.

On this basis, even allowing for substantial committed capacity increases, the average all day load factor on the West Coast TOC into and out of London is expected to grow from 56% in 2008 to 75% in 2043. As this is an all day average it represents a very significant level of crowding; during the peaks and on busier routes the load factors would be much higher than 75% resulting large numbers of people standing on many trains.

The reduction in the load factor shown between 2008 and 2021 on some sections of the WCML reflects the fact that the forecast growth in trip numbers over this period is less than the increase in capacity provided by the introduction of the "Very High Frequency" timetable at the end of 2008 and the committed lengthening of the Pendolino fleet. However, it is important to note that actual growth on Virgin Trains between 2008 and 2011 of around 10% per year has been noticeably higher than the average growth of 2% per annum forecast. This means that the demand level forecast for 2021 has already been reached and the load factors shown for that year are therefore likely to prove an under-estimate.

The forecasts provided assume that the Pendolino fleet retains the same number of first class carriages as today and that current policies on fares remain in place, including an annual increase of RPI+3% between 2012 and 2015 in line with decisions taken following the 2010 Spending Review.

While we have not ourselves undertaken any analysis of possible pricing measures to smooth demand, a 2006-07 study by AECOM for DfT which focused on peak flows at busy London termini concluded that very little could be done in practice to shift people out of the peak. Peak fares on long distance services are already significantly higher than during the off-peak, and we believe it unlikely that different pricing structures—that is, further increases in fare levels at peak times—would do much to smooth demand. And by 2043 crowding across the whole day is expected to be so high that such pricing measures would be largely irrelevant.

There is no simple definition of when capacity on a route is exhausted. It can be defined as the point when additional seating capacity via longer or more frequent trains can no longer be reliably provided, or the point when existing trains become unacceptably crowded. Further complexity is introduced as demand and train frequencies vary considerably across different days of the week and times of day.

This means there is no established definition of when a route is full. However, as explained in their evidence to the Committee, analysis has been conducted by Network Rail which indicates that a) by the mid-2020s some train services on the West Coast Main Line will be sufficiently full that—ordinarily—further capacity enhancement intervention would be considered essential, but b) no further viable options for enhancing capacity will be available. The recently published West Coast Main Line RUS strongly supports a new high speed line as the best solution to long term capacity issues on this route.

2.  Has the DfT's guidance been followed fully with respect to the sensitivity tests performed on passenger demand forecasts and income elasticities?

As far as possible HS2 Ltd has followed the Department's guidance for forecasting, appraising and sensitivity testing transport schemes. However, given the nature and scale of HS2, HS2 Ltd considered that certain elements of the guidance relating to sensitivity testing and choice of forecast year or demand cap are not appropriate.

In terms of testing the robustness of the rail demand forecasts, the guidance recommends that forecasts are subject to sensitivity tests regarding the elasticity of rail demand to changes in income and fares. The impact of these sensitivity tests is to change the rate of growth in rail demand which, in turn, will affect the business case for a project or policy.

Since the range of uncertainty regarding the growth in rail demand is greater than uncertainty around the income and fare elasticities, HS2 Ltd chose to undertake more wide ranging sensitivity tests than recommended by the guidance. The tests undertaken by HS2 Ltd included varying the rate of rail demand growth, the year at which growth is capped and the impact of lower (indeed, non-existent) growth in air and car travel.

The results of these tests produce a much wider range of demand outcomes than would be obtained from following the guidance. The tests undertaken by HS2 Ltd therefore exceed the guidance and remove the need to carry out the specific tests suggested. The details of all of the sensitivity tests undertaken by HS2 Ltd are set out in Chapter 7 of the Economic Case for HS2 Consultation Document.

3.  What is the base case or do-minimum scenario (in terms of more rolling stock or track capacity) on which the answers to Q1 above are predicated? Can you confirm that the same base case is used in calculating the BCRs of HS2 and the strategic alternatives such as Rail Package 2?

The do minimum scenario includes all major rail schemes to which Government was committed as of summer 2009. Among the more important schemes this includes 106 additional Pendolino vehicles on the WCML, IEP trains running on the ECML and Crossrail. The Chiltern Evergreen 3 upgrade is not included, as it was not agreed at that point.

By 2043 crowding on some services is expected to become so severe that it causes instability in the demand model. To increase confidence in model performance the capacity of all long distance services on the ECML was therefore further increased by 20% above that assumed by IEP, even though this does have the consequence of potentially understating the benefits of HS2.

The base case used to assess the network-level strategic alternatives published as part of the suite of consultation documents included a similar allowance of additional capacity on the ECML. Separately, in updating the economic case for the original "rail packages", additional modelling instability was encountered and a further adjustment was required. This was achieved by lengthening all Pendolino services to 11 cars in the base case and is acknowledged in the report on this update.

4.  What assessment has been made in the business case of the implications for HS2 of Evergreen 3 - the improved Chiltern line service?

HS2 Ltd has not modelled the impact of Evergreen 3, and hence the exact impact on the HS2 business case is unknown.

However, it is our view that the implications of including this scheme are likely to be small. Even with the upgrade, journey times on the Chiltern route will still be longer than the WCML and onward access options from Marylebone more limited than at Euston. More importantly, the Chiltern route is only a viable alternative for those passengers travelling between London and Birmingham whereas HS2 is serving a much wider market.

We expect to be exploring this further as part of our advice to Secretary of State following the consultation.

7.  We were told by TfL that they were worried about capacity at Euston to handle and disperse the passenger flows generated by the combination of HS2 and existing routes. They told us that Crossrail 2 would need to be in operation before the opening of HS2 to handle demand. We have also received representations about the disruptive impact of the Euston HS2 works on the existing train service into Euston. Can you comment on these issues?

HS2 would increase the numbers of national rail passengers using both the mainline and Underground stations at Euston. As well as rebuilding the mainline station improvements to the Underground station would also be made, including a new direct link to Euston Square. These works would be expected to deal with crowding issues in the Underground station.

In terms of crowding on the underground trains, our analysis indicates that the extra number of Underground passengers at Euston due to HS2 would be small compared with the overall numbers already using the Underground. Whilst high quality public transport access and dispersal at all HS2 stations would undoubtedly be desirable to maximize the benefits of the new line, HS2 Ltd is not in a position to comment on the value for money of particular schemes.

Even without HS2, the number of national rail passengers arriving or departing Euston will grow by 100% by 2043 resulting in around 8,700 additional passengers using the Underground station during the morning peak. The average loading of all London Underground services travelling through Euston Underground in the three hour AM peak period is currently 138% and is expected to increase to 185% in 2043 without HS2. Both the Northern and Victoria lines which stop at Euston are likely to be particularly heavily crowded.

By 2043, HS2 Ltd estimates some 5,500 additional rail passengers would use Euston Underground Station in the morning peak as result of HS2 Phase 1—but this is equivalent to an increase in the total number of passengers travelling on London Underground services passing through Euston of just 2%. As a result of HS2 Phase 1 we estimate only a small additional increase in crowding on LUL services at Euston from 185% to 191%

Accordingly, any requirement for additional underground capacity would be predominantly triggered by general growth, not the effect of HS2. We believe that the same conclusion holds, in principle, for the wider Y network which would further increase demand at Euston but may also limit demand growth at Kings Cross St Pancras as passengers transfer to high speed services from the ECML and MML. We have not, however, analysed these numbers in equivalent detail, as we have yet to finish our work on developing the route and business case for links to Manchester and Leeds. HS2 Ltd will be working with TfL on the impacts at Euston as the Manchester and Leeds work is finalised, and is ready to provide any necessary input to TfL's wider ongoing strategy for modernising and improving Underground services should a decision be taken to proceed with HS2.

Impact on existing train services into Euston

Our Euston station proposal was developed from the outset to minimize disruption to users during its construction.

Euston station would be one of the most complicated areas of HS2 to construct. It would be undertaken over a number of years in several stages. Staging was developed on the basis of constructing new platforms on the western side to provide initially temporary platforms for existing "classic" services during subsequent construction stages and then progressively rebuilding the existing station in a number of stages. Upon completion of each stage, new platforms would be bought into service immediately.

At the current feasibility stage of the project, the proposals provide at least 14 platforms at all times. This followed an examination of the current standard off-peak and morning peak service. The latter demands the use of all 18 platforms at times and represents the "worst case".

We concluded that the off-peak service could be maintained with a minimum of 11 platforms with minor adjustments to operational practice to reduce some long turnaround times. We considered a 12th platform would be useful to maintain all-day operational flexibility for special events and the like.

The most critical period currently in the Morning peak is 08:40-09:10, with all 18 platforms being in use for part or all of this period. In order to operate the current volume of trains with a minimum of 14 platforms, we concluded turnaround times for some services would need to be reduced in line with those achieved at other similar London terminals. This would require detailed changes to arrival and departure times. However, by so doing it would be possible to maintain the current quantum of services, their frequency and general service intervals.

The London and South East Route Utilisation Strategy, July 2011 (Chapter 4, Table 4.1), notes that Euston currently operates less trains per hour in the peak than other London main line termini which have a similar mix of long distance and commuter services. This reflects extended platform occupation for some services. For example, the Highland Sleeper arrives before the critical peak but the empty stock remains occupying a platform until 0926 at present.

Therefore through the period of Euston development we concluded that the existing train service could be maintained. Passengers would experience some level of inconvenience through building works changing pedestrian, public transport and road access during the multiple stages of the works, similar to other major rebuilding projects of which the most recent and relevant was St Pancras.

We noted also in our report that on occasions it would be necessary to close the station entirely for short periods in order to stage the work. This would typically be to disconnect the track from one set of platforms and reconnect to another set, with the accompanying alterations to the signalling and overhead electrical equipment. Such closure would probably last several days, and would need to be timed to coincide with periods of lower demand such as long Bank Holidays or during the summer. The extent and timing of such closures would be developed if the project proceeds and be planned in conjunction with the availability of alternative routes.

8.  Do you foresee any capacity problems on WCML north of Lichfield if HS2 opens in 2026 but the second phase to Manchester (and Leeds) does not start to open until 2032? Can the northern part of the line accommodate traffic from both HS2 and the classic line, including freight?

We do not foresee any significant capacity problems on WCML north of Lichfield, subject to the completion of Network Rail schemes as set out in the Technical Appendix to our 2009 Report.

We considered the effect of the Day One service on the capacity of each route section of the WCML north of Lichfield including both routes towards Manchester (via Crewe and via Macclesfield). Our baseline was the existing capability of the routes concerned including any relevant NR committed schemes.

We concluded that sufficient capacity would exist to operate the proposed pattern of HS2 services without detriment to other Train Operating Companies and Freight Operating Companies. However we do acknowledge that detailed timetabling work for a potential 2026 timetable would be necessary and would expect to work with Network Rail should the project be developed.

We based our conclusion on the service pattern modelled for Day One and the change it would represent, as shown below:
Existing Trains per Hour from London
Assumed Future
Trains per Hour from London
London toPendolino
or Voyager
or Voyager
HS2 Total
Crewe01 01+1
Chester11 010
Liverpool10 22+1
Manchester via Stoke2 123+1
Manchester via Crewe1 0110
Glasgow11 12+1

The above table compares the potential future off-peak services with the existing off-peak standard hour. In peak hours we have modelled a number of additional services, broadly in line with the level of service frequency enhancement in peak hours that already exists on the WCML. Further detailed work would be necessary to produce validated timetables at a later stage of the programme.

The effect on each route section would be:

Lichfield to Colwich

This section of the WCML was modernised and four-tracked as part of the West Coast Route Modernisation project, completed in December 2008. Sufficient capacity exists on this section to accommodate the four additional HS2 services without detriment to other operators or freight services.

Colwich to Cheadle Hulme via Stoke

The London—Manchester via Stoke line diverges from the WCML at Colwich Junction. At Stone the line from Stafford converges, bringing with it three trains per hour (two Cross Country and one London Midland), and further north there are also local services linking Macclesfield with Manchester.

We concluded that the addition of an additional path per hour was achievable although detailed adjustments to the timetabling of existing services might be necessary.

Stafford—Crewe Liverpool and Scotland

We concluded the proposed additional services could be accommodated.

From Stafford through to Crewe the existing railway is four-track.

Whilst Crewe station itself is complex due to the series of flat junctions, there is some grade separation of the freight lines which bypass the station. Between Crewe and Winsford the railway is four-tracked, reducing to two-tracks going north apart from a four-track section between Hartford and Acton Bridge, where freight trains can be overtaken by passenger services.

North of Warrington we proposed an increase of London services from one to two per hour. Having considered the limited capacity available we proposed that the two services (one HS2 and one classic rail) would be flighted closely together. This would maximise the connectional possibilities between the two services and minimise the demand on capacity.

9.  We have been told that no high speed railway currently operates at 18 trains per hour. To what extent is 18 tph dependent on the deployment of new signalling technology? What are the main risks to meeting that target? Does HS2 Ltd have a strategy for risk mitigation? If 18 tph is not achieved, what implications would this have for services frequencies, destinations served and the economic case?

We calculate that an 18tph service can be offered reliably on HS2 on a "clock face" regular interval timetable. This is based on using the European Train Control System (ETCS), the most up-to-date available design for the reference train, our proposed configuration of infrastructure for stations and junctions, and our proposed service pattern. We do not consider it requires technology development to achieve this at 225mph and we believe that only limited, foreseeable, development would be necessary for the ultimate potential route maximum speed.

Capacity of current HS railways

The operational capacity of any railway depends on traffic type, speed and stopping pattern mixes, layout of junctions and stations and train technical performance as well as the innate capability of the signalling control system. For example, the Japanese centralised train control system permits trains to run safely at three minute intervals (notionally 20tph). However due to constraints of terminal station capacity from initial construction in 1964 and a complex pattern of stopping, semi-stopping and non-stopping trains, including trains timetabled to overtake each other, the practical capacity is generally limited to 13tph.

Existing high speed lines have been designed and are operated with a variety of national systems developed variously in the 1970s and 1980s, such as TVM in France and LZB in Germany. These are reported to give a capacity of up to 16tph but in practice, sharing use existing lines into terminal stations this figure is reduced to 12 or 13 tph.

New high speed lines in Europe are now being designed and fitted with ETCS (European Train Control System) which is now mandated under Interoperability legislation. Examples are Malaga—Madrid—Barcelona and Milan—Rome—Naples.

The HS2 proposal

The HS2 proposal was developed as a whole operational system to accommodate the specific intensive frequency required, having taken full account of experience elsewhere on factors limiting practical capacity.

We have determined capacity on the HS2 route based on:

—  the current functionality of ETCS Level 2 train control system and the standard European train radio system, GSM-R.

—  the acceleration and braking performance of the HS2 Reference Train which used the performance data from Alstom for its AGV third generation high speed train with 360kph (225mph) capability.

—  all trains having the same design performance.

—  the gradient profiles of the proposed route where there is an absence of sustained steep gradients, which affect train braking distances, due to the topography of the land traversed.

—  avoiding capacity pinchpoints by providing grade separation at junctions and in Euston station throat, acceleration and deceleration tracks and high speed turnouts to minimise capacity loss at junctions, optimum design of track sectioning for the detection of train position and sufficient through platforms at Old Oak Common.

—  no intermediate stations hence no stopping or overtaking movements on the two track core section.

On the basis of the technical performance of both the ETCS/GSM-R train control system and the Reference Train:

—  the minimum headway between successive trains operating at the maximum initial speed of 360kph would be 116 seconds and 11.6km. The emergency stopping distance of the reference train from 360kph would be 5.7km.

—  the worst case minimum headway between two trains was established as when a southbound train joined the line at a junction to follow a train passing through at full permitted speed. Following subsequent acceleration of the second train it would be some 130 seconds, and 13km, behind the first.

A realistic combination of though and stopping trains at Birmingham Interchange, and through and diverging / converging trains at the point on the "Y" network where the northwest and Northeast limbs join, would give a technical capacity of 29 tph with existing available technology.

To convert this to a practical, timetable planning, capacity we took into account general accepted railway practice which allows for typical day to day service variations, and European guidance published by the International Railway Union (UIC). On this basis we calculated a maximum planned capacity of between 21 and 22tph.

The proposal then took into consideration the potential variability of on-time performance of trains coming on to the HS2 route from existing railway lines. In the first stage the greater proportion of trains would be joining off the West Coast Main Line at Lichfield. In the second stage a higher proportion of train services would operate wholly on the dedicated high speed network but a significant number would still start on existing railway.

Having regard for the future desire for regular "clock-face" services, with some principal destinations served on a 20 minute cycle, we determined that we should plan HS2 service specifications on the basis of 18tph.

Risks to delivering reliable 18 tph capacity

The principal risks of adopting the European Standard ETCS with GSM-R as the radio carrier are of technical obsolescence. However we considered that the continuing development of the system in the years before it was brought into service on HS2 would more likely enhance its capability than diminish it. Similarly, the risk of the European Union abandoning ETCS for a less capable system was considered remote. In any event we considered the additional margin we had already created by confining to 18tph compensated for this theoretical risk.

We consider other developments of train and signalling control technology would more likely enhance the ability to deliver high capacity reliably. For trains we expect to see improved guaranteed braking and deployment of automatic train operation (ATO) under driver supervision. The former already exists on some trains without recourse to novel unproven technology to the degree necessary to maintain the headways, and therefore capacity, described above at 400kph.

ATO has been widely used on metros and a version is operated on Japan's high speed lines, but there is not a specific version for ECTS Level 2 currently. It is anticipated that others will have created and proven such a product before 2020. We see the main benefits of ATO as being around improved management of key junctions to minimise potential delay and reduce energy consumption.

Implications of not achieving 18tph

Although we consider we have adopted a prudent approach in using up to 18tph to develop the illustrative service specification of HS2, we have considered the impact of a lower planned capacity. We would expect to maintain the range of destinations and key frequencies by joining trains south of the West Midlands (ie two x 200m trains joined together) where demand forecasts indicate no requirement to operate full 400m long trains.

10.  Does the proposed land-take for HS2 provide sufficient width for widening to 4 tracks at some future date? Are structures being designed with future widening in mind?

No. The reasons for this were discussed in HS2 Ltd's 2009 report High Speed Rail: London to the West Midlands and Beyond. The relevant extract is reproduced below:

"6.1.60 We have considered the possibility of laying four tracks along the HS2 alignment, thereby increasing its long term capacity, to 30+ train paths per hour in each direction, rather than the maximum of 18 we assume for a two track railway. However, for the following reasons we have not pursued this option:

—  The level of demand we have assumed—with growth continuing to 2033 and then levelling off—does not appear to support such a substantial increase in capacity. That is not to say that the demand may not materialise at some point after the next 25-30 years. However it does suggest that HS2 would need initially to bear a substantial degree of additional cost and environmental impact on the basis that the demand may materialise. We do not believe this to be a credible position.

—  Were a second trunk into London to be justified, there are compelling reasons to believe that its optimal alignment would not follow the same as that of HS2. Firstly, a more easterly leg would enable high speed rail to address a broader market, and bring with it the possibility of further improved journey times to destinations east of the Pennines. Secondly, we believe there is no plausible site for the approximately 20-platform station that would be required to serve a four track high speed railway operating at full capacity, and nor is there a surface alignment into London that could support a four-track HS2. Were HS2 to be four-tracked to a point somewhere outside London, the second pair of tracks would need to enter London entirely in tunnel and terminate at a different station (although it is worth restating here that our analysis of the possible sites in central London suggests there is no obvious location for a second high speed terminal). A further reason for preferring a second route alignment is the added resilience it would give to a national network.

6.1.61 In short, a decision to four-track HS2 would need to be made against the backdrop of considerable uncertainty about future demand, and when other potentially superior options exist should the demand materialise. For these reasons we have recommended as part of our proposals for HS2 that it remain only a two-track railway. If demand materialises, a second leg could be built from the East Midlands to London."

11.  Pierre Messulam, SNCF Director, told us that although passenger forecasts may prove broadly correct in the long run, the timing of costs and income can be problematic and make a significant difference to project viability. What sensitivity analyses have been performed on HS2 cost and income profiles?

Costs and revenues can affect project viability in a number of ways. HS2 Ltd has undertaken a number of sensitivity tests around the effect on the business case if demand growth were to be higher or lower, or capped at a different level, some of which are described in response to question 2 above.

The nature of cost and revenue risks also differs under different models for funding and operating high speed rail. In particular, revenue risk would be a key issue for a private sector concessionaire under a PPP arrangement such as has been used for recent TGV projects in France.

Ernst and Young provided some early views to us on financing issues for our 2009 Report, High Speed Rail: London the West Midlands and Beyond and, for example an illustrative profile of government funding is shown in Figure 5.1b of the Report (p203), but the work was not detailed enough to identify specific risks around timing.

However, no decision has been taken on the preferred financing model for HS2. More work would be undertaken in this area if the decision is taken to take the project to the next stage.

12.  How do the costs of a single route via Heathrow compare with the costs of the HS2 route plus a spur to Heathrow?

We have reported on the estimated base construction costs for a route via Heathrow with a station at Iver and the HS2 route plus a spur to Heathrow in our report to Government published in March 2010 and also in our Options for Connecting to the Heathrow Area Supplementary Report published later in September 2010. Our worst case assumption for a spur, assuming a Terminal 5 station on-airport in a box below-ground was that the estimated base construction costs would be c£200 million less than for a route through a Heathrow Hub 4km north of the airport. As noted below we calculated the journey time penalty to a through train of stopping on a route via Heathrow Hub as 7 minutes.

The cost of the spur option would be incurred, under the government's presently stated intention, with the second phase of HS2 to the North East and North West, when direct airport services would be scheduled.

We continue to work with BAA to investigate the possibility of creating a ground level station at Terminal 5. Should this be the case, the cost of the spur would reduce and therefore the cost differential between it and the more expensive through route would increase.

13.  We have received a detailed submission saying that the Heathrow Hub / Iver Common site assessed by HS2 Ltd is not the same as the Heathrow Hub station proposed by Heathrow Hub Ltd, and that the conclusions drawn are therefore misleading. Can you please comment?

Briefly, we believe the site we assessed is at the same location as Heathrow Hub Ltd's, although the assumed nature of the station and services are very different.

During preparation of our report in 2009 we met the promoters of the Heathrow Hub on a number of occasions to discuss their proposals and they made a written submission to HS2 Ltd to outline their proposed scheme.

We believe that the location we assessed, adjacent the Great Western Main Line and the M25 on flood plain land occupied currently by the Iver Sewage Treatment Facility, is the same as that proposed for the Heathrow Hub. We also assumed that it would be linked to the airport by an extended people mover.

However, there were a number of differences in approach:

—  Our remit was to provide an interchange for HS2 with Heathrow Airport and Crossrail. Accordingly, we assessed only the benefits that such an HS2 interchange would bring. In contrast, the Heathrow Hub proposal was developed as a wider interchange with conventional rail and coach services.

—  The Heathrow Hub proposal included the shared use of the high-speed rail corridor into London, such as by "Javelin" services to Kent. These were not compatible with the capacity that we considered would be needed for long distance high speed services on HS2, consuming around half the potential capacity of the HS2 route.

—  The Heathrow Hub proposals envisaged a new 30 million passenger airport terminal integrated with the hub.

—  In addition, our station design and approach routes differed slightly—we did not consider that a surface level station was viable given the necessary tunnelled approach either side.

However, setting aside these differences, we did not progress this station location because:

—  If it was served by a through route, as the Hub promoters proposed, passengers on HS2 travelling to and from London—who comprised the great majority of travellers—would incur a significant journey time penalty.

—  For air passengers it was not as attractive as options closer to or on-airport.

—  For HS2 passengers going to and from London it was not as attractive as a Crossrail interchange at Old Oak Common and we could not envisage these passengers transferring to Crossrail at this location, thereby increasing demand at Euston.

14.  If a route were to be provided via Heathrow, what is your latest estimate of the time penalty that would be incurred by stopping trains at Heathrow? Has this figure been used in your economic analysis?

The economic analysis assumes that the journey time penalty of going via Heathrow would be an extra 7 minutes including a station stop.

15.  The business case analysis assumes fare levels similar to those on the existing WCML. If premium fares were charged on HS2 (as occurs on HS1), what would be the impacts on passenger numbers, the business case and the level of much public subsidy. How has the business case taken account of the prospect of fares competition from Chiltern Line and WCML?

The demand model used by HS2 Ltd makes use of data on average fares between any two places across all routes and services. It is therefore unable to analyse any competitive effects of different prices across different routes or operators.

Nevertheless, for the work published in March 2010 HS2 Ltd undertook a high level study on the impact of charging a premium fare for HS2 trains. This found that the impacts of premium fares are many and complex, however it is certainly not the case that a single percentage premium is applicable or desirable across all markets and routes. Instead there would need to be careful management of revenue strategies—similar to those already seen on long distance services—to maximise use of capacity. The initial conclusions from this work were:

—  The scope for premium fares is complex, with the impact varying considerably across different markets and routes.

—  The availability of non-premium service alternatives would make a big difference to the scope to generate additional revenues through premium fares.

The economic case does not take account of fares competition across different routes or operators and we have not sought to undertake this analysis. Amongst other things, the impact of competition will be dependent on the regulatory framework under which HS2 would operate

More work would be needed in all these areas if the Government decides to proceed with the scheme following the public consultation.

17.  What analysis have you made of the use of HS2 by income groups and how does this compare with current rail use?

HS2 Ltd has not specifically undertaken this kind of analysis. However, as the economic case assumes that HS2 trains are priced at the same level as classic rail services then it would be expected that the income distribution of HS2 will be broadly similar to the existing income distribution of users of long distance services classic rail.


5.  Has further work been completed to improve the robustness of the [economic] case for the Y network?

The current consultation is focused on the strategic case for the overall Y network, but only a detailed proposal for the initial London—West Midlands phase. Therefore, a strategic assessment of the potential economic case for such a network was appropriate.

Work is currently ongoing to develop a detailed route proposal for extending the network to Leeds and Manchester, which would form the basis for subsequent public consultation. The work involves developing a detailed line of route that will allow a much more accurate assessment of the costs, benefits and environmental impacts of the Y than was presented in the recently completed consultation process. HS2 Ltd will provide advice to Government on the refined Y route later this year.

9.  How dependent is the business case on the standard forecasting framework? Have alternative (especially non-PDFH) rail demand forecasting frameworks been tested?

HS2 Ltd has not directly tested the impact of different demand forecasting frameworks.

Instead, the robustness of the economic case to different levels of demand has been tested by adjusting the overall rates and level of demand growth. These included varying the rate of rail growth, the year at which growth is capped and the impact of lower (indeed, non-existent) growth in air and car travel. Further explanation of these tests is provided in the response provided to question 2 of the Transport Committee's questions to HS2 Ltd.

10.  How was the level of the demand cap determined? What evidence is there to support it being set at the level selected?

There is no evidence to suggest the observed trend of strong growth in long distance rail travel is slowing. Nevertheless HS2 Ltd considered that it would be prudent to cap demand at some point in the future and that it would be reasonable that this cap should be defined at a particular level of demand, rather than at a particular point in time.

With no evidence available to suggest whether or when demand might saturate HS2 Ltd undertook its own analysis of existing trip rates by examining how many long distance trips people currently make across different income quintiles of the population. This showed that a demand cap that results in a growth of 61% more long distance rail trips (over 100 miles) per person per year in the absence of HS2 seems reasonable. Such a cap is equivalent to about 0.5 extra long distance rail trips per person per year and represents an average rate of trip making (1.4 rail trips per person per year) across the whole population that is lower than the rate already seen in today's population containing the top 20% of incomes (2.0 rail trips per person per year).

Taking account of population growth we forecast the total number of long distance rail trips (over 100 miles) to increase by 95% by 2043, representing an increase of 1.9% a year on average. This compares to a growth of around 5% a year over the past 15 years.

This demand cap is also consistent with the forecasts originally published in March 2010, when demand was capped in 2033. Since then amended assumptions about higher fares and lower economic growth mean that this level of demand is not now forecast to be reached until 2043.

The Department for Transport's current guidance is that demand should be capped in 2026. This assumption is not based on the belief demand growth will cease in 2026; it is just a convenient simplifying assumption that allows the Department to easily compare different conventional rail schemes on a consistent basis. However, HS2 Ltd consider that a project of HS2's size, timescale, and strategic impact necessitates thinking much further ahead than 2026 and that the Department's normal guidance is therefore not appropriate. The Department for Transport and HMT agreed with and fully supported this change in approach.

11.  Have other scenarios of higher or lower fare increases been tested?

Yes. Scenarios involving both higher and lower fare increases have been tested and this is reported in the Demand and Appraisal Report published on the HS2 Ltd website.[272]

The results of these sensitivity tests are set out in the table below. It should be noted that while the overall benefit:cost ratio for the initial London-West Midlands phase of HS2 is 2.0 including Wider Economic Impacts (WEIs), the sensitivity tests carried out by HS2 Ltd were calculated as variations on the BCR for the proposed line without WEIs and therefore show a "central case" BCR of 1.6.

(excl. WEIs)
Central case16,54413,660 1.60
High rail fares (cap 2064)13,521 19,5983.09
Low rail fares (cap 2035)18,131 11,4491.45
High rail fares (cap 2043)11,156 11,5660.90

As a rule, higher fares will reduce demand and lower fares will increase it. However, the effect on the benefits and revenues in the business case is more complex. In particular an assumption must be made about how fares impact the cap on demand.

It is consistent with the approach we have taken to the cap on demand, explained in Question 10, to assume that the cap occurs at the same level of demand as the central case reached in 2043. In this case higher fares reduce the rate of demand growth with the demand cap now reached in 2064 rather than 2043. That reduces benefits (fewer people save time before 2064) but increases revenues (after 2064, higher fares result in higher revenues). Similarly, lower rail fares increase demand and the cap level is reached earlier, in 2035. That increases benefits (more people save time before 2043) but reduces revenues (after 2043, revenues are lower). As the table shows, in these circumstances the net impacts are that higher fares result in a higher BCR and lower fares a lower BCR. Implicitly these scenarios assume that a change in fares levels will change the rate of demand growth but not the overall level of demand that is ultimately reached.

In contrast, if it is assumed that the cap on demand always occurs at 2043 (the same time as in the central case) irrespective of the fare or level of demand, then the result of higher fares is to reduce the level of demand in 2043 and all later years compared to the central case. This has the effect of significantly reducing both benefits (fewer people save time) and revenues (fewer people pay fares) after 2043. The net impact is to reduce the BCR. Whilst a sensitivity test has not been carried out on this basis for lower fares it is likely that they would have the opposite effect—eg increasing benefits and revenues and raising the BCR. Implicitly these scenarios assume that changes in fare levels will both change the rate of demand growth and the overall level of demand growth achieved.

12.  Has further work on premium fares for high speed services been conducted since 2010? How would premium fares affect expected revenues? In particular, is there a role for demand management to "lock in" the benefits of the High Speed Rail programme?

Please refer to the response provided to question 15 of the Transport Committee's questions to HS2 Ltd.

13.  Has the benchmarking suggested areas where costs could be reduced through efficiency savings?

Yes. Our benchmarking work has specifically resulted in reductions to assumed tunnelling rates, which are included in our most recent cost estimate. Our work also became a key input into the Infrastructure UK cost study looking at the costs of UK civil construction projects. The IUK's conclusions were reported at the end of 2010 and were that there was potential to reduce the cost of building such projects by at least 15%. Were this potential to be realised, we could see a saving in HS2 scheme costs of nearly £5 billion for the "Y" and an improvement in BCR from 2.6 to 3.4.

15.  How have asset renewal rates been derived?

We considered the individual asset types and their typical lifespans. As a result, we made assumptions regarding which assets would require either partial or full renewal over the 60 year appraisal period. Where renewal was required we applied the appropriate percentage of the estimated initial construction costs for these asset types at the required renewal frequency in our business case model. The renewals assumptions are shown below (see overleaf):

Permanent WayFull replacement by end of 30 and 60 years, each taking four years 25% spend each year
Switches and CrossingsFull replacement by end of 30 and 60 years, each taking four years 25% spend each year
OHLERenew 50% each by year 15, 30, 45 and 60, each taking two years
Power supplyRenew 50% each by year 15, 30, 45 and 60, each taking two years
SignallingRenew 50% each by year 15, 30, 45 and 60, each taking two years
CommunicationsRenew 50% each by year 15, 30, 45 and 60, each taking two years
Stations40% renewal by year 40 taking four years
EarthworksNo renewal in evalution period
Retaining WallsNo renewal in evalution period
StructuresNo renewal in evalution period
TunnelNo renewal in evalution period
Depot / stabling50% renewal by year 30 and 60 taking three years
Trains Renewal by year 35 spread in line with initial expenditure phasing

16.  What progress has been made in improving the robustness of the cost estimates for the Y network?

We are undertaking work to develop route proposals for the Y during 2011. This enables a better understanding of the assumed scope of work which is fundamental to further refining the Y network cost estimates. We have also engaged Davis Langdon to provide specialist independent cost support during 2011. Their work includes review of unit rates, quantitative risk analysis and improvements to the granularity of cost estimation enabling more detailed challenge than was previously possible.

17.  How have the cost savings on the conventional network been estimated?

HS2 Ltd has calculated the net change in train kilometres for each type of rolling stock running on the classic rail network as a result of introducing HS2. This change includes both a reduction of longer distance services and an increase in shorter distance services. Information on the cost per train kilometre of different stock types has been obtained from the Department for Transport's Network Modelling Framework, and this is then applied to the calculated change in kilometreage. This is more fully described in Annex 2 of the document "A Summary of Changes to the HS2 Economic Case" published on the HS2 Ltd website.[273]

In line with DfT guidance, an optimism bias uplift of 41% is then applied to the net change in operating cost as measured across the whole of rail network (thus including both HS2 operating costs and classic line savings).

18.  Has there been analysis equivalent to that of Graham and Melo (2010) for the agglomeration benefits from additional commuter capacity? If so, does it provide indications of the robustness of the estimate of £3 billion agglomeration benefits?

HS2 Ltd has followed the Department for Transport's standard guidance for calculating agglomeration benefits. Other than the Graham and Melo work, HS2 Ltd has not undertaken any additional work to test the robustness of this approach for the calculation of agglomeration benefits.

The Graham and Melo work was undertaken to specifically investigate whether there were any additional benefits on top of those already captured within the standard guidance due to the unusual characteristics of high speed rail.

21.  Would it be possible to reduce the estimated range of potential carbon emissions?

The range of potential carbon emissions estimated in the report is wide because there are a large number of uncertain factors outside of the scope of the HS2 project. Whilst it would be possible in theory to reduce the range, this would rely upon the uncertainty being reduced, either through better information or by more specifically defined assumptions. For example, Government's firmer policies on future GRID energy mix will help to refine the estimates.

22.  Will the estimated carbon values in the AoS be updated to reflect this change?

The carbon valuations in the AoS will be updated to reflect the most current guidance and reported to Government by the end of the year.

23.  Is it correct that there may be a net increase in carbon emissions because there is no reduction in the number of flights and additional HS2 services?

The assessment of carbon impacts included in the Appraisal of Sustainability for HS2 includes a wide range of uncertainties, including around the impact on aviation. This indicates that if no reduction in flights were to occur as a result of HS2, then depending on the carbon intensity of electricity generation used to power HS2 trains, there would be an increase in carbon emissions. It is important to note, however, that even in the worst case scenario, where the carbon intensity of the grid remains as it is today and no modal shift from either aviation or road is achieved, the average increase in annual emissions would still be less than 1% of current annual transport emissions. In addition, HS2 Ltd's forecasts indicate that the full Y-shaped network could see as many as six million trips a year transfer from aviation, meaning that it is credible to imagine that some air services would be discontinued.

It has also been argued that an increase in carbon emissions could occur where domestic flights are cancelled as a result of passengers shifting from flights to HS2, and freed up slots are then refilled by new flights of a more polluting nature (eg domestic flights being replaced by international flights). However, in this scenario, caps on emissions would apply due to the introduction of aviation into the EU Emissions Trading System. As a result, there would not be a net increase in carbon emissions across the System as a whole.

24.  If changes in the cost of carbon beyond 2050 are considered, would this significantly affect the estimates?

The effect that the cost valuation schedule introduced by DECC in 2010, which extended the end year from 2050 to 2100, would have on the AoS carbon cost valuation is not simple. For a given level of emissions, the cost of carbon would increase. This means the range estimated in February 2011 would widen.

However the cost of carbon has real impacts on the economy and on choices made by the travelling public because of the impact of the EU Emissions Trading Scheme. This means a higher carbon price is likely to increase electricity costs, air fares and other prices. This may change transport decisions which in turn could change the impact of HS2 on carbon emissions.

25.  Will these assessments be carried out when more data becomes available in order to have a better indication of the impacts, and would these assessments be likely to have a significant impact on the BCR of the scheme?

The cost valuations will be reassessed using the most current guidance, to report back to Government this year. Going forward, if Government decides to progress scheme planning, some of the uncertainties in the carbon assessment will be reduced, for example through greater clarity in Government energy policy; level of detail in the design proposals; and, commitments to different construction or operation strategies. Carbon assessment would continue to be a theme through all future design and environmental assessment. We would expect revisions to be within the range considered and even in the worst carbon case, it is unlikely to have more than a small impact on the BCR.

26.  Have estimates been made of the landscape impacts of a new high speed line, and would these be likely to have a significant impact on the relevant BCRs? Are such assessments planned?

The Appraisal of Sustainability has considered landscape impacts in line with DfT guidance; and this was a consideration throughout the route selection process.

In 2009-10, HS2 Ltd undertook an indicative assessment of the potential impact as the route stood at that stage. This valued the impacts at up to £4.5 billion, but was a brief assessment to consider potential scale of impacts and has not been updated to reflect the latest design and mitigation of environmental impacts. The Department is also reviewing, in the light of recent evidence, how analysis of landscape impacts can be best undertaken to provide robust measures of such effects.

27.  Has there been consideration of the types of user, in terms of socio-economic status, who will benefit from travel on HS2?

Please refer to the response provided to question 17 of the Transport Committee's questions to HS2 Ltd.

28.  Are there expected to be significant distributional effects between socio-economic groups as a result of the construction of the HS2 line?

The Appraisal of Sustainability provided a high level assessment of the potential impacts on the most deprived people in the community, as identified by the Government. Impacts on equality would be addressed at a greater level of detail in future stages of scheme planning, should Government decide to proceed with the scheme.

29.  What estimates have been made of the adverse economic impacts on areas not served by the new high speed line?

In the relatively few places where HS2 might adversely affect the transport provision of an area (either through poorer train service provision or through higher road congestion), the impact is captured within the overall net benefits presented within the economic case. As explained in question 30 below, no analysis has been undertaken of how such effects are distributed.

30.  What is the relative size of the economic impacts on cities expected to be served by the high speed network? What proportion of these economic impacts is abstracted from other regions not served by the high speed network?

HS2 Ltd has not undertaken analysis of how different regions or cities will be either positively or negatively affected by HS2. In part how different cities and regions may or may not benefit is related to a wide range of issues and local policies.

HS2 Ltd has examined how benefits are distributed on the basis of where trips originate, and on this basis well over 50% of benefits fall outside London and the South East. Around one third of benefits accrue to trips starting north of Birmingham with the North West the biggest beneficiary.

We are aware that a number of regional cities have carried out their own analyses of the potential economic impacts of new high speed rail lines and that the key outputs have been included in their evidence to the Committee.

33.  How would substantial long-term oil price rises or falls have an impact on demand for rail? Would the impact be greater than those in the tested fuel duty scenarios?

The central case for HS2 uses assumptions on car running costs (itself a combination of assumptions around fuel costs, duty and VAT, vehicle efficiency, and non fuel costs) provided by DfT's standard WebTAG guidance. This assumes that fuel costs themselves increase by 19% between 2008 and 2043.

HS2 Ltd have run a sensitivity test in which fuel duty is assumed to increase by 50%. This results in a greater demand for rail services and significantly improves the business case for HS2. (The BCR for London—West Midlands excluding wider economic impacts moves from 1.6 to 2.4)

30 August 2011

272   http://www.hs2.org.uk/assets/x/78304 Back

273   http://www.hs2.org.uk/assets/x/77820 Back

previous page contents next page

© Parliamentary copyright 2011
Prepared 8 November 2011