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The two-sided density dividend: Agglomeration economies in *consumption*

Why are people – both in NZ and around the world – increasingly choosing to live in cities?

The answer usually advanced in response to this question, at least from an economic perspective, is “agglomeration economies”. In this post I want to unpack a few things about agglomeration economies, before discussing why I think our current understanding places too much focus on production as opposed to consumption. The post finishes by (briefly) considering why I think agglomeration economies in consumption are relevant to transport policy.

First, let’s consider how agglomeration economies are defined. In general, agglomeration economies are understood as the external economies of scale that arise from proximity. I tend to think of agglomeration economies as spatial economies of scale.

An example may help.

Consider street-lighting. Here the costs of provision (whether public or private) is largely independent of the number of people who actually benefit from the investment. Hence, the cost per person of providing street lighting will tend to be lower in larger and/or more dense areas.  This type of agglomeration economies is one reason why larger (and in particular denser) cities are able to support more specialised public services, such as displays of giant pieces of fruit made from steel-pipe offcuts.

P1010251b

There are a number of other ways in which agglomeration economies give cities a productive advantage. Larger and more dense cities, for example, tend to have more efficient labour markets, in which better matches are found between firms and employees. City centres in particular seem to generate knowledge spillovers, whereby proximity facilitates formal and informal networking which in turn contributes to higher rates of innovation. While agglomeration economies vary across cities and industries, they do appear to be relatively significant. A doubling in Auckland’s “effective density”, for example, would be expected to cause a 5-10% increase in productivity (NZTA 2009).

But is this the full story? More specifically, is increased productivity the only way in which agglomeration economies can contribute to quality of life?

I think not. Instead, I’d suggest that a large part of the so-called “density dividend” manifests by way of benefits to consumers rather than producers Let me present two (personal) examples of agglomeration economies in consumption.

First, consider the “where shall Stuart eat dinner problem”. Now, I am someone who appreciates good food. So the fact I can access a diverse range of restaurants from my apartment in central Auckland makes me very happy. And while culinary contentment ranks high on my list of priorities, it does not directly contribute to increased productivity (NB: given how much time I spend dining out there is a high chance the presence of these restaurants has the opposite effect!). In this example, density has supported greater specialisation in the provision of goods and services (restaurants), which in turn leads to a more contented Stuart.

Second, consider the “who shall Stuart date” problem. Now I’m not ashamed to say that I was recently introduced to the word of “Tinder”, and by golly there’s much romantic fun to be had. For those of you who don’t know about Tinder, let me explain briefly: Tinder is an app for your mobile phone which enables you to “connect” (in all its wonderful forms) with people in the immediate vicinity. So how on Cod’s green earth is this related to agglomeration economies? Well, consider this: The number of potential Tinder matches is directly related to the sheer number of people in the surrounding area. Finding a Tinder match is simply a numbers game in which people living in Auckland’s city centre have a distinct advantage compared to, say, people who live in Waiuku.

As a tip for new Tinderers, I’d suggest taking an evening stroll up Maungakiekie to view splendid sunsets and rainbows.

DSC00109b

So based on my own personal experiences of food and dating, I feel compelled to argue that agglomeration economies in *consumption* are relatively significant. Call me a hedonist if you will, but I’m as interested in consumption as I am in production. “Work to live”, as they say.

Unfortunately, consumer benefits don’t seem to rate a mention in most formal academic analyses of agglomeration economies. For example, when completing my masters thesis in economics I could uncover only *one* study of agglomeration economies in consumption, which was published in the Journal of Urban Economics in 2000 and titled “Separating urban agglomeration economies in production and consumption” (NB: I studied Spatial Economics at VU University, Amsterdam; I’d highly recommend this course to people interested in these kinds of spatial economic issues).

The paper’s author finds evidence of substantial agglomeration economies in consumption. More specifically, he finds that while agglomeration do increase nominal wages it tends to decreases real wages, once increased costs, such as congestion, pollution, and housing, are taken into account. In the context of an economic equilibrium that seems counter-intuitive, unless of course there is another (unobserved) countervailing economic benefit which arises from living in cities. The author posits this countervailing effect is agglomeration economies in consumption. While this is an interesting finding, I’d be the first to admit that more research is required before we draw a line under agglomeration economies in consumption.

If you’re still reading by this stage let me reward you by considering one final question: Why might agglomeration economies in consumption be relevant to transport policy?

The answer to this question is that agglomeration economies in consumption are likely to vary considerably between projects that concentrate development, versus those that disperse development. Project like the City Rail Link, for example, will tend to concentrate land use development not just in the city centre but everywhere there is a station. This concentration may in turn be expected to result in agglomeration benefits in consumption as more firms are able to overcome the fixed costs of setting up shop. Hence, agglomeration benefits in consumption may be relatively significant when considered across the entire rail network (in contrast to agglomeration economies in production, most of which will tend to be realised in the city centre).

And how might these agglomeration economies in consumption look when they eventuate? Well, the way they always have, both in NZ and overseas: As cute little shopping centres centered around train stations. Like Kingsland. That’s something worth investigating, methinks.

P.s. Hope you enjoyed “consuming” this somewhat nerdy post!

P.P.s. Puppy photo time! Not sure whether Princess Ku or I was the most chuffed with how the Tinder date worked out …

Puppy

Affordable Lifestyles in Auckland

Housing is considered affordable if it costs less than 30% of a household budget. Transportation is the second largest expense for families, but few consider these costs when choosing a place to live.  Center for Neighborhood Technology

We’ve run a few posts lately discussing the topic of housing affordability and transportation costs. Of course you can’t separate the concept of housing affordability from transportation costs, since most people have to travel to work to pay for their housing.

The posts were based on recently published research from the University of Otago, by Kerry Mattingly and John Morrissey titled, “Housing and transport expenditure: Socio-spatial indicators of affordability in Auckland”. Their work included a series of maps that showed a significant transportation premium associated with living in the distant suburbs. While the maps they published did not assume everyone would be working in the cbd, the results of the research showed that households furthest away from the centre generally travel greater distances for work and therefore spend more of their income on housing AND transportation.

There was a robust discussion in the comments about how the data was not so useful since everyone’s situation is so different. This is where Alex Raichev and Saeid Adli come in. Using the methodology of Mattingly and Morrissey as a starting point, they developed a dynamic website called Affordable New Zealand that shows housing (rent) costs + transportation costs and allows users to identify housing and travel costs based on specific location of work.

They have included a number of factors which  contribute to the overall cost of living such as parking and car ownership. The car ownership cost reflects the sunk cost of the car, even if the mode of travel chosen is public transport (or walking, cycling). Further travel costs for the car are determined by distance  traveled to work. The public transport costs are estimated using the formula from Mattingly and Morrissey.

Here is a look at the results using Albany as the job location.

Where to live? Job in Albany.

Where to live? Job in Albany.

Another way to interrogate the data is to consider the pin drop as a housing choice and then the data reveals the relative affordability of accessing employment areas.  Here is a comparative fictitious example of a young family with one parent working trying to decide between living in Titirangi or Freemans Bay. The Titirangi family has 2 cars and use 1 car to go to work paying $15 for parking. The Freemans Bay family has 1 car, but uses PT to get to work.

Affordable Lifestyle Choice #1: Titirangi

Affordable Lifestyle Choice #1: 2 Cars in Titirangi (source: affordability.org.nz)

Affordable Lifestyle Choice #2: Freemans Bay

Affordable Lifestyle Choice #2: 1 car + PT  in Freemans Bay (source: affordability.org.nz)

The site is still under development. One idea is to expand the search criteria to suit a couple/household scenario with two unique job locations.  Another improvement will be refining the data to provide a more accurate cost of public transport.  Wellington and Canterbury versions are coming soon. The project is open source (Github), and if you have any comments about the project leave them below or contact Alex from the notes page.

Z Energy to build a biodiesel plant (hopefully)

As announced in the Herald, Z Energy is planning to build a biodiesel plant. The company has been looking at this option for quite some time, but they’re now at the stage where it’s looking pretty likely. As per the statement they released to the NZX:

While Z has publicly discussed the potential for this project in the past, the Z Board has approved the project, subject to the completion of regulatory and resource consenting – including approvals from competitor companies to construct a blending facility at the Wiri fuel terminal – and the finalisation of key contracts.

The company intends to build the plant over the next year or so, and it will produce 20 million litres of biodiesel a year, using tallow as a feedstock. Tallow is a waste product from meat processing, so it avoids one of the common concerns around biofuels – that they’re made from crops which would otherwise be used as food.According to the MBIE, New Zealand produces 7 million litres of biofuels a year – a drop in the bucket as far as transport energy is concerned, and with biodiesel production at just 1.4 million litres. The MBIE go on to note:

In New Zealand, biodiesel is currently produced from tallow, oilseed rape and used cooking oil, resulting in life-cycle greenhouse gas emissions 40 to 50% lower than those from fossil diesel. As tallow and used cooking oil are by-products of other industries and oilseed rape is grown as a break crop on grain fields to increase soil quality, current New Zealand biodiesel does not compete with food production or compromise biodiversity or soil quality.

We produce plenty of tallow in New Zealand, with one presentation suggesting that we could use it to produce around 150 million litres of biodiesel a year. At the moment, though, no one is really producing biodiesel on a major scale in New Zealand.

New Zealand uses about 4 billion litres of diesel a year, so 20 million litres is less than 1% of that supply – even a full 150 million litres would be less than 4%. No doubt there’ll be a lot of people watching to see how the Z plant turns out, or whether oil prices (or Emissions Trading Scheme charges) rise just that little bit extra to make biofuels more viable, but it seems unlikely that they’ll play more than a niche role given current technology and feedstocks. Of course, that’s not to say we shouldn’t be investing in it, and it’s good to see Z willing to make the first move.

Diesel consumption

The main reasons that biodiesel hasn’t taken off so far come down to dollars and cents. The short-lived Biodiesel Grants Scheme ran from 2009 to 2012, but hasn’t been renewed. Carbon charges under the Emissions Trading Scheme have fallen to the point where they’re pretty much negligible, so there’s not really much incentive to produce lower-emissions fuels. Biodiesel is a bit more expensive to produce than regular diesel – although Z reckon the difference is only a couple of cents a litre, given current oil prices. They hope to recover the higher costs through charging a slightly higher price to the customers who choose to use it. That would mainly be large-scale commercial clients who want to make it part of their sustainability story, although a 5% biodiesel blend is likely to be offered at Upper North Island petrol stations as well.

Auckland Transport’s draft Statement of Intent for 2014-17

Every year Auckland Transport agree with the council a new Statement of Intent (SOI) with the council. It sets out their strategic approach, priorities and targets for the following three years. They are currently in the process of setting the SOI for the 2014-2017 period and there appear to be some quite concerning aspects in the documents - which are found in the various agenda items for the Council Controlled Organisations Governance and Monitoring Committee. My understanding of the process is that the Council send AT a letter of expectation outlining their key priorities, Auckland Transport are meant to incorporate that into a draft SOI which is then reviewed by council officers. The comments from them get responded to by AT and then goes to the council for a final decision.

Last year the biggest change to the SOI as the lowering of patronage targets, most notably for rail. It’s also something that backfired on them with the Ministry of Transport highlighting it their first review on the progress towards the CRL targets the government, suggesting it shows AT don’t believe rail can grow by the amount required.

So this year what do we see? The same thing is happening again with in some cases AT wanting to drop their targets for all PT modes. In the case of rail especially this is to almost absurd levels. For example in their current SOI their target is 11.4 million trips by the end of June 2014 (which they might meet if they keep growing they way they are) while by end of June 2015 they are expected to reach a total of just over 13 million. In their new draft SOI they want the rail target for 2014/15 lowered to just 12.1 million. The target seems way to low considering that:

  • We’re already going to be at ~11.1 million (as we hit 11 million before the end of March)
  • There’s 15 months to go before the end of June 2015
  • In that time electric trains are expected to roll out to the Onehunga Line, Manukau and Southern Lines

Here’s a graph to show how the rail SOI target has changed over the last few versions of the SOI and how we’re actually performing.

Draft 2014 SOI Rail Target

My guess is that we could potentially blow past the 13 million trip target and this isn’t something that should be changed. For the other modes there are similar outcomes. The targets proposed in the 2014/15 year go

  • Total patronage – 78.16 million -> 74.24 million
  • Busway (NEX) – 2.59 million -> 2.51 million
  • Other Bus – 56.63 million -> 53.70 million
  • Ferry – 5.90 million -> 5.94 million

So only the target for ferries goes up which is interesting in itself as they are the mode currently going backwards. Overall this seems like a cop out and the councillors shouldn’t accept this (especially no on the rail figures).

The issue of dropping patronage targets is something noted by the council officers and by Councillor Chris Darby in a memo he sent to other councillors which is also online.

Darby’s letter also highlights that many of the “Key Focus areas for 2014/15 for Auckland Transport” from the council’s letter of expectation are not simply not reflected on in the SOI. These include

  • A strategic review of public transport fares
  • Increased priority for pedestrians and cyclists, and improvement of walking and cycling facilities that improve access to public transport.
  • Identification of and reporting on the delivery of any improvements to the quality of urban design outcomes.
  • Effective management of hygiene factors in the public realm such as cleaning, mowing, and tree clipping.
  • Identifying surplus non-strategic properties for disposal in conjunction with ACPL

On the issue of cycling he notes that many of the timelines set for projects are quite at odds with the presentation AT gave the councils Infrastructure Committee just over a month ago on The Role of Cycling in Auckland. He highlights this in the following table

Draft 2014 SOI cycling issues

Lastly here’s the programme of works proposed in the SOI. Darby thinks that added to this should be planning and route protection for a North West busway along SH16, the Te Atatu bus interchange and the list of bus lanes that will be added. I agree with him.

1. Planning and route protection
1.1 Complete the Auckland Regional Land Transport Plan by June 2015
1.2 Undertake planning and route protection for major new transport initiatives, including:

  • City Rail Link.
  • South-Western Multimodal Airport Rapid Transit (SMART) network
  • Botany lo Manukau rapid transit network.
  • Mill Road corridor upgrade.
  • East-West Link (In conjunction with NZTA). including public consultation on the development and progression of a preferred option;
  • Penlink; and
  • Auckland-Manukau Eastern Transport Initiative (AMETI).

2. New transport infrastructure
2.1 AMETI:
Complete investigation and design of

  • Package 4 ( Panmure Roundabout. Lagoon Drive, Additional Panmure Bridge. Busway to Pakuranga, New Pakuranga Bus Station and car parking facilities, and Reeves Road Flyover) by 2017.

Complete construction of:

  • Package I Phase 1 (Panmure interchange) in 2014:
  • Package 2 (Sylvia Park bus lanes) by 2016:
  • AMETI Package 4 enabling works including local road changes and major utility diversions

Commence construction of Reeves Road flyover (to be completed by 2019)

2.2 Introduce new electric trains into service.

2.3 Local road improvements associated with State highway upgrades, including:

Complete construction at:

  • Tiverton Road to Wolverton Street upgrade by 2014 (Culvert upgrade by 2016); and
  • Te Atatu Road corridor improvements by 2017.

Complete design and acquisition for:

  • Lincoln Road corridor improvements by 2017.

2.4 Major local road improvements (over $5m). Including:
Complete construction of:

  • Dominion Road corridor upgrade Including dedicated bus lanes, 12 kin of parallel cycle routes, and 3 village centre upgrades by 2017:
  • Albany Highway North upgrade by 2017;
  • Murphy’s Road bridge improvement by 2016;
  • Brigham Creek corridor upgrade by 2017; and
  • North Western transformation protect (NORSGA) for the Northside Drive East, Westgate Bus Interchange, and Hobsonville Point Park and Ride by 2017.

Complete land acquisition for:

  • North Western transformation project (NORSGA) for Hobsonville Road by 2017.

2.5 Public transport Infrastructure, Including:

Complete construction of the following projects by 2016

  • Otahuhu bus/rail interchange;
  • Manukau bus interchange;
  • Parnell Station:
  • Pukekohe Station. and
  • Silverdale park and ride facilities stage 2.

Complete land acquisition and, subject to that acquisition, complete construction of:

  • Fanshawe / Albert / Wellesley streets bus Infrastructure improvements by 2017,

2.6 Complete construction of road safety Improvements at high-risk areas on the road network, including:

  • Great South Road / Bell Avenue Intersection ($09m) by 2014:
  • Piha Road by 2017 ($0.8m):
  • Ngapipi Road / Tamaki Drive Intersection by 2017; and
  • Whitford Road I Sandstone Road ($0.9m) by 2014.

2.7 Complete the construction to upgrade ferry terminals at:

  • Downtown by 2017;
  • Devonport by 2017; and
  • Half Moon Bay by 2016.

2.8 Extend the regional cycleway network. including:

Complete construction of:

  • Beach Road cycleway by 2017:
  • Dominion Road parallel cycle routes by 2015:
  • Northcote, Waitemata, Mangere. Mt Roskill, and Point England sate cycleway routes by 2017;
  • Upper Harbour Drive cycleway by 2016; and
  • Waterview cycleway connection (in conjunction with NZTA) by 2017.

Complete scheme assessment and preliminary design of:

  • Glen Innes to Tamaki Drive cycleway by 2017.

Is our transport model flawed?

This story from The Press caught my attention the other day.

Environment Canterbury’s (ECan) boss believes Christchurch’s public transport model is “flawed” and is lobbying the Government for change.

In a letter to then Local Government Minister Chris Tremain in January last year, Dame Margaret Bazley writes about how public transport sits between councils, and should be addressed at a national level.

The letter, released to The Press under the Official Information Act, states: “The current model for delivery of integrated and effective public transport is flawed in Christchurch in particular. We have signalled our support to the minister of transport for a review of public transport arrangements.”

I think the fact that ECAN is controlled by government appointed commissioners rather than elected officials leads people to think that this suggestion is automatically about trying to damage PT in Christchurch and that comes through in the comments a bit but reading further, I actually agree with ECAN.

In Christchurch, responsibility for the provision of public passenger transport lies with ECan, but the responsibility for providing the infrastructure to support public transport, such as bus stops, shelters, and interchanges, rests with the city council, which has caused some tension.

However, hundreds of emails between the staff from both organisations, released under the Official Information Act in a separate request, show they appear to be working together, with the differences occurring at the governance level.

ECan commissioner Rex Williams, who is in charge of public transport, agreed it was a flawed model.

A review would most likely be done in “due course”, he said.

“It’s not urgent. We should be able to get around it,” Williams said. “All we have to do it work together and commit to the policy instead of veering off with other stuff.”

He hoped the two organisations would be able to communicate better at a governance level.

Any review of public transport would have to take place nationally, and would be unlikely for a couple of years, Williams said.

During last year’s budget-setting process, ECan lobbied the city council to put aside $18 million a year for the next three years for public transport infrastructure, but $8.4 million was included in its budget.

In a written submission at the time, Bazley said ECan was unhappy with the level of funding from the council.

“The absence of any significant capital expenditure to improve the operation of public transport over the next three years reinforces our view that the city council no longer seems committed to a viable future for public transport in Christchurch,” she said.

The problem really stems from the fact that the organisation that controls the PT network is different from the one that controls the roading network. The best plans for PT mean nothing if the road owner won’t do anything to support them.  For example if ECAN want a bus stop added in but the council don’t want to do it then it doesn’t happen and getting bus lanes added can be a whole other level of difficulty.

The reality is this issue is not just one that is faced by Christchurch but by every city in NZ with the exception of Auckland. The problem exists due to the local body structure that we have and I assume the primary reason for putting public transport under the control of the regional body was to address the likes of Wellington and the old separate Auckland councils where there were multiple councils within a single urban area.

Auckland used to suffer this fate with the old ARTA setting plans for PT but it being reliant on individual councils to put in infrastructure like bus stops and bus lanes. For this reason it is perhaps even the more surprising that we managed to get the bus lanes we did on roads like Dominion Rd. Of course the creation of Auckland Transport was intended to be able to cut through these types of issues as well as the through the political impediments to change however oddly that didn’t help with the creation of more bus lanes until recently.

Overall I agree with what ECAN are saying. As we start to build a greater appreciation of the importance PT plays in the transport system in our cities then the current way it is set up simply isn’t going to work.

Should Auckland Transport get out of the parking business?

This is a question that Councillor Chris Darby asked on Facebook last week:
chris-darbyIt is a valid question, especially considering the white elephant that has been the Ronwood Ave carpark in Manukau. But if we look a bit closer at the city centre, it seems like some pretty key sites – worth quite a lot of money – are wrapped up in parking. Let’s just look at the Downtown and Victoria Street carparks.

The Downtown carpark has nearly 1,900 spaces, occupies a prime site pretty much on the waterfront and is a key location in terms of linking together the city with the viaduct and Wynyard Quarter areas, as well as to the growing Victoria Quarter. The site has a capital value of $65 million, of which around half is the value of the land it occupies:

downtown-carparkThe Victoria Street carpark is about half the size (just under 900 spaces) and once again is located in a pretty prime spot in the city centre – right next to Albert Park and with a bit of elevation overlooking the Queen Street valley. It’s worth $45 million, of which just over $20 million is the value of the land itself.

victoria-st-carpark

I wonder what sort of rate of return the Council is getting on these pretty expensive assets. Looking at the pricing structure of parking in these buildings it seems as though prices are about the same (for early bird) or cheaper (for casual parking) than they were a decade ago. The Draft Annual Plan suggests a fairly modest $2.7 million profit from the entirety of the Council’s off-street parking business – on revenue of $28.6 million. While some expenditure will be on free parking areas in smaller centres, it does appear as though the rate of return on the city centre parking buildings (let alone the Ronwood Ave white elephant) is fairly dismal.

Councillor Darby seems keen to have the conversation around whether off-street parking buildings should be something Council (through Auckland Transport) gets involved in. Considering that in the city centre, owning parking buildings and probably subsidising the cost of parking (through the very low rate of return) goes against all policies to boost public transport use and unclog the city centre of cars, it’s a damn good conversation to have. Another one is whether Council should sell the buildings in their current use or redevelop them into something else themselves (as suggested for the Downtown carpark in the City Centre Master Plan).

How can we make road pricing fair?

Talk to a transport economist for more than a couple of minutes (seconds?) and the issue of road pricing will come up. “If only we could introduce road pricing, all our problems would go away,” says your transport economist. Congestion – gone. Greenhouse gas emissions – significantly reduced. Public transport efficiency – dramatically increased. And so on..

So why is implementing road pricing so difficult and so rare? The most common answer is “politics”, but essentially that’s just a proxy for the concept being considered unacceptable by most of the population. And one of the main reasons why road pricing is so unpopular is that it’s seen as unfair, particularly for poorer people.

In a recent Planetizen post, Canadian transport academic Todd Litman looks further into this assumption that road tolls and other means of pricing are unfair and harm the poor.

A major obstacle to efficient pricing is the common, but often inaccurate assumption, that such fees harm poor people. This is generally wrong, and reinforces automobile dependency (an automobile-oriented transportation system which offers inadequate alternatives to driving and therefore forces people to drive more than optimal), which tends to harm physically, economically and socially disadvantaged people overall.

While it is true that a given fee is regressive (each dollar represents a greater portion of income for a poor than a wealthy person), tolls are generally less regressive than other roadway expansion funding options because poor people drive relatively little on such highways: many poor people are retired or unemployed, lower-income workers often have local jobs that do not require highway commutes, and if they do commute on major travel corridors they are more likely to use alternative modes, or travel off-peak because they often have off-peak work schedules.

If the money raised from road pricing or tolls is spent on improving public transport or active transport, then the progressive nature of the funding is enhanced further:

As a result, road tolls are generally less regressive than financing urban highway expansion by increasing fuel taxes (which all motorists pay, not just urban commuters) or general taxes (which everybody pays regardless of how much they drive), and can be progressive overall if a portion of revenues are used to improve alternative modes, such as public transit, so lower-income travellers have better alternatives to driving.

Similarly, poor people often benefit from parking unbundling (paying directly for parking, rather than having it automatically included with building rents) and cash out (being able to choose cash instead of subsidized parking) because they tend to own fewer cars and value the opportunity for financial savings.

There are a couple of ares where Litman’s analysis doesn’t necessarily hold true for Auckland, particularly in relation to how the current debate about road pricing is happening – as an additional revenue raiser, rather than as a replacement of existing funding sources.

  1. Tolling or road pricing is probably only fairer if it replaces other, unfair, methods of funding transport – such as petrol taxes (which unfairly charge those travelling off-peak for infrastructure only required at peak times) or rates. If tolling or road pricing is just another tax on people to pay for a bloated transport programme then chances are they will be unfair because it will be the poor who end up suffering the most from the extra charges (as those charges will be the greatest proportion of their income).
  2. Auckland currently has a very different relationship between income and mode choice compared to US cities. In most US cities it seems that the poorest areas have the highest levels of public transport use – therefore improving PT using money raised from tolls or road charges has the potential to play a wealth distribution role. As illustrated by the map below – which shows car modeshare for journey to work trips in the 2013 census – Auckland seems to have the opposite patters, with poorer areas often being highly car dependent.

car-modeshareOverall, it seems as though road pricing could be introduced in a way that’s considered “fair” by Aucklanders – and therefore may be able to overcome political opposition. However, this would require a couple of pretty big changes to how it’s currently being proposed by the Council. Firstly, the money raised would need to be used instead of existing funding sources, rather than just being another tax. Secondly, some dramatic improvements in the attractiveness and affordability of alternatives to driving appear necessary to reduce car dependency in Auckland’s poorer areas.

The new bus network and the City Rail Link (which vastly benefit the south and west respectively) may meet the second hurdle. A whole pile of unnecessary roading projects need to be killed off to pass the first hurdle, reduce some of the regressive existing transport funding tools, and therefore make road pricing and tolling actually fair.

Looking back at Transport Policy from the 2011 election

I initially started writing this post with the intention of posting it last week however it was put on hold as a result of the Green Party policy targeting kids walking and cycling to school.

In just over 6 months is next general election. At a national level transport is an oddity in that it’s not normally a big talking point – with the possible exception of those who read this blog – instead the focus is usually on the big three of the Economy, Education and Health. It’s an oddity as transport policy can have massive impacts on those three issues along with many others. This is because transport isn’t a direct objective but is an enabler for other outcomes, and that is why it is also so important to get right. While I expect some minor changes in some areas, overall I suspect we aren’t going to see any major changes in transport policy from the main parties. Many people probably have a good idea of each party stands for but with this post I thought I would highlight what the transport policy of the parties that achieved over 5% in the 2011 election.

National

National’s transport policy at the last election was really just a continuation of what they had been doing for the three years prior to that. There were a number of issues that they highlight as wanting to do however the one given the most attention was clearly Keep building better roads. That part of the policy said they would:

  • Invest $12 Billion over 10 years in State Highway construction.
  • Complete construction on:
    • Christchurch’s Southern Motorway Stage 1.
    • The Ngaruawahia and Te Rapa sections of the Waikato Expressway.
    • The Tauranga Eastern link.
  • Construct New Zealand’s largest-ever roading project, the Waterview Connection on Auckland’s Western Ring Route, including two three-laned tunnels bored under Avondale.
  • Start construction on:
    • The Christchurch Western Bypass and the Southern Motorway Stage 2.
    • The Basin Reserve Flyover and the Mackays to Peka Peka Expressway on the Wellington Northern Corridor.
    • The Cambridge and Rangiriri sections of the Waikato Expressway.
  • Design and consent the Transmission Gully section of Wellington’s Northern Corridor (construction due to start in 2015/16).
  • Finalise the design and consenting of the Puhoi to Warkworth section of the Puhoi to Wellsford RONS, and prepare for a construction start in 2014/15.
  • Construct replacement Waitaki River bridges on State Highway 82 at Kurow.
  • Evaluate four new RONS projects for development following final completion of the first three RONS projects (Victoria Park, Waterview, and Tauranga Eastern Link):
    • State Highway 29 between Hamilton and Tauranga.
    • State Highway 1 between Cambridge and Tirau.
    • Further development of the Hawke’s Bay Expressway.
    • State Highway 1 North and South of the current Christchurch motorway projects.
  • Continue to develop key regional roading projects that will enhance productivity and economic growth, including the Rotorua Eastern Arterial and the Waiwakaiho Bridge in New Plymouth.
  • Improve the resilience of key inter-regional freight routes like Mt Messenger on State Highway 3, and the Manawatu Gorge.

The most interesting (and concerning) of these points was the additional four RoNS projects. I don’t know if the NZTA has done any work on them internally but I’m certainly not aware of any public discussion of them. Part of the reason these may not have happened is that the government are having enough problems funding the current RoNS work and so anything extra is being left for the time being. This coming election I suspect we will see the policy largely unchanged however there will definitely be an increased focus on the fast tracked Auckland projects they announced in June last year. They will undoubtedly claim a lot of credit for electrification and other PT improvements (expect to see a lot of shots of politicians wanting to associate themselves with the new trains). Of course discussion of the CRL will feature somewhat however I suspect that before the election we might see the government agree to Len Brown’s $250m kick start suggestion.

Labour

As you would expect Labours’ policy (6.2MB file) was more friendly to public transport including supporting paying for half of the CRL which would have been done by opting for an Operation Lifesaver approach to the Puhoi to Wellsford road although other than that there were no specifics given as to what would be done. There seemed to be quite a bit of talk around reducing emissions and working to shift more freight to rail. One difference to National was in sea freight where they promised to develop a national port strategy.

In addition to Puhoi to Wellsford which was mentioned earlier, when it came to roads Labour opposed the four new RoNS projects that National talked about but more specifically mentioned a few other projects including that:

  • Labour will investigate and prioritise improvements to the “East-West Corridor” proposal in Auckland between East Tamaki at State Highway I and Onehunga at State Highway 20.
  • Labour prefers the original Western Link Road plan, not the four-lane Kapiti Expressway as has now been approved and will fund it 100%
  • Labour will also continue to support the Transmission Gully project but only so long as it meets reasonable cost-benefit criteria.
  • Labour will ensure the funding for local roads is not further undermined by the excessive focus on Roads of National Significance.
  • Labour will promote the introduction of a nationwide infrastructure to recharge electric vehicles.
  • Labour will investigate the appropriate use of mechanisms including tolling, PPPs and road pricing, ie. congestion charging.

So a bit of a mixed bag there. Perhaps the overall thinking is summed up well by this statement which sits under the PT section

Labour will examine ways to maintain and increase the overall transport spend beyond the National Land Transport Fund to develop our public transport systems so that they are a credible and attractive transport option.

That sounds quite a bit like what we’re seeing in Auckland with Len (which I guess is unsurprising) where with the exception of a few of the RoNS projects, the focus is on working out how to raise more money to pay for everything rather than cut low performing projects.

This election I suspect we will see some more of the same. We know Labour have already said they are backing the CRL and would pay for half of it including Len’s proposed early start. I also suspect they will end up copping the Greens walking and cycling to school policy.

Greens

Of course we already know one of the Greens policies with the announcement last week although there is obviously more to come. As many would expect, the policy focused around reducing investment in roads and investing more in alternatives like PT, Walking and Cycling and shifting freight to rail and shipping. In Auckland they said they would:

  • invest 60% ($1.44 billion) to fast track the CRL
  • spend $500 million to build north-west and south-east busways
  • provide $30 million per year to fund walking and cycling in the region including across the harbour bridge.

The greens actually seem to keep their transport policy up to date (or have done so recently) meaning we don’t really have to speculate much. Here is the vision they are aiming for.

Vision

New Zealand has a sustainable transport system that supports liveable, people-friendly towns and cities, and enables the movement of people and goods locally, regionally and nationally at least social, environmental and financial cost.

  • People of all ages and abilities have access to safe, reliable and convenient transport.
  • Traffic on roads and roading is reduced as other modes of transport are preferred. Road traffic is predominantly low or zero-emission vehicles.
  • Public transport in urban and rural areas is widely available and extensively used.
  • Walking and cycling are a popular transport choice, facilitated by a nationwide web of safe and attractive cycle and walkways.
  • Transport infrastructure provides access to provincial areas and supports regional development.

The link above also contains a number of very specific policy points should you be interested.

New Zealand First

The NZ First transport policy relates almost exclusively to the movement of freight whether it be by road, rail or sea. In fact there isn’t even a single mention of public transport or commuters in the policy and there’s only one mention of building a cycle network which comes with the caveat of “where appropriate”.

With his history, I’m not even going to bother trying to predict what kind of policy Winston Peters might come up with this time.

So there’s my brief look at the transport policies of the main parties at the last election. Overall this year I don’t expect we will see too much different in the various positions compared to the last election with perhaps the biggest difference being National and whether or not they support an early start to the CRL. I’m guessing that will largely depending on what the polling is looking like

Understanding US transit ridership trends

An article in the New York Times looks at the recent announcements that transit (PT) ridership in the USA in 2013 was the highest since the 1950s – much the same as in Auckland. What’s perhaps most interesting in the 2013 numbers is that petrol prices doesn’t seem to have featured as much in the reasoning behind the increase:

The trade group said in its annual report that 10.65 billion passenger trips were taken on transit systems during the year, surpassing the post-1950s peak of 10.59 billion in 2008, when gas prices rose to $4 to $5 a gallon.

The ridership in 2013, when gas prices were lower than in 2008, undermines the conventional wisdom that transit use rises when those prices exceed a certain threshold, and suggests that other forces are bolstering enthusiasm for public transportation, said Michael Melaniphy, the president of the association.

“Now gas is averaging well under $4 a gallon, the economy is coming back and people are riding transit in record numbers,” Mr. Melaniphy said in an interview. “We’re seeing a fundamental shift in how people are moving about their communities.”

New Zealand has been different in regards to petrol with prices hovering around or even above the peaks of 2008 for the last few years. Here’s the graph of our average weekly petrol price up to 7th March.

Petrol Price - Mar 14

Furthermore, the article notes how over the last 18 years, PT ridership has grown faster than the rate of population growth, whereas the level of driving per capita has fallen:

From 1995 to 2013, transit ridership rose 37 percent, well ahead of a 20 percent growth in population and a 23 percent increase in vehicle miles traveled, according to the association’s data.

Stronger economic growth is playing an important role in the increased use of public transit, as more people are using the systems to get to an increasing number of jobs, the association reported, and transit agencies are nurturing growth by expanding their systems or improving services.

“We’re seeing that where cities have invested in transit, their unemployment rates have dropped, and employment is going up because people can get there,” Mr. Melaniphy said.

Overall public transit ridership increased by 1.1 percent from 2012, with the biggest gains in rail service and in bus service for smaller cities.

Here’s what Auckland’s vehicle kilometres travelled per capita looks like compared to the number of trips per capita. Note: we won’t have VKT data for 2013 till later this year, also the latest PT trips per capita has started climbing again.

VKT vs PT Trips per Captia 1

There’s often debate about whether the levelling off of traffic growth and the fairly dramatic increase in PT use over the past few years is a “blip” – caused by the global financial crisis and the fairly long recession that followed it, plus highly fluctuating oil prices in the past few years – or whether the changes are a longer term trend. With US ridership booming despite lower oil prices and at a time of growing economic success, the “blip” argument seems to be getting weaker and weaker. The longer term trends are well summarised in the article’s final two paragraphs:

Todd Litman, an analyst at the Victoria Transport Policy Institute in Victoria, British Columbia, said the new data were the latest indication of changing consumer preferences as a result of increasing urbanization, an aging population, and environmental and health concerns.

“A lot of people would prefer to drive less and rely more on walking, cycling and public transit, provided that those are high-quality options,” Mr. Litman said.

Time to change those traffic projections NZTA.

Can New Zealand transition to 100% renewable electricity? (Spoiler: yes)

New Zealand has excellent renewable electricity resources. We’ve got hydro, wind and geothermal up the wazoo. In a typical year, more than 70% of our electricity comes from renewable sources, and the government wants this to increase to 90% by 2025 (for non-dry years).

NZ renewables over time

 Source: Energy in New Zealand 2013, MBIE

Researchers at the University of Canterbury have been investigating whether NZ could generate 100% of our electricity from renewable sources. Dr Ian Mason, part of the research team, gave a presentation on this topic at the NERI Energy Conference last year.

Mason cover page

The researchers are all from UC’s College of Engineering, and they have focussed on whether it is technically feasible for NZ to go fully renewable.

Since I’ve lost my notes (!) from the conference last year, I’m going to quote from a paper published by the researchers (Ian Mason, Shannon Page & Arthur Williamson – referred to as “Mason et al” below). If video is more your thing, though, here is a video of Dr Mason giving a similar presentation at a conference in California. There’s also a good newspaper article on their research here.

 

Do renewables have enough growth capacity?

If renewables are going to grow their share of generation, we’ll obviously need to build new plants. So the first question is, can we build enough capacity to match current demand, and allow for future growth?

According to Mason et al:

Recent resource estimates published by… EECA indicate near-term potential for 6600 MW of new wind generation, 4680 MW of new hydro generation, 635 MW of new geothermal generation and 3090 GWh/ year of electricity from woody biomass

That compares to current capacities of 622 MW of wind, 5,254 MW of hydro, and 731 MW of geothermal. Theoretically, we could develop twice as much hydro and geothermal as we have now, or ten times as much wind. In practise, we’d run into issues with the wind, since it can’t be relied on to blow when you need it – but Mason et al refer to several studies which suggest that “penetration levels well above 20%” are possible. That’s still three or four times what we have now.

Even the woody biomass contribution could be fairly substantial. New Zealand currently uses around 43,000 GWh/ year, so biomass could account for up to 7% of that.

Overall, growth in capacity isn’t an issue – there’s plenty of room for growth, although some of those plants will cost more to build than others. The other question is:

 

Can an all-renewable system meet demand in peak periods, or in “dry years”?

This is the tricky part. Electricity demand fluctuates quite a lot during the day, and during the year. We use more electricity in the evening, as people get home from work, shower, flick on the TV, and start cooking dinner. We also use more power in winter, mainly for extra heating. An all-renewable system would need to cope with both these patterns, as well as any unexpected demand surges.

The other issue is that hydro generation forms the backbone of our power system. For those plants to operate at full blast, we need good rainfall, running into the rivers which fill up the hydro lakes. Every now and again, we get a “dry year” with rainfall that is well below average. This means that we can’t generate as much hydro electricity.

“Dry years” aren’t that dry – the difference between our best year for hydro generation (2004) and our worst recent year (2001) was around 20%, or 5,000 GWh – but that’s still quite a bit of slack which other plants need to take up. And the crunch comes during winter, when demand is high and supply is struggling to match it.

Mason intro

So, how do you design an all-renewable system? You let the wind turbines turn whenever they can, as that’s essentially free electricity. Most of the geothermal plants will also run constantly. These are your “base load” plants. Hydro is also part of the base load, but the aim is to use as little of it as possible, since that’s the easiest form of energy to store for when you might need it later.

You also need “peaker” plants, which only run during higher demand periods. Hydro plants can actually gear up and down their production pretty quickly, so they’re a good option. To do this, they need to have “stored energy” ready to go – water reservoirs or lakes.

From Mason et al: “A significant characteristic of New Zealand’s hydro generation system is the relatively low energy storage capacity. When all lakes are full this amounts to approximately 34 days reserve at peak winter demand (approximately 130 GWh/d in 2007), assuming zero inflow”.

For an all-renewable system, you’d need to build a bit more storage. You might consider a “pumped-hydro energy storage” (PHES) system for some plants. That means that when there’s plenty of electricity available – the wind is blowing, and it’s a beautiful summer day – you use some of the excess hydro energy to pump water uphill, into another reservoir. During high-demand periods, you let it flow down again, delivering more energy to the power plant.

Ian Mason’s presentation assumes that we build PHES equivalent to 8% of the current hydro storage. As far as I can tell, there aren’t any other increases in storage – although I seem to remember him mentioning that current lakes would need to be dipped into more heavily. At present, the lakes have “minimum storage levels”, and need consent from the regulator to go below those levels. The minimum levels are perhaps on the conservative side at the moment,

It’s also possible to use biomass on a seasonal basis: burning it during the winter to match the greater demand. However, Mason et al don’t think it’s necessary, and this energy source isn’t developed further in their model.

Mason summary

From Mason et al:

The proportion of dispatchable generation in the final mixes was 75–78%, as wind was the only non-dispatchable source. Load shifting, pumped storage hydro generation, biomass-derived gas- fired generation and additional conventional hydro were considered the most likely peaking generation options for New Zealand. These are in addition to the response capabilities of the existing hydro system. Hydro turbine response times of 6–15 s (spinning reserve) can be assumed; implying that full power can be readily achieved within a half-hour period (the resolution of the modelling). Gas turbine response times of seconds (hot reserve) to minutes (cold reserve) can be assumed, again implying that full power could be achieved within a half- hour period.

One of the conclusions from Ian Mason’s presentation is that NZ can indeed develop a 100% renewable system. Whether this would be economically feasible, or likely under the current market structure, are different questions – the presentation does consider them as well, and finds that we’re unlikely to get there given current policy settings.  I’ll look at this another day.

 

Second, third and fourth opinions?

The Herald also published an article in their Element magazine a couple of years ago, written by Dr. Eric Martinot (“senior research director at the Institute for Sustainable Energy Policies in Tokyo and a teaching fellow at Victoria University of Wellington”). He began his article with:

 New Zealand could easily reach the goal of nearly 100% of its electricity from renewable energy in the coming two decades. And it would be folly not to.

Benjamin K. Sovacool and Charmaine Watts wrote a paper called “Going Completely Renewable: Is It Possible (Let Alone Desirable)?”, published in The Electricity Journal, vol. 22 issue 4.

According to them, New Zealand has “the resource base necessary to transition to a renewable electricity sector”, and “a completely renewable power sector is technically feasible. There are no sound technical reasons why existing renewable power plants could not replace all conventional units. To quote just one of a plethora of recent studies, ‘‘it is clearly feasible to replace the present fossil fuel energy infrastructure . . . with renewables.’’.

Greenpeace commissioned a study from the Institute of Technical Thermodynamics of the German Aerospace Centre, which found that “New Zealand can have 100% renewable electricity by 2025”.