Transport technologies!?! Part 2

This previous post considered wider socio-economic factors which might shape the development/deployment of transport technologies, namely 1) denser cities, 2) policy settings, and 3) demographics. In this post I now discuss some more specific issues that are relevant to transport technologies, specifically:

  1. Economies of density
  2. Costs: Fixed versus variable
  3. Complements versus substitutes
  4. Conclusions: The Spruce Moose?

The takeaway message from this post is that the future is complex and uncertain. D’uh … read on for enlightenment!

1. Economies of density

The Prime Minister’s recent speech, in which he announced funding for the City Rail Link and the East-West Link, is an example of how policy settings can respond to wider socio-economic factors, such as population growth. Auckland’s rapid growth means that public investment in underground passenger rail stacks up more now than it perhaps has done in the past. As a result changed, Auckland’s transport network is set to change in a rather profound way.

Why has Auckland’s growth helped make the case for the CRL? Well, passenger rail has relatively high fixed costs. This in turn means that passenger rail experiences so-called economies of scale (or more accurately density). The phrase “economies of density” is used to describe situations where marginal costs are below average costs. This means that average costs fall as demand increases. Fixed costs like rolling stock and train stations all contribute economies of density in passenger rail.

 

Last week saw another example of “economies of density” in the context of New Zealand’s transport system, although this time the investment originates with the private sector. Emirates announced that – from this March – they will begin direct flights between Auckland and Dubai (NB: Apparently Qatar Airways is considering similar moves). Direct flights to Dubai will shave approximately 3 hours off travel-times between New Zealand and a number of destinations in the Middle East and Africa.

 

Economies of density lead to virtuous/vicious cycles: Higher demand begets lower costs, which begets higher demand etc (and vice versa). That’s why they are sometimes called “positive feedback loops”. Domestic air travel in New Zealand provides a nice example of virtuous cycles at work. Here, a combination of falling fuel costs, higher visitor numberslarger and more efficient planes, and competition has seen airfares fall (NB: I’m waiting on updated inflation data before making a more definitive statement). Many transport technologies, especially those where passengers share vehicles and/or facilities, tend to experience economies of density.

Private vehicles also experience economies of density to some degree. High levels of car ownership, for example, makes it easier to find a petrol station when you need one. The key difference between private vehicles and other transport technologies, however, is the degree to which road networks experience congestion. Beyond critical levels of demand, traffic congestion increases rapidly, i.e. congestion is a convex (upwards sloping) function. Congestion externalities are an example of dis-economies of density, and it’s one that is apparent in most cities of Auckland’s size and larger.

Congestion externalities are also an issue that things like driverless and/or electric vehicles do not resolve. Road pricing does solve congestion, although this is achieved by suppressing demand. So when people argue that electric and/or driverless cars will reduce demand for PT I’m somewhat sceptical, because these technologies don’t seem to change the fundamental dis-economies of scale that afflict urban road networks.

And when one thinks of the growth that Auckland will experience over the next 20 years, then economies of density are actually rather important. Perhaps more important than new technologies themselves …

2. Costs: Fixed versus variable costs

Our previous discussion noted that economies of density/scale arise in the presence of fixed costs. In this section I want to distinguish more carefully between fixed and variable costs. One useful way to think about transport costs is using a matrix which has “fixed/variable” versus “private/public” dimensions (NB: The latter is not relevant to this discussion, but can be for discussions of transport pricing more generally).

Cost table

 

Of course, such distinctions involve some arbitrary judgements. Parking for example, is both a private and a public cost. I’ve categorised it as “public” simply because a proportion of parking costs are subsidised by society. Despite the need for such judgements, I think this type of cost matrix is quite useful for classifying costs and subsequently analysing how changes in transport technologies (or policy settings for that matter) might impact on demand.

Using this framework (and a bunch of heroic assumptions) I have constructed the following graph to illustrate how the costs of cars compares to taxis and public transport, and how costs vary with distance measured in kilometres travelled per annum. PT fares are capped at the price of 12 monthly passes at $220 per month).

C1 Total private costs (c)

 

Here we see that cars become cheaper than taxis for people who are travelling more than 2,500 kilometres per year. Of course, the orange line is just one possible instance of the cost curve for cars. Depending on their preferences and circumstances, some people may opt to buy a cheaper car with higher operating costs, which would reduce the intercept but bump up the slope of the orange line. Nevertheless, the general point remains: For people who travel a lot, owning your own car makes more sense than using taxis.

Now consider a future scenario where electric driverless vehicles (“robot cars” for short) are available. How might they impact on these cost curves? Well, let’s assume robot cars cost 50% more than conventional cars; are 50% cheaper to park; and cost 25% less per kilometre to operate/maintain than conventional cars. When robot cars are used for taxis, they remove the need for a driver and increase higher utilisation. For the sake of the argument, let’s assume that the cost of using taxis drops by 50% with the advent of robot cars.

Under these assumptions, the cost curves presented above can be re-calculated as follows.

C2 Total private costs (future)

 

In this scenario taxis suddenly become cheaper than private cars for people who travel less than 10,000 kilometres per annum. By way of comparison, that’s slightly more than the average New Zealander travels per year. By pushing up fixed costs but reducing variable costs, robot cars seem to dramatically increase the scope for cheap taxi services to meet the demand for car travel for a wider range of households.

So consider this “what if” scenario: What if the primary impact of robot cars was to reduce the cost of taxis? In such a scenario would we need more or less PT? This leads me nicely onto the next topic …

3. Complements versus substitutes: A or B versus A & B?

When a new transport technology hits the market, one of the key questions we should seek to answer is whether it will complement or substitute existing technologies. The answer is not always obvious, but it is always important.

To provide an example, consider whether taxis increase or decrease demand for public transport. Many people think taxi’s compete with public transport, i.e. the two are substitutes. Rodney Hide, for example, had this to say on the matter (source; emphasis added):

[Uber is] … a whole new way of doing business. It disempowers bureaucrats and puts customers and drivers in charge. I love it. The public transport of the future won’t be clapped-out trains but driverless cars and Uber. It may happen much quicker than we now can possibly imagine. We won’t own a car. A driverless car is always just a minute away, ready to whisk us to our destination.

According to U.S. researchers, however, taxis are complements for public transport. This article provides a nice synopsis of relevant issues, while more detailed analysis is available here. The last report identifies “primary factors” for taxi demands, including 1) the number of workers commuting by subway and 2) the number of households that don’t own vehicles. Of course, places like New York have some attributes which are – for better or worse – not relevant to the New Zealand context …

 

Given that Auckland doesn’t have the density or subway system which exists in NYC, could Rodney be correct with his crystal ball-gazing? The answer, I think, is both “yes and no”. More specifically, taxis will compete with public transport in some places, while complementing it in others.

I think this article puts the distinction rather nicely when it says:

It is likely that these [taxi] services will just exacerbate the differences that already exist in the quality of public transit in different areas.  The localities that invested and ran their systems well won’t be as impacted.  In the areas where frustration is higher, the problems will surely become worse when revenues and ridership decline.  And the biases and history that impact why certain systems are the way they are will become more apparent.

The complements versus substitutes issue is relevant to many debates about new transport technologies. Some people seem convinced not only that driverless cars are imminent, but that they will drag people away from PT. I’m personally not so sure.

Conclusions:  “The Spruce Moose”?

One of my favourite Simpsons episodes starts with Mr Burns opening a casino. At the end of the episode, when the whole sordid venture is crashing down, an increasingly erratic Mr Burns pulls a gun on his ol’ mate Smithers and orders him to get into the model bi-plane affectionately known as the “Spruce Moose”.

maxresdefault

 

While hilarious, the behaviour of Mr Burns is not something we should emulate when it comes to transport policy. History is littered with unfortunate examples of politicians picking winners well in advance of demand. Indeed, such attitudes gave us 50 years of motorway building in Auckland, replete with well-documented examples of optimism bias and strategic misrepresentation. My point? Let’s not hold a proverbial gun to our own heads and over-commit to any particular kind of transport technology. Instead, let’s embrace the transport technologies we have, and be passionate about using them more efficiently, while keeping tabs on new transport technologies as they evolve.

There is no doubt that we live in exciting times: New Zealand is growing and seems to be experiencing economies of density, at least in the transport sector. Costs of air travel are falling, while other technologies, such as passenger rail, are more viable than they have perhaps been in the past. Robot cars and trucks seem likely to emerge onto the scene at some point, helping our car fleet to become smaller, quieter, cleaner, and generally more efficient than it is currently.

Meanwhile, rapid developments in telecommunications (which I intend to discuss in a later post) are changing the way that goods and services are delivered. This change is occurring at astounding speeds and in amazing ways. In a few years Uber has grown to become one of the world’s most valuable transport companies. In Europe, a start-up called “Blah blah car” has raised hundreds of millions in venture capital to expand its business, one which is already moving millions of people around the continent at very affordable prices. I can book any one of 5 trips from Amsterdam to Brussels tomorrow for about 10 Euro.

In such a dynamic and rapidly changing environment it’s hard to know what to do. And that’s kind of the point: There’s a risk that we over-adjust to new technologies, just like the motorway builders did in Auckland 50 years ago. What I would do, however, is ask some hard questions “around the edges” of what we are currently doing. And perhaps consider delaying some projects slightly in light of the uncertainty.

Indeed, when it comes to the CRL, my main criticism of the National Government’s requirements for accelerating funding was that similar conditions were not also attached to other large transport projects. Appropriately specified triggers would seem to be useful adjunct to existing benefit-cost analysis and provide a more precise understanding of when work on a particular project should go ahead (NB: Of course there are other factors to consider, such as interest rates).

In an upcoming post I will talk more about emerging technologies for non-car transport modes; that stuff is so exciting it deserves its own post.

Building a better city: Policies and perspectives (part 2 of 2)

This is the second and final post discussing some broad ideas for building a better city. The first post discussed the dynamic nature of cities and argued that a focus on appropriate pricing and incentive mechanisms was important to managing urban ills without stifling beneficial change. This part discusses how we might identify policy areas in need of improvement, and why we should care about efficient policy.

2. Cost benefit analysis is important for identifying opportunities to improve policies

Over the last 170 years, New Zealand cities have been shaped by a wide range of policies, ranging from planning regulations to public investments to government land-holdings to tax and subsidy policies. Many of those policies serve (or served) a useful purpose, and most are good intentioned. But it’s almost inconceivable that all of them are efficient. Cities are dynamic places, and policies put in place in past decades can easily become outmoded and begin to distort prices and limit people’s choices.

Fortunately, as I have tried to suggest in the previous post, we’ve got more policy alternatives than we think. We don’t have to use yesteryear’s solutions to solve next year’s problems. But how do we know what we might have to change?

In my view, cost benefit analysis, or CBA, has an important role to play in identifying which policies are good and which need to change. If you want to learn more about CBA, you can delve into the technical guidelines published by organisations like the Treasury and the NZ Transport Agency. But CBA is not really as complicated as the tedious official guidance makes it sounds. It boils down to a rather simple question:

“This policy has some benefits and some costs. Do we expect the benefits to exceed the costs?”

If the answer is no, perhaps we should do something different instead.

Cost benefit analysis can be applied to a wide range of policy questions. It’s commonly applied to evaluate public investment options – that’s what NZTA uses it for – and less widely used elsewhere. But the principles can readily be extended to a wide range of urban policies. In a paper I wrote for this year’s NZAE conference, I looked at a couple of approaches to evaluating the costs and benefits of planning regulations. I found that analysis of property sales could be used to identify cases where planning rules distorted prices and prevented people from making useful investments – as well as cases where planning rules could provide benefits by managing localised externalities.

Here are a few good examples of how CBA can help in making better decisions.

Back in 2009, the new National-led Government worked with the Green Party to design and implement an insulation and clean heating subsidy programme. In the first four years of the programme, roughly 180,000 homes were insulated and heat pumps were installed in around 60,000 homes. A cost benefit analysis undertaken in 2011 (Grimes et al, 2011) found that the project’s benefits exceeded the costs by a factor of five:

The overall results suggest that the programme as a whole has had sizeable net benefits, with our central estimate of programme benefits being almost five times resource costs attributable to the programme. The central estimate of gross benefits for the programme is $1.28 billion compared with resource costs of $0.33 billion, a net benefit of $0.95 billion.

This finding provided a strong rationale to extend the programme to 2016 and trial a rental warrant of fitness programme to improve home weathertightness and safety performance in selected NZ cities.

A second good example is the Ministry of Transport’s recent analysis of the economic performance of state highway investment. I reviewed their analysis in a series of posts last year (parts 1, 2, 3, 4). Among other things, they found that the economic efficiency of road spending had fallen since 2008, with projects with low benefit-cost ratios being selected over projects with higher BCRs.

MoT state highway BCRs 2005-2012

This is a valuable finding that should be taken seriously by policymakers and the public. It suggests that there may be opportunities to significantly improve the value that we are getting out of transport investment. That being said, it also suggests that policymakers have chosen to take a more optimistic view about project benefits than indicated by conventional CBA procedures. Sometimes this is warranted – it’s difficult to accurately account for some benefits – and sometimes it’s not.

This reminds me of a third example. I was struck by recent comments by Wellington’s Deputy Mayor about the city’s new publicly funded convention centre and film museum:

Deputy Mayor Justin Lester said the museum would become New Zealand’s most significant man-made attraction and an international draw card.

“It’s a little bit when Disneyland first opened in California, but in a Wellington context… In the 150th year since Wellington became New Zealand’s capital, there are only a handful of moments that rival the significance of this announcement.”

I haven’t read the business case, so I don’t know what assumptions were made to sell the project. But if the financial and economic forecasts require Wellington to become the “Disneyland of the south”, I would be very nervous.

This leads on to a very important consideration when using CBA results: To get the real story, it’s important to dive into the data and calculations that sit behind the headline figures. In some cases, people make claims about projects that are not backed up by their analysis. For example, they may require unlikely things to happen in order for the hypothesised benefits to materialise. In these cases, a properly-done CBA should also provide you with a means of understanding the risks inherent with the policy.

3. In an efficient city, there is time and space left over to lead a good life

But why is efficiency important? At the start of this post, I argued that good urban policies facilitate agglomeration economies in both production and consumption. This, in turn, enables cities to succeed in attracting new businesses and new residents. (The alternative of urban stagnation or economic decline is not really very appealing.)

Or, as Stu argued in a post last year, efficient urban policies provide us with an abundance of good things. Efficient urban planning policies allow us to have abundant, affordably priced housing, without sacrificing public goods. Efficient transport policies enable us to have abundant access. Good management of public assets allows us to combine a productive economy with a good supply of public goods.

Furthermore, generally prioritising efficiency in our urban policies means that we will have more resources left over for all the non-economic things that make life beautiful and enjoyable. For example, allowing people to use land efficiently by building more housing in areas that are accessible to jobs and amenities will also allow them to avoid commuting long distances to sprawlsville. This in turn frees up time to spend with the ultimate in non-economic investments – children and families.

Last December, I saw how things could be a little different. It was the first day that LightPath / Te Ara I Whiti cycleway was open. (Incidentally, I think it should be called PinkPath.) I skipped the mass ride organized by Bike Auckland in favour of a drink elsewhere, but checked out the new cycleway on the bike ride home.

Now, I wasn’t extraordinarily enthusiastic about the project. It seemed to be too far over to the west edge of town and so I wasn’t sure how many people would want to use it. But it has surprised me. I’ve been up and down it eight or ten times since then, and there are always people out on it, even at 10pm. They are having fun cycling – a relatively new concept for Auckland.

LightPath - Vaughn Davis

PinkPath was designed to be fun to cycle on and fun to see from a distance. It sends a message: “Auckland will give you new choices about how to travel. Rock up on your bike.” It didn’t cost much – less than 1% of Auckland’s annual transport budget and a disused motorway off-ramp. But that money and space can easily be consumed by inefficiency elsewhere in the system.

Which leads me to my conclusion: the good things in life are not necessarily expensive, but they can easily be crowded out by bad urban policies. So get the prices right, do some CBA, and live a better life in a better city.

Transport technologies!?! Part 1

As the new year kicks off, it seems like an appropriate time to reflect on some wider trends – as Patrick recently did in this excellent wrap-up of the year just gone. Looking forward, one of the most exciting trends relates to how technology will impact on how we travel. This post marks the first in what I hope to be a long-running series on transport technologies. In this initial post I want to focus on wider factors that might shape changes in transport technologies.

Some people may find this strange. After all isn’t technological change a random gift from the gods, i.e. something which emerges from the ether without any particular rhyme or reason? Au contraire. Technological change doesn’t occur in a vacuum; it arises from entrepreneurial people and businesses anticipating people’s wants and needs. And just because a particular technology is developed doesn’t mean it will find a market and become widely adopted.

For this reason, before we try and portend too much about future transport technologies themselves, I think it is useful to step back and think about the process through which technological change occurs, and in particular the factors that capture the attention of entrepreneurs and/or shape the market for new technologies in other ways. The following sub-sections identify three factors, namely 1) Land use; 2) Public policies; and 3) Demographics, which I expect to direct the arrow of technology change in coming decades.

You may be able to think of others, and I’d be interested to hear what they are.

1. Land use: Denser cities favour space-efficient transport modes

Why begin a conversation about transport technologies by talking about land use? Put simply, the demand for transport (especially when measured in terms of passenger-kilometres travelled) is strongly dependent on the choices people make about where to live in relation to where they want to be. Land use also impacts on the relative effectiveness of different transport modes. For example, when average trip distances are short, then walking and cycling become more viable and vice versa. Hence, trends in land use are likely to have a bearing on the scale and composition of future travel demands.

What is happening to land use in New Zealand? Two over-arching trends emerge from the data: 1) urbanisation, i.e. more people are living in cities and towns and 2) densification, i.e. the dense areas of our cities are growing the most rapidly. The first trend is well-established and has persisted for the best part of a century, so I won’t cover it here. The second trend, however, is not well-understood in some quarters. David Seymour, for example, was recently quoted by The Herald as follows (source):

I don’t believe in 50 years time when we’re a society with vastly more sophisticated transport that people will be as attracted to living so intensely,” he said. “As transport technology improves, as it has for the last 200 years, people will say that’s great and travel farther and faster and we’re going to consume more space,” he said.

Seymour’s forecast runs contrary to observed land use trends over the last two decades or so. The table below is extracted from a paper written by my colleague Peter Nunns, which summarises densities for New Zealand cities in the period 2001 – 2013. We find that most cities that are growing have also experienced increases in density in this period, with Auckland leading the pack with a 33% increase in density.

Densities

I should point out that this table uses “population-weighted densities”, which measures the density at which the average resident lives. Population-weighted densities are a more  accurate indicator of urban density than the more-commonly cited “average density”, for reasons Peter discusses here.

The following two graphs provide strong evidence of how density is changing in Auckland. The first figure shows population growth in Waitemata compared to other parts of Auckland. The second figure then shows population growth in Auckland’s city centre from 1996 to 2015, in which time the population of the city centre grew at an average rate of ~12% p.a.. This is approximately six times higher than the Auckland average, which in turn is higher than the New Zealand average.

Auckland LB Population Change - 2015 2

City Centre Population - 1996-2015 2

It’s reasonable to suggest that where density increases, then we can also expect the value of land to increase – holding other factors constant. Research by Arthur Grimes into land values in Auckland suggests that the “pull” of Auckland’s city centre has indeed increased in the last two years (source).

And where space becomes more valuable, then one might reasonably expect space efficient transport modes to become relatively more attractive. A paper aptly titled “The Future of Motorized Transport” had this to say about the relative space efficiency of different transport modes (source).

Land use per mode

This analysis suggests that, on average, cars require ten times more space than the next least space-efficient transport mode (buses). In my opinion, this seems to indicate that where density increases, and space becomes more valuable, then cars will be placed at an significant disadvantage compared to other transport modes.

Is my hypothesis borne out by data on people’s transport choices? While we can never be sure, I would cautiously answer “yes”. The following figure, for example, shows how the total number people accessing the city centre using cars or public transport has changed in the period from 2001 and 2014.

Basically, all of the growth in travel demands to Auckland’s city centre over the last 15 years (plus some) has been met by public transport. Moreover, the following figure shows total public transport patronage in Auckland since 1920. While much hooplah has been made of recent patronage growth, this figure shows how PT patronage in Auckland has actually been growing at a decent pace since the early 1990s, which is around the same time that the population of central areas started to grow. Coincidence? I suspect not.

1920-2015 Auckland Patronage 1

Is Auckland unique in terms of its land use trends? After all, what matters most to technological development is not what’s happening in Auckland but the general trends that are happening globally. It’s hard to say conclusively, and I don’t have time to do a detailed survey in this blog post (please let me know if you know of one). However data does suggest that Auckland is not *alone* in terms of the land use trends that it’s seen over the last two decades or so. For example, here’s what a recent publication had to say about trends in the value of land in Amsterdam (source): “The price of land in the Amsterdam city centre is 200 times as high as that in the countryside … this price difference more than doubled between 1985 and 2007.

Now at this point you might not be convinced by my dot-joining between density, land values, and transport outcomes, and for quite understandable reasons: Not all of the transport outcomes illustrated in the preceding figures will be caused by trends in land use. You might argue that changes in travel demands are likely to reflect a myriad of other factors, such as policy changes and demographic trends. And I think you’d be correct, which brings me to my next two points …

2. Public policy: Slowly recognizing the need for change?

The preceding section argued that trends in land use in Auckland have increasingly favoured space-efficient transport technologies. This raises the question of whether policy-makers have been responding to these trends? The answer, I think, is “yes, albeit rather slowly”. The key point I want to make in this section is that future trends in travel demands will be impacted by shifts in public policies which are already underway. Hence, it is useful to understand these shifts because they are relevant to the question of which technological developments are adopted by people with the most vigour.

Parking is perhaps the most notable example of policy change in the Auckland context. So-called minimum parking requirements, or “MPRs”, were removed from Auckland city centre in the 1990s. For those of you who haven’t heard of MPRs, they are regulations imposed by Councils which require new developments to provide a certain “minimum” amount of parking. The amount is based on predictions about the peak demand for parking at each individual development.

Of course, if you provide a lot of free parking then you are providing a large subsidy to people who drive, and at the same time reducing the density of development. In this recent post, Peter discussed the removal of MPRs in terms of the proposed Commercial Bay development at the foot of Queen Street. He comments as follows:

… if those MPRs still applied to the city centre, Commercial Bay would have required over 2,000 carparks. That’s seven times as much parking as the developers actually want to build … According to Precinct, Commercial Bay will cost $681 million to build. If MPRs required the development to include another 1,750 carparks, at a cost of $30-50,000 apiece, it would add $50-90 million to the cost of the project. That suggests that MPRs would impose a “regulatory tax” of  7-13% on downtown development.

In a nutshell, removing MPRs can be expected to both 1) increase the costs of owning and operating cars and 2) enable more intensive development. For this reason, the Unitary Plan proposes to remove MPRs from areas where they are considered likely to do the most damage, as illustrated by the red areas in the figure below (source).

MPRs

* This map is slightly out of date due to recent changes.

I note that Auckland is not alone in rolling back MPRs: Many cities in New Zealand and overseas are moving in a similar direction. Basically, it seems likely that the size of the red blobs in the figure above will grow over time. In this context, it seems reasonable to suggest that parking policies will increasingly shift in a direction that is, by historical measures, not as favourable to individual car ownership and use.

What other policy shifts might change the way we travel in the future?

The recent “Paris Outcome” on climate change and carbon emissions is an obvious one. Given its multi-lateral nature, the Paris Outcome seems like a policy that might impact on global trends in transport technologies. Personally I think the transport technology game-changed in Paris; our transition to a low carbon economy needs to start immediately and be complete by the middle of the century if we are to avoid catastrophic climate change.

Congestion charging is another potential policy shift. It involves charging differential prices by time and location so as to keep vehicle demands within the available road capacity. Over time, congestion pricing is becoming more attractive as the benefits of adopting such a scheme increases (due to Auckland’s growing population), while the costs of doing so decreases (due to improvements in technology). Congestion charging is supported by the likes of this Blog, the Auckland Council, NZCID, and the Productivity Commission.

The general point I want to make, however, is that public policies are changing in response to wider transport and energy issues. Unfortunately I think it’s all-too-common to focus on how policy should respond to technology, without thinking also about how technology might respond to major policy settings. Widespread adoption of policies associated with parking reform, the Paris Outcome, and congestion charging will change the way we use existing transport technologies in the near future, while also changing the incentives associated with new technologies. There is a mutual dependence between policy and technology that operates in both directions.

The final factor I want to discuss is the question of demographics, i.e. what the hell is New Zealand’s population going to look like in 30 years?

3. Demographic trends: Which horoscope do you prefer?

Demographic trends are increasingly difficult to predict, hence I prefer to talk in terms of “scenarios”, rather than defined outcomes. The two key demographic attributes are size and age.

To highlight how uncertain these projections are, just consider that barely 5 years ago New Zealand was effectively staring down the barrel of a major demographic problem: We’d done so well at exporting young people to more exciting cities overseas that our population growth was slowing and our demographic profile was becoming increasingly imbalanced. This was all occurring at the same time as the first of the baby-boomer generation were entering into their retirement, with all of the associated fiscal costs this implied. Back in 2011, Natalie Jackson from the University of Waikato’s (excellent) NIDEA research group had this to say on the issue of demographics (source):

As elsewhere, New Zealand’s population is ageing. As elsewhere, this ageing has two main drivers: increasing longevity, and declining birth rates, both outcomes of the Demographic Transition. In New Zealand’s case, however, the population is also ageing ‘prematurely’ from another cause, the legacy of net migration loss at young adult ages (typically 20-24 years) which New Zealand experiences in most years, and at 15-19 and 25-29 years in many other years as well. The loss, compounded by the falling birth rates at the time each cohort was born, has created a deep bite in today’s age structure across ages 25-39 years. This bite is not only driving up the median age faster than would otherwise be the case, given that New Zealand has the highest birth rate in the developed world, but has enormous implications for the country as it faces the retirement of its baby boomer generation.

Around the same time, economists working at the NZIER published a separate working paper titled “The Flight of the Kiwi”. This made the following comments on net migration between New Zealand and Australia, which was accompanied by the figure below (source):

If economic growth for the 2010-2025 period in New Zealand and Australia were to be at the rates currently projected by the OECD, then we should expect a net 412,000 people to emigrate between now and 2025. This is the equivalent of the whole population of Wellington, including the Hutt Valley and the Kapiti Coast, moving to Australia.

Actual versus predicted migration

Fortunately, subsequent events have ensured these demographic predictions have not materialised. I can’t shake the feeling, however, that this owes more to Australia’s relative misfortune (due to the collapse in global commodity prices) than it does to New Zealand’s good management. And despite New Zealand’s economic performance relative to Australia’s being about as good as it gets, we still only achieve a net migration gain between the two countries of a couple of hundred people p.a. This suggests that if/when Australia gets on top of its economic/fiscal challenges, then the net outflor might return to the sorts of levels predicted by the NZIER.

Personally, I think volatility in population and demographic statistics is something we need to get used to. In gneeral, New Zealanders seem to be a relatively mobile, skilled group of people who are benefiting from the opportunities afforded by an increasingly globalised world. As such, movements of people appear to be increasingly sensitive to relative socio-economic performance. When New Zealand is not performing well, then tends of thousands of us are likely to take our leave and head offshore (mostly to Australia), and vice versa. This is good for them and generally good for the receiving country. I doubt that it’s good for New Zealand, given the aforementioned demographic issues we face.

This has led me to consider two rather divergent population/demographic scenarios for New Zealand:

  1. The home-coming queen” – New Zealand’s socio-economic performance exceeds that of the countries with which we compete for people, such that fewer people depart while more New Zealanders currently living overseas decide to return home. As a result, New Zealand experiences strong population growth of 2-3% p.a., which helps to grow the workforce and mitigate the demographic imbalance introduced by the baby-boomers; or
  2. The gerontocalypse” – New Zealand’s socio-economic performance lags behind that of the countries with which we compete for people, most notably Australia. Young and/or mobile New Zealanders depart en masse, and population growth to fall to approximately 1% – almost all of which occurs in Auckland. The growth in the workforce is unable to offset increasing costs of health and super, but necessary policy reforms are opposed by baby-boomers. As a result, tax rates rise, further exacerbating the exodus.

The transport implications of these two scenarios are obviously rather different. The “home-coming queen” scenario might require increased transport investment, especially in the upper North Island where most of the population growth is likely to occur. It might also require different types of transport technologies, such as driverless metro systems and/or and inter-city passenger rail between Auckland and surrounding urban centres, namely Hamilton, Tauranga, and possibly even Whangarei. It might a new tunnel under the Kaimai ranges, or Auckland and Tauranga ports to merge into one “super-port” located midway between the two cities. I don’t know.

In contrast, the “gerontocalypse” scenario would be associated with lower economic growth, and lower socio-economic well-being generally. In terms of transport, we’d expect transport budgets to come under pressure. Some roads may need to be closed or sold off, and/or road user charges might need to rise simply to fund maintenance of the existing network let alone new investments.

I don’t know which scenario is more likely, but I know it’s important to discussions of transport technology. There’s a big difference between what technologies might work for a country of 5 million versus a country of 10 million, where most of the growth is located in and around Auckland, Hamilton, and Tauranga.

Without having answers to such question, it’s hard to frame discussions of which transport technologies might need to be adopted in the future. Dare I say it, perhaps this raises the need for some strategic thinking at the national level about demographic/population changes? It seems like National is betting on our ability to attract young people as a means for mitigating the rising costs of health and super associated with an ageing population. If so then that’s fine – but it would be useful to know this such that it can inform discussions of transport technologies, and the appropriate policy responses.

4. Conclusion

Discussions of future transport technologies often occur within a “transport silo”, where the interaction with wider socio-economic factors is downplayed. In reality, the development and adoption of transport technologies does not happen in a vacuum but is instead shaped by prevailing socio-economic factors. Current trends in land use and public policy, for example, indicate that transport technologies which are space and energy efficient are likely to have a comparative advantage in the future. Demographic outcomes are something of a wild-card. Whether New Zealand is able to address its demographic imbalances, and more specifically maintain socio-economic performance at levels comparable to the countries with which we compete for skilled migrants, may have a large bearing on the transport technologies needed over the coming decades.

I want to be a super transport model …

In Matt’s recent post about MoT’s work on the future of transport, there was an interesting little side-discussion about transport models, and in particular the travel demand forecasts which emerge therefrom.

We’ve previously written about the accuracy of transport models when used for project evaluation purposes. Perhaps the most notable (notorious?) was this post on the Waitemata Harbour Crossing, where we discussed how NZTA’s business case used traffic volumes that were approximately 10% higher than actual volumes. Naturally this led to the benefits of the project being overstated.

More recently, this post on the SH20 Manukau Harbour Crossing found it was carrying approximately 45% less traffic than projected 10 years after it was complete.

Manukau-Harbour-Crossing-Traffic-Volume-actual-vs-prediction

Transport models are important not just for the purposes of project appraisal. The outputs of transport models are also used to forecast aggregate travel demands and determine policy at a much higher level. For example, the MoT and the NZTA use (different) transport models to forecast aggregate vehicle kilometres travelled, which in turn determine the funding that is available in the NLTF to fund the projects identified in the NLTP. Hence, our ability to plan ahead is influenced by transport models.

In this context, graphs such as the one below are something of a cause for concern.

But let’s not be to critical of the MoT and NZTA; they are not alone insofar as their transport models have consistently over-estimated demand. Graphs surprisingly similar to that above exist in the US and the UK; one such example is shown below.

In some earlier posts here and here, we’ve presented some possible reasons for what might be causing the transport models that are used for forecasting travel demands (both at the level of individual projects and in aggregate) to get it wrong. The systematic positive bias in forecasting errors has been the subject of formal academic research led by the Danish economist Bent Flyvberg. I presented a paper at last year’s IPENZ Transportation Conference in which I discussed some of these issues in more detail, while Peter wrote an excellent post on the topic here. His analysis of NZTA data suggests that New Zealand may not be immune to the same systematic biases found overseas.

This post, however, is not about the systematic positive bias into transport models. Instead, this post is about whether the mechanics of the models are capturing what they need to capture in order to formulate accurate predictions. I think this is a useful starting point for thinking about “transport futures”, as the MoT seem keen to do.

I also think it’s fair to say that the superficial explanation for the slowdown in the growth of aggregate vehicle travel is that per capita vehicle travel has been on the decline. That is, people (both in New Zealand and overseas) aren’t driving as they used to. But this doesn’t get us very insofar as predicting the future, i.e. observing that per capita demands are declining simply begs the question of why?

And this is exactly where things start to get interesting. In my time thinking about these issues the views that are expressed tend to be readily grouped into one of three broad categories, which I now present for you to consider.

First we have what I call the “establishment view“, which is led by the likes of the MoT, the Government more generally, and a number of consultants. This view argues that the decline in per capita vehicle travel primarily reflects higher fuel prices and reduced economic activity over the last 5-10 years. There’s obviously some logic to this view; it seems reasonable to suggest that both the cost of fuel and the state of the economy will impact on travel demands, at least in the short term (say 1-5 years). Where the establishment view struggles, however, is to explain why the slowdown in vehicle travel started so early (way back in 2005), and why volumes haven’t bounced back more strongly of late. The latter is particularly interesting given NZ’s robust levels of economic growth, strong population growth, and sustained low fuel prices.

While VKT is currently growing again, it doesn’t seem to be growing by as much as one might expect based on these factors.

Which leads me to the second view, which I call the “wider socio-economic view“. This is probably the position which best describes my own views, at least in terms of understanding travel demands in the medium term (say 5-10 years). This view looks beyond the hard economic factors considered by the establishment view and instead consider some wider factors that seem likely to impact on the demand for vehicle travel. People who subscribe to this view will often talk about the following issues:

  • Demographic factors, such as an ageing population and changes in the number of people with drivers licences;
  • Transport and land use factors, such as availability of public transport and the ongoing intensification of our cities; and
  • Vehicle substitutes, such as air travel and telecommunications.

The wider socio-economic view complements the “establishment view” in some senses, because it appeals to similar micro-economic mechanisms, but it does so in a way that allows for a wider range of factors to impact on the demand for vehicle travel. In doing so, however, the socio-economic view can lead to predictions that are quite different to those of the establishment view. Instead, the socio-economic view allows quite a lot of room for future growth in aggregate vehicle travel to differ from what we’ve seen in the past – which is something the establishment view struggles to incorporate.

Finally, we have what I call the “changing preferences” view. This perspective interprets the declining per capita demand for vehicle travel as a function of wider shifts in people’s underlying preferences. This view emphasises, for example, that young people are now placing a higher value on other forms of consumption, such as the connectivity offered by smart phones, than the personal mobility associated with owning and operating a vehicle – at least compared to their parents. The changing preferences view would seem to suggest the trends we’ve seen in the last 5-10 years are just the tip of the ice-berg, and that profound changes are just around the corner. Often people highlight that it’s not just technology which is driving these changes, but also awareness of the health and environmental effects of driving. Evidence for this view were recently summarised in this NZTA research report, which we previously discussed in this blog post.

The following figure is taken from this report.

Which view to believe? Well, personally I think all three have elements of truth to them. I think the establishment view is correct insofar as certain price and economic factors are likely to dominate changes in travel demands in the short term.

In the medium to long run, however, the other two views presented above seem to have more currency. I mean, if fewer people have drivers licenses then it seems plausible to suggest that there will be a reduction in per capital vehicle travel, ceteris paribus. Similarly, we can expect reductions in the cost of air travel to eat into the demand for long distance vehicle trips. In terms of preferences, these are critical to the accuracy of any model that seeks to forecast future demands based on past behaviours. If preferences changes, then our predictions are resting on a wobbly plank over shark-infested analytical waters.

So what’s the takeaway message? Well, I think it’s fair to say that we simply don’t know what to expect with regards to the future demand for vehicle travel.

In this context, I personally wouldn’t be investing in large transport projects, especially in rural areas, e.g. Puhoi-Wellsford, Waikato Expressway etc. As for the CRL, I think it’s likely to be a good project because of 1) patronage growth on the rail network, 2) Auckland’s growth as a whole, 3) the explosive growth in the city centre (both in terms of population and retail), and 4) wider trends in transport and land use policy, e.g. time-of-use road pricing and removing minimum parking requirements.

But I’m open to being convinced either way, and am interested to hear what others think on all this.

MoTs Future Vision for Transport

Meet George Jetson, his boy Elroy, daughter Judy, Jane his wife.

That’s the what immediately popped into my head after seeing the future vision for transport released by the Ministry of Transport yesterday. The visions look about 30 years into the future and the reason for doing the work is explained as:

The Ministry of Transport is taking a whole of system, long-term view of the future of transport to help in our role as the Government’s adviser on transport. We want to stimulate wider debate and generate ideas on the possible future of New Zealand’s transport system by sharing our visions of how we think the transport system could look in the future.

The visions we are sharing are not predictions about what will happen, just what could happen.

A lot of the premise for this work seems to be the idea that we’re about to see fundamental change in transport as a result of technology. There are repeated analogies made to the level of change experienced in the early and mid-20th century with them noting how the first cars came to NZ in 1898, that by the 1930’s they were becoming more common while around 30 years later we had wide-bodied passenger jets and had landed a man on the moon.

The technological change expected over the coming three decades is primarily about making our transport system more intelligent. For example the likes of autonomous vehicles and using data to better organise trips.

The ministry have been looking at what the future holds for a while, starting last year with their work on future travel demand. From it they found that in most possible scenarios the level of personal travel – i.e. how far we collectively travel – would decline.

ResizedImage700325-FutureDemand-Diagram2

That work also produced this chart which is one of my favourites and shows that their previous predictions of vehicle kilometres travelled have continued to be over optimistic.

ResizedImage600304-FutureDemand-Diagram1

The visions released so far are not all of them but do cover off a lot of transport sphere. They note that at least one more they are working on is looking at the future of public transport and I’m taking a trip to Wellington shortly to discuss this with them.

To me the visions as shown in the slides below are a mixed bag. Some seem fairly likely such as the suggestion that we will buy mobility as a service – which is starting to happen right now as a result of companies like Uber – and  that high-density urban villages will allow for more trips to be made by walking and cycling which will improve health. However other ideas seem much more fanciful such as the people will be able to commute by plane from a regional centre to a job in Auckland in the same length of time as those who live in Auckland or that we’ll have airships carting freight around.

Some ideas aren’t in the slides but in supporting documents (like this one). One that we’ve seen raised before has been that we turn our rail network – outside of Auckland and Wellington – into guided truckways occupied by trucks platooning together.

The challenge with these road trains is they will probably require dedicated freight lanes. We think New Zealand has unique opportunities in this space.  The rail network, outside of Auckland and Wellington, already provides a separated corridor that could be transformed into a high-speed freight network. The space already allocated means we can potentially be an early mover when
the right technology comes along. Imagine platooned trucks, not guided by a physical set of rails, but by a system that allows them to operate safety on narrow concrete pads on dedicated freight corridors. Imagine the productivity gains for our supply chains, and the avoided costs, by not having to extend the road network to accommodate these systems.

We are not advocating we close rail transport in New Zealand, but there may be whole new ways we could utilise existing rail networks and corridors.

Or you know we could just make trains more efficient and not have to pave all the tracks in concrete.

Here’s a couple more videos about the work, one from the MoT CEO and one from the Deputy CEO.

Have you looked through it and what are your visions for the future and do they align with the Ministry’s? Now, where are those moon colonies and how do I get to them.

25 Years of New Zealand Travel

Last week the Ministry of Transport released a very interesting report looking at how travel in NZ has changed over the last 25 years. The data is based on the ministry’s Household Travel Survey (HTS) they conduct which monitors the travel of all members of a large number of households all across New Zealand. One of the advantages of the over the other sources like the census is that the HTS covers trips for all activities and not just trips to work like the Census currently does. That doesn’t mean it’s perfect but it does at least provide a different picture.

One of the strong themes that comes through in the report is one that we’ve talked about a lot which is that young people are starting to behave differently to older generations. They’re getting drivers licences later, driving less and using alternative modes to get around (or live in closer proximity to their destinations). This is shown a few ways.

  1. Fewer young people are getting their drivers licence. Part of this will be the driving licence changes of a few years ago but it for many it appears they’re simply not interested in doing so.
    HTS 25 year - Driver Licences
  2. Younger people – and the 25-34 age group especially – are driving less than they have in the past.
    HTS 25 year - Distance driven by age

One of the big questions is whether the trend will continue or if it is just a blip, will those 25-34 year-olds continue to drive less as they shift into the older age brackets. Given the 25-34 age group decline has been going on since the late 1990’s it seems to be the former. My guess is that in places like Auckland where the city and its transport systems are evolving so rapidly that we’ll see the trend start to flow though.

Travel to Work

This is a measure that hasn’t changed a lot over the last 25 years and seeing as the data is at a nationwide level it isn’t likely to do so much in the future either. At a city level I think Auckland in particular will start to see much more change coming through as transport options improve.

HTS 25 year - Travel to Work

But work isn’t the only place people are travelling too, in fact it’s one of the smallest destinations.

HTS 25 year - Travel Purpose

 

Travel to School

The travel to school data helps show one of the areas where there has been the most significant change over 25 years and also the one of the biggest areas of opportunity. As of the last survey 57% of kids aged 5-12 are now driven to school compared with 32% in 1990. Public Transport mode share has remained about the same and so the biggest contributors to the loss have been from walking and cycling which respectively have gone from 42% to 29% (thanks to a small recovery recently) and 12% to 2%.

HTS 25 year - Travel to School

It all reminds me very much of this cartoon

Walk to School cartoon

Interestingly though secondary school students are actually walking to school more than in the past and catching public transport more too. The biggest change has been cycling dropping from 19% in 1990 to just 3% now.

HTS 25 year - Travel to School - 13-17

The MoT look at cycling to school for both age groups separately in the chart below. Statistics NZ estimate there are around 487,000 5-12 year olds and 306,000 13-17 year olds. If they were cycling at the same rate as they did in 1990 instead of being driven it could potentially take over 40,000 car trips off the road in Auckland and 100,000 nationwide. Of course some of the current driving figures will be the result of a parent dropping the kids at school on their way to work so it wouldn’t necessarily result in a reduction of car use in the immediate term – just a shifting of where and maybe when it occurs. Instead the process of getting back to those kind of mode share will certainly involve much better bike infrastructure and that will get others using it too.

HTS 25 year - Cycle to School

Public Transport

With the PT data there isn’t the long term charts like above but there is some very interesting information from the most recent survey.

The chart below shows the frequency of usage of PT across different age groups and as you can see the 13-17 and 18-29 age groups are the ones most likely to catch a bus, train or ferry.

HTS 25 year - PT frequency of use

Around 2/3 of all those who used PT during the survey used it to get to work or to education but another third were doing so for other reasons.

HTS 25 year - PT use reasons

Lastly the report includes a section on how much time is spent drinking alcohol per week. It seems this was put in the survey in the context of drunk driving. What I found fascinating is how much the younger generations have taken reduced the amount of time spent drinking. It seems to only be those 65+ who are drinking more than they were

HTS 25 year - Hours spent drinking

All up some very interesting stats and a good report from the Ministry

 

Closing the 18 month gap

Despite enabling works for the City Rail Link being on the cusp of starting we still don’t know just when the rest of the project will get the green light. Here’s the latest on the issue.

While they are yet to budge on the start date in recent months we’ve seen a noticeable change in the way the government talks about the project. It is talked about much more positively and I think a big part of that is Transport Minister Simon Bridges not being ideologically opposed the project like his predecessors were. The latest comments about it come from the break at Waterview yesterday.

Transport Minister Bridges says Auckland’s next big tunneling project will be the City Rail Link (CRL), with the early stages getting underway in the first half of next year.

The government and Auckland Council are still at odds over when central government funding for the CRL should kick in, but Bridges said they were getting there.

“Everyone accepts it’s got to happen, it should happen, it will happen, now really we’re down to about an 18-month timing gap between the council and the government,” he said.

An 18 month timing gap doesn’t sound like much at all but actually aligns fairly closely to what we already knew. The council have now said they want works under way in 2018. They actually wanted it sooner and the draft long term plan included funding for it however the Auditor General didn’t think it should be included without the government confirming their share of funding.

On the other side of the fence the Government have said a 2020 start date but have also said they would consider it happening sooner if some employment and patronage thresholds were met. The CRL is the only transport project that I’m ever aware of in New Zealand that has had targets attached to. As I’ve said before the employment target in particular is odd as there are many other factors that influence travel demand and many other trips to the city centre every day that aren’t for employment.

The Ministry of Transport have finally published their latest six-monthly report on progress which covers up to the end of June – you can read my version for a few months ago here. The MoT report only covers the patronage target as the employment figures are only produced annually with the latest ones due out at the end of next week. On to patronage but before reading the current update it’s worth remembering what the Ministry have said in the past about it.

The first report in December 2013 essentially predicted that Auckland would never reach 20 million trips prior to 2020. The second one in August 2014 and the third one in February this year predicted that patronage would grow till about 2017 then taper off.

Here’s what they now say:

Auckland Transport’s Public Transport Monthly Patronage Report for June 2015 shows rail patronage of 13.9 million trips for the year to June 2015, compared to 11.4 million trips for the previous year. This is an increase of 2.5 million trips or 22 percent.

Rail patronage has shown strong growth over the last two years and, if this growth can be sustained, the rail system is likely to reach 20 million trips well before 2020. However, given current patronage of 13.9 million is 6.1 million trips below the threshold and the variability in results since 2010, at least another year’s growth will be needed to confirm this result.

The Ministry’s comments on patronage are now verging on comical. After saying for almost two years that it’s unlikely Auckland will meet the 20 million trip target the stunning growth of over 21% has forced them to change tack. They now finally admit we’re likely to see the target eclipsed but then go on to ignore the growth rate and say that with the total being only 13.9 million trips that we should wait another year just to make sure the growth continues. If the current growth continues then by June next year rail patronage will almost be at 17 million trips a year and on track to hit 20 million trips some time in 2017.

2015-08 - Rail Patronage vs Govt Target

It’s like whoever is writing these reports is desperately holding out hope that the growth will slow down. The question is will it?

Reality dictates that at some point the high level of growth we’re currently experiencing will have to slow down. Even when it does I doubt growth will suddenly grind to a halt and those future increases will be off a larger base. There is still a lot of improvements to be made that will influence patronage including:

  • Optimisation of the EMUs should see them become faster and even more reliable
  • A move to six trains an hour at peak times on the Western Line, frequency is perhaps the most factor for driving patronage
  • Integrated fares will make it easier to transfer between bus and train services and make many current trips cheaper.
  • The New Network creates an integrated PT network with more buses feeding in to train stations we should see more people transferring between services.

So how has rail performed in the months since June – pretty well actually. Patronage for the month of July was almost 22% higher than July 2014 while August was over 20% higher. That has raised the annual growth of trips on the rail network by 22.7%. As of the end of August patronage is sitting at 14.4 million trips up almost 500k trips in just two months. I’ve also heard that September is shaping up to be another good month and the results of that should be out within the next few days.

I often wonder if there’s a bit of a physiological barrier of 15 million that affects many people’s view on the targets. Once over that 15 million trips I think we’ll see comments like those of the Ministry start to change.

One thing Simon Bridges has said recently is that he is reminded almost every day from Len Brown about just how fast patronage is growing. Hopefully he kept that in mind when he read this report.

The Ministry of Transport and Driverless Cars

Automated, autonomous, driverless or self-driving – whatever you want to call them cars that can drive without the interaction of a human are increasingly talked about as the next big thing in transport and the Ministry has recently highlighted what’s happening in New Zealand around them.

They say that while the talk going around is about fully autonomous vehicles, there are actually different levels of it and increasing levels of technology are already in some cars. A good description of the different technology levels comes from the United States National Highway Traffic Safety Administration which breaks things down to five levels as shown below. It’s noted that other jurisdictions have similar classifications.

Levels of vehicle automation identified by NHTSA

As for actually implementing driverless cars they note that they will pose a number of challenges although one advantage is they likely mean there is no need to change existing roads. Instead the challenges are more likely to be policy/requirement related

The Ministry of Transport has a work programme to clarify the current legal situation that applies to the deployment of autonomous vehicles in New Zealand. Section 4.14 (page 25) of the government’s Intelligent Transport Systems (ITS) Technology Action Plan [PDF, 431 KB]specifically relates to autonomous vehicles. This includes the following action:

Government actions to promote New Zealand internationally as a test-bed for new technologies

The Ministry of Transport, in conjunction with the NZ Transport Agency, will review transport legislation to clarify the legality of testing driverless cars in New Zealand. This will specifically consider the issues of liability associated with testing, but will not consider liability for general use.

The work programme has a range of possible outcomes – one being a law to set requirements for driverless vehicles. However, there are no immediate plans to do this. The relevant excerpt from Section 4.14 of the ITS Action Plan reads:

Internationally there is a great deal of thought being given to what laws will be necessary for the general operation of driverless vehicles. Their widespread operation will pose complex legal challenges, especially to determine liability in the event of any accident. It is not proposed that the New Zealand government will explicitly look at these legal issues at this time. Rather, the government will continue to monitor international developments and draw on this knowledge once international thinking has developed further and it is clearer if or when these vehicles will be commercially available.

One interesting thing I’ve been noticing with the driverless car debate is that many countries, states and cities all seem to be falling over themselves to be the test-bed for these new technologies – presumably in the hope that some of the big players will turn up invest money. The MoT say they have started to look at the legal issues associated with testing these vehicles. However they also say there are “no obvious legal barriers” towards testing driverless cars as “NZ Law has no explicit requirement in our laws for a driver to present”. Despite this the MoT say there have been no formal requests to test driverless cars on our roads.

 

While the MoT seem to be mostly thinking about how the legal issues of testing driverless cars, perhaps they should also start to have a think about other associated issues too. Some of these are highlighted quite well in a few pieces I’ve read recently.

The Ethical issues

There’s a greater issue that just liability should an incident occur but a debate that needs be decided about how driverless cars deal with accidents in the first place. This article highlights the issue well

He soon came to see both its significance and its painful complexity. For example, when an accident is unavoidable, should a driverless car be programmed to aim for the smallest object to protect its occupant? What if that object turns out to be a baby stroller? If a car must choose between hitting a group of pedestrians and risking the life of its occupant, what is the moral choice? Does it owe its occupant more than it owes others?

When human drivers face impossible dilemmas, choices are made in the heat of the moment and can be forgiven. But if a machine can be programmed to make the choice, what should it be?

Coming up with an answer to these issues could have wide ranging implications for society – but then again we’ve changed society in the past in the way we allowed vehicles to dominate our cities. The implication of driverless cars on cities is the next point

Are we solving the wrong problem?

A great piece from Peter Norton, the author of Fighting Traffic highlights that driverless cars could be fantastic and fix many of the issues we associate with our auto-dominated society – which he says came about because we focused on how best to move cars and not what is best for people or the city. Unfortunately he says that if we don’t address the issue of what we want our cities to be then driverless cars could actually make our auto-dependency worse.

In autonomous vehicles and other intelligent transportation systems, we may have a solution so powerful that we fail to pause and ask what problem such systems are best suited to solving. We may fail to ask whether the problem formulation we inherited is the right one.

If engineers continue to seek to accommodate all of motorists demands, and f they accommodate such demands much more efficiently, each car may make much more efficient use of road and parking capacity, but total demands may rise so much that even more space will be needed for road surface and for parking. In the fully autonomous vehicle, as the driver need pay little or no attention to driving, driving time may become work or play time in effect negating the time cost of travel. Autonomous cars might also safely travel much faster. Such changes might turn the 50-mile commute of today into the 100-mile commute of tomorrow. Today, people trying to travel by other modes such as walking or bicycling must contend with urban sprawl governed drivers perceptions of distance. How will they reckon with distances that have doubled again? Presumably many of them too will resort to driving. However reluctantly they turn to it, their decision will be taken as a vote for driving. Finally, as the skill demands of driving fall well have more drivers. Such trends would mean that we would continue to rebuild the world for drivers, instead of asking what world we want to live in and conforming driving to it.

If we do get the right implementation of driverless cars then the impact they could have is absolutely transformative.

The transformative potential?

This piece from Vox looks at some of the massive potential driverless cars offer. He openly says he’s being a bit utopian in his thinking on some of the benefits that could be delivered. These include that we can “right-size” both vehicles and the infrastructure needed to support them such as roads and parking. Doing that could mean more space made available for people. They also could fix the suburbs, freeing up space and allowing more development to occur all while improving air quality (assuming they’re electric).

The piece also notes that this utopia is a long way off. There are a lot of vested interests in the transport system and many of those will be reluctant to change forcing path dependence along a route we don’t necessarily want. The article also highlights that there are likely to be some substantial privacy implications.

But “smart” means information, and a city filled with sensors and trackers will accumulate a lot of information about every citizen within it. Who owns that information? Who can access it? How much will basic services like transportation hinge on the surrender of personal data? How will all that data be protected from the copious cybersecurity threats that face smart cities?

As people continue to look closer at driverless vehicles they will also continue to see there are a lot of issues that needs to be addressed. As such it could be some time before we really start seeing any serious driverless car proposals.

 

CRL targets August 2015 – six-monthly review

Every six months the Ministry of Transport produce a monitoring report on how Auckland is performing against the targets the government set for work to start prior to 2020 on the City Rail Link. As a reminder

On 28 June 2013, the Prime Minister announced the Government’s commitment to a joint business case with Auckland Council for the City Rail Link in 2017 and to providing its share of funding for a construction start in 2020.

The Prime Minister also stated that the Government would consider an earlier business case and construction start date if it becomes clear that Auckland’s CBD employment and rail patronage hit thresholds faster than current rates of growth suggest. The two thresholds are:

  • an increase in Auckland CBD employment of 25 percent over the February 2012 estimate (the baseline), which is half of the increase to 2021 predicted in the 2012 City Centre Future Access Study ; and
  • rail patronage is on track to hit 20 million trips a year well before 2020.

The reports are in August and February each year based on patronage to the end of June and December. So far the reports have been extremely underwhelming, especially in relation to patronage. The first one in December 2013 essentially predicted that Auckland would never make the CRL target. The second one in August 2014 and the third one in February this year predicted that patronage would grow till about 2017 then taper off.

With a new report due soon, I thought it would be worthwhile do give my take on the report if I was writing it for the minister.

CBD Employment

We remain unconvinced that CBD employment is a particularly useful measure of the need for the City Rail Link. Even if just as a measure of demand for travel to the CBD, there are many other factors – such as parking costs and availability, public transport offerings – which can and are changing travel demand.

Data on CBD employment is produced annually and isn’t due from Stats NZ until later this year. At this stage we’re not expecting any significant change in employment numbers as research from Colliers International shows that the Auckland city centre continues to experience historically low vacancy rates. They say prime office space has a vacancy rate of just 1.4% compared to a 20 year average of 8.2%.

We do note that a number of new builds are due to be completed in the next year or two and since the last update, a number of very large projects have been announced or made significant progress towards starting construction over the next few years. In addition many of these projects are along the City Rail Link route.

CRL Growth Corridor

Rail Patronage

Auckland Transport’s rail patronage data for the year to June 2014 shows patronage of 13,916,822 trips, an increase of 2,481,737 or an increase of 21.7%. This is ahead level needed to reach the target by 2020.

2015-06 - Rail Patronage vs Govt Target

Over the course of the Ministry’s monitoring reports the rate of patronage increases has actually accelerated. We expect that high patronage growth will continue for a number of years yet as the full impacts of rolling out the electric train fleet, the new bus network and integrated fares are rolled out. Extrapolating the trends witnessed in recent years shows – as Auckland Transport have in the chart below – that patronage could hit the 20 million target as early as mid-2017. The chart plots the extrapolations out to 2020 however we expect capacity constraints to prevent patronage rising too much above 20 million trips.

Extraploated Patronage Growth Trends

While we expect patronage to reach the 20 million target in advance of 2020, we do see some potential risks to that – although it is worth pointing out none of these risks relate to demand for rail trips. The two biggest risks are:

  • Capacity of the rail system – Despite the extra capacity provided by the new electric fleet, there are already reports of capacity constraints emerging. These will be exacerbated by future growth including the changes resulting from the implementation of the new bus network. We recommend that the government urgently enter into discussions with Auckland Council/Transport about the potential of buying additional trains.
  • The City Rail Link enabling works – The enabling works will see the main entrance to Britomart closed as part of the works to start building the CRL. It is unknown if this will have any impact on patronage from people looking to avoid the disruption. Conversely it is possible the enabling works may have a positive impact on patronage as a number of other city centre roads will be adjusted to also handle AT moving buses off Albert St during the construction period.

Assessment

Rail Patronage growth has been strong and remains on track to reach the target needed for an earlier start to the CRL.

Employment has been stymied by a lack of available office space however that looks set to change over the medium term as a number of large developments in the city centre become available.

We believe the government should urgently re-consider it’s timeframes for the project with a look to getting it under-way as soon as possible. The longer it is left the greater the number of people and businesses will be negatively affected by crowded trains and construction disruption.

 

Close the (freight) rail network?

Yesterday the Treasury released documents related to the government’s budget announced a few months ago. One that has gained a lot of attention is the suggestion from Treasury that the rail network – with exception of Auckland and Wellington – be shut down. The paper can be found here and contains quite a bit of information – although a lot of the actual details such as how much funding Kiwirail want in the future are not shown.

NZ Rail Network

The current New Zealand rail network

The paper discusses how Kiwirail have undertook a nine month study into its operations last year and the key findings were

  • rail’s high fixed costs are spread across the network and do not materially vary with changes in volumes being transported
  • revenue earned from train movements on most parts of the network is interdependent with other parts of the network because most freight movements travel across multiple network segments, and
  • as a result of the high fixed costs and interdependence of revenue between the different network segments, it is challenging to reduce costs as fast or to the same extent as a reduction in revenue.

In other words this isn’t just a case where you can trim off a few dead limbs and carry on but that those limbs all combine to contribute to the overall network. For example trains carrying milk powder from Taranaki also use and contribute towards the busy Hamilton to Tauranga section on their way to the port. Just like has happened in the past here and overseas in places like the UK, cutting back the network can do more harm than good. As such it was recommended that one of two main options be pursued.

  • retain most of the freight network and rationalise unprofitable services and some lines on the fringes of the network, or
  • close most or all of the freight network, with the option of retaining the upper north island section only (Auckland to Hamilton to Tauranga) as this part of the network carries the most freight volumes and covers most of its costs.

Treasury’s preferred option was to close the network and in their argument for doing so they say that over the last 5 years earnings haven’t really changed. They do however note that Kiwirail have been hit by a huge number of external factors which even they suggest the magnitude of and extent of which have been greater than the company could be expected to deal with. These include the Canterbury earthquakes, the Pike river mine explosion, Solid Energy’s financial difficulties, extreme weather events and the Aratere being out of service for a period earlier this year. What’s more the hits keep coming and now it seems the next issue will be looming trouble with the dairy industry.

One aspect the paper does highlight is that Kiwirail are really running a shoestring operation. As part of Treasury looking for ways to reduce funding they note that there is no evidence of “gold-plating” infrastructure or inflating funding requirements. They also highlight the results of an independent assessment by AECOM who say that in comparison to Australian systems, planned spending on infrastructure per kilometre was low. They also couldn’t find opportunities to reduce what was planned without significantly impacting levels of service. This doesn’t surprise me as I frequently get the impression the company is running only on fumes after being institutionally and politically beaten up.

The report claims that shutting the rail network down

During 2014, the Treasury, the Ministry of Transport and NZTA undertook an assessment of the economic and policy considerations for continuing to fund KiwiRail at the levels required. The key findings from this work were:

  • if all the freight currently transported on rail was transferred to road, the additional road user charges (RUC) earned by NZTA from the additional trucks on the road would be sufficient to adequately address road capacity and safety issues (resulting from the additional trucks) in most areas
  • the estimated environmental and safety benefits from transporting the current volume of freight by rail of ~$10 million and ~$20 million per annum respectively do not outweigh the costs of continuing to fund rail, and
  • a national cost benefit analysis estimated the net social cost of continuing to fund rail at the levels sought in this paper at between $55 million and $170 million per annum, which takes into consideration all the costs and benefits associated with funding rail at the levels required (another interpretation is that there is a shortfall in benefits of between $55 million and $170 million per annum at the current levels of funding).

I find it interesting the claim that shifting all rail freight to truck would pay for itself and any capacity and safety upgrades. According to the MoT there are currently around 900 freight trains around the network each week which probably equates to more than 3,000 trucks worth of goods being moved each day. The trucking lobby will be rubbing their hands with glee.

Treasury wanted the government to only provide one more year of funding during which public study would be carried out before what they assume would be a closure of the network. They do say that if the government didn’t agree to that, that they should provide Kiwirail more certainty by way of a three year funding package – something the Ministry of Transport supported. Thankfully the government didn’t agree with Treasury and agreed to keep funding Kiwirail – although only on a two year package.

I personally have no issue with Treasury looking at the issue of whether we should fund something, that is after all a key part of their job. What I do have an issue with is that there doesn’t appear to be a consistency in advice. Where’s the questioning of the RoNS businesses cases – some of which are as low as 0.2, where’s the questioning about why we’re pouring so much money in to new roads when people are travelling less and the assessment of many projects showing major flaws. Then there’s the absurd notion that the rail network should be a profitable business while ignoring the road network elephant in the room. For example the NLTP announced last week shows around $3 billion of funding from outside road taxes to build and operate the network.

 

NLTP 2015-18 revenue and investment flows

In my view Kiwirail should stop being treated like a business and instead the government should stop the madness of the NZTA not being able to fund rail improvements. That would allow rail projects that meet certain requirements e.g. improve safety and/or capacity to compete on a more even playing field. The NZTA should also be required to consider and allowed to build rail projects as part of any other improvements they make to get the best transport network outcome regardless of mode. They are after all the transport agency, not just the road building agency.