Burning the Midnight Oil for Living Energy Independence
This blog has been used over the past year primarily as a central cross link point to access Midnight Oil blog posts at various community blog sites, with the Sunday Train series outnumbering all other series over the past year by a substantial margin.
The Sunday Train will run tomorrow as scheduled. This post is to publish a more formal analysis of the California Legislative Analyst's Office (LAO) risk assessment of investment in the California High Speed Rail project. Regular readers of the Sunday Train will know that I see the project as moving in the right direction with the most recent revision of the CHSRA Business Plan. However, the California LAO has taken a different view, and so starting a few weeks back I took a careful look at their analysis of the use of cap and trade funding in particular. This analysis is the result of that look at their work.
_________________________
Look for online commentary at:
European Tribune (forthcoming)
The Stars Hollow Gazette (forthcoming)
Progressive Blue (forthcoming)
Daily Kos (forthcoming)
________________________
A Preliminary Analysis of the LAO Analysis of cap-and-trade
funding of High Speed Rail
The LAO has
made much of the risk that the HSR might not attract further Federal funding in
previous reports. The purpose of this section on cap-and-trade funding appears
to be to defend that earlier conclusion against the proposal to partially fund
the HSR from cap-and-trade revenues. The LAO raises three points (p. 8) with respect to use of
AB32 Cap and Trade funding for the High Speed Rail project. These are:
- ·
Would Not Help Achieve AB
32’s Primary Goal.
- ·
High-Speed Rail Would
Initially Increase GHG Emissions for Many Years
- ·
Other GHG Reduction
Strategies Likely to Be More Cost Effective.
These points shall be
considered in reverse order.
The third claim is:
Other GHG Reduction
Strategies Likely to Be More Cost Effective. As
we discussed in our recent brief on cap-and-trade, in allocating auction
revenues we recommend that the Legislature prioritize GHG mitigation programs
that have the greatest potential return on investment in terms of emission
reductions per dollar invested. Considering the cost of a high-speed rail
system relative to other GHG reduction strategies (such as green building codes
and energy efficiency standards), a thorough cost-benefit analysis of all
possible strategies is likely to reveal that the state has a number of other
more cost-effective options. In other words, rather than allocate billions of
dollars in cap-and-trade auctions revenues for the construction of a new
transportation system that would not reduce GHG emissions for many years, the
state could make targeted investments in programs that are actually designed to
reduce GHG emissions and would do so at a much faster rate and at a
significantly lower cost.
In
comparing projects that are designed to reduce Greenhouse Gas Emissions to
projects that have reduction in GHG as one of several program benefits, GHG
reduction funds must cover the entire cost of projects aimed soly at GHG
reduction, but may share the cost of projects that meet multiple goals.
The sole
means that the LAO supports to allow cap and trade funding to share the cost of
an investment is by purchasing CO2 emissions reductions credits at market
determined rates. The return on emissions credits is both variable and
uncertain, so this implies that long term infrastructure investment that
results in reduced CO2 emissions must treat CO2 emissions reductions credits as
an uncertain source of funding. If sufficient funding is obtained from other
sources to complete sufficient infrastructure to begin operations, then at that
time CO2 emissions reduction earnings may be treated as a windfall gain.
The LAO
argues that there is substantial funding uncertainty regarding completion of
the entire San Francisco to Los Angeles / Anaheim High Speed Rail corridor, and
that because of that uncertainty, construction should not begin. And then they
propose restricting the use of cap and trade funds in a way that maximizes the
uncertainty of long term infrastructure investments that include CO2 emissions
reductions as one of multiple benefits.
Evidently,
a system of funding that prevents cap and trade funding from being used to
complete a system that will result in reduced CO2 reductions is interfering
with the development of systems that are carbon neutral and low emissions,
while favoring a policy of continued development of existing high emissions
systems, which implies hoping that carbon offset programs will both fully
offset the additional emissions of the status quo systems and additionally
offset our current emissions while using those systems.
The
fundamental flaw in the analysis is that the LAO is performing a risk analysis
of a system that represents a substantial departure from the status quo, yet neglecting
to consider the status quo risks of reliance on combustion of petroleum
products in our current intercity passenger transport system. These risks
include the risk of crude oil price shocks, interruption of access to imported
crude oil, and the CO2 emissions impacts of reliance on the current system.
It should
be noted that this set of risks apply across a wide range of scenarios of
potential future economic growth. That is, if crude oil prices remain low, and
access to imported crude oil is uninterrupted, one likely consequence is strong
economic growth. Continued dependence on petroleum combustion for intercity
transport then implies that CO2 emissions impacts are higher. If there is a
relatively fixed available portfolio of inexpensive CO2 offset projects, this
implies that CO2 must be offset at an increasing cost.
On the
other hand, a coming decade of repeated severe oil price shocks and oil supply
interruptions directly implies forced reduction in petroleum consumption due to
household and business travel budget constraints, and so implies substantially
less risk of rapid growth in CO2 emissions from the intercity passenger
transport system. However, it also likely implies a substantially lower economic
growth rate, and under this scenario, the economic benefit of having an
oil-independent common carrier intercity transport corridor is substantially
greater than is represented by California HSR Authority Cost/Benefit modeling.
If these
status quo risks are taken seriously, then there is a substantial risk in not
proceeding with an available petroleum-independent common carrier intercity
transport corridor. Given this status quo risk, the policy that the LAO is
arguing for, of only funding CO2 emissions reductions from long term
infrastructure after the fact, is amplifying those risks.
Addressing
these neglected status quo risks brings attention to the neglected alternative
policy. Under this policy, a reasonable cost is established for up-front
investment in infrastructure in support of CO2 neutral and low emissions
systems to replace existing high emissions systems. The CO2 emissions
reductions associated with the new system is estimated, and that determines the
maximum amount of capital support that may be provided by either grants or
revenue bonding from the cap and trade fund.
The risks
associated with this approach are that the cost will be at times higher than a
cost than the current cost of emissions reductions over the coming decades, and
that the project will not achieve the expected levels of CO2 emissions.
However, the risks of not proceeding with this approach is
that the projects in question are not able to go ahead for lack of funding, so
California remains more dependent on petroleum combustion for intercity
transport than is necessary and as a result suffers, under one set of
scenarios, substantially greater reductions in economic activity than if the
infrastructure had been made available or, under another set of scenarios,
substantially higher CO2 emissions due to a failure of CO2 reductions policy to
cope with the consequences of strong economic growth.
In line
with its neglect of status quo risks, the LAO also restricts its consideration to
direct GHG emissions benefits of the HSR line and ignores opportunity benefits
associated with the availability of the HSR corridor. First, unlike the auto
and air intercity transport systems, the HSR intercity transport system does
not require explicit or hidden operating subsidies, so diversion of travel to
HSR will free up resources for providing operating subsidies for low emissions
and carbon neutral local transport. Second, an intercity train station offers
an effective anchor for dense, multi-use development, even in areas that are
presently car-dependent. Third, because rail pays a much smaller time penalty
than airplanes for adding a stop, intercity rail is a superior intercity
transport complement to sustainable local transport technologies that are
competitive with gasoline fueled automobiles for local transport in smaller
urban centers, but cannot compete with gasoline fueled automobiles for
intercity trips.
______________
The second
claim is:
High-Speed
Rail Would Initially Increase GHG Emissions for Many Years. As
mentioned above, in order to be a valid use of cap-and-trade revenues, programs
will need to reduce GHG emissions. While the HSRA has not conducted an analysis
to determine the impact that the high-speed rail system will have on GHG
emissions in the state, an independent study found that—if the high-speed rail
system met its ridership targets and renewable electricity
commitments—construction and operation of the system would emit more GHG
emissions than it would reduce for approximately the first 30 years. While
high-speed rail could reduce GHG emissions in the very long run, given the previously
mentioned legal constraints, the fact that it would initially be a net emitter
of GHG emissions could raise legal risks.
The LAO
does not cite their source, but it appears to be the Chester and Horvath (2010)
study which appeared to reach this conclusion, while including infrastructure
construction, maintenance and operation emission costs and vehicle manufacture
emission costs on both sides. However, this was based on a miscalculated figure
of 170 kilowatt hours per vehicle kilometer traveled (kWh/VKT) from the
California HSR Authority program EIR. A cross check with a source such as the
CCAP & CNT (2006, pp. A1-A3) study of High Speed Rail and CO2 emissions in
the US, would have shown power consumption in the range of 20-30 kWh/VKT. While
the actual figure for the California system is expected to be an average of
46kWh/VKT for the double-length trains and operations at 220mph rather than
180mph, a figure of 170kWh/VKT should have been recognized as implausible.
The source
of the miscalculation here is the California HSR Authority EIR itself. The
German peer review of the California HSR Corridor Evaluation performed a
detailed analysis of specific energy consumption based on a 240mph version of
the German “ICE” HSR equipment, arriving at 74.2kWh/VMT, or 46 kWh/VKT. In the
preparation of the EIR, the contractor for the CHSR Authority performed an
incorrect conversion, which resulted in the value that Chester and Horvath (2010)
used.
The LAO
must clarify whether they are basing a substantial point in their analysis of
the suitability of using cap and trade funds for a portion of High Speed Rail
capital funding on the original Chester and Horvath figures, which were based
on overestimating vehicle energy consumption nearly fourfold. Examination of
the results of other studies point to the miscalculation embedded in Chester
and Horvath (2010) as the source of their conclusion.
Further,
the California HSR Authority has committed to sourcing renewable power for its
operations. While there are unlikely to be contracting terms that guarantee
that 100% of the power comes from incremental new capacity, the availability of
a single guaranteed institutional buyer for carbon neutral power will encourage
the more rapid development of carbon neutral power sources, so that the
effective GHG emissions per kilowatt-hour for the California HSR system will be
lower than the current grid norm assumed by Chester and Horvath (2010), so that
their figures will still overstate the GHG emissions of the California HSR
system, even corrected to take into account the miscalculation of HSR Vehicle
power consumption.
Chester and
Horvath (2010) also make the extraordinary assumption that a realistic low
occupancy rate for HSR services is 10% occupancy of a sixteen car train with a
1,200 seat capacity. However, this train is comprised of two eight-car consists
coupled together, and if there was an average 10% occupancy on such a service,
operating costs could be cut nearly in half by only running an eight car train
at 20% occupancy.
Indeed,
even operating at an average 20% occupancy seems infeasible, given a
requirement to operate without subsidy. Since a three hour corridor service is
far more capable of tailoring its frequency to available transport demand than
a six to twelve hour corridor service, 40% would be a quite conservative lower
bound on occupancy.
In Chester
and Horvath (2010b: fig S1), GHG emissions per Vehicle Kilometer travelled
(VKT) appear to be about 55kg CO2e emissions per VKT, with about 45kg for
operations, and so about 10kg for infrastructure. If their assumption of a low
10% occupancy of sixteen car trains is taken to be a 40% actual occupancy of
eight car trains operating half the projected Vehicle Kilometers, the 10kg
infrastructure emissions per 120 passengers remains the same, for 80-90g per
passenger mile on the low assumption. However, at 46kWh/VKT rather than
170kWh/VKT, and at an actual 40% vehicle occupancy, that is more realistically
3kg CO2e/VKT than 45kg, so a further approximate 25g per passenger mile on the
low assumption, for 105g to 115g CO2e/PKT.
Supporting
40% to 80% as a more reasonable range for HSR occupancy is Network Rail (2009):
In comparison, the following Table 2.12
summarises typical load factors for European high-speed rail services, which
range from 42% to as high as 88%. The lower load factors of the German ICE services
are notable compared to the French TGV and Spannish AVE. The primary reason for
this is considered to be a degree of over-capacity provided by the ICE services
(ATOC, 2009a) in order to compete more effectively with services from new
low-cost airlines. On ICE lines, services are run closer to the capacity of the
network than comparable TGV and Eurostar services. Load factors above 60% are
achieved by TGV and Eurostar in most cases, which is achieved by running trains
under the capacity of the infrastructure and pulling passengers to the train
times (Network Rail, 2009). It is also notable that the medium-long distance
high-speed rail services seem to achieve higher average load factors than the
shorter distance services. This is presumably due to the increased competition
with road at lower distances, where road transport can more effectively compete
in terms of journey time.
If Chester
and Horvath (2010) were to perform their analysis again and take into account
that the energy consumption value is overstated nearly fourfold, with the
knowledge that a sixteen car train is simply two eight car trains coupled
together which can be operated individually if there is no demand for the
additional seats, and taking into account the constraint on the train to
operate at an occupancy that permits operating cost break-even or better, they
would find that the “low” occupancy GHG emissions on a full life-cycle analysis
are below their midpoint values for car, conventional rail, and air travel, and
the GDG emissions at a mid-point occupancy value are below the emissions of
car, conventional rail and air travel at 100% occupancy.
______________
References for this section:
Center for Clean Air Policy (CCAP) and
Center for Neighborhood Technology (CNT). (2006). “High Speed Rail and
Greenhouse Gas Emissions in the US”. http://www.cnt.org/repository/HighSpeedRailEmissions.pdf
Chester, Mikhail, and Arpad Horvath.
(2010) “Life-cycle assessment of high-speed rail: the case of California.” Environmental Research Letters Vol.5
Issue 1. January 2010.
Chester,
Mikhail, and Arpad Horvath. (2010b) “Supplementary Data for Life-cycle
assessment of high-speed rail: the case of California.” Environmental Research Letters Vol.5 Issue 1. January 2010.
Network Rail (New Lines Programme). (2009) “Comparing
environmental impact of conventional and high speed rail.” http://www.mendeley.com/research/comparing-environmental-impact-conventional-high-speed-rail/
______________
The first claim made is:
Would Not Help Achieve AB
32’s Primary Goal. The primary goal of AB 32 is to reduce
California’s GHG emissions statewide to 1990 levels by 2020. Under the revised
draft business plan, the IOS would not be completed until 2021 and Phase 1
Blended would not be completed until 2028. Thus, while the high-speed rail
project could eventually help reduce GHG emissions somewhat in the very long
run, given the project’s timeline, it would not help achieve AB 32’s primary
goal of reducing GHG emissions by 2020. As a result, there could be serious
legal concerns regarding this potential use of cap-and-trade revenues. It would
be important for the Legislature to seek the advice of Legislative Counsel and
consider any potential legal risks.
As part of
the overall carbon cycle, carbon dioxide persists in the atmosphere for about a
century. The goal of AB32 is therefore to reduce California’s ongoing
contribution to climate change going forward by reducing CO2
emissions in 2020 to 1990 levels. While a lawyer may analyze the legal position,
from the perspective of ecological economics, California’s transport system and
its dependence on petroleum combustion is one of the principle sources of the
problem. In terms of the primary objective of AB32, it is a far better outcome
to arrive at 2020 in a position to make further substantial progress on this
important GHG source than to arrive in 2020 at 1990 emissions level, but with
little immediate prospect of further improvement.
In the
analysis here, the LAO also ignores the fact that the current funding request
is required to begin construction of the Initial Construction Segment (ICS),
and that the initial construction segment will be put to use once track and
signaling is completed by the San Joaquin service connecting the Bay Area to
the San Joaquin Valley and connecting through to the LA Basin via a connecting
intercity bus service between LA Union Station and Bakersfield. The capacity to
support this service was a federal requirement for funding the ICS, and neglecting
this independent utility has been a feature of previous LAO analyses as well.
The
substantial reduction in San Joaquin service trip times will increase the
ridership on the service, and additional passengers at existing stops on an
existing train has a negligible impact on energy consumption of the train. Operation
on the HSR corridor will also be more energy efficient than operation on the
mainline freight corridor presently used. So the transfer of the San Joaquin to
the HSR ICS corridor will have its own modest carbon emissions impact, before
any cap-and-trade funds are required. Chester and Horvath (2010) confirm that
will conventional rail has lower life cycle carbon costs than cars at
equivalent occupancy, whether cars at 5 passengers and rail at 100% occupancy
or cars at 1 passenger and rail at 20% occupancy.
While the
gain in GHG reductions from increasing the average occupancy of conventional
Amtrak California services is modest, there is no need to fund this work from
cap and trade funds. The LAO advice to repeatedly delay start of the ICS and
hope that the Stimulus ARRA funds awarded to California on the basis of
constructing the ICS in the Central Valley were Express HSR speeds are possibly
risks not only losing these ARRA funds, but also losing the GHG emissions reductions
from operations of the San Joaquin on the ICS.
Conclusions
The
California HSR Authority has been directed to plan to build an Express HSR
system, and much of the LAO report has focused upon the fact that a project of
this magnitude is built in stages, and that the completion of the entire
project is uncertain so long as the Federal Government has not committed to a
funding mechanism for HSR that seems likely to fund the bulk of the California
HSR system.
However,
the LAO ignores the benefits of completion of portions of the proposed
California HSR corridor even if completion of the entire Phase 1 is delayed.
This is in line with the LAO neglect of the risks to the California economy of
being dependent upon petroleum combustion for its intercity transport.
When
considering alternative established, mature technologies, electric passenger
trains are the most energy efficient mode of intercity transport per seat mile,
and under current economic conditions, it is Express HSR that consistently
generates operating surpluses when operated in transport markets at similar
distances and size (though typically smaller than) the LA to SF transport
market. Electric automobile transport is complementary with electric Express
HSR transport, but unlike Express HSR, technology for all-electric operation on
trips of 200 miles to 500 miles trips is not mature, proven technology. So the
strategy of pursuing both potentially carbon-neutral intercity transport
options is preferable to strategies of pursuing either one alone.
The focus
of the use of CO2 cap-and-trade funds for the Express HSR system should be on
providing insurance against dependency on petroleum fueled transport. The proposed staging of the HSR construction
is:
- The Initial Construction Segment (ICS) from Merced to
Bakersfield;
- A construction segment from Bakersfield to
Lancaster/Palmdale;
- A construction segment from Lancaster/Palmdale to the
San Fernando Valley;
- A construction segment to connect from the San Joaquin
Valley to San Jose;
- And completion of the “bookends” to the San Francisco
Transbay Terminal and LA Union Station.
Under the
business plan, the ICS is first used by the San Joaquin service, while Express
HSR service will commence after construction is finished to the San Fernando
Valley, to be extended further with each following phase.
It is
feasible to provide a one-seat ride from the LA Basin to the Bay Area once the
Bakersfield to Lancaster segment is complete, by electrifying the Lancaster to
Merced segment and using one of several options to operate by a combination of
electric and diesel power. This is not assured of operating at a surplus under
current economic conditions, but is a useful contingency in the event of an
urgent need to reduce petroleum consumption, whether because of oil supply
shocks or because of increased urgency in addressing the problem of greenhouse
gas emissions, or both, and under severe oil price shocks and supply
interruptions, its financial viability would be assured.
Therefore,
the most effective strategic use of CO2 cap-and-trade funds for the financing
of the California HSR system, to guarantee the opportunity for an effective
carbon-neutral intercity transport system, is to approve their use up to a
total level appropriate for the projected CO2 emissions reductions, and to
focus the spending on assuring the completion of the corridor from Merced
through to Lancaster.
... for Progressive Populism ... for the Arc of the Sun ... for the Next American Revolution ... for Living Energy Independence ... for a Brawny Recovery ... 
This week's Sunday Train is a trio of shorter topics. The first is a research development project to develop a modern steam train to run on biocoal. The target is a sustainable steam train that, as a headline grabber, will attempt to run at 130mph and break the world steam train speed record. There's much to like about this research development project ... but I am going to argue that biocoal to operate trains is not it.
Second, SF's MUNI transport agency is one of the ten agencies slated to split $760m in Prop1a(2008) bond funds improvements to systems interconnecting with the planned High Speed Rail system. The balance of the $950m goes to the three existing Amtrak California intercity rail services, the Capitol Corridor, the San Joaquin, and the Surfliner.
And third, a speculative look at an alternative technology that SF MUNI might deploy that money on, that actually would connect with the HSR system at the Transbay Terminal, as well as connecting to BART, the MUNI light rail network, the existing (and proposed alternative) Caltrain terminus at 4th and King, and provide express transit service along Geary Blvd.
And why the Great Lakes? Because that's where the wind blows, as shown on the trimmed down version of the 2004 50m wind speed map for Ohio to the right. 
Back in the 29 Nov 2009 Sunday Train, 
The Iowa Department of Transport has just completed the Chicago to Omaha Regional Passenger Rail System Planning Study, to select its preferred alignment for a detailed Environmental Impact Report. 
