I would electrify the major corridors around the country, and the longer distances would be diesel. I would have FRA approved versions of the Talgo S730 for higher speeds/high speeds
http://www.railpictures.net/viewphoto.php?id=403145&nseq=6 and FRA approved versions of the Stadler KISS's and FLIRTS for regionals and/or commuter services.
http://www.railpictures.net/viewphoto.php?id=405943&nseq=7
In response to the previous post, where would the money for this project come from and why should it be done?
As an aside, the original poster's passion for electrification sounds a lot like the insistence on open access (and Roadrailers) from a previous member of these forums.
zkr,
Why would you do such a thing and with whose money? Just because something is pretty does not mean it is a good idea.
Mac
PNWRMNM The fact that no one is stringing wire is evidence that the expected return on investment is less than on other projects. Mac
The fact that no one is stringing wire is evidence that the expected return on investment is less than on other projects.
The question, of course, is whether the investors doing the expecting are correct. In 1999, during the dot com bubble, the stock market valued webvan.com at $6 billion. CSX and NS valued Conrail at $10 billion. If capitalists are by definition always correct, then webvan.com had a greater expected return on investment than either the portion of Conrail acquired by CSX or the portion acquired by NS.
Except that webvan.com promptly went bankrupt without ever showing a profit.
This isn't an irrelevant example: I recall circa 2000 reading laments from railroad execs that Wall Street wouldn't give them the time of day because railroads were viewed as obsolete, low-ROI industries compared with the dot coms. Today railroads get much more respect, but at the same time, an enormous amount of capital is being poured into social networking companies whose business plans don't quite explain how they will ever show a profit. Might it be better invested in electrification?
In the long run, capitalism may optimize the allocation of financial resources. In the short run, not so much.
References: http://www.forbes.com/sites/greatspeculations/2010/12/13/the-biggest-ipo-flops/ and http://articles.latimes.com/1997-06-24/business/fi-6518_1_norfolk-southern.
ecoliThe question, of course, is whether the investors doing the expecting are correct. In 1999, during the dot com bubble, the stock market valued webvan.com at $6 billion. CSX and NS valued Conrail at $10 billion. If capitalists are by definition always correct, then webvan.com had a greater expected return on investment than either the portion of Conrail acquired by CSX or the portion acquired
ecoli,
I have never claimed, and I do not think anyone else has either, that capitalists are by definition always correct. Not even the efficient market hypothesis does that. The notion is obvious rubbish.
There have been numerous bubbles in history taking as a working definition of a bubble a situation in which investors believe some asset can only go up in price without regard to the fundamental facts, earnings or reasonableness of earnings projections. I would, and have, argued that KCS stock selling for 24 times earnings when NS was selling at 12, indicates investors are placing more faith in KCS's projected growth than is reasonble.
The good thing about capitalist bubbles is that they self correct. Political bubbles, or restated political misallocations of capital, do not self correct.
As to electrification of railroads you have two mature financially sophisticated industries. The math on the projects is straight forward. Does that mean the planners can predict the future beyond that it will be much like the past. No, it does not. Is it reasonable to assume that government planners are better at predicting the future than private planners. I do not believe that either.
I do believe that the government has the capability to continue totaly idiot policies long beyond the time that the policies have been demonstated to be idiot. For that reason the less medling with the economy the government does the better the quality of life will be for everyone, with the possible exception of bureacrats and politicians who frankly I do not give a damn about.
This thread is becoming very ideological and political.
C&NW, CA&E, MILW, CGW and IC fan
ecoliThe question, of course, is whether the investors doing the expecting are correct. In
It's different. All you really need to look at with respect to economics of something like railroad electrification is (1) opportunity cost, and (2) stranded cost.
A 'proper' capitalist is going to look at effective ROI... and a primary criterion is 'what other place could I put the investment where it would earn more money, or involve less risk' (and preferably both). As noted, the electrification involves significant infusion of capital, for only delayed income, and the advantages are far more long-term than most analysts are looking. So why allocate capital to electrification, when the same investment could have been used for multiple projects with greater net profitability or growth potential...
Meanwhile, an investment in catenary is basically only good for... running electrified rail service. (My approach is somewhat different, but I'm not pretending it's going to be 'sold' to investors as straight railroad electrification...). There is a huge amount of construction that isn't useful for many other purposes, but that is tied to ongoing profitability of railroad services, and that does not 'scale' well should the volume or type of those services change downwards. The electrical utility companies and the pre-Internet telephone companies understood the issues very well ... and often had to suffer when technology changes left them having to pay finance charges on very large amounts of obsolescent or outmoded property. (Anyone remember the AT&T medium-wave transatlantic station complex, or the investment in runways and fueling systems at Gander, or the fun involved with buildings equipped with the old type of multimode fiber with the little void defect up the middle...)
Webvan failed because its proponents didn't understand the right business model for an Internet company. I still suspect that if Bezos had gotten involved with it and run it properly, as an adjunct to a service already needing last-mile random access, it could have been made to work. As it was, it's a pity nobody remembered REA...
... and anyone who mistakes market cap for actual invested value needs to go back and reread their copy of Investing 101 or whatever... ;-}
schlimm This thread is becoming very ideological and political.
Many of the issues dealing with railroads have political ramifications of one sort or another. As long as posters treat each other with due respect, I see nothing wrong with bringing in ideology or politics.John Timm
desertdog schlimm This thread is becoming very ideological and political. Many of the issues dealing with railroads have political ramifications of one sort or another. As long as posters treat each other with due respect, I see nothing wrong with bringing in ideology or politics.John Timm
Overmod A 'proper' capitalist is going to look at effective ROI... and a primary criterion is 'what other place could I put the investment where it would earn more money, or involve less risk' (and preferably both). As noted, the electrification involves significant infusion of capital, for only delayed income, and the advantages are far more long-term than most analysts are looking. So why allocate capital to electrification, when the same investment could have been used for multiple projects with greater net profitability or growth potential... ...Webvan failed because its proponents didn't understand the right business model for an Internet company. I still suspect that if Bezos had gotten involved with it and run it properly, as an adjunct to a service already needing last-mile random access, it could have been made to work. As it was, it's a pity nobody remembered REA... ... and anyone who mistakes market cap for actual invested value needs to go back and reread their copy of Investing 101 or whatever... ;-}
...Webvan failed because its proponents didn't understand the right business model for an Internet company. I still suspect that if Bezos had gotten involved with it and run it properly, as an adjunct to a service already needing last-mile random access, it could have been made to work. As it was, it's a pity nobody remembered REA...
Though I have no expertise, I find some of the specific arguments against electrification persuasive. What I don't find convincing is the argument that I quoted from PNWRMNM that if it made sense, somebody would already be investing in it. Many things are thought not to make sense till somebody invests in them and succeeds.
I also don't find it convincing when people cite Solyndra as proof that government can never invest prudently, unless they agree that venture capitalists (who also invested in Solyndra) can never invest prudently, and that the private sector, which invested in the Milwaukee Road, the Rock Island, webvan.com, pets.com, myspace.com, Enron, CIT Group, WorldCom, etc, can never invest prudently.
As for market capitalization, it's a measure of the ROI expectation of investors whether or not their investment flows to the company in question. Imagine you're a Wall Streeter with $6B in your pocket: if you prefer to buy shares in the webvan.com IPO rather than lending the money to a railroad for an infrastructure project, that indicates you expect a better ROI from Webvan.
As for Bezos, I'd be more likely to believe he could have made Webvan profitable if he had demonstrated that consistently with Amazon itself. Henry may be right that Wall Streeters exhibit a myopic focus on short term results with respect to railroads, but they sure don't have that problem with Amazon:
http://www.slate.com/articles/business/moneybox/2014/01/amazon_earnings_how_jeff_bezos_gets_investors_to_believe_in_him.html
http://www.businessweek.com/articles/2013-10-24/same-old-amazon-all-sales-no-profit
PNWRMNM The good thing about capitalist bubbles is that they self correct.
The good thing about capitalist bubbles is that they self correct.
So after the bubble self-corrects, can we get back all the money that was wasted on Foosball tables, masseurs, and catered dinners for dot com programmers, and spend it on a railroad infrastructure project?
in all and every business there is both internal and outside the company politics. the best example is the transcon of UP/CP started in the civil war. somethings never change. thank go for the UP/ "uncle Pete"/ union pacific railroad. we will see the 'BIG BOY" aliving breathing behemouth again. everything old is new again.
ecoli PNWRMNM The good thing about capitalist bubbles is that they self correct. So after the bubble self-corrects, can we get back all the money that was wasted on Foosball tables, masseurs, and catered dinners for dot com programmers, and spend it on a railroad infrastructure project?
Of course not. The point is that private economic bubbles will self correct, while political bubbles will not self correct. Think of the Soviet Union for example.
A question was asked as why no major electrications. The answer was given that in the diesel age, as opposed to the steam age, it doesn't add up economically. Now, given that fact, why should electrication proceed? This is the question that might be asked to stay on topic.
daveklepper A question was asked as why no major electrications. The answer was given that in the diesel age, as opposed to the steam age, it doesn't add up economically. Now, given that fact, why should electrication proceed? This is the question that might be asked to stay on topic.
Perhaps part of the answer is that outside of the NEC, there has been little emphasis on fast, frequent, convenient passenger rail service in the US. This is mostly because only the NEC (and part of the MI line) is owned by a corporation which runs passenger trains; the rest are private freight lines where electrification has been judged to not be cost effective.. Another related part is that many of the distances between metro areas in the US are not well-suited to passenger rail service.
So the answer is, given the current structure of US railroading, electrification will not proceed unless Diesel fuel becomes too expensive and/or emission standards become unattainable with Diesel.
I can think of two potential reasons offhand; I'm sure there will be more. The increase in traffic-handling potential (see Don Oltmann's blog piece for an amusing example) may become relevant at some point. Another is shared infrastructure with the commercial AC power grid, and the use of dual-mode locomotives as peak or distributed generation capacity.
I do think that some Federal contribution toward the cost of the electrification infrastructure -- even if that only takes the form of enhanced tax credits or whatever -- will be necessary. Welfare-economic concerns do apply, although I'm not going to debate them here.
Carriers have been spending Billion$ over the past several years improving their on line clearance problems in order to be able to accomidate 20 foot 2 inch double stacks and auto racks. How much additional clearance would a catenary require? With current locomotives being approximately 16 feet high, how high would pantographs have to be to reach the wire at proper clearance above the 20 foot 2 inch cars?
Never too old to have a happy childhood!
Catenary would have to be ~24 feet above the rail to provide clearance for a 50kV contact wire and anything at ground potential (e.g. bridge, tunnel roof, etc) would have to be about 2 feet above that. Somewhere around 24 feet above the rail has been the standard height for contact wire in heavy electrifications in open country for a century, so that's not a show stopper. Maintaining adequate clearance between the top of a double stack AND maintaining clearance between the catenary and any bridge, tunnel or other such thing may very well be a show stopper.
When the Southern California Regional Rail Authority issues their report on the proposed electrification of the railroads in the LA basin, half of the estimated cost was just for increasing clearances.
- Erik
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