On Tuesday, FS Links and global accounting firm KPMG made public the results of a pre-feasibility study for a 500-kilometer high-speed Hyperloop One network connecting Finland and Sweden across the Aland Islands. Using Hyperloop technology, passengers (or cargo) could get from Helsinki to Stockholm in less than 30 minutes, compared with 3.5 hours flying or an overnight ferry. Trips to Helsinki and Stockholm’s airports from city centers would be slashed to less than 10 minutes. An entire region of 5 million people would become a metro network, lifting property values and productivity along the route. (Click here to download the report.)
FS Links, a multi-stakeholder consortium formed to bring the Hyperloop to the Nordic region, will now move to begin the full project scoping study required to secure funding and approvals to begin construction of a test section along the route. Assuming the project is funded and clears regulatory and safety hurdles, the domestic networks could take about 8 years to complete and the international link four years after that. The domestic sections in Sweden and Finland are viable stand-alone projects and can start generating revenue before the sea-crossing tunnel is complete, reducing commercial risk for the overall project. Hyperloop One, meanwhile, is aiming to demonstrate a full-scale, high-speed test of its track, vehicle and controlled-environment tube in late 2016 or early 2017.
The next step began last Friday when Hyperloop One and FS Links signed a letter of intent with the City of Salo, Finland to begin a detailed study of the first stage of the network: a 50-kilometer route west from Salo to the coastal city of Turku. A second stage of the proposal covers a 140-kilometer eastward extension from Salo to Central Helsinki and its airport. That link would cut travel time from Salo to downtown Helsinki or the airport to 10 minutes, and the trip from the historic capital of Turku to the current capital Helsinki would be only 12 minutes. That compares with up to two hours by train today, and even longer driving.
Let’s get the biggest number out of the way: 19 billion euros. That’s the estimated capital budget for the entire project, including tube, track, civil engineering, vehicles, and allowances for risk, overhead and project delivery costs. It even includes 3 billion euros to build one of the world’s longest marine tunnels through the Aland archipelago. That works out to 36.7 million euros per kilometer, or $64 million per mile. That’s a lot, and on the high side of what a Hyperloop could cost per mile, to be sure. But the speed, frequency and convenience of Hyperloop (non-stop journeys with departures every few minutes and cruising speeds nearing 1,000 km per hour) would slash transit time across the region, increase property values on the route and unlock new travel demand by creating a super-metro area of 5 million people.
The study projects that a completed system would quickly begin generating a surplus over operational costs and a capital surplus as well within 10 years once you factor in the wider economic benefits to the region. The project pegs the value of time saved over existing transport modes at 321 million euros a year. Greater Stockholm is growing at 30,000 people a year and has a serious housing crunch with a 13-year waiting list for a rental apartment. Sweden has announced plans to to add 210,000 new commuter homes, which could to be built around a new Hyperloop station in a less-expensive site well beyond current city limits. With Hyperloop, residents of these new locations wouldn’t spend hours a day commuting, they’d be in Central Stockholm in less than 8 minutes. Engineers who live in Salo, Finland (home of thousands of talented tech workers idled by Microsoft’s closure of its Nokia business) can now access good-paying engineering jobs in either Helsinki or Stockholm.
Annual revenue and operating profit for the entire 500-km system is projected at 1 billion euros and 814 million euros, respectively, based on forecasts of 42.7 million passenger trips a year at an average ticket price of 25 euros. Most of those trips, some 35 million per year, will take place within Sweden or Finland at ticket prices below 20 euros. It was crucial to the FS Links study to base its revenue numbers on the prices people are already paying for current modes of transport.
The FS Links study reinforces the cost advantage and flexibility that a Hyperloop One system offers over other advanced transportation alternatives. Assessing the costs of different transport infrastructure projects is very tricky because so much depends on terrain, price of land, business model and project finance structure. We’ve said that, generally speaking, a Hyperloop system can be built at 50% to 60% of the cost of high-speed rail because Hyperloop technology requires less intensive civil engineering, its levitated vehicles produce fewer maintenance issues and its electric propulsion occupies far less of the track than high-speed rail. With Hyperloop, passengers glide most of the way above the track in a near-vacuum tube with little air resistance. At 36.7 million euros per kilometer, a Baltic Super Region Hyperloop line comes in well under the 100 million euros per kilometer infrastructure estimate for the UK’s London to Birmingham HS2 rail project, just as an example. But it's important to remember that Hyperloop is a new kind of transport technology that can adapt to its environment in new ways.
Who’s going to pay for all this? There are many private and public options at our disposal. Governments at the city, regional, national and EU level may choose to fund the project or provide loan guarantees to a private entity based on the wider economic benefits FS Links can deliver in time saved, higher productivity, reduced pollution and wear-and-tear on roads. A transformational infrastructure project of this nature will have a profound impact on property values, in which case it could make sense to create a special-purpose vehicle to capture the value uplift of strategic urban and economic development and use it to contribute to the capital cost of the infrastructure. Given the size of the project, it will likely be a blend of public and private sector capital.
A recent precedent supporting the economic case for a Baltic super-regional Hyperloop is the Oresund fixed-link across the strait between Denmark and Sweden. In 2000, the two countries completed an 8km bridge and 4km tunnel for road and rail joined by an artificial island in the middle. About half of travelers take the rail service, which connects Copenhagen, its airport and Malmo in Sweden. The economic gains to date from the fixed link—7.7 billion euros—has far exceeded the 2.5 billion euros it cost to build it. Daily commutes between Copenhagen and Malmo rose from 2,800 to 18,000, split equally between highway and rail. Immediately after the opening, the volume of goods transported by rail increased 33% and the Oresund region saw 76,000 new jobs created in the first decade after the bridge opening. The bridge-tunnel is supposed to pay for itself by 2037.
The European Union’s Transportation Commissioner Violetta Bulc has put “disruptive innovation” at the heart of the EU’s transport policy. We look forward to working with the relevant EU programs to prove not only how Hyperloop disrupts conventional thinking, but also delivers transformational benefits. Thanks to our partners and contributors who worked on the FS Links study: KPMG, Ramboll, Volterra, Setterwalls, and the Railway Consultancy Ltd.
-by our friends at Hyperloop One
Also published on Medium.