Conceptual basis for assessment of effects of magnetic levitation-based high-speed transport systems projects development

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Abstract


New economy forms a new value of transport service, in which the cost of time is becoming the most important factor in substantiation of investment decisions.

Aim: the aim of the work is to form the methodological basis and procedures of economic substantiation of magnetic levitation based transport.

Methods: the research builds on economic laws (keeping integration and high revenues) describing a new economic paradigm, methods of analysis of reason-and-consequence relation between speed and maximum revenue. The conclusions are based on representative summary of data about investment, operational and organisational costs of existing and designed high-speed lines.

Results: design of a two-dimensional matrix of combination of maglev technologies with modular intermodal configuration, which enables building a scheme of economic assessment using rules of modular and architectural innovations’ combination. Consequently, the assessment process for transportation pricing from the point of view of maximum revenues for manufacturers and due mobility for population.


INTRODUCTION

Transformation of transport systems, happening at the same time with changing of the entire economic space of the world under influence of digitalisation in the new technological paradigm, is ensured, in the first instance, by high speed of production and consumption. Change of behaviour of transport services consumer, that is passenger and freight forwarder, is connected with growth of value of time as an economic category. Commodity markets and producers become competitive when their goods and services meet consumers’ demands: “now and in the required quantity”. The cost of time, in case of its growth for transportation, leads to increase of financial cycle in the freight-forwarding company, thus turning into additional expenditures and even losses in the sales market, and in case of passenger - it leads to decrease of mobility, which influences incomes of households.

This article is the result of the research into efficiency of influence of high-speed transport (in this case the project of building of fundamentally new high-speed transport on the basis of magnetic levitation technologies HST MLT) on national economy, economic of manufacturing companies and population mobility. The purpose set in this research, namely to form a methodological basis and procedures for economic substantiation of innovative HST MLT, has been realised in terms of high-speed lines (HSL) of a new technological paradigm, which provide transportation with speeds over 500 km/h. Implementation projects for high-speed magnetic levitation transport, which are hence referred to as HST MLT, are the objects of the research.

The subject of the research is the dynamic procedures of forming of expenditures for design and construction of HSL, and weighing up dependences of the forecast revenues on transportation speed growth in freight forwarders and households.

The theoretical basis for the research became the transport systems theory as the general systems theory. Its evolution starting from 1930s led to understanding of “open systems”, that is the systems with constant exchange of the matter and energy with the external environment. This is an important note in our research in particular, since we have a logical and conceptual, cybernetic and mathematical apparatus of systems researches into development of the systems in a new technological paradigm. The growth of significance of the category of time fundamentally changes the essence of transportation. In this regard, we are talking about “high-speed transport systems” [1]. The HSL assessment procedures are based on new vectors of economic theory development: the theory of destabilisation, theory of resources, procedures and values, theory of value chains.

The informational environment of the research rests on the representative selection of data about investment, operational and organisational costs of high-speed mainlines in Europe, China and Russia. The dependent (homomorphic) and independent (single) data about parameters “expenditures– effects” in various HSL have been studied, in accordance with time, cost and technical parameters of their realisation.

The methods of the research are based on analysis of reason-and-consequence relation between speed and its growth effects, dynamic modelling of assessment of speed influence on revenues of manufacturers (freight forwarders) and population mobility.

1.      ASSESSMENT METHODOLOGY FOR SPEED EFFECTS IN HIGH-SPEED TRANSPORT SYSTEMS

The basis of any research is supported by theory, which is formed in cyclic process, including stages of observation, classification, forecast, and confirmation. The transport systems theory makes it possible to describe reason-and-consequence relations, which form new transport systems in every new technological paradigm. Basing on this, allowing for certain situations, the methodology, methods of research and analysis, and a set instrument for decision-making on realisation of new projects are formed [2, 3]. Today it is obvious that implementation of HSL projects with speeds exceeding 1000 km/h acquired broad discussion coverage, however the decision to construct those does not find neither political nor financial support. This is due to the following circumstances needed to be clarified:

 

  1. Ambiguity of assessment of near future dominance of emerging destabilising (i.e. breakthrough) technologies, including maglev.
  2. Destruction of “value proposals” (i.e. fundamentally different speed) of market dominating transport companies as well as change of structure of resources consumption and transportation procedures.
  3. Change of spacial organisation of transportation under conditions of new value chains development.

 

The magnetic levitation based high-speed transport projects are part of a new identity, which is called “digital economy”. In this case transport organisations can go beyond limits of the analogous age and should handle flow of digital goods and services, which in its turn will require using new concepts and tools of strategic vision. It is necessary to consider development of destabilisation processes or various types of asymmetrical threats, which instantly worsen the state of existing transport companies and destruct their value proposal. It needs pointing out, that today’s value proposal of transport is the speed of 450 km/h (maximum of wheel-rail technology). Consequently, there is necessity to develop methodology which distinguishes common competition from destabilisation (i.e. breakthrough technologies), assessment of potentially destabilising threats, and methodology that enables forming methods to assess effects of destabilising (i.e. breakthrough) projects.

The theory of destabilisation relies on processes of destruction of older economic systems and branches by virtue of creative destruction and creation of new systems [4]. The author of this theory, Schumpeter, claimed that destabilisation of branches is an integral feature of society’s development: successive innovations cycles create new branches of industry, destructing the previous ones. As the theory developed, there arouse the notion of destabilising innovations, together with understanding how exactly sustainable companies and industry branches lose to destabilising competitors [5, 6]. This understanding fully correlates with the process of implementation of HSL projects and is connected, in the first instance, with changes of customers’ preferences. In our case, it is growth of requirements of freight forwarders and passengers to growth of transportation speed. Innovative type of transportation, which is being created on the basis of magnetic levitation, is currently losing to conventional transportation by most of parameters, offered in the market by existing organisations, however it is innovative transport that meets new economy requirements. Existing companies predictable ignore the innovator, because their own clients are either unwilling to change or not willing to change at all their preferences. However, in due course innovative product considerable improves its properties, with its price and affordability remained at the same level. At the moment of critical accumulation of time, the innovator company’s product catches up by its properties the conventional companies products and develops into a profitable alternative for the their customers. The customers see a better offer and decide to leave for new company’s products.

In developed economics, ex-leaders come to find out that their business models and products have become obsolete, and are therefore not able to compete with a destabiliser. This theory is confirmed and checked in many cases from various industry branches, with high-speed transport being the most vivid among them. It is obvious today that speed generates growth of contribution margin (maximal profitability) of freight forwarders and population mobility, that find profit in growth of household’s incomes [7].

The theory of resources, procedures and values provides explanation, why transport companies, that have gained foothold in the market, so hardly adopt “disruptive” innovative technologies [8]. It resources (what is available in transport company, energy in the first instance, that ensures transportation), procedures (company’s established operational chart), and values (what company strives for) that in general determine advantages, disadvantages and “blind areas” of company’s strategic development. The company can successfully utilise disruptive technologies only when it owns required resources (sources and generation of magnetic energy), when its procedures foster, but not hinder the required actions, as well as when corporate values, in particular business capitalisation growth, increase of incomes and market shares, of the service offered make it possible to a promising project a prioritised one.

The change of value of transportation service is explained by two constituents. The first one is time or speed of transportation as it is. The second one is the time spent for enquiry, order placement, calculation, and everything that makes door-to-door service. The total cost of the ownership of the value “transportation” is ensured in the case when average costs long-term curve of transport system acquires descending character. In case of railway transport systems it is possible when the high-speed projects confirm the effect of revenue growth, explained by increase of density of network and transportation speed.   Specific costs decrease as the capacity of railway grows, because the fixed price of railway lines supply is distributed among gradually increasing transportation volume. In order to identify the effect of speed of railway network, high degree of infrastructure utilisation with the increase of transportation speed is needed: the more the utilisation degree is, the more the infrastructure economy is and the more the revenues for owner and the customer are achieved.

Implementation of MLT-based high-speed project is associated with transport company’s organisation: whether it is integration of the entire production within its own capacities or concentration solely on strictly defined types of production. In the latter case, there is a chain of price forming which will further include all intermodal services, because freight forwarder and passenger need the integral transportation time [9, 10]. The problem is that the company should have control over all kinds of activity (or combinations thereof) while forming the price, while these activities directly influence the customer’s dependence on speed (i.e. transport service consumption time). Direct control or integration with other companies, which render intermodal services, is always a complicated choice due to a great number of reasons. In the first place, the integrated architecture becomes less flexible as compared to other types of architecture. At some point, it may happen that the effect of such cooperation with other companies is completely unpredictable. However, it needs taking into account that the major effects of any HSL can be identified only in intermodality of all services, engaged in door-to-door transportation. A way out of this is the modular architecture which simplifies disintegration, yielding technically, but it enables companies to react more flexibly to customers’ demands. In accordance with the major rule of the theory of price forming chains, integration should affect those zones, which most need improvement (container and passenger transportation), because the carrier can ensure they will acquire profit in the longer-term perspective.

2.      RESULTS OF COMPARATIVE ANALYSIS OF WHEEL-RAIL HSL AND MLT-BASED HSL EFFECTS

2.1    Results of comparative analysis of investment costs of wheel-rail HSL and MLT-based HSL

Development of new transport technologies, which change speed of transportation, for the last 20 years has demonstrated a qualitative leap from a progressive change of TGC recorded speed of 574.8 km/h (test run) to the speed of 1000, 1200 km/h. This transition is explained by emergence of fundamentally new technologies and capabilities to realise them. Experts’ opinions confirm that electrically driven wheel-rail has its maximum economically reasonable speed limits. This limit is realised on designated tracks. For the time being wheel-rail transport effects meet the requirements of investors and, consequently, demand for them is guaranteed. All existing and designed high-speed lines are realised with support of state or on the basis of inter-country agreements, the interest in which is explained by multiple effects of mixed transportation. But unfortunately, the income curve of these projects tends to decrease.

The economy of a new technological paradigm demonstrates an ideal combination of growth of value of time (speed) and expectation of revenue growth of transport systems based on fundamentally new solutions. From the standpoint of investment economics and operation of high-speed transport systems, the most interesting technology is the one employing the effect of magnetic levitation with a linear traction motor. This technology overcomes the following limitations of all previous transportation technologies:

 

  1. the technology rests on vacuum transport tube, in which vehicle are not in contact with the guideway;
  2. transport mode, which is capsule in the form of hermetic low-capacity, using levitation accelerates with the help of linear synchronous motor up to a nominal speed and further travels within the tube without additional power consumption;
  3. technology exceeding the allowable wheel-rail friction coefficient requires different infrastructure and energy types;
  4. with the advent of distributed register and blockchain technologies, the expenses for organisation and management of transportation decrease considerable.

 

The characteristics given above significantly change the structure and volumes of investment costs of high-speed maglev lines, which distinguishes them from existing wheel-rail high-speed lines both by volumes and structure.

The process of establishment of any transport system (high-speed to a greater extent) requires large-scale investment. However, the cost of construction of HSL is individual for each project, state, and is dependent on many factors. Below are the generalised factors, determining the cost of HSL of any speed, as follows:

 

  1. climatic and geographical, engineering and geological conditions of the HSL route, that determine discrepancies in rules of and requirements for design and construction of high-speed railway infrastructure;
  2. planned train speed (e.g. up to 300 km/h, up to 350 km/h, up to 400 km/h, and over 400 km/h for wheel-rail, and over 500 km/h for maglev), because as the speed increases, so do the requirements to infrastructure, rolling stock and traffic organisation;
  3. HSL organisation model, which includes any new construction of high-speed lines, or reconstruction and modernisation of existing railway lines, and operation model, i.e. designated or mixed traffic.

2.2    Сonsideration of wheel-rail and maglev HSL

From the standpoint of methodology, consideration of effects of wheel-rail and maglev high-speed lines is reasonable to carry out using as the basis the major money flows of the projects in comparison, in terms of the following constituents:

 

  1. capital costs for infrastructure, transport modes, organisation, construction and management of the project;
  2. operational costs associated with infrastructure maintenance, organisation and management of transportation;
  3. incomes from transportation and additional services.

2.3    Results of comparative analysis of investment costs of wheel-rail and maglev HSL.

The analysis of average capital costs for existing wheel-rail high-speed lines and designed high-speed maglev lines in terms of separate items of the costs can be compiled only on the basis of experts’ assessments.

 

Table 1. Comparative characteristics of the contents and share of capital costs (fragments of costs) of existing HSR.

Types of costs

(fragments of costs)

Share in overall capital costs, as per classification of UIC, of high-speed lines construction, %

 

 

High-speed lines

 

Share in overall capital costs, as per Transrapid International GmbH, %

 

 

 

Maglev

Land allocation and planning costs, including feasibility study, design, land purchase, and other costs, e.g. legal and administrative fees, licenses, permits, etc.

Up to 10 %

6 %

Infrastructure erection costs, including all costs associated with land preparation and construction works.

Up to 25 %

Up to 60 %

Additional construction works costs, such as signalling, electrification, communication, safety systems, etc.

Each of these elements usually makes 5-10% of all the investment volume (up to 50% in total).

15 %

Other costs

15 %

19 %

Calculated using data: [11, 12]

 

According to the UIC research data, the cost of construction of 1 km of HSR, considering a selection of 45 projects, varies from 6 up to 45 million euros, whereby the average figure is 17.5 million euros. Limiting the selection of projects to 24, the range varies from 9 up to 39 million euros, with the average figure of 18 million euros [11]. The exceptions are the projects delivered in Asia (China, Japan, Taiwan, South Korea), where the cost of construction considerably outstrips the average European figures, including for geological reasons.

As to the Russian projects of HSR, the Moscow−Ekaterinburg section of the Moscow−Kazan HSR, as per February 2017 data, is estimated 24.5 million euros per one kilometre, which out outstrips the average European figures [13].

However, the Saint-Petersburg−Moscow Maglev Line was estimated 18.75 million euros per kilometre, considering the cruise speed of 500 km/h and travel time of 1 hour 19 minutes.

2.4    Results of comparative analysis of operational costs in wheel-rail and maglev high-speed transport.

Starting from operation of any high-speed line, the operational costs emerge, which include two major types:

 

  1. costs associated with operation, technical maintenance and repair of railway infrastructure and rolling stock;
  2. costs associated with organisation and rendering of services of railway transportation.

 

The order and sequence of formation and distribution of these costs in every country can vary, depending on degree of vertical integration between the owner of the infrastructure and carrier. Within the present research, these peculiar features are not considered.

         In the Table 2 below, the generalised data about maintenance costs of wheel-rail and maglev high-speed lines in four European countries are presented. We do not analyse costs connected with organisation and rendering of passenger and freight transportation services.

 

Table 2. Aggregate operational costs of high-speed lines projects

Operational costs

Wheel-rail high-speed lines, euro/km

Maglev high-speed lines,

euro/km

Infrastructure

0.48

0.19

Rolling stock

1.29

0.37

System as a whole

1.77

0.56

Compiled as per: [11, 12].

 

There are even more discrepancies that can be observed in the structure and volumes of operational costs of HSR and MLT. This part of the analysis a most significant factor in the decrease of the costs of transportation and, consequently, in the increase of investment attractiveness of the project.

Analysing operational costs change dynamics depending on train speed change, one should note non-linearity and multiple-leveledness of relation between speed and operational costs. In particular, as the speed grows, the turnover of rolling stock and volume of works increase as well. And it needs pointing out that the increase of rail transport speed results in train motion resistance and associated additional costs of fuel and power, required for traction, which is not found in maglev systems motion. The figure of maximal revenue of the freight forwarder-manufacturer is one of the most important parameters of the model of assessment of direct transport systems effects. In the first instance, it depends on the price for high-speed transportation and is formed by virtue of tariffs, which include consumers’ demand, costs of transportation and other factors influencing the final revenue figures. The high-speed trains tariffs, depending on demand in Europe, vary from 120 up to 200 %, as compared to conventional passenger trains.

This is explained by both the necessity to ensure payback of high-speed transportation and advantages of this transportation, which is characterised by time saving of freight forwarder and passenger, provided with high-level service. Double tariff growth already today is justifying a special value of one’s own time management and its saving. Our researches prove that in case of increase of speed up to 1000 km/h, transport service consumers will be ready to pay maximal price against the cost, i.e. the estimated profitability of transportation can make up to 300 %, depending on destination and demand, considering optimal intermodality, of course, ensuring final consumption of the transportation service. This statement is built on analysis of growth of maximal profitability of freight forwarders, depending on time of reduction financial cycle in manufacturing goods.

3.      DEVELOPMENT OF PROCEDURES OF EFFECTS ONFIRMATION ANALYSIS AND PROFITABILITY ASSESSMENT OF HIGH-SPEED MAGLEV TRANSPORT (HSL MLT)

Unlike other economy branches, transport systems are not capable of rapid changing. In transition to transportation service of a new quality, transport companies will need integration in all interfaces in the pricing chain, which will be subject to change. To give such a product as MLT maximal consumer properties and reliability, a special type of company organisation and integration will be required. It is integration that is capable of ensuring the required consumer properties of transportation service, required for freight forwarder and passenger, as well as decreasing its price. In the world, the following tendency is observed: the incomes of the companies which specialise in assembly of the modular service are falling (e.g. conventional companies of railway transport), whereas the incomes of the firms producing especially important subsystems, e.g. HSR, are growing. The undertaking integration should not only be unafraid of development of modular structures, on the contrary, they should foster their development.

It follows that the effect of two economic laws, describing behaviour of the organisation in a new technological paradigm, has a direct relation to transport systems development, and their understanding can serve as the foundation of economic description of HSL MLT.

First of all, the law of conservation of integration, in accordance with which, if at one stage of price forming there is interdependent architecture required (because one needs to optimise technical characteristics of a service), then the architecture of products and services at neighbouring stages should be modular and compatible, and only in this case will it be possible to increase the level of technical characteristics [14, 15]. Further on, the law of conservation of high income confirming that a company receives a maximal income only when it finds solutions to complicated technological problems in the form of highly integrated systems.

In other words, economic description of HSL MLT projects should be built on modular structure, which will ensure for investor revenue growth at the expense of new modular architecture, in case revenue falls at one stage of price forming. This architecture should include an extra-market environment as well, e.g. transport service consumers’ behaviour, which can be ensured by neural networks.

The main result of this research is creation of 2D matrix of combination of maglev technologies and intermodal configuration. In general, it consists in two dimensions, where the vertical is a technological change (new one against older one), and horizontal is a dimension of architecture and configuration (new one against older one). Further on, we have two options for combining the technology of the HSL MTL with the novelty of the architectural configuration.

The first option is to consider magnetic levitation as a radical innovation with the previous architecture. Thus, the scheme of economic substantiation should be build using rules of modular innovation.

The second option is to combine technological innovations (maglev technologies) with the architectural innovation. In this case the entire process of transportation price forming should be estimated from the standpoint of maximal profitability of freight forwarders and due level of population mobility.

4.      CONCLUSION

The methodology of assessment of economic efficiency of high-speed transport systems based on magnetic levitation should correspond to new vectors of economic theory development, which adequately describes a new technological paradigm and enables reliable description of transport systems economics, corresponding to this paradigm. The fundamental change of assessment of time (speed) forms a new value of transport service, that cannot be satisfied by existing freight and passenger transportation technology.

 The weakness of the modern methodological support of substantiation of fundamentally new technological solutions considerably complicates their implementation, especially on transport. Strategic capabilities of transport companies’ activity should be assessed from the standpoint of current and future changes in the economy. In this case, the methodology suggested to economically substantiate HSL MLT projects on the basis of modular intermodal configuration enables forming methods and procedures of economic assessment of these projects.

Natalya A. Zhuravleva

Emperor Alexander I St. Petersburg State Transport University

Author for correspondence.
Email: zhuravleva_na@mail.ru
ORCID iD: 0000-0003-3566-9225
SPIN-code: 8599-5636

Russian Federation, 9 Moskovsky ave., St. Petersburg, 190031

Doctor of Economics, Professor

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