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Lytton Advisory was in the Middle East last year for an assignment. It got us thinking about comparisons of urban transport systems and what constitutes value for money.
Here is one to consider. A few simplifications have been made to bring capital cost, new route length and population into perspective. These projects are at the core of these cities’ transport systems.
Brisbane’s Cross River Rail is building 10.4 km of new rail line and four new stations. A further eight existing stations will be upgraded. The cost is stated to be A$5.4 billion or around US$3.5 billion.
Cross River Rail – US$336 million per kilometre. The population of Brisbane is 2.5 million. Cross River Rail costs about $134 per person per kilometre.
Riyadh is installing a complete metro system for US$22 billion. This will build six metro lines totalling 176km with 85 stations.
Riyadh metro – US$125 million per kilometre. The population of Riyadh is 6.9 million. Riyadh metro costs US$18 per person per kilometre.
Station densities on the new routes are one every 2.6 km for Cross River Rail and one every 2.1 km for the Riyadh metro.
It appears that Cross River Rail is more expensive on a per new kilometre per resident basis by a factor of 7.4 times. There are plenty of reasons why Cross River Rail might be more costly, but surely more is going on than just tunnelling and labour costs.
So is Cross River Rail better value for money than Riyadh metro?
Thanks, Gene (Adept Economics) for hosting me on an episode of your podcast series Economics Explained. It was great we were able to unpack a few things about city infrastructure for your listeners, particularly regarding Brisbane’s Green Bridges program and Cross River Rail.
Municipal waste-to-energy (WTE) systems incorporate significant uncertainty and risk. However, they provide ways to achieve significant environmental and economic sustainability for communities. With growing uncertainty, there are significant challenges around when and how to exercise flexibility.
Flexibility is important because as a mechanism it helps ensure better sustainability for WTE systems with long-term lifecycles. Flexibility of capacity expansion, in particular, is an important consideration given the expenditures that are typically required. Multi-stage stochastic modelling can help develop an optimal decision rule to guide decision making on capacity expansion using a real options approach.
Research on the expected net present value (ENPV) arising from flexible design suggests significant improvements are possible over the fixed rigid design in terms of economic lifecycle performance. The ability to make multi-stage decisions in any time period based on available information as uncertainties are resolved is an advantage over lifetime capital investment decisions that are typically set in the first year of WTE projects.
Through work with UTL Utilities, we bring strong cost benefit analysis and real asset option approaches to this kind of infrastructure investment.
For it is in giving that we receive. (St Francis of Assisi)
A big thank you to our clients for the opportunity to work on very interesting projects during 2019. In a sentence, it has been a year of electrification, explosives, timber, leases, water, telecommunications, free zones, customs and trade across Papua New Guinea, Saudi Arabia and Australia.
Personally, I have been blessed to work some very smart people who have generously shared their experience, skills, talents and good humour in these projects.
Wishing everyone all the very best over the holiday season.
Work with Maxwell Stamp colleagues continues in Saudi Arabia. Gene Tunny and I got a great view of the significant changes occurring right now in downtown Riyadh, including the construction of the city’s USD22.5 billion metro (176km of track and 85 stations). We are on the Sky Bridge at the Kingdom Center, one hundred floors above the city.
Intra regional trade and the effectiveness of 147 active zones (economic, industrial and free) in the Middle East will be under consideration by Lytton Advisory. The firm has been given a mandate to develop advice for the Gulf Cooperative Council Secretariat on the next phase of closer economic cooperation between member states. This will involve a baseline review of existing economic zones, careful analysis of customs arrangements between Gulf states, an examination of World Trade Organisation implications and economic modelling of preferred solutions. Lytton Advisory is looking forward to working with colleagues from Maxwell Stamp in the Middle East, building on engagements in the region over the past three years.