There is pretty much no way for me to say that the Hyperloop has anything to do with my 3D blog. I don't care. This is one of the coolest technologies going and since it will be happening in 3D space, I'm going to count that as good enough. So, what is the Hyperloop and why should we be interested in it? Read on and see why this idea is crazy enough, it just might work. This post will explore the back of the envelope business case for the hyperloop and argue that we are ready to move on to the next step in testing it's economic and practical feasibility.
Hyperloop basics
The Hyperloop is all about travelling from point A to point B more quickly than existing modes of transportation. It is a compromise between exciting, not yet developed flying cars and boring old-timey trains. It combines the speed of air travel with the use of alternative fuels and a cushion of air to free trains from centuries of steel on steel friction.
At its most basic, the Hyperloop involves a long straight tube, generally hundreds of miles long, and a capsule that ferries passengers or freight along the tube while gliding on a cushion of air (kind of like an air hockey table except the air comes out of the puck rather than the table). The capsule floats through a low air pressure tube starting out by being pulled along by strong, sequential magnets that get the capsule going and then the capsule's speed is renewed periodically along the route with more magnets. Since that probably didn't help much, a picture is worth 1000 words:
Well, I think that clears things up. To get a much clearer description and to read more in depth about the idea and its origin you will want to read Elon Musk's initial treatise titled Hyperloop Alpha. It goes into a surprising amount of detail for an initial concept piece.
So, is the hyperloop a good idea? I think that depends on a couple things:
This post is devoted to starting to explore that question -- Is the hyperloop a good idea. I will be discussing the second question above, does it make economic sense. While I am not an economist (although I married an Econ major), I always like to start any discussion of the utility of a new technology with a back of the envelope business assessment. For the sake of intellectual honesty, I start off with the hypothesis that the hyperloop could be a great idea. That said, a lot more needs to be figured out at this point.
Musk's Hyperloop Alpha explains in summary form the basic elements of system design, tube design, capsule design, station design, propulsion design, and safety design. The safety design discussion is important to me because someone very near and dear to me was severely injured in the Amtrak 188 derailment in Philadelphia. The accident, whatever its original cause, was fundamentally caused by the train going 100 mph on a curve with a speed limit of 50. This was an avoidable accident. I would love to see a company who cares about safety take on this project rather than to continue to subsidize the folks at Amtrak who said with a straight face that their experts had done the math and determined that it was not possible to get up to 100 miles per hour on that section of track. Time to get some new experts.
While I may revisit some of the areas above in future posts, today I just want to apply the back of the envelope business case to this idea. So here is my preliminary take.
Economics of the hyperloop
Elon Musk estimates that the San Francisco to Los Angeles hyperloop could be built for about $6 billion. I'm not going to challenge that number at this point as I don't understand its basis well enough to know how realistic it is. If accurate, however, that would be less than 10% of the proposed California High-Speed Rail, which is currently expected to cost around $68.4 billion.
Revenue opportunity
Here is my back of the envelope assessment of the hyperloop revenue opportunity:
SF/LA Daily passenger revenue
Assumptions:
If you assume that roughly 1,500 people per hour (max of 28 x 30 = 840 times both directions) can travel between SF and LA and that they will do so about 16 hours per day (say 6 a.m. until 10 p.m.), that gets you 24,000 individual trips per day. If we ball park the price at $50 each way, then we are talking about $1,200,000 per day in passenger travel revenue. If you set up a sandwich shop at each station and keep it well stocked with cold beverages, I think we can safely bump that daily number up to $1,205,000.
SF/LA nightly freight revenue
The Alpha document suggests that for about 25% more, we could build a larger tube that would permit the passage of capsules that could carry vehicles and freight in addition to passengers. I'm going to assume for this assessment that this larger tube system is not built but rather that the system uses some capsules with the seats taken out for the carriage of freight during the overnight period when passenger demand could be expected to be very low.
Let's assume that freight companies think that this is a good way to lose their trucks and cut costs. My freight charge numbers come from my reading of DAT Solutions website (any mistakes are mine) which suggest $700 per ton for the trip based on 350 miles at about $2.00 per mile (including fuel charge). If you assume that each pod can carry three tons of freight (in capsules without passenger seats), then at $700 per ton, that is up to $2,100 x 60 trips per hour (i.e., max of 30 trips per tube per hour). Note: I came up with three tons per load since we know the capsule plans to carry 28 people times an average of 175 pounds per person (a gross underestimate since this is the U.S. population we're talking) without accounting for the seats is about 5,000ish pounds. The actual specs have a higher number for capacity (2,800 kilograms or 6100 pounds). So, say you can get $700 per ton, the max nightly freight revenue would be $700 x 3 tons x 60 trips x 8 hours or $1,008.000.
Preliminary Conclusion
Total daily revenue then would look to max at around $2.2 million or $800,000,000 per year. If you had no operating expenses, then the payback for the initial construction costs would be 7.5 years. Nobody expects payback that quickly for a project this size; normally you would need payback somewhere in the 15-25 year range. The good news is that if I'm off by only 50% in my revenue projections (or you don't assume that you have no operating expenses), then payback could come in as few as 15 years -- just in time for the planned $68.4 billion California high speed rail project to get online. Admittedly, this discussion covers only payback on initial costs, but there is reason to believe that operating costs may not be as large as similar transportation projects.
The Hyperloop Alpha document makes the following estimates on revenue and some operating cost analysis: "Transporting 7.4 million people each way [my note: that is a little over 20,000 people each day each way] and amortizing the cost of $6 billion over 20 years gives a ticket price of $20 for a one-way trip for the passenger version of Hyperloop." The document provides more information on the construction and start-up costs than on operating costs, so that is harder to estimate. But in light of the fact that the document also asserts that by using solar panels on top of the tube the whole system could be self-powering, that would be one large operating cost (fuel) that is rolled into the upfront expenditure but would end up make the operating costs presumably lower than other forms of transport like trucks, airplanes and trains.
Next Steps
I would love to hear from folks who have better insight into realistic revenue and operating expense projections. As I wrote in my earlier post on back of the envelope business cases, the exercise is really just intended to be a thought experiment in order to make sure that there is some hope that the enterprise could make economic sense. I don't see any reason at this point that it couldn't make sense. From my perspective, it now becomes time to build out a test system, work to confirm system feasibility and to start to push harder to understand real numbers.
And that is exactly what we have learned is starting to happen. The SpaceX Hyperloop Pod Competition rules were recently announced and they are aiming toward a January 2016 Design Weekend at Texas A&M in College Station, Texas. A test track is being built where a number of designs will later be tested in what I think is one of the most amazing crowd sourcing efforts of all time. It is almost like we decided to go to the moon by asking all of the smart college kids and aeronautics companies to work up their ideas for a giant corporate sponsored science fair devoted to how to do it. I am truly cheering for this effort to work. What do you think?
NOTE: The remainder of this post is what I would normally put in the Reading Room if this topic were remotely related to 3D.
Sites devoted to or covering hyper loop efforts:
Hyperloop Tech
One of the first two announced groups actively seeking to execute on the hyperloop idea. These guys include venture capitalists and sciencey types so it has to be successful. They write:
WE ARE DEVELOPING THE TECHNOLOGY AND HARDWARE TO MAKE HYPERLOOP A REALITY. We design, build and test every aspect of the world's next transportation system - Hyperloop. We are growing a world class team to solve and execute every aspect of this bold vision. We are led by a distinguished board of directors and are financially backed by leading investors Formation 8, Sherpa Ventures, Zhen Capital, David O. Sacks and others.
Hyperloop Transportation Technologies
This is the other of the two announced groups working on making the hyperloop a reality. They talk about making the trip from Washington DC to New York City in 30 minutes. That would benefit me and as I said above, I am no fan of the current Amtrak effort. Hyperloop Transportation Technologies is using a novel approach to starting the design/build effort by asking engineers, designers, architects, and anyone excited about the Hyperloop to work a minimum of 10 hours per week in exchange for stock options. I'm working on understanding how they plan to make this work.
SpaceX
SpaceX has taken a very interesting approach to promoting Musk's idea. They are supporting the effort to prototype the system by building a one mile test track and holding a competition to further the design efforts on the Hyperloop pod. This is what the folks at SpaceX have to say:
Neither SpaceX nor Elon Musk is affiliated with any Hyperloop companies. While we are not developing a commercial Hyperloop ourselves, we are interested in helping to accelerate development of a functional Hyperloop prototype.
Having read this disclaimer several times, I wondered if SpaceX's lawyers always wrote their creative copy, but now I'm wondering whether they are just trying to distance themselves from one of the companies with Hyperloop in its name. Not all of these companies seem likely to succeed. I really like what SpaceX is doing here. This SpaceX sponsorship of others figuring out how to tackle a grand challenge is akin to the Florentine Renaissance patrons of the arts. I'm hoping that Elon Medici identifies his Leonardo Da Vinci(s) and that together they are able to move forward with what is a real high speed rail.
Here is the Wikipedia discussion of hyper loop.
And no discussion of technology is complete until you read the Wait but Why viewpoint. Always good stuff,
Critiques of the hyperloop:
Opinion: The science behind the Hyperloop is ‘done the wrong way’ MarketWatch
Why Elon Musk's 'hyperloop' transport won't work USA Today
Random musings about the hyperloop
I read the Elon Musk autobiography by Ashlee Vance and I couldn't help coming away thinking: Is this hyperloop thing all just an elaborate scheme for Musk to avoid paying for all that jet fuel when he commutes daily between SpaceX and Tesla headquarters? I think I like it even better if it is.
The Hyperloop is all about travelling from point A to point B more quickly than existing modes of transportation. It is a compromise between exciting, not yet developed flying cars and boring old-timey trains. It combines the speed of air travel with the use of alternative fuels and a cushion of air to free trains from centuries of steel on steel friction.
At its most basic, the Hyperloop involves a long straight tube, generally hundreds of miles long, and a capsule that ferries passengers or freight along the tube while gliding on a cushion of air (kind of like an air hockey table except the air comes out of the puck rather than the table). The capsule floats through a low air pressure tube starting out by being pulled along by strong, sequential magnets that get the capsule going and then the capsule's speed is renewed periodically along the route with more magnets. Since that probably didn't help much, a picture is worth 1000 words:
Well, I think that clears things up. To get a much clearer description and to read more in depth about the idea and its origin you will want to read Elon Musk's initial treatise titled Hyperloop Alpha. It goes into a surprising amount of detail for an initial concept piece.
So, is the hyperloop a good idea? I think that depends on a couple things:
- Can it be done?
- How much does it cost to build and operate?
- Will it kill/injure people routinely like cars, planes and trains?
This post is devoted to starting to explore that question -- Is the hyperloop a good idea. I will be discussing the second question above, does it make economic sense. While I am not an economist (although I married an Econ major), I always like to start any discussion of the utility of a new technology with a back of the envelope business assessment. For the sake of intellectual honesty, I start off with the hypothesis that the hyperloop could be a great idea. That said, a lot more needs to be figured out at this point.
Musk's Hyperloop Alpha explains in summary form the basic elements of system design, tube design, capsule design, station design, propulsion design, and safety design. The safety design discussion is important to me because someone very near and dear to me was severely injured in the Amtrak 188 derailment in Philadelphia. The accident, whatever its original cause, was fundamentally caused by the train going 100 mph on a curve with a speed limit of 50. This was an avoidable accident. I would love to see a company who cares about safety take on this project rather than to continue to subsidize the folks at Amtrak who said with a straight face that their experts had done the math and determined that it was not possible to get up to 100 miles per hour on that section of track. Time to get some new experts.
While I may revisit some of the areas above in future posts, today I just want to apply the back of the envelope business case to this idea. So here is my preliminary take.
Economics of the hyperloop
Elon Musk estimates that the San Francisco to Los Angeles hyperloop could be built for about $6 billion. I'm not going to challenge that number at this point as I don't understand its basis well enough to know how realistic it is. If accurate, however, that would be less than 10% of the proposed California High-Speed Rail, which is currently expected to cost around $68.4 billion.
Revenue opportunity
Here is my back of the envelope assessment of the hyperloop revenue opportunity:
SF/LA Daily passenger revenue
Assumptions:
- Two passenger size tubes (1 each direction)
- Each hyperloop capsule can carry 28 people
- Passengers pay a flat rate of $50 each way and there are no "First Class" capsules
If you assume that roughly 1,500 people per hour (max of 28 x 30 = 840 times both directions) can travel between SF and LA and that they will do so about 16 hours per day (say 6 a.m. until 10 p.m.), that gets you 24,000 individual trips per day. If we ball park the price at $50 each way, then we are talking about $1,200,000 per day in passenger travel revenue. If you set up a sandwich shop at each station and keep it well stocked with cold beverages, I think we can safely bump that daily number up to $1,205,000.
SF/LA nightly freight revenue
The Alpha document suggests that for about 25% more, we could build a larger tube that would permit the passage of capsules that could carry vehicles and freight in addition to passengers. I'm going to assume for this assessment that this larger tube system is not built but rather that the system uses some capsules with the seats taken out for the carriage of freight during the overnight period when passenger demand could be expected to be very low.
Let's assume that freight companies think that this is a good way to lose their trucks and cut costs. My freight charge numbers come from my reading of DAT Solutions website (any mistakes are mine) which suggest $700 per ton for the trip based on 350 miles at about $2.00 per mile (including fuel charge). If you assume that each pod can carry three tons of freight (in capsules without passenger seats), then at $700 per ton, that is up to $2,100 x 60 trips per hour (i.e., max of 30 trips per tube per hour). Note: I came up with three tons per load since we know the capsule plans to carry 28 people times an average of 175 pounds per person (a gross underestimate since this is the U.S. population we're talking) without accounting for the seats is about 5,000ish pounds. The actual specs have a higher number for capacity (2,800 kilograms or 6100 pounds). So, say you can get $700 per ton, the max nightly freight revenue would be $700 x 3 tons x 60 trips x 8 hours or $1,008.000.
Preliminary Conclusion
Total daily revenue then would look to max at around $2.2 million or $800,000,000 per year. If you had no operating expenses, then the payback for the initial construction costs would be 7.5 years. Nobody expects payback that quickly for a project this size; normally you would need payback somewhere in the 15-25 year range. The good news is that if I'm off by only 50% in my revenue projections (or you don't assume that you have no operating expenses), then payback could come in as few as 15 years -- just in time for the planned $68.4 billion California high speed rail project to get online. Admittedly, this discussion covers only payback on initial costs, but there is reason to believe that operating costs may not be as large as similar transportation projects.
The Hyperloop Alpha document makes the following estimates on revenue and some operating cost analysis: "Transporting 7.4 million people each way [my note: that is a little over 20,000 people each day each way] and amortizing the cost of $6 billion over 20 years gives a ticket price of $20 for a one-way trip for the passenger version of Hyperloop." The document provides more information on the construction and start-up costs than on operating costs, so that is harder to estimate. But in light of the fact that the document also asserts that by using solar panels on top of the tube the whole system could be self-powering, that would be one large operating cost (fuel) that is rolled into the upfront expenditure but would end up make the operating costs presumably lower than other forms of transport like trucks, airplanes and trains.
Next Steps
I would love to hear from folks who have better insight into realistic revenue and operating expense projections. As I wrote in my earlier post on back of the envelope business cases, the exercise is really just intended to be a thought experiment in order to make sure that there is some hope that the enterprise could make economic sense. I don't see any reason at this point that it couldn't make sense. From my perspective, it now becomes time to build out a test system, work to confirm system feasibility and to start to push harder to understand real numbers.
And that is exactly what we have learned is starting to happen. The SpaceX Hyperloop Pod Competition rules were recently announced and they are aiming toward a January 2016 Design Weekend at Texas A&M in College Station, Texas. A test track is being built where a number of designs will later be tested in what I think is one of the most amazing crowd sourcing efforts of all time. It is almost like we decided to go to the moon by asking all of the smart college kids and aeronautics companies to work up their ideas for a giant corporate sponsored science fair devoted to how to do it. I am truly cheering for this effort to work. What do you think?
NOTE: The remainder of this post is what I would normally put in the Reading Room if this topic were remotely related to 3D.
Sites devoted to or covering hyper loop efforts:
Hyperloop Tech
One of the first two announced groups actively seeking to execute on the hyperloop idea. These guys include venture capitalists and sciencey types so it has to be successful. They write:
WE ARE DEVELOPING THE TECHNOLOGY AND HARDWARE TO MAKE HYPERLOOP A REALITY. We design, build and test every aspect of the world's next transportation system - Hyperloop. We are growing a world class team to solve and execute every aspect of this bold vision. We are led by a distinguished board of directors and are financially backed by leading investors Formation 8, Sherpa Ventures, Zhen Capital, David O. Sacks and others.
Hyperloop Transportation Technologies
This is the other of the two announced groups working on making the hyperloop a reality. They talk about making the trip from Washington DC to New York City in 30 minutes. That would benefit me and as I said above, I am no fan of the current Amtrak effort. Hyperloop Transportation Technologies is using a novel approach to starting the design/build effort by asking engineers, designers, architects, and anyone excited about the Hyperloop to work a minimum of 10 hours per week in exchange for stock options. I'm working on understanding how they plan to make this work.
SpaceX
SpaceX has taken a very interesting approach to promoting Musk's idea. They are supporting the effort to prototype the system by building a one mile test track and holding a competition to further the design efforts on the Hyperloop pod. This is what the folks at SpaceX have to say:
Neither SpaceX nor Elon Musk is affiliated with any Hyperloop companies. While we are not developing a commercial Hyperloop ourselves, we are interested in helping to accelerate development of a functional Hyperloop prototype.
Having read this disclaimer several times, I wondered if SpaceX's lawyers always wrote their creative copy, but now I'm wondering whether they are just trying to distance themselves from one of the companies with Hyperloop in its name. Not all of these companies seem likely to succeed. I really like what SpaceX is doing here. This SpaceX sponsorship of others figuring out how to tackle a grand challenge is akin to the Florentine Renaissance patrons of the arts. I'm hoping that Elon Medici identifies his Leonardo Da Vinci(s) and that together they are able to move forward with what is a real high speed rail.
Here is the Wikipedia discussion of hyper loop.
And no discussion of technology is complete until you read the Wait but Why viewpoint. Always good stuff,
Critiques of the hyperloop:
Opinion: The science behind the Hyperloop is ‘done the wrong way’ MarketWatch
Why Elon Musk's 'hyperloop' transport won't work USA Today
Random musings about the hyperloop
I read the Elon Musk autobiography by Ashlee Vance and I couldn't help coming away thinking: Is this hyperloop thing all just an elaborate scheme for Musk to avoid paying for all that jet fuel when he commutes daily between SpaceX and Tesla headquarters? I think I like it even better if it is.