California Rail: The Silicon Valley Railroad

13 May 2010 (Last Updated May 13th, 2010 18:30)

California's high-speed rail is offering hope for more than commuters. Those in Silicon Valley, as Phil Thane finds, are hoping high-speed will help high-tech as contracts come in and cashed-up workers flock to the state.

California Rail: The Silicon Valley Railroad

Despite the recent economic downturn, California's economy is still huge. If it were an independent country it would be in the top 10 world economies just ahead of Italy and France. On size it would rank 59th and with a population approaching 40 million it would be 35th in terms of inhabitants. It has some of the world's largest cities, world-class universities and of course Silicon Valley, home of many of America's largest, most famous high-tech companies. One thing it does not have is a public transport system that countries of similar size take for granted.

For journeys around the cities (which are vast by European standards) cars are the norm, although there are commuter rail services in many cities operated by different companies. In the Silicon Valley area, diesel-hauled commuter services are operated by Caltrain. From the Los Angeles area in the south to the central Silicon Valley area most people fly.

Domestic air travel is under pressure though. Recent terrorism incidents have forced US airlines and airport operators to tighten security, increasing the time spent in check-in considerably. It's now common for passengers on domestic flights to spend longer in the airport than in the air. Airports are generally some way outside the cities they serve, so travellers often spend as long again driving to the airport and driving to their final destination.

A modern high-speed railway (HSR) from San Diego in the south to San Francisco and Sacramento in the north is the obvious answer, and the state government has been pushing the idea since the mid 1990s. The California High-Speed Rail Authority was set up in 1996 to examine possible alternatives and promote the creation of such a line.

The initial work of winning public and business support and deciding on an approximate route was paid for by state and local county funds, but in January this year President Barack Obama awarded the project a $2.25bn stimulus grant, which should ensure that it goes ahead.

Rail on the way

"A modern high-speed railway from San Diego in the south to San Francisco and Sacramento in the north is the obvious answer."

'Silicon Valley' is often used as a metonym for the whole US high-tech industry sector, but in this case the geography is important. The valley in question is the southern end of the San Francisco bay, extending as far as south the city of San Jose, and about halfway up the shores of the bay. The San Francisco branch of the HSR will pass through San Jose, Palo Alto and serve the San Francisco airport.

The eastern side of the bay will, it is hoped, be served by another project, the Altamont Corridor Rail Project, which will run from the HSR at San Jose and pass through several important Silicon Valley centres before swinging north to join the north western (Sacramento) branch of the HSR at Stockton.

Silicon Valley companies are vital to the Californian economy, and together they have considerable political clout. In 1977 David Packard, co-founder of Hewlett-Packard, founded the Silicon Valley Leadership Group (SVLG). Today it has more than 200 member companies. Collectively, its members employ more than 250,000 people in the Valley, a quarter of the entire private sector workforce in the region. They generate more than $1tn worth of business, which is approximately eight times as large as California's entire state budget, and represents a significant contribution to the state and the national government treasuries, along with hefty property taxes for local governments.

SVLG has been a long-time supporter of HSR not least because a generalised boost to the economic activity of the area means more people with money to spend on high-tech gizmos. The rail authority believes the HSR projects will provide 130,000 early construction jobs, and nearly 600,000 long-term construction jobs and 450,000 permanent jobs. Coupled with new development opportunities around the stations for offices, homes and neighbourhood villages, this economic activity has got to be good news for anyone selling electronics.

Any modern transport system relies on IT to a huge degree, which again is good news for SVLG companies. Ticketing, station information systems, in-train information, control systems and back office work all rely on computer terminals and screens. Most of this hardware is made in Asia these days, but the design work, the software development, marketing and sales jobs are still in the Valley.

"HSR travel times will be very competitive with airplanes, especially when you consider the time it takes to go through airport security."

Bena Chang, senior associate, Transportation and Housing at SVLG, explains the importance of the HSR project to business travel in the region: "HSR travel times will be very competitive with airplanes, especially when you consider the time it takes to go through airport security and the fact that most of our airports are outside of the city centre. HSR will provide a fast, environmentally friendly connection from city centre to city centre in two hours and 40 minutes from SF to LA."

Chang also sees advantages for workers getting to work, as the HSR scheme will use part of the Caltrain corridor on the San Francisco peninsula, bringing electrification and grade improvements that are expected to provide a faster, more reliable commuter service.

Overseas and local

How, and to what extent Silicon Valley companies will be directly involved in the HSR project is unclear at the moment. California High-Speed Rail Authority spokesperson Kris Deutschman says that they are a long way from awarding any contracts, and haven't decided on what sort of contracts to offer.

The options are: a single 'Design, Build, Operate' contract in which a company (or more likely a consortium of specialist companies) designs and builds the system then is allowed to operate it for a fixed term; or a series of individual contracts for designing the track, the stations, the power and control systems, and more contracts for engineering work, building work and so on, then finally a contract to run the line.

Deutschman says a decision on this wouldn't be taken until all the environmental work was complete and a definitive route set out. She says that no company would be interested in taking on a major project such as this in the US before the environmental issues were resolved because it's just too risky an investment.

But even at this early stage it's clear the US doesn't have the experience of building high-speed lines, so the likely contenders will be Kawasaki, GEC-Alsthom, Bombardier and Siemens together with the Chinese and Taiwanese governments, all of which have built HSR systems in Europe and Asia.

That's not to say there won't be a role for US companies. It makes sense to use local expertise in engineering and electronics both economically and politically. The State of California is likely to look more favourably on a bid from a consortium of foreign and US companies where some of the profit remains in the US, and local companies benefit from the technology transfer that comes from working on projects of this magnitude.

"It makes sense to use local expertise in engineering and electronics both economically and politically."

In April this year, for example, the Chinese Government signed cooperation agreements with the State of California and General Electric, just one of seven such memoranda of understanding the rail authority has entered into with other countries and companies. General Electric has years of experience building diesel locomotives but very little with electric HSR. Its agreement with China specifies that at least 80% of locomotive components and system control gear would come from American suppliers, and that final assembly work would be done locally. Even though there is no specific involvement of Silicon Valley companies in this, or any of the other agreements, it's not hard to see how they would be involved.

Whenever there is a major construction project or industrial development there are always people calling for 'local jobs for local workers', and no doubt there will be a 'Buy USA' campaign when the tenders go out ,but globalisation has made such ideas largely irrelevant. Whoever builds the railway it will use computers and sophisticated control gear. Some of those will come from companies head-quartered in California, and most of those companies have manufacturing plants in China, Taiwan and Korea.

What really matters is that what happens in Silicon Valley sets an example to the rest of the world. Once we see Californians whizzing through the Valley in low-carbon trains it will encourage the rest of us to get off the plane and out of our cars.