Hyperloop May Be the Ultra-Fast Transportation of the Future, But Investors Are Slow to Come Around

Hyperloop is proven to be faster and cheaper than high-speed rail. How come no one wants to pay to build one?

A hyperloop prototype
Hyperloop tubes are displayed during the first test of the propulsion system at the Hyperloop One Test and Safety site on May 11, 2016.
Getty Images

It has been almost a decade since Elon Musk floated the idea of hyperloop, a new mode of transportation that promises to move people and goods at the speed of airplanes while staying on the ground. The technology, its advocates claim, is affordable, energy-efficient and potentially profitable for its operators. However, after years of studies and tests around the world, few hyperloop projects have moved past the initial feasibility study phase, and no investor is convinced enough of its promise to pay to build one.

According to Musk’s vision, which is based on a vacuum tube train” concept that dates back to as early as the 18th century, a hyperloop system would consist of enclosed low-pressure tubes that extend hundreds of miles. Within them, magnetic levitation (maglev) tracks support capsules carrying passengers and cargo that would move at speeds of up to 600 miles per hour—that’s more than three times faster than the world’s fastest high-speed trains.

In traditional modes of travel, such as trains and planes, a significant amount of energy is lost in overcoming friction and wind resistance. If a vehicle can do away with friction and air resistance, it can theoretically move at very high speeds on relatively low horsepower. Among existing transportation technologies, the closest thing to hyperloop are maglev trains, which eliminate the friction between tracks and wheels, and have been built in countries like the U.K., Japan, Korea and China. But hyperloop takes the concept to another level by confining a train within a low-pressure or vacuum tube, thus removing air resistance as well. Musk’s white paper claims it would only need 134 horsepower—about as much as a low-end Toyota Corolla—to achieve a speed of 700 mph. For comparison, a high-speed train needs two 2,250-horsepower diesel engines. A 2017 study by the U.S. Department of Transportation (DOT) estimates hyperloop could be up to six times more energy efficient than air travel on short routes.

Hyperloop builders include billionaire-led startups and public-private joint ventures

There’s no lack of engineering interest in making hyperloop a reality. After the publication of Musk’s white paper, a crop of startups were founded with the same goal of building the world’s first passenger hyperloop. The best-known one is probably The Boring Company, cofounded by Musk himself in 2016. The Boring Co. has built a roughly mile-long prototype tube in Hawthorn, Calif. as a site for an annual student competition to test hyperloop pods. The company plans to test a “full-scale hyperloop” as soon as this year, it said in April without sharing details such as location and size. The Boring Co. didn’t respond to a request to elaborate on the plan.

In November 2020, Virgin Hyperloop, a subsidiary of Richard Branson’s Virgin Group founded in 2014, conducted the world’s first human test of hyperloop at a 500-meter test track in a Nevada desert. A prototype pod carrying two Virgin Hyperloop employees sped up from zero to 107 mph in less than six seconds and then screeched to a stop in a ride that lasted a total of 17 seconds. “I felt a little pushback, but nothing uncomfortable,” Sara Luchian, Virgin Hyperloop’s head of passenger experience, said of the extreme acceleration experience in an interview with the Observer after the test.

The same year, Virgin Hyperloop published a 19-page feasibility study of a proposal to build a 500-mile passenger hyperloop route in the Great Lakes area that would link Chicago, Columbus and Pittsburgh. However, the project was abandoned after Virgin Hyperloop decided to focus on moving freight, not passengers.

In the U.S., the only passenger hyperloop system that’s actively under development is a 300-mile route, also in the Great Lakes region, that would connect Chicago, Cleveland, and Pittsburgh. The project is a public-private partnership between Hyperloop Transportation Technology (HyperloopTT), a Los Angeles-based startup, and the Northeast Ohio Areawide Coordinating Agency (NOACA), a local agency responsible for planning and overseeing major infrastructure projects in the Cleveland metropolitan area.

“Cleveland is the halfway point between America’s largest city and its third largest city. If we can build a hyperloop that allows people to travel from New York to Chicago in under an hour with stops in between, it’s going to open up a totally new range of jobs and business opportunities,” said Grace Gallucci, NOACA’s executive director.

In December 2019, HyperloopTT and NOACA co-published a feasibility study proving that the Great Lakes project is financially viable. The report, which runs 180 pages and costs $1.3 million, is the most extensive hyperloop study ever conducted in the U.S., Gallucci said.

According to the study, the Great Lakes hyperloop will cost between $25 billion and $30 billion, or $60 million per mile, and six years to construct. Once in operation, passengers can expect to pay about two thirds the price of a comparable air ticket.

“We are looking at a commuter rail type of pricing. It’s not intended to be something like the Concorde,” Gallucci said, referring to the supersonic jet.

NOACA’s math sounds encouraging. But skeptics say the actual cost of building hyperloop could be much higher and vary greatly depending on location. The per-mile cost of the Great Lakes hyperloop is more than three times what Musk projected in 2013 for a hypothetical route between Los Angeles and San Francisco.

A 2016 study by Australia’s University of Queensland estimated a hyperloop route along the east coast of Australia would cost ten times more than Musk’s prediction, “which relied on undeveloped or immature technology,” wrote Nicholas McLean, the author of the study. And this doesn’t take into consideration the fact that major infrastructure projects often go well over budgets and take longer than expected to build anyway.

A long road of fundraising and regulatory approval

HyperloopTT, backed by venture capital firms including Lauder Partners and China’s EdgeWater Investments, has built small-scale hyperloop prototypes in France, Germany and the Middle East. Its longest system built to date is a 10-kilometer tube in Abu Dhabi. “The technology is ready,” said Andrés De León, CEO of HyperloopTT. But a lot has to happen before engineers can break ground in the U.S.

The 2019 feasibility study estimated construction of the Great Lakes hyperloop would begin in 2023. But with less than four months away from 2023, the project has barely moved to its next step, which is an environmental review by the Federal Railroad Administration, a process that can take a few years. HyperloopTT will likely have additional regulatory hurdles to clear before it can actually transport passengers and cargo, for which legal standards have yet to be established. (That job falls to the DOT’s NETT Council, created in 2018 under the Trump administration and tasked to develop standards for regulating emerging transportation technologies.)

Gallucci said a question she often receives is why her agency is not considering more mature technology such as high-speed rail, which is proven safe and in wide use in countries like China and Japan.

“The answer is: we are happy to look into high-speed rail if private investors are interested,” she said. “But the truth is there hasn’t been any studies done in the U.S. that shows high-speed rail could generate substantial profits.”

De León is from Spain, which has the world’s second largest high-speed rail network. He said the payback period of high-speed rail is between 100 and 120 years, while hyperloop can recoup its construction costs in less than 25 years. According to NOACA’s calculation, investors in the Great Lakes hyperloop project can expect an annual return of 3 percent, which is higher than most corporate bonds.

Still, fundraising appears to be difficult. Gallucci said NOACA decided to leave the effort to HyperloopTT, its private partner, after unsuccessfully applying for government funding. De León said his firm is in talks with several major infrastructure investors but hasn’t secured any funding yet. “They have shown some interest, but they want to wait till the completion of the environmental review,” for which funding hasn’t been found either.

A promising source of some public funding is the $1.2 trillion Infrastructure bill, signed into law by President Joe Biden in November 2021. Hyperloop projects may be eligible to apply for grants and loans under a Department of Energy advanced vehicle program, according to Bloomberg Government, an analytics firm.

“Ideally, we want this project to be 100 percent privately funded, but that doesn’t exclude the possibility of getting the public sector involved,” De León said.

Historically, major public transportation projects were usually funded by tax dollars or government bonds. But private-public partnership, known within the infrastructure industry as the P3 model, is an emerging trend in the developed world, De León said, as a result of rising demand for infrastructure improvements and shrinking government budgets.

Given all its financial uncertainty, hyperloop may need government funding if it’s ever going to past the planning stage.

“I wouldn’t bet my money on being able to make something like the Hyperloop financially viable,” said Bent Flyvbjerg, an economist specializing in mega-projects at Oxford University, told The Guardian in a 2017 interview. “But that’s OK. We subsidize all sorts of other infrastructure so why not the hyperloop, if we think there’s an environmental or business case for it?” Hyperloop May Be the Ultra-Fast Transportation of the Future, But Investors Are Slow to Come Around