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Case Study on the Role of Fiscal Policy in Hydrogen Development

Baseline Report

Pembina Institute and the Canadian Energy Research Institute

May 10, 2004

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The State of the Hydrogen Sector

The hydrogen sector, as defined for this study, is undergoing development in many countries around the world. Development stages range from early research to pre-commercialization and commercialization, with new technologies and products being discovered, advanced and introduced to the marketplace every year. Because the focus in this study is the impact of hydrogen technologies between now and 2030, only the most commercially advanced technologies are discussed in this section.

Developments in hydrogen energy technologies are primarily focused on three end-use sectors: transportation; stationary electricity and heat generation (both for primary and back-up power); and portable power applications. Each of these applications is described in the sections that follow.

Portable Power Applications

Portable power applications are undergoing considerable technological development worldwide. Many research organizations and firms view the portable power sector as an area where hydrogen and fuel cells can offer improved performance compared with conventional technologies, such as batteries, due to their use of an external fuel supply, which may allow longer run-times. There are also expectations from some that the portable power market will provide fuel cells with an early method of commercialization, due to its relatively high cost of power. This will likely serve to further the development of fuel cells and other enabling technologies, as real-world experiences in producing commercial products will result in valuable learnings for fuel cell developers. In addition, early market application of fuel cells and hydrogen provides an opportunity to increase consumer confidence and provide a level of familiarity with the technology that future fuel cell products will benefit from.

Despite the importance of this sector to fuel cell development, portable power applications are not analyzed in this study. Relative to the transportation and stationary sectors, the portable power sector will not have a significant impact on national carbon emissions and it is for this reason that it does not warrant further analysis in this study.

Stationary Electricity and Heat Generation

The development of stationary electricity and heat generation using hydrogen fuel has focused on the use of fuel cell technologies. Comparatively little development has occurred with regards to using hydrogen in other electricity and heat generation technologies, such as stationary internal combustion engines, boilers, turbines and furnaces. The hydrogen fuel supply for fuel cells is most commonly anticipated to be from existing natural gas infrastructure. The majority of the stationary fuel cell products being demonstrated, including those discussed below, therefore include a natural gas reformer or pre-reformer.

Research in this area has focused on several different types of fuel cells:

  • Alkaline fuel cells (AFC) have been used most prominently in the United States’ space program; however, their intolerance to impurities has resulted in little development for terrestrial applications.1

  • Phosphoric acid fuel cells have been commercial since 1990 with about 250 units sold worldwide.2 However, the primary supplier of these systems, UTC Fuel Cells, has shifted much of their development efforts to Proton exchange membrane fuel cells in recent years.3

  • Proton exchange membrane (PEM) fuel cells have been demonstrated in field trials by many companies. Small (1–10 kW) PEM products are considered to be the next closest to commercialization of the non-commercial fuel cell technologies. Large (100–2000 kW) products are also under development and have been demonstrated in several applications.
  • Solid oxide fuel cells (SOFC) are reaching pre-commercialization with several hundreds of residential stationary power units (about 1 kW) being tested in Europe and larger units (250 kW or above) being evaluated by various utility companies worldwide. 4
  • Large molten carbonate fuel cells (MCFC) have also been demonstrated in field trials by a few companies.
  • Direct methanol fuel cells, which use methanol as a fuel, have been demonstrated on an experimental level.

Electricity is the primary product for all fuel cell types, whereas the use of the output heat depends on the amount of heat, its temperature and the intended application. Combined heat and power (CHP) applications have been proposed for PEM, solid oxide, and molten carbonate fuel cell technologies. The solid oxide and molten carbonate systems operate at higher temperatures than the PEM systems, and therefore are more likely to be applicable to a wider range of CHP applications.

Transportation

For the transportation sector, the number of technologies being developed for use with hydrogen fuel are much more diverse. They include technologies for hydrogen production, storage, transportation, refuelling and use. At this time, the developmental stage for each of these technology categories ranges from basic research to having been commercially available for a number of years; additional details are presented in the sections that follow.

1. Hydrogen Production – Hydrogen production can occur through a wide variety of methods, although only those at or near commercialization have been investigated for this study. Hydrogen production from natural gas, electricity and methanol are relatively well-established processes. Further development is required, however, to allow these technologies to supply a vehicle fuelling infrastructure. In particular, the ability to supply hydrogen to a distributed network of fuelling stations and the high purity requirements for PEM fuel cells are issues currently being addressed with new product developments.

Fuelling station reformers (both centralized and decentralized) fuelled by natural gas or methanol have been demonstrated in field trials on a limited basis. In contrast, decentralized electrolysis units are commercially available, although currently at a relatively high cost due to low production volumes. Methanol and gasoline reformers on-board the vehicle have been demonstrated in a few vehicles at this time, although there is still uncertainty as to whether they will reach prescribed cost and performance targets set out by the United States Department of Energy (DOE). According to the United States DOE, “on board fuel processing presents serious technical and economic challenges of its own that may not be overcome in the required ‘transition’ time frame. Consequently, DOE is deciding whether to continue onboard fuel processing research and development beyond 2004”. 5

2. Hydrogen Storage – While hydrogen storage is a well-established industrial technology, to be suitable for transportation applications higher energy and volumetric densities and relatively low costs are needed. At present, there are a number of different storage types that may be suitable for this application; compressed and liquefied hydrogen are the two most common methods currently used. Liquefied hydrogen is fairly well established within current areas of use and focus is on trying to achieve higher pressures for storing gaseous hydrogen. Three hundred and fifty bar storage is currently being demonstrated in various applications, whereas 700 bar storage is a target for many developers. Advancements in gaseous hydrogen storage include the development of high-pressure hydrogen compressors, valves, seals and storage tanks. Another alternative to hydrogen storage is to store liquid hydrocarbons such as methanol or gasoline and then reform them to hydrogen at a point further downstream, as described in the Hydrogen Production section above.

Each storage medium has different advantages and disadvantages, and it is still uncertain as to which ones will reach commercial application. The majority of vehicle and refuelling demonstrations up to this point have used 350 bar compressed hydrogen, but this results in relatively limited range with the current demonstration vehicles, and many believe that 700 bar compressed hydrogen is required to achieve comparable ranges to gasoline vehicles.

3. Hydrogen Transportation – Hydrogen transportation is again a well-established industrial process and can occur by truck or pipeline. The primary issue with transporting hydrogen is the relatively high initial costs during periods when hydrogen demand at fuelling stations is relatively low. Until demand increases, transporting relatively small amounts of hydrogen will be very expensive. In the meantime, there is a need to combine information related to transporting other fuels by truck and pipeline with knowledge related to hydrogen storage and pipelining to decrease the cost of transporting this fuel. Currently, the amount of hydrogen consumed in North America is approximately 2% of the total oil consumed on an energy basis.6

4. Hydrogen Refuelling – Hydrogen dispensers for refuelling vehicles are a relatively new technology and have been demonstrated at several refuelling stations around the world. Standardization for the interface between the nozzle and the vehicle, one of the more critical features of hydrogen dispensers, is currently being worked on. Developments in this area are required before commercialization can take place.

5. Hydrogen Use – Two different types of engines for hydrogen vehicles have seen the most development over the past few years: fuel cell and internal combustion. Fuel cell vehicles have been demonstrated by most of the large automobile manufacturers (light-duty vehicles primarily) and some urban transit companies. The California Fuel Cell Partnership is the largest of these demonstration projects with eight automotive manufacturers engaged with many other technology, fuel and government organizations. Beyond demonstration, both Toyota and Honda have leased fuel cell vehicles to government agencies, although only in limited quantities and at a very high price. The number of fuel cell bus demonstration vehicles produced since 1993 is 65, with 30 of those buses scheduled to be delivered in 2003/04 to two European Commission projects: Clean Urban Transport for Europe (CUTE) and the Ecological City Transport System (ECTOS).

Hydrogen internal combustion engine (ICE) vehicles have been demonstrated mostly through aftermarket conversions, although Ford demonstrated an original hydrogen ICE light-duty vehicle. The technology to convert ICE engines to run on hydrogen is currently commercially available from a handful of aftermarket conversion companies, and is anticipated by some to be an early market application of hydrogen vehicles.

The above discussion describes the range of applications (portable, stationary and transportation) for hydrogen technologies as well as the many stages of hydrogen development that currently exist. In the section that follows, we put these applications into the context of other energy pathways and identify several key hydrogen pathways for further consideration and modelling.

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