John
Lounsbury
With
the furor over the potential for hybrid,
plug-in hybrid and all-electric cars recently, one might think the
hydrogen car
was dead.
Nothing could be further
from the truth.
Feasibility at an
affordable price appears to be established and market availability of
hydrogen
powered cars may come sooner than you think.
Many
issues remain to be addressed and this article
will try to cover them.
The problems
to be overcome are not insurmountable, but are also not trivial. These
problems include the
economics of hydrogen production,
transportation, distribution and storage systems, as well as safety
issues for
cars involved in collisions.
Alan
Ohnsman, writing for Bloomberg,
reports that GM (MTLQQ), Toyota (TM), Daimler AG (DAI) and
other car makers want to start supplying car fueled by hydrogen as soon
as six
years from now. Quoting from the
article:
"The
advances that have been made by the automobile manufacturers are
remarkable,”
said Scott
Samuelsen, director of the
National Fuel Cell Research Center at the University of California,
Irvine.
“Infrastructure is the Achilles’ heel.”
The
fuel
cell center
opened in 1998 and is funded mainly by the U.S. government and
California Energy
Commission. It has also received grants from Toyota and Royal
Dutch Shell Plc’s
hydrogen
unit, said Kathy Haq, a spokeswoman for the center.”
Here
is
a picture of a Royal Dutch Shell (RDS-B) hydrogen fueling station in
New York
City, discussed in a
Seeking
Alpha
Instablog
in August
According
to the Ohnsman article, the economic factors are starting to line up
for
hydrogen. He quotes a Toyota
objective of a $3,600 price premium for a hydrogen
fuel cell powered car. This
compares to the current
price premium for the Synergy Hybrid Drive
system from Toyota, currently averaging around $4,000 for the Camry.
This is quite a change from
the $1,000,000 price tag estimated to build
one of these vehicles just a few years ago.
Advantages
of Hydrogen Fuel Cells over Batteries
To
understand the significance of this topic, one must first recognize how
the
hydrogen fuel cell powers a vehicle. Hydrogen
fuel cell powered vehicles are electric vehicles. Hydrogen is not
burned like a
hydrocarbon fuel. Hydrocarbons are storage
media for thermal energy which is released for
power in an internal combustion engine. The
hydrogen fuel cell is a storage medium for electrical energy, which is
released
when hydrogen and oxygen are combined electrochemically to release
electricity. The hydrogen fuel cell is
conceptually a battery, providing electricity
to power an electric car. Unlike
other battery powered cars, the fuel cell uses an onboard source of
energy
(hydrogen “fuel”) to generate electricity and does
not have to stop to be
recharged. The advantage of hydrogen
powered cars is basically a long driving range, requiring only a fuel
refill
like internal combustion cars do today.
The
hydrogen powered car has advantages for long trips. For daily commutes
under 100
miles round trip, the operational
convenience of battery and fuel cell energy storage is similar. In
fact, it could be argued
that the convenience of plugging in within
your own garage to recharge batteries is more convenient than finding a
refueling station every few hundred miles. The
ultimate decision for most commuters will be which power source is
cheaper.
Fuel
Cost
The
most
convenient metric to compare fuel costs across the ICE (internal
combustion
engine) – electric drive interface is the fuel cost per mile.
Miles per gallon (mpg)
becomes an awkward measurement. Consumers will be required
to start thinking in cost per mile terms,
because that will become the comparative price on the new car sticker.
According to
http://www.costpermile.org/,
the
electricity “fuel” cost per mile (CPM) for
electric cars will be between
$0.01 and $0.05. Currently
electric utility charges per kWh (kilowatt hour) run between $0.10 an
$0.15 in
most of the U.S., so most of this large range in costs must be
associated with
the difference in engineering technology and size of the
vehicle.
Since
I like a larger car, my
example will compare to a mid-size Toyota
Camry Hybrid. The assumed cpm for an
equivalent electric car will be $0.05. (Disclosure: I own a Camry
hybrid.) At
$2.50 per gallon (near the national average price as this is written),
the Camry
has a cpm of $0.07 at $3.50 per gallon, the cpm is $0.10. I have used
35 mpg for the
Camry hybrid. This is 3% higher than the
sticker and 10% lower than my actual
experience.
For
the
standard Camry the cpm would be $0.08 and $0.11 (highway and city,
respectively)
at $2.50 per gallon and $0.11 and $0.16 at $3.50 per gallon. The
sticker mileage numbers
have been used for the ICE Camry. These fuel costs are
summarized in the following table.
|
Estimated
Cost per Mile (CPM)
|
|
Car
|
Gas at $2.50 per gallon
|
Gas at $3.50 per gallon
|
|
Design
|
City
|
Highway
|
City
|
Highway
|
|
Camry ICE
|
$0.11
|
$0.08
|
$0.16
|
$0.11
|
|
Camry Hybrid
|
$0.07
|
$0.07
|
$0.10
|
$0.10
|
|
"Camry"* Electric
|
$0.05
|
$0.05
|
$0.05
|
$0.05
|
|
*An
electric car equivalent to
the Toyota Camry.
|
|
Electricity
cost assumption for
Camry equivalent is $0.05 cpm
|
If
the
range available with an all electric car is sufficient, then customer
acceptance
will require that purchase costs (and maintenance costs, which will be
ignored
here) to be such that the purchase price difference is more than
recovered in,
say, 100,000 miles. The cost savings
for city driving at $2.50 per gallon for gasoline is $6,000 per 100,000
miles of
driving, compared to an ICE car. At
$3.50 per gallon the cost savings would be $11,000. If two cars are
available for
our commuter and the electric car purchase
cost difference is less than $5,000 more, there will be a big market.
If the purchase price is
$12,000 more, the market will be limited until
the cost of gasoline exceeds $3.50-$4.00 per gallon.
In
an
August 6 press release,
Toyota reported the results of a one-time driving test comparing a
Toyota Hybrid
Highlander with a new 4
th
generation fuel cell equipped Highlander
Hybrid. In that test, the cpm for
the production hybrid was more than double the cost for the fuel cell
equipped
model. I am taking this test result
with a grain of salt because it was a one time test.
The
remaining comparison to be made is hydrogen fuel cells to plug-in
electric
vehicles. Hydrogen requires power
for production by electrolysis of water. If
the same power is used that is available at the residential power plug,
all the
added costs of handling, storing, transporting and distributing
hydrogen are
added to the costs that one has at his own power plug. Hydrogen is very
uncompetitive on a cost basis with other sources of
power in this scenario. If the cost
of gasoline goes much higher than the $3.50 we have in our examples,
then
hydrogen might compete there. But
hydrogen can never compete with electricity for local driving (right
now under
100 miles per day) if the same electricity source is used for both
battery
recharging and fuel cell operation.
Never
forget that a hydrogen fuel cell is nothing more than another form of
battery,
wherein a chemical reaction produces electrical current. A hydrogen
fuel cell car is
an electric car.
Can
Hydrogen be Produced with Cheap Power?
Do
sources of electrical power exist that are cheaper than what we produce
(or can
produce in the future) for domestic consumption? The short answer is:
Yes. (Well, maybe.)
One
possible source of cheap electrical energy is from ocean currents that
have a
large temperature differential between the surface currents and those
at depths
of 1000 feet or so. This process is
called OTEC,
Ocean
Thermal Energy Conversion.
The
above
graphic, from
The
World Energy Council 2007 Survey of World Energy Resources,
shows that most of the areas with the largest thermal differentials
occur in
areas that are too far from populated shorelines to make feasible
electricity
generation for transmission into a power grid. Temperature
differentials of
20
o C
or more are necessary for
efficient power generation.
The
cost
estimates for power from OTEC are somewhat problematic. The
World
Energy Council
estimates that a single 10MW demonstration plant
would produce electricity at a cost somewhere between $0.14 and $0.21
per kWh,
depending on factors such as recovery of potable water and marketable
chemicals
such as ammonia and various salts. The
existence of carbon tax credits could lower the costs further by as
much as
$0.03.
It
is
only with the building of multiple plants of the same design that costs
may come
down below $0.12, the reference cost for existing electricity
generation. For example, eight 10 MW
plants could produce electricity at a cost
between $0.098 and $0.119.
There
is
potential here, but the costs have to come down more to bring
electricity from
OTEC to a price to make hydrogen production economically attractive.
Remember, we need to
transport this hydrogen from the point of generation
by ocean going tanker and distribute it by truck or rail tanker (or
pipeline) to
retail points.
Another
potential source of electricity
for hydrogen production is wave and tidal motion. To supply electricity
for a
power grid, the waves and tides must be close
to populated shore lines. Wave
motion can be used anywhere for hydrogen production, not just where is
occurs
close to populated shore lines. The
same is true for tidal action in remote regions of the planet. The
picture below,
from New Scientist,
shows a SeaGen tidal electricity generator, made by
Sea
Generation Ltd, in the tidal
currents at Strangford Lough in Northern
Ireland. Sea Generation is a division
of privately held
Marine Current
Turbine
Ltd.
Generation
costs for electricity from capital costs alone will be about $0.07 per
kWh for a
25 year depreciation. There will be
additional unspecified maintenance and operation costs.
Wave
action can also be used to generate electricity. The picture below (
from
New Scientist)
shows a wave operated electrical power generator in a generation farm
off the
north coast of Portugal.
These
generators are made by privately held
Pelamis
Wave Power Ltd. Each
generator is a
150-meter-long steel jointed structure, which flexes
to drive hydraulic generators and produce 750 kilowatts of power. The
company claims
electricity generation a competitive costs, but
provides no specifics.
The
reasons I selected these examples as potential hydrogen generation
power sources
are:
1. Potential for a lower electricity price point;
2. Electricity generated with plentiful raw
material (water) present to produce hydrogen; and
3. With OTEC, the potential for additional
revenue from side products.
Battery Costs vs. Fuel Cell
Costs
The
implications from currently
available information are that the costs
and
durability will be similar. The
current objective for Toyota is to have a price premium for hybrids
less than
the current price premium for a hybrid. The
latest generation fuel cell engine is about the same size as a typical
4-cylinder ICE engine and contains about 30 grams of platinum. This is
down from the
previous generation fuel cell stack which was more
than twice the size and contained 80 grams of platinum. The costs just
for the
platinum alone have been reduced from more than
$4,000 in the previous generation to less than $1,500 in the current
one. The final fuel cell structure
is expected to use only 10 grams of
platinum, the same amount as a typical catalytic converter today.
The
dramatic change from the previous generation hydrogen fuel cell stack
power
system to the current generation is seen in the following picture
from AutoBlogGreen.com,
showing the latest fuel cell drive system on the left next to the drive
system
used in the past few years in the Chevy Equinox test vehicles that have
been
driven by volunteers in California, Washington, DC and New York. The
power, range and
performance of the two systems are the same. The horsepower rating is
the
equivalent of a current four-cylinder ICE.
Transportation
of Fuel and Wholesale
Distribution
The
technology for distribution by tanker truck and
railway car exists today. You can
not spend a few hours on any interstate highway near a population
center without
seeing several pressurized gas tank transports sharing the roadway with
you. Pipeline distribution for
pressurized hydrogen gas may require different
features than currently use for natural gas, but there is no reason to
believe
that the engineering and construction would present any more challenges
or
costs. Currently, there is no data
reflecting transportation and wholesale distribution impediments to
scaling up
the use of hydrogen to higher volumes.
Retail
Distribution
The
cost to build a new gasoline station has been
estimated to be in the $250,000 to $450,000, with the largest variable
being
land cost, using estimates obtained from national average costs at
RS Means Cost
Works. Obviously, where land
costs
are extremely dear, near the center of major
cities, for example, the cost to build a gasoline station could be much
higher,
up to $1,000,000 or more.
The
cost of building the first 32 hydrogen
refueling stations in Southern California has been quoted as $32
million. As high as this cost
projection is, it is less than the current cost for
a hydrogen refueling pump in Los Angeles, according to Phil Baxley,
President of
Shell
Hydrogen, quoted in the Ohnsman
article. He said currently the
cost is
from $1 million to $5 million per pump,
depending on capacity. Even the
lower quoted cost, averaging $1 million each for 32 stations, seems to
be more
costly than all but the most expensive gasoline stations. However,
there are three
factors related to hydrogen refueling stations
that mean this apparent current cost difference may decrease or even be
reversed. These are:
1. externality cost exposures for gas
stations;
2. lower costs for hydrogen stations in the
future through economies of
scale; and
3. lower costs to add hydrogen to existing
gas stations than to build
new.
There
are major externality exposures for petroleum
based fueling stations. The biggest
exposure pertains to future liabilities for soil and ground water
contamination
by petroleum products and fuel additives. When
these externalities are realized, they can be more than the original
construction cost (even adjusted for inflation) and occasionally are
many
millions of dollars. Hydrogen
refueling stations do not have these environmental cost exposures.
When
the initial costs and the externalities
are
considered, the refueling stations for hydrogen have an original
construction
cost of the same order as petroleum fuel stations. Hydrogen refueling
stations
may decrease in construction costs from the
estimates for the first 32 stations in Southern California when many
hundreds
are constructed per year. If
hydrogen were to become ubiquitous, there might be a few thousand new
stations
per year for a couple of years. A
more likely progression would be the modification of existing gas
stations to
also offer hydrogen refueling facilities at a fraction of the cost of
building
new stations.
Other
countries have more advanced plans for
infrastructure development.Both
Japan and Germany are working to build large scale distribution
networks, with
over 1,000 stations on line for each county in five years.
Safety
To
start with, we must recognize that hydrogen
would not be replacing something that did not have an extremely high
fire and
explosion hazard. We have managed to
live with the risks of gasoline for more than a century, with the
material being
stored in thin walled tanks that can easily rupture.
Hydrogen,
a pressurized gas, would be stored in
thick walled, virtually indestructible tanks. Pressurized gases are
handled
in such containers in a variety of
industrial environments today and have been for most of the past 100
years. There are few examples of
these tanks being breached. The risks have been
associated with the pressure reduction valves
(regulating the controlled release of the gas) being broken by impact
damage. The major risk associated
with using hydrogen will be the exposure to the
fuel lines being damaged and allowing the tanks to lose pressure
rapidly,
turning them into jet propelled missiles.
The
pressurized gas tank as a missile is the major
safety hazard. It is not
insignificant, but should not be an insurmountable problem.
Conclusion
There
are still a lot of questions to be answered. But one thing is clear:
hydrogen
powered cars are not dead. In
congested metropolitan areas where electrical costs are high, hydrogen
may
become widely utilized. The further
advantage of much longer travel ranges may also give hydrogen an
additional edge
over plug in alternatives.
It is too
early to make investment decisions trying to select eventual winners.
It is not wise to assume
there will not be a viable hydrogen car and
hydrogen distribution systems during the next decade.
John
Lounsbury, CFP, PhD is a financial planner in
Clayton, NC. He has extensive experience in computer technology
research and
development both as an engineer/scientist and in corporate management
with academic
degrees in physical science. He is a regular
contributor to Real Money at
TheStreet.com and
to Seeking Alpha. Dr. Lounsbury
also has his own professional
blog,
PiedmontHudson. His articles are
widely circulated on
the internet.
Other technologies played
on bit parts in the abatement
portfolios (left) the report found are likely to achieve the needed levels of climate
reduction most efficienctly.
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