Despite the extensive progress auto makers have made in developing hydrogen fuel cell vehicles (FCV), energy companies have largely sat on the sidelines with only a couple of exceptions in building out a refueling infrastructure.
Big Oil is flush with profits, but has little financial incentive at present to invest in a hydrogen production and refueling infrastructure so vital if the auto makers are to succeed. Indeed, much more is at stake for companies such as General Motors (GM), Honda, and Hyundai – all leaders in fuel cell vehicles (FVCs) – in quickly moving to a hydrogen economy. They can’t sell cars unless consumers are confident the fuel supply is plentiful, convenient and affordable. In a speech at the National Hydrogen Assn.’s (NHA) annual conference in April, GM Vice President of R&D Larry Burns all issued a hydrogen call-to-arms to government and energy companies.
“While we have made impressive progress, we have now reached a point where the energy industry and governments must pick up their pace so we can continue to advance. What is urgently needed is sufficient investment by energy providers to assure auto companies that the required hydrogen infrastructure will be in place when we deploy our next generation of fuel cell-electric vehicles,” he says.
Today, about 40 billion kilograms of hydrogen is produced which is enough to fuel 130 million fuel cell vehicles. A quarter of that is used in the oil refining process or enough to power 33 million FCVs, according to a study entitled “Hydrogen Fueling Infrastructure Assessment” released jointly last December by Shell Hydrogen and GM. The study goes on to say 12,000 hydrogen stations could be erected for $10-$15 billion or one half of what it cost to build the Alaskan Pipeline. These stations could fuel up to a million FCVs and put a hydrogen pump and supply within two miles of 70 percent of the U.S. population.
In the U.S., according to a list updated in June on FuelCell.com, there are about 70 hydrogen refueling stations across the U.S., but only a handful are public. Most are run by universities, municipal works departments or are dedicated to experimental FCV programs. Almost half are in smog-conscious California. Another 100 are in other countries and about 65 more are planned worldwide.
The Shell and GM report projects the price at $4-$6 per kilogram (kg) of hydrogen, which in energy yield is equivalent to a gallon of gasoline (GGE). However, FCVs get roughly double the mileage per kilogram of hydrogen over a gallon of gasoline. So even if a kilogram of hydrogen costs $6 at the pump, consumers would be relishing the price considering 2008’s runaway gas prices. Burns outlined a plan where 40 hydrogen stations spread across three Los Angeles counties and costing $4 million each would consistently put drivers within 3.5 miles of refueling.
Shell Hydrogen, which is closely allied with GM, is one of the few energy companies working on hydrogen stations. Shell Global VP Duncan McLeod outlined the company‘s position in a February speech at the National Hydrogen Assn. (NHA) meeting.
“Our aim is two-fold: to move to fully renewable hydrogen as fast as possible and to help accelerate the mass rollout of FCVs. Our credo? To learn by doing,” he says. “We need to learn by doing, align our goals and adapt in the light of experience. It must a joint effort across all sectors, underpinned by sustained investment and facilitated by enabling policies and incentives.”
While there’s a bit of a “you go first mentality,” Shell, since 1999, has consistently invested in hydrogen. The company presently has refueling stations in Washington, New York and a third was christened in West Los Angeles on June 26. It has another three overseas. Reluctant to cast itself as leader, Shell Hydrogen clearly recognizes the need for other companies to step up.
“We don’t say we’re the leaders go and follow us. We work on things like hydrogen at a steady pace,” says Shell Hydrogen president Phil Baxley. “We continue to put in stations when others are finished or have quit building stations.” The effort, says Baxley, is driven by “three hard truths:” demand for energy will increase especially in developing countries, the supply of “easy” oil will not keep up with demand after 2015 and CO2 emissions will keep growing unless we move to fuels like hydrogen.
“There’s two ways we can go. We can scramble where every country scrambles for itself. The other way is where there are blueprints for which government, industries and nation cooperate to develop energy. We typically don’t favor scenarios, but we have a strong preference for blueprints,” says Baxley, also a former chairman of the NHA.
While Shell Hydrogen is pushing the new fuel hard, Baxley is cautious about how quickly a hydrogen FCV market will unfold.
“That’s a challenging question. By 2015, we will move from the demo stage to the pre-commercial stage which might last five to 10 years. We’ll need to look for signs when a business model emerges. It won’t be until 2025-30 until you see a real market,” says Baxley.
Other energy companies will be key to any transition to a broader hydrogen economy. Their have the industrial capacity to produce hydrogen in large quantities and already do. Chevron Corp., the other hydrogen leader among oil companies, already produces more than one million kg of hydrogen every day for use in refining. Chevron Technology Ventures, which is charged with managing the $214 billion energy concern’s hydrogen initiative, has set up five refueling stations and is one of the acknowledged leaders. However, British Petroleum’s (BP) rationale for backing off “hydrogen for transport” speaks directly to one why Shell and Chevron are virtually alone among oil companies continuing to invest in an infrastructure. BP, she added, has built private stations and has worked with Ford’s and Daimler’s FCVs.
“The industry view is that the onset of mass production for FCVs will commence in 2015 at the earliest, and will take until 2030 for a significant number of vehicles to be in use,” according to BP Spokeswoman Sarah Howell. “Through the various projects we have already undertaken, we have a clear understanding of what is required to build and operate a hydrogen refuelling facility safely.”
As a result, BP is refocusing its hydrogen effort on power plant generation and increasing its investments in bio-fuels such as Jatropha oil.
For the moment, Exxon-Mobil, the world’s largest oil company whose revenues were $117 billion in the first quarter alone, isn’t investing to in a hydrogen refueling infrastructure today. That’s not to say the company won’t power FCVs when they finally arrive in quantity. Exxon-Mobil is a partner in a project to convert gasoline into hydrogen using a reformer technology on board the vehicle. The “onboard reformer” as it’s called promises to increase miles per gallon by up to 85 percent and reduce CO2 emissions by 45 percent, according to Gantt Walton, an ExxonMobil spokesperson.
“(The onboard reformer works) without the need for a dedicated hydrogen infrastructure,” he says. “Just because we’re not investing in an infrastructure does not mean we’re against it. We’re looking for good business opportunities that are broadly scalable and commercially viable in the next decade.” Collectively BP and ExxonMobil raked in $219 billion in Q1 revenues and $18.7 billion in profits. You heard that right: for the quarter, not for the year. Their combined participation in building out a hydrogen infrastructure would be invaluable given their experience and financial clout.
Author of “The Hydrogen Age,” James Provenzano sees greed behind Big Oil’s absence from actively investing in renewable hydrogen and blames investors.
“Interest in expanding their portfolio is in conflict with maintaining profits. You have conflict in that Americans want more renewable fuels and shareholders want to make sure they want to see the profits. They want their cake and to eat it too,” says Provenzano.
But it’ll be the cars that excite the buying public more than the hydrogen and its associated infrastructure, according to Catherine Dunwoody, executive director of the California Fuel Partnership which is charged with promoting adoption of FCVs.
“It’s difficult for anyone to make a business case for fuel where there is no demand,” she says. We were in the tens of vehicles and now we’re in the hundreds and moving to the thousands. When there’s ten of thousands, you start to see a market emerge. There is going to be a market for this fuel,” she says
Even hydrogen’s stakeholders – energy and auto companies, as well as government policy makers – agree that a variety of fossil fuel alternatives will play a role in the future. While hydrogen is a promising answer, it’s only one solution to shrinking oil reserves.
“What those fuels will be is still to be determined. Hydrogen is one that should be considered. You can make it from a diversity of sources,” says Puneet Verma, hydrogen program manager at Chevron Technology Ventures. “We think hydrogen shows a lot of promise.” But just as soon as one challenge is resolved, another emerges.
“We’ve had tremendous technology breakthroughs. Four years ago, the idea of making hydrogen at the station was just a theory. Now we can do it at five locations using six different methods,” he says. They principally include Steam Methane Reforming (SMR) where it is taken from natural gas and electrolysis when hydrogen gas is made from water and electricity. However, storing hydrogen at a service station where production could sales initially could top 1,500 kilograms a day becomes the next challenge. The typical filling station has neither the space nor storage tanks for hydrogen. What’s more, the output at Shell Hydrogen’s White Plains, N.Y. station is a mere 12 kg based on need at present.
Another major player is Air Products and Chemicals, which claims to be the world’s largest producer of hydrogen. It has already completed 85 station projects and performed 60,000 FCV refuelings. “We have build stations for pretty much all the auto manufacturers here and abroad,” says Ed Kiczek, Air Products director of hydrogen energy systems.
In addition to production capacity, Air Products and other industrial gas companies such as Linde and Praxair have extensive distribution networks consisting of trucks and pipelines. And Air Products is confident there’s a sufficient hydrogen already to support FCVs.
“If someone wanted to put 100,000 FCVs in L.A. Basin, there would be no problem fueling the vehicles. We’d just have to build the stations,” says Kiczek. The supply, however, tends to be concentrated in areas where there are refineries and chemical plants where hydrogen is already produced or is a by-product of other processes.
Air Products believes on-site reformers or electrolysers at refuelling stations would be impractical at this point for a host of reason. The storage footprint is too large and production is too expensive. .
“Hydrogen production likes to run at capacity and steady. You have a demand and supply mismatch at filling stations. Typically cars pull into a gas station between six and eight in the morning and four and eight in the afternoon and evening. Delivered product is an easier and expandable.”
Shell is doing both SMR and using on-site electrolysers built by Proton Energy Systems and Hydrogenics, but understands on-site or even at home production is years away.
“We don’t see electrolysers playing a big role initially. The best path to hydrogen is to make it from LNG or biomass. Electrolysers in the long run could be part of that mix,” says Baxley. But Shell is using them in several of its stations and will install one on top of a station canopy next year to get around the space constraints.
Supply and expense is another issue, according to Kiczek. Electrolysers are expensive and currently produce small quantities whereas Steam Methane Reforming can produce quantities of hydrogen in high volume. “Electrolysers are certainly a renewable way, but they are very expensive compared that to large SMR plant.”
Indeed, a comprehensive report Oak Ridge National Labs. entitled “Transition to Hydrogen FCVs and The Potential Hydrogen Infrastructure Requirements” estimates that central plant production including transportation and terminal costs would net out to between $2.50 and $3.25 a kilogram which is considered the “gallon of gasoline equivalent (GGE).” estimated distributed small plant production at, for example, a service station would be closer to $5 per kilogram.
“The small plant (0.1 tons per day) costs for hydrogen are prohibitively high, at nearly $5 untaxed),” according to the report.
But it’s not the price alone that matters, argues James Provenzano, co-author of the book, “The Hydrogen Age.”
“Efficiency does not mean a damn thing. The consumer does not look at the efficiency of fuel when they buy. It takes 1.3 units of energy to produce one (unit of gasoline) in your tank. What matters is the cost per mile driven,” he says. “It’s not efficient for us to drive a 4,000 lb car to get a head of lettuce, but we do it anyway.”
Kiczek hesitates to pinpoint a timetable when the hydrogen economy will begin to emerge, but he’s confident it’s “when” not “if.” And he recognizes Air Products can’t do it alone.
“We are not the driver of this. We can’t just build stations and hope the cars will show up, but on the delivery side, we do not see many technical barriers,” Kiczek says. “We are confident we can supply hydrogen that is competitive with gasoline.”
Indeed, Air Products is an $11 billion pipsqueak compared to oil companies 10 to 20 times larger. Said one Air Products manager recently commenting if Big Oil will soon be a rival: “One of them could buy us in a heartbeat.”
|The Shell hydrogen pump at a gas station on Benning Rd. in Washington. Photo courtesy of Shell Hydrogen
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