Executive Summary

This report responds to a request from Senator Byron L. Dorgan for an analysis of the impacts on U.S. energy import dependence and emission reductions resulting from the commercialization of advanced hydrogen and fuel cell technologies in the transportation and distributed generation markets.

Hydrogen is an energy carrier, not a primary energy source. Like electricity, another energy carrier, hydrogen can be produced from a variety of fossil fuels and other primary energy sources. Electricity can also be used to produce hydrogen via electrolysis, and hydrogen can, in turn, fuel electricity generation using either combustion technologies or fuel cells.

The production of hydrogen using primary energy sources or electricity necessarily engenders some loss of energy content. This situation is typical of all energy transformation processes, including the generation of electricity from fossil fuels, where the electricity produced contains only 33 to 55 percent of the energy content of the oil, natural gas, or coal input to generation. Despite these transformation losses, electricity has been the fastest-growing source of energy in end-use applications in both the United States and the world over the past 50 years, reflecting its highly desirable characteristics, which include flexibility, efficiency, and absence of pollution at the point of end use, as well as the availability of a wide range of alternative generation technologies. Hydrogen’s future success as an energy carrier is likely to rely on its ability to demonstrate similar or superior attributes.

The development of a large market for hydrogen-powered light-duty fuel cell vehicles (FCVs) would likely require a major financial commitment by industry and government. The ultimate success of that market will depend on the ability to overcome significant technical and infrastructure challenges. Competition from other promising new vehicle technologies, such as plug-in hybrid electric vehicles (PHEVs) that could run on electricity from the grid for 50 to 80 percent of their travel, as well as continued improvement in more conventional technologies, make the prospect of widespread use of hydrogen FCVs an even greater challenge. Nonetheless, if the challenges can be met, FCVs powered with hydrogen can provide considerable reductions in light-duty vehicle (LDV) energy demand and carbon dioxide (CO2) emissions by 2050.

Certain aspects of a hydrogen economy are already in place on an industrial scale. More than 1 quadrillion British thermal units (Btu) of hydrogen is produced annually in the United States, equivalent to more than 1 percent of the total U.S. primary energy consumption of approximately 100 quadrillion Btu. Petroleum refining and petrochemical industries producing methanol and ammonia currently account for more than 90 percent of hydrogen use. In a hydrogen economy, where hydrogen is used as a fuel or energy carrier rather than as an industrial chemical, substantially more hydrogen production capacity would have to be developed. There would also be a requirement to address transportation and distribution challenges that do not arise in current hydrogen markets, where hydrogen typically is consumed in large quantity at a small number of sites in close proximity to its production location.

Technologies for hydrogen production can be categorized on the basis of their primary fuel source and the distinction between “on-purpose”¹ and “byproduct” production. The technology options for fossil fuels include steam methane reforming (SMR) in “on-purpose” hydrogen production plants, and byproduct production of hydrogen in the petroleum refining process. Another option for hydrogen production is partial oxidation, which can include gasification of solid or liquid feedstocks. Electrolysis processes using grid or dedicated energy sources could also be used to produce “on-purpose” hydrogen, and some production is currently available as a byproduct resulting from electrolysis processes used in the chlor-alkali industry. Other advanced electrolysis techniques—such as thermochemical processes using nuclear power as an energy source—may be available, but they have not yet been fully developed. From a cost perspective, it appears that production of hydrogen from electrolysis is generally a more expensive method of hydrogen production than gasification or SMR. The exception would be when hydrogen is produced as a byproduct of electrolysis used to produce chlorine.

Table ES1 summarizes the potential impacts of a hydrogen economy on petroleum use and CO2 emissions in two scenarios where hydrogen serves as an energy carrier and light-duty FCVs achieve major market penetration. Both scenarios assume that the financial and infrastructure challenges to a widespread hydrogen economy that are discussed in this report can be overcome. Additionally, the range of potential impacts reflects a number of different assumptions related to vehicle market penetration, hydrogen production technologies (including the manner in which they are deployed from a distributed local level to centralized production), and hydrogen vehicle efficiencies.

As shown in Figure ES1, under a more aggressive scenario,² U.S. CO2 emissions from LDVs calculated on a full fuel cycle basis (often referred to as “wells to wheels”), could potentially be reduced to less than 54 percent of the emission level in 1990, reaching 704 million metric tons, compared to the 1990 level of 1,295 million metric tons. Under the less aggressive scenario,³ there would be some reduction from the reference case,⁴ but LDVs still would have higher CO2 emissions and energy requirements than they do currently.

In the more aggressive scenario, petroleum consumption by U.S. LDVs would be reduced to a level of about 1.5 million barrels per day, 78 percent below the 1990 level of 6.9 million barrels per day. In the less aggressive scenario, LDV petroleum consumption in 2050 is 11 percent below its 1990 level.

The potential impacts depicted above are intended to illustrate the range of impacts that a hydrogen economy would have on LDV CO2 emissions and petroleum consumption if all significant technical and other challenges, necessary for a large scale deployment of light-duty FCVs, are resolved. Most, if not all, of the following significant challenges will require successful resolution in order to make a hydrogen economy a reality, especially as characterized in the more aggressive scenario.

CO2 Reduction. The main sources of hydrogen currently are hydrocarbon feedstocks, such as natural gas, coal, and petroleum, all of which also produce CO2. Thus, in order for a hydrogen economy to produce overall CO2 emissions reductions, any hydrogen production process must mitigate CO2 emissions through carbon capture and sequestration (CCS) or similar technology; use non-emitting fuel sources such as nuclear, wind, or other renewable power; and/or offset CO2 emissions with comparatively greater vehicle or generation efficiency. Because hydrocarbons currently are the cheapest feedstock, additional costs would be incurred.

Production and Distribution Costs. Fossil fuel feedstocks processed at large centralized facilities, with appropriate consideration of life-cycle emissions, are the least expensive source for a centralized hydrogen supply. Although a centralized distribution system is likely to provide the most economical means of production, such an infrastructure will have to overcome significant cost and structural challenges to become economically viable. If crude oil prices are sustained at about $90 per barrel in real 2006 dollars, the delivered (untaxed) cost of hydrogen, including production, transportation and distribution, must decline to between $2 and $3 per gallon gasoline equivalent in order to be economically viable.⁵ Although future breakthroughs in other hydrogen production technologies, such as nuclear thermochemical processes, could substantially lower life-cycle emissions, and presumably costs, they still need considerable research and development (R&D) before widespread adoption.

Hydrogen Storage. Efficient hydrogen storage is also among the most challenging issues facing the hydrogen economy, due to its low density as a gas and the costs of liquefaction. The largest hydrogen storage challenges relate to transportation applications in which FCV design constraints, such as weight, volume, and efficiency, limit the amount of hydrogen that can be stored onboard a vehicle. Hydrogen storage costs for fuel cells must fall to about $2 per kilowatthour, from the current estimate of about $8 per kilowatthour for a system with a pressure of 5,000 pounds per square inch.⁶

Hydrogen Vehicles. Perhaps the biggest impediments to a hydrogen economy require resolution of technical, economic, and safety challenges related to the FCVs themselves. Federal and State policies and incentives are likely to be needed to encourage fuel cell and vehicle manufacturers to invest in hydrogen FCVs. The cost of the fuel cells must fall to $30 per kilowatt,⁷ compared with current cost estimates of $3,000 to $5,000 per kilowatt for production in small numbers. While projected fuel cell costs at a scale of 500,000 units per year would be considerably lower, in the neighborhood of $100 per kilowatt according to one recent study,⁸ accomplishing a reduction in fuel cell costs to $30 per kilowatt over a period consistent with the time frames associated with any of the vehicle penetration rates analyzed here would represent technological learning and progress at rates that would be unprecedented for consumer durables.

Bridge Technologies. There are some “bridge” technologies that might provide some initial penetration that could lead to more experience with hydrogen as a fuel and greater public acceptance. For example, deployment of LDVs with hydrogen internal combustion engines (HICEs), which currently have a significantly lower incremental cost than FCVs, may represent an option for developing hydrogen production and fueling infrastructure; however, they still may be cost prohibitive for the average consumer. Unless there are CO2 emission constraints or government incentives, HICE vehicles are not likely to penetrate the market significantly in the short term.

Similarly, the use of fuel cells in stationary applications could provide a path for continued development of fuel cell technology. Stationary fuel cells can be economically attractive at costs significantly above $30 per kilowatt of capacity. In addition, natural gas can be used with an on-site reformer to generate hydrogen for many stationary applications of fuel cells, allowing for deployment in advance of the availability of a hydrogen distribution infrastructure.

In sum, although R&D eventually could succeed in solving all the technical and economic challenges that are faced in making hydrogen FCVs a cost-effective reality, several concurrent successes and investments would be required within the next 25 years to permit early FCV penetration and the concomitant development of a fueling infrastructure. Other promising technologies, such as PHEVs with an extended driving range on electricity from the grid, also offer opportunities for major reductions in petroleum use and CO2 emissions from LDVs. Competition from PHEVs presents further challenges to the prospect of a large future market for hydrogen FCVs.

Notes