4. Technological and Economic Challenges

While engineering research and other R&D eventually could succeed in solving all the technical and economic challenges of making hydrogen-powered light-duty FCVs a cost-effective reality by 2030, the number of necessary successes and investments required over the next 25 years is large by many measures. Large-scale penetration of FCVs or HICE vehicles in the United States is unlikely without significant long-term Federal and State policies that promote FCV and HICE vehicle adoption and hydrogen infrastructure development. This chapter focuses on some of the challenges faced in achieving widespread penetration of FCV vehicles. All but one of the challenges—economical fuel cells—are the same for widespread HICE vehicle penetration.

Challenges to Deployment of a Hydrogen Economy

The most difficult technical challenge for large-scale adoption of FCVs appears to be the high capital cost of the PEM fuel cell, which would need to drop to about $30 per kilowatt. Complicating the potential for success in achieving this target is the cost of the platinum catalyst, which has been affected by a recent dramatic increase in platinum prices.

Widespread use of hydrogen fuel cells in LDVs will require significant R&D breakthroughs, including: (1) the development and widespread deployment of economical hydrogen production technologies or processes; (2) the development and production of economical, high-density, on-board hydrogen storage that can be drawn on quickly as needed;⁷⁶ (3) the widespread development and deployment of an economical hydrogen transportation, distribution, and dispensing network; and (4) the development and large-scale deployment of economical PEM fuel cells and their seamless integration into LDV motors. Moreover, in addition to the economic and technological challenges, public safety concerns about hydrogen in LDVs must be addressed at the consumer, State, and Federal levels, as they have been for compressed natural gas (CNG) vehicles.⁷⁷

Competition in the Light-Duty Vehicle Market and Technological Progress

While considerable Federal R&D is focused on the development of FCVs and advanced battery technologies, large amounts of industry R&D are also focused on improving the performance of more conventional automotive technologies. Previous studies of investments in R&D indicate that that Federal R&D represents roughly 10 percent of the total R&D spending. However, industry’s R&D typically is focused on the next 5 years. Consequently, technological progress on conventional power trains and advanced hybrids is likely to advance, especially with the challenges faced by the automobile industry in meeting the Corporate Average Fuel Economy (CAFE) standards set by provisions of EISA2007, which raise average new LDV fuel efficiency to 35 miles per gallon in 2020. To comply with the law, average new car efficiency is projected to rise to about 42 miles per gallon and new light truck efficiency to about 31 miles per gallon in 2020.

FCVs are also likely to face stiff competition from all-electric vehicles and PHEVs. Only one major challenge remains for those vehicles to be commercialized: the development of a durable, safe, reliable, and relatively light-weight set of batteries that do not produce too much heat and can safely power the LDV for about 40 miles under normal driving conditions.

Successful R&D and commercialization of an advanced battery technology that achieves acceptable safety, performance, durability, and costs could support all three advanced automotive technologies—for all-electric PHEVs, all-electric FCVs, and hybrid FCVs. Because about 80 percent of all LDV round trips in the United States are less than 40 miles, early development of either the all-electric car or the PHEV could provide an attractive alternative to FCVs for significantly reducing oil imports, even if PHEVs continued to consume some petroleum and other liquid fuels on long-distance trips. There still are unresolved issues of safety and overheating with the current lithium-ion configuration, however, and how those challenges are addressed will weigh heavily on the ultimate success and market acceptance of the technology. Successful battery development could be an important option, or part of a portfolio of options, if a policy to reduce CO2 emissions were adopted.

General Motors has suggested that the delivered price at which hydrogen is competitive with gasoline is the price of gasoline, excluding taxes, times the average efficiency advantage that the FCV has over a new conventional vehicle, all else being equal.⁷⁸ If FCVs had a 50-percent efficiency advantage over the best new conventional and hybrid vehicle alternatives (Table 4.1), then, all else being equal, hydrogen priced between $2 and $3 per kilogram would be competitive with gasoline priced between $3 and $4.50 per gallon.

While further R&D on fuel cells targets improving electricity generation for FCVs,⁷⁹ R&D is also likely to improve the performance of more conventional automotive technologies and the development of enhanced battery technology for PHEVs. As shown in Table 4.1, the technological progress projected for gasoline and diesel hybrids in AEO2008 is expected to result in average fuel efficiencies of more than 50 miles per gallon by 2015 and nearly 60 miles per gallon by 2030, narrowing the efficiency advantage of FCVs over conventional hybrids.

DOE’s Key Targets and Goals for Hydrogen and Fuel Cell Vehicles

According to EERE,⁸⁰ the following hydrogen-related goals must be achieved if FCVs are to attain large-scale dominance in the LDV market:

• The delivered, untaxed, cost of hydrogen, including production, transportation, and distribution, must decline to between $2 and $3 per gallon gasoline equivalent, or approximately $2 to $3 per kilogram of hydrogen, because 1 kilogram of hydrogen contains about the same energy as a gallon of gasoline, and $1 per kilogram is about $8.77 per million Btu,⁸¹ if crude oil prices are sustained at about $90 per barrel in real 2006 dollars. Higher crude oil prices would allow higher-cost hydrogen to pass the economic test.

• Federal and State policies must be instituted to facilitate the construction of all phases of a hydrogen production, transmission, distribution, and dispensing infrastructure. The policies may have to include financial incentives and guarantees that currently are unspecified, as well as safety regulations for the transportation of hydrogen through tunnels and on bridges.

• Fuel cell and vehicle manufacturers must be convinced that the Federal and State governments will provide a stable and supportive set of policies that encourage their investments in hydrogen FCVs for at least 10 years, according to an ORNL report.⁸²

• Hydrogen storage costs for fuel cells must fall to about $2 per kilowatt from their currently estimated price of about $8 per kilowatt for the 5,000 psi system.⁸³

• The total cost of all the fuel cell components, including fuel stacks, catalyst, and balance of system, must fall to $30 per kilowatt,⁸⁴ as compared with current cost estimates of $3,625 to $4,500 per kilowatt for production in small numbers.

• Ideally, the first FCV markets must be developed in areas with high population densities that already have excess capacity at hydrogen production facilities, in order to encourage early adoption, provide consumer familiarity, and accelerate fuel cell cost reductions based on learning by the automobile manufactures.

Each of these major goals and associated challenges are discussed below. Additional technical and economic feasibility items may also require resolution.

Hydrogen Production

Hydrogen can be produced from any number of well-known processes, as described in Chapter 2. As shown in Table 2.1, hydrogen production from a large-scale SMR plant is less than $1.50 per kilogram, whereas the cost of production from small-scale decentralized plants is much higher—roughly, $2.60 to $7.00 per kilogram using today’s technologies, depending on the production method and source.

DOE has noted that there are not enough dispensing stations with sufficient land to construct on-site natural gas steam reformers to achieve a market penetration of between 2 million and 10 million FCVs.⁸⁵ Additional R&D breakthroughs or significant subsidies will be required to reduce the delivered cost of hydrogen at the dispensing stations.

In regard to the supply of biomass for hydrogen production, enactment of either a stringent cap-and-trade program for GHG emissions or an RPS for electricity generation, in addition to recently enacted EISA2007 provisions, could cause biomass prices to rise significantly and make the production of hydrogen from biomass much more costly.⁸⁶ Other researchers have also highlighted the implied scale-up of biomass production from current levels that must be achieved as a significant uncertainty in evaluating the feasibility of using biomass resources on a large scale.⁸⁷

Hydrogen Storage

Any vehicle that provides a substantially lower range and less convenience than those of conventional gasoline and diesel vehicles (currently, about 300 miles per fill-up) is unlikely to achieve dominance in the LDV market, because consumer expectations for vehicle range have been set by conventional gasoline and diesel vehicles and, more recently, hybrids. The three prevalent on-board hydrogen storage methods being considered, as discussed previously, are high-pressure tanks, liquid storage in refrigerated or insulated containers, and storage in a yet-to-be developed metal hydride.

The ultimate goals of the hydrogen storage R&D program are to develop a low-cost storage medium that would: (1) safely trap and store sufficient volumes of hydrogen to provide a range of at least 300 miles per fill-up; (2) provide stable “on-demand” hydrogen storage under a wide range of temperatures; (3) quickly and controllably release the stored hydrogen “on demand” to the fuel cell or HICE to provide acceptable vehicle acceleration and torque; (4) safely provide numerous recyclings, or fill-ups, that are comparable in number and frequency to those for a conventional LDV over a 3- to 5-year period; and (5) reduce hydrogen storage costs for FCVs to about $2 per kilowatthour, as compared with current estimated costs of at least $8 per kilowatthour.⁸⁸

High-pressure tanks (5,000 to 10,000 psi) made of carbon fiber that can be used for hydrogen storage range in cost from $8 per kilowatthour to $17 per kilowatthour,⁸⁹ depending on the pressure capability. Doubling the tank pressure from 5,000 to 10,000 psi increases the hydrogen storage capacity by 70 percent for the same volume, based on the physical properties of hydrogen, thus increasing the range of the vehicle by 70 percent. More than 65 percent of the estimated storage cost is the cost of the carbon-fiber tank.⁹⁰ Used in vehicle conversions, these tanks take up most of the trunk space in LDVs, provide a range of more than 250 miles in FCVs and less than 100 miles in HICE engines, require a relatively long time to refill (2 minutes per kilogram or gasoline gallon equivalent,⁹¹ are significantly more expensive than gasoline or diesel vehicles, and face perceived safety concerns in the event of accidents. These characteristics, while generally undesirable for LDVs, are likely to be surmountable.

Hydrogen could also be stored in liquid form, at about -423 degrees Fahrenheit, in refrigerated or insulated units, thereby significantly increasing its volumetric energy density but still containing only about 26 percent of the energy of a gallon of gasoline. Furthermore, the evaporative losses of at least 1.7 percent per day and the energy consumption needed to convert the hydrogen gas to liquid form (the equivalent of at least one-third of the original tank of liquid hydrogen), add to the energy transformation losses associated with hydrogen production and increase the cost of hydrogen-fueled vehicles using liquid hydrogen considerably. The major drawback for liquefied hydrogen storage, besides the hydrogen production and liquefaction cost, is the volume of trunk space required—roughly four times the volume of gasoline for the same energy content.

Considerable research is being directed by DOE into the development of storage systems, including: metal hydride storage media, carbon nanotube systems, and other novel storage systems, as discussed above. There are no economical advanced storage media that currently satisfy all the requirements, and it is uncertain whether or when the needed successes will occur. It would appear that considerable R&D success would be required to make them commercial.

Development and Deployment of a Hydrogen Infrastructure

Through 2030, the two approaches being considered to develop a hydrogen transmission and distribution infrastructure are the development of a complete pipeline transmission and distribution system, similar in some ways to the current system for natural gas, and the development and implementation of a series of local hydrogen production facilities using natural gas as the feedstock. The goal of the current program is to start with the local system and then transition to the larger central system as the hydrogen market grows.

The economic challenges are different for each option and difficult to overcome without government intervention. A full-scale hydrogen pipeline and distribution system resembling today’s natural gas network would provide more options for hydrogen production and generally lower costs than the decentralized option, provided that the hydrogen pipeline and distribution system has a high utilization rate. Initially, however, utilization rates are likely to be low, and the investments needed are unlikely to be made without significant Federal incentives. The local SMR option would avoid high initial investment costs and the need for high overall utilization rates, but the efficiency of the technology would have to be improved, and production costs would have to be reduced significantly. In addition, the feedstock fuel usually is limited to natural gas, which is subject to significant price volatility and could become more expensive when natural gas is used on a large scale for hydrogen production.

For centralized hydrogen production and distribution, the cost of a hydrogen transmission system will depend on a number of factors that are specific to the site, operating conditions, and pipeline. Hydrogen pipelines are likely to have a smaller diameter than natural gas pipelines, which would reduce the cost; however, they also are likely to require more expensive steel alloys to avoid embrittlement and other issues, unless alternatives are developed.

Distribution and dispensing costs for hydrogen depend heavily on the mode of transportation (pipeline, truck, or rail) and the form of the hydrogen (pressurized gas, container, or liquefied) delivered to distribution and dispensing centers. The costs can vary widely. Shell, a partner in a recent hydrogen infrastructure study, noted that it expected a limited role for distributed SMR in the initial development of the hydrogen economy, because SMR requires significant progress in the development of small reformer technology before it becomes economical.⁹²

The current analytic approach is to initially target locations with high population densities, such as Southern California and the New York City metropolitan area, with decentralized hydrogen production facilities to avoid the costs of constructing a transmission and distribution system. Those areas would be later be expanded to include the Boston and Washington, DC, areas. This approach minimizes many of the initial large-scale investment cost difficulties of the centralized hydrogen production, transmission, and distribution system, but it could create other new challenges in terms of potential natural gas delivery bottlenecks and price volatility.

Production of Fuel Cells for Light-Duty Vehicles

Fuel cells have been used for more than 40 years in niche markets, including the U.S. space program. Capital costs initially exceeded $30,000 per kilowatt. PEM fuel cells, a more recent development, have been built and used in some LDVs. More than 4,000 new transportation vehicle applications of PEM-like fuel cells have been made worldwide between 2000 and 2006,⁹³, ⁹⁴ amounting to more than 250 megawatts of capacity for transportation applications. Honda Motor Company will introduce 200 fuel cell hybrid cars, the FCX Clarity, late in 2008 or early in 2009 for 3-year leases. The Clarity, which uses a 100-kilowatt hydrogen fuel cell system, will be leased at $600 per month for 3-year leases in the Los Angeles metropolitan area. Honda has stated that the lease rate does not fully cover the cost of the vehicle.

Reduction of Automotive PEM Fuel Cell Costs to $30 per Kilowatt

The PEM units to be used in LDVs produce low-level heat and are estimated to have initial costs between $3,000 and $5,000 per kilowatt, depending on the application (e.g., LDVs or forklifts). Costs are already projected to be considerably lower for production on a large scale, with one recent study citing estimates in the neighborhood of $100 per kilowatt⁹⁵ but are still well above the DOE goal to reduce the “first purchase” cost of the PEM fuel cell to about $30 per kilowatt by 2015. In addition, catalyst use is targeted for reduction from 1.7 ounces to 0.56 ounces of platinum per 80-kilowatt fuel cell system.⁹⁶ If the program goals are achieved, the incremental cost of the fuel cell drive system would be approximately offset by the elimination of the internal combustion engine.

Although the target cost of PEM fuel cells may be achievable with successful R&D and numerous breakthroughs, the timing and occurrence of those breakthroughs are far from certain. The fuel cell cost reductions, if achieved through normal technological learning and progress, would be unprecedented for consumer durables. Appendix F provides a further discussion of learning in the context of experience in other markets for durable goods.

Catalyst Cost Challenge

Using DOE’s catalyst cost of $1,000 per ounce,⁹⁷ and assuming that platinum usage is 1.7 ounces per FCV, the cost of the catalyst in a PEM fuel cell is about $21 per kilowatt. Reducing the platinum requirement to 0.56 ounces by 2015 would reduce the per-kilowatt incremental cost of the catalyst to $7 per kilowatt.

Recent developments in the worldwide platinum market suggest the possibility that platinum prices could rise to more than $1,000 per ounce. Platinum is a rare metal—more than 30 times more rare than gold and much more difficult and costly to mine. The commodity prices of platinum, while showing some variability, have been trending steadily upward since January 2003, reflecting rising demand for platinum in all markets. Worldwide platinum production in 2007 was about 225 tons, and the average price was about $1,200 per ounce.⁹⁸ In early 2008, the spot price for platinum continued rising to more $1,500 per ounce, and it hovered between $1,700 and $2,200 per ounce from April through July 2008. According to the largest platinum distributor in the world (the United Kingdom’s Johnson Matthey), in 2007 the total world demand for platinum was 241 tons, of which roughly 27 percent was used for industrial purposes, 23 percent for jewelry, 3 percent for investment purposes, and the remaining 47 percent for catalytic converters. Appendix G provides a further discussion of the implications of platinum market conditions for the cost of PEM fuel cells using platinum.

Notes