Navigant Research Blog

The Hydrogen City Is a Thing Again—and Thanks to China, it Might Actually Work This Time

— February 8, 2018

The hydrogen city concept has been around almost as long as the hydrogen energy economy, but neither have really materialized as envisioned. Hydrogen cities (like the unrealized utopias of the 1980s and 2000s) face a familiar chicken-and-egg problem, with demand for hydrogen held back by a lack of hydrogen infrastructure, and vice versa. Now, with a number of recent market developments, the hydrogen city has returned. With global enthusiasm for hydrogen fuel building, this time it could be different.

China Propels the Market Forward

With its city air pollution issues, diverse energy appetite, and top-down interest in developing hydrogen and fuel cell technologies, China has a small but rapidly growing hydrogen scene. Notably, Wuhan in central China’s Hubei province is set to become a hydrogen city thanks to an announced $1.8 billion investment from a tech company. An auto manufacturing hub, the city could have 3,000 hydrogen powered vehicles in 2020 and 100 hydrogen fueling stations in 2025. Other recent developments from China include the world’s largest proton exchange membrane electrolysis order (to fuel buses in Guangdong province) and a number of partnerships with western companies that manufacture and share technology in the country.

Hydrogen Overcoming Hurdles at the Local Level

The hydrogen energy economy has been held back in part thanks to rapidly improving battery technologies, which have seen dramatically higher adoption in both transport and grid-tied storage applications. Underscoring this challenge, outgoing Governor Brown of California announced the raw numbers from last week’s clean vehicle plan—calling for 200 hydrogen fueling stations and 250,000 charging stations. That there were 1,250 times more charging stations points to the infrastructure and complexity challenges of hydrogen, and the strong incumbency of electric infrastructure.

But there is reason for optimism, with many decision makers seeing longer-term hydrogen potential along with a surge in actual deal activity. Though light duty vehicle sales have been slow, more fueling stations are quickly coming online, with one 2017 tally finding that 30% of global hydrogen refueling stations had been built in the past year alone. In the shorter term, captive fleets like buses are showing significant growth with at least 300 units expected in Europe in the coming years, and hundreds more in China and elsewhere. Indeed, a hydrogen city could deploy a fleet of fuel cell vehicles in a mobility as a service configuration, as covered in a recent Navigant Research report. And the potential of power-to-gas for renewables integration, as outlined in another recent Navigant Research report, is being realized with (for example) a massive 100 MW project recently announced in France.

Each of these use cases has a place in the hydrogen city. Aggressive local hydrogen plans in Japan and in the UK city of Leeds all point to the value hydrogen can provide especially when focused on a local level—overcoming infrastructure hurdles, enhancing economies of scale, and boosting local adoption. Whether the larger hydrogen energy economy will materialize remains an open question. But if it does, it just may happen one hydrogen city at a time.

 

A Roadmap to the Coming Hydrogen Economy in One Chart

— July 5, 2017

Hydrogen has been discussed as a future energy carrier for decades, though infrastructure challenges and high cost seem to always keep broad adoption in the hypothetical realm. However, as the cost of electrolyzers and renewable energy continue to tumble and climate policies tighten, hydrogen is again experiencing renewed global interest.

Versatility and Disruptive Potential

Hydrogen’s versatility boosts its appeal as an energy carrier. It is the only energy carrier that has significant disruptive potential across the world’s energy-consuming segments: power, transport, industry, and heating. Electrolytic hydrogen—which comes from splitting water molecules by electrolysis, often with renewable electricity—is broadly seen as the key to clean hydrogen.

As seen in in the following chart, electrolysis remains expensive today. This is because electrolyzer capital costs have not fallen much below $1,000/kW. Renewable electricity costs, while falling dramatically, remain relatively high compared to a very high penetration future. But as those two costs fall, as is projected through 2025 and beyond, the cost of clean hydrogen falls substantially.

Hydrogen Cost Comparison with Other Energy Carriers, World Markets: 2017, 2025, and Beyond

Notes: Commodity costs include representative data from California, Germany, and Japan. Electrolytic hydrogen (2017) based on DOE data and actual filling station costs, while future prices presume large-scale (100 MW) systems with continued declines in both cost of renewable electricity and electrolyzer capital costs. SMR is steam methane reformation.

(Sources: Navigant Research, US Department of Energy, International Monetary Fund, International Energy Agency, California Energy Commission)

Hydrogen Use in Transportation

Transportation, which favors expensive energy-dense fuels, is among the more attractive uses for hydrogen. Indeed, electrolysis is providing a growing share of hydrogen to rollouts of both passenger vehicles and heavy duty vehicles like buses—in places such as China, California, Germany, and the United Kingdom. The success of battery EVs (BEVs) represents a major hurdle for hydrogen, though there is growing reason to believe that both energy carriers will be embraced. For example, the range-extending capabilities of hydrogen on battery vehicles are continuing to improve.

Other Hydrogen Uses

Hydrogen is also highly valued by industry as an important process input to production of ammonia, glass, and metals. Industrial uses represent an existing hydrogen economy that can be decarbonized and made more efficient by renewable hydrogen. Finally, hydrogen could revolutionize power generation and heating through fuel cells or other thermal generators, though it is expensive compared to natural gas, especially in the United States with its ongoing shale gas boom. Still, if the aggressive cost decline targets are met, even these two heavily polluting segments could be disrupted by hydrogen energy.

Hydrogen detractors correctly point to the infrastructure challenges of hydrogen storage, compression, and transport and the steep cost declines needed. If those hurdles can be cleared, this chart may hold two additional reasons for optimism: carbon pricing and hydrogen’s efficiency bonus. Carbon pricing, which is on the rise, makes hydrogen more attractive, as it displaces fossil fuels. Finally, comparing by units of energy hides a key efficiency bonus of hydrogen: it is often twice as efficient as the fossil fuels it replaces. This is because both stationary and vehicular fuel cells can be around 60% efficient, which is roughly twice the efficiency of combustion-based technologies after losses.

A Roadmap to Future Energy

This chart can be considered a roadmap to an eventual hydrogen economy. Electrolytic hydrogen is already competing with fossil fuels in the transport and industrial segments, and will continue to grow its market share. Provided the favorable carbon policies and cost declines continue, hydrogen has the potential to be the best and most versatile energy carrier of the future.

 

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