FINANCING THE HYDROGEN REVOLUTION Why fuel cells? Commercialisation prospects, barriers and strategies

An activity of the World Fuel Cell Council e.V.

FINANCING THE HYDROGEN REVOLUTIONFINANCING THE HYDROGEN REVOLUTION

Why fuel cells?Why fuel cells?Commercialisation prospects, Commercialisation prospects,

barriers and strategiesbarriers and strategies

London, 26 February 2004


Why Fuel Cells?Why Fuel Cells? Environmental & Economic ProblemsEnvironmental & Economic Problems

• Air pollution increases human morbidity and mortality

• Build-up of greenhouse gases

• Energy security under threat


Europe's dirty air 'still a killer'Europe's dirty air 'still a killer'BBC News, 31 October 2002BBC News, 31 October 2002

Thousands are "dying prematurely" through air pollution


““London to fail pollution targets”London to fail pollution targets”BBC News, 4 April 2003BBC News, 4 April 2003


Energy SecurityEnergy Security

• Colin Campbell, July 2001:– Oil production is about to peak– Leading to severe political and

economic tensions

• German study suggests oil shortage by 2015– oil reserves are finite – dependence on the Middle East

and Russia will increase


Electrolyte

- +

+ +

+2H +

2e -

O 212

2H +

2e -

H 2

2e -

2H +

Anode Cathode

heat+water

H 2O

hydrogen(from fuel)

oxygen(air)


Unique Combination of Advantages:Unique Combination of Advantages:

• Minimum or zero toxic emissions• Increased efficiency, reduced CO2 emissions• H2 derived from variety of sources• Increased energy security• Efficient in small size and part load• Siting flexibility allows use of by-product heat• Reliable and durable / lower running costs


A fuel cell is the most efficient way A fuel cell is the most efficient way to convert hydrogen to energy to convert hydrogen to energy

and may enable the benign and may enable the benign hydrogen economy hydrogen economy

of the futureof the future


International competition is also International competition is also driving fuel cell developmentdriving fuel cell development

“Energy…the biggest business in the world…is on the verge of massive change”

• Forces that are reshaping the energy world:– Deregulation– Convergence of oil, gas electricity & service sectors– Volatility of supply and price– Disruptive innovations such as fuel cells and distributed

power [Source: The London Economist, 10/02/01]


International competition is also International competition is also driving fuel cell developmentdriving fuel cell development

• FCs expected to be economic growth leader • Securing quality employment for many

thousands of people• It is essential that Europe be able to compete


Increasing public support:Increasing public support:

• Japanese government has set aggressive targets:– 50,000 fuel cell vehicles on road by 2010– 1.4m residential/commercial cogeneration unitsExpected to achieve only 10-20%, but will lead the world

• $1.7bn over five years for US FreedomCAR and Freedom Fuel initiatives

• EU launched High Level Group on H2 and FCs, now formed Hydrogen Technology Platform

• China to invest $290m over five years in electric vehicle / fuel cell programme


But, fuel cells are a But, fuel cells are a “disruptive” technology“disruptive” technology

• “... mainstream customers are unwilling to use a disruptive product in applications they know and understand …”

• A disruptive technology will muddle along until a ‘killer’ application comes along that pulls it into the market

Source: Harvard Business Review, January 1995


Are there ‘killer’ applications Are there ‘killer’ applications for fuel cells?for fuel cells?

Early markets (mainly direct H2 fuel cells)

• Portable generators • Backup and premium power• Power from by-product H2

• Specialist vehicles– Buses– Boats– Utility– Locomotives / trams


Are there ‘killer’ applications Are there ‘killer’ applications for fuel cells?for fuel cells?

Early markets (hydrocarbon fuelled FCs)• Battery Replacement (portable electronics)• Residential & commercial co/tri-generation

Longer-term markets• Two-wheeled vehicles (Asia)• Distributed generation• Mass market vehicles


Fuel Cell MarketsFuel Cell MarketsTiming and Industry Cost CurveTiming and Industry Cost Curve

100,000100,000

10,00010,000

1,0001,000

100100

1010202020202010201020022002

ResidentialResidentialCHPCHP

Stationary Mass MarketsStationary Mass Markets

AutomotiveAutomotiveRemoteRemote

StationaryStationary

Peak ShavingPeak Shaving

Backup & Standby, PortableBackup & Standby, Portable

Microfuelcells, Innovators, Early AdaptorsMicrofuelcells, Innovators, Early Adaptors

Syst

em C

ost

( $/k

W)

Syst

em C

ost

( $/k

W)

Source: Plug Power Inc. presentation on February 6, 2002 at SalomonSmithBarney conferenceSource: Plug Power Inc. presentation on February 6, 2002 at SalomonSmithBarney conference


Critical Issues Critical Issues OverallOverall

Immediate• FC system cost and lifetime

– recycling may reduce short-term cost problem• Bridge the financial gap between:

– high cost, low volume prototype production– and high volume commercial production

Longer-term• On-board H2 storage for vehicles• Fuel choice and fuelling infrastructure


Research fabricationCell invention and proof of cell concept

Generic lab equipment: “beakers” “paint brushes”

101 cells week-1

103 cells year-1

1 kW to 10 kW year-1

Fabrication for cell developmentCell development and optimisation

Bespoke manual equipment (no increase in scale, but improve quality and consistency):

101 cells week-1

103 cells year-1


2 – 10 yrs

0.5 – 1.5 yrs

0.5 – 1.5 yrsLab technology processMeet early demonstration needs and support cell and process development102 cells week-1

104 cells year-1


-Pilot automated processDemonstrate “in-line” high volume processes105 cells week-1

107 cells year-1


Full scale, high volume low cost process107 cells week-1

109 cells year-1


-Pilot automated processDemonstrate automated process at small scaleEliminate most of the ‘human’ process noise

103 cells week-1

105 cells year-1


2 yrs

2 yrs

New process scoping, design and development + commissioning

Engaging expert process vendors, further process trials, “turn-key” installation and commissioning

1 2

3

4

5

6

TIME

PROCES SCALE

Generic planar SOFC fabrication scale-up path


Early applications will help build manufacturing experience for automotive applications

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

automotive

stationary

Portable and niche

Target Volume to reach 45 €/kWe

Pro

duct

ion

Vol

ume

Target Volume to reach 1000* €/kWe

Target Volume to reach 5000* €/kWe

*Source of cost targets: DoE “Technical Plan Fuel Cells” Washington June 2003


Fuel Cell Industry Value ChainFuel Cell Industry Value Chain

OEMFC SystemFC StackComponents

Establishing a supply chain is critical: early applications provide a near-term

incentive to suppliers; generate volume and learning to drive costs down.


Massive investment will be made Massive investment will be made

to build production facilitiesto build production facilities Potential size of the FC industry is huge, implying

significant investment requirements• Financial markets and fuel cell manufacturers will not

invest in production facilities until they can be reasonably certain that a market will emerge.

What needs to be done to help fuel cells move from laboratory to market?


Remove barriers to Remove barriers to commercial introductioncommercial introduction

Stationary fuel cell generators:– Facilitate access to the grid– Costs and administrative burdens must be

reduced to an absolute minimum Permit the storage and use of hydrogen,

particularly for vehicles Codes and Standards Public education / acceptance of H2


Extensive demonstration Extensive demonstration and field trials are requiredand field trials are required

First, demonstrate how the entire system works Larger field trials then required to demonstrate

benefits, applicability, reliability and durability Gain experience and build production volume Identify ‘showstoppers’ e.g. regulations / other

Europe and Member Nations must set targets(ref. Japan) and establish funding mechanisms


Market entry support Market entry support to “push” the technologyto “push” the technology

• Large-scale demonstrations should bring products to technical readiness for market introduction

• However, in many cases, production costs would not have been reduced to market entry levels

• A deployment strategy will have to be put in place to allow manufacturing investments to be made, e.g.:

– A “buy-down” subsidy to users that declines over time.– Fiscal: reduced fuel tax, rebate on produced energy, etc.


Access to Finance is a Major Access to Finance is a Major Impediment in EuropeImpediment in Europe

• Europe does not have a quoted fuel cell sector– limits venture capital activity– restricts access to capital– innovation cannot get beyond laboratory

• Companies may seek capital outside Europe• EIB/F could consider setting aside venture capital

for seed and early stage enterprises to help diffuse European creative invention into world markets


Given the required support Given the required support Europe can compete, BUT:Europe can compete, BUT:

Manufacturers will soon make investment decisions based on which markets are most conducive to the successful introduction of fuel cells

On present trends US will build on market advantage and attract most fuel cell investment

Manufacturing capacity and human capital (jobs) will follow financial capital


FINANCING THE HYDROGEN REVOLUTIONFINANCING THE HYDROGEN REVOLUTION

A view from BrusselsA view from Brussels

With thanks to Dr. W. Borthwick Principal Scientific Officer, DG Research, EC


Meeting EU Kyoto Commitments8% CO2 reduction by 2008-12 compared to 1990

Much deeper reductions required by 2015-2025…

Maintaining Security of Supply Green Paper of Nov. 2000 launched debate on a future EU

energy strategy addressing both demand and supply sides

Promoting Industrial Competitiveness Hydrogen and fuel cell technologies forecast as paradigm

shift in way we produce and use energy

EU Policy Objectives


EU Policy ActionsAction Plan on energy efficiency Improving Energy Efficiency: + 18% from 1995 to 2010 Increasing the Share of Cogeneration: 12% of EU-15 electricity by 2010

White Paper on Renewable Energies Doubling the Share of Renewable Energies from 6 to 12% of final energy

White Paper on EU transport policy 20 % substitution of diesel and gasoline by alternative fuels by 2020

Communication on Alternative Fuels Hydrogen : 5% of road transport fuel by 2020 Alternative motor fuels contact group report 2003See http://europa.eu.int/comm/energy_transport/en/fa_en.html

Support development of sustainable energy technologiesincluding RTD on hydrogen and fuel cell technologies


High Level Group Report: Main Recommendations

Five “Actions” European Political Frame for fostering new

hydrogen and fuel cell technologies; Strategic Research Agenda; Deployment Strategy; A European Hydrogen and Fuel Cell Technology

Partnership, steered by Advisory Council; European Roadmap for Hydrogen and Fuel Cells.


European Hydrogen and Fuel Cell Technology Platform: A brief history….

High Level Group – October 2002

Conference (HLG vision report) – June 2003

President’s Communication – September 2003

Advisory Council – December 2003

Platform Launch – January 2004

Initiative for Growth – Dec ‘03


European Hydrogen Technology Platform General Assembly Meeting, 20th January 2004

• President Romano Prodi: “….our objective is to realise a step-by-step shift, towards a fully integrated hydrogen economy, based on renewable energy sources, by the middle of the century…. We must focus on technologies that can sustain economic growth, neutralise the debate on climate change and eliminate harmful pollution forever…. In achieving this goal we shall contribute to quality of life, peace and stability the world over”.

• Vice President L. De Palacio: “Hydrogen as a potential new universal energy carrier has attracted our special attention. An integrated development for energy and transport sectors is particularly important to take full profit of common technologies. Hydrogen also can break the monopoly of oil in the transport sector and give it access to all energy resources”.


The H2/FC Technology Platform:Structure and Participants

• Participants: Research Community, Industry, Public Authorities, Financial

Community, Users and Consumers, Civil Society.

• Platform Operations: General Assembly On-going and future projects, networks and initiatives,

supported by EC, national and regional programmes.

• Steering and support structures: Advisory Council (and Executive Group), Steering Panels and Initiative Groups, Member States’ Mirror Group, Commission Inter-service Hydrogen Project Team Secretariat

Commission H/FC Project Team(Inter-service Group)

Advisory Council(incl. Executive Group)

Deployment Strategy

(incl. policy framework)

Strategic Research Agenda

Public awareness

Safety, codes & standards

Business development

Education & training

Member States’ Mirror Group

TP SecretariatInformation OfficeIT Support Service

Steering Panels :

(possible) Initiative Groups :

H2/ FC TECHNOLOGY PLATFORM

PLATFORM OPERATIONS

New and on-going projects and initiatives (EC + MS national, regional and local)

HLG Vision

GENERAL ASSEMBLY

(Bi-)annual Technology Platform Forum

H2/ FC Roadmap


The H2/FC Technology Platform: Status

• Advisory Council established December 2003 (35 members).

• Member States Mirror Group established February 2004. Discussion on ERA-NET proposal for March 2004.

• General Assembly (20/21 January 2004) launch of TP - More than 400 participants

• TP Secretariat proposals received in response to Call - Evaluation in progress.


General Assembly Recommendations:

Hydrogen Production• Different levels of maturity and timelines

for available technologies.• Currently, large scale methane steam reforming

is the most competitive technology; but strong debate on CO2 sequestration.

• Much effort on “clean” hydrogen from RES (i.e. wind, solar, biomass); strong public support; need cost reductions.

• High Temperature thermochemical cycles could produce large amounts of carbon-free H2 but are capital intensive and dependent on other developments (i.e. High Temperature Reactors).

• Novel “Biohydrogen” routes (i.e. photobiological processes) seem theoretically attractive; demonstration will require big efforts;


General Assembly Recommendations: Hydrogen Storage

• Storage is a key enabling technology for H2 economy.• Main challenges related to the next generation of

“conventional” on-board storage systems addressed in EC “StorHy” project.

• Solid storage addressed in several EC projects with emphasis on particular metal hydrides (Mg, Alanates). Substantial challenges still remain; incremental improvements are not enough.

• Increasing pessimism on carbon nano-structures. • Basic research needed to identify innovative materials

and processes that provide breakthroughs.


General Assembly Recommendations: Hydrogen Delivery

• For early wide scale distribution, one possible way is the use of NG pipelines to transport H2 mixtures; EC project “NATURALHY” will address feasibility.

• Alternatively on-site production either via electrolysers or compact fuel reforming. Both available but have significant challenges: “energy equation” for the electrolysers and CO2 issues for the compact reformers.

• Local community acceptance is key to deciding on locating infrastructure like hydrogen fuelling stations and pipelines – “Not in my back yard!”


General Assembly Recommendations: Technology Challenges for Fuel Cells

• Hurdles to deployment:• Fuel cells: stack cost and lifetime• Hydrogen storage: energy density• Market acceptance and introduction• Capital investment requirement

• Corresponding RTD priorities• High temperature membrane• New polymers – no/low humidification• Catalysts – low noble metal loading• Component reduction / system simplification• Fuel cell oriented vehicle design


General Assembly recommendations concerning Regulations, Codes and Standards

• Permanent group of experts needed, with a long-term mandate and commitment, to work on regulatory and standardisation: identified lack of resources

• Need commitment from industry, MS and EC• Use existing experience from demonstration projects as

well as ongoing regulatory and standardisation activities• Allocate resources where the real obstacles are:

co-operation / co-ordination bigger obstacle than resolving technical issues

• Europe needs to speak with one voice internationally • European pre-normative RTD needed to support standards

making


Actions supporting the Technology Platform Sixth Framework Programme:

H2/Fuel Cell Projects under negotiation

European Roadmap for H2 and FC Technologies (consolidate HyNET, HySociety)

Hydrogen : (6 Integrated Projects, 2 Specific Targeted Research Projects, 1 Network of Excellence for total 61m€ EU support)

Hydrogen Production, distribution and storage Hydrogen Safety

Fuel Cells: (3 Integrated Projects, 3 Specific Targeted Research Projects, for a total of 30m€ EU support)

SOFC, PEM for stationary & transport applications DMFC for portable applications


European Growth Initiative• Proposal for actions to mobilise investment, stimulate economic

growth, create jobs, targeting public/private investment in networks and knowledge

• Targets : priority TENs energy, transport and broadband communications networks, and accelerating innovation in key technologies, e.g. H2;

• Proposes « Quick-start » (open) programme of concrete projects, outlining costs and possible supporting financial tools: Structural Funds, research spend, EIB;

• Proposes 40/60 public/private share• Proposal for Hydrogen economy

«Quick-start» project H2 production & electricity generation, and «hydrogen communities» in 3 phases 2004-2015, indicative total budget 2.8b€ - including private funding!

• European Council approval: Commission, Council, European Parliament, MS, EIB to consider overall actions and timetables


International Cooperation

Implementing agreements and hydrogen co-ordination group created by IEA

Bilateral co-operation agreements in place (or under development) with U.S., Japan, Canada, Russia, China, Australia, Brazil…..

The U.S. International Partnership for The Hydrogen Economy (IPHE).


General Assembly: Recommended Elements for a Deployment Strategy

Think about applications where “activation energy”is low: seek early “high value” niche markets to start deployment

Exploit synergies, e.g.: Stationary and transport applications to reduce costs and

establish H2 infrastructure - lighthouse project is one instrument

An integrated approach to deploying H2 ICE & FCVs Marine applications Concentrating fuel processor development for APUs:

for trucks, ships, aircraft and military Using reformer technology for NOx reduction !


Strategy Elements (2)Secure transition from proof of concept to market viability through iterative technology improvement – ensure close links between research & deployment

Concentrate on EU strengths: Strong capabilities in basic research EU has biggest fuel cell deployment programme worldwide

(yet too many core components imported)

Foster EU FC stack and component industry, Develop a process for setting and monitoring measurable targets

(Strategic Research Agenda). Take profit from established initiatives Deepen international co-operation Identify appropriate regulatory & standardisation framework

Secure support of the capital market: - Public/private Partnerships


• Still too early to make technology choices;• Hydrogen Roadmaps: a lot of work done individually

by companies and countries (esp. US, Canada, Japan). There are similarities but also differences;

• Major challenge to define transition strategies to ‘clean hydrogen’ from fossils - with or without CO2 sequestration;

• H2 production technology is not biggest challenge: 5% of EU vehicles could be fuelled using ~25% of the hydrogen industrial production;

• Other important challenges: public awareness and acceptance, lack of clear policy, regulations & standards, safety issues,…need to be addressed by TP!

General Assembly Conclusions


The H2/FC Technology Platform: Next Steps• Finalise establishment of Member States’ Mirror Group;• Establish steering panels for research and deployment;• Establish initiative groups

(Education & Training, Public Awareness, Regulations and standards proceeding – others under consideration);

• Appoint secretariat• Continue development of ERA-NET to help structure

EU RTD and support the Member States’ Mirror Group;

Deliver by end of 2004:• Strategic Research Agenda• Deployment StrategyInputs to Growth Initiative and FP7


Invitation to submit Expressions of Interest (EoI) 2003

• Only applicable to: Sustainable Energy Systems, research activities having an impact in the medium and longer term (i.e. that part of the WP managed by DG RTD)

• Open: 26 November 2003

• Close: 19 March 2004 at 17.00 (Brussels time)

• All details and forms: on CORDIS web-site at http://www.cordis.lu/eoi/sustdev-energy/


International co-operation: http://europa.eu.int/comm/research/fp6/index_en.html

Cordis FP6 Service: http://www.cordis.lu/fp6/

Energy Research at Europa: http://europa.eu.int/comm/research/energy/index_en.html

Energy research/ high level group/technology platform: http://europa.eu.int/comm/research/energy/nn/nn_rt_hlg1_en.html

CIRCA website – download presentations and documents: http://forum.europa.eu.int/Public/irc/rtd/eurhydrofuelcellplat/library

European Initiative for Growth: http://europa.eu.int/comm/commissioners/prodi/pdf/growth_initiative_en.pdf

Useful Websites

FINANCING THE HYDROGEN REVOLUTION Why fuel cells? Commercialisation prospects, barriers and strategies

Documents

fuel cell vehicles

fuel cell developmentfcs

freedom fuel initiativeseu

killer applications

energy world

disruptive technology

oil shortage

oil reserves