The new Green Power? Hydrogen, renewables and zero emission transport David Hart H2 SA 2014, 24-25th February | Strategic thinking in sustainable energy Introducing E4tech | Strategic thinking in sustainable energy E4tech: Strategic thinking in sustainable energy • International consulting firm, offices in UK and Switzerland • Focus on sustainable energy • Deep expertise in technology, business and strategy, market assessment, techno-economic modelling, policy support… • Established 1997, always independent • A spectrum of clients from start-ups to global corporations Hydrogen is a system solution | Strategic thinking in sustainable energy 4 A gentle start: Hydrogen ‘101’ Hydrogen is the lightest, most abundant element on earth but is highly reactive with others Hydrogen can be stored as a liquid, compressed gas, or in solid state forms Hydrogen is an energy carrier (like electricity) not a primary energy source (like oil) as it has to be produced Hydrogen can be produced from many sources: e.g. splitting of hydrocarbons such as gas and oil, or electrolysis of water Hydrogen can be used as a store for renewable energy to make it continuously available Hydrogen can be burned in an internal combustion engine or gas turbine or used in a fuel cell. Byproducts are water and heat High energy per unit mass (oxidation) : 120 MJ/kg Gaseous to 20K (-253 deg C) 5 And fuel cells can in theory do almost anything … but tackling some sectors is very hard 10,000,000 1,000,000 Power Range [W] 100,000 10,000 1,000 100 10 0 1 Electronics Transport Portable power Heat and power Marine Sources: E4tech, MyFC, BOC, Intelligent Energy, Honda, FellowSHIP, Baxi InnoTech, Bloom Energy, FuelCell Energy “The difficulty lies, not in the new ideas, but in escaping from the old ones…” (John Maynard Keynes) • ‘Hydrogen’ is a major system change: – it only responds to conjoined policy drivers (CO2 and clean air and energy security and …) – It’s not ‘the answer’ – only one way to the answer • It’s a ‘supply-side’ solution – it needs market pull: – Fuel cell technologies were mis-understood/-represented – The coincident ‘tech bubble’ didn’t help! – Big companies moved very early but couldn’t sustain • So what can we learn? 7 The energy system is evolving… and challenges arising €0/MWh Fifth Assessment report, Working Group 1, IPCC 2013, www.offshorewind.biz, www.americanlivewire.com, ses.jrc.ec.europa.eu, www.renewablesinternational.net CO2 reduction is pushing the vehicle manufacturers hard 2010 OEM average emissions c.f. targets for 2015 All OEMs struggle to get below the emissions limit curve… Source: eea.europa.eu 9 Fuel cell vehicles have the potential for zero emissions, long range and fast fuelling… but aren’t quite ready Toyota, Honda, Hyundai will have showroom vehicles in 2015 ‘Mass-market cars’ in 2017: Daimler-Ford-Renault/Nissan alliance BMW, VW and others are making public moves Hydrogen fuelling infrastructure development: • California – new bill funds up to 100 stations • Germany – 2017:100 stations; 2023: 400 • Japan – 100 stations by 2015 FCEV Sources: Hyundai, GM, Daimler, Honda, Toyota; A portfolio of power-trains for Europe ICE - Internal combustion engine, BEV - Battery electric vehicle, PHEV - Plug-in hybrid electric vehicle, FCEV - Fuel-cell electric vehicle Power to Gas can be another part of a solution • Energy storage, grid support and balancing are required • Serious decarbonisation includes heat, transport and chemicals System interconnection and power-to-gas Surplus renewable electricity • It also requires serious scale Electrolyser H2 injected into gas grid H2 storage • Many stakeholders are represented, and many assets Fuel cell Gas plants • Making it work well is not simple • Regulations and tariffs need co-ordination CHP • But international thinking is advancing Transport fuel Chemicals Heating Conventional route Novel route (No market crossover) (e.g. electricity  transport) And modelling reinforces the importance of the hydrogen option – especially in transport 2,500 H2 FCEVs are an essential option for transport decarbonisation Early support makes economic sense CO2 reduction is a crucial driver 2,000 Transport fuel demand (PJ) The potential market is huge Ethanol/methanol Bio-diesel/kerosene Jet fuel Hydrogen Electricity Diesel Petrol 1,500 1,000 500 100% - Percentage of road transport fleet 90% 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 80% 70% 60% 50% 40% UK transport fuel demand, 2010 to 2050 Natural gas Electricity Hydrogen Petrol, diesel and biofuels 30% 20% 10% 0% 2000 2020 2040 2060 2080 2100 Global vehicle shares 2000-2100, given strong decarbonisation (Modelling conducted by University College London. Search for UCLEnergy online) 12 But ‘hype cycles’ hinder sensible development GM EV1 Daimler NECAR 5 Rush to biofuels driven by post 9/11 energy security in US Nissan Leaf A123 chapter 11 Better Place EV reality check: Limitations of battery tech, cost FCV reality check: maturity, cost, H2 supply Biofuel reality check: eco credentials, food price, land use FCEV BEV Electromobility initiatives H2Mobility Biofuel 1995 2000 2005 2010 2015 Source: E4tech, loosely following Gartner Hype cycles move upward by high profile technology push, politics or world events – and downward through inevitable reality checks Unusually, ALL options now seem to have a (slight) upward trend 13 Supportive policy is essential | Strategic thinking in sustainable energy 14 Hydrogen policy support has varied by time and jurisdiction US support was strong under Bush, but is weaker under Obama • Hydrogen was the ‘Freedom Fuel’ • Energy Secretary Chu was not a ‘believer’ • California’s ZEV mandate has been the strongest historical driver and continues to be very important Japanese support has been high, consistent, strongly linked to the car industry • Funding has been comparatively high and constant • Hydrogen infrastructure testing has been supported in tandem EU programmes have moved from research to implementation • The FCH Joint Undertaking is a major public-private partnership • Co-ordinated roll-out is a key goal 15 The Fuel Cells and Hydrogen Joint Undertaking of the EU is an interesting model A public-private partnership supporting research, technological development and demonstration (RTD) activities to accelerate market introduction Members: • The European Commission • FC and H2 industries • Research community The FCH JU supports: • Long-term and breakthrough-orientated research • Support actions, including pre-normative research • Research and technological development • Demonstration 16 Other key institutions include major corporations, national and regional governments The International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE) has global reach H2Mobility in Germany builds on a wide-ranging support base The California Fuel Cell Partnership is regional but as strong as some national projects 17 And policy drivers can sum across regions • Energy policy is not often coherent • The ZEV mandate remains one key legislative driver • Vehicle CO2 legislation is another • Energy security is still hot • Technology and market positioning has been driven to evolve too 250 Grams CO2 per kilometer normalized to NEDC • Japanese and Korean industrial policy is aggressive Solid dots and lines: historical performance Solid dots and dashed lines: enacted targets Solid dots and dotted lines: proposed targets Hollow dots and dotted lines: unannounced proposal Shaded area: uncertain targets 270 US-3%[1] US-6%[2] California Canada 230 EU Japan 210 China[3] S. Korea 190 170 150 130 110 90 2005 ? 2010 2015 2020 2025 [1] Based on 3% annual fleet GHG emissions reduction between 2017 and 2025 in the September 30th NOI . [2] Based on 6% annual fleet GHG emissions reduction between 2017 and 2025 in the September 30th NOI . [3] China's target reflects gasoline fleet scenario. If including other fuel types, the target will be lower. Worldwide greenhouse gas standards collated by ICCT 18 The technology is just about ready | Strategic thinking in sustainable energy Certain applications are embracing fuel cells 20 But today’s ‘commercial’ fuel cells are unusual and share several characteristics Demand-side focus / meet very specific need Specialised entry markets: materials handling, telecoms backup, education Small size: from Watts to a few kW Competing with batteries or remote power Rarely sold as just a fuel cell Some outliers exist: • Monetising ‘waste’ (e.g. hydrogen) • Military requirements But most ‘commercial’ fuel cell companies still lose money Sources: Heliocentris, BOC, SFC Energy, Horizon, ReliOn, Crown Corp. 21 Almost all other sales are ‘subsidised’ in some way Stationary heat and power relies on: • Capital subsidies • Tax offsets • Mandated renewables portfolios and/or • Feed-in-tariffs Current business models: • ‘subsidy’ – underlies the others • ‘utility aggregator’ – sell to the operator • ‘expanded offering’ – product portfolio PureCell™ PAFC system These are necessary to build the ecosystem… …but not sustainable long-term 22 And newer approaches focus on offering a service, not a technology Bloom sells electrons – guaranteed power/price – not a fuel cell • Gas contracts are handled by Bloom • Extended warranty can be purchased as an option Materials handling is competitive against big battery forklift installations on system basis • The battery room is no longer needed • Power price spikes are avoided • Productivity increases Telecoms power enables a service or avoids a problem • Fewer fuel replacement trips – including for stolen fuel • Users have increased uptime and hence pay more 23 Actual sales are still in the thousands, but fuel cells are finding a foothold Analysts have repeatedly and wrongly predicted hockey stick uptake The promise of cars in 2004 still haunts the industry But fuel cell markets are – finally – growing • Few large systems (hundreds) • Many small systems (thousands) Sales remain small compared to established products But early commercial products enable investment and progress Source: Fuel Cell Today (RIP) There is no silver bullet | Strategic thinking in sustainable energy Successful business models have a key driver: “want”, “need”, “must” and suitable boundary conditions “Want” – status or vanity purchase • Disposable income purchase • High price insensitivity Customer awareness of need and potential • iPhone “Need” – enables specific service or benefit • Could have novel/joint funding model Realistic supply chain options • Distributed cost • Remote communication “Must” – regulated into existence Service and support infrastructures • Constrained solution set • Justifiable investment Channels to market • Zero emission vehicle 26 And business model scope depends on your standpoint, but new needs are still opportunities Early-stage company Large company • Simplicity is important • Ultimate market size does matter • Manageable sets of partners • A Long-term perspective helps • Very focused value proposition • Complex/multi-faceted value proposition can be managed • Warrantied technology is available, with increasingly robust supply chains • Finding a need to service no longer also requires invention of the ecosystem Just remember – nobody much cares it’s a fuel cell, so the business model shouldn’t either 27 Where do we go from here? | Strategic thinking in sustainable energy 28 Geographical characterisation of markets shows an interesting picture Niche applications Commercial markets Globally Telecoms / back up power Materials Handling N America N America Prime Power & CHP & mCHP Mobility Parts of Asia Europe Japan Incentivised markets N America South Korea S Africa Upcoming markets Germany Germany S America UK California Middle East Scandinavia Japan Europe South Korea UK Canada Parts of USA Scandinavia Indicative E4tech analysis; not exhaustive | 29 And maybe the ‘industry’ is coming out of the trough? Peak of inflated expectations 2001 Visibility Plateau of productivity 2014 Hydrogen and Fuel cells? Technology trigger Slope of enlightenment Trough of disillusionment Maturity * E4tech assessment, ‘Hype Cycle’ framework by Gartner 30 E4tech – strategic thinking in sustainable energy Thank you David Hart david.hart@e4tech.com www.e4tech.com E4tech (UK) Ltd E4tech Sàrl 83, Victoria Street London SW1H 0HW United Kingdom Av. Juste-Olivier 2 1006 Lausanne Switzerland +44 (0)20 3008 6140 +41 (0)21 331 15 70 info@e4tech.co.uk info@e4tech.ch 31