Transition to a Hydrogen Economy
- a strategy for sustainable development in Iceland
WWF
Iceland Nature Conservation Association
April 2001
Table of contents
1Introduction 1
The hydrogen experiment in Iceland 2
The hydrogen project 2
The project plan 3
Energy carriers 4
Why Iceland? 5
The energy transition in Iceland 6
Energy consumption 6
Greenhouse gas emissions 9
Energy potential 10
Hydro- and geothermal energy 10
Wind power 12
Landfill gas 13
Energy carriers 14
Transport pattern 15
Environmental aspects 15
Public transport 16
Economic analysis 16
Energy prices 17
Influence on the Icelandic economy 19
Markets for emission quotas 20
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Introduction
At a conference in Iceland on sustainable future development in January 2001, the country’s environment minister, Siv Friðleifsdóttir, introduced a draft policy on sustainable development until the year 2020. Amongst other things, it stated the goal that by 2020, 20% of vehicles and vessels in Iceland will be powered by renewable energy, i.e hydrogen-based energy carriers[1]. Furthermore, the draft policy aims to make Iceland the first country in the world to become free of dependence on fossil fuels.
Compared to other nations, Iceland has been quite successful in transforming its economy into one based on renewable energy. No other country in the world uses as little fossil fuel as Iceland for space heating and electricity generation. On the other hand, the car density is one of the highest in the world and investments in the fishing fleet have mainly been in energy-intensive factory trawlers. Therefore, the use of fossil fuels in Iceland per capita is slightly above the European average[2]. For Iceland, therefore, the way to reduce carbon dioxide emissions is to replace the fossil fuel used by the transport sector and the fishing fleet with emission-free energy sources such as hydrogen.
In an article in the Economist in August 1997, MP Hjálmar Árnason gave the year 2030 as a target date for the government’s evolving hydrogen plans. The article created a buzz in the international community and Iceland’s prime minister released a statement announcing that the government was officially moving the country toward a hydrogen economy[3]. Hjálmar Árnason, who is also chairman of the Icelandic government’s committee on alternative fuel, estimated that Iceland could eliminate most of the nation’s dependency on oil by 2030.
In February 1999, on the occasion of the establishment of the Hydrogen and Fuel Cell Company (now Icelandic New Energy Co. Ltd, INE), the minister for the environment, Guðmundur Bjarnason, announced that it was “the government´s policy to promote increased utilisation of renewable energy resources in hamony with the environment.” Hydrogen is an exampel of such a resource for powering both vehicles and fishing vessels.[4]
During the last 3-4 years a number of articles about the Icelandic hydrogen project have appeared in international news magazines, the most recent one in Time Magazine for April 09 2001, Cool and Clean[5]. All these articles convey the message that Iceland will become free of fossil fuels within about 30 years, but they do not go into the details of how this transition can take place or whether Iceland is really prepared for it.
The objective of this study is to investigate whether the goal set in the draft policy for sustainable development is realistic and, if so, whether Iceland can go for a higher target in the next 20 years. In addition, an attempt is made to describe the economic premises for this energy transition in more detail. A full conversion to hydrogen will not depend on Iceland alone. Iceland can not decide the technical solutions for the vehicles or fishing vessels of the future, and in fact no one can say for certain what solutions will be found to the problem of storing. For the sake of argument, therefore, it is taken for granted that hydrogen-powered vehicles and vessels will be in mass production.
The hydrogen experiment in Iceland
The hydrogen project
The Icelandic hydrogen project began in February 1999 when an Icelandic consortium, Vistorka hf (EcoEnergy Ltd.) signed a Cooperation Agreement with DaimlerChrysler, Norsk Hydro and Royal Dutch/Shell setting up a joint venture to investigate the possibility of replacing fossil fuel in Iceland with hydrogen and creating a “hydrogen economy”. The aim of the joint venture company, originally called “the Icelandic Hydrogen and Fuel Cell Company”, now Icelandic New Energy Ltd, was to test various applications utilising hydrogen fuel cells or hydrogen energy carriers.[6]
The project plan
At a conference held in Reykjavik on 2 March 2001, Icelandic New Energy presented a six-phase plan for the introduction of a hydrogen economy in Iceland. Exactly how and when each phase will take place is now under discussion. The phases are:[7]
Phase 1: A demonstration and evaluation project of operating hydrogen infrastructure and fuel cell buses in Reykjavik. This phase is known as ECTOS, an acronym formed from the name of the project (Ecological City Transport System), which was introduced on 2 March 2001 at a conference in Reykjavik. The key elements of the project are to integrate an on-site infrastructure in the city of Reykjavík (2001), to operate three hydrogen fuel-cell buses in Reykjavík (2002-2004) and to carry out socio-economic studies parallel with the project (2001-2005).
Phase 2: Gradual replacement of the Reykjavik city bus fleet, and possibly other bus fleets, with buses powered by fuel cells.
Phase 3: Introduction of “hydrogen based” fuel-cell private cars.
Phase 4: Fuel-cell vessel demonstration and evaluation project.[8].
Phase 5: Gradual replacement of fossil fuels in the fishing fleet by fuel-cell powered vessels.
Phase 6: Export of hydrogen from Iceland to Europe.
Icelandic New Energy is preparing for Phase4, powering vessels with hydrogen, and investigating the possibility of exporting hydrogen to the European mainland.[9]
Icelandic New Energy estimates that the transformation of Iceland into a hydrogen economy could possibly be completed in 30 to 40 years[10].
Energy carriers
Most car manufacturers are working on developing vehicles driven by some sort of alternative fuel, and hydrogen-powered vehicles are just one of many possibilities. Others include cars powered by electricity, ethanol, methanol or hydrogen, and “hybrid cars”, which would use a combination of fossil fuel and some other kind of energy carrier. All these alternative fuels can be produced in different ways. Methanol, for example, can for example be produced by electrolysing water into hydrogen and oxygen and further processing the hydrogen with carbonic acid or by refining natural gas (fossil gas). The same applies to hydrogen, which can be derived from natural gas or by electrolysis of water, using energy originating from solar-, wind-, hydro-, geothermal or coal-powered plants.
The hydrogen project in Iceland is focused on electrolytically produced hydrogen stored as gaseous hydrogen or as methanol.
The first phase of the project, operating fuel-cell buses in Reykjavik and a hydrogen infrastructure, will use gaseous hydrogen that will be produced in small electrolytic plant at a single site in Reykjavik. The input supply channels i.e. for the water and electricity, are already in place, but storage and tapping facilities must be built.
Parallel with Phase 1, Icelandic New Energy will carry out a joint study with the University of Iceland, Icelandic Alloys and Elkem ASA on the possible production of methanol from the hydrogen and carbon dioxide gases emitted from a 42-MW ferro-silicon furnace at the Icelandic Alloys ferro-silicon plant in Iceland[11].
In Phase 3, the introduction of hydrogen-based fuel-cell private cars, the energy carrier will be hydrogen or methanol, depending on what the car manufacturers decide. If methanol is chosen, existing infrastructure for distribution, storage and tapping of fuel can be used[12].
Why Iceland?
According to Jón Björn Skúlason, CEO of INE, there are a few key reasons why the foreign investors in question chose Iceland as a site for the hydrogen project[13]:
- Iceland’s electricity is generated without the emission of greenhouse gases in the energy chain.
- The standard of living and transportation system in Iceland are similar to those in most other European countries.
- Iceland has already experienced an energy transition, and knows the pros and cons of such a transition.
- The population is small, so the impact of the project will be large.
- It has North European climate.
- The Icelandic government has announced its support for projects aimed at the increased use of hydrogen in the near future.
Iceland is not the only country where such a project is under way, however: there are several similar projects focusing on renewable energy sources in progress all around the world. There are hydrogen buses running in some cities in Europe and in California the Air Resource Board is demanding that 10% of all new cars sold in California in 2003 will be zero emission vehicles (ZEVs). Iceland is therefore not a island in that sense that’s its only there that project demonstrating hydrogen infrastructure and hydrogen as energy carrier is under way. What is unique is that Iceland is the first country in the world that can be almost free of dependence on fossil fuels.
The energy transition in Iceland
Energy consumption
Total annual energy consumption in Iceland is 121.6 PJ (ca. 34 TWh). Approximately 7.185 TWh (1999) of this is in the form of electricity. About 84% of this electricity is generated in hydro-electric plants, and geothermal sources account for about 16%.[14]
Table 1 shows the total energy pattern in Iceland, by energy carrier and activity.
Table 1: Energy in Iceland, by source and activity
Type[15] / % / ~TWh / Activity[16] / % / ~TWhOil / 29 / 9,9 / Space heating / 40 / 13,6
Geothermal / 50 / 17 / Industry / 27 / 9,2
Coal / 3 / 1 / Residential / 5 / 1,7
Hydro / 18 / 6,1 / Fisheries / 12 / 4,1
Transport / 16 / 5,4
The transport and fishing sectors account for c. 65% of the liquid fossil fuel consumed in Iceland.. This figure does not include fuel purchased by vessels and aircraft abroad. Icelandic New Energy estimates that 10% (c. 5 TWh) of the energy potential in Iceland would be needed to replace the present oil import. [17]
Even though this report focuses mostly on the fisheries and the transport sectors, there is nothing to contradict the assertion that the remaining fossil fuel used in Iceland, with the exception of coal, can be replaced by hydrogen.
In Iceland there are about 150,000 private cars, 1,600 buses and 17,000 trucks, lorries, etc. [18] If the 20% goal presented in the draft on sustainable future is achieved, then 30,000 cars, 320 buses and 3,400 trucks, lorries, etc, will be powered by hydrogen by the year 2020.
Table 2 shows the breakdown of electricity consumption between power-intensive industries and the general market.
Table 2: Electricity consumption in Iceland
Year / Power-intensive industries [19](GWh/year) / General market
(GWh/year) / Total
1994 / 2,304 / 2,470 / 4,774
1995 / 2,391 / 2,676 / 5,067
1996 / 2,451 / 2,662 / 5,113
1997 / 2,823 / 2,758 / 5,581
1998 / 3,471 / 2,805 / 6,276
1999 / 4,284 / 2,901 / 7,185
2000* / 4,805 / 3,065
2005* / 5,176 / 3,365
2010* / 5,176 / 3,677
2015* / 5,176 / 3,992
2020* / 5,176 / 4,373
*Forecast from the Icelandic Energy Forecast Committee[20]
The load factor[21] for power plants generating electricity for power intensive industries is approximately 90%, while that for the general market power plants is approximately 65%[22]. This is mainly due to mismatch in supply and demand in time. This mismatch depends on daily variations (day and night) and seasonal variations (summer and winter). The plants runs on full capacity during peak hours (daytime) but nights are off peak hours because electricity can not be stored.
Increased electricity demand in order to produce hydrogen can, therefore, be met in two ways in order to meet the 20% goal set in the draft government policy. 1) by producing energy in off-peak hours, storing it, for example as hydrogen, and using it at peak hours. 2) by building new power plants which will then have the same load factor as the existing power plants for power intensive industries.[23]
Greenhouse gas emissions
Energy is a basic requirement for social and economic welfare in modern industrial societies. Energy production, however, has some major consequences for the environment, such as production of radioactive waste and emissions of CO2 and other greenhouse gases. For this reason, energy consumption is often measured in carbon dioxide emission or CO2 equivalents.
Power-intensive industries in Iceland, which today consists of two aluminium smelters and one ferro-silicon plant, are the largest CO2 emitters in Iceland (33%), with the transport sector and the fishing industry in second and third place, accounting together for 48% of the emissions.
Table 3: Emissions of greenhouse gases in Iceland.
Emissions per year Emissions by sources in 1999 Emissions in 1999
Year / CO2[1000 ton] / GHG[24]
[1000 ton GWP[25]] / Source / GHG / %
1994 / 2,292 / 2,809 / Industry / 33 % / CO2 / 80 %
1995 / 2,305 / 2,860 / Geothermal heat / 4 % / CH4 / 8 %
1996 / 2,395 / 2,935 / Household / 1 % / N2O / 6 %
1997 / 2,494 / 3,068 / Fisheries / 23 % / HFC / 2 %
1998 / 2,500 / 3,114 / Transportation / 25 % / FC / 4 %
1999 / 2,706 / 3,410 / Others / 14 % / SF6 / ~ 0 %
Source: Environmental and Food Agency of Iceland[26]
Energy potential
Hydro- and geothermal energy
It is currently estimated that the economically harnessable hydro-electric energy potential in Iceland is about 35-40 TWh/year. Taking environmental factors into account, the hydro-electric potential is, at the most, 30 TWh per year. Harnessable geothermal energy is estimated at 200 TWh/year, mainly for space heating. Geothermal electricity is estimated to be about 20 TWh/year with present technology. Added together, the total electricity potential that could be harnessed from hydropower and geothermal sources is estimated at 50 TWh[27].
Others have estimated that the total harnessable energy (hydro and geothermal) is no more than 25 TWh when environmental factors are taken into account[28].
As mentioned above, enough energy potential exists in Iceland to support the energy transition to a hydrogen economy. What is more interesting is that already today there is enough capacity to replace 20% to 40% of the fossil fuels used in the fisheries and the transport sectors.