EPCEM - M3John van Duursen
Short- and long-term considerations for
the development of a sustainable hydrogen economy
in The Netherlands
Nothing is more risky than not innovating,
with the possible exception of confusing innovation
with something that fails to create value.
Name: John A. van Duursen
Student Nr:1340530
Date: 20th of December 2003
Course: EPCEM – Module 3
Supervisor: Mr. F. Oosterhuis
INTRODUCTION
December 21, 2002Myrtle beach, USA
Dear reader,
As an EPCEM student of 2002/2003, I was required to write a policy proposal in order to get acquainted with the process and to learn ‘how to write this type of document’. The actual subject matter was of secondary importance. Everything was acceptable, as long as the subject dealt with an environmental issue of the home country, in my case - The Netherlands.
I chose the hydrogen economy as my main subject because of its promising potential and its relatively unknown reputation
I would like to thank Mr. Frank Zenker for his lessons in writing skills, Mr. Martijn Rietbergen for helping me narrow down my subject and scope and Mr. Frans Oosterhuis for his constructive feedback.
I hope you enjoy reading it.
John A. van Duursen
SUMMARY
It is expected that fuel cell technology is going to play a significant role in the energy supply of the future and is referred to as ‘the fuel of the future’. It is clean, highly efficiency, quite, reliable and widely applicable. Fuel cell technology can be used for transportation (vehicles, trains, planes), for the storage and distribution of energy (batteries), for homes, for factories as well as for power stations. Fuel cell technology works on hydrogen. Today however, 99% of the worldwide production of hydrogen comes from fossil fuels, highly offsetting the social and environmental gains. A number of problems will continue to prevail. The most apparent are urban air pollution, the risk of climate change, the issue of energy security, and acidification.
This is a short and specific policy paper, aimed at promoting a sustainable situation for the production of hydrogen, via a transition phase that uses natural gas, and towards the use of renewable energy for the production of hydrogen. It is written for the Dutch Government in general and the Ministry of Economic Affairs (EZ) and the Ministry for Housing, Spatial Planning and Environment (VROM) in particular. Furthermore, this paper should be seen as part of a strategic shift in the Dutch energy plan.
The central question is ‘How can the Dutch government stimulate the development of a sustainable development of fuel cell technology?’ The emphasis of this paper will be mainly on the supply side: ‘the production side of hydrogen’ and onlypartly on the demand side.
In this policy paper, four measures are introduced to reach the above-mentioned goals focussing on “Political emphasis”, “stimulating the development of a hydrogen infrastructure”, “tax reform” and “subsidies”.
It is argued that without aggressive energy and environmental policies, the hydrogen economy is likely to emerge along the more incremental path.
For the sustainable development of the energy system, more political commitment would be very appropriate and government should be clearer on the desired technological and infrastructural direction concerning the production of hydrogen.
The ambitions of the government on the (direction of) technological development in The Netherlands are crucial for the success or failure of fuel cells.
The second measure focuses on stimulating the development of a hydrogen infrastructure. In the short and middle term, during the transition phase, government attention should focus on the use of the existing natural gas network, using the “steam reforming” technique for the production of hydrogen. Gradually, it should shift the focus from natural gas to sustainable energy sources like biomass and wind energy. The natural gas infrastructure can easily be adapted for hydrogen and it emits scarcely half as much carbon as coal does for each unit of energy produced. Eventually, hydrogen will likely use its own full-fledged network, using electricity from solar, wind, biomass or other forms of renewable energy.
The third measure is the Introduction of a carbon tax as a fiscal measure. Provide tax incentives for those agencies and companies that are working on a sustainable production system for hydrogen and for those that are in the research, development and the application of the fuel cell technology. The main emphasis should be on the transportation sector for they are a large contributor to the energy- and emission issue and because the fuel cell technology can already be applied in this sector.
The fourth and last main measure suggests increasing the subsidies for hydrogen and fuel cell R&D and giving subsidies to the importers of fuel cell cars and buses. Furthermore, funds should be used to create a platform for the sustainable development of the hydrogen economy and the building of the necessary infrastructure with a yearly budget of 5 million Euros over the coming 10 years.
The potential of the fuel cell technology for The Netherlands is considerable. It can help the Netherlands to reach its long-term Kyoto targets for the reduction of green house gasses. It can also play a big role to reach the targets for renewable energy sources. It can contribute to Holland’s international position for exporting its knowledge and expertise. Also The Netherlands can play a big role for the production and distribution of Hydrogen in Europe.
TABLE OF CONTENT
INTRODUCTION
SUMMARY
1.FUEL CELLS AND THE PRODUCTION OF HYDROGEN
1.1.Background
1.2.Central question
1.3.Structure of the paper
2.PRODUCING HYDROGEN – DESCRIPTION AND ASSESSMENT
2.1.Not all innovation is progress
2.2.Why worry?
3.A PLEA FOR THE SUSTAINABLE USE OF FUEL CELLS
3.1.The objective
3.2.Preconditions
4.POSSIBLE MEASURES
4.1.Political emphasis
4.2.Stimulating the development of a hydrogen infrastructure
4.3.Tax reform
4.4.Subsidies (National and EU)
5.AN ASSESSMENT OF THE MEASURES
5.1.Political emphasis
5.2.Stimulating the development of a hydrogen infrastructure
5.3.Tax reform
5.4.Subsidies (National and EU)
5.5.Additional remarks regarding the assessment
6.CONCLUSION......
7.RECOMMENDATIONS
LITERATURE LIST
1.FUEL CELLS AND THE PRODUCTION OF HYDROGEN
1.1.Background
Fuel Cells (FCs) are on the rise on a global scale. The Japanese car industry has recently released the first hydrogen cars. The country of Iceland sees the fuel cell technology as a major substitution for fossil fuels and it intends to be independent of fossil fuels by the year 2030 [16]. In September this year in the USA, a consortium of industry leaders, technology- and research agencies and universities stated the following;
“Full commercial status for fuel cells in vehicles and power generation is achievable only with the active and sustained support of government at all levels. The effort is justified by the unique combination of public benefits that fuel cells offer: high efficiency, unparalleled environmental characteristics, enhanced energy security, improved reliability, and flexibility in installation, siting, operation and fuel choice” (3).
It is generally expected that fuel cell technology is going to play a significant role in the energy supply of the future [1, 10] and is referred to as ‘the fuel of the future’.
First, what is this fuel cells technology?
It is a technology that directly transforms hydrogen – the simplest, lightest and most abundant element in the universe – into heat and electricity. The main characteristics of this technology are 1) low emission, 2) high efficiency, 3) no economies of scale mechanism, 4) low noise contribution and 5) reliability [1]. The only by-product is water. It has very low harmful emissions, like CO2 or NOx that contribute to climate change and acidification worldwide.
The fuel cell technology can be used for transportation (vehicles, trains, planes), for the storage and distribution of energy (batteries), for homes, for factories as well as for power stations. Thus, the technology can be widely used: from energy producers to transportation companies, from research agencies to industry and from agriculture to households.
There are several ways to produce the hydrogen needed for fuel cells. It can be created by splitting water (electrolyse) into hydrogen and oxygen using electricity. It can also be produced through the reforming of natural gas or other fossil fuels or via biomass. A third general option is thephotosynthetic processes.
In The Netherlands, the supply and production of energy is high on the political agenda. In the year 2000, the Dutch government ratified the Kyoto Protocol. This means that it has committed itself to reduce its greenhouse emissions by 6% based on the emissions in the year 1990. Furthermore, the Dutch want 5% of the total energy supply tocome from renewable energy sources by 2010. The reduction target for CO2 by the year 2030 is 40% to 60% and for NOx it is 80% to 90%, based on the 1990 emissions [9]. It is predicted that The Netherlands will not reach the targets for 2010[5]. Nor will it reach its targets for the year 2030.
The fuel cell technology obviously offers a good solution to this problem. There are however a number of issues to be addressed. Current developments in the production of hydrogen are mainly focussed on technologies that use fossil fuels and not on those using renewable energy. This will highly offset the environmental and socio-economic gains. The alternative is to aim for the use of renewable energy for the production of hydrogen.
1.2.Central question
This paper will focus on the following question:
‘How can the Dutch government stimulate the development of a sustainable development of fuel cell technology?’ The emphasis of this paper will be mainly on the supply side: ‘the production side of hydrogen’ and onlypartly on the demand side.
This policy paper is written for the Dutch Government in general and the Ministry of Economic Affairs (EZ) and the Ministry for Housing, Spatial Planning and Environment (VROM) in particular.
1.3.Structure of the paper
The following structure will be used to deal with the above-mentioned central question. The next chapter will discuss the issues and difficulties related to the production of hydrogen. A brief description will be given of the history, the current state of affairs, the political choices and the consequences if government policy is not changed.
Chapter 3 states the main objectives of the policy proposal and in chapter 4 a number of measures are introduced to reach the afore-mentioned objectives. In chapter 5, the measures will be assessed individually in terms of advantages and disadvantages. Subsequently, in chapter 6, a number of conclusions will be drawn on the basis of the assessment in chapter 5. Finally, several recommendations will be discussed in chapter 7.
The reference list can be found at the end of this paper.
2.PRODUCING HYDROGEN – DESCRIPTION AND ASSESSMENT
2.1.Not all innovation is progress
Fuel cell technology obviously offers a solution to the energy problem. There are however a number of issues to be addressed. First, the technology is still young and there are many different technological standards. Second, who is going to pay for the necessary investments for adapting the current infrastructure? The type of infrastructure highly depends on choices concerning the production method of hydrogen and which technology is going to be the standard. Third, 99% of the worldwide production of hydrogen comes from fossil fuels, highly offsetting the social and environmental gains. The obvious alternative is to aim for the use of renewable energy for the production of hydrogen.
At this moment (2002), the Dutch government stands on the crossroads. What technologies should it stimulate? What infrastructural investments to make? Which policy instruments should it use? And why?
Hydrogen can be found in combination with oxygen in water, in combination with carbon in a range of hydrocarbon fuels, and in combination with carbon in plants, animals, and other forms of life.
The power needed for splitting the molecule to separate the hydrogen can come from either a non-renewable source (fossil fuel) or from a renewable source. The sustainable solution usually uses electricity from renewable energy whereas the unsustainable solution uses reforming techniques basedon fossil fuels. Currently, the development is towards technologies that use fossil fuels. Some 99% of the hydrogen produced today comes from fossil fuels. Without aggressive energy and environmental policies, the hydrogen economy is likely to emerge along the more incremental path 2.
There are many techniques for the production of hydrogen. These are steam-reforming, gassing of coal, partial oxidation of oils, plasma reforming, breaking natural gas thermally, plasma breaking of natural gas, electrolyse, wind electrolyse, solar / PV electrolyse, thermal solar energy, photo electrochemical H2 production, photo-biological H2 production, gassing of biomass, and biomass pyrolyse. Without a clear direction and long-term plan for production technique, the necessary investments on the infrastructure for the hydrogen economy will be too low. So will the R&D efforts. The most optimal method for The Netherlands will be dealt with later on in this paper.
2.2.Why worry?
The hydrogen economy and technology is on the rise. But the way in which the hydrogen is produced is still in question. Current developments are focussing on the use of fossil fuels. If this road is continued, the environmental and socio-economic benefits of the hydrogen economy will be very limited. A number of problems will continue to prevail. The most apparent are urban air pollution, the risk of climate change, the issue of energy security, and acidification.
Unless the antiquated rules of the energy economy – aimed at keeping hydrocarbon production cheap by shifting the cost to consumers and the environment – are reformed, hydrogen will not make major inroads 2.
3.A PLEA FOR THE SUSTAINABLE USE OF FUEL CELLS
3.1.The objective
The objective is to stimulate sustainable development of fuel cells technology in The Netherlands. More specifically, the emphasis will be put on the supply side – ‘to stimulate the sustainable production of hydrogen’. Therefore, the objective is that only natural gas will be used to generate hydrogen during the transition phase and not coal, fuel or other fossil sources. The energy needed to produce hydrogen should increasingly come from renewable sources. Starting with a minimum proportion of 5% renewable in 2004 and a yearly increase of 1,5% until 2025.
Another objective is to make the transition from fossil fuel to a sustainable hydrogen economy via the use of natural gas and the existing infrastructure. The emergence of hydrogen as a major energy supplier could initially be built on the existing natural gas distribution-network, with the hydrogen derived at first from natural gas. The natural gas infrastructure can easily be adapted for hydrogen [17] and it emits scarcely half as much carbon as coal does for each unit of energy produced. Eventually, hydrogen will likely use its own full-fledged network, using electricity from solar, wind, biomass or other forms of renewable energy. In the case of The Netherlands – based on the current developments – the most evident types of renewable energy are biomass and wind energy.
3.2.Preconditions
The measures offered below focus on a short term and on a long term. The measures should be seen as part of a strategic shift in the Dutch energy plan. Inevitably, this is a long-term change. Nevertheless, there are some measures that focus on a short-term implementation and a short-term effect.
As a given, The Netherlands has a very good and dense infrastructure for the production and distribution of natural gas. Also, in The Netherlands, biomass is the most important source of renewable energy in the Dutch energy policy objectives for 2020. Its potential contribution is 26% [7]. The second most important renewable energy is wind energy.
In order to increase the potential of fuel cells as a viable energy carrier, more emphasis needs to be put on renewable energy by governments, R&D agencies and businesses alike.
4.POSSIBLE MEASURES
In order to reach the above-mentioned objectives, a number of measures have been selected. These will be described below. The assessment of these measures will be dealt with in chapter 5.
4.1.Political emphasis
Get fuel cell technology higher on the political agenda. Initiate information campaigns to the voters about the energy policy and the advantages of a sustainable hydrogen economy. This way, politicians need to include it in their political campaigns.
Today, the fuel cell technology is only rarely included in the sustainable energy policy of the Dutch [4, 7]. After 14 years, the government drastically cut the budget for a fuel cell research project [6]. For the sustainable development of the energy system, more political commitment would be very appropriate and government should be clearer on the desired technological and infrastructural direction concerning the production of hydrogen.
The ambitions of the government on the (direction of) technological development in The Netherlands are crucial for the success or failure of fuel cells. With new technologies, it is very hard to convert the environmental benefit into consumer benefits without political leadership 18.