Roadmap and Action Plan for the Introduction of Hydrogen …€¦ ·  · 2007-07-31Roadmap and...

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Page 1 www.HyWays.de HyWays HyWays Roadmap and Action Plan for the Introduction of Hydrogen in the European Energy System Harm Jeeninga ECN Policy Studies [email protected]

Transcript of Roadmap and Action Plan for the Introduction of Hydrogen …€¦ ·  · 2007-07-31Roadmap and...

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HyWays

HyWaysRoadmap and Action Plan for the Introduction of

Hydrogen in the European Energy System

Harm JeeningaECN Policy Studies

[email protected]

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HyWaysHyWays

Contents• Main conclusions• The challenge that we are facing• More HyWays results?

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HyWaysSummary

Main conclusions• The analysis show that in time hydrogen in transport does become

cost effective leading to (small) positive economic impacts• The introduction of hydrogen into the energy system also has a

positive impact on costs of CO2 reduction and offers the opportunity to enlarge the share of renewable energy

• Despite these promising prospects, hydrogen does not enter the energy system by itself, since significant initial barriers have to be overcome– Cost reductions of the drive train– Build up of the energy infrastructure– Other barriers: regulations, codes and standards, education and training…

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HyWays

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very high policy support, fast learning

high policy support, fast learning

high policy support, modest learning

modest policy support, modest learning

a) Very high policy support, fast learningb) High policy support, fast learningc) High policy support, modest learningd) Modest policy support, modest learning

Scenario build-up with 2 parameter“policy support”“technical learning”

Hydrogen demand in road transport

HFP Snapshot 2020 is spanned by scenarios very high policy support, fast learning and high policy support, modest learning!

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HyWaysImpact on emissions

Road transport: WtW impact on CO2 emissions

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Base line (-35% CO2)

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High policy support,high learning

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Mton CO2

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HyWaysMarginal abatement costs (MAC) for CO2 emission reduction (Europe)

Economic impacts

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HyWaysHydrogen as CO2 reduction option• Marginal abatement costs for CO2 reduction go down when

hydrogen enters the energy system– Transport and stationary are included

• In time, H2 becomes a cost effective CO2 reduction option– A system that includes hydrogen can reduce CO2 emissions at lower costs

than the reference system (without hydrogen) • The graph does not tell if and when initial costs are paid back • Underestimation

– Contribution of reduction of other emission (fine dust etc.) is not taken into account

– Security of supply can not (hardly) be monetarised

Economic impacts

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HyWays

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Total Cash Flow: Fuel+Fleet cash flow "Business as usual costsMINUS H2 scenario costs"

Total cash flow all HyWays countriesEconomic impacts – Cash flow analysis

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HyWays• A slow market penetration of hydrogen vehicle (modest policy

support, modest learning) is unacceptable from: – Infrastructure viewpoint due to long period of high cost (underutilisation of

plants, no investor will be found)– OEM side (too slow pay back of R&D cost).

• A higher oil price increases conventional fuel costs and advances break-even and back payment of the H2 fuel infrastructure cash flow

• A higher H2 vehicle penetration rate (very high policy support) reduces negative cash flow and advances break-even and back payment both for H2 fuel infrastructure and H2 vehicles

Economic impacts – Conclusions

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HyWays• A surcharge of 1,000 € per hydrogen vehicle (accepted by user or a

subsidy (e.g. internalisation of external cost)) helps to diminish the negative fleet cash flow strongly– Some MS already grant over €1.200 or more for cleaner or more efficient

vehicles• the Netherlands: hybrid vehicles• Denmark: hydrogen vehicles

– A number of countries have (very) high excise taxes on vehicles purchase (on top of VAT) – Denmark, the Netherlands

• This offers the opportunity for substantial tax incentives for vehicle purchase

Economic impacts – Conclusions

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HyWaysImpact on GDP• Introduction of hydrogen contributes to economic stability

– Negative GDP effects of vulnerability to oil price exceeds by far the expected (positive) impact on GDP due to the introduction of hydrogen

– Impacts on GDP growth of the introduction of hydrogen amount to approximately 0.01%/y

Assumption: no changes in import/export shares– (temporary) effects of oil price shocks (5 – 10 $/barrel) on GDP growth

amount to -0.2%/y to -0.4%/ySource: IEA, European Investment Bank (EIB)

– Impact of structural high oil prices is expected to have a comparable structural negative effect on GDP growth

Economic impacts

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HyWaysSummary

Main conclusions (cont’d)• Hydrogen can substantially mitigate problems of security of supply

in the transport sector– Demand and resources are de-coupled– Each country can choose its preferred production mix

• Hydrogen needs a technology specific policy framework– Flexible to ensure cost effectiveness – cost will go down fast– Covering barriers in infrastructure build up as well as end-use applications– Methodological framework needs to be developed soon (e.g. HyLights) and

implemented in the various member states– Hydrogen needs to be embedded in the policy support framework for

renewable energy as well as deployment support schemes

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HyWaysSummary

Main conclusions (cont’d)• Hydrogen needs to become higher on the agenda of ministries

responsible for green house gas emission reduction and security of supply– Ministries (departments) currently involved are responsible for economic

competitiveness and/or have an R&D focus– Large scale demonstration projects are needed to convince the policy makers

to implement deployment programmes for hydrogen

• The contribution of hydrogen in stationary end-use applications seems to be limited to remote areas and niche markets– Costs of replacement of low pressure natural gas infrastructure are (too) high

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HyWaysSummary

Main conclusions (cont’d)• About 60 billion € is needed for infrastructure investment for the

period up to (about) 2030– This is about 1% of the societal costs to meet the 450 ppm target

• R&D support needs to increase to 80 M€ per year• Budget for deployment support (Europe wide) need to be in the

range of 180 M€ per year

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HyWaysPartners

Ludwig-Bölkow-Systemtechnik

Industry

InstitutesMember states

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HyWaysParticipating countries

Norway(WNRI)

TheNetherlands

(SenterNovem)Germany

(dena)

France(CEA)

Italy(ENEA)

Greece(HIT)

6 member state partners in HyWays Phase I

4 further member state partners in HyWays Phase II

Finland(VTT)

UK(DTI)

Poland(CMI)

Spain(INTA)

TIME HORIZON2010 / 2020 / 2030 / 2050

Coverage [%] by

land area population

Phase I 49,7 39,2

Phase I+II 80,5 71,4

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HyWays

The challenge……

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HyWaysHyWays

The challenge…..• Initial barriers have to be overcome

– Costs of the drive train– Very high cost reduction potential– About 10 million vehicles need to be manufactured first….– But we are selling about 15 million vehicles a year in Europe

• For the first phase of large scale demonstrations, infrastructure costs are second order…..– Only a limited number of fuelling stations is needed to fuel a substantial

number of cars

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HyWaysHyWays

The challenge…..• Cost can be brought down through R&D and deployment

(economy of scale)– R&D budgets need to increase– Deployment is lacking!!!!– Imagine the costs of building the first Internal Combustion Engine (ICE)

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HyWaysIllustration: impact of technological progress on vehicle costs

Hydrogen demand in road transport

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FC vehicle moderate learning ICE vehicle moderate learning

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HyWaysHyWays

The challenge…..• Limited interest (and knowledge) at key ministries• How to convince the policy makers?• The first 10.000 vehicles will be a major challenge

– Large scale demonstration projects as a first step– Funding is a major issue – EC FP does not cover series production– In the mean time, policy makers need to be convinced and deployment

support schemes implemented– PPP (such as a JTI) needed until deployment support is in place – covers

both R&D and deployment support

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HyWaysPolicy framework and action plan

Key issues to be addressed by the policy support framework1. Facilitate deployment

– End use applications (vehicles)– Infrastructure build-up

2. Facilitate R&D– Costs reduction of the drive train– Increase in performance (driving ranges, efficiency etc.)

3. Monitor (and ensure) the balance between R&D and deployment

4. Ensure a level playing field– Harmonisation of EU market: regulations, codes and standards– US, Japan etc.

indirect

direct

Barrier – higher budgets and

proper allocation requiredMain barrier – hardly existent

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HyWaysPolicy framework and action plan

The required policy support depends on a large number of factors:• Level: EU, MS and regional/local level• Type: financial (subsidies, taxes), regulatory (quota, standards),

other (e.g. education)• Timing: effectiveness depends on the stage of innovation stage• Specificity: general support of sustainability vs. specific support

of hydrogen technologies• Technology characteristics: production, infrastructure, end-use

applications

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HyWaysPolicy framework and action plan

EU, MS and local/regional level• Interests differ on EU, MS and local/regional level• At EU-level H2 applications as transition technologies are part of

R&D strategy – Medium to long term focus on prospects of the technology

• At local/regional level, low penetration of H2 vehicles can already contribute to reducing problems and offer economic opportunities– Reduction of pollutants and noise in city centres– Employment for local industry

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HyWaysPolicy framework and action plan

• National level: need to meet (short to medium term) emission reduction targets at minimum costs– Hydrogen is not part of the short and medium term emission reduction

portfolio – usually the responsibility of the ministry of environment• It will not contribute to reaching the Kyoto target• Contribution to CO2 emission reduction target for 2020 is small and costs will be

relative high as the technology is not cost-effective before 2020• Impacts need to be visible on the macro level (Mton, PJ, thousands of jobs)• Knowledge on the relevance of hydrogen as transition option is often lacking

– As a results, no deployment schemes initiated by the ministry of environment are in place

– In case of high economic interests (opportunities, threats), the ministry of Industry and/or Transport can be a key driver – usually programmes with a strong R&D / innovation orientation

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HyWaysPolicy framework and action plan

• Interests of all ministries involved have to be aligned in an early stage– This is the case in the US

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HyWaysPolicy framework and action plan

• Hydrogen needs to become part of the emission reduction portfolio of the ministries of environment and transport– Education through various channels (EC, other ministries, industry,

science)

• Hydrogen needs to become part of deployment schemes to facilitate the growth towards mass market– Link with renewable energy policy framework– Integration in framework for sustainable transport

• Interests of various ministries needs to be aligned in an early phase

Recommendations

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HyWaysPolicy framework and action plan

Generic vs. policy support of hydrogen• Hydrogen has to compete with both conventional technology as

well as to other (incremental) innovations (e.g. bio fuels)• Generic support schemes give both hydrogen as well as competing

options an advantage over the conventional technology– CO2 taxation, emission trading

• But: generic support schemes don’t bridge the gap between hydrogen and (short term) incremental innovations– Choice for ‘tomorrows’ cheapest option

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HyWaysPolicy framework and action plan

• In the early phase a hydrogen specific policy support scheme is needed to make hydrogen compete with alternative (non-disruptive) options to ensure a gradual phase-in

• With increasing competitiveness, the hydrogen specific support schemes can be replaced by support schemes promoting sustainability

Recommendations

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HyWaysPolicy framework and action plan

What kind of deployment support scheme is needed?• Hydrogen needs a complex policy support scheme

– Various barriers in production, distribution and end-use have to be overcome

– Not just copying existing schemes for renewable energy or clean vehicles

• For the introduction of renewable electricity, primarily only barriers in production have to be overcome

– Flexibility is needed • The economic and technical performance of hydrogen technology improves

in time, the support scheme needs to be flexible in order to adapt to the decreasing need for support

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HyWaysPolicy framework and action plan

How does the hydrogen support scheme need to look like?• Costs of the hydrogen pathway have to be comparable to the

reference technology– Comparison base for hydrogen in transport: costs in €ct/km– Total costs are determined by fuel expenditures (fuel efficiency, fuel price)

and costs of the vehicle (investment, maintenance costs, depreciation)

• Two linked policy schemes are needed: 1. Fuel – covering infrastructure and production2. Vehicle –a distinction between vehicle classes is likely needed

• Balance between these schemes is needed – Total costs (€ct/km) of hydrogen pathway need to be comparable with the

conventional technology

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HyWaysPolicy framework and action plan

What not to do…….• Short term obligations, e.g. % of fuel or minimum number of

vehicles, do provide very strong incentives to technology deployment

• Technological progress can not be predicted• If the target turns out to be over-ambitious, it can only be met (if

met at all) at very high costs– This is sub-optimal from an economic point of view– It also seriously threatens the support (public acceptance) for the

technology, potentially endangering the entire transition

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HyWaysPolicy framework and action plan

• A hydrogen specific deployment support scheme needs to be designed and implemented

• Support through JTI, where R&D and deployment go hand in hand, can play a crucial role in bridging the gap between the R&D-phase and start of implementation phase

• On the short term, forcing in hydrogen through targets is notan effective measure

Recommendations

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HyWaysPolicy framework and action plan

Measures that can facilitate the hydrogen transition• EU-level

– Direct support: R&D programmes (like FP6, FP7) – harmonisation of R&D efforts on key hydrogen applications between countries

– JTI– Indirect: R&D support of sustainable and renewable non-hydrogen

technologies playing a potential key role in the hydrogen transition• Wind energy, biomass, CCS, etc.

– Not feasible at this level: subsidy schemes for large scale deployment• Deployment schemes are likely to be within the responsibilities of the MS

– Codes and standards, education and training• Harmonisation, facilitate cross border trading of hydrogen flows

– Promote implementation of external costs– Make the environmental benefits clearly within labelling systems

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HyWaysPolicy framework and action plan

Measures that can facilitate the hydrogen transition• MS-level

– Deployment related subsidy schemes– R&D programmes – country specific technologies – harmonisation with

EC programmes– (Planning of) infrastructure build up– Road pricing instruments – generic and hydrogen specific– Create early markets: national government departments– Avoid adverse incentives (fuel, vehicle)

Tax revenues (VAT, excise taxes) increase as a result of higher costs of the hydrogen vehicle and fuel

– Internalisation of external costs– Education and training– Facilitate implementation codes and standards (harmonised at EC level)

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HyWaysPolicy framework and action plan

Measures that can facilitate the hydrogen transition• Local and regional level

– Create early markets• Obligations: limited city centre access, access to toll roads, bus lanes,

parking permits, right to be first in line for taxis etc.– Act as early markets– Subsidies (local)– Optimisation of logistics: setting up of distribution centres

Creating an early market – single access point facilitates infrastructure build up in early market phaseOn top: restricted access to city centres: zero emission vehicles onlyExample: La Rochelle

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HyWaysPolicy framework and action plan

• EU-level: Develop and implement a technology progress monitoring programme to avoid excessive costs by ensuring the right balance between deployment and technological learning

• MS-level: implementation of tax-reduction schemes for hydrogen applications and hydrogen fuel– Adverse signals (increase in revenues of excise taxes due to shift to

low emission technologies) needs to be avoided

• Local-level: creation of early markets

Key actions

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HyWays

Final reports will be available soon through www.HyWays.de

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HyWays

More results from HyWays

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HyWaysMain assumptions

Main assumptions• Greenhouse gas emission reduction targets• Targets for renewable energy• Energy prices• Boundary conditions

– General resource limitations

Sensitivity analysis on main assumptions

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HyWaysMain assumptions

Policy framework• The impact of hydrogen is assessed in comparison to a “moderate”

CO2-emission reduction scenario (base line)– -35% CO2 reduction in 2050 in comparison to 1990-level (all sectors)– With more ambitious CO2 reduction scenario’s the value added of H2 is likely to be

higher– In addition, a scenario of –80% CO2 reduction for 2050 is assessed

• Targets for renewable electricity:– In line with EC ambitions (2010, 2020)– After 2020, share of renewable energy sources remains constant (approx 28% of all

electricity produced)

• Introduction of bio fuels (5.75% in 2010, 10% in 2020)

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HyWaysMain assumptions

Energy prices• Energy price development used in HyWays based on official EU

scenarios– Minimise discussions on energy price developments– HyWays phase I: prices based on Energy Trends 2030 (low oil price)– HyWays phase II: WETO-H2 study (update of Energy Trends 2030)

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HyWays

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HyWays

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HyWays

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HyWaysMain assumptions

Sensitivity analysis on main assumptions:• Results of the roadmap and action plan should be robust• Primary energy prices

– De-coupling of oil and natural gas prices– Development of coal price– High prices of fossil fuels

• Failure of CCS• -80% CO2 emission reduction target for 2050• Handled by means of scenarios:

– deployment rate (hydrogen demand)– technological progress (cost reductions)

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HyWays

Hydrogen demand

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HyWaysHydrogen demand in road transport

• Transport applications considered– Passenger cars– Light commercial vehicles– City busses– Not: heavy duty trucks, long distance coaches– In line with e.g. WETO-H2 study

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HyWays

0%

10%

20%

30%

40%

50%

60%

70%

80%

2010 2015 2020 2025 2030 2035 2040 2045 2050

H2 V

ehic

le F

leet

Pen

etra

tion

very high policy support, fast learning

high policy support, fast learning

high policy support, modest learning

modest policy support, modest learning

a) Very high policy support, fast learningb) High policy support, fast learningc) High policy support, modest learningd) Modest policy support, modest learning

Scenario build-up with 2 parameter“policy support”“technical learning”

Hydrogen demand in road transport

HFP Snapshot 2020 is spanned by scenarios very high policy support, fast learning and high policy support, modest learning!

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HyWaysHydrogen demand in stationary end-use applications

Total share of households 2010 2020 2030 2040 2050 High penetration - 1% 4% 8% 10% Low penetration - 0.1% 0.5% 2% 5%

Total share of commercial demand 2010 2020 2030 2040 2050 High penetration - 0.3% 1.3% 2.7% 3.3% Low penetration - >0% 0.2% 0.7% 1.7%

Penetration rates

Scope• HyWays only focuses on directly fuelled hydrogen applications

– This explains the major differences between HyWays and the HFP documents where natural gas fuelled FC-systems are included

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HyWaysHydrogen demand in stationary end-use applications

• Penetration rates for stationary applications are low compared to hydrogen in transport– Long life of gas grid

Replacement of existing (low pressure) distribution grid by hydrogen pipelines is costlyTherefore, infrastructure build up is in general limited to new construction projects in new residential areas

– Competing options with high efficiency fit better in existing energy infrastructure

– Opportunities exist in niches, but minor contribution to penetration:Connecting to existing pipelinesRemote areas and islands

– Picture may change considerably if H2 can be transported through the existing natural gas grid

e.g. coatings, separation of H2 / natural gas

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HyWays

Results

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0

20

40

60

80

100

120

140

160

180

200

0,000 0,010 0,020 0,030 0,040 0,050 0,060

Spec. H2 supply costs [€/km]

Spec

. CO

2 eq

uiva

lent

emis

sion

s[g

/km

]

Untaxed External costs added

Onsite SMR

By-product

Gasoline

Diesel

Waste wood

Coal gasification(with CCS)

Central SMR(with CCS)

Onshore wind

EU taxed

EU taxed

U.S. DoE goal:2-3 $/gge (FC)

Offshore wind

H2 Well-To-Wheel pathway portfolio for 10 EU member states (2030)

Pathway analysis

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HyWaysRegional spread of H2 useVehicles EU-

widePhase

Extension of existing user centres and development of new hydrogen regions; dense network installed by 2030; vehicles EU-wide: one distributed and one concentrated users deployment scenario in all steps

>500,000Step 1: 500kStep 2: 4MStep 3: 16M

Phase III(full commercialisation)

2-5 “early user centres” per country** (10-25% of total population, emerging simultaneously). Possibly also a network of transit roads for commuters out of early user centres and between them (considered by various deployment scenarios, focus: on private cars or captive fleets)

10,000-500,000

Phase II(early commercialisation)

Some large-scale demonstration “first user centres” in Europe (LHPs)

10,000Phase I (LHPs, JTI) pre-commercial phase)

HyW

ays

Market penetration phases

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HyWays• Based on stakeholder

consensus

• Early user centres: most population centres (but also less densely populated areas)

• Early corridors (highways): ~25,000 km to connect user centres and catchment areas

Early user centres and early H2 corridors

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HyWaysScenario: Focus on populated areas - Late extension of corridors

Further regional deployment: Based on demographic indicators like population density ⇒extension of existing and build-up of new user centers (organic growth)

Phase II

Regional H2 demand development

Phase III-1

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HyWaysScenario: Focus on populated areas - Late extension of corridors

Regional H2 demand development

Phase III-2 Phase III-3

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HyWays• Build up of a European

hydrogen synthesis could follow the so-called Blue Banana region – Blue Banana: 40% of

European people, most European cities, well developed infrastructure, relevant industries

• Followed by other attractive regions and hot spot areas

European synthesis

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70,000 km25,000 km25,000 km0 kmLate road network

70,000 km70,000 km70,000 km25,000 kmEarly road networkLong-distance road scenarios

Long-distance road network supplied (10 MS)

100%90%75%26%Concentrated users

85%52%32%26%Distributed usersLocal use scenarios

% of population in areas with hydrogen fuelling stations

2036202820212017Modest policy support, modest learning

2027202120172014High policy support, high learning

2024201920152012Very high policy support, high learningPenetration scenarios

Years these vehicle number will be realised

16 mill.4 mill.500,00010,000Hydrogen vehicles in EU27

III-3III-2III-1IIPhase

Infrastructure scenario overview

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HyWays• Full commercialization phase: H2 costs at the filling station

in comparison to oil-based fuels are no relevant barrier for H2as long as the crude oil price are over 50 $/b (in densely populated regions) or 60 $/b (in low populated regions)

• The introduction phase with underutilization of capacities will be critical due to the small demand

Costs of infrastructure build-up

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HyWays• Onsite:

– Initial phase, permanently in sparsely populated, remote areas. – But: initially low FS utilization, later high energy prices

• LH2 trucks:– Strongly in the initial phase (bound: 20% LH2 demand assumed). Without

Bound only a minor role. This may change if existing liquefiers with free capacities exist.

– Later mainly for remote locations with a high demand, competing with onsite • Pipelines:

– Solution for central hydrogen production and transport to demand areas. – Distribution pipelines in dense areas and for larger fuelling stations

• CGH2 trucks:– Mainly during transition phase from LH2 to pipeline, – Also an option for local distribution of produced H2 for less dense areas

• Such a development and diversity is reflected in the MS visions

Role of road transport options

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HyWays

Hydrogen production mix(transport and stationary)

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HyWaysHydrogen production mix: MS bounds

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2020 2030 2040 2050

Solar HT

Biomass

Wind

Grid

Nuclear

Natural gas

Coal

By-product

PJ / y

Hydrogen production mix

Transport and stationary

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HyWaysHydrogen production mix: least cost solution

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2020 2030 2040 2050

Solar HT

Biomass

Wind

Nuclear

Coal +natural gasBy-product

PJ / y

Hydrogen production mix

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HyWaysHydrogen production mix

• As a result of the country specific conditions and stakeholder preferences, a rather diversifies hydrogen production mix is found– Nuclear energy based production pathways are selected by a limited

number of countries (France, Spain, Finland, Poland, UK)– Upper and lower shares were provided by the stakeholders for some

pathways (“bounds”)

• In the ‘least cost’ case, these bounds were removed– The share of biomass based pathways is substantially higher– Wind energy based pathways enter later but reach a higher share– The share of nuclear energy based pathways is substantially lower

• By-product hydrogen has a marginal role on the long run, but can be an important pathway in the initial phase

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HyWaysHydrogen production mix: -80% CO2 reduction

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2020 2030 2040 2050

Solar HT

Biomass

Wind

Nuclear

Coal +natural gasBy-product

PJ / y

Sensitivity analysis H2 production mix

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HyWaysHydrogen production mix: failure of CCS

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2020 2030 2040 2050

Solar HT

Biomass

Wind

Nuclear

Coal +natural gas

By-product

PJ / y

Sensitivity analysis H2 production mix

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HyWays• Share of coal vs. natural gas is very sensitive to small changes in

relative prices– Coal and natural gas is combined in the graphs

• The moment oil price reaches a certain level rather than the absolute height determines the share of renewables in 2050

Sensitivity analysis H2 production mix

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HyWays• Share of H2 produced from wind energy increases substantially in

case of high energy prices, CCS failure and -80% emission reduction target– Alternatives are limited (biomass potential, restrictions on nuclear)

Biomass needed as feedstock, bio fuelFor remaining biomass potential, competition exists between power sector and H2 productionShares depend on whether specific sectors have alternativesNuclear first applied in power sector (competition with H2 production)

– High energy prices increase profitability of wind energy• Renewable potential restrictions will be reached (e.g. biomass)

under these extreme conditions– In time, a substantial part of H2 production can be covered by renewable

(biomass, wind, renewable hydrogen import, later on solar HT)

Sensitivity analysis H2 production mix