Government Incentives

The Poultry Problem. Government incentives may be required to initiate any new alternative vehicle transportation system.  Energy suppliers may not install new fuel systems until there are many cars on the road, and automobile companies may not produce large numbers of alternative vehicles until the fueling infrastructure is in place---the “chicken and egg” or “poultry” problem. Government incentives or subsidies may be required initially for both the fueling infrastructure and for buying down the incremental cost of alternative vehicles [1].

Summary of fueling infrastructure investments required.  The model calculates total government incentives required for hydrogen infrastructure to support fuel cell electric vehicles (FCEVs) and the necessary public charging outlets to support battery electric vehicles (BEVs)   [Note: previous versions of this table were based on the assumption that the initial hydrogen fueling stations used onsite steam methane reformers; however, it is less expensive to install mobile refuelers or stations based on storing liquid hydrogen. although these options result in higher hydrogen costs, they do reduce the initial capital investments necessary to jump-start the new fueling infrastructures. The results are summarized in this table: along with a summary of the government incentives required to buy-down the cost of alternative vehicles

 

H2 Infrastructure

BEVPublic Charging Infrastructure

government Investments

$29.3 billion

$41 billion

Net Present Value (10% discount) of govt. invest

$2.12billion

$3.31 billion

Private Industry Investments

$51.6 billion

$234 billion

Total Investments

$80.9 Billion

$276 billion

Net Present Value (10% discount) of Investments

$2.57

$12.19 billion

Government Vehicle subsidies with 3 year fuel savings

$1.94 billion

$1.07 Trillion!!

Government Vehicle subsidies required with 10 years fuel savings

$73.5 million

$45 million

Total Government Investments (fuel infrastructure plus vehicle subsidies with 3 years fuel savings accounted for)

$31.2 billion

$1.1 Trillion!

[1] Alternately, we have shown that companies or groups of individuals could make significant return on their investments by installing hydrogen fueling stations and selling hydrogen to FCEV drivers.  One concept would be for groups of FCEV drivers could join together to form a hydrogen co-operative to build hydrogen stations in their neighborhood.  This approach would moderate the chicken and egg dilemma, since the station would only be built once enough drivers in a region had signed up to participate.

McKinsey and Company published a report in November 2010 that also estimated the costs of installing a hydrogen fueling infrastructure and a battery-charging infrastructure in all of Europe. They concluded that installing an EU-wide charging network for BEVs and PHEVs would cost over 500 billion EUROs over 40 years, while installing a hydrogen infrastructure for the entire EU would cost about 100 billion EUROs over the same period.

Industry investments between $52 billion to $234 billion over several decades may seem like a lot of money, but these sums are not exceptional compared to past energy industry expenditures.

For example, we estimate that the oil industry has invested over $100 billion each year for the three years 2000 to 2003 just in the US to support the existing US gasoline and diesel fuel infrastructure.  The annual industry incentives required for  hydrogen infrastructure and for public fueling outlets  are minor compared to past fueling industry capital expenditures to maintain the gasoline and diesel fuel infrastructure:

 [Source for oil industry expenditures estimate: Marilyn Radler, Oil & Gas Journal]

Similarly, the government incentives for hydrogen and public charging outlets are less than past government support to achieve major societal objectives such as the Federal highway system beginning in 1956 and putting a man on the moon in the 1960’s and much less than the projected government subsidies for ethanol: for example, if the Congressional goal of producing 36 billion gallons of ethanol by 2022 is achieved, and if ethanol is subsidized at 45 cents/gallon (Down from past subsidies of 51 cents/gallon, then the total ethanol subsidies will increase to $16.2 billion per year in 2022;  As shown below, these ethanol subsidies are much greater than the maximum government hydrogen infrastructure investment of $1.36 billion in 2044:

Similarly, the $16 billion/year ethanol subsidy would be huge compared to the maximum annual government incentive for public charging stations of $2.88 billion in 2045:

Finally, the total government incentives required for public charging outlets ($41 billion) and for a distributed hydrogen infrastructure ($29.3 billion) are both small compared to past government programs such as President Eisenhower’s 1956 national highway system ($197 billion in today’s dollars) or President Kennedy’s project to put a man on the moon ($151 billion in today’s dollars), the 2009 Stimulus package or particularly the cost of the Iraq and Afghanistan wars ($3.7 trillion):

(Iraq and Afghanistan war estimate by the Congressional Budget Office)

 

 

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[Alternative Vehicles Compared] [Societal Threats] [Alternative Vehicle Choices] [Simulation Assumptions] [Simulation Results] [Greenhouse Gas Results] [Oil Consumption Results] [Air Pollution Results] [Societal Cost Results] [Government Incentives] [Batteries or Fuel Cells?] [Hydrogen Safety] [FAQ] [Natural Gas Vehicles] [Links] [About Us] [Contact Us]
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