Hydrogen fueling systems must be installed before fuel cell electric vehicles (FCEVs) can be sold in large numbers. When first installed, hydrogen fueling systems may be underutilized. Fueling system operators may lose money for several years until there are enough FCEVs on the road to generate sufficient revenue selling hydrogen.
Previous analyses by the National Research Council and the National Hydrogen Association estimated that governments would have to invest approximately $8 billion to subsidize the startup of a distributed hydrogen infrastructure system. These analyses assumed that governments would pay 100% of the capital cost of installing hydrogen systems. However, energy companies will make money selling hydrogen and they and private venture capitalists will eventually be willing to invest in hydrogen fueling equipment as a normal business venture, making sufficient return on their investment to justify the expense. This new hydrogen infrastructure model calculates the government incentives required to entice industry to make the necessary investments based on conventional business practice. The “hurdle rate” for making private investment is initially set to 25%, decreasing over time to 15%. With this government/industry cost-sharing arrangement, the total government subsidies required are reduced from $8 billion in previous studies between 2010 and 2024 to only $1.06 billion as shown below; total government investments sum to $29.3 billion over more than 50 years, with a net present value (10% discount) of $2.1 billion:
Private industry invests $2.55 billion between 2011 and 2024. total industry investments sum to $51 billion over 50 years, with a net present value of $4.15 billion.
In the model, the price of hydrogen is set such that the industry earns the target IRR each year; the resulting price of hydrogen and the average station capacity factor (Hydrogen sold /hydrogen capacity, which is an input to the model) are shown below:
Thus the hydrogen fueling equipment capacity factor is only 10% when the equipment is installed in 2010, but rises to 84% by the end of the 15-year economic life of the equipment. Hydrogen is sold at $14.05/kg in 2017, falling to $7.20/kg 12 years later. These hydrogen prices are equivalent to gasoline selling between $5.93/gallon of gasoline in 2017 and $3.20/gallon of gasoline in 2029 on a range-equivalent (cent/mile) basis assuming that the FCEV is 2.4 times more energy-efficient than a gasoline car.
These cost estimates are based on mobile refuelers and delivered liquid hydrogen, which reduces the initial capital cost, but increases the cost of hydrogen. Eventually, hydrogen costs will be reduced to the $4/kg to $5/kg range with on-site steam methane reformers that convert natural gas to hydrogen. In this case hydrogen prices would be equivalent to gasoline selling between $1.69/gallon and $2.11/gallon.