Environmental, Social and Economic Measures for Introducing Hydrogen to City Centres
David Hart, Nigel Lucas and David Hutchinson
Imperial College Centre for Environmental Technology
and the London Research Centre
Introduction
A substantial proportion of current investigation into hydrogen as an energy carrier involves detailed technical and engineering analysis. While this is vital to ensure that technologies are available to take advantage of the opportunities created by using hydrogen as a fuel, it is also essential to examine the economic and social effects of its introduction. As part of the Japanese WE-NET Program, Imperial College and the London Research Centre are investigating 'the conceptual design of the total system' of hydrogen usage in an urban area. This paper reports on the methodology used to approach the analysis, and details some of the initial findings of the research.
The Reference Scenario
The analysis presented here is based upon comprehensive energy and emissions data compiled for Greater London by the London Research Centre (LRC, 1993). The data are sufficiently disaggregated to allow the investigation of the effects of specific fuel substitution within small areas of London (down to 1km square), both on energy use and emissions characteristics. For the purposes of the WE-NET Project the analysis taking place has been set at a convenient point in the future - far enough that it is conceivable that hydrogen could have been introduced into the energy supply infrastructure, yet near enough that energy demand and usage patterns can be regarded as being largely unchanged from today. The nominal date is 2015.
In order to reduce the amount of data in the computation it was decided to divide London into 'central', 'inner' and 'outer' regions and analyse a representative sample from each. An area of nine square kilometres was chosen to be representative and the full calculation was carried out only using this region.
In order to focus on the supply and demand infrastructure of the city, and the environmental issues associated with urban air pollution, it is assumed that pure hydrogen is available at the urban boundary. At this stage there is no cost associated with the hydrogen. The analysis seeks to associate a value with its use by investigating the infrastructure requirements of moving the hydrogen to where it is demanded, and offsetting the costs related to the infrastructure against the potential environmental benefits associated with reduced urban pollution.
The analysis is based upon cost-benefit analysis of energy and emissions scenarios. New scenarios representing different methods of introducing hydrogen into the energy infrastructure of the city are assessed against a reference scenario. This reference scenario is based on expectations of energy demand in the year of 2015 but includes some assumptions that are time-frozen - in particular the fact that some levels of demand-generating activity remain the same as present (passenger-kilometres, building floorspace, etc.). For the purposes of the modelling, however, this is unimportant, as the scenario provides a 'level playing field' against which to compare the alternatives.
The goal of the scenario is for hydrogen to provide 10% of the energy demand of the city, and for some scenarios it has been necessary to consider more than one option for hydrogen in order to achieve this. For example, adding hydrogen to methane for use in internal combustion engines is beneficial for an energy content of about 5%, but emissions benefits are marginal above that level. It is therefore not sensible to continue to add hydrogen until the 10% overall target has been attained.
The Alternative Scenarios
The long-term aim of this study is not only to provide information on the most cost-effective ways of introducing hydrogen into an urban area, but also to propose transitional strategies for achieving hydrogen penetration. At present, it seems that the most likely uses of hydrogen are in niche market areas that exhibit some form of cost or emissions advantage, so these areas have been investigated with a view to assessing their strategic promise in addition to their hydrogen capacity. The alternative energy supply scenarios have therefore been designed to target particular niche areas for the use of hydrogen. These niches include decentralised power generation using fuel cells, fuel cell buses and the mixing of hydrogen with natural gas for both vehicles and power generating equipment.
The first two scenarios considered were the 'Hythane®' and the 'Niche Market' scenarios. In the former, 5% of the energy content of the natural gas use in London is replaced by hydrogen - a 15% replacement by volume. This gas is distributed using the existing pipeline network to the existing stock of appliances and vehicles, with the minor modifications required assumed to be carried out as part of general maintenance. Using hydrogen in this way results in low introduction costs but relatively high reductions in polluting emissions.
In the niche market scenario the hydrogen is used in its pure form, but only used in technologies where it is considered that the environmental benefits may be large - for example in fuel cell buses. In this case the infrastructure required to provide the hydrogen and the technology required to use it must both be costed and the environmental benefits offset against these costs. Discounted cash flow analysis has been applied to enable a longer-term view of the scenarios.
Externality costing and calculating the 'premium' for hydrogen
In order to enable the comparison of technology costs and environmental benefits, externality costing has been used. This is a methodology that attempts to attach monetary values to costs that are otherwise not considered in an economic analysis. For example, particulate emissions in urban areas may be linked to increased instances of breathing difficulty, in turn resulting in increased hospital admissions and healthcare costs. By following the trail backwards it may be possible to disaggregate the costs sufficiently to be able to estimate the 'cost' of particulate in $/kg or /tonne. Using these figures it is possible to evaluate the amount of 'avoided pollution' resulting from the introduction of hydrogen. By comparing this value with the cost of the technology and infrastructure changes required to bring the hydrogen to the user, it is possible to assign a 'premium' to the amount of hydrogen used, in $/GJ or equivalent. Equation 1 shows how this can be done:
 @(1)
This 'premium' is intended to represent the value of the hydrogen within the city, and may be offset against the cost of the hydrogen itself, but the cost of supplying it has already been included in the analysis. The analysis is conducted over a timespan considered appropriate to the technology under investigation, e.g. 20 years, and discounted using a suitable rate. This enables the investigation of the longer-term consequences including capital and maintenance costs.
'Distributed hythane®'
The distributed hythane® concept has been explained as a mixing of 5% hydrogen by energy with the natural gas supply to London. Taking the reference scenario as a base, it is possible to calculate the emissions reductions brought about by using the mixture. The reduction in volume of a pollutant is then used to give a 'value' for the reduction of that pollutant by applying an externality cost factor, and the total 'value' calculated by adding the component values of the individual pollutants. The results are strongly influenced by the choice of externality 'adders', as these vary widely both geographically and methodologically. In order to give some indication of this spread each calculation has been done using both high and low estimates of externality costs. Table 1 shows the results obtained for central, inner and outer London using a discount rate of 8%.
Table 1: The Premium on Hydrogen used in Hythane® by Area and Cost
|
Value ($/GJ) |
Area of London |
|
Externalities |
Central |
Inner |
Outer |
|
High |
48 |
44 |
36 |
|
Low |
7 |
5 |
4 |
It is apparent from the table that there may be significant benefits attached to the use of hydrogen mixed with the natural gas supply in urban areas. According to the analysis, there are benefits for pollution reduction in central London ranging between seven and 48 $/GJ of hydrogen. To add some perspective to this, natural gas costs about $2/GJ at the point of supply. It is thus apparent that there may be a cost-effective case for mixing small amounts of hydrogen with natural gas.
The 'Niche Market'
In the niche market scenario the hydrogen is not used in a mixture but in its pure form, and targeted at specific market areas. These areas are chosen primarily on the basis that they contribute a significant amount of urban pollution and that the introduction of hydrogen could thus benefit them in particular. Other areas that may be initial markets for hydrogen, such as combined heat and power schemes using fuel cells are also considered.
In the niche market scenarios the amount of pollution coming from any one unit of production is reduced to almost zero. The overall effect on pollution will be determined by the take-up of the technology. For example, replacing all local buses with fuel cell buses may have a significant effect on local particulate emissions, but replacing only one bus would not. Another significant factor in this case is the infrastructure cost associated with the introduction of a particular technology, as this may be amortised better with a larger technological penetration. Building a hydrogen pipeline to supply one home is not efficient; the same pipeline supplying 200 homes may be.
The results for a limited number of cases are shown in Table 2.
Table 2: Premiums on Hydrogen in Niche Markets
|
Technology |
|
Premium ($/GJ) |
Gas Turbines |
PAFC |
FC Bus |
ICE Taxi |
|
Low Externalities |
2 |
0 |
-23 |
-6 |
|
High Externalities |
12 |
3 |
4 |
1 |
Again, the results suggest that there may be instances where it is economic to introduce pure hydrogen into an urban energy supply system. However, it is also apparent that the infrastructure and technology costs associated with some areas are expensive in comparison with the expected benefits of hydrogen.
Targeting hythane®
Further analysis of the hythane® scenario suggested that the majority of the emissions reductions were occurring in the transport sector, and that it might be valid to investigate targeting of hythane® rather than indiscriminate distribution to all natural gas users. As part of the wider aims of the WE-NET Project are the eventual use of pure hydrogen and strategies for its introduction, it was decided that pure hydrogen would be fed to the point of use for (assumed to be refuelling stations) for natural gas vehicles. It would be mixed with methane at this point for refuelling vehicles, though there would also be an option for using it in pure hydrogen vehicles or other modes.
By combining some of the techniques used for the previous two scenarios and introducing further estimated infrastructure costs, it was possible to analyse a targeted hythane® scenario. In this case we have also included a median estimate of environmental externality costs, though it should be stressed that these are intended merely as a guide and should not be quoted out of context. Table 3 shows the results obtained.
Table 3: The Premium on Targeting Hythane® by Area and Cost
|
Value ($/GJ) |
Area of London |
|
Externalities |
Central |
Inner |
Outer |
|
High |
211 |
173 |
-124 |
|
Median |
8 |
-20 |
-262 |
|
Low |
-23 |
-50 |
-292 |
These results suggest that the extra infrastructure costs required for the introduction of targeted hythane® are only worthwhile in the case of high externality costs, and even then only in central areas. This is because the central area is more densely populated than others are and thus lower investment is required for an effective result. It is also the central areas that suffer most from pollution episodes. The large difference in values suggests the variation in externality cost estimates is more of a factor here than in some of the other scenarios.
Conclusions
The work presented here is a first attempt to introduce the concept of externality costing to a cost-benefit analysis of hydrogen introduction in an urban area. The analysis suggests that it may be valuable in pure economic terms to introduce hydrogen into a city in order to reduce pollution and associated effects. The value associated with pollution reduction varies considerably from place to place and with different methodological approaches and thus a particular geographical area needs to be examined in some detail before specific recommendations can be made.
The results suggest that it is valuable to mix hydrogen with natural gas and deliver it indiscriminately to all users of natural gas, but that targeting pure hydrogen may not be as cost-effective in the short term because of the high costs associated with developing a hydrogen infrastructure. Targeting the hythane® mixture may be valuable, partly as it can be cost-effective in its own right and partly because it may allow a transitional strategy towards the use of pure hydrogen to evolve.
For future work it is intended to refine the analysis as new data are received on all aspects of the model. The city of Tokyo, amongst others, will be subjected to the same procedures to verify the transferability of some of the underlying methodologies in the analysis. Further scenarios and transitional strategies will be developed.
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