THE INTRODUCTION OF HYDROGEN IN LONDON AND TOKYO - COSTS AND STRATEGIC ISSUES
INTRODUCTIONThe majority of hydrogen research in the recent past has been concerned with technical issues, such as the development of efficient means of storage and production. Some work has been carried out on infrastructure issues [1, 2] but apart from these studies there has been limited emphasis on the detailed analysis of the wider economic and strategic issues surrounding hydrogen. The WE-NET Project begun in 1993 by the Japanese Government, under the auspices of the New Energy and Industrial Technology Development Organisation (NEDO), is also heavily technology focused. However, it has as a component an analysis of the 'Conceptual design of the Total System' of introducing hydrogen economically to Japan. This section covers the international and national implications of hydrogen production and pricing, and a part of the analysis is devoted to assessing the capacity for hydrogen introduction into Tokyo as an urban area. This capacity is dependent not only on the price of hydrogen and the level of technology, but also on the environmental and economic benefits that can be derived from the introduction of hydrogen. These may be in the form of increased energy efficiency and thus reduced energy spending or in reduced pollution and associated health costs, amongst other things.
Research carried out by Imperial College and the London Research Centre focused initially on the introduction of hydrogen into London, as detailed energy and emissions data were available for that city. The methodology developed for the analysis of hydrogen introduction into specific geographical areas and sectors in London has been described in more detail elsewhere [3,4]. It concentrated on the benefits that might be accrued by targeting hydrogen into particular niche markets or by distributing it generally mixed with natural gas, contrasting these with the economic costs of the introduction. To determine these costs and benefits it was necessary to build on a base reference scenario for energy use and emissions patterns within the city.
A similar analysis is now under way for Tokyo, looking at the transferability of the methodology used in London as well as the specific technology and policy solutions that might be applicable for the two areas. Specific data on energy use and emissions in Tokyo have been obtained in Tokyo from the Institute of Behavioural Sciences (IBS), with additional information on energy structures and patterns of energy use from the Tokyo Metropolitan Government (TMG) and the Institute of Energy Economics.
2. ANALYSIS OF LONDONTThe London analysis was broken down into several primary stages, to which cost-benefit modelling techniques were applied. An important and comparatively unusual component in the analysis was the introduction of environmental externality costs into the economic cost-benefit evaluation. Although the exact level of these costs is disputed, there is general consensus amongst economists that some means must be adopted to incorporate environmental externalities into the decision-making process, in order to balance the choice of (for example) more expensive but less polluting fuels and technologies against cheaper but more polluting ones.
Environmental externalities are explained more fully in , but are essentially side (external) effects of a production or use process that are not taken into account in the price of the process. If the burning of a fuel produces emissions that have an effect on the environment without compensation to those affected, these are external environmental effects. Attaching a cost to these effects produces an externality cost. If these costs are included in the price of the fuel and accounted for in the process then they are said to be 'internalised'. In the scenarios adopted for the analysis of hydrogen introduction into London (and subsequently into Tokyo), an attempt was made to internalise the external costs in a simplistic manner, to characterise the benefits arising from the use of 'clean' hydrogen and the displacement of 'dirty' fossil fuels. Different environmental costs were attributed to polluting emissions in different urban areas, with health effects considered to be lower in less populated areas. Calculations were then performed based on a reference energy system before the introduction of hydrogen and after, considering the costs and benefits of that introduction and using discounted cash flow techniques to give a longer-term perspective than a simple static system. The analysis proceeded along the following lines:
*reference scenario definition;
*alternative scenario definition;
*introduction of cost-benefit data;
*'before' and 'after' calculations for energy, emissions and costs;
*results and analysis.
The alternative scenarios adopted for London were:
*'Distributed hythane' - hydrogen mixed with natural gas, used in standard natural gas technologies.
*'Targeted hythane' - hydrogen mixed with natural gas but used specifically in higher emissions natural gas technologies, such as vehicles.
*'Niche markets' - pure hydrogen in fuel cell buses, turbines and other specific technologies.
In each scenario assumptions were made for the costs associated with the introduction of new technologies, infrastructure development and other relevant factors. Estimates for the levels of pollution reduction were taken from published literature. The external costs associated with polluting emissions were taken from a literature survey of available studies, with high and low costs included in the analysis. This was in order to account for the spread of costs - in some cases an order of magnitude apart. Final results were presented using both the high and low figures.
3. LONDON RESULTSThe overall results for London are given below in tables 1,2 and 3. The so-called 'premium' attached to hydrogen is not a price; it is a representation of the estimated monetary benefits (positive number) or costs (negative number) associated with the introduction of hydrogen into the urban energy system. For example, introducing hydrogen into fuel cell buses may require such a large investment in infrastructure that health and other benefits are outweighed in the final analysis. For a simple evaluation of whether it is economically viable to introduce hydrogen into the area under consideration in the manner specified, it is possible to subtract the cost of the hydrogen itself (in $/GJ delivered) from the premium in the table. Any number greater than or equal to zero represents an economically acceptable introduction, a negative result indicates that the benefits accrued are not sufficient to outweigh the costs. N.B. It is important that the following tables are viewed in the context of the assumptions under which they were derived. The results are not directly transferable. They are shown here as an indication of the type of results generated using the methodology described above.
As is clear, the tables show a wide disparity in the values associated with the introduction of hydrogen into an urban area.
4. DIFFERENCES BETWEEN LONDON AND TOKYOLondon and Tokyo are broadly similar in that they are both large, predominantly commercial cities with significant urban pollution. However, differences in the local climate and historical attitudes towards heat and energy generally combine to show a significant difference in patterns of energy use. Almost half (47 per cent) of London's total energy needs are met by natural gas (methane) whereas town gas (also primarily methane but described differently in Japan) only meets 18 per cent of Tokyo's energy requirements. In contrast, electricity meets almost twice as much (31 per cent) of Tokyo's energy demand as it does of London's (16 per cent). The population of Tokyo (11.8 million) is significantly larger than London's population (6.7 million) and this is reflected in overall energy demand. However, energy demand per person is significantly lower (73 per cent) in Tokyo than in London. Transport energy use per person is almost the same, commercial and industrial energy use per person is slightly higher in London, but the largest difference is in the residential sector where energy use per person in London is over double (239 per cent) that in Tokyo.
These differences can be partly explained by the fact that Tokyo suffers hot and humid summers where the use of air conditioning at home and work is routine. In the winter, although similar temperatures are experienced in both cities, Japanese houses do not generally have central heating and the average use of energy is significantly lower. While London has a natural gas distribution network that is almost ubiquitous, households in Tokyo tend to use gas tanks outside the building in which they live to provide gas for cooking. Heating is often electrical or supplied by kerosene heaters.
It is therefore possible to note, by inspection, that distribution of hydrogen as hythane may be less cost-effective in Tokyo than in London. This is simply because of the smaller extant distribution network and thus relatively lower payback per investment. In addition, the more limited use of natural gas suggests that introducing hydrogen in its place will have less effect on the total pollution level in Tokyo than in London. However, if other fuels can be replaced then the eventual reduction of pollution may be larger per unit of energy, as natural gas is a comparatively clean fuel. The replacement of fuel oil and kerosene is a potentially significant target, and it may also be useful to consider the use of hydrogen-fuelled fuel cells for the on-site production of electricity and heat in a distributed network. Although electricity is locally non-polluting, the production of heat is not, so the health benefits of replacing e.g. kerosene, combined with the potential cost-effectiveness of a distributed power generation network could show a positive rate of return on investment.
5. PRELIMINARY ANALYSIS OF TOKYOAt present the analysis for Tokyo is not yet complete. However, the reference scenario to be adopted in the calculations is broadly similar to the London case. It takes as a basis the increased use of cleaner fuels such as natural gas in transport (much of Tokyo's taxi service already uses LPG and the switch would not be of major consequence), increased levels of distributed power generation within the city and a significant replacement of kerosene heating with natural-gas fired heaters. At this point it is valuable to emphasise that the purpose of the reference scenario is not to predict the future but to enable a consistent basis for comparison of the alternative scenarios.
The alternative scenarios for Tokyo are initially to be the same as for London, though with locally specific infrastructure costs and emissions coefficients. Externality costing will be used on the same basis as previously, with the high and low costs found in the literature incorporated into the cost-benefit analysis to give a 'spread' within which the results calculated can reasonably be expected to fall.
6. POSSIBLE TRANSITIONAL STRATEGIES FOR LONDONOne of the key outcomes of the research is not the numerical results of the cost-benefit analysis; rather it is the guidance on strategic and policy issues associated with the outcomes that is desired. While transitional strategies for London are still being considered, the results produced so far suggest the following tentative outcomes:
* While it is highly cost-effective to produce hythane and use it in natural gas vehicles as a targeted pollution reduction method, this will only account for a limited proportion of overall energy use. This is not a long-term strategy for hydrogen introduction except in terms of public acceptance - in principle hydrogen is regarded as 'unsafe' in the public perception, though in practice the use of hydrogen in transport in Chicago, Vancouver, Los Angeles and Munich has prompted no adverse reaction.
* The introduction of fuel cells burning any fuel into city centres can result in a city becoming a net electricity exporter. This could have significant ramifications for the future design of energy networks. If hydrogen is the fuel of choice then it must be generated and piped into the city to enable this exportation of electricity; full calculations have yet to be done on the spatial implications and relative merits and disadvantages of this concept.
The most recent projections of costs associated with fuel cell vehicles, coupled with calculations on their fuel consumption, suggest that it may be useful to target fuel cell transport directly with introduced hydrogen. This would enable true zero emissions transport while increasing public awareness of hydrogen issues; at the same time it would stimulate interest in the potential for fuel cells to be used in wider applications.
It is likely that the most cost-effective way of introducing hydrogen into the urban energy system in the short term will only account for a small proportion of the energy use of the area and will thus have a concomitantly minor effect on the overall level of emissions. If the goal is to establish hydrogen as a major component of the energy system (a conceptual target for this study is 10% of primary energy use over the medium term) then it may be necessary to adopt strategies that do not pay back financially in the short-term, but result in greater hydrogen use and pollution reduction in the future. Tentatively, the following are suggested as components of a portfolio of strategies, though these will almost certainly be revised in the light of future technological advances or cost reduction:
1) Transport, a major polluter in urban areas, is a key target.
2) The use of fuel cells in urban areas for combined heat and power generation is potentially very efficient . While these cells would not necessarily use hydrogen in the first instance, the issues associated with providing a fuel supply are similar whether natural gas or hydrogen is considered.
7. CONCLUSIONSWhile the proposals made above are no more than tentative at this stage, especially in the light of unfinished analysis of the situation in Tokyo, they represent an initial perspective on some strategies and policies affecting the potential introduction of hydrogen into the energy system of an urban area. It has been shown that given certain assumptions the introduction of hydrogen into an urban energy infrastructure could be both environmentally beneficial and economically viable. In order to achieve this introduction several possible strategies have been proposed, although none of these has been tested in detail. These strategies are highly likely to vary between different urban areas depending on the prevailing conditions. Specific analysis on the conditions in Tokyo will be carried out in the near future. This should enable the qualitative evaluation of some of the proposals already made, and suggestion of new ones. At the same time, the transferability both of the methodology used for analysing London and the strategies suggested for the early introduction of hydrogen will be examined.
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Figure 1: Energy use in Tokyo 1991
Figure 2: Energy use in London 1991