3.4 City-level Estimation and Assessment

3.4.1 R&D Goals

This study follows directly from the full report for Fiscal 1996 and broadens the analysis of the introduction of hydrogen into an urban fuel economy.

This phase of the project builds on work reported in the previous two fiscal years and extends the study from previous work on London, to Tokyo. The most effective scenarios analysed in the past (hythane, targeted hythane and niche markets) are applied to data obtained for energy and emissions use in central Tokyo and updated to allow for recent technological and economic changes in fuel cell and hydrogen technologies. The study also makes a preliminary assessment of transitional strategies for the introduction of hydrogen into an urban area.

Figure 3-4-1 shows the way in which progress has advanced during Phase I, from the initial conceptual designs through the scenario modelling to the final conceptual design.

3.4.2 Result in fiscal year 1997

3.4.2.1 Assessment of scenarios

1. This work confirms that the emphasis put on hythane as potentially the most cost-effective strategy for hydrogen introduction in previous reports may require revision for the analysis of Tokyo. This is partly due to recent changes in the forecast costs of fuel cells. The fact that Tokyo has a sparsely developed natural gas infrastructure also plays a major role, with infrastructure costs likely to be a key element in a hydrogen or hythane energy system.

2. The methodology adopted for the comparison of introducing hydrogen in different scenarios is the same as that detailed in the final report for FY96.The comparison is not based on fuel costs but on a comparison of environmental benefits and infrastructure issues, with a valuation made of the potential benefit of using hydrogen in urban centres. This valuation is called a premium. The premium on the hydrogen was assessed by a direct valuation of the reduction it brought about in external environmental costs.

   Premium for Hydrogen ($/GJ) = Reduction in Externality Costs ($) / Hydrogen Supplied (GJ)

3. The differences in energy use and infrastructure cost between London and Tokyo are significant and are shown in the applications chosen for the reference scenarios, for example in the replacement of kerosene-fired heaters with fuel cells. The emissions from transport in Tokyo are, however, just as important as those in London, and it is clear that the introduction of hydrogen in transportation will be a key area to consider.

4. In all cases there can be circumstances in which the value of hydrogen assessed is large compared to its likely cost of production. Work in the earlier phase showed that the environmental benefits of hydrogen in applications other than transport were substantially less. The use of hydrogen for urban transport therefore appears to be the most effective way of introducing hydrogen into the energy supply structure.

5. Natural gas supplies 47% of London's energy requirements but only 18% of Tokyo's. This suggests that the London reference scenario, devised primarily around natural gas, may require revision for further Tokyo scenario calculations.

6. Electricity accounts for twice as much energy use within Tokyo (31%) as London (16%). This significant demand for electricity in Tokyo could speed the introduction of highly efficient fuel cells producing both heat and electrical power for use in a distributed generation framework.

Figure 3-4-3 Energy use in London 1991

Table 3-4-1 The premium on hydrogen as a partial replacement for natural gas in Central Tokyo distributed hythane scenarios

The table above shows the value of hydrogen when it is used in one area of Tokyo as 'distributed hythane'. It is noticeable that this value changes significantly with a change in the externality costs assumed, and it is important that these values are interpreted correctly. They do not represent the cost of the hydrogen; rather the 'value' that can be ascribed to it if it is used to replace a proportion of natural gas in the energy infrastructure of the city of Tokyo. The value is calculated from the amount of pollution avoided and by the value of any surplus electricity generated by the use of hydrogen in fuel cells.

It is important to note that the value is relatively high in all cases (between $25 and $200) and may be above the cost of production and transportation of hydrogen, but it is particularly striking if high externality costs are assumed. However, the scenario calculated above, in which the optimum proportion of hydrogen is added to reduce emissions without incurring unnecessarily large costs, only uses about 3% of hydrogen in the energy mix - rather than the 10% specified in the initial description. Emissions reductions are between 8% and 11% by weight.

Table 3-4-2 The premium on pure hydrogen in Central Tokyo

The second table shows the value of hydrogen in its pure form in a number of niche markets. The comparison is made between hydrogen introduced to replace a conventional technology such as a diesel bus, but also a more advanced technology such as a natural gas-burning PAFC. It can be seen that the most valuable options in each case (low, median and high externality values - highlighted in bold) are hydrogen technologies replacing conventional ones. If high externality costs are assumed then the most valuable option for consideration is the fuel cell bus. This situation is different from the results calculated for London two years ago, but this is largely because the forecast prices for fuel cells have also been reduced. Were the London scenario to be recalculated the results might be very similar. The other important outcome of the niche market scenario is that the value of hydrogen in niche markets does not seem to be as high as in the hythane scenarios if the externality costs are median or low. Therefore, in order to use these scenarios as a guide to introducing hydrogen into distinct areas it is important to understand externality costing and the likely values to adopt.

3.4.2.2 Observations on Infrastructure Development

1. The results calculated for Tokyo suggest that the use of hydrogen in hythane might not be the best target for its early introduction. This is partly because the natural gas infrastructure is less developed than in London, and thus the use of hythane would necessitate some infrastructure development and corresponding costs. However, an important point that mirrors the London results is that the proportion of hydrogen that can be cost-effectively introduced in this way is limited to a few percent.

2. The limited infrastructure development associated with the introduction of hydrogen-fuelled PEFC buses would be worthwhile according to the outcome of the scenario modelling. These buses, while also accounting for a relatively small amount of the energy use of the city, would allow pure hydrogen to be available for further developments of fleet vehicles or private cars with a limited range of operation (for refuelling purposes). This would reduce the 'chicken and egg' situation common to the introduction of alternative fuelled vehicles, where the fuel infrastructure must be available for the vehicles to become popular, to be avoided. Other studies have suggested that the use of pure hydrogen in fuel cells is the most energy-efficient fuel cell introduction strategy, more efficient than reforming an alternative hydrocarbon such as methanol or gasoline on board the vehicle. The use of 'island' developments (building an 'island' of hydrogen-using technologies around an area of hydrogen supply) would enable that philosophy to be followed.

3. As the percentage of hydrogen in the energy infrastructure approaches 10%, a large proportion of the vehicles will run on hydrogen. This prevalence of hydrogen in the transport sector may allow the further development of stationary fuel cell power and heat plants.

4. The proportion of energy use within the city would still be below the 10% limit if all the buses were to be converted to hydrogen PEFC. However, if some fleet vehicles such as post office vans and refuse collection vehicles could be included then the emissions reductions would be proportionately higher and the value of the hydrogen would be increased. This might enable some of the marginal vehicles to be converted and bring the energy contribution back towards the expected target.

5. The use of hydrogen-fuelled fuel cells for local heat and power generation would be cost-effective if higher externality values were considered, but the construction of an infrastructure enabling hydrogen to be supplied to apartment blocks and offices would be a large undertaking. However, additional credits for distributed generation, such as avoiding the need to instigate capital projects for major power stations and reducing grid expansion costs, have not been taken into account. These may further sway the balance towards embedded generation.

6. The 'island' approach towards developing hydrogen centres may be particularly relevant for the Tokyo-based scenario. The energy supply system already allows for significant amounts of local gas delivery in the form of LPG in tankers, so changing this to hydrogen might not pose major problems.

3.4.3 Research plan for fiscal year 1998

1. Detailed energy and emissions data have been collected for the Greater Tokyo area and analysed in some depth to produce the results discussed above. However, the breakdown of the results requires further analysis to enable exact categorisation. This will be carried out and detailed comparisons drawn with the London data and results. This will enable final optimal scenarios to be chosen for each city.

2. The spatial characteristics of the infrastructure have not been analysed in detail for Tokyo. However, the fleet refuelling capacity and movements of urban transport are similar to those in other major cities where hydrogen vehicles such as buses are already in conventional service trials. The infrastructure development is following the 'island' theory in these examples (albeit with only one 'island' currently under study in each city) with pure hydrogen supplied in liquid form as merchant hydrogen from the marketplace, or produced on demand by local electrolysis using off-peak electricity.

3. Secondary uses of hydrogen could be developed around the island refuelling centres. The development of these should be carefully co-ordinated to coincide with increasing hydrogen supply potential. One study conducted outside the WE-NET Project has shown that in cases where small numbers of fuel cell vehicles are being supported there may be a benefit in using small local electrolysis plants for supplying the hydrogen. This depends strongly on the price of off-peak electricity but could be subsidised in some instances to promote uptake of hydrogen-using technologies.

4. Transitional strategies towards these optimal scenarios will be produced based on the existing infrastructure in each city. Where possible these strategies will be designed to allow their use in alternative geographical locations although the primary focus will remain on Tokyo.

5. The final transitional strategies and optimal scenarios for Tokyo will address the original objective of the project - the introduction of hydrogen into an urban area in the most cost-effective manner possible. The strategies will use externality costing in conjunction with infrastructure and emissions analyses to highlight the primary benefits and costs of hydrogen energy. The scenarios will present the best short- and medium-term overview of a potential (initial) hydrogen energy economy that is possible given the uncertainties in forecasting.

6. These strategies and scenarios will also prepare the ground for further analysis in Phase II of the WE-NET Project. Although Phase II is primarily hardware oriented, it is envisaged that significant economic and environmental analysis will benefit the project, both by enabling resources to be used efficiently and by prioritising development for the introduction of hydrogen. Suggested areas for analysis in Phase II will be highlighted in the final report for Phase I.