The Department of Energy (DOE) has raised the target it has set for the end-user cost of hydrogen to $2.00–$3.00 per gallon of gasoline equivalent (gge) (delivered, untaxed, in 2005 dollars, by 2015).
The prior target of $1.50/gge (delivered, untaxed, in 2001 dollars, by 2010), was developed in 2002, and was based on hydrogen produced from distributed natural gas reforming.
The rationale is that hydrogen should cost no more than gasoline on an equivalent energy basis. Since one kilogram of hydrogen contains approximately the same energy as one gallon of gasoline, the hydrogen cost goal was set at $1.50/kg (or $1.50/gge) to be equivalent to the untaxed cost of gasoline.
The new hydrogen cost goal of $2.00–3.00/gge is independent of the pathway used to produce and to deliver hydrogen. In addition, the new methodology factors in the energy efficiency of the gasoline hybrid vehicle and the fuel cell vehicle on a cost-per-mile basis.
The cost goal was derived using the National Academy of Sciences (NAS) fuel-efficiency improvement factors and the Energy Information Administration’s (EIA) “High A” scenario gasoline price projection for 2015.
The scenarios are from the EIA’s Annual Energy Outlook 2005. In the high A world oil price case, the lower 48 crude oil price is projected to be $33.65 per barrel in 2010 and $38.84 per barrel in 2025.
In the High A case, the US economy is more vulnerable to limited oil supplies from foreign sources due to the increasing world and U.S. oil demand, resulting in higher oil prices.
According to the DOE, this case is more representative of the economic and energy security environment in which hydrogen must compete.
There are several interesting things about this announcement. First is that by essentially doubling the target price, the DOE has brought it much closer to being achievable by hydrogen producers. (Current pricing is around $5.00–$6.00 gge.)
It also is a recognition that rising oil prices bring hydrogen closer to being cost-competitive in the market.
Second is the pathway-independence. Environmental considerations aside, if the supply of hydrogen was linked only to the supply of natural gas, costs would inexorably rise as the price of natural gas rises. Some research (earlier post) has projected that natural gas reforming will move from being the lowest-cost production method currently to the most expensive by around 2025. (Chart to right, Click to enlarge.)
The decoupling of pricing from the steam methane reforming of natural gas acknowledges the possibility that the crossover in cost will happen much sooner (and also recognizes the amount of research that is flowing into different mechanisms for hydrogen production.
Third is the embrace of the High A scenario—the high oil price scenario. While from the point of view of developing a market-competitive price for hydrogen, high oil prices work well (rising prices “lower the bar”, so to speak), it’s also an acceptance, from a planning point of view, that the prices of oil and oil products are not coming back down.