fuel cell economics Archives

April 10, 2015April 11, 2015

The Recent “Mind Bogglingly Stupid”* Arguments Against Fuel Cell Vehicles

During a press conference at the Automotive News World Congress in February Elon Musk was famously quoted saying hydrogen fuel cells are “extremely silly,” and that fuel cell electric vehicles (FCEVs) are “incredibly dumb.” He made two arguments to support this view – that electrolysis to generate hydrogen is way less efficient than using solar to charge vehicle batteries and that hydrogen was an unsafe fuel. So this is pretty transparent: it’s just the old slam-your-competition marketing ploy. Musk’s Tesla must feel pretty threatened by the spate of fuel cell electric vehicles coming on the market, especially in Japan and California. But then a month later we get Climate Progress publishing an article by Joe Romm seconding Musk’s view and supporting his opinion with actual charts. Romm’s analysis, with all its credentials, is no better than Musk’s uninformed off the cuff commentary.

Romm essentially recycles an article he published in Scientific American in 2006 where his primary criticism, as I interpret it, follows this equation:

REI=> (CHG) or (EWMFC) => EMP

Where:

REI=Renewable power in

CHG= Charge battery

EWMFC=Electrolyze water for hydrogen, make fuel cell

MP=Energy expended motive power

In the case of a FCEV fueled with hydrogen from renewably generated electrolysis, only 20% to 25% of REI ends up as EMP. An electric vehicle (EV) charged with renewably generated electricity gets 75% to 80% of REI.

That’s it. The sum total of the argument. Note the complete absence of any economics. Eliminating cost (and the discussion of other paths for zero emission FCEVs) relegates this whole argument to the realm of fierce debates over how many angels dance on the head of a pin. Perhaps intellectually challenging, but irrelevant to the market or to policy decisions. Think about it: install a solar array at a particular cost. Use its output to operate an electrolysis unit for hydrogen or use it to charge batteries. Is one more efficient in the use of solar power? Sure. But does it matter? No. Either way you have a true zero emission vehicle. And as long as the cost per mile is competitive, it makes sense in the market place. Might the battery vehicle be a little cheaper in cost per mile? Perhaps, but what if the end user is willing to value range, where the FCEV wins hands down?

The reality, however, is that we are on the cusp of a new market of lower emission vehicles. The zero emission world is still a good distance away because economics are a real factor. That means we need EVs and FCEVs, and it also means that they are not completely “green” but rather olive drab. EVs in most places will not be charged with renewable electricity but from whatever the local grid supplies, and that can be pretty dirty. Most FCEVs will get their hydrogen from natural gas – its use in a fuel cell is an improvement over direct combustion but still results in carbon emissions.

The bottom line here is that simplistic assertions are no more than that, and while soundbites in headlines attract, they are not analysis and should not be taken seriously.

** Headline in EV World, July 7, 2014 “Musk: Fuel Cells ‘Mind Bogglingly Stupid'”

April 9, 2015April 9, 2015

Is That Fuel Cell Economic? Forget cents/kWh or GGE

It’s very easy to find graphics that compare the cost of several forms of emerging energy technologies. In the case of fuel cells, since they make electricity to perform a task, the metric used is the cost of a unit of electricity: (pick your currency) per kilowatt-hour or cents/kWh. In vehicular applications, an attempt is made to equate hydrogen fuel with gasoline, generating the absurdly fictitious “gallon of gasoline (or liter of petrol) equivalent” or GGE. If you see these metrics used, you are witnessing one of the greatest failures of the fuel cell industry: its inability to articulate its worth.

Allow me to demonstrate how daft and self-defeating these comparisons can be. We all use batteries in our daily lives. Batteries generate electricity, which we put to good use. The going rate for AA batteries is broad, but to pick a number, a 4 pack of Energizer batteries is $4.01, or about $1/battery.

Each battery provides a little less than 3 watt hours of electricity. That means that if you compared AA batteries with other forms of generation, its output would be about $330/kWh. Now let’s take that value and do the conventional comparison with other generation forms, shown below. Note that this uses a logarithmic scale.

Clearly it looks horribly expensive. But here’s the thing- we don’t value the AA battery for its costs of electricity, we value it for its convenience and size. Relative to other kinds of electricity generation, it costs a fortune, but only because we are using the wrong metric. A friend and mentor reminds me frequently that what is being sold is the product of the product, not the product itself. And so it goes with fuel cells.

This is readily apparent in three applications where fuel cells are deemed commercial and where sales are happening every day: remote telecommunications backup power; uninterrupted storage and as replacement drives for battery systems in materials handling equipment. In each case, what make the fuel cell commercially viable is its context in an economic system that values the attributes of its output, not the actual output itself. Consider any of the following factors:

Avoided costs of equipment to achieve desired level of enhanced:
- Reliability
- Power Quality
Avoided costs of battery maintenance and disposal
Value of quiet operation
Avoided fees and penalties for emissions for certain industries
Longer operational periods in EPA non-attainment areas
Much longer operation in battery replacement applications
Portability

Each one can be valued and monetized in the overall economic equation.

Total Cost of Ownership (TCO)

A far better metric and methodology for evaluating the commercial viability of fuel cells is total cost of ownership (TCO), a form of life cycle cost analysis. Investopedia defines TCO as “The purchase price of an asset plus the costs of operation. When choosing among alternatives in a purchasing decision, buyers should look not just at an item’s short-term price, which is its purchase price, but also at its long-term price, which is its total cost of ownership. The item with the lower total cost of ownership will be the better value in the long run.”

Materials Handling Equipment

Use of TCO is best illustrated by the business case for fuel cell replacements in electric drive systems for materials handling equipment. Virtually all indoor forklift trucks are battery powered electric units. A recent DOE report provides a detailed analysis, summarized below.[i]

The relevant costs of ownership include the following items:

Cost of the bare forklift
Cost of the required battery or fuel cell systems
Cost of battery changing and charging or hydrogen fueling infrastructure
Labor costs of battery changing or hydrogen fueling
Cost of energy required by the forklifts
Cost of facility space for infrastructure (indoor and outdoor)
Cost of lift truck maintenance
Cost of battery or fuel cell system maintenance.

When each of these cost elements are evaluated, the following table results for a hypothetical Class I or Class II forklift:

Total Annual Cost of Ownership
Cost Element	Battery Drive Forklift	Fuel Cell Drive Forklift
Amortized cost of truck	$2,800	$2,800
Amortized cost of Battery or Fuel Cell Unit	$2,300	$2,600
Per Truck Cost of Charging Battery/ Fuel Cell Hydrogen Fueling Infrastructure	$1,400	$3,700
Labor Cost for Charging or Refueling	$4,400	$800
Cost of Electricity/Hydrogen	$500	$2,400
Infrastructure Warehouse Space	$1,900	$500
Forklift Maintenance	$2,800	$2,800
Battery/ Fuel Cell Maintenance	$3.600	$2,200
Total Cost of Annual Ownership	$19,700	$17,800

If one only looked at the total costs of the forklift plus drive unit, the fuel cell unit is more expensive. Add in the cost of charging batteries, the cost of hydrogen and the charging/fueling infrastructure, the fuel cell looks that much worse. Now factor in the productivity costs or gains: the labor cost for refueling a fuel cell is far less than that of a battery unit; the warehouse costs are far less, as is the maintenance costs of the drive units. At this level of analysis, the fuel cell drive is the clear winner, although it represents a discrete set of values. An analysis which looks at the sensitivity of each of these parameters underscores the clear choice of the fuel cell drive unit.

Source: NREL

There are other increases to productivity for the fuel cell that these analyses do not capture. Over a normal shift, the battery loses capacity such that near the end of a shift it cannot lift the same amount of material to the same heights. Fuel cell units retain their power as long as they have fuel available. In some cases, more electric drives need to be purchased to compensate for long battery recharge times and the diminished capacity of units over shifts. Finally, while the costs of battery maintenance are included above, the environmental cost of battery disposal are not. Fuel cell units do not have that problem.

A similar analysis can be performed for remote telecom site backup. In this case, the fuel could either be a liquid (operating a methanol fuel cell), or compressed hydrogen. Diesel generators or battery units require maintenance, with very high labor costs attributed to simply getting to the site and returning. A fuel cell unit, once installed and made ready for operation, eliminates a considerable amount of potential labor costs. In addition, it does its work without emissions and without noise.

Gallon of Gas Equivalent

The GGE metric, when applied to hydrogen fuel cells, is one of the most inappropriate attempts to compare one type of fuel system with another. Clearly it was created on the assumption that it would be easy for the general public to understand. All it does is obfuscate reality. GGE works as a comparison basis when we are talking about fuel use in an internal combustion engine which resides in a vehicle that was designed with an internal combustion engine. Period. The only time GGE would apply to a hydrogen fueled vehicle would be if hydrogen was being combusted in a conventional engine. Further, GGE by definition relies on petroleum economics to set price and petroleum market dynamics have nothing to do with the cost of hydrogen. A fuel cell vehicle is designed to accommodate a fuel cell and make best use of its attributes. It is far more efficient than combustion engines and makes best use of the available electricity to incorporate features not found in today’s vehicles.

The introduction of fuel cell vehicles offers the opportunity for end users to think about their transportation quite differently from what is on the road today. Instead we persist in talking about these new vehicles in terms that do not fit. Most egregious is the continued use of GGE as a filter to determine where R&D funding should go for hydrogen vehicles and refueling infrastructure. For several years, if someone guessed that a particular project or concept could not beat $3.50 GGE it was rejected. Achieving lowest cost is certainly a goal but using the wrong yardstick is just plain stupid.

A far more appropriate metric for comparing new and emerging vehicles (and the R&D associated with them) is cost per distance. This metric would apply to fuel cells and to electric vehicles.

Emerging Energy Metrics

As new forms of energy emerge in this new energy economy as much care needs to be taken in their evaluation to assure that we take fully into account the change in perspective that comes with them. The risk in using old methods to consider new concepts is that we miss altogether their potential.

[i] Ramsden, Ted USDOE “An Evaluation of the Total Cost of Ownership of Fuel Cell-Powered Material Handling Equipment” NREL/TP-5600-56408. April 2013

March 2, 2015

Contrarian Approach to Fuel Cell Powered Forklifts and Scooters in Taiwan 燃料电池发展的逆向操作：台湾叉车及摩托车

The worldwide population of motor scooters is approaching 130 million. China alone produced over 40 million gasoline powered motor scooters in 2011. Many of these engines emit 8 to 30 times the hydrocarbons and particulates emitted by automobiles. Several companies are developing fuel cell powered scooters to reduce these enormous emissions. Fuel cells are devices that make electricity from hydrogen and oxygen, emitting water vapor as the exhaust. When hydrogen is produced from renewable sources, or even from natural gas the emissions are far less than those resulting from oil refining and combustion. Fuel cell powered scooters run on that electricity.

全球目前使用小型摩托车人口已达1.3亿。在2011年仅中国就生产了超过四千万的燃油驱动摩托车，这些摩托车引擎比汽车所排放的碳氢化合物及微粒多出了8至30倍。现有数家公司研发燃料电池摩托车，以减少巨大的碳排放量。燃料电池利用氢和氧发电，唯一的副产品是水。当我们使用可再生能源，或甚至是天然气来制造氢气，都能使废气量远比炼油和火力发电来的更少。燃料电池也能作为摩托车运行的动力。

Two years ago I wrote about a very forward thinking fuel cell technology company in Taiwan (https://worthingtonsawtelle.com/fuel-cells-and-7-eleven/), Asia Pacific Fuel Cell Technologies, Ltd. (APFCT). The company had just rolled out its first major demonstration of fuel cell powered scooters.

两年前我在台湾为一家非常具有前瞻性的燃料电池公司 – 亚太燃料电池科技公司写了一篇文章（ https://worthingtonsawtelle.com/fuel-cells-and-7-eleven/）。该公司当时刚举行其首次大型燃料电池摩拖车的示范运行。

What was unique about the company and its scooters was the approach APFCT took to fueling. APFCT designed their system with simplicity and consumer convenience in mind. Instead of taking the path of nearly all fuel cell transportation devices that require the refilling of an onboard cylinder with highly compressed hydrogen, the APFCT units use small canisters that store hydrogen in metal hydride powder. Instead of driving the vehicle to a fueling station and waiting for a cylinder to be filled the user simply takes their empty canisters to a vendor who exchanges them for filled canisters (with about the same internal pressure as a racing bike tire).

亚太燃料电池公司的独特之处是在充氢方式。其设计概念是系统简单性和对消费者便利性，所以设计团队并未采用现在大多数燃料电池车所使用的高压氢气瓶，而是运用低压的小型储氢罐，内装金属氢化物粉末，氢气罐的内部压力约同于竞速自行车的胎压。驾驶不需至加氢站，而只需把空罐子给供货商并同时换取新的氢气罐。

In its first demonstration APFCT put 80 scooters on the road at a beach resort in southern Taiwan. Tourists were permitted to use the scooters for free. When they ran out of hydrogen all they needed to do was to take the empty canisters to any 7–Eleven convenience store, repair shop or police station for exchange. Why 7-Eleven? Taiwan has the fifth largest number of 7-Eleven stores in the world, behind the U.S., Japan, Thailand and South Korea. There is a 7-Eleven within walking distance of almost any place in Taiwan.

亚太首次大型燃料电池摩托车示范运行是在台湾南部的海滨度假胜地垦丁。游客可免费自行骑乘亚太所提供的80辆燃料电池摩托车。当游客发现氢气耗尽时，他们只需将空罐子带到任何一间7-Eleven便利商店，维修店或派出所进行储氢罐交换。你可能好奇为什么是7-Eleven呢？因为台湾7-Eleven营业据点数量排名全球第五，仅次于美国，日本，泰国和韩国。台湾几乎任何地方都可步行至附近的7-Eleven。

APFCT has continued to build upon this hydride storage fueling model over the last two years. It has tested a number of different vehicles, all of which use identical canisters. Those with larger hydrogen demands simply require more canisters for operation.

亚太燃料电池在过去的两年持续建立低压储氢的商业模式。目前使用相同的储气罐在数个不同类型的车辆上进行测试，如车辆运作需使用大量的电力，只需要增加储氢罐的数量。

Scooters 2.0

燃料电池托摩车

Last November, APFCT began a second scooter demonstration in Taiwan with the city government of Taipei. In this demonstration 20 scooters have been deployed for use in environmental auditing site inspections and surveying by city officials.

去年十一月，亚太燃料电池在台北市政府展开第二次示范运行。在此示范当中，台北市政府使用亚太二十辆摩托车作为公务车，在官员环境审计及现场检查时使用。

APFCT’s current scooter model has a range of approximately 80 km.

亚太最新一代摩托车续航力约80公里

Fueling costs can be very economic – in the Taipei demonstration, the local cost of electricity to generate the hydrogen results in a canisters exchange cost of NTD 30 (about USD 1).

充氢成本可以是经济实惠的 – 在台湾示范运行中储氢罐交换价格为新台币30元 (约一块美金)，此价格包括当地产氢所使用的电力及物流费。

APFCT says this current model would sell for about NTD 90,000, about USD 3,000. That’s not quite a commercial price, but getting close. Assuming a successful demonstration, orders from city governments and the public could generate sufficient volume to get the price down, which would make APFCT fuel cell scooter be competitive with gasoline powered scooters.

根据亚太表示，最新燃料电池摩托车售价约新台币九万元，约三千美金。这并非商业化的价格，但已经愈来愈接近了。如未来有一个成功的示范运行，让亚太能从政府和民众取得大量的订单，将有望大规模经济生产并降低价格，并使亚太燃料电池摩托车车与传统燃油驱动摩托车相抗衡。

Fork Lifts

燃料电池叉车

APFCT has migrated its consumer friendly fueling system to a forklift application. They recently completed a demonstration of 5 forklifts in a distribution center in Taiwan operated by the RC Mart chain.

亚太燃料也将便利的充氢系统运用在叉车上，并在近期在台湾连锁量贩店爱买的配送中心完成五辆叉车车队的示范运行。

Forklifts are an area of significant growth for fuel cells and one of the few applications that are commercially economic. Globally, there are at least 5,000 forklifts in operation at large distribution centers. These forklifts were all originally electric drive battery units. Their electric drives were all replaced with a fuel cell power system. The fuel cell systems themselves are somewhat expensive, however when one compares their total cost of ownership of the swapped out system with that of an electric drive, fuel cell systems are cheaper to operate and increase worker productivity.

燃料电池叉车近期有显着的销售成长，也是少数目前具有经济效益的燃料电池应用之一。在全球至少有五千辆叉车在大型配送中心运作。这些叉车原本都是电动叉车，现在被替换成燃料电池动力系统。燃料电池系统本身较电池昂贵，但若以总体拥有成本来衡量，燃料电池系统则相对便宜，并且能提高员工的工作效率。

The following chart provides a quick cost comparison between the two systems. In this case, a Class III forklift is used, which is a smaller unit where the operator rides on the truck.

下面的图表显示电动和燃料电池二个系统之间成本比较。此表当中我们使用较小型的搬运车来进行比较。

Source: APFCT, Worthington Sawtelle LLC, National Renewable Energy Laboratory

图片来源: APFCT, Worthington Sawtelle LLC, National Renewable Energy Laboratory

The bottom line here is that even though their fueling infrastructure and electricity costs are less, the battery driven units require significant labor for charging and refueling. What the chart does not show is that more battery units are required for a three shift day than fuel cell units; one battery unit must always be charging.

最重要的是，即使电动搬运车所需的基础设施和电力成本较低，但是使用电动搬运车需要大量劳力为其进行充电和加油。虽然此图表并未显示，但实际上若运用于一天三班制的工作环境下，电动搬运车需要大量的备用电池以供替换。

Virtually all fuel cell options for forklifts use high pressure hydrogen storage linked to a fuel cell with high internal pressures. Notice that in the high pressure bar above, all but the cost of hydrogen are likely to be relatively constant. The economics of the system depend almost entirely on the cost of hydrogen fuel. All systems currently in operation get their hydrogen delivered to a dispensing station in the distribution center from tube truck deliveries. The cost of that hydrogen increases with distance from the hydrogen production facility. Because of these high costs, a few operators are considering the installation of small natural gas reformers to generate hydrogen on-site from natural gas, which is relatively inexpensive in today’s market.

绝大部份燃料电池叉车都使用高压储氢罐。值得注意的是在上述高压系统，其中氢的成本很可能无法稳定。该系统的经济性几乎完全依赖氢燃料的成本。所有目前运作中的系统使用的氢气都从卡车运输至其配送中心的充氢站。在这样的情况下，氢气的成本会随着与制氢中心的距离而增加。由于这些高昂的成本，一些运营商正在考虑在厂内设置小型天然气重组器来制造氢气，这是在目前市场上比较经济的制氢方式。

APFCT, characteristically, has developed a much different solution to this application, one which enhances its already winning cost analysis. The APFCT unit is shown as the third bar in the chart above, labeled “Low Pressure Fuel Cell.” This forklift design uses four fuel canisters that are identical to the ones used in the scooter. But unlike most other fuel cell forklifts, the APFCT unit uses a low internal pressure fuel cell. Lower internal pressures are less susceptible to membrane failure and have less moving parts. In the picture below the cabinets by this unit are the refuelers. Fuel canisters are placed in a rack in the unit and refilled with hydrogen being released from water through electrolysis.

亚太燃料电池一如既往地为叉车发展出与众不同的解决方案，图表成本分析中也显示了此解决方案的优势。亚太的叉车系统列在图表中的第三条，标有“低压燃料电池” 。该叉车设计采用四个储氢罐，与燃料电池摩托车所使用的储氢罐是相同的。和大多数燃料电池叉车不同的是，亚太使用了低内压的燃料电池。较低的内部压力使质子交换膜较不易损坏且运动部件较少。在图中位于叉车旁边的柜子内置有充氢机。充氢机可透过电解水制氢将氢气充填至氢气罐。

Next Steps

未来展望

The best technology does not always make it in the marketplace, however. APFCT’s fueling approach offers a number of clear advantages over what is now regarded as conventional. Nonetheless, a number of alternative methods to store and dispense hydrogen in transportation applications have been attempted and then largely abandoned – usually due to the fact that such commercialization decisions are heavily influenced by the automobile manufacturers. It remains to be seen if APFCT can overcome the momentum already gained by others who are thoroughly invested in the high pressure cylinder on-board hydrogen storage model.

有时最好的技术并不容易商业化，亚太的低压储氢方式提供了许多明显的优势。尽管如此，目前已有部份储氢和配氢的替代方法都已经尝试过后并放弃 – 通常是由于此类替代方案的商业化主要是由汽车制造商所决策。让我们拭目以待，看亚太是否能克服多数使用高压储氢罐的主流，让低压金属储氢成为通往氢经济的快捷方式。

December 4, 2014

Bloom “Box”: Reverse Engineering the Economics

Last July Bloom Energy announced the placement of a 200 kW “Energy Server” (Bloom’s preferred language for “generator”) at Keio University in Japan, another at a large Softbank building in Fukuoka (Softbank is a major Japanese mobile phone service provider), as well as the creation of a 50/50 joint venture with Softbank to establish Bloom Energy Japan, Ltd. These announcements were all part of the steady drumbeat of Bloom unit installations. About the same time, however, Bloom issued a white paper where the President of Bloom Energy Japan, Miwa Shigerumotu, provided some insight into their pricing structure. Below is a picture of the Bloom installation at the Softbank building.

Source: Bloom Energy Japan, Ltd.

As with other installations, Bloom is selling the product of the product, rather than just a piece of equipment. The customers receive full output of the units with no upfront costs, paying a fixed rate of 25 yen/kWh, or about USD 0.21/kWh. This rate is fixed at 10 years, with no fuel adjustment clauses. In the white paper Mr. Miwa acknowledges that 25 yen is high relative to current prices, but goes on to say that the days of predictable electricity prices are over. From April 2010 to April 2014, electricity prices in Japan rose an average of 10% annually. He argues that paying a premium of about 5 yen now will be more than balanced out longer term when compared with the volatile and escalating conventional electricity cost. His bottom line: a Bloom Energy Server provides price hedging and risk mitigation.

Fair enough, but is Bloom likely making money here or just initiating a loss leader program to pave the way for future sales? We can get a very approximate sense of the implied cost of the unit with some reverse economic calculations.

The most significant variable cost to Bloom is fuel price. The Bloom units are running on liquefied natural gas (LNG), which is not an inexpensive commodity in Japan. The chart below gives some perspective to Japanese LNG pricing relative to the US and UK (Blue is US Henry Hub; Green is the UK and Red is Japan). Last winter Japan LNG was at about $19/MM Btu.

Source: National Gas Price in Asia, Rice University

The figure above overlays the timing of the Fukushima disaster and the closure of the Japanese nuclear fleet, which clearly had a major impact on price (and on the price increases noted above by Mr. Miwa). Longer term, however, most analysts do not foresee a return to UK- or US-like pricing in Japan. The Economist forecasts a decline in Japanese LNG price over time.

Whereas the IMF foresees a relatively constant price for the next several years.

Forecasting LNG prices in Japan is further complicated by the fact that, at least historically, Japanese LNG prices have been strongly correlated to world oil prices. It remains to be seen if OPEC’s production announcement keeps oil prices stable in the short term but resulting in an increase when many now uncompetitive shale projects fail to survive, reducing supply.

For the purposes of this approximation, we’ll assume a fuel cost range for our Bloom units between $10 and $19/MM Btu. We’ll also assume that Bloom internally financed the capital cost for these units at about a 2% interest rate.

Along with some other assumptions about O&M costs and taxes, the following break even maximum costs of capital as a function of fuel cost assumptions can be calculated.

Fuel Cost, $/MMBtu	$/kW installed to achieve 10 year levelized cost of electricity equal to USD 0.21/kWh*
10	$9,000
15	$6,800
19	$5,000

When the first Bloom units were sold, industry estimates for their cost was on the order of $30,000 kW to $40,000/kW. Perhaps 100 have been sold in the interim. Given that starting point, it seems very unlikely that 100 units could result in economies of scale that would reduce cost by a factor of 5 or 6, as would be necessary for these two examples.

Even given all of the necessary caveats about the very approximate nature of the estimates and assumptions made above, loss leading is the market introduction strategy for Bloom in Japan.

*21 cents uses the current exchange rate – at the time the transaction was completed earlier this year the rate would have been nearly 25 cents US. Perhaps this is why there was a report last month that the current rate is 28 yen/kWh.