A cost benefit analysis of fuel cell electric vehicles

Transcription

1 A cos benefi analysis of fuel cell elecric vehicles Anna Crei, Alena Koelnikova, Guy Meunier, Jean-Pierre Ponssard o cie his version: Anna Crei, Alena Koelnikova, Guy Meunier, Jean-Pierre Ponssard. A cos benefi analysis of fuel cell elecric vehicles. [Research Repor] <hal > HAL Id: hal hps://hal.archives-ouveres.fr/hal Submied on 16 Feb 2015 HAL is a muli-disciplinary open access archive for he deposi and disseminaion of scienific research documens, wheher hey are published or no. he documens may come from eaching and research insiuions in France or abroad, or from public or privae research ceners. L archive ouvere pluridisciplinaire HAL, es desinée au dépô e à la diffusion de documens scienifiques de niveau recherche, publiés ou non, émanan des éablissemens d enseignemen e de recherche français ou érangers, des laboraoires publics ou privés.

2 A cos benefi analysis of fuel cell elecric vehicles Anna Crei 1, Alena Koelnikova 2, Guy Meunier 3 and Jean-Pierre Ponssard 4 February 2015 his sudy benefied from he financial suppor of Air Liquide. Air Liquide also provided helpful assisance on echnical and economic issues. All informaion and conclusions conained in his sudy remain he sole responsibiliy of he auhors. 1 Universiy Paris Dauphine and Ecole Polyechnique 2 Ecole Polyechnique 3 INRA and Ecole Polyechnique 4 CNRS and Ecole Polyechnique

3 Conen Execuive summary...3 A cos benefi analysis of fuel cell elecric vehicles...4 Scope of he sudy...4 Mehodology...5 he base case: summary of daa and he associaed cos benefi analysis...6 he main conclusion for he base case: a reasonable range for H2 abaemen cos...7 Robusness of he main conclusion wih respec o major uncerainies arge analysis Suggesed research issues Glossary Appendix 1: A seleced review of he recen lieraure on he hydrogen mobiliy Appendix 2 Daa and Sources Marke size Manufacuring coss Fuel coss for hydrogen Fuel coss for ICE Hydrogen infrasrucure cos CO2 emissions References for he daa sources Appendix 3 Mehodology Sandard framework for a cos benefi analysis Social discoun rae Normaive cos of carbon Levelized coss Simplified approaches o ge an abaemen cos Implici cos of carbon: wind and phoovolaic echnologies in Germany References A cos benefi analysis of FCEV Page 2

4 Execuive summary his sudy develops a consisen framework o compare FCEV wih gasoline ICE (igniion combusion engine) and applies his framework o he German marke over he period As such i provides for: - he formulaion of a proper cos benefi analysis, including he definiion of he abaemen cos for he hydrogen echnology; - he simulaion of he resuls under various echnological and cos assumpions; - he idenificaion of he major concepual issues o faciliae analyical developmens. he sources used in he analysis are based on an updae of previous indusry sudies. he main conclusion is ha FCEV could be a socially beneficial alernaive for decarbonizing par of he projeced German car park a he horizon he corresponding abaemen cos would fall in he range of 50 / CO2 o 60 / CO2. his range is higher han he curren esimae for he normaive cos of carbon as expressed in Quine (2009 and 2013), which is around 30 / in Sill he gap is no ou of hand. We idenify he marke and cos condiions ha would shoren he gap. he mehodology used in his sudy could be expanded o inegrae wo pending issues noed in he lieraure for he successful deploymen of FCEV: - Making he deploymen for FCEV endogenous and depending on he public and privae insrumens ha could induce he decreasing of coss and he accepance of he FCEV echnology by consumers. - Designing an appropriae insiuional framework o promoe cooperaion for manufacuring FCEV, producing carbon free H2 and invesing in he disribuion of H2. he iniial sunk coss necessary for invesmen canno be recouped hrough pure marke equilibrium behavior. his sudy already provides an order of magniude o quanify hese issues. A cos benefi analysis of FCEV Page 3

5 A cos benefi analysis of fuel cell elecric vehicles Scope of he sudy Nowadays approximaely 25% of he world CO2 emissions are aribuable o he ransporaion sysem (Eurosa, 2009). Ou of his percenage, 75% is caused by passenger cars and rucks. According o curren rends he number of cars may double unil 2050 due o populaion and income increases (IEA-Inernaional Energy Oulook repor, Feb 2013). he decarbonisaion of he ranspor sysem is one of he key challenges for miigaing climae change. A number of sudies have explored he possible echnological innovaions and he associaed economic condiions ha could lead o he emergence of new power-rains such as baery elecric vehicles (BEV), fuel cell elecric vehicles (FCEV), hybrid vehicles A survey of hese sudies is provided in appendix 1. Among hem a sudy (McKinsey & Company, 2010) developed scenarios for he deploymen of PHEV, BEV and FCEV in Europe over he period his sudy involved a group of companies (among which car manufacurers, oil and indusrial gas companies, elecriciy producers), he European Fuel Cells and Hydrogen Underaking, wih he suppor of he McKinsey consuling firm (McKinsey & Company, 2010). In 2012, Bruegel and he European School for Managemen and echnology reviewed he poenial benefis of a new energy and ranspor sysem and revisied he economic raionale for public acion using FCEV as an illusraion (Zachmann e al., 2012). he objecive of he curren sudy is o provide a simple model ha builds on hese sudies. I compares FCEV wih gasoline ICE (inernal combusion engine) for he German marke, wihou aking ino accoun any indirec incenive ools (carbon ax on ranspor emissions) nor direc incenive ools for FCEV (ax reducion, subsidies, bonus ) excep fuel ax exempion for H2 (such as IPP in France). As such i provides a consisen framework for: - he formulaion of a proper cos benefi analysis, including he definiion of he abaemen cos for he hydrogen echnology; - he simulaion of he resuls under various echnological and cos assumpions; - he idenificaion of he major concepual issues o be addressed in analyical developmens. his framework may be a good saring poin for a number of exensions (comparing porfolios of power-rains, oher markes areas ). A cos benefi analysis of FCEV Page 4

6 Mehodology his cos benefi analysis of FCEV versus gasoline ICE vehicles: - Sars from a scenario characerized by an exogenously given marke size for he deploymen of FCEV over he period , using he German marke as an illusraion; - Generaes he various cos componens associaed wih his scenario (manufacuring, fuel, infrasrucure); - Compares hese coss wih a counerfacual scenario in which gasoline ICE vehicles would be used insead of FCEV; - Compares he CO2 emissions of boh scenarios aking ino accoun he echnologies used o produce hydrogen a differen ime periods. A number of saic and dynamic indicaors are derived from his model: - For any given year he oal cos of ownership for he consumer (CO) of one car uni of FCEV versus ICE is obained based on he associaed capial (given he life ime of he car) and he operaing coss a ha year; he year (if any) a which he wo CO cross is derived; - he yearly saic abaemen cos defined as he raio of he dela CO divided by he dela CO2 emissions for ha year; his cos is expeced o decline over ime due o economies of scale and learning by doing in he cos componens; - he oal ne discouned cos of he FCEV scenario versus he ICE scenario over he period; - he dynamic abaemen cos based on his oal ne discouned cos and he dela CO2 emissions for year Appendix 2 provides he daa used for he various cos componens, and he sources used o generae his daa. Appendix 3 deails our economic reasoning, including he assumpions regarding he discoun facor, he noions of levelized coss and abaemen coss. A cos benefi analysis of FCEV Page 5

7 he base case: summary of daa and he associaed cos benefi analysis able 1 gives a summary of he daa used for he base case and able 2 gives he associaed resuls. able 1 Summary of he daa for he base case Simplified Daa Shee Uni Marke size (car life ime 10 years) # Manufacuring coss FCEV purchase cos (19% VA is no included) k 60,0 37,9 32,4 28,9 23,1 ICE purchase cos (19% VA is no included) k 22,0 21,4 21,3 21,1 20,5 Fuel coss FCEV Hydrogen producion cos (delivery cos o HRS included) /kg 7,0 5,8 6,1 6,3 6,8 Hydrogen consumpion per 100 km kg/100km 0,95 0,87 0,84 0,80 0,70 ICE Gasoline price per lire (VA 19% is no included) /l 1,30 1,35 1,40 1,46 1,71 Gasoline consumpion per 100 km l/100km 7,04 6,2 4,97 4,88 4,8 Infrasrucure coss Number of HRS # Capial cos per uni of car k 62,24 2,39 2,02 1,65 1,18 Opex per uni of car k 6,22 0,24 0,16 0,13 0,09 CO2 emissions Hydrogen kgco2/100km 9,0 6,2 5,0 3,8 1,7 Gasoline kgco2/100km 19,8 17,4 14,0 13,7 13,5 Marke size refers o he FCEV park. Manufacuring coss are embedded in he purchase cos of he car (developmen and capial expendiures are assumed o be inegraed in his cos). A yearly mainenance cos is added o he purchase cos (8% for FCEV and 10% for ICE). Fuel coss for hydrogen depend on he echnology o produce hydrogen (developmen and capial expendiures are assumed o be inegraed in his cos). he logisics cos o he hydrogen refueling saion (HRS) is added o he producion cos. Gasoline price is he delivery price a he reail saion; i depends on he oil price in he world marke. he sae ax on impored peroleum is included. he infrasrucure cos for hydrogen is derived from he required nework o deliver he oal hydrogen consumpion a every ime period (wih lower capaciy uilizaion raes for he early years) and on he associaed capial and operaing expendiures. able 2 Cos analysis for he base case Cos benefi analysis Uni Dela purchase and mainenance cos k /year 7,6 3,0 1,9 1,2 0,1 Dela fuel cos k /year -0,4-0,5-0,3-0,3-0,5 Infrasrucure for H2 k /year 13,8 0,3 0,2 0,1 0,1 Dela CO per vehicle k /year 21,1 2,8 1,8 1,0-0,3 CO converge in year 2042 oal discouned dela cos from 2014 o M CO2 emissions avoided /year 1,62 1,68 1,35 1,49 1,76 oal CO2 avoided M 161 Abaemen cos Saic approach / Dynamic approach / 53 A cos benefi analysis of FCEV Page 6

8 he main conclusion for he base case: a reasonable range for H2 abaemen cos Consider firs he cos aspec (Figures 1 and 2). he CO for FCEV crosses he one for ICE on year he dela cos of CO sars a a very high level (21 k in 2015), sharply drops from 2015 o 2020 and hen drops more slowly from 3 k in 2020 o 1 k in 2030 o remain in he range.5 k o -.5 k hereafer. he infrasrucure cos rapidly declines afer he firs hree years. While i represens a high absolue iniial invesmen cos, he yearly equivalen for one car uni drops o.2 k /year afer he relaively high hydrogen producion cos is compensaed by he higher efficiency of FCEV so ha here is a benefi over ICE in erms of fuel cos (recall ha no fuel ax is incurred on hydrogen) ha more han compensaes he infrasrucure cos. he manufacuring cos for FCEV sars quie high and experience akes ime o accumulae, so his cos remains he main cos componen over he whole horizon. Figure 1 Analysis of he cos componens in he dela CO for one car uni ( ) 25,00 Analysis of he cos componens in he dela CO for one car uni ( ) 20,00 15,00 K /year 10,00 5,00 Dela purchase and mainenance cos Dela fuel cos Infrasrucure for H2 0, Dela CO per vehicle -5,00 Figure 2 Analysis of he cos componens in he dela CO for one car uni ( ) 3,50 Analysis of he cos componens in he dela CO for one car uni ( ) 3,00 2,50 2,00 K /year 1,50 1,00 0,50 0,00 Dela purchase and mainenance cos Dela fuel cos Infrasrucure for H2 Dela CO per vehicle -0,50-1,00 A cos benefi analysis of FCEV Page 7

9 Going from he cos per uni of car o he full cos brings some ineresing insighs for he deploymen scenario: he uni dela cos is now muliplied by he oal FCEV car park (aking ino consideraion he respecive life imes of cars and HRS). he discouned coss are displayed in able 3. he coss are discouned from year 2014 using a social discoun rae a 4 % (all financial figures are in 2014). able 3 he oal ne discouned cos for he deploymen of FCEV versus ICE oal discouned dela cos (M ) Dela purchase and mainenance cos Dela fuel cos IPP Infrasrucure for H oal wih IPP excluded oal wih IPP included A preliminary commen concerns he role of he inerior ax on impored peroleum (IPP). We consider ha hydrogen should be given he benefi of conribuing o he reducion of peroleum impors, so ha his ax should no be applied. Sill, as can be seen in able 3, he difference beween he oal discouned wih no IPP (IP excluded in he gasoline price) and wih IPP (IPP included in he gasoline price) corresponds o he associaed ax revenue. his amoun is significan and a financing issue may arise for he Sae during he full deploymen phase ( ). Over he whole period ( ) he oal discouned dela cos (IPP included) amouns o billion euros. he breakdown of his figure over he hree periods , and , and over he hree cos componens shows ha: - he main expenses would occur from 2021 o 2030 ha is billion euros. - From hen on, he negaive dela fuel cos per uni of car generaes a subsanial excess ha increases as he car park increases, so much ha i compensaes par of he wo oher componens in he period ; sill he discouned cash flow over ha period remains negaive; - his emphasizes he complemenariy naure of he hree cos componens (manufacuring of FCEV, H2 producion, H2 disribuion). Consider now he emissions aspec. I depends on he relaive energy efficiencies of FCEV and ICE (ICE improves by 30% over , and only by 2% over ; FCEV improves by 16% and 13% respecively over hese ime periods), and on he porfolio of echnologies used o produce H2. We consider four poenial echnologies, a maure one and hree which are sill under developmen and which would be necessary o decarbonize he producion process: - he curren maure echnology, seam mehane reforming (SMR) using naural gas - SMR using naural gas wih carbon capure and sorage (SMR+CCS) - SMR using Biogas A cos benefi analysis of FCEV Page 8

10 - Elecrolysis wih renewable elecriciy From hese echnologies we consruc five echnological scenarios: a pure SMR scenario; hree scenarios in which one of he hree new echnologies is progressively inroduced in subsiuion o SMR; our base case in which all he new echnologies are combined. Figure 3 compares he emissions of hese five scenarios. he reducion of emissions will provide increasing benefis o sociey as he FCEV car park increases from million unis in 2030 o million unis in Figure 3 CO2 emissions in he producion of hydrogen 12,00 10,00 kg CO2/kg H2 8,00 6,00 4,00 2,00 0, SMR Elecrolysis SMR+CCS Biogas Base mix Using he cos figures and he emissions we derive he abaemen coss. he saic abaemen cos drasically declines over he period, say from / in 2025 o 781 / in 2030, o become negaive afer his drasic decline shows he limi of such a saic indicaor in presence of learning raes and economies of scale. he dynamic indicaor is more meaningful. I is derived for he deploymen of he car park unil 2050, neglecs he inerim gains in emissions bu assumes ha he avoided emissions will indefiniely remain afer As proved in he Appendix 3, his can be considered as an exension of he saic abaemen cos o assess he benefi of an invesmen program wih significan learning raes and economies of scale. his approach leads o an abaemen cos of 53 /, which may be compared o he normaive values of CO2 prices esimaed o be around 30 / (cf. appendix 3). he main conclusion from hese resuls is ha FCEV should be considered as a socially profiable alernaive o explore for he decarbonisaion of he ranspor sysem by A cos benefi analysis of FCEV Page 9

11 Robusness of he main conclusion wih respec o major uncerainies In his secion he robusness of our main conclusion is firs esed wih respec o hree major uncerainies: - he availabiliy of a new decarbonized producion echnology for hydrogen; - he oil price; - he accepabiliy of FCEV by he consumer and is impac on he deploymen of FCEV. able 4 ess he echnological uncerainy in producing hydrogen. If none of he hree new echnologies currenly under developmen emerges, here will be a subsanial increase in he abaemen coss. he decrease in he oal discouned cos due o he exclusive use of SMR (cheaper han he 3 oher ways) does no compensae he decrease in he oal CO2 avoided. Moreover, i does allow Europe o reach is objecive of decreasing by 95% he GHG emissions relaed o road ransporaion by However, if a leas one of he hree new echnologies emerges, whaever i is, our main conclusion remains valid. able 4 he echnological uncerainy in producing hydrogen Impacs of he H2 producion echnology Base mix SMR+na gas SMR+CCS SMR+Biogas Elecrolysis CO converge in year oal discouned dela cos from 2014 o M oal CO2 avoided M Dynamic approach / he fuure oil price is a major uncerainy. 5 We es exreme scenarios around our base case which corresponds o IEA projecions. A low oil price (corresponding o a 0% annual growh rae) would increase he dynamic abaemen cos from 53 o 68 /, as shown by able 5. However able 6 shows ha a moderae increase in he learning rae in manufacuring (leading o he convergence of manufacuring coss in 2050; FCEV keeping some advanage in erms of mainenance) would be enough o reverse he siuaion, leading o an abaemen cos of 4 /! Again we noe he impac of he manufacuring cos in driving our resuls. able 5 Scenario wih a low oil price Cos benefi analysis Uni Dela purchase and mainenance cos k /year 7,6 3,0 1,9 1,2 0,1 Dela fuel cos k /year -0,4-0,5-0,2-0,2-0,3 Infrasrucure for H2 k /year 13,8 0,3 0,2 0,1 0,1 Dela CO per vehicle k /year 21,1 2,8 1,8 1,1-0,1 CO converge in year 2046 oal discouned dela cos from 2014 o M CO2 emissions avoided /year 1,62 1,68 1,35 1,49 1,76 oal CO2 avoided M 161 Abaemen cos Saic approach / Dynamic approach / 68 5 For hisorical rends in oil prices see hp:// From 2000 o 2014 he oil price (in $2014) increased from 30 o $80/bbl ha is a 7%, while i remained fla over he years A cos benefi analysis of FCEV Page 10

12 able 6 Scenario wih a low oil price and a high learning rae in manufacuring Cos benefi analysis Uni Dela purchase and mainenance cos k /year 7,6 2,6 1,4 0,6-0,5 Dela fuel cos k /year -0,4-0,5-0,2-0,2-0,3 Infrasrucure for H2 k /year 13,8 0,3 0,2 0,1 0,1 Dela CO per vehicle k /year 21,1 2,4 1,3 0,5-0,7 CO converge in year 2035 oal discouned dela cos from 2014 o M CO2 emissions avoided /year 1,62 1,68 1,35 1,49 1,76 oal CO2 avoided M 161 Abaemen cos Saic approach / Dynamic approach / 4 Consider now he impac of a high oil price (corresponding o a 4% annual growh rae). As seen from able 7 he dynamic abaemen cos would drop from 53 o - 5 /. he CO would converge in 2035 and he oal discouned cos would become negaive. able 7 Scenario wih a high oil price (IPP included) Cos benefi analysis wih IPP Uni Dela purchase and mainenance cos k /year 7,6 3,0 1,9 1,2 0,1 Dela fuel cos k /year -0,5-0,6-0,5-0,6-1,5 Infrasrucure for H2 k /year 13,8 0,3 0,2 0,1 0,1 Dela CO per vehicle k /year 21,0 2,7 1,6 0,7-1,3 CO converge in year 2035 oal discouned dela cos from 2014 o M CO2 emissions avoided /year 1,62 1,68 1,35 1,49 1,76 oal CO2 avoided M 161 Abaemen cos Saic approach / Dynamic approach / -5 Under hese condiions excluding IPP from he cos benefi analysis would sill provide reasonable resuls. able 8 gives a dynamic abaemen cos a 69 /. able 8 Scenario wih a high oil price (IPP excluded) Cos benefi analysis wihou IPP Uni Dela purchase and mainenance cos k /year 7,6 3,0 1,9 1,2 0,1 Dela fuel cos k /year 0,2 0,0 0,1 0,0-0,6 Infrasrucure for H2 k /year 13,8 0,3 0,2 0,1 0,1 Dela CO per vehicle k /year 21,7 3,3 2,2 1,3-0,4 CO converge in year 2044 oal discouned dela cos from 2014 o M CO2 emissions avoided /year 1,62 1,68 1,35 1,49 1,76 oal CO2 avoided M 161 Abaemen cos Saic approach / Dynamic approach / 69 A cos benefi analysis of FCEV Page 11

13 able 9 analyses he hird uncerainy: he accepabiliy of FCEV by consumers eiher wih a slower ramp up or wih a quicker ramp up. his would affec he oal discouned cos of he deploymen and possibly he yearly amoun of CO2 saved in On he one hand a slower deploymen saring 2 years laer han in he base case and reaching only 7 million cars in 2050 would decrease he deploymen cos bu a he expense of avoided emissions and resul in an abaemen cos of 65 /. On he oher hand a quicker deploymen in which a arge of 8.0 million cars would be achieved in 2050 would significanly decrease he deploymen cos wihou affecing he avoided emissions in year 2050 giving an abaemen cos of 48 /. Given ha here are large uncerainies on he marke condiions ha influence he subsiuion of ICE by FCEV furher analysis should cerainly be made. able 9 he uncerainy abou he accepabiliy of FCEV by consumers Cos benefi analysis wih slower ramp up Uni Dela purchase and mainenance cos k /year 7,6 4,1 2,3 1,4 0,2 Dela fuel cos k /year -0,4-0,5-0,3-0,3-0,5 Infrasrucure for H2 k /year 90,4 0,5 0,2 0,1 0,1 Dela CO per vehicle k /year 97,6 4,1 2,2 1,3-0,2 CO converge in year 2044 oal discouned dela cos from 2014 o M CO2 emissions avoided /year 1,62 1,68 1,35 1,49 1,76 oal CO2 avoided M 125 Abaemen cos Saic approach / Dynamic approach / 65 Cos benefi analysis wih a quicker ramp up Uni Dela purchase and mainenance cos k /year 7,6 3,0 1,9 1,2 0,0 Dela fuel cos k /year -0,4-0,5-0,3-0,3-0,5 Infrasrucure for H2 k /year 13,8 0,3 0,2 0,1 0,1 Dela CO per vehicle k /year 21,1 2,8 1,8 1,0-0,4 CO converge in year 2041 oal discouned dela cos from 2014 o M CO2 emissions avoided /year 1,62 1,68 1,35 1,49 1,76 oal CO2 avoided M 170 Abaemen cos Saic approach / Dynamic approach / 48 A cos benefi analysis of FCEV Page 12

14 For compleeness we also provide a sensiiviy analysis on he discoun rae, using 6% raher han 4%. able 10 shows ha he oal discouned cos decreases bu ha he dynamic abaemen cos increases up o 63 / (see Appendix 3 for more on he role of he discoun rae). able 10 he cos benefi analysis wih a discoun rae a 6 % Cos benefi analysis wih 6% discoun rae Uni Dela purchase and mainenance cos k /year 8,0 3,2 2,0 1,2 0,1 Dela fuel cos k /year -0,4-0,5-0,3-0,3-0,5 Infrasrucure for H2 k /year 14,4 0,3 0,2 0,2 0,1 Dela CO per vehicle k /year 22,0 3,0 1,9 1,1-0,3 CO converge in year 2043 oal discouned dela cos from 2014 o M CO2 emissions avoided /year 1,62 1,68 1,35 1,49 1,76 oal CO2 avoided M 161 Abaemen cos Saic approach / Dynamic approach / 63 A cos benefi analysis of FCEV Page 13

15 arge analysis A reasonable esimae for he normaive cos of carbon is provided by he Quine repor (2009, 2013). his esimae is around 30 / for Anoher way o make our sensiiviy analysis meaningful is o invesigae under wha condiions our dynamic abaemen cos would mee his esimae. able 11 gives he simulaion resuls, explicaing he change in he key parameers ha would be necessary o eliminae he gap. wo cases are considered: one parameer or all four parameers change. I would be ineresing o carefully evaluae he empirical credibiliy of he individual or global changes. he argeed learning raes for manufacuring cos and hydrogen producion cos could be pu in line wih he accepabiliy of cars by consumers. he all four parameer change illusraes his poin able 11 arge analysis o ge he normaive cos of carbon as he abaemen cos arge analysis uni base case one parameer arge 4 parameer arge Dynamic abaemen cos / Marke size in % of oal car park % 15% 26% 20% Gasoline price (yearly rae of increase) % 1,40% 2,80% 2% Manufacuring cos (FCEV vs ICE in 2050) % 12% 8% 10% Hydrogen producion cos in 2050 /kg 6,8 4,8 6,0 % -30% -12%. A cos benefi analysis of FCEV Page 14

16 Suggesed research issues his sudy provides a consisen se of echnological and cos assumpions under which FCEV would be a socially beneficial alernaive for decarbonizing 15% of he projeced German car park a he horizon he analysis is using gasoline ICE as he alernaive echnology. he cos benefi framework used for he sudy suggess a number of developmens o comfor he validiy of his conclusion. We briefly discuss he wo research issues which we consider as he more relevan. he sudy sars from an exogenous deploymen for FCEV and infers cos componens. I would be preferable o rely on a supply and demand model. his exension would make he deploymen for FCEV endogenous and depending on he public and privae insrumens ha could induce he decreasing of coss and he accepance of he FCEV echnology by consumers. he environmenal objecive could be made endogenous and relaed o a global objecive for he whole ranspor sysem and he expeced conribuions of differen power-rains. his is parly done in he previous sudies; however hese sudies do no address he quesion of he iming of he public and privae insrumens ha would rigger he underlying learning by doing. Should he deploymen be acceleraed or should i be posponed? How should i be phased over ime? his is a recurren debae for green echnologies. We have seen ha saic abaemen coss for FCEV are a crude way o discuss he iming issue and may easily lead o conflicing views. Our formulaion of dynamic abaemen coss is a firs sep o a more appropriae economic seing. his firs sep should be refined and relaed o he emerging lieraure on he opimal dynamic deploymen of renewable echnologies. he sudy highlighs he complemenariy naure of manufacuring FCEV, H2 producion and H2 disribuion. Under our assumpions his complemenariy is paricularly severe in he launching period ( ) bu also persiss over ime. Complemenariy ordinarily induces inefficiencies due o he so-called hold up problem: he sunk coss necessary for invesmen canno be recouped hrough a marke equilibrium based on marginal coss. he economic exbook answer would be o allow inegraion. More realisically in he conex of FCEV he hree goods will be provided by differen players originaing from differen indusries; an insiuional framework specifying conracs among he paries need be designed. hese conracs would specify for insance commimens in erms of invesmens and deploymens, condiions for hese commimens, revision clauses he design of a proper insiuional framework for cooperaion among hese indusries while preserving compeiion wihin each indusry is an imporan research issue for he success of H2 mobiliy. A cos benefi analysis of FCEV Page 15

17 Glossary 200/700 bar Pressure levels for hydrogen sorage anks AL BEV capex CEP CO2 FCEV g H2 H2M HRS ICE Air Liquide Company Baery Elecric Vehicle Capial Expendiures Clean Energy Parnership Carbon Dioxide Fuel Cell Elecric Vehicle Gram Hydrogen Hydrogen Mobiliy projec Hydrogen Refuelling Saions Inernal Combusion Engine k housands of Euros kg km l MJ OPEX SMR SMR + CCS CO VA Kilogram Kilomeer Lier Mega joule Operaing Expenses Seam Mehane Reforming Seam Mehane Reforming wih Carbon Capure and Sorage oal Cos of Ownership on Value-added ax A cos benefi analysis of FCEV Page 16

18 Appendix 1: A seleced review of he recen lieraure on he hydrogen mobiliy 1. Achnich, M., G. Bühler and C. Hermeling (2008) Impac of service saion neworks on purchase decisions of alernaive-fuel vehicles, Discussion Paper no , Zenrum für Europäische Wirschafsforschung Objecive: he paper sudies he impac of service saion availabiliy on he demand for alernaivefuel vehicles. Resuls: he resuls sugges ha a failure o expand he availabiliy of alernaive fuel saions represens a significan barrier o he widespread adopion of alernaive-fuel vehicles. Considering in addiion ha hydrogen and elecric cars are likely o remain more cosly han heir convenional counerpars due o expensive fuel cells and baeries, he barriers o widespread adopion are considerable. Mehodology: Analysis is based on saed preference daa from a discree choice experimen carried ou in Germany, and considers a broad range of fuel ypes. Applying a sandard logi model, he auhors show ha fuel availabiliy influences choices posiively, bu is marginal uiliy diminishes wih supply. Furhermore, consumers' marginal willingness o pay for an expanded service saion nework is derived. 2. Beeker E. (2014) Y a--il une place pour l'hydrogène dans la ransiion énergéique?, Noe d'analyse, France Sraégie, Commissaria général à la Sraégie e à la Prospecive, available a hp:// Objecive: he auhor discusses he role of hydrogen echnology in he energy ransiion in France. Resuls: his sudy revisis how hydrogen echnology can conribue o he energy ransiion. According o he auhor Fuel cell elecric vehicles (FCEV) canno ye compee wih incumben inernal combusion engine (ICE) echnology because of high cos of key componens, high elecrolysis coss and inexisen infrasrucure. he auhor suggess coninuing R&D for elecrolyzes and fuel cells in order o improve economic and echnical performance. Mehodology: he sudy is based on inerviews of indusry represenaives. 6 6 Air Liquide has been inerviewed bu disagrees wih he conclusions of his repor. A cos benefi analysis of FCEV Page 17

19 3. Bruegel Insiue Zachmann G., Holermann M., Radeke J., am M., Hubery M., Naumenko D., and Ndoye A. (2012) he grea ransformaion: decarbonising Europe's energy and ranspor sysems, Bruegel Blueprin Series, Volume XVI, available a hp:// Objecive: his sudy compares he indusry scenario (Mc Kinsey, 2010) for he deploymen of FCEV o an endogenous scenario depending on he consumers accepance for his new echnology and condiional on he public policies ha could poenially suppor his deploymen. d. Resuls: he auhors argue ha a consisen policy approach is needed. Policy inervenion appears indispensable as he exising energy and ranspor sysem is locked-in ino an incumben echnology. Overcoming his lock-in is crucial. he repor makes hree main proposals. Firs, he scope, geographical coverage and duraion of carbon pricing should be exended. By seing a higher carbon price, incenives for developing and invesing in new low-carbon echnologies are creaed. Second, emporary consoria for new infrasrucure o solve early-phase marke failures could be pu in place. Lasly, an open and public ransiion model is needed so ha ranspor soluions do no ge a head sar ha aferwards would be reversed. Mehodology: his sudy analyses possible decarbonisaon sraegy of he ranspor secor in Europe wih respec o expeced economic, environmenal and socieal benefis. he second chaper of he sudy examines exising commercial and policy gaps in he case of fuel cell elecric vehicles. A he cenre of he gap analysis are wo quesions: (1) wha condiions are needed for fuel cell elecric vehicles o become a successful echnology and (2) how much of hese will he marke provide auonomously in he business-as-usual case wihou policy inervenion? o answer hose quesions he auhors use a model based approach. I uilises he Marke Model Elecric Mobiliy (MMEM) a simulaion ool developed by he European School of Managemen and echnology in MMEM is a simulaion model designed o forecas and evaluae policies ha aim o promoe he diffusion of alernaive-fuel vehicles. Is core componen is a marke simulaion module ha is based on discree choice modelling o forecas he evoluion of differen auomoive echnologies on he German marke. I covers nine compeing echnologies (gasoline, diesel, hybrid, biofuels, LPG-CNG, baery elecric vehicles, range exender, plug-in hybrid, fuel cell). 4. California Environmenal Proecion Agency Air Resources Board (2009) California exhaus emission sandards and es procedures for 2009 and subsequen model zero-emission vehicles and hybrid elecric vehicles, in he passenger car, ligh-duy ruck, and medium-duy vehicle classes, rerieved on 7 Ocober 2011 from hp:// Objecive: his documen provides he requiremens necessary o complee an applicaion for cerificaion of zero-emission vehicles and hybrid elecric (his documen is incorporaed in California Code of Regulaions). Resuls: his documen describes ZEV emissions sandards and imposes he minimum percenage ZEV requiremen for each manufacurer as i is lised in he able below: A cos benefi analysis of FCEV Page 18

20 Moreover, i defines ZEV fuel as a fuel ha provides racion energy in on-road ZEVs (examples of curren echnology ZEV fuels include elecriciy, hydrogen, and compressed air). Mehodology: he emission sandards and es procedures in his documen are applicable from 2009 and subsequen model-year zero-emission passenger cars, ligh-duy rucks, and medium-duy vehicles, and 2009 and subsequen model-year hybrid elecric passenger cars, ligh-duy rucks, and medium-duy vehicles. 5. Farrell, A.E., D. W. Keih and J. J. Corbe (2003) A sraegy for inroducing hydrogen ino ransporaion, Energy Policy 31(13): Objecive: he paper focuses on one aspec of sraegy for inroducing hydrogen he choice of ransporaion mode. Resuls: he analysis suggess ha cos of inroducing hydrogen can be reduced by selecing a mode ha uses a small number of relaively large vehicles ha are operaed by professional crews along a limied number of poin-o-poin roues or wihin a small geographic area. In addiion, echnological innovaion in vehicle design will ake place mos quickly in modes where individual vehicles are produced o order and each receives significan engineering aenion (no hose manufacured in vas quaniies on assembly lines). he immediae environmenal benefis of inroducing hydrogen fuel will occur in modes ha have relaively less sringen polluion regulaions applied o hem. hese insighs, sugges ha heavy duy freigh modes would be a less cosly way o inroduce hydrogen as a ransporaion fuel and a more effecive way o advance hydrogen-relaed echnologies so ha hey could subsequenly be used more widely in ligh-duy vehicles. Mehodology: Comparaive review analysis which suggess ha he overarching goal of inroducing hydrogen as a ransporaion fuel should be o develop he cluser of echnologies and pracices associaed wih is use a minimal public cos and social disrupion. 6. HyWays (2008) he European hydrogen energy roadmap, available a hp:// Objecive: his sudy analyses he poenial impacs on he EU economy, sociey and environmen of he large-scale inroducion of hydrogen in he shor- and long- erm (up o 2050). Resuls: Firsly, he HyWays "Roadmap" shows ha hydrogen can become a cos-effecive opion for he reducion of CO2 in he long-erm (oal well-o-wheel reducion of CO2 emissions will amoun o Mon per year in 2050 for he 10 counries analysed in HyWays). Secondly, i indicaes ha hydrogen inroducion may lead o a subsanial improvemen in he securiy of energy supply (he A cos benefi analysis of FCEV Page 19

21 oal oil consumpion of road ranspor could be decreased by around 40% by he year 2050 as compared o oday if 80% of he convenional vehicles were replaced by hydrogen vehicles). hirdly, he projec highlighs ha hydrogen, if produced hrough susainable pahways, offers he opporuniy o increase he uilisaion of renewable energy in Europe (hydrogen could also ac as a emporary energy sorage opion and migh hus faciliae he large-scale inroducion of inermien resources such as wind energy). Mehodology: he HyWays projec compiles echnological and socio-economic aspecs relaed o a fuure hydrogen infrasrucure build-up. he peneraion rae is exogenously given only based on he cos-effeciveness of he hydrogen echnology. I shows he consequences of he inroducion of hydrogen as a fuel and indicaes he financial effor necessary o reach he break-even poin. he qualiaive daa from sakeholders is incorporaed wih quaniaive infrasrucure analysis, hus adding significanly o he common quaniaive modelling approach adoped by oher roadmaps. In he HyWays projec he Roadmap is based primarily on counry-specific analyses of en member saes (Finland, France, Germany, Greece, Ialy, he Neherlands, Norway, Poland, Spain and he Unied Kingdom). 7. McKinsey & Company (2010) A porfolio of power-rains for Europe: a fac-based analysis. he role of baery elecric vehicles, plug-in hybrids and fuel cell elecric vehicles, available a hp:// Objecive: his sudy on passenger cars compares alernaive power-rains mos likely o fulfil he EU CO2 reducion goal for Subsequenly, i re-assesses he role of FCEVs in he ligh of recen echnological breakhroughs in fuel cell and elecric sysems ha have increased heir efficiency and cos-compeiiveness significanly. Resuls: Firsly, BEVs, PHEVs and FCEVs have he poenial o significanly reduce CO2 and local emissions, assuming CO2 reducion is performed a he producion sie. Secondly, all elecric vehicles are viable alernaives o ICEs by 2025, wih BEVs suied o smaller cars and shorer rips, FCEVs for medium/larger cars and longer rips. Wih ax incenives, BEVs and FCEVs could be cos-compeiive wih ICEs as early as hirdly, coss for a hydrogen infrasrucure are approximaely 5% of he overall cos of FCEVs ( 1,000-2,000 per car) and comparable o rolling ou a charging infrasrucure for BEVs and PHEVs. Finally, he deploymen of FCEVs will incur a cos o sociey in he early years because i requires close value chain synchronisaion and exernal simulus in order o overcome he firs-mover risk of building hydrogen reail infrasrucure. Mehodology: A facual evaluaion of BEVs, FCEVs, PHEVs and ICEs based on proprieary indusry daa. A combined forecasing and backcasing approach was used o calculae he resuls: from 2010 o 2020, global cos and performance daa were forecased based on proprieary indusry daa; afer 2020, on projeced learning raes. he conclusions are showed o be robus o significan variaions in learning raes for he power-rains and he cos of fossil fuels. A cos benefi analysis of FCEV Page 20

22 8. Mui, S. and A. Baum (2010) he zero emission vehicle program: an analysis of indusry s abiliy o mee he sandards, Naural Resources Defense Council, available a hp://docs.nrdc.org/energy/files/ene_ a.pdf Objecive: Since he 1990s, California s Zero Emission Vehicle (ZEV) program has served as a criical echnology-forcing componen of he sae s vehicle emissions program. he goals of he ZEV program include helping assure he ransformaion needed for very low or zero-emiing vehicles consisen wih he Sae goal of an 80% reducion in GHG emissions by An assessmen was conduced o evaluae auomaker s abiliy o comply wih he ZEV requiremens in California and in oher saes ha have adoped he sandards. Resuls: he resuls of he forecass show ha he U.S. marke for elecric-drive vehicles will grow from approximaely 85,000 vehicles in model year (MY) 2012 o beween 320,000 o 540,000 by MY 2015, wih cumulaive U.S. sales reaching 1 o 1.3 million for elecric-drive vehicles by he range reflecs low and high oil price cases. Slighly over one-quarer of hese vehicles are esimaed o be produced by new enrans. Overall, he forecass show ha he auo indusry will likely overcomply wih he ZEV requiremens hrough he MY 2020 ime period even for a low-growh case scenario ha holds MY 2015 sales nearly fla ou o MY Mehodology: Forecass generaed by he Planning Edge were conduced on auomakers planned producion and sales of elecric-drive vehicles over he nex five model years. Over fory vehicle models from welve major original equipmen manufacurers (OEMs) and en new enrans are considered in he forecass. 9. NREL (2007) Validaion of hydrogen fuel cell vehicle and infrasrucure echnology, Naional Renewable Energy Laboraory, available a hp:// Objecive: he U.S. Deparmen of Energy (DOE) has a major program for research and developmen of hydrogen and fuel cell echnology. A key elemen of ha research and developmen is he fiveyear, $175-million indusry-cos-shared Conrolled Hydrogen Flee and Infrasrucure Demonsraion and Validaion Projec. Resuls: Key DOE arges for he program for 2009 a he end of he iniial validaion projec, and for 2015 o mee objecives believed adequae for consumer accepance include: 5,000 hours is equivalen o abou 161,000 km (100,000 miles) for an average vehicle. Oher imporan parameers ha he validaion projec is racking include refueling ime, dynamomeer and on-road fuel economy, cold-weaher saring, safey incidens, fuel impuriies, and sorage ank capaciy per volume and weigh. Mehodology: hrough a 2003 compeiive soliciaion, DOE seleced four auomobile manufacurer/energy company eams o paricipae in he projec Chevron/Hyundai-Kia, DaimlerChrysler/BP, Ford/BP, and GM/Shell. DOE is cos-share funding hose eams o build small flees of fuel-cell vehicles plus fueling saions o demonsrae heir use in five regions in he Unied Saes. DOE s Naional Renewable Energy Laboraory (NREL) has se up a daa-collecion and analysis A cos benefi analysis of FCEV Page 21

23 sysem wih he eams for he projec. he sysem collecs exensive daa on he demonsraion flees and infrasrucure. NREL researchers use he daa o validae progress oward meeing DOE objecives for hydrogen and fuel cell echnology and help guide fuure research and developmen. NREL validaion projec provides muliple oupus o differen sakeholders. Aggregaed general resuls are repored publicly as composie daa producs. 10. Roads2HyCom (2009) Fuel cells and hydrogen in a susainable energy economy final repor of he ROADS2HYCOM projec, available a hp:// %20Final%20Repor.pdf Objecive: he objecive of Roads2HyCom is o assess and monior curren and fuure Hydrogen and Fuel Cell echnologies for saionary and mobile energy generaion for curren and fuure applicaion requiremens, and he needs of communiies which may adop hese echnologies, in order o suppor he Commission and sakeholders in planning fuure aciviies. Resuls: Firsly, he echnological sae of he ar is advancing significanly, bu he righ suppor and incenives are required o address criical issues and realise recen progress in volume-produced applicaions; as well as developing he engineering, manufacuring and servicing skill-base o suppor heir arrival in he marke. Secondly, here are significan early markes creaed by specialised applicaion niches and by he poliical will of municipal early adopers; hese markes need o be encouraged and replicaed by implemening appropriae policy, in a manner ha is sable long-erm, a European level. hirdly, here is a criical need o link he developmen of susainable and low carbon energy policy, o ha for he supply of Hydrogen as a fuel, so ha he environmenal poenial of hydrogen-fuelled applicaions can be fully realised. he linkage o grid developmen and susainable elecriciy (which boh complemens and compees wih hydrogen as an energy vecor) is especially criical. Mehodology: he projec has sudied (hrough a framework of merics) echnical and socioeconomic issues associaed wih he use of Fuel Cells and Hydrogen in a susainable energy economy, by combining exper sudies in echnology saus, energy supply and socio-economics wih an acive programme of engagemen wih key sakeholders, especially early adopers of he echnologies. 11. Schoos, K., G. Kramer and B. van der Zwaan (2010) echnology learning for fuel cells: an assessmen of pas and poenial cos reducions, Energy Policy vol. 38(6): Objecive: Fuel cells have gained considerable ineres as a means o efficienly conver he energy sored in gases like hydrogen and mehane ino elecriciy. his sudy characerizes cos, safey and reliabiliy levels necessary o achieve widespread use in he energy ransiion. A cos benefi analysis of FCEV Page 22

24 Resuls: he auhors esimae he curren cos of fuel cell a abou 1100 (2005)/kW for an 80 kw fuel cell sysems bu noe ha specific coss vary markedly wih fuel cell sysem power capaciy. For PEMFC echnology hey calculae a global learning curve, characerized by a learning rae of 21% wih an error margin of 4%. Given heir respecive uncerainies, his global learning rae value is in agreemen wih hose he auhors find for differen manufacurers. In conras o some oher new energy echnologies, R&D sill plays a major role in oday s fuel cell improvemen process and hence probably explains a subsanial par of he observed cos reducions. he remaining share of hese cos reducions derives from learning-by-doing proper. Since learning-by-doing usually involves a learning rae of ypically 20%, he residual value for pure learning for fuel cells is found o be relaively low. In an ideal scenario for fuel cell echnology he auhors esimae a boom-line for specific (80kWsysem) manufacuring coss of 95 (2005)/kW. Mehodology: he sudy analyzes pas fuel cell cos reducions for boh individual manufacurers and he global marke. he auhors deermine learning curves, wih fairly high uncerainy ranges, for hree differen ypes of fuel cell echnology AFC, PAFC and PEMFC each manufacured by a differen producer. 12. he Connecicu Cener for Advanced echnology Inc. (2011) Connecicu Hydrogen and Fuel Cell Deploymen ransporaion Sraegy, available a hp:// 10%20Final%20Plan.pdf Objecive: his sraegic Plan provides informaion and direcions for he deploymen of hydrogen and fuel cell echnology o suppor ransporaion in he sae of Connecicu. Resuls: Marke: he U.S. Deparmen of Energy has projeced ha beween 15.1 million and 23.9 million ligh duy fuel cell vehicles will be sold each year by 2050 and beween 144 million and 347 million ligh duy fuel cell vehicles will be in use by 2050 wih a ransiion o a hydrogen economy. hese governmen esimaes could be acceleraed if poliical, economic, energy securiy or environmenal polices promp a rapid advancemen in alernaive fuels. Environmenal performance: he use of fuel cells, and especially fuel cells ha direcly uilize hydrogen, provides high value for improving air qualiy and reducing greenhouse gas (GHG) emissions. I has been calculaed ha he poenial annual emissions reducions are beween 26.2 and 37.3 pounds of NOx; and pounds of SO2; and 10,169 and 15,772 pounds of CO2 per passenger vehicle and ligh duy ruck, respecively. For each ransi bus, he poenial emissions reducions have been calculaed a approximaely 1,020 pounds of NOx; 1.75 pounds of SO2; and 183,000 pounds of CO2 annually. Deploymen: Connecicu is expeced o have four hydrogen refueling saions in operaion by Wih suppor from he federal and sae governmen and privae indusry, approximaely seven or eigh hydrogen refueling saions could be in operaion by 2020, and as he marke expands his could resul in over 1,000 hydrogen refueling saions in operaion by In summary, informaion in his plan suggess ha a ransiion o a hydrogen economy and he deploymen of zero-emission, hydrogen fuel cell buses sae-wide will increase ransporaion efficiency, improve environmenal performance, increase economic developmen, and creae new jobs. he echnical and financial arrangemens needed for such a ransiion from convenional vehicles and bus flees will require iniial invesmen by he sae and federal governmen and privae indusry; however, such invesmen is well jusified and will become a necessiy as concerns abou A cos benefi analysis of FCEV Page 23

25 public healh and climae change increase and he supply of convenional fuels becomes more limied. Mehodology: he Deparmen of ransporaion in collaboraion wih he Connecicu Cener for Advanced echnology, Inc. develops a plan o implemen zero-emissions buses sae-wide. his plan includes he echnological, faciliy and financial arrangemens needed for such a conversion of bus flees as well as idenifying specific locaions for hydrogen refueling saions along sae highways or a locaions ha could poenially be uilized by sae flees or oher public or privae-secor flees. his is a par of a larger collaboraive effor beween he Deparmen of ransporaion and he Connecicu Cener for Advanced echnology, Inc. o idenify sraegies o expand he availabiliy and use of hydrogen fuel and renewable energy sources wihin any such corridor or around such a cenralized flee fueling locaion. he plan is compleed wihin available appropriaed funds designaed for he purpose of sudying or designing clean fuel or alernaive fuel soluions. A cos benefi analysis of FCEV Page 24

26 Appendix 2 Daa and Sources Marke size he oal passenger car flee in Germany is assumed o increase from oday s level of 47 million vehicles o 49.5 million in 2030 (Shell, 2009). he car park is assumed o be sable from 2030 o We assume a arge in 2050 for he FCEV car park a 15% of he oal car park ha is, million unis. his defines he base scenario. We inroduce wo varians: - A slower ramp-up scenario in which he arge is reduced o 12%; - A quicker ramp-up scenario in which he arge is increased o 20%;. Figure 2.1 oal passenger car flee in Germany Our 15% assumpion for he H2 car park can be pu in he following perspecive: Assumpions on he vehicle mix in 2035 in Germany depend on he power-rain scenarios: No Change, Diesel Dominaes, and Alernaive echnologies Emerge. For example, in he sudy of Krisian Bodek & John Heywood (2008) Gasoline ICE represens 52%, 20%, and 15% of he oal mix respecively. We assume ha he average life ime of a car is 10 years and ha i runs approximaely km per year (he Economis, 2012). A cos benefi analysis of FCEV Page 25

27 Manufacuring coss FCEV and ICE purchase prices for he base scenario are based on A porfolio of power-rains for Europe: a fac-based analysis forecas (Mc Kinsey & Company, 2010). he daa is available for 2020, 2030 and 2050 for B/C car segmen. We assume daa value in 2015 be he same as 2014 averaged marke value. he daa for inerim years is obained by linear exrapolaion of available daa for ICE and on a leaning rae for FCEV. Yearly FCEV and ICE mainenance coss are assumed o be a consan percenage of he purchase coss, equal respecively o 8% and 10 %. hese values are consan during all ime period sudied in he model. he lower value for FCEV mainenance cos comes for insance from less roaing mechanism in he power rain. For sensiiviy analysis we assume FCEV purchase price varying according o learning-by-doing effec wih respec o he following formula: P n =P 1 *(N 1 /N n ) µ, where P n is FCEV price in he year n; P 1 is FCEV price in 2015; N n is a cumulaed number of FCEVs consruced up o n year; N 1 is a cumulaed number of FCEVs consruced in 2015; and µ is learning rae. he FCEV purchase price base scenario corresponds o he learning rae calibraed a is -0,1 which gives a FCEV purchase price 13% higher han he ICE purchase price in he calibraion is made o fi he raw daa of marke deploymen wih associaed manufacuring cos over ime. he high learning rae scenario corresponds o a learning rae of -0,113, for which FCEV and ICE have idenical purchase prices in able 2.2 ICE and FCEV manufacuring and mainenance coss scenarios Manufacuring coss ICE purchase price base scenario (k ) 22 21,4 21,1 20,5 ICE mainenance cos 10% 10% 10% 10% FCEV purchase price calibraion se (k ) 60 30,9 25,7 23,7 1. FCEV purchase price base scenario (k ) learning rae = FCEV purchase price wih learning rae =.11 (k ) 3. FCEV purchase price wih learning rae =.12 (k ) 60 37,9 28,9 23, ,7 26,3 20, ,6 24,9 19,1 FCEV mainenance cos 8% 8% 8% 8% A cos benefi analysis of FCEV Page 26

28 Fuel coss for hydrogen Hydrogen consumpion he daa for 2015, 2020, and 2030 is based on AL esimaes. he daa for inerim years is obained by linear exrapolaion of available daa. able 2.3 Hydrogen energy efficiency Hydrogen consumpion kg H2/ 100km 0,95 0,87 0,80 0,7 Hydrogen can be produced via differen echnologies: seam mehane reforming using naural gas (SMR), SMR wih carbon capure and sorage (SMR + CCS), SMR wih biogas, and elecrolysis. he individual cos of producion for he differen echnologies is based on inernal AL daa. - SMR + Naural gas, he hydrogen producion cos due o SMR echnology is composed of wo ypes of cos, which conribue o final hydrogen producion cos: firs, he fixed cos, which is relaed o invesmen in specific producion capaciy (assumed o be consan over ime; no inflaion aken ino accoun); second, he variable cos due o he naural gas price evaluaion (assumed o follow he same rend as he oil price). he iniial daa is available for SMR + CCS As a simplified approach, he hydrogen producion cos due o SMR+CCS echnology is supposed o be 25% more expensive han SMR. - Elecrolysis he hydrogen producion cos due o elecrolysis echnology is calculaed wih respec o learning-by-doing effec. he iniial daa is available for he inroduced learning rae of - 0,042 based on he cumulaive hydrogen producion is calculaed o fi indusry forecas. - SMR + Biogas he hydrogen producion cos due o biogas and SMR echnologies is calculaed wih respec o learning-by-doing effec and akes ino accoun cumulaive hydrogen producion. he iniial daa is available for he learning rae for he cos reducion is calibraed according o he indusry forecas and is equal o -0,010. A cos benefi analysis of FCEV Page 27

29 able 2.4 Hydrogen producion cos for differen producion echnologies H2 producion cos for individual echno SMR +naural gas /kg 2,9 2,9 3,0 3,3 SMR + CCS /kg 3,6 3,6 3,8 4,1 Elecrolysis /kg 8,0 6,0 5,0 4,4 SMR + Biogas /kg 6,0 4,9 4,3 4,0 Logisic cos (delivery o HRS) /kg 4,0 2,1 2,2 2,6 A logisic cos supposes delivery o he HRS by 200 bar ube railers and is o be added o all producion coss. he decrease in cos is mainly due o a higher densiy of H2 sources and HRS nework, reducing disances o cover. he decrease could even be more imporan if we ake ino accoun echnological breakhroughs like he 700 bar logisic. From hese pure producion scenarios, which suppose only one producion echnology, several mixed scenarios can be consruced in which a respecive dominan echnology is progressively inroduced. able 2.5 Conribuion of differen echnologies o he hydrogen producion mix scenarios Seleced mix Base scenario SMR + naural gas 96% 65% 35% 5% SMR + CCS 0% 5% 5% 30% Elecrolysis 2% 15% 35% 40% SMR + Biogas 2% 15% 25% 25% SMR scenario SMR 100% 100% 100% 100% SMR+CCS scenario SMR + naural gas 96% 85% 20% 10% SMR + CCS 0% 5% 50% 60% Elecrolysis 2% 5% 10% 10% SMR + Biogas 2% 5% 20% 20% Elecrolysis scenario SMR + naural gas 96% 78% 30% 5% SMR + CCS 0% 2% 5% 5% Elecrolysis 2% 15% 60% 85% A cos benefi analysis of FCEV Page 28

30 SMR + Biogas 2% 5% 5% 5% Biogas scenario SMR + naural gas 96% 78% 30% 5% SMR + CCS 0% 2% 5% 5% Elecrolysis 2% 5% 5% 5% SMR + Biogas 2% 15% 60% 85% he cos of hydrogen producion for each of hese scenarios is hen calculaed as he weighed average of coss of respecive echnologies conribuing o he seleced mix. Discussion of H2 producion scenarios Differen hydrogen producion echnologies have cerain echnological and economic consrains. his secion briefly presens hem. - SMR +Naural Gas SMR is a well masered and widely used echnology ha implies low cos (2,86 /kg of hydrogen) bu CO2 emissions remain subsanial (8,69 kg of CO2 emied for 1 kg of hydrogen produced; or 9,78 kg of CO2 for 1 kg of hydrogen produced and delivered o he HRS; according o JRC, 2014 p. 135) sill 20% less CO2 from well o wheel han an ICE. his echnology does no represen he bes soluion for he drasic CO2 carbon reducion argeed in ranspor bu could serve as a good base of comparison for oher hydrogen producion echnologies, which are more environmenally friendly. - SMR+CCS SMR+CCS echnology relies on a similar echnical process as SMR. CCS allows capuring 84% of carbon emissions compare o SMR (JRC, 2013) bu implies around 25% increase in producion cos. However, SMR+CCS echnology faces difficulies in social accepance. Moreover, he cos of carbon sorage depends a lo on he localisaion of sorage (saline cave). he saline cave should be nex o he place of hydrogen producion; oherwise he high ransporaion cos of CO2 drives up hydrogen producion cos. he limied availabiliy of saline caves in cerain areas represens herefore a physical consrain for hydrogen producion via SMR+CCS echnology. - Elecrolysis he elecrolysis echnology of hydrogen producion is carbon free if renewable elecriciy is used (he only carbon emissions are relaed o he ransporaion of hydrogen o he HRS). However, i is currenly relaively cosly (8 /kg of hydrogen). he main conribuors o he hydrogen cos produced via elecrolysis are he equipmen cos and he elecriciy price. In order o bring down he equipmen cos, he indusrial acors arge 35-50% capex elecrolyser reducion on op of echnological improvemen for fas frequency change in elecrolyser adapabiliy. his fas frequency change regime will allow consuming cheap elecriciy in addiion o equilibraing elecriciy nework, and herefore will drive down he elecriciy price componen. hese measures allows in he long erm o achieve a argeed 4.5 /kg price for hydrogen produced via elecrolysis echnology in spie of increase in he average elecriciy price. A cos benefi analysis of FCEV Page 29

31 - SMR + Biogas Biogas echnology of hydrogen producion relies on a similar echnical process as SMR. he curren cos is relaively high (6,00 /kg of hydrogen). his cos is mainly composed of equipmen depreciaion cos (abou 1-2 /kg of hydrogen) and of bio-mehane cos (abou 3-4 /kg of hydrogen). he cos of hydrogen produced via biogas can be brough down for example if he cos of biogas is reduced. Nowadays, he bio-mehane price is regulaed and differs from one counry o he oher. New echnologies of SMR are also sudied o reduce he need for purificaion of he biogas used in he process. Fuel coss for ICE Gasoline consumpion relies on IEA (2013) daa projecion up o We assume engine energy efficiency o remain unchanged from 2040 o Gasoline price per lire scenarios are based on IEA (2013) crude oil price projecions. he daa are available up o From hese projecions we infer a yearly long erm growh rae a 1.4 % in real erms (wihou VA and IPP). We inroduce various scenarios corresponding o various annual growh raes: 4% for a high oil price and 0% for a low oil price. he average gasoline marke price per lire in Germany in March 2014 was equal o 1,6 (including all axes). In our calculaion we exclude he German 19% VA ax on gasoline. We esimae anoher sae ax in Germany (equivalen o he French IPP) in 2014 a.65 /l (sources hp://energyransiion.de/2012/10/environmenal-axaion/ and IEA saisics Energy prices and axes, 2014 Q2); his (volume) ax is included in our analysis since i represens an opporuniy cos for imporing oil. I is assumed o be consan over he ime period Gasoline prices in Germany wihou axes are supposed o follow he same variaion as for crude oil world prices. able 2.6 Gasoline consumpion and marke prices (VA excluded IPP included) scenarios Gasoline consumpion per 100 km: annual Gasoline consumpion EIA scenario l/100 km growh rae 7,04 4,97 4,88 4,80 1. Gasoline price reference scenario /l 1,4% 0,65 0,75 0,80 1,06 2. Gasoline price high scenario /l 4,0% 0,72 1,07 1,30 2,85 3. Gasoline price low scenario /l 0,0% 0,64 0,64 0,64 0,64 Hydrogen infrasrucure cos HRSs are supposed o have 10 years lifeime up o 2020 included, and 15 years lifeime aferwards. he oal number of HRSs is derived from he hydrogen consumpion, he mix of HRSs and heir respecive capaciies. he oal HRS park generaes capial and operaing expenses. An iniial HRS base coverage is predefined in he model for years HRS capaciy is differen from nominal HRS capaciy. I akes ino accoun he fac ha HRSs are delivering hydrogen only 17 and no 24 hours per day. 7 Air Liquide, 2014, Press Ki, Hydrogen, a clean Energy, available a hp:// A cos benefi analysis of FCEV Page 30

32 Assumpions for HRS producion and mainenance coss are based on AL daa. hey correspond o indusry esimaes and a learning rae of Varians are inroduced for his learning rae: -.1 and -.02 for a high respecively low learning rae. HRS scenarios able 2.7 HRS mix, cos and capaciy assumpions Mix for new HRS: HRS 80 kg/d % 10% 10% 0% 0% HRS 200 kg/d % 80% 80% 50% 50% HRS 400 kg/d % 10% 10% 30% 30% HRS 1000 kg/d % 0% 0% 20% 20% 1. HRS cos base case: HRS 80 kg/d cos base case k HRS 200 kg/d cos base case k HRS 400 kg/d cos base case k HRS 1000 kg/d cos base case k HRS cos wihin high learning rae scenario: HRS 80 kg/d cos wihin high learning rae k HRS 200 kg/d cos wihin high learning rae k HRS 400 kg/d cos wihin high learning rae k HRS 1000 kg/d cos wihin high learning rae k HRS cos wihin low learning rae scenario: HRS 80 kg/d cos wihin low learning rae k HRS 200 kg/d cos wihin low learning rae k HRS 400 kg/d cos wihin low learning rae k HRS 1000 kg/d cos wihin low learning rae k HRS OPEX/CAPEX raio % 10% 8% 8% 8% Reained HRS capaciy: HRS 80 kg/d kg/d 60 HRS 200 kg/d kg/d 170 HRS 400 kg/d kg/d 340 HRS 1000 kg/d kg/d 700 CO2 emissions he CO2 gasoline emissions are 87.8 gco2/mj (JRC, 2013). he energy conen of one lire of gasoline is 32 MJ. CO2 hydrogen emissions daa is available in gco2 per MJ of final fuel for all ypes of hydrogen producion echnologies: SMR is 72,4 gco2/mj (JRC, 2013), SMR+CSS is 11,9 gco2/mj (JRC, 2013), biogas is 17,3 gco2/mj (based on municipal wase biogas JRC, 2011). We suppose hydrogen producion via elecrolysis o be carbon free. he energy conen of one kilogramme of hydrogen is 120 MJ. he CO2 emissions relaed o he (pipeline or road) ranspor o marke are esimaed a 9,1 gco2/mj (1,09 kg CO2 / kg H2) and are o be added o he emissions resuling from hydrogen producion (JRC, 2014, p.129). A cos benefi analysis of FCEV Page 31

33 he oal CO2 emissions of hydrogen producion scenarios are calculaed as he weighed average of CO2 emissions of respecive producion echnology conribuing o he mix. able 2.8 CO2 emissions relaed o differen hydrogen producion echnologies (excluding delivery o HRS) CO2 hydrogen emissions by echnology g CO2 / MJ kg CO2 / kg H2 SMR ,69 SMR + CCS ,43 Elecrolysis 0 0 Biogas 17,3 2,06 A cos benefi analysis of FCEV Page 32

34 References for he daa sources IEA - Inernaional Energy Agency, 2013, Inernaional Energy Oulook repor JRC - Join Research Cenre-EUCAR-CONCAWE collaboraion, 2011, echnical Repor Well-o-wheels Analysis of Fuure Auomoive Fuels and Powerrains in he European Conex Version 3c (Appendix 1), available a hp://ie.jrc.ec.europa.eu/abou-jec/sies/ie.jrc.ec.europa.eu.aboujec/files/documens/ww3_ww_repor_eurforma.pdf JRC - Join Research Cenre-EUCAR-CONCAWE collaboraion, 2013, echnical Repor Well-o-ank Repor Version 4.0 a JEC Well-o-Wheels Analysis, Well-o-Wheels analysis of fuure auomoive fuels and powerrains in he European conex, available a hp://ie.jrc.ec.europa.eu/aboujec/sies/abou-jec/files/documens/repor_2013/w_repor_v4_july_2013_final.pdf JRC - Join Research Cenre-EUCAR-CONCAWE collaboraion, 2014, echnical repor Well-o-ank Repor Version 4.a JEC Well-o-Wheels Analysis (Repor EUR EN ) available a hp://ie.jrc.ec.europa.eu/abou-jec/sies/ie.jrc.ec.europa.eu.aboujec/files/documens/repor_2014/w_repor_v4a.pdf Krisian Bodek & John Heywood, 2008, Europe s Evolving Passenger Vehicle Flee: Fuel Use and GHG Emissions Scenarios hrough 2035, Laboraory for Energy and Environmen, MI, available a hp://web.mi.edu/sloan-auolab/research/beforeh2/files/europe's%20evolving%20passenger%20vehicle%20flee.pdf Mc Kinsey & Company, 2010, A porfolio of power-rains for Europe: a fac-based analysis. he role of baery elecric vehicles, plug-in hybrids and fuel cell elecric vehicles, available a hp:// Shell, 2009, Shell Passenger Car Scenarios up o 2030, Facs, rends and Opions for Susainable Auo- Mobiliy, absrac is available a hp://s06.saic-shell.com/conen/dam/shell-new/local/counry/deu/downloads/pdf/publicaions- 2009shellmobiliyscenariossummaryen.pdf, he full version is available (in German) a he Economis, 2012, he fuure of driving: seeing he back of he car, available a hp:// A cos benefi analysis of FCEV Page 33

35 Appendix 3 Mehodology Sandard framework for a cos benefi analysis he cos-benefi analysis (CBA) is grounded in sandard economic heory and is used in mos evaluaion of public policies relaed o climae change (for insance Sern, 2006). he objecive of a CBA is o deermine wheher a projec (or a policy) increases social welfare and should be implemened. Social welfare is he sum of individual uiliies. Benefis and coss are compued in moneary unis; he moneary evaluaion requires ha all goods (or bads) produced by he projec should be properly priced. In our case, a price for CO2 emissions is needed o assess wheher hydrogen vehicle should be launched. Our aim is o deermine a hreshold price a which he projec is launched if and only if he price of CO2 is above his hreshold. his hreshold price could also be inerpreed as he marginal abaemen cos of his echnological opion; i should also allow he regulaor o rank his opion among oher abaemen opions (e.g. CCS, renewables, rerofiing). In order o assess he value of a projec, a baseline or "business as usual" scenario, describing wha happens if he projec is no implemened, is required. In our case we consider ha ICE vehicles will progressively be replaced by FCEV vehicles. For a long-lasing projec, wo crucial aspecs should be sressed. Firs, benefis and coss a differen daes should be aggregaed. o do so a discoun facor δ is used, which gives he presen value of 1 obained nex year, δ=1/(1+r), where r is he discoun rae. Le us denoe B and coss C he oal benefis and coss a dae, he ne presen value (NPV) is he sum of he discouned differences beween benefis and coss, which is indeed equal o he difference of he sum of discouned benefis and coss: NPV= δ (B C ) = δ B δ C he projec should be launched if he NPV is posiive. Second, o evaluae a projec ha reduces emissions a differen ime periods a CO2 price per period is needed. he aim of he analysis is o obain a CO2 price ha represens he abaemen cos associaed o a deploymen rajecory of he FCEV. One difficuly is o obain a single indicaor for a dynamic invesmen schedule in a long-lasing infrasrucure. o do so, we use he mehodology of levelized coss. Social discoun rae here are vivid debaes over he proper social rae of discouning (see Dasgupa, 2008 for a clear presenaion of he debae). In a well-funcioning economy he relevan social discoun rae should be equal o he risk-free long-erm marke ineres rae. his leads some auhors o choose a A cos benefi analysis of FCEV Page 34

36 discoun rae of 4% which corresponds o he average rae of reurn o US governmen bonds over he pas 200 years (e.g. Newell and Pizer 2003). Normaive cos of carbon In he following, we refer o he analysis developed by he Quine Commiee (Quine, 2009), as well as o a recen revision of his repor (Quine, 2013). hese repors sudy he social cos of carbon in he perspecive of a cos efficiency analysis, ha is, hey compue he carbon price rajecory ha minimizes he cos o aain a given abaemen objecive. he objecive refers o he consrains as defined for France in he Loi Grenelle de l'environnemen. Based on heoreical work and validaion by large scale models (Poles, Gemini E3, Imaclim R), differen esimaes of such a value have been released, hen compared wih inernaional benchmarks, as he able below shows. In all cases, he carbon price increases hrough ime (wih a rae beween 2% and 5%). he relaionship beween he growh rae of he carbon price and he discoun rae depends on he policy objecive (or he shape of he environmenal damage funcion). he complex opimal dynamics of he carbon price is due o he persisence of GES emissions in he amosphere. 8 8 For insance, if he objecive is o sabilize GHG concenraion he growh rae of he carbon price should be equal o he discoun rae plus he removal rae before he objecive concenraion is reached (laer emissions A cos benefi analysis of FCEV Page 35

37 Our base case follows hese proposals, namely a 4% discoun rae and a CO2 price growing a 4%. Normaive Cos of Carbon according o he Quine Commiee Levelized coss o compue abaemen cos from irreversible invesmen i is common o use levelized coss. his mehodology has been inensively used in he elecriciy indusry o compare he producion cos of various echnologies wih differen cos srucure (fixed/variable cos), life span, and consrucion delay. he levelized cos of a echnology is he sum of an annualized invesmen cos and a variable cos. Le's consider he cos of a given echnology o produce elecriciy. he invesmen cos I in a uni of producion capaciy (e.g. /MW ) wih a life span of N years is ransformed ino an equivalen annual cos F by he formula : So ha I = F + δf + δ n-1 F = F (1 - δ n )/(1- δ) F = I (1-δ)/(1 - δ n ) ; conribue more o bind he concenraion consrain because of he removal rae, and should hen be more expensive han earlier emissions, once discouned). he carbon price proposed by he Quine Commiee follows an increasing pah, reaching he pivo value of 100 euros in Afer his dae, an array of values has been proposed, mainly according o he applicaion of he Hoelling rule (ha is a CO2 price growing a he same pace as he discoun rae), and differen hypoheses on he CO2 absorpion rae and uncerainy. A cos benefi analysis of FCEV Page 36

38 and adding he yearly fixed and variable (including fuel) operaing and mainenance coss f: LC=F+f For example, assume ha he invesmen cos of a Combined Cycle Gas urbine (CCG) is I=500 /kw, he consrucion delay is 2 years. he invesmen cos compued a he dae where producion sars is I=500/δ 2, he life span is 30 years, he annualized invesmen cos is 500(1-δ)/[δ 2 (1-δ 30 )], for r=8% i gives F=48 /kw/yr. he fixed O&M is 12 /kw, he variable one is 35 /MWh (of which 30 for fuel), so ha for a baseload producion for a urbine operaional 8700 hours per year, he levelized cos for producing 1 MWh is LC= (48+12)/8.7+35=42 /MWh he levelized cos depends on several hypoheses on he echnology characerisics: If he uilizaion facor decreases, hen he levelized cos increases. In our example, if he urbine runs only 3000 hours per year, he cos becomes LC= (48+12)/3+35=56 /MWh. he impac of he discoun rae is illusraed in he Figure below, in which he producion cos of nuclear and CCG are depiced. he cos of each echnology is increasing wih respec o he discoun rae because he opporuniy cos of capial increases wih he ineres rae. he influence of he discoun rae is larger for echnology wih a larger share of invesmen coss (e.g. Nuclear). 9 Producion cos of Nuclear (EPR) and Gaz (CCG) as a funcion of he discoun rae Cos MWh EPR Nuclear CCG Gaz Discoun rae r 9 For Nuclear he figures are: he invesmen cos is 2300 /kw, he consrucion delay is 5 years, he life span is 50 years, he fixed O&M is 50 /kw and he variable cos (mosly combusible) is 5 /MWh. he figures correspond o DGEMP (2003) excep for he invesmen cos ha is larger. A cos benefi analysis of FCEV Page 37

39 Levelized coss are relevan o compare echnologies if several assumpions are saisfied. ypically one considers ha he underlying demand o be saisfied is consan, or smoohly growing over ime, ha he coss of he echnologies o be compared are sable over ime and ha he wo echnologies are able o produce similar producion schedules. Using levelized cos whenever hese assumpions are no saisfied requires some cauion. For insance, in he elecriciy indusry, here is a cos associaed o renewables inermiency ha is no capured by levelized coss. When relaxing he hypohesis of a discree producion, he previous analysis can be generalized. Consider a producion flow q for from 0 o +, wih q +1 q : - firs, q 0 plans are buil for a cos Iq 0 and produce for a yearly cos fq 0, and N years laer he plans should be rebuil and so on: C( q = 0 ) = N1 = 0 = LCq 0 N1 N 2N1 [ Iq0 + δ fq0 ] + [ δ Iq0 + δ fq0 ] δ ( F + + = 0 = 0 f ) q 0 δ = LCq N + δ 0 1 1δ N1 = 0 δ ( F + = N f ) q hen, a each dae he same sraegy should be implemened for a marginal increase in producion of q +1 -q. he oal cos o produce he flow is simply he levelized cos imes he discouned sum of producion quaniies : C LC LC = q δ ( q + = + 1 q0 ) LC δ q = 0 1 δ 1 δ Simplified approaches o ge an abaemen cos he abaemen cos of he subsiuion of an exising polluing echnology (index 2) by a low-carbon echnology (index 1) is evaluaed as follows: - compue he levelized coss associaed wih he wo echnologies : LC 1 and LC 2, - deermine he quaniy of emissions avoided each year A - he abaemen cos AC is as follows: AC=(LC 1 -LC 2 )/A. We use wo approaches o evaluae he AC for he deploymen of he FCEV: - he saic approach does no consider he evoluion of coss and compue he abaemen cos associaed o a vehicle each year given he coss of ha year; A cos benefi analysis of FCEV Page 38

40 - a dynamic approach ha considers he whole deploymen as an invesmen spread over 35 years, from 2015 o 2050, in a flee of vehicles ha sars funcioning and abaing emissions from 2050 and implies a yearly cos o operae and renew he flee. he dynamic approach consiss in compuing he abaemen cos of he whole deploymen. he relevance of he dynamic approach could be undersood by considering he choice of he opimal launching dae of he projec of deploymen. I firs requires describing formally he deploymen: - here is a flee of n vehicles. - he deploymen akes years wih replacing k τ ICE vehicles by k τ FCEV vehicles in period τ of he deploymen. - he invesmen cos in he infrasrucure is denoed s τ. - he cos of use of an ICE vehicle depends a dae is c ICE, ; he cos of use of a FCEV vehicle depends on τ, he sage of he deploymen, i is c FCEV,τ. Afer years he cos of use of a FCEV vehicle is assumed o be sabilized a c FCEV. - Concerning CO2 emissions, he CO2 price is p, and a each sage of he deploymen he abaemen is he difference beween he emissions from an ICE vehicle e ICE, and he emissions from a FCEV vehicle e FCEV,τ, imes he number of FCEV. A he end of he deploymen he emissions of FCEV are sabilized a e FCEV. herefore, abaemen in year in sage τ of he deploymen is a,τ =k τ (e ICE, -e FCEV,τ ). Le us denoe I 0 he cos of he deploymen if sared in dae 0: 1 [ s + ( = 0 k cfcev, cice, I0 = δ )]. his is precisely he oal cos of invesmen for he whole deploymen up o dae as compued in able 2. Under some simplifying assumpions o be deailed shorly we shall show ha he dynamic abaemen cos a dae associaed wih his deploymen can be wrien as [(1-δ)I 0 / δ + n(c FECV - c ICE, )]/A in which A=n(e ICE, - e FCEV ) denoes he avoided emissions a full deploymen. his expression can be inerpreed as a generalizaion of he saic formula in which a once and for all invesmen wih a capex of I 0 / δ a dae, an invesmen wih an infinie life ime, plus he difference in yearly operaing coss will balance a recurring amoun A of avoided emissions. Assuming ha he CO2 price p evolves as he social discoun rae, he dynamic abaemen cos evaluaed a dae 0 is δ [(1-δ)I 0 / δ + n(c FECV - c ICE, )]/A = (1-δ)I 0 /A + nδ (c FECV - c ICE, )/A which corresponds o he lower limi in able 2. A cos benefi analysis of FCEV Page 39

41 A cos benefi analysis of FCEV Page 40 o obain his resul we proceed as follows. Consider he choice of he launching dae. If he deploymen sars oday he overall cos is: + = = = = FCEV FCEV FCEV ICE FCEV ICE c e p n s c k c k n e k e k n p C ) ( ] ) [( ] ) [( 1 0,, 1 0,, 0 δ δ δ I is he sum of he cos of CO2 emissions during he deploymen, he cos of vehicles and he infrasrucure during he deploymen, and he cos of he FCEV flee including emissions once he deploymen is finished. Rearranging erms: = = + = = = 1 0, 1 0,, 1 0,, 0 )] ( [ ) ( ) ( ICE FCEV FCEV FCEV ICE ICE p a c c k s c e p n c p e n C δ δ δ δ he second line is precisely I 0, i.e. he cos of he deploymen if sared in dae 0, minus he benefi from inerim abaemen. If he invesmen sars a year laer, a similar decomposiion gives: = = + + = = = ICE FCEV FCEV FCEV ICE ICE a p c c k s c e p n c e np C 1 1, 1 1,, 1 1 0,, 1 )] ( [ ) ( ) ( δ δ δ δ And we can inroduce he cos of deploymen in ha case: = + = + = + = + = + = 1 0, 1, 0 1 0, 1, 1 1,, ) ( )] ( [ )] ( [ ICE ICE ICE FCEV ICE FCEV c c k I c c k s c c k s I δ δ δ δ δ Compared o I 0, he deploymen is launched one year laer (so he discoun facor), and he ICE vehicles are replaced one year earlier (so he index +1 ). he cos o wai one year can be compued as = = + + = ICE FCEV FCEV ICE a p a p c c n e e p n I I C C 1 1, 1 0,,, )] ( ) ( [ ] [ δ δ δ Waiing one year o launch he projec creaes i) a financial gain by posponing invesmen, ii) a cos due o higher emissions in year minus he relaive cos of a full FCEV flee and iii) a cos (or benefi) due o he difference beween inerim abaemens. For simpliciy hree assumpions shall be made. Firs, we assume ha he cos of ICE vehicles evolve slowly, c ICE, c ICE,+1, so ha I 1 =δi 0. Second, he emissions inensiy of ICE is nearly consan e ICE, e ICE,+1.hird, as already inroduced, he CO 2 price evolves as he social discoun rae i.e. p = p 0 /δ.

42 Wih hese assumpions he difference beween he abaemen benefis are null because abaemen has he same value wheher i akes place a or +1 and same abaemen is done wih he wo opions bu wih a one year delay: 1 δ p = 0 a, = p 0 1 k ( e = 0 ICE, δ p = 1 a, 1 e ICE, + 1 = ) = 0 1 δ p = 0 a, δ p = 0 + 1a+ 1, = p 0 1 ( a = 0, a + 1, ) Consequenly he projec should be launched oday if and only if: p 1 e [(1 δ ) I / δ + nc nc ] > 0 FCEV ICE, n( eice, FCEV ) = LC FCEV LC A ICE his gives he expeced resul for he dynamic abaemen cos. Summarizing he resuls we have wo simplified approaches o assess he cos of abaemen of FCEV relaive o ICE: a saic yearly indicaor, which we expec o be decrease rapidly due o decreasing coss (in manufacuring FCEV, infrasrucure and H2 producion), a dynamic indicaor in which FCEV subsiue ICE a he horizon In he main par of he sudy we have provided esimaes for hese indicaors for he base case, and discussed heir sensiiviy o various hypoheses. Implici cos of carbon: wind and phoovolaic echnologies in Germany I is ineresing o compare he FCEV abaemen cos no only o he normaive cos of carbon as defined in secion c above bu also he abaemen coss of oher carbon free echnologies. he paper "he Cos of Abaing CO2 Emissions by Renewable Energy Incenives in Germany", by C. Marcanonini and A. D. Ellerman (2013) analyzes he German experience in promoing Renewable Energy (RE) over he pas decade o idenify he ex-pos cos of reducing CO2 emissions hrough he promoion of wind and solar. he auhors calculaed he annual CO2 abaemen cos for he years as he raio of he ne cos over he CO2 emission reducions resuling from he use of RE. he quaniy of CO2 abaed as a resul of injecions of wind and solar energy for he years was esimaed by Weig e al. (2012) using a deerminisic uni commimen model of he German elecriciy sysem. he ne cos is given by he sum of he coss and cos savings due o he injecion of renewable energy ino he elecric power sysem. Oher benefis -wheher hey are expressed as energy securiy, innovaion, jobs, non-co2 emissions, ec.- are no included, nor are coss associaed wih ransmission and disribuion. he coss are: he remuneraion o RE generaors (which depends on he RE incenives), he addiional cycling coss of convenional hermal generaion and he addiional balancing cos (Pérez-Arriaga and Balle, 2012). Addiional cycling coss and addiional balancing cos are due o he inermiency of wind and solar energy. he cos savings are: he fuel cos saving, he carbon cos saving and he capaciy saving. Prioriy access o he grid and near- zero variable coss of RE generaion means ha when available renewable generaion nearly always displaces convenional fossil fuel generaion, ypically eiher coal or naural gas. he fuel cos saving is he A cos benefi analysis of FCEV Page 41

43 saving in he cos of he fossil fuel required o generae he elecriciy hus displaced, and he carbon cos saving is he saving in he cos o acquire he carbon allowances in he EU ES for he CO2 emissions displaced. Increasing renewable generaion means also increasing generaion capaciy in he sysem. Even if, because of inermiency, 1MW of nominal wind(solar) capaciy i is no equivalen o 1MW of convenional generaion, however wind(solar) capaciy can subsiue an amoun of convenional capaciy as much as he wind(solar) capaciy credi, wihou exposing he sysem o addiional risks. As he paper develops an ex-pos assessmen, he impac of he subsidies (i.e. Feed In ariffs) is considered. he relevan law in Germany provides producers of RE a 20-year guaraneed fixed FI. Since he level of he FI diminishes in value over ime boh in nominal and real erms, aking he amoun paid for he FI in a given year would make wind energy appear more expensive in he firs years of aciviies, when he paymens are relaively generous, and cheaper in he following years. Consequenly, he srucure of paymens over ime requires some equalizaion o avoid over- and undersaing cos in he early and laer years of he faciliies life. Mehodology: he auhors assume a 25-year lifeime for all solar and wind power plans and esimae remuneraion for each vinage based on observed wind or solar generaion in each year hrough 2010 assuming equal annual capaciy facors for each in-service vinage and based on an assumed capaciy facor for he remaining years of aciviy of ha vinage; ha sream of paymens is discouned a he fixed rae of 7% and summed o ge an iniial Ne Presen Value (NPV) of all he remuneraions; he equalized remuneraion for all urbines in a given year consiss of he sum of he equalized paymens o each vinage of capaciy in service ha year. he following able summarizes he resuls of he model. Abaemen coss for Wind and solar, from Marcanonini and Ellerman (2013, able8) A cos benefi analysis of FCEV Page 42

44 hree main poins can be drawn. 1. here is a large dispariy among differen coss and cos savings. 2. here is a large difference beween he abaemen coss of wind and solar energy. 3. CO2 abaemen cos can change considerably from year o year, paricularly for wind where variaions by a facor of wo can be observed. hese changes in ne cos mosly reflec changes in annual fuel cos saving and carbon cos saving, which are correlaed wih variaions of fossil fuel prices and he carbon price. Oher values for abaemen coss and implici cos of carbon can be calculaed. As an example, he graph below displays some figures by ranking several abaemen echnologies (SBC Energy Insiue, 2013). A cos benefi analysis of FCEV Page 43

45 References Dasgupa, P. (2008). Discouning climae change. Journal of risk and uncerainy, 37(2-3), DGEMP (2003). Coûs de référence de la producion élecrique, Minisère de l économie, des finances e de l indusrie. Ellerman, D. and Marcanonini, C. (2013). he Cos of Abaing CO2 Emissions by Renewable Energy Incenives in Germany. MI CEEPR Working Paper. Newell, R. G., & Pizer, W. A. (2003). Discouning he disan fuure: how much do uncerain raes increase valuaions? Journal of Environmenal Economics and Managemen, 46(1), Pérez-Arriaga, I. J. and Balle, C. (2012). Impacs of inermien renewables on elecriciy generaion sysem operaion. Economics of Energy and Environmenal Policy, 1(2), Quine, E. (2009), Rappor Quine, La Valeur uélaire du Carbone, La Documenaion Française. Quine, E. (2013), Rappor Quine 2, L'évaluaion socioéconomique en période de ransiion, Commissaria General au Plan e à la sraégie. SBC Energy Insiue (2013) Facbook on CCS, available online: hp:// 20Energy%20Insiue_CCS_Facbook.ashx Sern, N. (Ed.). (2007). he economics of climae change: he Sern review. Cambridge Universiy press. Weig, H., Delarue, E. and Ellerman, A. D. (2012). CO2 Abaemen from RES Injecions in he German Elecriciy Secor: Does a CO2 Price Help? EUI working paper, RSCAS 2012/18. A cos benefi analysis of FCEV Page 44