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Hydrogen demand, production, and cost by region to 2050.

This report presents an analysis of potential hydrogen (H{sub 2}) demand, production, and cost by region to 2050. The analysis was conducted to (1) address the Energy Information Administration's (EIA's) request for regional H{sub 2} cost estimates that will be input to its energy modeling system and (2) identify key regional issues associated with the use of H{sub 2} that need further study. Hydrogen costs may vary substantially by region. Many feedstocks may be used to produce H{sub 2}, and the use of these feedstocks is likely to vary by region. For the same feedstock, regional variation exists in capital and energy costs. Furthermore, delivery costs are likely to vary by region: some regions are more rural than others, and so delivery costs will be higher. However, to date, efforts to comprehensively and consistently estimate future H{sub 2} costs have not yet assessed regional variation in these costs. To develop the regional cost estimates and identify regional issues requiring further study, we developed a H{sub 2} demand scenario (called 'Go Your Own Way' [GYOW]) that reflects fuel cell vehicle (FCV) market success to 2050 and allocated H{sub 2} demand by region and within regions by metropolitan versus non-metropolitan areas. Because we lacked regional resource supply curves to develop our H{sub 2} production estimates, we instead developed regional H{sub 2} production estimates by feedstock by (1) evaluating region-specific resource availability for centralized production of H{sub 2} and (2) estimating the amount of FCV travel in the nonmetropolitan areas of each region that might need to be served by distributed production of H{sub 2}. Using a comprehensive H{sub 2} cost analysis developed by SFA Pacific, Inc., as a starting point, we then developed cost estimates for each H{sub 2} production and delivery method by region and over time (SFA Pacific, Inc. 2002). We assumed technological improvements over time to 2050 and regional variation in energy and capital costs. Although we estimate substantial reductions in H{sub 2} costs over time, our cost estimates are generally higher than the cost goals of the U.S. Department of Energy's (DOE's) hydrogen program. The result of our analysis, in particular, demonstrates that there may be substantial variation in H{sub 2} costs between regions: as much as $2.04/gallon gasoline equivalent (GGE) by the time FCVs make up one-half of all light-vehicle sales in the GYOW scenario (2035-2040) and $1.85/GGE by 2050 (excluding Alaska). Given the assumptions we have made, our analysis also shows that there could be as much as a $$4.82/GGE difference in H{sub 2} cost between metropolitan and non-metropolitan areas by 2050 (national average). Our national average cost estimate by 2050 is $$3.68/GGE, but the average H{sub 2} cost in metropolitan areas in that year is $2.55/GGE and that in non-metropolitan areas is $$7.37/GGE. For these estimates, we assume that the use of natural gas to produce H{sub 2} is phased out. This phase-out reflects the desire of DOE's Office of Hydrogen, Fuel Cells and Infrastructure Technologies (OHFCIT) to eliminate reliance on natural gas for H{sub 2} production. We conducted a sensitivity run in which we allowed natural gas to continue to be used through 2050 for distributed production of H{sub 2} to see what effect changing that assumption had on costs. In effect, natural gas is used for 66% of all distributed production of H{sub 2} in this run. The national average cost is reduced to $$3.10/GGE, and the cost in non-metropolitan areas is reduced from $7.37/GGE to $4.90, thereby reducing the difference between metropolitan and non-metropolitan areas to $$2.35/GGE. Although the cost difference is reduced, it is still substantial. Regional differences are similarly reduced, but they also remain substantial. We also conducted a sensitivity run in which we cut in half our estimate of the cost of distributed production of H{sub 2} from electrolysis (our highest-cost production method). In this run, our national average cost estimate is reduced even further, to $$2.89/GGE, and the cost in nonmetropolitan areas is reduced to $4.01/GGE. Thus, the difference between metropolitan and nonmetropolitan areas is reduced to $1.46/GGE, but it remains substantial. Given that these sensitivity runs demonstrate continued substantial differences between regions and between metropolitan and non-metropolitan areas, we believe that we have demonstrated the potential for significant differences in H{sub 2} cost between and within regions. We think the potential for these differences needs to be addressed in future H{sub 2} cost analyses. Finally, there are many issues involved in adequately estimating what resources might be used to produce H{sub 2}, how H{sub 2} demand will grow over time, and what H{sub 2} costs will be regionally and nationally.