March 1, 2005

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BERLIN - The total investment cost for a European hydrogen fueling infrastructure through 2025 could be anywhere between Euro 3.5 billion ($4.6 billion) and Euro 9-12 billion ($11.7-15.6 billion), depending on different assumptions and strategies.

This, in a nutshell, is the basic message of the 80-page Linde-commissioned study, “The Economics of a European Hydrogen Automotive Infrastructure,” by the E4tech consultant group headed by David Hart. The consultancy has offices in London and Lausanne.

While the costs under the different scenarios are “considerable, they are quite low in comparison with other infrastructure transitions and investments,” the authors note in their executive summary. In Sweden, the rollout of broadband to rural areas cost Euro 4.4 billion ($5.7 billion), and in Britain, third-generation mobile phone licenses were auctioned for about Euro 35 billion ($45.5 billion), they wrote.

Linde said in its release the Eurofighter jet costs Euro 24 billion ($31 billion), the high-speed Cologne-Frankfurt rail line cost Euro 5.5 billion ($7.2 billion), and China is spending $36 billion (Euro 27 billion) on preparations for the 2008 Olympics.

Linde says the overall goal of this hydrogen infrastructure is not to replace the existing gasoline structure but to add to it, similar to the way in which diesel fuel was launched in Europe in the 1970s.

Different Scenarios, Launch Paths Examined

The strategy looks at two basic implementation frameworks: Scenario 1 looks at the hydrogen infrastructure in Europe’s 50 most densely populated urban areas. Scenario 2 focuses on Europe’s automotive manufacturing centers.

Scenario 1 assumes a hydrogen car population of 40 million vehicles by 2030 requiring 7 million tons of hydrogen fuel, to be distributed by 16,000 urban and 3,000 freeway hydrogen fueling stations.

Scenario 2, which runs until 2025 and under which vehicles are “allocated to strategically located cities,” assumes some 20 million vehicles have been introduced, equaling a hydrogen demand of 3.5 million tons and 9,000 fueling stations, according to the executive summary.

The study also examines three possible launch paths: A centralized concept is based on 100% centralized production from large methane steam reformers, with hydrogen distributed by tanker trucks. Under the distributed steam reforming concept 50% of total production is generated by large central reformers, with the rest produced locally by small steam reformers. In the third path, 50% of total output is also produced by large central steam reformers, with the rest produced on site via electrolysis.

Finally, the authors factored in two additional aspects based on expectations of the automotive industry - fast and slow market growth - to assess the number of hydrogen-powered cars.

For the period until 2020, the least-cost path is centralized production with total costs of Euro 3.5 billion ($4.6 billion), assuming fast growth for all of Europe.

Positive Cash Flows in 10 Years?

For the time frame until 2030, total investment costs will vary widely, depending on the production and distribution and market growth, ranging from about Euro 8 billion ($10.4 billion) to Euro 33 billion ($43 billion), according to Linde’s summary of the study. Concept 2 is seen as the most economical, requiring Euro 8 billion ($10.4 billion) under slow growth conditions and Euro 18 billion ($23.4 billion) under conditions of rapid growth.

Under both scenarios, investment takes place in stages over a period of time, the authors say, and “revenues are generated early on as hydrogen vehicles are introduced.” This results in cash flows “that can become positive in less than 10 years for some scenarios. “Some major corporations may view this timescale as well within their horizons for a major infrastructure project,” the executive summary says. “However, risk will need to be managed carefully as hydrogen vehicle uptake is a key uncertainty.”

Contact/Source: The study is available at the conference website, www.hydrogenday.com.