Special Report: Oil industry ramps up for hydrogen vehicles

Dec. 8, 2008
In the coming decades, demand for energy in the world will increase significantly, while access to “easy oil” will become more difficult, and the threats of global warming will continue to grow.

In the coming decades, demand for energy in the world will increase significantly, while access to “easy oil” will become more difficult, and the threats of global warming will continue to grow. Given this reality and the mobility challenge linked to this, energy companies are looking at solutions that go beyond fossil fuels.

While petroleum will remain a primary energy source well into this century, alternatives will also play an important role.

The solution to our energy crisis is not a silver bullet but a mosaic. One of the pieces will be biofuels, which are already being blended into gasoline and diesel in many countries. As the largest distributor of biofuels in the world, Royal Dutch Shell is actively involved in this industry, seeing the production and distribution of first-generation biofuels as a bridge to the development and commercialization of the next generation. Shell is also investing heavily in the research and development of “next-generation” biofuels that are derived from nonfood crops such as wood chips and wheat straw.

Hydrogen is another alternative source of energy that Shell is developing. Automakers are under intense pressure to come up with vehicles that run on clean, abundant, and convenient fuels. Fuel cell vehicles (FCVs) powered by hydrogen are getting a lot of attention. FCVs give off just water vapor and heat so local emissions produced by the vehicles are zero.

Although hydrogen could occupy an important share of the energy mix, it will need to be used alongside other sources of fuels: again, the mosaic. This will include conventional fuels such as diesel and gasoline, biofuels of all kinds, and the increasing availability of electric vehicles.

Shell’s hydrogen strategy

Based on the current development plans of automobile manufacturers, Shell estimates that the commercialization of hydrogen FCVs could start as early as 2020. However, a great deal will depend on market demand and overcoming a number of technological, financial, and political obstacles.

Shell has developed a clear strategy to provide infrastructure that addresses these challenges and since 1999 has been working closely with the automotive industry, local and national governments, academics, and NGOs to create the infrastructure necessary to bring hydrogen into a retail setting as a fuel.

To be able to market hydrogen within the foreseeable future, Shell is operating along two channels. First, broadening our own expertise in order to provide hydrogen infrastructure and second, building public awareness around subjects such as usability and safety with hydrogen fuel demonstration projects around the world.

Shell’s retail demonstration projects have been developed in all three major hydrogen markets—Asia, North America, and Europe (Tokyo, Reykjavik, Shanghai, and the US cities of Washington, DC, White Plains, NY, and Los Angeles). They include building new hydrogen fuel stations or adapting existing locations for that purpose. A number of supply options have been tested, including liquid hydrogen, compressed gaseous hydrogen by trailer, and on site production through electrolysis and steam methane reforming.

As part of this plan, Shell recently opened the first combined hydrogen and gasoline refueling station in California. In addition to forming part of the “California Hydrogen Highway,” this station is also part of a program with the US Department of Energy and General Motors through which FCVs are being introduced to the Los Angeles market and other cities around the country. This public-private initiative allows the auto and energy industry to test vehicles and fueling infrastructure under “real-world” conditions.

As part of this partnership, GM conducted in-depth market research to arrive at a vehicle demand model per zip code, using real-market and consumer behavior in its analysis. Shell, in turn, modeled the supporting hydrogen infrastructure that deals with the associated changing hydrogen demand over time by minimizing the total cost of supply under different scenarios for the design of refueling station networks.

The cost of hydrogen

Industry needs to focus on the deployment of an infrastructure at the lowest cost of supply for the safe delivery of hydrogen to the consumer. While the government and automakers want to deploy hydrogen vehicles as soon as technical and economic obstacles are removed, both stakeholders must not push for a costly and underutilized roll out of hydrogen stations that drives up hydrogen supply costs.

At a Shell retail gas-hydrogen station in West Los Angeles, hydrogen fuel is produced on site by an electrolyzer on top of the station canopy. Photo from Photographic Services, Shell International Ltd.
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The cost of hydrogen needs to be reduced to become competitive with conventional fuels, even when using currently available hydrogen and existing infrastructure. A kilogram of hydrogen in an FCV is about twice as efficient as a gallon of gasoline in an internal combustion engine, and it is estimated that the market price for each kilogram would be about twice the cost of a gallon of gas.

The retail end of the supply chain seems to have the biggest cost reduction potential, and there are options available to help reduce those costs. These include integration into existing retail sites, avoiding overcapacity through coordinated roll out, and government incentives that account for an increase in supply costs when new assets must be built.

With important lessons being learned from demonstration projects, industry is now looking to take the next step, moving from low-use stand-alone stations to higher-use, long-term, mini-retail networks. These consist of at least four gasoline-hydrogen stations in one urban center. Shell has been working closely with automakers from the US, Europe, and Asia to build retail facilities in cities that are showing the greatest interest in cleaner transportation fuels. Such networks will play a crucial role in bridging the gap between demonstration and commercialization.

The jury on refueling pressure of hydrogen is still out. Some of the automotive manufacturers want to see the adoption of 700 bar (10,000 psi) refueling dispensers rather than 350 bar (5,000 psi). However, the Honda Clarity has shown that it’s possible to extend the driving range without increasing the pressure from the 350 bar level.

The groundwork for hydrogen FCVs is clearly being laid, but how do we speed up the process, and who should take the initiative: automakers or energy companies? This in the past has been seen as the chicken and egg dilemma. The automakers are reluctant to manufacture direct-hydrogen FCVs if energy companies will not create the infrastructure to support hydrogen refueling. On the other hand, energy companies will not invest in infrastructure if car companies do not manufacture and sell enough FCVs.

During 2008, Shell opened its first combined hydrogen and gasoline station in California. Photo from Photographic Services, Shell International Ltd.
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Partnerships are therefore key. Shell actively sought collaboration with automotive manufacturers (Daimler, GM, Honda, and Toyota) at an early stage. This way, we can share information on numbers, dates, and locations where FCVs will be introduced to trigger the right level of infrastructure investment.

Clean to green hydrogen

Hydrogen’s contribution to reducing CO2 emissions will depend on how hydrogen is produced in the future. Currently 95% of hydrogen is manufactured using natural gas. While CO2 emissions from this method are less than those associated with gasoline production, industry needs to look at how to transition fossil-based hydrogen into clean and then green hydrogen.

One way to reduce CO2 emissions in the manufacturing process today is through carbon capture and storage (CCS). Shell is committed to investigating CCS as part of a suite of actions to address climate change and manage emissions from hydrocarbons. Shell is a partner in several CCS joint ventures aimed at establishing best practices and securing public acceptance. This includes the CO2 SINK project in Germany and the Australian Otway project, which will inject 100,000 tonnes of CO2 into a depleted natural gas reservoir 2 km beneath the surface. Together with Qatar Petroleum, Shell signed a $70 million research collaboration with Imperial College London to provide the foundation for new CO2 technologies that can be applied in Qatar and beyond.

While CCS remains one solution for the production of large-scale, clean hydrogen, there are also other things that can be done to reduce CO2 emissions in the manufacturing process. Since last spring, Shell has been operating a forecourt reformer from H2Gen at our Westhollow research and technology facility in Houston, where feedstock options such as biomaterials are being evaluated.

Working towards a green hydrogen future, Shell is forging partnerships with cutting edge businesses like Virent Energy Systems Inc. Last year, Shell entered into a 5-year joint development agreement to further commercialize its BioForming technology, which enables hydrogen to be produced economically from renewable glycerol and sugar-based feedstocks.

Also at the Shell retail gas-hydrogen station in West Los Angeles, hydrogen fuel is produced on site by an electrolyzer above the station canopy. Electrolysis separates the hydrogen molecules from the oxygen molecules found in plain water. The oxygen is released into the air while the hydrogen is stored in a gaseous state. A portion of this hydrogen uses “green electricity” from the Los Angeles City Department of Water and Power, which comes from solar, wind, and other alternative energy sources.

Hydrogen at pivotal juncture

Hydrogen is the most abundant element in the universe and is not harmful to the environment. It is nontoxic, noncarcinogenic, and cannot contaminate groundwater or air. With social, economic, and technological challenges being addressed, the hydrogen industry now stands at a pivotal juncture: investment is rising, costs are falling, and technology is rapidly advancing. Increasing numbers of FCVs have been tested successfully, and more hydrogen refueling stations are being put in place.

But while there is broad consensus that the widespread use of hydrogen FCVs by 2020 is achievable, no outcome can be guaranteed. It will take considerable cooperation between automotive manufacturers, the energy industry, and governmental bodies to ensure that hydrogen becomes an established part of the energy mosaic. Only by aligning goals and sharing experience can we maximize impact and accelerate technology development that will lead to transforming ideas into the ultimate goal: commercial reality.

The author

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In January 2006, Duncan Macleod became vice-president in charge of Shell Hydrogen, a Shell business created in 1999 to develop hydrogen as a future fuel for mobility and power. Macleod has a Shell career spanning 3 decades working in Venezuela, the Caribbean, Nigeria, Japan, and the Netherlands. He has held key positions in supply-trading, mergers and acquisitions upstream, strategy, and government relations. Macleod was also instrumental in setting up Shell’s biofuels technology ventures with Iogen in Canada and Choren in Germany. Since October 2008, he has taken additional responsibility for Shell’s GTL business. Macleod is a member of the advisory council for the EU Hydrogen & Fuel Cell Technology Platform, the California Hydrogen Highway Network advisory panel, the California Fuel Cell Partnership steering team, and the board of Icelandic New Energy. His personal vision is that for Shell to be successful for another 100 years, substantial new energy businesses such as hydrogen must be developed now, steadily building on Shell’s many capabilities while collaborating with governments, industry partners, and customers. Macleod is Scottish-born, and he studied economics and geography at Birmingham University.