Analyzing Natural Gas Based Hydrogen Infrastructure - Optimizing Transitions from Distributed to Centralized H2 Production

Proceedings of the National Hydrogen Association Annual Hydrogen Conference (NHA 2005), Washington, DC, March 29 - April 1, 2005 Hydrogen offers a wide range of future environmental and social benefits, when used as a fuel for applications such as light duty vehicles and stationary power. These potential benefits include significant or complete reductions in point-of-use criteria emissions, lower life-cycle CO2 emissions, higher end-use and life-cycle efficiency, and a shift (with respect to transportation fuels) to a range of widely available feedstocks. Despite the potential benefits of a hydrogen economy, there are many challenges as well. One of the most critical is the tremendous cost and investment associated with developing and transitioning to an extensive transportation network based upon hydrogen. The widely-discussed "chicken and egg" problem focuses on the difficulty in building vehicles and hydrogen supply to meet a small and growing demand. While many current studies of the 'Hydrogen Economy' present a steady-state portrait of a mature energy system including H2 production, distribution and utilization, the transitional issues that are embodied in the chicken and egg problem are not addressed. Modeling the transition to a hydrogen economy is more complex than these static analyses because of dynamic nature of the problem. The transition costs will be determined by the size of the production, distribution and other infrastructure components and the economies of scale associated with these components and with the major shift in the transportation sector. Some analysts believe that in the near-term, infrastructure will be built up by means of distributed production of hydrogen at refueling stations by fuel processors or electrolyzers, which will lessen the initial infrastructure investment. These systems take advantage of existing energy distribution infrastructure (natural gas and electricity) reducing the capital expenditure requirements for hydrogen infrastructure. Only after significant maturation and market penetration of vehicles will the hydrogen demand be large enough to take advantage of the economies of scale associated with a dedicated infrastructure with large centralized hydrogen energy production plants and hydrogen pipeline distribution. In general, there is a trade-off between production costs and distribution costs that impacts a decision when to move from distributed to centralized hydrogen production. One key question that this analysis will explore is when and under what circumstances this transition could occur.