First degree impacts of hydrogen as a transport fuel: A case study in New Zealand Andrew Baglino May 5, 2004

Context Relevant History Responded to 1970s OPEC oil crises with Think Big encouraging alternative fuels. Signed and ratified Kyoto Protocol. Planned policies include carbon charges of NZ$25/tCO 2 and forestry sinks New Zealand Quick Facts Population of 4 million on two large islands in the South Pacific Largely deregulated energy sector; immense coal stocks; limited amount of natural gas, 65% of oil imported

Motivation Will hydrogen fuel cell vehicles help New Zealand achieve goals of: Carbon emission reductions Sustainable resource use Minimizing dependence on foreign oil What policies will promote these goals?

Methodology System dynamics modeling of the NZ’s energy system Equilibrating, price-clearing markets for electricity and hydrogen Myopic (No foresight) 16 time steps per year to 2050 Use Model to: Determine key variables Undertake Monte Carlo sensitivity analysis Test policy interventions and their probable outcomes

Key Assumptions Fuel Cell Stack $2000/kw today $50/kw 2020 Hydrogen Vehicles Unreliable now Equivalent performance in figures now Equivalent price in 2020 Exogenous Static Variables Population grows at median gov’t prediction Electricity demand linked to 2.5%/yr GDP growth

Model Block Diagram PO P Electricity Generation GDP Vehicle Market Fossil Fuel Extraction/Imports Hydrogen Production Carbon Emissions

Stochastic Inputs World Oil price Imported LNG price Biomass price Hydrogen technology improvement Cost of carbon sequestration

Scenario Definition NOH 2 : H 2 FCVs are never economic. BAU: No H 2 -specific government regulation Subsidize H 2 : H 2 excise taxes reduced by 50% 1¢/kM to.5¢/kM Double CTax: Carbon taxes doubled in $/tCO 2 to 25$/tCO 2 Tax Petrol:Petrol taxes increase by 50% in ¢/kM to 3¢/kM

Sample Output: BAU CO 2 Distribution Median 25 th percentile 5 th percentile

Carbon Emissions in 2050

Carbon Emissions: Median Reductions No scenarios predict emissions returning to 2002 levels by 2050 ScenarioEmissions Abatement Tax Petrol19% Double CTax19% Subsidies13% BAU5%

Fossil Energy in 2050

Fossil Energy: Median Reductions ScenarioFossil Energy Tax Petrol5% Double CTax7% Subsidies2.5% BAU2% Fossil fuel use will continue to increase

Petrol Use in 2050

Petrol Use: Median Reductions ScenarioPetrol Consumption Tax Petrol37% Double CTax22% Subsidies30% BAU12% BAU shows reasonable reductions; Petrol Taxes and H2 Subsidies both can bring consumption down to 2002 levels.

Overall Implications Business as Usual: Modest emission (5%) and fossil fuel consumption (2%) reductions Petrol demand reduced by 12% Of the three policy goals, minimizing dependence on foreign oil is the most achievable. Policy is an effective driver.

Summary International interest in R&D in hydrogen technologies New Zealand as a unique and motivated nation Even with strong policy instruments, a hydrogen economy will not help New Zealand meet Kyoto Stepping stone to a renewable future?

Acknowledgements Jonathan Leaver and the School of the Built Environment at Unitec Institute of Technology in Auckland, New Zealand Paul Kruger, Jim Sweeney, the Goldman Program at the Center for Environmental Science and Policy at Stanford University