1. California Energy Commission Crude Oil and Transportation Fuel Price Cases For the 2015 IEPR Joint Lead Commissioner Workshop on Transportation Energy Demand Forecasts June 24, 2015 Ysbrand van der Werf Supply Analysis Office Energy Assessments Division 1

2. California Energy Commission Overview Fuel price cases in Preliminary Transportation Forecast –Petroleum (Refiner Acquisition Cost) –Gasoline/ E85 –Diesel / Jet Fuel –Transportation NG / Electricity –Hydrogen Proposed updated fuel prices for Revised Transportation Forecast 2

3. California Energy Commission 3 Source: California Energy Commission and U.S. Energy Information Administration 3 Preliminary cases based on 2013 values resulted in a narrow band of prices

4. California Energy Commission 4 Source: California Energy Commission and U.S. Energy Information Administration 4 E85 prices grow at about the same rate as gasoline. E85 significantly cheaper than gasoline

5. California Energy Commission 5 Source: California Energy Commission and U.S. Energy Information Administration 5 Diesel and Jet Fuel prices expected to increase through the forecast period.

6. California Energy Commission 6 Source: California Energy Commission and U.S. Energy Information Administration 6 Electricity prices increase slightly over forecast. Natural gas prices remain flat, driven by ample supplies.

7. California Energy Commission 7 Source: California Energy Commission and U.S. Energy Information Administration 7 Hydrogen prices very low compared to more recent data, discussed later in this presentation

8. California Energy Commission Proposed Changes to Fuel Price Cases for Revised Forecast 1.Updated petroleum price forecasts based on new forecasts from EIA 2.Revised hydrogen price forecasts based on newly available data and analysis tools 8

9. California Energy Commission 9 Revised Petroleum Prices Preliminary prices were adapted and updated versions of the 2014 crude oil price cases from the Energy Information Administration (EIA) Staff developed new cases based on recently published oil price projections from EIA Annual Energy Outlook (AEO) 2015 Produces more variation between cases, in part because different 2015 prices are used 2015 data will be updated for revised forecast; subsequent years adjusted to fit the 2015 price 9

10. California Energy Commission 10 Source: California Energy Commission and U.S. Energy Information Administration 10 New cases (solid lines) based on EIA forecast include wider range of prices

11. California Energy Commission 11 Proposed New Hydrogen Price Cases Based on $15/kg price of 2015 actual transactions and other retail station data High quality data collected by Energy Commission from state-funded stations Scenarios developed using the Hydrogen Financial Analysis Scenario Tool (H2FAST) available from National Renewable Energy Laboratory (NREL). Note that this does not produce forecasts, but is used for analysis http://www.nrel.gov/hydrogen/h2fast/ 11

12. California Energy Commission 12 Noteworthy Changes in Hydrogen Prices 1. Cases include all components of producing and retailing hydrogen 2. Cost of methane is almost negligible 3. Technology of producing and compressing hydrogen well established - unlikely to change 4. Technology of hydrogen retail station is new and costs could decline 5. Utilization rate of the station is key variable; higher the throughput, lower the cost of retailing fuel 6. More data will be available for final forecast 12

13. California Energy Commission 13 Hydrogen Station Cost Breakdown Representative Station, 2015 Offsite SMR Natural Gas $ 0.60 Hydrogen Production $ 1.20 Compression $ 4.00 Transport $ 2.00 Retail at 50% Station Capacity $ 6.00 Sales Tax $ 1.20 Retail Price $ 15.00/kg 13 Cost of Station is Single Biggest Cost Component

14. California Energy Commission 14 Hydrogen Common Assumptions Cost of building retail stations is uniform and is lowest available with current technologies All stations use offsite Steam Methane Reformation (SMR) and transport hydrogen to the retail station All stations use biomethane as feedstock to produce renewable hydrogen - implicitly incorporated in scenarios Station lifetime of ten years and no replacement costs of any kind are necessary—this may be overoptimistic 14

15. California Energy Commission 15 Source: California Energy Commission and U.S. Energy Information Administration 15 Hydrogen prices now reflect real-world data and show significant increase

16. California Energy Commission 16 Hydrogen Low-Price Case 1.Cost of building retail stations is constant and funded with grants for two-thirds of the construction costs 2.Retail stations pay their own operating costs after receiving operation and maintenance (O&M) grants for two years 3.Retail station usage increases to 80 percent of capacity over five years 4. It may be possible to improve on this scenario using NREL’s H2FAST 16

17. California Energy Commission 17 Hydrogen Mid-Price Case 1.Cost of building retail stations remains the same and some construction costs continue to be funded with grants 2.Retail stations pay their own operating costs after receiving operation and maintenance (O&M) grants for two years 3.Retail station usage increases to 70 percent of capacity over eight years 17

18. California Energy Commission 18 Hydrogen High-Price Case High Station Counts Drive High Retail Hydrogen Prices For a given number of vehicles Stations are used at low percentage of capacity (sales per station will be low) If number of stations grows faster than number of vehicles, cost of retail hydrogen can continue to increase Higher the number of stations, fewer stations will sell enough fuel to pay their own costs Fewer stations that can pay their own costs, greater the need for O&M grants 18

19. California Energy Commission 19 Mid Energy Price Case Summary Single largest relative change are the Hydrogen prices

20. California Energy Commission 20 High Energy Price Case Summary Source: California Energy Commission and U.S. EIA Wider variation across all fuels reflected in high case.

21. California Energy Commission 21 Low Energy Price Case Summary Source: California Energy Commission and U.S. EIA Wider variation across all fuels reflected in low case.

22. California Energy Commission 22 Questions? Comments? Ysbrand van der Werf Supply Analysis Office Energy Assessments Division Ysbrand.vanderWerf@energy.ca.gov / 916-651-4531 22

23. California Energy Commission 23 H2FAST Inputs That Differ from Defaults 23 Input Common to all scenarios Input Common to all scenarios Number of stations1Installation time0 Station typeDelivered gasCost of delivered hydrogen ($/kg)$7.50 Capital Cost1,900,000Road tax0 Installation Cost200,000Sales tax8% Maintenance Cost80,000Project operational life12 years Operating Incentives200,000Debt/equity financing0.33 Operating incentives decay rate50%Debt typeOne-time loan Operating incentives sunset2 yearsPeriod of loan12 years Price of hydrogen at project onset$15

24. California Energy Commission 24 H2FAST Inputs That Differ by Scenario 24 Inputhigh-pricemid-pricelow-price Total Capacity (kg/day)100 180 Capital Cost$1,900,000 $2,500,000 Capital Incentives$1,400,000 $1,800,000 Price escalation rate4.75%1.9%-1.0% Demand ramp-up10 years8 years5 years Long-term nominal utilization60%70%80%