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National Petroleum CouncilFuture Transportation Fuels Study

HydrogenBase Case Commentary Guidelines and

Template

FINAL

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Purpose of the Templates

• The following Guidelines and Template are a result of a request from several subgroups for more guidance and structure regarding base case commentary for the NPC Future Transportation Fuels Study– These templates will be used for the November 10 & 11 Supply & Infrastructure report-outs

on the Base Case– The templates will be the basis for the narrative assessment of the Base Case in the study

report

• These guidelines are a supplement to pages 10 and 11 of the “EIA AEO 2010 Reference Case Transportation Sector Overview” that was issued by the Supply & Infrastructure Task Group• The “In Bounds for Comments on the Base Case” (p.11) section has been further

grouped into the following categories :

1. Supply and Infrastructure

2. Technology

3. Demand

4. GHG

5. Legislation

6. Other materially significant areas not addressed.• Upon completion, this document should be a top line overview, about 7-10 PowerPoint slides.

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Future Transportation Fuels Study – Instructions

Instructions:

1. Assess the Base Case (EIA AEO 2010 Reference Case + 2050 Extrapolation + 2005 GHG baseline)

A. Consider the assumptions, data and conclusions for each category

B. Subgroups should use the data supplied in the Base Case, even if assumptions are not clear

2. Explain the subgroup’s view as compared to the base case

3. Provide references and sources for the subgroup’s view relative to the base case

4. Subgroups should comment on all six categories listed in the template

5. Summarize the subgroup’s top findings upon completing the exercise

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Supply & Infrastructure

Subgroup’s comments (example items for the Supply & Infrastructure category: Supply Chains, Infrastructure availability and development, Refining and manufacturing capacity and production costs, Supply and feedstock availability, volumes, and timing, Opportunities for fuel switching or substitution, State and regional observations)

There is no hydrogen pricing in AEO 2010The AEO 2010 does not contain the fuel pricing information (and rationale) for Hydrogen in Table 3. In the absence of this information it is difficult to establish the relative market competitiveness of Hydrogen and its future outlook.

It is unclear what feedstock mix was assumed for hydrogen production and its resulting affordability, GHG emissions and energy security implicationsThe AEO 2010 does not list feedstock assumptions for hydrogen production. This information is essential for establishing hydrogen affordability, green house gas emissions and energy security implications. There are diverse feedstock options (e.g., natural gas, coal, electricity, biomass, nuclear) for hydrogen production. The resulting GHG emissions, cost of fuel and resource requirements are highly sensitive to feedstock selection.

The AEO 2010 does not contain any discussion or data on the hydrogen infrastructure, including refueling stationsThe commerciality and market acceptance of the use of hydrogen as a transportation fuel is materially dependent on a consumers ability to conveniently and reliably refuel. Several infrastructure options are available with varying economics, technical readiness and scalability. Fueling infrastructure availability should be considered while forecasting the potential use of hydrogen as a transportation fuel.

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Technology

Subgroup’s comments (example items for the Technology category: Technology pathways and timing, Vehicle technology availability, Timelines):

AEO’s forecasted hydrogen fuel cell vehicle costs are inconsistent (higher) with multiple studies and OEM comments that hydrogen fuel cell vehicles could be commercially introduced by approximately 2015AEO incremental cost (Table 70) for FCVs over gasoline vehicles in 2035 is $19,400 and $32,600 for subcompact and large utility vehicles respectively. Multiple OEMs have publicly stated their intent to commercially introduce FCVs in 2015 (Germany – Letter of Understanding). Additionally, these incremental cost assumptions are inconsistent with reports published by well-recognized academia (Heywood –MIT ($5300 for LDV, $7400 for HDV) and Ogden-U.C. Davis).

FCV driving range and fuel economy assumptions imply an impractical and unnecessary volume of onboard hydrogen storageAEO assumes that in 2035, a subcompact and large utility vehicle will require 9.26 kg and 21.08 kg of onboard hydrogen storage respectively. These assumptions are inconsistent with current data from the DOE Hydrogen Demonstration Program and FCV data published on http://www.fueleconomy.gov. FCVs today have approximately 4 to 6 kg of onboard hydrogen storage and can achieve 300+ mile range.

FCV fuel economy should improve rather than remain relatively constant from 2020 to 2035 as it currently does in the AEOToday’s fuel cell demonstration vehicles already surpass the 2035 fuel economy projections as reported by the DOE and multiple OEMs. Similar to conventional vehicles, it would be reasonable to expect FCV fuel economy will increase over time with continuous technology improvements. Considering that FCVs are not a mature technology, fuel economy should improve at a greater rate in the near term (similar to the fuel economy increase from 54 mpg to 92mpg for battery vehicles) than that of more mature technologies such as conventional ICEs.

The AEO does not include energy conversion factors for hydrogenIt is unclear how hydrogen FCV fuel economy is converted from miles per kg to mpg equivalent because conversion factors are not included in Table 128.

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Demand

Subgroup’s comments (example items for the Demand category: Fleet turnover, demand volumes and timing):

Numerous credible studies exist which include hydrogen as a material component of the future transportation fuels portfolio, however, this is not consistent the AEODue to the numerous inconsistencies and exclusions evident in the technical assumptions for hydrogen and FCVs, the AEO modeling does not lead to material hydrogen FCV deployment. Additionally, the Consumer Choice Module of NEMS may not have the flexibility to accurately forecast market penetration that is reflective of real-world consumer desires. For example, sports cars have to be “forced” into the current NEMS model.

The AEO only considers light duty FCVsHydrogen ICEs have been successfully demonstrated by OEMs but are not included in the AEO. Additionally, the current report does not consider advancements in vehicle platforms other than light duty vehicles (e.g. transit buses, long haul vehicles).

The long-term low volume FCV sales projections (Table 57) is commercially unsustainableThe AEO forecasts an annual sales range of 6100 to 8600 FCVs between 2020 and 2035. From the commercial perspective of an OEM and fuel provider, such low sales volumes are unsustainable. In reality, FCV and hydrogen sales will either increase to volumes which are material to a business or be abandoned.

Forecasted FCV volumes are below the assumed regulatory requirementsEIA notes that transportation sector projections assume that California Low Emissions Vehicle (CA LEV) Program requirements are in place. The CA LEV Program requires that a minimum percentage of a manufacturer’s vehicle sales are ZEVs or equivalent ZEV earned credits. For instance, for model years 2018 and beyond, manufacturers must meet a minimum ZEV requirement of 16 percent of total sales. ZEV credits can be earned through sales of Partial ZEV (PZEV) and Advanced Technology PZEV (AT-PZEV) vehicles. CA LEV Program requirements further specify a minimum floor for production and sales of true ZEVs. EIA notes that pure ZEV requirements under the CA LEV Program will be met with sales of hydrogen fuel cell vehicles. AEO 2010 projections for hydrogen fuel cell vehicles appear low in light of CA LEV Program ZEV requirements and EIA’s assumption that these ZEV requirements will be met with hydrogen FCVs. ZEV requirements alone should result in 2 to 5 times more hydrogen fuel cell vehicle sales than are presented in the AEO 2010 projection.

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GHG

Subgroup’s comments (example items for the GHG category: Carbon/GHG, Other tail-pipe criteria pollutants):

AEO 2010 greenhouse gas projections result in the administration’s 2050 GHG targets not being metThe baseline greenhouse gas (GHG) emission projections do not show that the Obama Administration’s greenhouse gas reduction targets will be met. (Targets for an overall 80% reduction in GHG emissions in 2050 relative to a 2005 baseline, and a 50% reduction by 2050 for the transportation sector in particular). Similarly, the AEO 2010 projection does not show a technology mix for transportation vehicles that would allow GHG reduction targets to be met. As major reductions in transportation demand over this period are highly unlikely, meeting transportation sector GHG reduction targets will require a vehicle mix with greatly improved fuel efficiency for conventional vehicles and increased deployment of alternative fuel and alternative technology vehicles. Hydrogen FCVs could help meet the 2050 GHG targets. The resulting GHG emissions and cost of such a revised transportation fleet are highly sensitive to the technology and fuel mix chosen .

It is unclear whether hydrogen production emissions are accounted for in the industrial or transportation sectorEIA notes that increases in ethanol fuel consumption have mitigated transportation sector GHG emissions; EIA also notes that emissions from ethanol production plants are counted in the industrial sector. For the case of hydrogen transportation fuels, greenhouse gas emissions do not occur from the vehicle during the use phase; emissions instead result from upstream hydrogen production. It is unclear whether the emissions related to hydrogen fuel production are accounted for in the transportation sector or if they are counted in the industrial sector as in the case for ethanol production.

It is unclear what feedstock mix was assumed for hydrogen production and its resulting GHG emissionsTo the extent that emissions from hydrogen production are part of transportation sector GHG projections (and not industrial sector emissions), it is unclear what feedstock mix was assumed for hydrogen production. The AEO 2010 does not list the feedstock used to produce hydrogen. Without this information it is infeasible to calculate relative GHG emissions. There is a diverse choice of available feedstock options for hydrogen production (e.g., natural gas, coal, electricity, biomass, nuclear). The resulting GHG emissions and cost of hydrogen fuel are highly sensitive to the feedstock selection.

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Legislation

Subgroup’s comments (example item for the Legislation category: Existing legislation and regulation):

AEO 2010 assumes static legislation; however, in reality regulatory activity is expected to continue and materially impact actual deployment of technology and future energy fuel streamsIt is highly unlikely that there will not be increased environmental regulations going forward and issues such as the low carbon fuel standards need to be considered. There are non-financial aspects (market transformation) of the Energy Policy Act that have not been implemented that can affect hydrogen and fuel cell deployment. There have been no new regulations since October 2009 that affect the incorporation of hydrogen and fuel cell vehicles, however other federal activities (e.g. RFS2, ARRA funding for batteries, etc.) have impacted industry’s focus in this area.

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Other Materially Significant Areas Not Addressed

The hydrogen and fuel cell data used to develop the AEO is inconsistent with current published DOE and independent assessments reportsThe AEO data set does not accurately reflect the technology advancements reported by the organization such as the DOE and the National Academy Study.

AEO forecasts that no unconventional vehicles or fuels will achieve material market penetration without regulatory interventionAEO does not discuss why Hydrogen/FCV do not achieve market penetration over the next 25 years. We understand that modeling is used to determine how consumer will react to different fuel and vehicle choices and features. Considering hydrogen and fuel cell vehicles (and other technologies - electric vehicles) possess many of the characteristics preferred by consumers, it is not evident why even with technological advancements over 25 years none of these technologies materially penetrate the market. Considering these technologies represent a significant shift from historical conventional technologies (ICEs and petroleum), it is not evident if and how the modeling used to develop the AEO could accurately accommodate materially new technologies.

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Base Case Assessment Summary of Top Findings

Subgroup’s comments:

Supply and Infrastructure•There is no hydrogen pricing or infrastructure discussion in AEO 2010•It is unclear what feedstock mix was assumed for hydrogen production and its resulting affordability, GHG emissions and energy security implications

Technology•FCV driving range and fuel economy assumptions imply an impractical and unnecessary volume of onboard hydrogen storage•FCV fuel economy should improve rather than remain relatively constant from 2020 to 2035 as it currently does in the AEO•The AEO does not include energy conversion factors for hydrogen

Demand•Numerous credible studies exist which include hydrogen as a material component of the future transportation fuels portfolio, however, this is not consistent the AEO•The long-term low volume FCV sales projections (Table 57) is commercially unsustainable•Forecasted FCV volumes are below the assumed regulatory requirements

GHG•AEO 2010 greenhouse gas projections result in the administration’s 2050 GHG targets not being met

Legislation•AEO 2010 assumes static legislation; however, in reality regulatory activity is expected to continue and materially impact actual deployment of technology and future energy fuel streams (static forecast are easy, but inaccurate)

Other Materially Significant Areas Not Addressed•The hydrogen and fuel cell data used to develop the AEO is inconsistent with current published DOE and independent assessments reports•AEO forecasts that no unconventional vehicles or fuels will achieve material market penetration without regulatory intervention