William Clausen
HSA 10: Professor Evans
5/3/12
Economic Analysis and Future Prospects of Hydrogen Fuel Cells
Introduction:
Recently, much discussion in the US has focused on changing the energy landscape. In
particular, people and the government are interested in cleaning up the transportation industry.
The transportation industry relies on oil as its primary fuel source.1 Oil is dirty and nonrenewable, and it’s use as the primary fuel source in automobiles subjects the United States to
the political whims of foreign (and sometimes unfriendly) countries. Alternative fuel sources
provide immediate advantages over oil in the areas of cleanliness, renewability, energy
independence, and as oil prices rise, these alternatives are becoming economically competitive.
A promising alternative to oil is the hydrogen fuel cell. This paper will explore the current
economic viability of fuel cells in automobiles, specifically passenger vehicles, and discuss
future prospects for this technology.
I: The Current Situation
94% of the energy used by the transportation sector in the US comes from petroleum, and
transportation applications consume more than two-thirds of all petroleum .1 In the past, this was
not a problem. Oil was cheap and provided high energy-density, ideal for transportation where
both range and power are important. However, this situation has changed over time. In the last
10 years, the price of a barrel of crude oil has increased close to 500%.2 Even if not at this pace,
this upward trend in price can reasonably be expected to continue as oil becomes more difficult
to obtain and if no changes are made to the current way oil is consumed. Not only is oil less
attractive as a fuel source on a purely monetary basis, but it also has become less attractive as
more is understood about oil’s environmental impact. The politics of global warming aside, it is
known that carbon dioxide (CO2) is a greenhouse gas, burning oil puts CO2 into the atmosphere,
and greenhouse gases in the atmosphere cause the earth to retain heat energy. Regardless of
opinions on whether global warming is a problem, it is a good idea to clean up and care for the
environment, and reducing greenhouse gas emissions is one way to do that. Furthermore, using
oil as a primary fuel source for the transportation industry makes the US dependent on foreign
countries for our energy needs. 49% of all oil consumed in the US in 2010 – a significant portion
– was imported, and this demonstrates our dependence on foreign oil to keep our vehicles
moving.3 If relations with those countries from which the US imports oil deteriorate, as seen with
trading partners in the Middle East, the consequences can have a negative impact on the US
economy by increasing the price of doing business, sometimes dramatically, and of purchasing
goods. To eliminate the possibility of negative impacts from dependence on foreign countries for
the United States’ energy supply, it is important to shift away from oil as the primary
transportation fuel source. One of the most promising prospects for replacing oil as the primary
fuel source is the hydrogen fuel cell.
Hydrogen fuel cells could provide the benefits of high-energy-density gasoline without
gasoline’s associated environmental, economic, and political costs. As one might expect based
on the name, hydrogen fuel cells utilize hydrogen as a fuel source. Hydrogen, like gasoline used
to be, has the potential to be manufactured cheaply. As of today, the most common way to
produce hydrogen is by reforming natural gas, though other methods are being researched to
achieve long-term production cost goals4. The process of reforming natural gas involve reacting
high temperature steam with the natural gas, which strips hydrogen from the natural gas and
produces very few CO2 emissions.19 One of the benefits of reforming natural gas to obtain
hydrogen is that natural gas is abundant in the US.20 This abundance of gas means the US can
produce all necessary hydrogen domestically and dramatically reduce US dependence on foreign
oil. In addition to reducing US energy dependence, compressed hydrogen as a fuel has
comparable energy-density to oil, which is beneficial in transportation applications due to the
ability to increase driving range and power. A hydrogen fuel tank that provides an average
vehicle with a driving range of 300 miles would occupy the same volume as a 26 gallon gas
tank.5 It is worth noting that a gas-powered vehicle could achieve a range of about 500 miles
with this size tank, but other electric vehicles require significantly larger tanks. By comparison,
battery-powered electric vehicles would require the same volume as a 100 gallon gas tank (far
larger than any passenger-vehicle gas tank today) for a driving range of 300 miles.5 This means
cars powered by fuel cells would not need to be any larger than traditional vehicles, which keeps
production costs low and increases performance. Furthermore, hydrogen fuel cells produce no
greenhouse gases. The only byproducts of running hydrogen fuel cells in automobiles are water
and (potentially useful) heat.6 Since hydrogen fuel cells emit no greenhouse gases in operation,
the only emissions come from the production of hydrogen fuel and the fuel cell itself. This
represents a significant reduction over typical gas-powered cars. A switch to using hydrogen as a
fuel source in transportation could reduce emissions in the US by as much as 50% over
traditional vehicles, a significant step in the right direction for US environmental goals.5 With the
potential to reduce emissions, provide a high-energy-density, low-cost fuel, and eliminate the
United States’ dependence on foreign oil, hydrogen fuel cells have great potential to change the
energy landscape in US transportation.
When painting the picture of hydrogen fuel cells and their place in the energy
environment in the US, it is worthwhile to have a basic understanding not only of the potential
benefits of hydrogen as a fuel source but also of the science behind the fuel cell. Hydrogen fuel
cells in automobiles utilize polymer-electrolyte membrane (PEM) technology to generate
electricity. The PEM works by first chemically separating hydrogen gas, H2, into two protons
and two electrons (two H+ and two e-). Next, the protons are allowed to pass through the
membrane, where they react with oxygen atoms to form water and heat. The electrons are not
allowed to pass through the PEM, which acts as an insulator, and instead the electrons pass
through a circuit, generating electricity.6 This electricity powers an electric motor that moves the
vehicle. Importantly, this process is inexhaustible. As long as there is hydrogen and oxygen, the
fuel cell can produce electricity. This means there is no need to recharge a fuel cell for multiple
hours. Fuel cell vehicles could be refueled in 5-10 minutes, comparable to the time most people
expect to spend refueling their current cars at the gas station.5 Also, the relatively simple
technology behind the fuel cell enables greater well-to-wheel efficiency than traditional cars that
use internal combustion engines. The well-to-wheel efficiency is a measure of what percentage
of initial energy stored in the fuel is converted into energy to turn the wheels. The efficiency for
an internal combustion engine is about 20%. The efficiency for a fuel cell electric vehicle is
close to 40%, a significant improvement over the engine in a typical car today.6 When
considering these benefits of fuel cell technology, the potential for this technology to change the
energy outlook for the US transportation sector is particularly evident.
It is not enough, however, to only consider the benefits of fuel cell technology. It is
important to note the design challenges with fuel cells. There have been several design
challenges with creating low-cost hydrogen fuel cells. First, the membrane discussed above
currently typically uses large amounts of platinum, a very expensive metal. As of now, this
platinum is necessary to oxidize the oxygen so that the oxygen can then react with the hydrogen
to form water.7 Significant research is being done into reducing the amount of platinum in the
fuel cell as a means of reducing fuel cell production costs. Research in the area includes using
carbon nanotubes instead of platinum8, and the US government is funding further research into
this technology and others, including investing $3.1 million into 3M company’s development of
“durable, low-cost, and high-performance membrane electrode assembly for use in massproduced fuel cell electric vehicles”.9 Also, hydrogen exists as a gas at room temperature. To
achieve necessary fuel storage requirements it is necessary to pressurize the hydrogen gas to a
liquid form. This is difficult to do and adds to the costs of producing fuel cells.10 The problems
with low-cost manufacturing of the fuel cell membrane and high-pressure storage of hydrogen
fuel are significant and addressing these problems will be important to realizing the potential of
this technology.
Diagram of a Hydrogen Fuel Cell11
II: Economic Analysis
Given what is known about the benefits and drawbacks associated with hydrogen fuel
cells and the amount of money being invested in exploring and realizing the potential for this
fuel source, it is worthwhile to ask about the current economic viability of hydrogen fuel cells
and consider the future prospects of this technology.
There are many potential questions about the economics of hydrogen fuel cells, but
perhaps the most important deals with how the fuel cell compares with the internal combustion
engine in terms of cost. How much does a hydrogen fuel cell car cost on a per-mile basis
compared with that of a car powered by an internal combustion engine?
When considering this question, it is important to establish what exactly will be
compared and what assumptions must be made to arrive at a useful answer. To stay within a
reasonable scope, this paper will complete a cost analysis for driving an average, 5-passenger,
mid-size sedan. Many assumptions will be made to simplify the calculations involved in this
process. First, all costs not related to the engine and fuel will be assumed to be equal (i.e. same
costs for the transmission, tires, brakes, headlights, etc.). This means both cars will have the
same costs of production, operation, and maintenance for parts not related to the engine and fuel
source. Also, it will be assumed that both the internal combustion engines and the fuel cells
benefit from the economies of scale associated with mass production. This is already taken into
account for the cost of the internal combustion engine and gasoline because those are currently
mass produced. The same is not true for the cost of fuel cells and hydrogen. The current price of
fuel cells and hydrogen will be adjusted based on researched estimates for cost reductions from
mass-production. Finally, environmentally, fuel cells have a clear cost advantage over vehicles
using internal combustion engines. This is advantage, though clear, is difficult to quantify, and
such an analysis is outside the scope of this paper. Despite not being explicitly calculated, this
environmental advantage will be considered in the summary and analysis of steps forward for
fuel cell technology. Now that the definitions and assumptions have been taken care of, it’s time
for the analysis.
Beginning with the internal combustion engine, the approximate cost of the engine for the
car will be based on costs of purchasing a new engine for existing cars similar to the average, 5passenger, mid-size sedan. The cost of gas-powered engines for the 2012 models of the Toyota
Camry, Ford Fusion, Chevy Malibu, Nissan Altima, and Honda Accord, were within the range of
$2000-3000, so the cost of an average engine will be estimated here as $2500.12 This engine can
conservatively be expected to function for about 100,000 miles. Dividing the cost of the engine
by the number of miles from the engine yields the cost per mile for the engine of the car as
$0.025/mile ($2500/100,000miles). Next, it is necessary to consider the cost of fuel.
Conservatively, the price of gasoline can be put at $4.00/gallon.13 Based on the miles per gallon
data for the Camry, Fusion, Malibu, and Civic this average car can be expected to achieve 25
miles per gallon.14-16 Dividing the cost per gallon by the miles per gallon yields the cost per mile
for the fuel, $0.16/mile (($4.00/gallon)/(25 miles/gallon)). Thus, adding these two figures, the
total cost per mile from the engine and the fuel over the life of a vehicle powered by an internal
combustion engine using current engine technology and gasoline is estimated at $0.185/mile.
This cost will be compared to that for cars powered by hydrogen and fuel cells. Data for
the cost of the fuel cell in the vehicle are in units of $/kilowatt(kW). This can be equated to the
engine cost for the gas-powered car by converting from the horsepower (hp) measurement in
traditional cars to kW, since both are measures of power. For the gas-powered cars analyzed
above, the average power in the engine is close to 150hp.14-16 One horsepower is close to 750
watts, or .75kilowatts. Thus, by converting from horsepower to kW the power in a fuel cell
engine can be estimated as 100 kW, a nice round number to use for the calculations
(150hp*(.75kW/hp) = 112.5kW, close to 100kW). The most recent cost estimates for fuel cell
production are close to $50/kW.17 The cost of the fuel cell can then be calculated by multiplying
the cost per kW by the kW in the engine. Doing so yields a cost of $5000 for the fuel cell
($50/kW * 100kW = $5000). Now, it is necessary to divide this cost by the number of miles one
can reasonably expect to drive with this fuel cell. Similar to the conversion from horsepower to
kilowatts, when calculating the number of miles for the fuel cell it is necessary to convert to
useful units. The typical measurement of fuel cell durability is the amount of time for the voltage
output of the cell to decrease by 10%.18 For the most recent measurements, the average time for
the drop in voltage was about 1,800 hours.18 Going from this time to distance requires using the
average speed of the vehicle. This average speed can be conservatively estimated as 30 miles per
hour. Thus, the total distance one can expect from a fuel cell vehicle today is about 54,000 miles
(1,800 hrs * (30 miles/hr) = 54,000 miles). Dividing the cost of the fuel cell by the number of
miles from the fuel cell gives a cost per mile for the fuel cell of $0.091/mile. To this cost, the
cost of fuel must be added. For hydrogen, the cost is measured in dollars per kilogram (kg).
Fortunately, one kilogram of hydrogen is equivalent in energy content to one gallon of gasoline.
Thus, since the cost of one kilogram of hydrogen has been calculated as about $3.00/kg, the cost
of hydrogen is also equal to $3.00 per gallon of gasoline equivalent.21 As discussed above, fuel
cell vehicles have significantly higher well-to-wheel efficiency when compared with internal
combustion vehicles, and this difference is evident in the fuel efficiency of the fuel cell vehicle
which can achieve 50 miles per kilogram of hydrogen. This means the fuel cost per mile for the
fuel cell vehicle is $0.06/mile (($3.00/kg fuel)/(50 miles/kg fuel) = $0.06/mile). Thus, the total
cost per mile for fuel cell vehicles can be estimated as $0.16/mile.
III: Conclusions and The Next Steps
The cost analysis shows that over the lifetime of the vehicle, purely from an individual’s
cost analysis perspective, fuel cell vehicles cost slightly less than traditional internal combustion
vehicles. This is despite the fact that the analysis did not address environmental costs associated
with each type of vehicle, which would further increase the price advantage of fuel cell vehicles.
It is extremely important not to take these costs at face value and to understand the meaning
behind the numbers. First, this analysis should only be considered as an estimate of costs, not
necessarily the exact costs of these technologies. Furthermore, these cost estimates only apply to
the specific type of vehicle considered. The analysis would very likely be different if it focused
on buses or SUVs, for example. Also, it is important to consider what portion of the costs for
each come from the engine and what portion comes from the fuel.
Breaking down the costs, it is clear that a majority of the cost of the gas-powered car
comes from the fuel costs. The opposite is true for fuel cell vehicles. This means that most of the
cost of the gas-powered car is accumulated gradually over the lifetime of the vehicle whereas
much of the cost of the fuel cell vehicle is paid when the car is purchased. So, if a gas-powered
car (like the ones used as examples) costs $20,000 at the dealership, then the equivalent fuel cell
vehicle might cost about $30,000, based on the difference in engine costs that would be part of
the production of the car. This difference is significant because it is more difficult for regular
people to finance a $30,000 purchase compared with a $20,000 purchase. This means that even if
fuel cell vehicles were mass produced starting today, it is likely few would be bought because
few people would be able to supply the necessary capital. Given this current state, fuel cell
adoption would be very slow to happen in the event of mass production. To change this,
production costs need to continue to decrease and durability of fuel cells needs to increase in the
future. Fortunately, prices have been falling dramatically and durability has increased in the last
few years and with continued investment, these trends can be expected to continue to the point
where fuel cell production costs are competitive with current production costs for internal
combustion engines.
The discussion above, though important to understanding the meaning of the cost
analysis, ignores a major issue with the analysis of fuel cell vehicles. There is no infrastructure to
support a transportation system built around hydrogen. Even if fuel cell vehicles could be
produced at a cost competitive with gas-powered vehicles, there are nowhere near enough
refueling stations in this country to keep those fuel cell vehicles moving. It is important to
recognize this major deficiency in the fuel cell picture. Also, given the current economic
potential of fuel cells outlined in this paper and the potential for continued future cost reductions,
it is important to not only continue investing in hydrogen fuel cell technology, but to also step up
investment in providing the necessary infrastructure such that a change to using hydrogen as a
fuel source can happen quickly and with little stress on the economy.
Hydrogen fuel cells have tremendous potential to change the way the United States
transportation sector operates. Fuel cells can eliminate our dependence on foreign oil, help
drastically reduce greenhouse gas emissions, create jobs as the hydrogen infrastructure is put in
place, and even potentially cost less than cars today. With continued investment it is reasonable
to conclude that within the decade fuel cell vehicles could replace gas-powered vehicles as the
primary means of transportation in this country. It is important to recognize these benefits and
this timeline and focus money and time toward realizing the tremendous potential of hydrogen
fuel cells. Though it may be difficult to find money to invest in this technology in today’s
economy, it is important to maintain the commitment to this technology so that fuel cells can
replace gas-powered engines and positively change the energy landscape in the US.
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Fuel cells would reduce GHGs by 50% compared to traditional cars.
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<http://www1.eere.energy.gov/hydrogenandfuelcells/fuelcells/fc_parts.html
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reducing or eliminating platinum in the membrane is the focus of much
research. Platinum is used to oxidize oxygen in the fuel cell.
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This
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$4.00/gallon. Actual price was $3.74/gallon.
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horsepower standard.
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$51/kW is the most recent figure.
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a durability of 1800 hrs. Measured as the time it takes for voltage output to
drop by 10%.
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