CGES Global Oil Report, January-February 2001

Fuel cells: how much of a threat to oil? - Executive Summary

Over the next twenty years rising global oil demand, much of it derived from growing transport use, is expected to boost emissions of greenhouse gases such as carbon dioxide, worsen the level of atmospheric pollution, particularly in urban areas, and leave consuming countries increasingly dependent on the Middle East. At the heart of this scenario lies the assumption that ever greater numbers of oil-fuelled, internal combustion vehicles will be used. However, stricter environmental legislation in the US, Europe and Japan has prompted the rapid technological evolution of alternatives to the oil-product-driven internal combustion engine.

Vehicles powered by fuel cells that run on hydrogen rather than hydrocarbons are now on the road in parts of the US and Europe and are expected to be commercially available to a limited number of consumers within three years. Most such sales will occur in California, where a tenth of all new vehicle sales must be of ‘zero emission’ units by 2004. Only battery powered and fuel cell vehicles can currently meet this stringent specification. Fuel cell vehicles have huge advantages over today’s cars: if run on pure hydrogen, they produce no greenhouse gases and virtually no pollutants, they are at least 50% more efficient to run and are mechanically more reliable.

Although fuel cells cars are now technically feasible and have speeds and acceleration comparable to those powered by gasoline, they suffer from several key disadvantages that will restrict the widespread use of such vehicles. First of all, the cost of a fuel cell system is still several times that of an internal combustion engine. Recent technological improvements have brought the cost down by 90% in the last five years, but the price differential is still too high to encourage consumers to switch to such vehicles, unless governments provide incentives in the form of subsidies and tax breaks. Secondly, new storage and distribution systems would be required to handle the pure hydrogen feedstock. Lastly - and most importantly - there is at present no cheap and easy way of producing the volume of hydrogen that would be needed to power millions of fuel cell vehicles. Most of the hydrogen in use today is produced from natural gas, a process which is only 70% to 80% efficient and which releases carbon dioxide and carbon monoxide into the atmosphere. Other methods of hydrogen production are under development but are at a relatively early stage, like for example the direct conversion of biomass to hydrogen and the use of renewable sources to make hydrogen through electrolysis.

In California the majority of fuel cell cars will initially run on hydrogen produced within the fuel cell system itself from liquid methanol that is produced from natural gas. These vehicles will still emit some carbon dioxide, although other pollutants will be mostly eliminated. Iceland, which is planning to become the world’s first hydrogen economy, has an in-built advantage in this respect, since all its electricity is produced from renewable sources such as geothermal energy and hydroelectric power.

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