Hydrogen Big Bet AD Little

1,705 views
1,473 views

Published on

Published in: Economy & Finance, Technology
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,705
On SlideShare
0
From Embeds
0
Number of Embeds
90
Actions
Shares
0
Downloads
0
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Hydrogen Big Bet AD Little

  1. Innovative Visions – Art of the Possible Potential for Dramatic Energy Mix Shift Mary Tolan Chief Executive Resources Group, Accenture
  2. Scenarios <ul><li>Way beyond conventional expectations </li></ul><ul><li>Requiring truly breakthrough innovation </li></ul><ul><li>Almost always surfacing significant opportunities </li></ul>Evaluation of Accelerated Change Scenarios
  3. <ul><li>Attacking Conventional Wisdom </li></ul><ul><ul><li>Accelerating Change in the Energy Mix </li></ul></ul><ul><ul><li>Transportation is the Key </li></ul></ul><ul><li>Path to Changing the Energy Mix </li></ul><ul><ul><li>Hydrogen Fuel Cell Vehicle is an Answer </li></ul></ul><ul><ul><li>Petroleum Down, Other Fuels Up </li></ul></ul><ul><ul><li>Cost is the big challenge </li></ul></ul><ul><li>Business Model Implications for Energy Providers </li></ul><ul><ul><li>Paths to Hydrogen </li></ul></ul><ul><ul><ul><li>Reforming </li></ul></ul></ul><ul><ul><ul><li>Electrolysis </li></ul></ul></ul><ul><ul><li>Implications </li></ul></ul><ul><ul><ul><li>Gas and power </li></ul></ul></ul><ul><ul><ul><li>Risk </li></ul></ul></ul><ul><li>Political Will as the Necessary Catalyst </li></ul>
  4. Challenge Scenario <ul><li>Weak global economy </li></ul><ul><li>Oil price inflation and expectations of more inflation shave 1-2% off G8 GDP growth </li></ul><ul><li>Geopolitical concerns lead to growing view of petroleum supplies – “Unacceptable Risk” </li></ul>Political Will for Structural Resolution Set up Scenario:
  5. How Different? <ul><li>Whereas environmental concerns provoke only modest immediate concern and change scenarios </li></ul><ul><li>Economic and national security motives create perception of acute nature of risk – providing significantly accelerated change </li></ul><ul><li>We see seeds of this paradigm shift beginning to emerge </li></ul>Why does this accelerate change? Wild Card: Political Will
  6. Transportation Focus <ul><li>Where do we focus? </li></ul><ul><ul><li>The pressure to reduce the risk of petroleum driven inflation and/or energy related disputes quickly puts the spotlight on the </li></ul></ul>Transportation Fleet
  7. G8 Petroleum Consumption Transportation Share of Total Petroleum Consumption for G8 - 2001 G8 Petroleum Consumption and Forecast – 1995-2015 Source: US Department of Energy – Energy Information Administration, International Energy Outlook , Annual Energy Outlook 2002 Source: US Department of Energy – Energy Information Administration, International Energy Outlook , Annual Energy Outlook 2002
  8. New Mandates Transportation Fleet to Hydrogen <ul><ul><li>So… </li></ul></ul><ul><ul><li>New Mandates are Created </li></ul></ul><ul><ul><li>Pick a date – 2013 . . . 2015 . . . 2018 </li></ul></ul><ul><ul><li>For Conversion of the </li></ul></ul>
  9. <ul><li>Attacking Conventional Wisdom </li></ul><ul><li>Path to Changing the Energy Mix </li></ul><ul><li>Business Model Implications for Energy Providers </li></ul><ul><li>Political Will as the Necessary Catalyst </li></ul>
  10. Hydrogen <ul><li>Achieve material displacement of petroleum </li></ul><ul><li>Greater energy supply diversity = greater security </li></ul><ul><li>More efficient conversion of energy </li></ul>Why Hydrogen?
  11. Theory of the Possible <ul><li>What would it take to significantly advance the take up of hydrogen vehicles to have a major impact on reducing petroleum consumption? </li></ul>
  12. Accelerating Change Petroleum Consumption Transportation Fleet – G8 Countries Source: Accenture analysis Hydrogen Fuel Cell Vehicle Annual Sales – G8 Countries Source: Accenture analysis MM
  13. Accelerating Change Hydrogen Fuel Cell Vehicle Annual Sales – G8 Countries Source: Accenture analysis Petroleum Consumption Transportation Fleet – G8 Countries Source: Accenture analysis Total transportation demand with 50% FCV penetration by 2015 MM FCV capture 100% of new vehicle sales
  14. Cost Challenge <ul><li>Relatively little investment to date to drive down fuel cell cost </li></ul><ul><li>Automobile manufacturers developing novel solutions to drive down costs </li></ul><ul><ul><li>Manufacturing costs </li></ul></ul><ul><ul><li>Fuel cell performance </li></ul></ul><ul><ul><li>Revenue opportunity </li></ul></ul>Biggest Challenge – Fuel cell cost and performance
  15. Fuel Cell Vehicle Cost Cents per mile Fuel Cell Vehicle Cost Reduction Impacts Total ownership cost Reduce fuel cell cost * Includes advances in conversion efficiency, reduced hydrogen compression, storage and dispensing loss rates Fuel Body/ BOS Fuel Cell Reduce fuel cell cost from $250/kw to $30/kw Conventional Vehicle
  16. Fuel Cell Vehicle Cost Cents per mile Fuel Cell Vehicle Cost Reduction Impacts Total ownership cost Reduce fuel cell cost * Includes advances in conversion efficiency, reduced hydrogen compression, storage and dispensing loss rates Increase fuel cell life Reduce body & BOS cost Fuel Body/ BOS Fuel Cell Reduce fuel cell cost from $250/kw to $30/kw Conventional Vehicle
  17. Fuel Cell Vehicle Cost Cents per mile Fuel Cell Vehicle Cost Reduction Impacts Total ownership cost Reduce fuel cell cost * Includes advances in conversion efficiency, reduced hydrogen compression, storage and dispensing loss rates Increase fuel cell life On-Peak Power Sales Revenue Reduce body & BOS cost Reduce system energy costs* Long-term goal Fuel Body/ BOS Fuel Cell Reduce fuel cell cost from $250/kw to $30/kw Conventional Vehicle
  18. Upfront subsidy required Subsidy for Adopting Fuel Cell Vehicle G8 Countries
  19. Public Will <ul><li>Cost breakthrough a function of effort and investment </li></ul><ul><li>Effort and investment are a function of perceived return on investment </li></ul><ul><li>Only way to create major demand is through near-term incentives and mandates – by 2013/2015 </li></ul>What will it take to drive down these costs?
  20. Advantaged Cost <ul><li>How do we </li></ul><ul><li>Deliver the Energy </li></ul><ul><li>to get to a </li></ul><ul><li>Fuel Cost Advantage? </li></ul>We can get to parity in vehicle costs…
  21. <ul><li>Attacking Conventional Wisdom </li></ul><ul><li>Path to Changing the Energy Mix </li></ul><ul><li>Business Model Implications for Energy Providers </li></ul><ul><li>Political Will as the Necessary Catalyst </li></ul>
  22. Alternative Paths to Hydrogen Reformation Liquid/ Gas Fuels <ul><li>Natural Gas </li></ul><ul><li>Ethanol </li></ul><ul><li>Etc. </li></ul>Retail Site Reformer Hydrogen Vehicle Electrolysis Low Cost Fuels <ul><li>Coal </li></ul><ul><li>Nuclear </li></ul>Base Load Generation Hydrogen Vehicle Retail Site Electrolysis <ul><li>Off-Peak Generation </li></ul><ul><li>40% Net Conversion efficiency </li></ul><ul><li>70% Conversion Efficiency </li></ul><ul><li>70% Conversion Efficiency </li></ul>3.0 cents/mile Note: Gasoline is about 5.2 cents/mile before tax 3.1 cents/mile
  23. Natural Gas Reforming <ul><li>Need to expand and build natural gas infrastructure </li></ul><ul><ul><li>Long-haul transportation </li></ul></ul><ul><ul><li>Local distribution </li></ul></ul><ul><ul><li>Reforming capacity at retail sites </li></ul></ul><ul><li>Increase gas production by 20-25% over current growth plans by 2020 </li></ul>Natural Gas Reforming at Retail Sites
  24. Natural Gas Reformation – Capital Capital Investment to 2020 – Decentralized Natural Gas Reformation* $B * Source: Accenture analysis ~90% vehicle fleet is Fuel Cell Vehicles – 75% supplied by Natural Gas ------------------US--------------------- -----------------Europe------------------
  25. Natural Gas Reforming <ul><li>Natural gas deliveries could increase by 50-75% in some areas </li></ul><ul><li>Creative pricing and supply approaches to manage peak loads could lessen incremental investment requirements </li></ul><ul><li>As in power, gas producers may benefit from time of day meters and pricing which reflects true capacity costs </li></ul><ul><li>With sophisticated pricing, retailers would have incentive to build the appropriate intra-day storage capacity </li></ul>Implications for Natural Gas Business
  26. Ethanol Reforming <ul><li>Potential to serve as additional source of energy for reforming to hydrogen </li></ul><ul><li>May be best suited for regional plays </li></ul><ul><li>Requires changes in production techniques versus today </li></ul><ul><ul><li>Alternate, non-food based crops </li></ul></ul><ul><ul><li>Large-scale ethanol production facilities – 10X today? </li></ul></ul><ul><li>Would further diversify energy sources </li></ul><ul><ul><li>Increased security from supply risks </li></ul></ul><ul><ul><li>Different pricing dynamics from Natural Gas – Competition and risk issue </li></ul></ul>Implications for Ethanol and other Bio-fuels
  27. Alternative Paths to Hydrogen Reformation Liquid/ Gas Fuels <ul><li>Natural Gas </li></ul><ul><li>Ethanol </li></ul><ul><li>Etc. </li></ul>Retail Site Reformer Hydrogen Vehicle Electrolysis Low Cost Fuels <ul><li>Coal </li></ul><ul><li>Nuclear </li></ul>Base Load Generation Hydrogen Vehicle Retail Site Electrolysis <ul><li>Off-Peak Generation </li></ul><ul><li>40% Net Conversion efficiency </li></ul><ul><li>70% Conversion Efficiency </li></ul><ul><li>70% Conversion Efficiency </li></ul>3.0 cents/mile Note: Gasoline is about 5.2 cents/mile before tax 3.1 cents/mile
  28. Electrolysis <ul><li>Utilize available off-peak capacity </li></ul><ul><ul><li>Off-peak power produced from low cost sources, such as coal and nuclear </li></ul></ul><ul><ul><li>Opportunity to “store power” </li></ul></ul><ul><ul><li>As much as 25% of the fleet requirements might be met </li></ul></ul><ul><ul><li>Leverages spare capacity to minimize new capital requirements </li></ul></ul><ul><li>On-peak power not economic to use </li></ul><ul><ul><li>Natural gas better used in reforming route to power </li></ul></ul><ul><ul><li>Would require significant investment in new power plants </li></ul></ul>Electrolysis at Retail Sites
  29. Leveling Electricity Load Typical Electricity Load Profile Hours GW Excess baseload capacity during off-peak hours – could supply 25% of US Vehicle Fleet US Profile
  30. Power Generation Equivalent Source: Accenture analysis, US Department of Energy – Energy Information Association, European Environment Agency Fuel Cell Vehicle Penetration Equal to Total Installed Electric Generation Capacity
  31. Natural Gas Reforming <ul><li>Significantly increased sales/utilization of base-load plants </li></ul><ul><li>Time of day pricing necessary to provide incentive for retailers to build hydrogen storage capacity for on-peak deliveries </li></ul><ul><li>Switch from building and operating peaking plants to connecting and managing distributed “Power Parks” </li></ul>Implications for Power Business
  32. Hydrogen Suppliers <ul><li>New opportunities for expanded sales in a sector not significantly served before </li></ul><ul><li>New investment opportunities from production to retailing </li></ul><ul><li>But, a new form of competition where power, gas, bio-fuels, and potentially others – all producing hydrogen – would compete daily for the same customer </li></ul>Hydrogen Summary – Either Reforming or Electrolysis
  33. Review <ul><li>Wholesale replacement of petroleum in the biggest sector it serves </li></ul><ul><li>Development of a distributed generation fleet that swamps the size of the existing generation network </li></ul><ul><li>New forms of very dynamic competition between electricity and gas </li></ul><ul><li>Massive investments to produce the energy to manufacture hydrogen and to develop the infrastructure to deliver it </li></ul>Scenario Review:
  34. Risks <ul><li>Ability of the fuel cell and automobile manufactures to bring down the total cost of the vehicle </li></ul><ul><ul><li>Reducing the cost of delivered hydrogen can help competitiveness of fuel cell vehicle </li></ul></ul><ul><ul><li>But ultimately, competitiveness will rest heavily outside the traditional gas and power businesses </li></ul></ul><ul><li>Therefore, the investment made today in preparing for the new hydrogen business environment is a bet on the come around the fuel cell technology </li></ul>Biggest Risks to Scenario:
  35. <ul><li>Attacking Conventional Wisdom </li></ul><ul><li>Path to Changing the Energy Mix </li></ul><ul><li>Business Model Implications for Energy Providers </li></ul><ul><li>Political Will as the Necessary Catalyst </li></ul>
  36. Likelihood of Political Will <ul><li>Weak Global Economy </li></ul><ul><li>Energy Inflation Risks </li></ul><ul><li>Geopolitical Risks </li></ul>Drivers of Political Will Add to this: Opportunities for Political and Economic Upside
  37. Upside <ul><li>What other investment could target this level of impact? </li></ul><ul><ul><li>Energy Sector Investment </li></ul></ul><ul><ul><li>Transportation Sector Investment </li></ul></ul><ul><ul><li>Durable productivity enhancement through technological advancement </li></ul></ul><ul><ul><li>Potential for significant emissions reductions </li></ul></ul>Opportunities for Upside If you were a G8 Leader Trying to Stimulate your Economy…
  38. Subsidy & Spending Examples <ul><li>$230 Billion OECD taxpayer and consumer support to agriculture </li></ul><ul><li>$37 Billion Homeland Security budget request for 2003 in the US </li></ul><ul><li>$160 Billion Annual gasoline tax across the G7 countries </li></ul><ul><li>$100 Billion Equivalent peak year spending of Apollo moon shot program </li></ul>The $225 Billion incentive this requires over 10 years is small relative to the annual size of other programs
  39. Barriers <ul><li>Public/private sector unintentional miscues </li></ul>Stated hydrogen enthusiasm <ul><li>1.7 Billion spending over 5 years </li></ul><ul><li>2025 before things get interesting </li></ul>Private sector does not drive to action Biggest Barrier to Political Will
  40. Requirements <ul><li>Double digit spending kick-start over next 3-4 years </li></ul><ul><ul><ul><li>e.g.: $10 – 20 Billion/year </li></ul></ul></ul><ul><li>Design of significant incentives to attract customer to the market ($225 over first 6 years) </li></ul><ul><li>8-10 year timeframe to reach full output from program </li></ul>What would it take?
  41. Putting it into Perspective
  42. The Prize <ul><li>Bigger prize </li></ul><ul><li>Higher probability of success </li></ul>

×