Hydrogen in Passenger Transport: A Macroeconomic Analysis

Abstract

Hydrogen is often seen as a promising future energy carrier given the major reliance of today's transport sector on finite fossil fuels. This article assesses the macroeconomic effects of introducing hydrogen as fuel in passenger transport within the framework of the computable general equilibrium model PACE‐T(H2). Our simulation results suggest small improvements in the macroeconomic performance in almost all European countries from the introduction of hydrogen. The magnitude of economic effects however depends on the assumed learning curve of hydrogen cars and on the future development of hydrogen infrastructure costs. The results presented in this article build on data and projects developed in the EU funded HyWays project.

Acknowledgements

We thank Harm Jeeninga, Gerard Martinus, Martin Wietschel and two anonymous referees for very constructive and helpful comments on an earlier version of this manuscript. Our thanks also go to Thomas Pfeiffer and Frederike Strunk for their help in editing the manuscript. Funding by the European Commission under the 6th Framework programme regarding the research project ‘The Development and Detailed Evaluation of a Harmonised European Hydrogen Energy Roadmap’ (HyWays) is gratefully acknowledged.

Notes

1. For details of the HyWays project, see the project webpage at http://www.hyways.de/

2. The general equilibrium structure of the model is based on Arrow and Debreu (1954).

3. This also holds for the energy‐system model MARKAL which is the main data source for our model.

4. The transport sector in commodity production captures all other transport services excluding passenger transport. Transport services describe the household's demand for vehicle kilometres. Of course, in reality households do not consume vehicle kilometres but trips and passenger kilometres. However, this assumption is convenient in macro models since vehicle kilometres help to avoid modelling load factors, demand management policies, etc.

5. These penetration rates are taken from the results of the MARKAL model; compare Section ‘Scenarios and Results’.

6. A SAM represents flows of all economic transactions that take place within an economy (regional or national). It is a statistical representation of the economic and social structure of a country.

7. For a detailed description of the GTAP5 database and model, see Rutherford (1998).

8. See Seebregts et al. (2001) for a description of MARKAL.

9. At ECN, a first version of MARKAL was used to describe the Dutch energy system; later it was extended to the Western European energy system (Seebregts et al. 2001). The version used for the HyWays project is a partial equilibrium economic model for energy markets in the EU, achieving a high level of technological disaggregation (see Smekens, 2005; Martinus et al., 2005a, 2005b).

10. For a description of the ISIS model used in the HyWays project, see Wietschel and Seydel (2007).

11. For details on the mix of hydrogen production technologies in the HyWays project, see Martinus et al. (2005a).

12. The yearly depreciation rates for hydrogen production technologies are calculated as the reciprocal of their lifetimes. Consequently, the discount rate for technology lifetime costs is the sum of interest and depreciation rate. In our model the discount rate thus varies between 7% and 14% depending on the technology.

13. Note that we assume no tax for hydrogen fuel. Of course this assumption has major effects on government revenues. This very important topic was however out of the scope of our macroeconomic analysis.

14. While the overall penetration rates of hydrogen cars were assumptions made in the task force, the relative penetration rates of different car sizes stem from the analysis in MARKAL. For more details on the scenario assumptions, see HyWays (2007).

15. Jokisch and Mennel (2007) also present and discuss the results of the H2M scenario, which combines a high cost decrease with medium hydrogen penetration, as a sensitivity check. This scenario essentially confirms the conclusions drawn here.

16. Environmental costs, in the form of greater or smaller damages, are excluded from the analysis. Costs arising from environmental taxation are included by way of leaving constant current duties on fossil fuel combustion. While carbon duties are likely to rise until 2050, it is unclear to what extent, due to regulatory and technological uncertainty. A study of the climate and political effects of hydrogen passenger transport in the HyWays project indicates that higher carbon duties are likely to benefit hydrogen vis‐à‐vis conventional technology (see Wietschel and Seydel 2007).

17. The full set of cost developments is shown in Jokisch and Mennel (2007).

18. A detailed comparison of costs is depicted for medium sized cars in the H2H scenario in Figure 7. It shows the relative importance of vehicle cost (hc_cost and cc_costs) O&M costs (the variables hc_price_o&m cc_price_o&m contain vehicle costs and o&m) and of taxes on conventional cars (the variables cc_totcost_net and cc_totcost_gross denote total costs net and gross of taxes).

19. One word of caution is warranted concerning these results: Costs of innovation are not included in the analysis. We assume that they are small in comparison to the overall economic development. The figures show effects of cost reductions in production taken technological progress as given.

20. Real consumption is an aggregate of all consumption goods including transport.