A once-in-a-lifetime confluence of forces is re-shaping the business models of America’s electric utilities. Rising costs, combined with technological advancements and shifts in regulatory policy...
Will the Hydrogen Economy Take Off?
determines its impact on utilities."
The question of how to achieve the vision of a hydrogen economy begins with how hydrogen is manufactured today.
Although a plentiful element throughout the world, hydrogen is "not just floating around," as Taub puts it. Hydrogen is, though, a very common industrial chemical. Nine million tons of it are produced annually as a feedstock for the chemical industry. And while hydrogen is a byproduct of some chemical manufacturing, such as ethylene and chlorine, it is increasingly manufactured purposefully, Taub observers.
Virtually all of the hydrogen that is manufactured as a feedstock is made via natural gas reformation. Steam reformation, as the process is also known, is the most economical method currently available for producing pure hydrogen. There are other methods-electrolysis, heat, chemical, and even biological processes using algae and photosynthesis-but none are as cheap as natural gas reformation. The leading alternative to natural gas is electrolysis, Taub says. But manufacturing hydrogen from electricity is expensive. Taub says that most analysts estimate that hydrogen made by electrolysis is two to three times as expensive as hydrogen made from steam reforming of natural gas.
The current economics of hydrogen likely make natural gas companies the first in the utility sector to benefit from a true shift to a hydrogen economy. "If you're a natural gas utility and have hydrogen economy," Taub says, "more natural gas will be used in either large plants-in which case [gas utilities] may want to get into the business of hydrogen pipelines-or hydrogen dispersed via filling stations or homes." Either way, natural gas use would likely increase dramatically in the first phase of a shift to a hydrogen economy.
Gas utilities, in particular, may benefit the earliest from a move to a hydrogen economy. Dan Rastler, technical leader of distributed power at the Electric Power Research Institute (EPRI), says, "If we're talking about fueling lots of vehicles, we have to have central hydrogen production and distribution." And gas utilities, which already know how to distribute gas to most any residence in the country, could be prime candidates to lead the way on hydrogen distribution.
If vehicles in America started using hydrogen as fuel, the demand for hydrogen would leap by billions of cubic meters annually, Taub says. If natural gas reformation were the method used to make hydrogen fuel for all 228 million vehicles on the road in the United States today, Taub predicts that natural gas consumption would jump 60 percent.
Of course, the supply of natural gas is limited. Using natural gas to create a hydrogen economy could certainly shorten the lifespan of known gas reserves-and in the short run, that would provide quite an incentive for natural gas suppliers to push for the hydrogen economy.
Right now, it makes little economic sense to use hydrogen to burn in turbines rather than natural gas, observes Rich Scheer, vice president of Energetics Inc., who was one of the main contributors to the national hydrogen vision document, published in 2002 by the Department of Energy (DOE). He predicts that the cost curves