# Presentation: 752125

## Moving Toward Consistent Analysis in the HFC&IT Program: H2A

- NREL Energy Analysis Seminar Series
- September 9, 2004
- Washington, D.C.

## Preview

- H2A history and purpose
- H2A structure (technical teams)
- Central and forecourt analyses
- Financial approach
- Cash flow model
- Approach to Feedstock / fuels prices
- Delivery analysis
- Accomplishments
- Future plans

## H2A Mission

*   **Improve the transparency and consistency of approach to analysis, improve the understanding of the differences among analyses, and seek better validation from industry.*

## History & Where We Are Now

- First H2A meeting February 2003
- Primary goal: bring consistency & transparency to hydrogen analysis
- Current effort is not designed to pick winners
- R&D portfolio analysis
- Tool for providing R&D direction
- Current stage: production & delivery analysis - consistent cost methodology & critical cost analyses

## H2A Teams

- Central
- > 50,000 kg/day H2, minimal storage, 300 psi
- Johanna Ivy (NREL), Maggie Mann (NREL), Dan Mears (Technology Insights), Mike Rutkowski (Parsons Engineering)
- Forecourt
- 100 and 1,500 kg/day H2
- Brian James (Directed Technologies, Inc.), Steve Lasher (TIAX), Matt Ringer (NREL)
- Delivery
- Components and delivery scenarios
- Marianne Mintz (ANL), Joan Ogden (UC Davis), Matt Ringer (NREL)
- Finance, feedstocks, and methodology
- Marylynn Placet (PNNL)
- Environmental assessment
- Michael Wang (ANL)

## Cash flow analysis tool for Central & Forecourt production
Estimates levelized price of hydrogen for desired internal rate of return
Take into account capital costs, construction time, taxes, depreciation, O&M, inflation, and projected feedstock prices
Production and delivery costs estimated
Current, mid- (~2015), and long-term (~2030) production technologies
Natural gas, coal, biomass, nuclear, electrolysis
Current delivery components
Data from published studies and industry designs
Refined inputs and results based on peer review and input from key industrial collaborators (KIC)
Identified key cost drivers using sensitivity analyses

- Estimates levelized price of hydrogen for desired internal rate of return
- Take into account capital costs, construction time, taxes, depreciation, O&M, inflation, and projected feedstock prices
- Production and delivery costs estimated
- Current, mid- (~2015), and long-term (~2030) production technologies
- Natural gas, coal, biomass, nuclear, electrolysis
- Current delivery components
- Data from published studies and industry designs
- Refined inputs and results based on peer review and input from key industrial collaborators (KIC)
- Identified key cost drivers using sensitivity analyses

**Approach for Production Analysis**

## KIC Companies

- Entergy
- Exxon Mobil
- FERCO
- GE
- Praxair
- Shell
- Stuart Energy
- Thermochem

- AEP
- Air Products
- Areva
- BOC
- BP
- ChevronTexaco
- Conoco Phillips
- Eastman Chemical

## H2A Cash Flow Analysis Tool

**H2A Cash Flow Analysis Tool**

## H2A Tool Features

- Yes/no toggle switches to allow for user input or H2A standard input
- Inputs turn on/off based on yes/no toggle switch
- Error messages included to alert user when input errors are made
- Color-coded to facilitate user input

|  | Calculated Cells |
| --- | --- |
|  | User Input Required |
|  | Optional Input |
|  | Information  |

## + Reference year (2000 $)
+ Debt versus equity financing (100% equity)
+ After-tax internal rate of return (10% real)
+ Inflation rate (1.9%)
Effective total tax rate (38.9%)
Design capacity (varies)
Capacity factor (90% for central (exc. wind); 70% for forecourt)
Length of construction period (0.5 – 3 years for central; 0 for forecourt)
Production ramp up schedule   (varies according to case)
Depreciation period and schedule   (MACRS -- 20 yrs for central;  7 yrs for forecourt)
Plant life and economic analysis period (40 yrs for central; 20 yrs for forecourt)
Cost of land ($5,000/acre for central; land is rented in forecourt)
Burdened labor cost ($50/hour central; $15/hour forecourt)
G&A rate as % of labor (20%)

- + Debt versus equity financing (100% equity)
- + After-tax internal rate of return (10% real)
- + Inflation rate (1.9%)
- Effective total tax rate (38.9%)
- Design capacity (varies)
- Capacity factor (90% for central (exc. wind); 70% for forecourt)
- Length of construction period (0.5 – 3 years for central; 0 for forecourt)
- Production ramp up schedule   (varies according to case)
- Depreciation period and schedule   (MACRS -- 20 yrs for central;  7 yrs for forecourt)
- Plant life and economic analysis period (40 yrs for central; 20 yrs for forecourt)
- Cost of land ($5,000/acre for central; land is rented in forecourt)
- Burdened labor cost ($50/hour central; $15/hour forecourt)
- G&A rate as % of labor (20%)

**Key Financial Parameters****Forecourt and Central**

**Notes:**
Debt/Equity. 86% of long-term financing in U.S. corporations is generated from cash flow from operations* . The remainder of financing comes from debt -- 9% -- and new stock issues -- 5%. For the base case, we’ve chosen 100% equity financing, reflecting INTERNAL equity financing.
10% IRR. Stock market return for large corporate stocks between 1926 and 2002 was ~12% nominal (returns are calculated after corporations pay taxes); Inflation was ~3% ; Real rate of return was ~9% 
Risk premium of 1% added, to arrive at 10% real return (this converts to a 12.1% nominal return)
Corporate bond rates during the same period were 5.7% (nominal); ~3.2% (real)
Tax Rate. . Our base case assumes a large corporation owns the production/distribution facilities and the 35% Federal tax rate applies.  Also assume 6% state/local tax rate
 35% + 6%(1-35%) = 38.9% total 
Depreciation. In the base case, all technologies will use the IRS Modified Accelerated Cost Recovery System (MACRS).  The annual depreciation factors are based on the following:
Modified* 200% double declining balance for 3, 5, 7, and 10 year recovery periods
Modified* 150% double declining balance for 15 and 20 year recovery periods 
Cost spreadsheet also allows the user to specify straight-line depreciation 
Plant lifetime and analysis time period. NPV calculations must be conducted over a specified economic analysis period that could be shorter than, equal to, or longer than the plant lifetime. If the analysis period is longer than the plant life, replacement costs must be added. If the analysis period is shorter than the plant life, a salvage value must be estimated (value of the equipment at the end of the analysis period + net present value of the revenue from remaining operations). Current thinking: 40 year analysis time period for central; 20-year analysis time period for forecourt. Salvage value= de-commissioning cost (except for nuclear); varying plant lifetimes

## Feedstock and Utility Prices

- Issues:
- Future prices of any fuel / feedstock will be dependent on market demand for that fuel / feedstock
- Demand for hydrogen may affect future fuel / feedstock prices
- Delivered prices vary significantly by sector (i.e., commercial, industrial, utility)
- Historically, volatility and risk have varied among fuels / feedstocks, and by location

## Solution:  
Develop reasonable price projections
Use “official” base case EIA projections through 2025 and extrapolate costs to 2070 using longer-term models (e.g., PNNL’s Climate Assessment Model (M-CAM) and MARKAL)
Inflate current market prices and apply professional judgment
Use national averages to represent generic U.S. cases
Conduct sensitivity runs 
Allow users to test their own assumptions

- Develop reasonable price projections
- Use “official” base case EIA projections through 2025 and extrapolate costs to 2070 using longer-term models (e.g., PNNL’s Climate Assessment Model (M-CAM) and MARKAL)
- Inflate current market prices and apply professional judgment
- Use national averages to represent generic U.S. cases
- Conduct sensitivity runs
**Allow users to test their own assumptions**

**Feedstock and Utility Prices, cont.**

## Central Technologies

|  | Coal Gasification | Coal Gasification    w/CO2 Sequestration | Coal Gasif w/CO2 Seq & Power Co-production |  | Biomass Gasification |
| --- | --- | --- | --- | --- | --- |
| Current | Conventional | Conventional | Conventional |  | Distinct |
| Mid  term |  | +Membrane Separation | +Membrane Separation |  | Advanced Distinct |
| Long term |  | +Adv Materials | +Adv Separation |  |  Integrated |
|  |  |  |  |  |  |
|  | Natural Gas Reforming | Nat Gas Reforming w/CO2 Sequestration | Current Nuclear Electrolysis | Advanced Nuclear |  |
| Current | Conventional | Conventional |  |  |  |
| Mid  term |  | + Autothermal OTM | High Pressure |  |  |
| Long term |  | +Advanced Separation |  
  | S-I Thermo-chemical |  |
|  |  |  |  |  Steam Electrolysis |  |
|  |  |  |  |  |  |
|  |  | Stand-alone        Wind Electrolysis   | Wind Electrolysis w Power Co-production | Note: Shaded Results Are Presented  |  |
| Current |  | Atmospheric  | Atmospheric  |  |  |
| Mid  term |  | High Pressure  | High Pressure  |  |  |
| Long term |  | High Pressure  | High Pressure  |  |  |

**Notes:**
Natural Gas (379 tonne/day)
Current: Conventional SMR w & w/o CO2 Sequestration 
Mid Term: Autothermal OTM-based SMR with CO2 Sequestration
Long Term: OTM with Advanced H2 Separation with CO2 Sequestration

Coal (283-316 tonne/day)
Current:
Conventional Gasification w & w/o CO2 Sequestration
Co-produced Power w/o CO2 Sequestration
Mid Term: Gasification with Advanced Cleanup and Membrane Separations with CO2 Sequestration
Long Term: Above plus Advanced Materials with CO2 Sequestration

Biomass Current: Distinct
Mid Term: Integrated
Long Term: Advanced Integrated

Wind
Current: Atmospheric Electrolysis w Stand-alone Wind Farm (ref) and w Grid Connected Co-producing Wind Farm
Mid Term: Advanced High Pressure w Stand-alone Wind Farm (ref) and w Grid Connected Co-producing Wind Farm
Long Term: Advanced High Pressure w Stand-alone Wind Farm (ref)  and w Grid Connected Co-producing Wind Farm

Nuclear
Mid Term: Advanced Light Water Reactor w High Pressure Electrolysis
Long Term: Very High Temperature Reactor w High Temperature Steam Electrolysis and Sulfur-Iodine Thermo-chemical cycle

## Central Capacities (1,000 kg/day)

|  | Coal Gasification | Coal Gasification    w/CO2 Sequestration | Coal Gasif w/CO2 Seq & Power Co-production | Biomass Gasification |
| --- | --- | --- | --- | --- |
| Current | 285 | 285 | 285 | 75 |
| Mid term |  | 315 | 315 | 75 |
| Long term |  | 315 | 315 | 75 |
|  |  |  |  |  |
|  | Natural Gas Reforming | Nat Gas Reforming w/CO2 Sequestration | Current Nuclear Electrolysis | Advanced Nuclear |
| Current | 380 | 380 |  |  |
| Mid  term |  | 380 | 675 |  |
| Long term |  | 380 |  | 770 |
|  |  |  |  | 720 |
|  |  |  |  |  |
|  |  | Stand-alone        Wind Electrolysis  | Wind Electrolysis w Power Co-production | Note: Shaded Results Are Presented |
| Current |  | 50 | 50 |  |
| Mid  term |  | 50 | 50 |  |
| Long term |  | 50 | 50 |  |

## Central Technology Options- $/kg Comparisons -

## Mid Term Central Technology Options- $/kg Components -

**Mid Term Central Technology Options****- $/kg Components -**

- $/kg Hydrogen

## IRR Sensitivitiesfor Mid Term Central Options 

**IRR Sensitivities****for Mid Term Central Options **

- $/kg Hydrogen

## Sensitivity Results: Natural Gas Reforming - 2015

**Base Case **
**$1.16kg**

- -50%

- 4.5

- -10%

- 475

**Low**

**Base**

- 95%

- 90%

- -30%

- 7.6

- +100%

- +30%

**High**

- 80%

- +30%

- 0

- 15

- 30

- 0

- 0

- 150

## Sensitivity Results: H2 From Coal Gasification - 2015

- -10%

- 1315

- -40%

- 25

**Low**

**Base**

- 95%

- 90%

- -30%

- 16.6

- +30%

- +60%

**High**

- 80%

- +30%

- 0

- 15

- 30

**Base Case **
**$1.15/kg**

- 0

- 0

- 150

## Sensitivity Results:  H2 From Biomass Gasif - 2015

- 1.2

- 2.5

- -20%

- 1,500

**Low**

**Base**

- 50%

- 45%

- 0.24

- 0.30

- 3.6

- 30%

**High**

- 36%

- 0.54

- 95%

- 90%

- 80%

**Base Case **
**$1.90/kg**

**Sensitivity Results: **** H****2**** From Biomass Gasif - 2015**

- 4.6

- 0

- 0

** ****(steam, kg/kg H2)**

## Sensitivity Results:  H2 From Wind Electrolysis - 2015

- -25%

- 1935

- -20%

- 3065

**Low**

**Base**

- 74%

- 71%

- 100%

- 0%

- 50%

- 20%

**High**

- 64%

- 0%

- 10

- 15

- 20

**Base Case **
**$3.13/kg**

##  Sensitivity Results: H2 From Advanced Nuclear (VHTR) & Sulfur-Iodine Thermo-chemical Process - 2030 

- 900

- 900

- 95%

- 90%

**Low**

**Base**

- -10%

- 1220

- -10%

- 865

- 825

- 80%

**High**

- 25%

- 25%

- 20$/MT

- 0

- O

**Base Case **
**$2.25/kg**

- Per Ongoing EPRI Project

## Forecourt Station Capacities

- Large H2 Capacity

- Average Gasoline Station

- 100 kg H2/day

- 1,500 kg H2/day

- -

- 70 kg H2/day

- 1,050 kg H2/day

- 3,000 gal/day

- 12 H2 cars/day

- 175 H2 cars/day

- 375 conventional cars/day

**Forecourt Station Capacities**

**Design Capacity**

**Average Fuel Demand**

**Average Cars Refueled**

**Type of Station**

- Note: Assumes 70% capacity factor and 6 kg/fill for H2 capacity, and 8 gallons gasoline per fill on average.

- Small and large H2 capacities are assumed to be integrated into existing gasoline stations with 8 dispensers total
- Small station = 1 cH2 dispenser
- Large station = 3 cH2 dispensers

## Forecourt Cases

- Delivered cH2 Pipeline

- Delivered LH2 Tanker Truck

- Natural Gas Reformer

- Methanol Reformer

- X

- X

- X

- Fall ‘04

- X

- X

- X

- Fall ‘04

- Ethanol Reformer

- Electrolyser

- Fall ‘04

- X

- Fall ‘04

- X

- Tube Trailer primary storage, 6250 psi compression + cascade dispensing

- LH2 primary storage, 6250 psi LH2 cryo-pump and evaporator + cascade dispensing

- SR with PSA cleanup, 6250 psi compression, cascade storage/dispensing

- TBD

- TBD

- No primary storage, 6250 psi compression + cascade dispensing

- Alkaline electrolyser, 6250 psi compression, cascade storage/dispensing

**Forecourt Cases**

**Small**

**Large**

**Type of Station**

**Current Technology / Design Assumptions**

- Note: All cases include assessment of current, mid-term, and long-term technologies.

## Summary of Cases: Technology Parameters - Large H2 Capacity

- cH2 Compression

- LH2 Storage

- NG-based H2 Production Unit

- Electrolyser

- Steel tanks:
- $818/kgH2 stored

- Recip-piston type:
- 65% ad. efficiency

- No boil-off recovery:
- 0.4%/day losses

- SR with PSA:
- 10 year life
- 69% LHV efficiency
- $1.2 MM (uninstalled)

- Alkaline:
- 64% LHV efficiency
- $665/kWinput

- Composite tanks:
- $323/kgH2 stored

- Intensifier or other?:
- 75% ad. efficiency

- Boil-off recovery:
- 0.2%/day losses

- Adv. Reformer and separation:
- 15 year life
- 72% LHV efficiency
- $0.90 MM (uninstalled)

- Alkaline or PEM:
- 71% LHV efficiency
- $400/kWinput

- Composite tanks:
- $296/kgH2 stored

- Advanced?:
- 85% ad. efficiency

- Boil-off recovery:
- 0.0%/day losses

- Compact and combined steps:
- 20 yr life
- 73% LHV eff.
- $0.82 MM (uninstalled)

- Adv. Alkaline/PEM:
- 76% LHV efficiency
- $300/kWinput

**Summary of Cases: Technology Parameters - Large H****2**** Capacity**

**Equipment**

**Current**

**Mid-term**

**Long-term**

- Note: Sensitivity analysis lower/upper bounds incorporate affects of other technologies.

## Generic Site Plans

**Generic Site Plans**

## Base Case Results: Mid-term Technology - Large H2 Capacity

- Note: For side by side comparison, central plant and delivery costs must be added to the Pipeline and LH2 cases.

- Forecourt Station Costs Only

## IRR Sensitivity Results: Mid-term Technology - Large H2 Capacity

- Note: For side by side comparison, central plant and delivery costs must be added to the Pipeline and LH2 cases.

## Base Case Results: Mid-term Technology – Capacity Comparison

- Note: For side by side comparison, central plant and delivery costs must be added to the Pipeline, Tube Trailer, and LH2 cases.

- Forecourt Station Costs Only

## Base Case Results: Technology Improvements – 1,500 kg/day

- For side by side comparison, central plant and delivery costs must be added to the Pipeline and LH2 cases.

## Sensitivity Results: Mid-term Technology - Large LH2

- 0.30

- 0.45

- 90

- 70

**Low**

**Base**

- 0.30

- 0.50

- 5

- 10

- 0.75

- 50

**High**

- 1.0

- 30

- 12

- 15

- 25

- Note: For side by side comparison with the on-site production options, central plant and delivery costs must be added to the LH2 case.

- Forecourt Station Costs Only

## Sensitivity Results: Mid-term Technology - Large NG SR

- 0.9

- 1.8

- 1.85

- ~4.15

**Low**

**Base**

- 375

- 525

- 90

- 70

- 3.1

- 8.58

**High**

- 1,500

- 50

- 0.025

- ~0.048

- 0.12

## Sensitivity Results: Mid-term Technology - Large Electrolyser

- 0.025

- ~0.048

- 1.1

- 2.2

**Low**

**Base**

- 0.12

- 3.7

**High**

- 375

- 525

- 90

- 70

- 1,500

- 50

- 74

- 71

- 64

## Approach for H2A Delivery Analysis

- Develop delivery component cost and performance database
- Develop delivery scenarios for major markets and demand levels
- Determine the cost of H2 delivery  for those scenarios
- Fixed charge rate
- Assumptions consistent with H2A production analysis
- Three delivery modes:
- Compressed gas truck
- Liquid truck
- Gas pipeline
- Future: mixed modes

## Delivery Scenarios

- Delivery costs are based on component combinations that meet the demands of the market

## Delivery Cost Analysis:Population Density => Household Vehicle Density => H2 Demand

- Population density consistently peaks in 10-20% of urbanized area
- Shape of density function (rate of decline) reflects compactness vs. sprawl
- Vehicle density rises from <0.5/capita in core to 1.16/capita in outer zones

- I

- II

- III

- IV

## A Generic Large City with Four Population Density Zones Requires Two Interconnected Mains + Service Lines

- Flow rates (daily demand) determine required diameter of inner and outer mains. Inner main can be smaller diameter pipe if pressure drop is not a problem
- Circuity factor applied to distribution mains corrects for noncircular layout
- Pressure at mainline inlet = 800 psi
- Minimum pressure at service station pipe inlet _>_ 200 psi

## Fuel Stations Are Uniformly Distributed in Zones. Total Stations Are Based on Density of H2 Demand 

- Rout = radius of outer distribution main ring
- RIII, RIV = radii of 3rd and 4th annular zones
- Rc = radius of zone centerline. Since stations are uniformly distributed around the centerline, station centroid ring = avg length of service lines
- Circuity factor applied to service lines corrects for grid layout

- Fuel Stations Are Uniformly Distributed in Zones. Total Stations Are Based on Density of H2 Demand

## A Generic Small City Requires a Single Main + Service Lines

*A Generic Small City Requires a Single Main + Service Lines*

**(Central fossil or renewable plant)**

## Delivery Components Modeled

| Delivery Components | Storage Components |
| --- | --- |
| Compressed gas truck
LH2 truck
Pipeline
Liquefier
Compressor (one-stage and multi-stage) | Compressed gas tubes
Bulk Liquid Hydrogen
Geologic storage
 |
| Terminals (gaseous and liquid) |  |

## Determining Delivery Costs

- Delivery Scenario Generator

- Delivery Component Model

- Equipment
- Requirements Model

***Hydrogen delivery costs, $/kg***

- H2A Delivery Analysis

- H2 Demand Model

## What We’ve Accomplished

- Developed central and forecourt standard reporting spreadsheets
- Documents assumptions, inputs, and results
- Completed base cases with sensitivity analysis for current, mid-term, and long-term technologies
- Natural gas reforming: central and forecourt
- Coal: central
- Biomass: central
- Nuclear: central
- Central wind / electrolysis
- Distributed electroysis
- Worked with key industry collaborators (KIC) to establish parameters, process designs, and technology assumptions
- Demonstrated ability to calculate levelized hydrogen price and document a consistent set of assumptions
- Results are not meant to “select” one technology over another, but to provide R&D guidance
- Developed set of delivery cost models including scenarios and component cost database

## Immediate Next Steps

- Use H2A for updating multi-year RD&D plan
- Website with spreadsheet tool, results, and detailed documentation (October 2004)
- Peer-reviewed paper (Fall 2004)
- Combine production & delivery scenarios
- Plan for next phase of H2A

## Many Many Thanks

- Mark Paster, Pete Devlin, Roxanne Danz – DOE
- Key Industrial Collaborators
- H2A team and their organizations