Phase 1 Results April 2013 UK H2Mobility Phase 1 Results This document reflects the results of a fact based study undertaken by the members of the UK H2Mobility project in 2012 with the assistance of professional consultants and advisors. The information contained in this document represents a collective view of the members listed and not that of individual members. It is intended only as a summary of the findings of one phase of the project. The members make no warranty as to its accuracy, completeness or suitability for any purpose. The members accept no liability whatsoever in respect of reliance placed by the user on information and materials contained in this document. This report and all information and data contained within it are owned by the members of the UK H2Mobility coalition. Other organisations and entities are welcome to use the data and information subject to a formal reference and acknowledgement. UK H2Mobility Phase 1 Results During 2012, the UK H2Mobility project undertook a robust production mix to achieve substantial CO2 savings relative to diesel fact based analysis of the potential for hydrogen fuel cell vehicles. This analysis has enabled the creation of a feasible and electric vehicles (FCEVs) in the UK. realistic roadmap for the introduction and roll-out of FCEVs in the UK, starting from 2015, together with an evaluation of the The work quantified the opportunities offered by FCEVs, studied benefits of its implementation. This report is a summary of the the barriers to their market introduction and integrated the findings. insights and results to understand the market dynamics. It predicted the required number of hydrogen refuelling stations to provide satisfactory national coverage and the required hydrogen The analysis was undertaken by the following organisations: McKinsey & Company and Element Energy Limited provided analytical support to the members of UK H2Mobility during the study. UK H2Mobility Phase 1 Results The UK H2Mobility members would like to thank the following organisations who kindly participated in interviews and provided input into the project’s findings: Arval Lex Autolease BVRLA National Grid CAP Sainsbury’s Commercial Group Shell DHL UPS The UK H2Mobility project benefited from having the following companies involved in the initial work of Phase 1: Air Products, Tata Motors and Vauxhall. The UK H2Mobility members would also like to thank the H2 Mobility Initiative in Germany and the participants in the study “A portfolio of powertrains for Europe: a fact-based analysis” for their kind contributions. This report was prepared in conjunction with Jonathan Lewis Consulting and Crest Communications (PR) Ltd. UK H2Mobility Phase 1 Results Contents Executive Summary i - iv Background 1-6 FCEVs and Hydrogen 1 Benefits to the UK of FCEVs 3 The Need to Act Now 4 The UK H2Mobility Project 5 Consumer Demand for FCEVs 7-14 Understanding Consumer Preferences 7 The Consumer Proposition 9 Consumer Reactions 11 FCEV Market Growth 13 Hydrogen Production and Retail 15-22 Supplying the Consumer with Hydrogen 15 The Refuelling Network Develops 17 How the Hydrogen is Produced 19 Benefits 23-26 The National CO2 Emissions Benefit 23 Local Air Quality Benefits 24 Industrial and Employment Benefits 25 Benefits for the UK Energy System 26 Towards Market Introduction 27-32 Building the Refuelling Network 27 Making it Happen 29 Next Steps 30 Support for the UK H2Mobility Process 31 Annexes 33-34 Data and Information Sources 33 Glossary 34 UK H2Mobility Phase 1 Results – Executive Summary Executive Summary Introduction FUEL CELL ELECTRIC VEHICLES (FCEVs) provide the potential to decarbonise road transport, create new economic opportunities, diversify national energy supply, and reduce significantly the local environmental impacts of road transport. The UK H2Mobility project was established to evaluate the benefits of FCEVs to the UK and to develop a roadmap for the introduction of vehicles and hydrogen refuelling infrastructure. Successful commercialisation will require the The UK H2Mobility members: establishment of a hydrogen refuelling network to support vehicle sales. This necessitates a co-ordinated llEvaluated the potential demand for FCEVs over approach involving many parties from different sectors time. acting together. llDetermined the hydrogen refuelling network FCEVs will be introduced in suitable markets from necessary to support the consumer demand and 1 planned its development. 2015 . The UK H2Mobility members recognise the importance of prompt action to ensure that the llIdentified a mix of production methods able potential economic and carbon benefits of hydrogen to provide cost-competitive hydrogen to the transport are realised within the UK. consumer while delivering significant CO2 emissions To build a fact base for the evaluation, the members reductions. of the project used their own data in combination llQuantified the benefits of establishing FCEVs in the with relevant information from previous studies and UK market. from published sources. Data on the performance, cost and availability of different classes of FCEV were aggregated and the costs of hydrogen production, distribution, storage, dispensing and retail calculated. In all cases, data were collated to cover the period 2015-2030. Having assembled the most robust and detailed fact base possible, the project was able to develop a roadmap for the roll-out of FCEVs and hydrogen refuelling stations in the UK. 1 Daimler, Ford, GM, Honda, Hyundai-Kia, Renault-Nissan and Toyota all signed a letter of understanding in September 2009 saying that they “strongly anticipate that from 2015 onwards” fuel cell vehicles could be commercialised. In 2013, Toyota and Hyundai have reiterated their commitment to a 2015 launch; Daimler and Nissan announced that they, in partnership with each other and with Ford, would go into series production of FCEVs from 2017. In September 2012, Honda reconfirmed its 2015 launch date for FCEVs. i UK H2Mobility Phase 1 Results – Executive Summary Consumer Demand adopters to generate sales of approximately 10,000 vehicles p.a. by 2020. As the vehicle costs become more competitive and the Gaining an improved understanding of the potential refuelling network develops, FCEV uptake increases rapidly. In the buyers of FCEVs was a central focus of the project. UK H2Mobility roadmap, by 2030 there will be 1.6 million FCEVs in the UK with annual sales of more than 300,000. A series of consumer focus groups and interviews provided new insights into how consumers view hydrogen-powered road The Hydrogen Refuelling Network transport. The focus groups explored consumers’ attitudes to FCEVs and related topics, including costs, performance (technical and environmental), safety and refuelling habits. The consumers It is important for the HRS network roll-out to strike a were receptive to FCEVs, especially in terms of vehicle performance balance between maximum consumer convenience (and and refuelling time. However, without intervention or dedicated therefore FCEV uptake) and investment required. mechanisms, in the early years after market introduction, FCEVs will be significantly more expensive to buy than conventional Consumers require both local availability and national coverage, vehicles using combustion engines, and the refuelling network and the quantitative survey showed them to be significantly more will be limited. These two factors were seen by the consumers receptive to FCEVs if they have access to more than one HRS surveyed as major barriers to buying an FCEV. locally. Detailed spatial modelling identified those locations which deliver the greatest consumer benefit. It showed that a roll-out In addition, a quantitative survey was completed by 2,000 targeting particular areas and the national trunk routes is the most consumers who have recently bought, or are looking to buy, efficient early strategy. a new or nearly-new vehicle. This was used to assess demand for the vehicles in different circumstances. Consumers were The analysis and network modelling undertaken within the project given information on the costs and performance (technical and indicated that 65 stations across the UK could provide sufficient environmental) of the vehicles. The information was based on initial coverage to start the market, covering major population a comparison between an FCEV and an equivalent vehicle with a centres (with more than one HRS in each) and the connecting diesel engine using the total cost of ownership over the first four roads. Thereafter, the network develops and extends in line with years of the vehicle’s life. The costs considered included purchase the demand for hydrogen by vehicle owners/users. The roadmap price (including VAT) less the residual value, financing, fuel, shows full national coverage with 1,150 stations by 2030, maintenance and servicing, insurance and vehicle tax. Although providing close-to-home refuelling for the whole of the UK. the project assumed a continuation of preferential vehicle tax rates In the market conditions assumed in the UK H Mobility roadmap, for zero CO vehicles, no other financial incentives were included. 2 2 the HRS network as a whole will not be profitable initially but The project was able to segment the market into groups of will be able to cover its operating costs by the early 2020s and consumers with similar attitudes to the particular characteristics to reach break-even in the late 2020s. In the roadmap, the total that they value in a vehicle, to new technology, to the environment financing need up to the break-even point is £418 million, of and to costs. For each group, the dependency between total costs, which £62 million is required before 2020. availability of hydrogen refuelling stations (HRS) and the decision to buy an FCEV was quantified. Some 10% of new vehicle buyers The low utilisation of the HRS network before 2020 will hurt showed themselves to be potential early adopters of FCEVs, being profitability and analysis of the economics of individual stations receptive to new technology and environmentally motivated. shows that the early stations will not be able to deliver the same returns as those built later.