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CHAPTER 3 - International Perspective

International Perspectives and EU Roadmap for Hydrogen and Fuel Cells

31. In this report regular reference is made to the "European Union roadmap". This is a significant document from which Scotland can benefit. This chapter will explain the background to it and also highlight other international experience.

32. At the moment fuel cells are not economically competitive with other sources of generation, although fuel cell systems out-perform their competitive products in conversion efficiencies and environmental benefits. The reason for this economic disadvantage is entirely due to the lack of economies of scale and continuous cost improvements in the technology. Once fuel cell systems move from prototype to large-scale production, the potential market is enormous. The European Hydrogen and Fuel Cell Technology Platform, has been developed by a pan-European group of experts of whom HEG group member, Professor John Irvine, is a member. They have developed the diagram below to explain the progress towards economic competitiveness.

Figure 2: European Hydrogen and Fuel Cell Technology Platform, "Deployment Strategy Report", Snapshot 2020

33. HEG's vision for Scotland draws heavily on the EU 2020 vision. By 2020, conventional oil supply is unlikely to be able to meet demand. Certainly, Europe's oil import dependence will be in excess of 70%, far higher than the 50% it is today. Hydrogen is therefore expected to become an important alternative energy vector. However, any major change in the energy industry is likely to require several decades to implement effectively, owing to the high capital intensity and long asset lives involved.

34. In pursuit of the long-term goals, a set of milestones, known as "Snapshot 2020", have been set by the European platform. 2020 has been chosen because it encourages challenging targets, whilst helping to test for practicality and feasibility. It also reflects requirements on the application side, corresponding with the findings of the Strategic Research Agenda ( SRA). Accounting for a lead-time from research to mass market roll-out, 2015 has been chosen for the SRA milestones, allowing 5 years for serial development and commercialisation activities.

35. The Table below indicates the deployment status for applications by 2020, expressed in numbers of sold units per year and cumulative sales projections respectively.

Figure 3: Key Assumptions on Hydrogen & Fuel Cell Applications for a 2020 Scenario

36. There are a number of countries that are investing significant funds in hydrogen energy and fuel cell technology. The most significant economic impacts have been in Canada, Germany, Japan and the United States of America where federal and state governments have led the development of these technologies and which are now reaching the next major challenge - commercialisation of the technology. In terms of the economic impacts that these countries have experienced, the major employment and value added impacts to date have been in manufacturing and R&D.

37. The US Department of Energy has adopted a different approach. It is committed to a 10-year research, development and demonstration programme in order to achieve demanding performance and cost targets which will enable industry and government to commit to a full commercialisation decision in 2015. The milestone for 2012 is to deploy around 100,000 units with a total installed capacity of 500 MWe capacity.

38. In both the USA and Japan, firm plans are supported by substantial public funds. Japan has set aside a budget in 2005 equivalent to €260 million. The US 2005 Federal Appropriation equalled €235 million plus equivalent funding from individual states. China, India and S Korea have also now entered the race.

39. In particular HEG has been alerted to the funding level of two-hundred-and-fifty-million euros per annum that may be committed by EU Framework Programmes targeted specifically at Hydrogen and Fuel Cell technologies. HEG sees this as a prime target for cross-national programmes that can accelerate and enhance Scotland's involvement in hydrogen and fuel cell technologies.

Relevance to Scotland

40. In the Scottish context, hydrogen and fuel cell technologies match well with Scottish capabilities in engineering of energy systems, technological development and manufacture. This is greatly reinforced by a wealth of renewable resources and the associated opportunities for clean energy export that presents a very real possibility that must be enabled. Furthermore, Scotland has some uniquely suitable development grounds to prove the feasibility of these new technologies and to showcase Scottish technology.

41. In essence, hydrogen and fuel cell technologies have an important role to play in Scotland becoming a 'centre of excellence' for sustainable energy. Scotland has over 25% of Europe's renewable resource impinging upon its shores, with the Pentland Firth alone predicted to supply 15TWhr per annum, which would equate with more than 0.25% of the 15 country EU's electricity production.

42. Scotland's renewable resource is primarily located in the Highlands and Islands whilst our skills in technology development are reinforced by extensive industrial capabilities in engineering for energy systems in the West of Scotland, high technology manufacturing in the Central Belt and oil and gas expertise in Grampian.

43. Several new Scottish companies; such as Fuel Cells (Scotland) Ltd, St Andrews Fuel Cells Ltd, Smart Energy and SiGEN; are already operating to develop and manufacture new fuel cell technologies as well as enhancing the systems integration for hydrogen and fuel cell technologies. The Scottish Hydrogen and Fuel Cell Association ( SHFCA) is already the leading UK industry association and is providing an excellent focus for these new industries in Scotland. On a UK level, Fuel Cells UK is promoting the development and commercialisation of fuel cells.

44. The Scottish academic base is strong with world-leading activities in fuel cell materials development, integration of fuel cells and hydrogen, and key activities in hydrogen production and storage. St Andrews and Strathclyde are International Centres of Excellence respectively in Fuel Cell Development and Integration with developing activities in Heriot Watt, Napier, Aberdeen and RGU.

45. Profiles of the above active organisations are attached in Appendix 3.

46. A study commissioned by Scottish Enterprise showed that, dependent on the market penetration of hydrogen and fuel cell technologies, up to 1000 full-time jobs in Scotland could be created from the hydrogen and fuel cell industry in the relatively short term with a net additional GVA of £39 million per annum. Additional jobs and GVA could be created from,
e.g. setting up of major manufacturing plants.

47. This independent assessment aligns with the HEG 2010 vision and underlines the need for Government support.

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