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Shell Takes Flexible Approach to Fueling the Future
by Dean Stanley

While Shell Hydrogen has taken some baby steps toward the coming hydrogen economy, it has yet to make that big leap of faith. And although caution may be the watchword right now, the underlying message is one of extreme optimism, especially coming from an energy giant like Shell.

Created as a wholly-owned subsidiary of Royal Dutch/Shell in 1999, Shell Hydrogen was established to formalize the corporation�s prior work in the hydrogen arena. Since then, the company has forged partnerships with several automakers, including General Motors and DaimlerChrysler, as well as the U.S. Department of Energy (DOE). Although hydrogen may be relatively exotic to the public at large, Shell and other energy companies have been using the element for decades as a chemical component in their refining activities.
Shell Hydrogen CEO, Jeremy Bentham (left), with General Motors� Larry Burns, fields reporters� questions on the future of a hydrogen infrastructure.

Quick to dispel comments to the contrary, Jeremy Bentham, CEO of Shell Hydrogen since 2003, reminds anyone who questions the prospect of a future hydrogen infrastructure that, in fact, one already exists. �The question of infrastructure does keep coming up. There is already a hydrogen infrastructure, but it�s mainly in industrial settings,� he states.

�There�s hardly a location in the developed world which is more than 50 to 100 miles away from a major hydrogen production facility. What is new is hydrogen being used as a fuel, rather than for its chemical purposes,� says Bentham, who also chairs the European Hydrogen and Fuel Cell Technology (EHFCT) platform. �Shell produces 7,000 tons a day of hydrogen, mainly in our refineries where we use it to make clean and light traditional fuels,� he explains.

Worldwide production of hydrogen is currently about 50 million tons annually, which according to Shell would be enough to support Europe�s transportation requirements, if all vehicles were powered by hydrogen fuel cells.

But while a great deal of hydrogen is produced during the refining process, most all it goes right back into creating hydrocarbon fuels. �The hydrogen we create now is the hydrogen we consume, so it�s sort of a steady state thing,� reminds Timothy O�Leary, manager of External Affairs at Shell.

This begs the question: How much hydrogen could possibly be made available for a hydrogen infrastructure if most of the production is already used as feedstock for petroleum refining and other commercial applications?

Making More Hydrogen
Given the relative infancy of the fuel cell industry, Bentham views concern over the hydrogen supply as somewhat premature, if not misplaced. �The time-determining step for the development of the hydrogen infrastructure won�t be the provision of hydrogen and the hydrogen infrastructure,� says Bentham. �The time-determining step is the development and the mass production of the attractive (fuel cell) applications.�

And this is the crux of Shell Hydrogen�s position on the creation of a hydrogen infrastructure. �We, as Shell, are trying to be champions in working with partners to help facilitate the development of (fuel cell) applications in the industry because we believe it is good business,� he says, while at the same time tempering the message, �I won�t pretend that you can just click your fingers and everything is easy. There�s plenty of work for people like us to do. But it is in our field of experience and expertise.�

Over the past five years, Shell Hydrogen has been pushing the point that hydrogen is a viable energy medium for future transportation. But the company is quick to point out that, at least in the beginning, the sources for hydrogen production will range from gray to green � both carbon-based and renewable resources.

Shell is on record as stating that hydrogen will initially be obtained mainly from natural gas, but ultimately it expects hydrogen to come increasingly from renewables, such as wind and solar � at the moment, Shell has a hand in all three.

�Clearly there are concerns from many governments about the places in which the large oil reserves in the world are currently found,� says Bentham. �The fact of natural gas having a broader supply base is of interest to people as well. But one thing about hydrogen in this context is that currently almost all transport fuel is oil-based, and hydrogen is a very attractive transport fuel which can be produced from almost anything.

Most recently, Shell WindEnergy, Inc. presided over the construction of a 162-megawatt wind farm in Colorado, which began producing in early 2004. �Wind power is becoming increasingly competitive with coal-fired plants,� explains O�Leary, �because wind power is the only major production source that does not require water.� Water for cooling and powerplant steam cycles is a non-starter in the drought-stricken western states.
The Colorado Green wind farm, a joint venture between Shell WindEnergy and PPE Energy, consists of 108 1.5-megawatt General Electric wind turbines.

But at this early stage, Shell is less concerned about which resources will provide the energy needed to produce the hydrogen. Rather, the company wants to learn as much as possible about hydrogen refueling and how to meet future customer needs as demand increases in the next 10 to 15 years.

�Hydrogen is a route to open up options in energy policy which haven�t been opened before. And whether that hydrogen is produced from natural gas, or from coal, or from nuclear electricity or wind-based electricity, it opens up those policy options in an attractive way,� says Bentham. �It also means that doors do not have to be opened or closed too early in terms of the primary energy choices.�

Placing the Car(t) Before the Fuel?
Shell�s pragmatic approach may seem less than encouraging to those looking for hydrogen to come on line fast and furious. Even as a self-professed standard bearer of the hydrogen cause, Shell prefers to take measured steps.

�Obviously, it would be irresponsible to bring together investment in an infrastructure which will be done in the wrong place at the wrong time and lead to a very low utilization of capital for a long time,� Bentham warns.

Shell�s existing hydrogen fueling station in Washington, D.C., and its future portable station announced earlier this year for the New York City area � due in 2006 � are part of Shell Hydrogen�s early efforts to establish what the company terms �mini networks.� A third station located between these two will form an East Coast hydrogen corridor to support a number of hydrogen test fleets from GM and other DOE partners.

Bentham maintains that Shell and the other energy companies can support whatever demands the automotive industry creates as fuel cell vehicles move closer to mass production. The initial stages will likely be incremental, which works for Shell, but as consumer interest and vehicle production ramps up in the next ten to fifteen years, supply is not seen as a huge bogey.

Shell�s Washington , D.C. integrated gasoline/hydrogen fueling station also includes a visitors center.

�If (fuel cell) vehicles are being chosen by customers, that means they are choosing against other vehicles which are fueled by something else,� Bentham points out, reminding that integrated gasoline/hydrogen stations � accessible by the public � will help feed interest in fuel cell vehicles.

�In Washington, D.C. it�s just that: gasoline pump, gasoline pump, hydrogen pump,� says Bentham describing the company�s permanent station in the nation�s capital. �You can generate a lot of interest�people see a hydrogen vehicle and say �that�s interesting, there�s a fuel cell vehicle over there.��

While there is still validation to be done regarding the best way to address fueling issues, Bentham believes that there are no major obstacles. �We are ready to go as soon as there are customers wanting the fuel,� he firmly states.

Beginnings of a Hydrogen Fueling Infrastructure
According to Bentham, Shell is the only major energy company currently working in the hydrogen area on three fronts: North America, Europe and Japan. While Shell Hydrogen�s investment to date has been miniscule compared to purse strings of its parent, each small step is part of a coordinated five-phase plan to bring a retail fueling infrastructure on line in the coming years.

Of the refueling stations already in operation, the most notable include one outside of Reykjavik, Iceland, which produces hydrogen onsite using an electrolyzer powered by one small portion of that country�s vast geothermal resources.

Shell Hydrogen also operates one of five hydrogen fueling stations in Tokyo, Japan. Japanese industrial gas company, Iwatani, was responsible for the system design and the arrangement of refueling devices for the station, which recently celebrated its 1,000th fill up since opening in January, 2005.

As a partner in a nine-city European program for fuel cell-powered public transport buses � the Clean Urban Transport Unit (CUTE) program � Shell Hydrogen is involved in fueling stations in several cities, including Amsterdam and Luxembourg.

Easy as One, Two, Three?
Shell�s approach to setting up a hydrogen infrastructure is embodied in what Bentham calls their �lighthouse projects� or mini networks. There are five steps that form Shell Hydrogen�s plan to fully develop fueling infrastructure:

Stage One
Provides refueling from the transport side, such as at a bus depot, where hydrogen refueling capability is not publicly accessible. Shell Hydrogen�s Amsterdam and Luxemburg facilities are typical of this early development stage.

Stage Two
Offers public accessibility, but is still not integrated into an existing gasoline station. The Shell Hydrogen facility in Reykjavik, Iceland, is located next to a traditional gasoline station. City buses use this station to refuel, but it is also open to the public.

Stage Three
This is where the present and future meet. Shell Hydrogen�s station in Washington, D.C. is an example of a fully integrated fueling site combining both gasoline retail pumps and a hydrogen dispenser.

Stage Four
Expands the scope of these stations from supporting just a handful of vehicles to serving an entire fleet. Shell Hydrogen�s Washington, D.C., and New York City stations represent this step by providing local refueling capabilities that can support future fuel cell test fleets from GM, DaimlerChrysler and other manufacturers.

Stage Five
The ultimate outgrowth of the stages one through four, this stage links various retail sites with corridors to create a networked infrastructure that can support the commercial rollout of hydrogen vehicles. A third, and as yet unnamed, refueling station to be located between Washington, D.C., and New York City would establish Shell Hydrogen�s East Coast corridor.

These are all just baby steps for a company like Shell. As Bentham reminds, they have yet to complete even a small network. �In New York City, we announced part of the project we�re doing with the DOE and GM, which is setting up this east coast corridor,� says Bentham.

�These are good steps forward, but they don�t yet constitute a full mini-network because you don�t have that (fuel cell) fleet,� he says, adding, �In Japan, you have an early step toward the mini-network, but the sites in Japan are not integrated, so they don�t yet constitute what we would call a full lighthouse project.�

Onsite Reforming or Traditional Delivery Methods?
Like many of the questions surrounding a hydrogen future, the type and size of hydrogen fueling stations is open for discussion. In fact, just as there is no single source of electrical power generation in any one geographical or political area, hydrogen production and delivery will take shape based a number of factors.

�One of the great attractions of hydrogen is that can be readily produced from a diverse range of sources,� says Bentham, �It can also be distributed in a diverse range of ways.

�All the projects that we are engaged in are exploring those different routes,� he adds, stating that some routes will have centralized hydrogen production and transport to the site, while others will use natural gas onsite to produce hydrogen. �At our site in Amsterdam and our site in Reykjavik, we�re using electricity which is produced from renewable sources.�

Shell Hydrogen�s Reykjavic fueling station uses an onsite electrolyzer powered by Iceland�s nearly unlimited geothermal resources.

Some factors are more basic, such as local building restrictions. Finding a suitable location in Washington, D.C., was time consuming and involved conferring with local authorities about integrating hydrogen storage into an existing gasoline retail station.

�We actually work a lot with the permitting and zoning authorities to facilitate the work of preparing the site and that just takes time,� Bentham explains, adding �For example, for the Washington D.C. site, there was about a two-year period between deciding (on the location) and the actual opening of the site.� Of course, situating an electrolyzer onsite would have created even more hurdles.

�If you add the space requirements and other setbacks required for onsite production, you reduce the number of sites that are attractive for hydrogen, says Bentham. �There will be some niche areas and locations where onsite production will be attractive, but it�s not the big mode of production and distribution for the commercialization of the infrastructure.�

Bentham believes that Shell and the other energy companies have the experience to grow a hydrogen infrastructure, regardless of the modes of production, delivery and storage. �This is our field of expertise. Over the years, fueling sites have become optimized to the consumer environment in which they live, so they�re at convenient places for large numbers of people,� he explains.

�We strongly believe that there is a major role for existing infrastructure in being the most attractive place to fuel vehicles, but not all of them are suitable for incorporating hydrogen, Bentham adds. �In our view of these mini networks, there would be sites where you would have several hydrogen (fueling islands), but they would be supplied from a central supply point.�

Financing the Hydrogen Economy
With nearly a century�s worth of supply chain and retail experience, Shell and the other energy companies bring with them the benefits of an existing fueling infrastructure. This is not to say that piggybacking a hydrogen network onto the current petroleum-based distribution network will be cheap.

Initial investments may continue to be expensive, especially in the early demonstration projects such as Shell Hydrogen�s Washington, D.C. station, which was built in partnership with GM, but not the DOE. An existing Shell gas station was chosen from 50 potential sites then retrofitted with a hydrogen fueling pump, fed by a relatively small 1,500-gallon hydrogen tank. The overall cost for the project topped $2 million.

Under the DOE program, Shell is looking to keep costs down while facilitating the deployment of hydrogen-capable stations. The company plans to do this by using portable refueling units, like the one slated for the New York City area. Doing so should help to cut costs for the early demonstration projects, but even now cost estimates for an entire fueling infrastructure seem to be dropping.

A recent study commissioned by industrial gas giant, Linde AG, stated the cost of building 2,800 hydrogen stations across the European continent was �manageable,� at about $4.6 billion over the next 15 years. The Linde figure is significantly less than Shell Hydrogen�s November, 2003, estimate of $20 billion.

While reticent to discuss specific dollar projections, Bentham tends to agree that the Linde estimate is in line with Shell�s current thinking. �I�m not familiar with all the details, but some of the main messages are not dissimilar with the way that we see things.

�The kinds of ideas and possibilities that are being brought forward by Linde sound like they�re not inconsistent with the types of thinking that a broader range of stakeholders, such as the EHFCT platform, have been considering,� says Bentham, adding that the same economies of scale that will make fuel cell vehicles affordable can be applied to the infrastructure as well.

�If you�re making a (fuel cell) vehicle now in numbers of 100, they would cost a million dollars each, because they�re custom-made. But you mass produce them and they cost around $10,000. The same is true with the infrastructure,� he adds.

�As you build the infrastructure, then the actual costs of the hydrogen will be very similar as you�re getting with gasoline. The cost of stations will obviously diminish over time as infrastructure becomes more mature,� Bentham reminds.

Regardless of the timing, with its parent company�s clout behind it, Shell Hydrogen�s ability to react will have everything to do with market forces. �As the fuel cell vehicle industry and ourselves develop, we will invest consistently,� says Bentham, adding, �If the timing of the other factors comes together five years earlier, then we will invest that much more, that much earlier.�

Relying on government incentives is also part of the plan, which Shell sees as necessary, especially in the beginning when the general public needs to be educated about hydrogen and encouraged to consider fuel cell vehicles.

And while there is a small segment of consumers that are willing to pay for the public benefits of low greenhouse gas emissions, Bentham reminds that the majority will see hydrogen in a more transparent way. Most consumers will base their choice on existing purchase criteria.

�The actual drive is around how attractive the vehicle is to a person in terms of its style, its brand, its acceleration � these are the type of things that people pay out of their own pocket for.

�We see that those features can be ultimately attractive in fuel cell vehicles, so we do see a business growing here. And, at the same time, we can see the framework that will encourage and enable that business to grow because of the public benefits,� Bentham says, adding that governments will be key to leading the way, �through fiscal and other means of shaping and incentivizing vehicle and fuel markets, (for businesses) who want to participate in a way that is positive for the development this ultimately commercial engine.�

How Soon Hydrogen?
Crystal balls and tarot cards aside, the precise timing of a hydrogen future is really anybody�s guess. Bentham is not completely comfortable when pressed, but puts it into perspective by comparing hydrogen�s commercial potential to other, more recent technologies.

�It�s a little bit like the cell phone,� Bentham says. �How many people had cell phones in 1980? They were clunky, there wasn�t much coverage and yet, you take a breath, your children grow up and it�s there.

�I feel that we�re in the same kind of phase with hydrogen fuel and fuel cell vehicles. I believe that for those companies which seek to champion this area, there�s an opportunity. I�m a business man and we wouldn�t be doing this unless we saw an important business opportunity,� Bentham states emphatically.

Carrying over his corporate optimism to his personal beliefs, Bentham explains that he holds out hope for hydrogen. �I care about the future for my children and for other people, and I�m proud to be working with people who feel just the same way, and who are intending to be champions in this,� says Bentham.

�I have a seven-year-old son who�s really into cars,� he says, adding, �I hope that when he gets to the point of being able to choose his first car, that he�s got the choice of it being a hydrogen-powered vehicle.

�Whether it will be his first car or whether I�ll be waiting for the second-hand market to grow depends on a lot of things,� Bentham adds, �but I think that�s the kind of timescale that we�re talking about before we�ll be seeing these attractive vehicles in the showrooms.�


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