Suggested Citation:
Sun, Yongling, Joan M. Ogden, Mark A. Delucchi (2010) Societal Lifetime Cost of Hydrogen Fuel Cell Vehicles. Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-10-09

Various alternative fuels and vehicles have been proposed to address transportation related environmental and energy issues such as air pollution, climate change and energy security. Hydrogen fuel cell vehicles (FCVs) are widely seen as an attractive long term option, having zero tailpipe emissions and much lower well to wheels emissions of air pollutants and greenhouse gases than gasoline vehicles. Hydrogen can be made from diverse primary resources such natural gas, coal, biomass, wind and solar energy, reducing petroleum dependence. Although these potential societal benefits are often cited as a rationale for hydrogen, few studies have attempted to quantify them.

This paper attempts to answer the following research questions: what is the magnitude of externalities and other social costs for FCVs as compared to gasoline vehicles? Will societal benefits of hydrogen and FCVs make these vehicles more competitive with gasoline vehicles? How does this affect transition timing and costs for hydrogen FCVs? We employ societal lifetime cost as an important measure for evaluating hydrogen fuel cell vehicles (FCVs) from a societal welfare perspective as compared to conventional gasoline vehicles. This index includes consumer direct economic costs (initial vehicle cost, fuel cost, and operating and maintenance cost) over the entire vehicle lifetime, and also considers external costs resulting from air pollution, noise, oil use and greenhouse gas emissions over the full fuel cycle and vehicle lifetime. Adjustments for non-cost social transfers such as taxes and fees, and producer surplus associated with fuel1 and vehicle are taken into account as well.

Unlike gasoline, hydrogen is not widely distributed to vehicles today, and fuel cell vehicles are still in the demonstration phase. Understanding hydrogen transition issues is the key for assessing the promise of hydrogen. We have developed several models to address the issues associated with transition costs, in particular, high fuel cell system costs and large investments for hydrogen infrastructure in the early stages of a transition to hydrogen. We analyze three different scenarios developed by the US Department of Energy for hydrogen and fuel cell vehicle market penetration from 2010 to 2025. We employ a learning curve model characterized by three multiplicative factors (technological change, scale effect, and learning-by-doing) for key fuel cell stack components and auxiliary subsystems to estimate how fuel cell vehicle costs change over time. The delivered hydrogen fuel cost is estimated using the UC Davis SSCHISM hydrogen supply pathway model, and most vehicle costs are estimated using the Advanced Vehicle Cost and Energy Use Model (AVCEM). To estimate external costs, we use AVCEM and the Lifecycle Emissions Model (LEM). We estimate upstream air pollution damage costs with estimates of emissions factors from the LEM and damage factors with a simple normalized dispersion term from a previous analysis of air pollution external costs. This approach allows us to estimate the total societal cost of hydrogen FCVs compared to gasoline vehicles, and to examine our research questions.

To account for uncertainties, we examine hydrogen transition costs for a range of market penetration rates, externality evaluations, technology assumptions, and oil prices. Our results show that although the cost difference between FCVs and gasoline vehicles is initially very large, FCVs eventually become lifetime cost competitive with gasoline vehicles as their production volume increases, even without accounting for externalities. Under the fastest market penetration scenario, the cumulative investment needed to bring hydrogen FCVs to lifetime cost parity with gasoline vehicles is about $14-$24 billion, and takes about 12 years, when we assume reference and high gasoline prices. However, when externalities and social transfers are considered, the buy-down cost of FCVs in the US could about $2-$5 billion less with medium valuation of externalities and $8-$15 billion less with high valuation of externalities. With global accounting and high valuation of externalities, we would have $7-$12 billion savings on the buy-down cost compared to a case without externality costs. Including social costs could make H2 FCVs competitive sooner, and at a lower overall societal cost.