Abstract:Beijing could be an attractive region to initiate a hydrogen infrastructure for transportation. Air quality is poor, oil imports are soaring, and there is a desire to introduce innovative responses for the 2008 Olympics. If Beijing were to proceed to build hydrogen infrastructure before and after 2008, how they might proceed has not been addressed empirically or theoretically. We introduce the Hydrogen Infrastructure Transition (HIT) model and apply it to urban Beijing. HIT is a dynamic programming model, which generates the spatial and temporal infrastructure buildup decisions that minimize the net present value of capital and operating costs, carbon externalities, and refueling travel time disbenefits over time. HIT incorporates regionally specific spatial data to find optimal strategies for meeting an exogenously specified market penetration over time. Input assumptions can be varied to study how the optimal strategy depends on technological evolution, feedstock prices, carbon tax, and market penetration rate.

We find that: 1) regional spatial features have a significant impact on cost; 2) faster market penetration could make a better business case because scale economies in production and delivery can be taken advantage of earlier; 3) internalization of carbon costs should keep pace with market penetration to avoid high GHG emissions from coal gasification plants without carbon capture technology; 4) a rate of return of 12% is possible for the base case for hydrogen priced at $3.52/kg from 2010 through 2019, $2.17/kg from 2020 through 2059, and $1.51/kg from 2060 onward; and 5) free hydrogen during the early stage could be a financially feasible solution to stimulate hydrogen demand.