Master_thesis_project_athanasia_lypiridi.pdf

MASTER OF SCIENCE THESIS

Fuel Cell Technology in Europe: What Are the Main Economic Barriers and How Can Policy Help to Overcome Them

A Master Thesis submitted to TUDelft for the M.Sc. of „‟Sustainable Energy Technology‟‟

Author: Nancy Lypiridi Supervisor: Servaas Storm

Delft, 2013

Summary Renewable Energy Technologies (RET) are the most promising way of covering the (present and future) energy demands all over the world in a sustainable manner and they have a big potential for being the energy leader in a few years. Until recently RET have supplied between 15 and 20% of the energy world demand and this will be possibly increased up to more than 20% in 2020, according to the Kyoto protocol that introduces at least 20% energy supply by RET and 20% less CO2 emissions by then. The European Union countries, considering the fossil fuel reserves‟ long-term depletion and their negative impact on environment, aim to meet these goals and move towards renewable energy solutions that combine both technological development and economic viability. (EC 3, 2013) However only a small part of the RET potential is efficiently implemented, since there are many different barriers that pose a threat to the transition to renewable technologies. These barriers to RE promotion include mainly the lack of cost effectiveness, market competition (from conventional energy technologies), technical, institutional, political, social and environmental barriers. Hereby the economic-financial barriers will be examined mainly in a more elaborated scale but also the rest of the barriers will be analysed always considering their economic aspects and impacts. These obstacles are responsible for keeping the world locked into an insecure, inefficient and high-carbon energy system unwilling to adopt new alternative energy technologies, a situation that is well known as lock-in system. (J.P.Painuly, 2000) The big challenge is to inform and educate people according to certain standards and find economic policies and instruments so as the renewable technologies to get lockedout. In order to create such a framework with both the obstacles stopping the alternative methods’ further development and the measures that could be implemented to solve this problem, it is necessary to select a certain renewable technology in a certain region. Therefore the fuel cell technology in Europe (as immature technology being strongly locked-out) will be examined as an example to identify its technical characteristics and history over the years, the economic barriers stopping its promotion by comparing different EU countries and finally define the economic policies that could help its further development in the less developed of them (Greece). (J.P.Painuly, 2000) ;(IEA, 2011) Keywords: Renewables, Fuel cells, Hydrogen, Economic barriers, Promotion, Greece, Europe

List of Contents PART A: Theoretical and Technical analysis ........................................................................ 1 1

Introduction ................................................................................................................... 2

2

Current Problem: ‘Lock-in’ effects on Renewable Energy ............................................... 7

2.1

How „technological lock-in‟ hinders the transition to renewable energy ..................................... 7

2.2

Understanding the „lock-in‟ ....................................................................................................... 18

2.3

Problem Definition: How does „lock-in‟ apply to fuel cell technology ...................................... 19

3

Technology Selection: Fuel cells .................................................................................... 22

3.1

History of fuel cell technology................................................................................................. 22

3.2

Applications of fuel cell technology ........................................................................................ 26

3.2.1 Most common application: Fuel Cell Vehicles (FCVs) ........................................................... 29 3.3 3.4

Technical analysis of fuel cell technology ................................................................................ 34 Potential of fuel cell technology .............................................................................................. 40

PART B: Economic Barrier Analysis ................................................................................... 45 4

‘Lock-in’ Analysis: Barriers blocking RE and Fuel Cell Development............................ 46

4.1

The role of economic barrier analysis ....................................................................................... 46

4.2

Barriers to renewable energy technology per category ............................................................. 47

4.2.1 Market failures ......................................................................................................................... 48 4.2.2 Market distortions.................................................................................................................... 53 4.2.3 Economic/financial barriers ..................................................................................................... 57 4.2.4 Institutional barriers ................................................................................................................ 59 4.2.5 Technical barriers .................................................................................................................... 61 4.2.6 Social/cultural/ behavioral ...................................................................................................... 63 4.2.7 Other barriers........................................................................................................................... 64 4.3

Barriers to fuel cell technology per category ............................................................................ 64

4.3.1 Market failures ......................................................................................................................... 65 4.3.2 Market distortions.................................................................................................................... 71 4.3.3 Economic/financial .................................................................................................................. 73 4.3.4 Institutional/ Administrative .................................................................................................. 77 4.3.5 Technical .................................................................................................................................. 78 4.3.6 Social, Cultural and Behavioral ............................................................................................... 86 4.3.7 Other barriers........................................................................................................................... 88 4.4

Predominant barrier to fuel cell promotion .............................................................................. 90

4.5

Case study: Fuel cell technology in EU .................................................................................... 96

4.5.1 Fuel cells in Germany and the Netherlands: the mature technology ...................................... 96 4.5.2 Fuel cells in Greece: immature technology ............................................................................ 106 4.5.3 Comparing the above EU countries in terms of fuel cell technological progress .................. 109 4.6

Factors contributing to fuel cell development in EU.............................................................. 112

4.6.1 Understanding the theory of technology diffusion and commercialization ........................... 113 4.6.2 Increasing fuel cell products‟ competence .............................................................................. 115 4.6.3 Increasing environmental and social interest by creating the appropriate hydrogen and fuel cell climate… .................................................................................................................................. 116 4.6.4 Supporting entry of firms, organisations, universities and other investors ........................... 117 4.7

Conclusions on barrier analysis ............................................................................................... 119

PART C: Policy Analysis................................................................................................... 120 5

Policy Analysis: Overcoming the Barriers ................................................................... 121

5.1

The role of policy for RE promotion ....................................................................................... 121

5.2

Specific policies promoting RE and fuel cells in Greece ......................................................... 122

5.2.1 Government ........................................................................................................................... 124 5.2.2 Innovators/ entrepreneurs ..................................................................................................... 148 5.2.3 Operators of the grid ............................................................................................................. 153 5.2.4 Consumers .............................................................................................................................. 156

5.3

Conclusions on policy analysis ................................................................................................ 158

PART D: Findings & Conclusions ..................................................................................... 160 6

Overall Conclusions and Suggestions ........................................................................... 161

6.1

General conclusions for Europe ............................................................................................... 161

6.2

General conclusions for Greece ................................................................................................ 162

6.3

Reflection of the Thesis ........................................................................................................... 164

6.3.1 Strong points of the project ................................................................................................... 164 6.3.2 Limitations and weaknesses of the project ............................................................................ 165 6.4

Suggestions for future work.................................................................................................... 166

References .......................................................................................................................... 168 Appendices ......................................................................................................................... 182 Appendix A: Additional figures ......................................................................................................... 182 Appendix B: Additional tables........................................................................................................... 189 Appendix C: Additional information ................................................................................................. 193 C1. Hydrogen production methods for further fuelling of fuel cells .................................................. 193 C2. Advantages and disadvantages of fuel cell technology ............................................................... 194

List of figures Figure 1. Energy sources share in the electricity production over the last years (D.W.Aitken, 2003) .. 10 Figure 2. Decreasing trend of oil/coal/gas and increasing trend of RES up to 2050 (estimated in amount of energy production) (D.W.Aitken, 2003) ................................................................................ 10 Figure 3. Comparison between private and social costs for conventional and RES technologies respectively ............................................................................................................................................... 14 Figure 4. Cost reduction of a RET system (e.g. PV system) and the respective projections) over the years (EPIA, 2011) .................................................................................................................................. 16 Figure 5. Component replacement in the existing system (P.Windrum, 1999) ...................................... 18 Figure 6. Entire existing system replacement by a new system (RES technologies to replace the conventional ones) (P.Windrum, 1999) ................................................................................................... 19 Figure 7. Trends in fuel use over the years showing a reduced oil consumption and almost 100% hydrogen containing fuels (B.Cook, 2001) ............................................................................................... 20 Figure 8. Grove’s first idea of fuel cell in 1839 (B.Cook, 2001) .............................................................. 22 Figure 9. NASA AFC used for Apollo mission (B.Cook, 2001) .............................................................. 23 Figure 10. Representation of a CHP system in a house by means of fuel cell stack (B.Cook, 2001) ..... 27 Figure 11. Comparison between compressed hydrogen devices (fuel cells) and conventional batteries used in portable devices (B.Cook, 2001).................................................................................................. 28 Figure 12. Fuel cell car components and its fuelling supply method representation, respectively (C.Davis et al, 2003) ................................................................................................................................ 31 Figure 13. The operation of a hydrogen fuel cell stack in a FCV (R.Rose, 2008) .................................. 31 Figure 14. CO2 emissions in gr/km for each vehicle category from 2010 and up to 2050 (Carbon Trust, 2012) ......................................................................................................................................................... 34 Figure 15. Main operating principle in a hydrogen fuelled fuel cell ........................................................ 36 Figure 16. Single fuel cell components to create a fuel cell stack (N.Karim et al, 2011) ....................... 37 Figure 17. R&D budget in million USD for RETs until 2004 (Roads2HyCom 2, 2013) ........................ 61 Figure 18. PEMFC stack cost in terms of the components individual prices ......................................... 68 Figure 19. Hydrogen infrastructure required to supply fuel cell cars (Fuel Cell Today 2, 2013) ........... 70 Figure 20. Payback time of fuel cell systems based on their cost range (G.Karady et al, 2002) ........... 74 Figure 21. Single investor perspective resulting to changes in levelised costs of hydrogen depending on the year of investment (P.Lebutsch, M.Weeda, 2012) ............................................................................ 75

Figure 22. Cumulative cash flow graph in terms of years to present the point of NPV=0 or else of the payback time (equity payback time of 9.2 years) of the fuel cell system ............................................... 94 Figure 23. Break-even investment graph to estimate profitability and payback time ........................... 95 Figure 24. Hydrogen cars’penetration in percentages over the years in the Netherlands, according to different scenarios (P.Lebutsch, M.Weeda, 2011) ................................................................................. 102 Figure 25. FCVs’ cost reduction over the years eliminating the cost gap (P.Lebutsch, M.Weeda, 2011) ............................................................................................................................................................... 103 Figure 26. Map of hydrogen cars’and refuelling facilities’diffusion in the Netherlands by 2050 according to the ‘low’ (on the left) and ‘high’ (on the right) scenarios, respectively (P.Lebutsch, M.Weeda, 2011) ............................................................................................................................................................... 104 Figure 27. Annual budget by EU or non EU countries on hydrogen related R&D in 2008 (B.Gnorich, 2008) ....................................................................................................................................................... 110 Figure 28. Hydrogen technology entries (in percentages) in 2008 in EU and non EU countries (B.Gnorich, 2008)................................................................................................................................... 110 Figure 29. Governmental spending on energy RD&D from 2005 to 2011 in Greece (IEA, 2011) ........ 112 Figure 30. Technology diffusion curve in respect to time (P.Balachandra et al, 2010) ........................ 114 Figure 31. Technology commercialization procedure in respect to cost (P.Balachandra et al, 2010) .. 114 Figure 32. Innovation chain of a technology (P.Balachandra et al, 2006) ............................................ 115 Figure 33. R&D funding (3%) as a percentage of FIT funding for RE ................................................ 130 Figure 34. R&D funding on energy and renewable energy (in million dollars) until 2008 (G.Rausser et al, 2011).................................................................................................................................................. 135 Figure 35. Estimated required installed capacity from different RET from 2010 to 2020 (MEECC, 2010) ....................................................................................................................................................... 142 Figure 36. Pre-liberisation market structure based on PPC (before L. 2733/99) ................................. 155 Figure 37. After liberisation market structure for the grid operating system (after L. 2733/99) ........ 156 Figure 38. Typical applications in respect to the fuel cell category (J.Larminie, A.Dicks, 2003) ........ 182 Figure 39. Schematic of a fuel cell vehicle (2, 2013) ............................................................................. 182 Figure 40. Most significant steps in the fuel cell vehicles‟ history (Daimler, 2013) .............................. 183 Figure 41. Evolution of Mercedes Benz fuel cell powered vehicles from 1994 until 2025 (Daimler, 2013) ............................................................................................................................................................... 184 Figure 42. Operating principle of PEMFC (Fuel cells 2000, 2013) ....................................................... 185 Figure 43. Types of fuel cells with their operating principles (incl. anode and cathode fuels, moving ions and operating temperatures) (Fuel cells 2000, 2013) ..................................................................... 185 Figure 44. Hydrogen Production from fossil fuels and renewables (Germany Trade&Invest, 2010) .... 186 Figure 45. Cost structure for hydrogen supply in 2040 in percentages based on a moderate scenario for Germany (Germany Trade&Invest, 2010) ............................................................................................. 186 Figure 46. Hydrogen energy chain (B.Gnorich, 2008) ........................................................................... 187 Figure 47. Roadmap for hydrogen and fuel cell activities from 2000 to 2040 (Window on state government, 2003).................................................................................................................................. 187 Figure 48. Map of Greece....................................................................................................................... 188

List of tables Table 1. Estimating the conventional fossil fuel reserves, their consumption and years to supply respectively (The Colorado River Commission of Nevada, 2002) ............................................................. 8 Table 2. Gross external damages GED and GED/VA ratio by sector (N.Z.Muller et al, 2011)............ 12 Table 3. GED and GED/VA by industry for each sector (N.Z.Muller et al, 2011) ............................... 13 Table 4. Mercedes Benz F-Cell B class specifications (European Automobile Manufacturers Association, 2013); (Daimler, 2012) ......................................................................................................... 32 Table 5. Fuel cell perspective cars in Europe from 2005 to 2050, showing the potential of fuel cells in the transport sector.................................................................................................................................. 33 Table 6. Comparison of fuel cell technologies (P.Zegers, 2005); (N.Karim et al, 2011); (Board of Governors of the Federal Reserve System, 2013) .................................................................................... 40 Table 7. FC stationary plants’ power output and application field ........................................................ 42

Table 8. Potential types and their positive or negative acceptance of fuel cell technology, respectively ................................................................................................................................................................. 42 Table 9. Most important barriers in categories that stop renewable energy promotion ........................ 48 Table 10. LCOE of conventional and renewable electricity in USD/MWh based on a maximum, medium and minimum cost scenario respectively (OpenEl, 2013) .......................................................... 51 Table 11. External costs for electricity production in the EU (Euro/KWh) (EC, 2003) ....................... 55 Table 12. Subsidies in Eurocents/KWh or millions EUR per year to renewable technologies in 2001 and 2010, in different EU countries (World nuclear association, 2013) .................................................. 56 Table 13. Estimated payback periods for the most common RE technologies (W.Nixon, 2010) .......... 58 Table 14. Skill shortage categories leading to unqualified personnel for fuel cell promotion (ERP, 2005) ................................................................................................................................................................. 63 Table 15. Most important barrier categories that stop fuel cell promotion ............................................ 65 Table 16. Cost projection for PEMFC stack (IEA, 2007) ....................................................................... 66 Table 17. Cost projection for PEMFC vehicles (80KW) for 2030 according to pessimistic and optimistic scenarios (IEA, 2007) .............................................................................................................. 67 Table 18. Summary of factors that evaluate an investment’s profitability ............................................. 76 Table 19. R&D requirements for fuel cell materials according to the application and fuel cell type (B.C.H.Steele, A.Heinzel, 2001) ............................................................................................................... 81 Table 20. Cost of hydrogen transport methods (Road2HyCom, 2013) ................................................... 82 Table 21. Costs of gas, liquid and solid hydrogen storage (IEA, 2007) .................................................. 83 Table 22. Fuel cell lifetime and performance based different types (IEA, 2007) .................................... 84 Table 23. Comparison of different automobile types (C.Davis et al, 2003) ............................................ 86 Table 24. RETScreen results (in the two following tables) after a financial analysis of a PEMFC 250KW stationary system to define the IRR and payback time in years of the project ........................ 93 Table 25. Main fuel cell systems under development in German companies (L.Bedel et al, 2004) ........ 98 Table 26. Selected companies –all potential partners for collaboration in fuel cell sector, in Germany (Germany Trade&Invest, 2010) ............................................................................................................... 98 Table 27. Feed-in Tariffs valid since June 2010, based on Law 3851/2010 (IEA, 2011) ...................... 127 Table 28. Household (consumption of 3.5 MWh/year) electricity prices in EU countries as measured in May 2013 (Europe’s Energy Portal, 2013)............................................................................................. 132 Table 29. The expenses of the European Commission (EC) on Framework programmes (FP) (Cardis, 2012) ....................................................................................................................................................... 141 Table 30. 2006 FIT system (in EUR/MWh) for electricity production from RES and CHP systems (CRES 1, 2006) ...................................................................................................................................... 144 Table 31.The maximum subsidy levels based on the zones of Greece and the size of enterprises (G.Maroulis, 2013) ................................................................................................................................. 146 Table 32. Overview of RE related laws and actions over the years in Greece (MEECC, 2010) .......... 147 Table 33. Summary of policies-measures in Greece for the promotion of renewable and fuel cell development ........................................................................................................................................... 159 Table 34. Anode and cathode electrochemical reactions for certain fuel cell types (J.Larminie et al, 2003) ....................................................................................................................................................... 189 Table 35. Fuel cell electrolyte-catalyst materials .................................................................................. 189 Table 36. Europe population over the years for the programmes, respectively (United Nations, 2009) ............................................................................................................................................................... 190 Table 37. Stages of the NECAR (New Electric Car) project (K.Zoglopitis, 2011) ............................... 190 Table 38. Energy density of fuels-lower heating value (Germany Trade&Invest, 2010) ...................... 191 Table 39. External costs of energy in terms of health and environment (EC, 2003) ........................... 191 Table 40. Project information and site reference conditions (Riem/Germany) used for the RETScreen computational analysis (for a Ballard stationary PEMFC of 250KW)................................................. 192

List of acronyms

GED

Gross External Damages

GDP

Gross Domestic Product

VA

Value Added

RET

Renewable Energy Technology

PEMFC

Polymer Electrolyte Membrane Fuel Cell

AFC

Alkaline Fuel Cell

DMFC

Direct Methanol Fuel Cell

PAFC

Phosphoric Acid Fuel Cell

MCFC

Molten Carbonate Fuel Cell

SOFC

Solid Oxide Fuel Cell

FCV

Fuel Cell Electric Vehicle

CHP

Combined Heat and Power

NECAR

New Electric Car

ECN

Energy Centre of the Netherlands

Redox

reduction- oxidation

AC

Average Cost

R&D

Research and Development

LCOE

Levelised Cost of Energy

NPV

Net Present Value

RES

Renewable Energy Sources

d

discount rate

i

interest rate

PV

Photovoltaics

REC

Renewable Energy Certificate

BOP

Balance of Plant

IRR or r

Internal Rate of Return

OECD

Organisation for Economic Cooperation and Development

NREL

National Renewable Energy Laboratory

CSA

Canadian Standards Association

ERP

Energy Research Partnership

PFSA

Perfluorosulfunic Acid

NOW

Nationale Organisation Wasserstoff- und Brennstoffzellen technologie (as per its German initials)

CEP

Clean Energy Partnership

NIP

National Innovation Programme

HEV

Hybrid Electric Vehicle

THRIVE

Towards Hydrogen Refuelling Infrastructure for Vehicles

GSRT

General Secretariat of Research and Technology

CRES

Centre for Renewable Energy Resources

CPERI

Chemical Process Engineering Research Institute

NTUA

National Technical University of Athens

FP

Framework Programme

OPC

Operational Programme of Competitiveness

FIT

Feed-in Tariff

EPO

European Patent Office

CSF

Community Support Framework

O&M

Operation and Maintenance

SET

Sustainable Energy Technology

VC

Venture Capital

TA

Technology Assessment

ERA

European Research Area

EIB

European Investment Bank

IEE

Intelligent Energy for Europe

EIF

European Investment Bank

NCCC

National Climate Change Programme

NREAP

National Renewable Energy Action Plan

NEEAP

National Energy Efficiency Action Plan

UNFCCC

United Nations Framework Convention on Climate Change

OPE

Operational Programme for Energy

OPC

Operational Programme for Competitiveness

TPF

Third Party Financing

MC

Ministerial Decrees

OPIS

Operational Programme for the Information of Society

PPP

Public Private Partnership

ETS

Emission Trading System

GHG

Greenhouse emissions

OG

Official Gazette

EC

European Commission

MEECC

Ministry Of Environment, Energy and Climate Change

RAE

Regulatory Authority for Energy

HTSO

Hellenic Transmission System Operator

HEDNO

Hellenic Electricity Distribution Network Operator

LAGIE

Hellenic Electricity Market Operator

DESMIE

Hellenic Transmission System Operator

ADMIE

Independent Power Transmission Operator

PPC

Public Power Corporation

OECD

Organisation for Economic Cooperation and Development

Acknowledgements

I would like here to acknowledge the assistance and significant contribution of Dr. Servaas Storm, the supervisor of the Thesis project, who provided advices and suggestions and facilitated every step of this work by contributing significantly to the fulfilment of the Thesis project. Also the members of the graduation committee (Dr. L.M.Kamp and Professor A. Kleinknecht) who read the work and suggested useful changes for the improvement of the chapters. Moreover my family and friends, who psychologically encouraged the completion of the report, helped and advised me on points of detail. Last but certainly not least I must thank each and everyone that provided guidance and information concerning the content of the Thesis by means of their websites‟ material, open sources, related projects and scientific papers. MSc Student-Author: Nancy Lypiridi M.Sc. Sustainable Energy Technology/Faculty of Applied Sciences, Section Economics of Technology, TUDelft, Delft, the Netherlands Student number: 4191757 Email: [email protected] Graduation committee: First Supervisor: Dr. Servaas Storm Second Reader: Dr. Linda Kamp Third Reader (Chair): Professor Alfred Kleinknecht

Dedication

I would like to dedicate this Thesis to my family and to Apostolis that have always been by my side whenever I needed them and motivated me to have the highest possible targets.

Nancy Lypiridi

PART A: Theoretical and Technical Analysis

PART A: Theoretical and Technical analysis

Master Thesis Project

Page 1

Nancy Lypiridi

Introduction

1 Introduction In order to prevent the destructive effects caused by global climate change, the European Union has prioritized the shift to less carbon based economies by supporting alternative low carbon technologies for energy production. However societies remain sceptical in adopting new energy systems since they tend to rely on already existing technologies (fossil fuels) that do not require significant changes in infrastructure and real life applications. This is referred as „‟lock-in‟‟, a problematic situation that has negative impact on the RE development nowadays. (Perkins R., 2003) Apart from the lock-in there are various other barriers inhibiting the RE promotion, the majority of which are of financial/economic nature or are directly related to either high costs or low benefits (which again contribute to economic obstacles). (NFCRC, 2009) As a result in the report the economic barrier category will be used as a broader basis for the analysis of all the rest (such as institutional, technical, societal, environmental and market barriers) due to the fact that all of them can result to cost limitations for RET, which consumers usually are most hesitant to accept. Moreover the barrier framework will be similarly specified for a certain renewable technology (fuel cell technology is selected) in order to observe how the above categories can be applied or adapted to this case. This transition from the general case of RET to the specific case of fuel cell barriers is performed, due to the fact that fuel cell technology is still one of the most immature technologies for which there are not much relevant data and information or related reference material yet that could be used as a trustworthy source. As a result mostly we have to rely on general conclusions of scientific papers regarding the general barriers faced by RET and identify the ones that apply also to the case of fuel cells. Since there are not many studies yet relevant to fuel cell economic limitations, it is challenging to see what the main economic or economic related obstacles are, so as to be able to propose solutions. Despite the potential differences in policy and energy market options among EU countries, in all of them fuel cell technology has not achieved to be widely established yet, unlike the rest of RET (wind or solar energy) and therefore the technical problems and financial barriers are mostly common at EU level. (IEA, 2011) Only some differences in fuel cell market applications that were observed among certain EU countries are highlighted, so as to investigate which of these countries are more developed in this sector and could be example-cases for effective policy making in the rest of EU (e.g. Greece). The main structure of the Thesis will be as follows. The first part (Chapters 2 and 3) will be technical and deal specifically with fuel cell technology. What is the „‟lock-in‟‟ and how does it hinders RET and fuel cell development? How can the lock-in analysis be used as a first basis for the later barrier analysis? What are fuel cells? What is their use/application and how has this technology developed over time? We will identify the most promising applications of fuel cell technology (e.g. in vehicles) and argue why it is a „„sustainable energy technology” (e.g. we will investigate the energy savings and carbon-emission reductions associated with fuel cells as well as a projection of fuel cell vehicles‟ entry in the next decades).

Master Thesis Project

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Nancy Lypiridi

Introduction

The second part (Chapter 4) will focus on the economic-financial obstacles hindering the introduction of both RE in general and fuel cell technology more specifically, by focusing on the impact all these can have on the economic aspects of the technology. Following J.P.Painuly (2000), we will identify on a European basis (since the basic barriers are common across EU countries): (a) market barriers, (b) economic-financial barriers, (c) technical barriers, (d) institutional barriers, (e) societal barriers, (f) environmental barriers. The main barriers will be analysed in theoretical terms to explain how fuel cell technology gets locked out and argue which barrier category seems to be the most responsible for the slow commercialization of the technology until now. This framework will next be applied to three specific EU countries (Germany, the Netherlands and Greece) by comparing the stages of fuel cell development in each one of them so as to draw out conclusions about the different policies. The third part (Chapter 5) will deal with policy in Greece: which policy instruments can be used to overcome the obstacles and effectively promote the RET? We will discuss the current legislative framework regarding RE and the policies and measures that could take place following the example of other countries of EU, since all of them are bound to the Kyoto protocol obligations concerning energy issues despite the rest of their differences. The question is: what can Greece (where the technology is still more immature) learn from the other EU countries‟ experience and what existing policies and measures have achieved until now in the energy sector? The policy analysis in the country is done in terms of a stakeholder analysis (including both governmental and non-governmental bodies both of which participate in the policy making procedure) by observing the inter-relation between these actor groups and the different policy role of each one. The context of Greece is important, because Greece is trying to come out of a severe economic crisis and at the same time trying to “green” its economy. The final part (Chapter 6) synthesizes the findings and presents the main conclusions on barriers and policies and the reflection of the Thesis so as to provide suggestions for future work. The main research question of the report will be: „‟Which economic factors are limiting the introduction of the fuel cell technology in Europe (examples of fuel cell applications and limiting factors in different countries of Europe will be examined and compared to each other)?‟‟ Further research sub-questions linked to the previous will be: „‟What is the lock-in and how does it affect RE and fuel cell development?‟‟ „‟What is the fuel cell technology and what is its history over the years, applications and potential in the energy market?‟‟ „‟How the different barrier categories can be specified from a general basis (RET) to a more specific (technology selection: fuel cells) and how all these are inter-related with cost limitations?‟‟

Master Thesis Project

Page 3

Nancy Lypiridi

Introduction

„‟What can be defined as the most binding barrier from all categories analysed, that needs to be first removed to achieve development?‟‟ „‟How the market status of fuel cell technology differs across EU countries being characterized as either mature or immature and what less developed countries (Greece) can learn from the more developed (Germany and the Netherlands)?‟‟ „‟What is the role of policy making in overcoming the economic barriers and which certain policiesmeasures have been or can be applied in Greece in order to follow the examples of other EU countries as a result from the comparison done before.‟‟ In order to answer the above, the methodology used in the report is based on the J.P.Painuly barrier framework (2000) as well as on other economic papers (for both the barrier and policy analysis) that all of them can represent methods for analysing the economic feasibility of a technology. This methodology is useful and relevant, since the J.P. Painuly framework has been developed from the beginning to identify the barriers to renewable energy penetration to suggest measures and policy approaches to overcome them and help realising the RE potential. J.P Painuly‟s work addresses the non-technological (mostly financial) but also societal and institutional barriers standing between today‟s energy infrastructure and the deployment of RETs. This study as well as other related technical or economic reports, were used as reference material and sources of collecting data and observing how strongly each particular barrier category is related to the other so as to identify the most predominant barrier of them that is of highest significance of removal and policy perspective. (J.P.Painuly, 2000) A sample of papers were collected to elicit information regarding RE and fuel cell limitations and further to categorise them in broad categories to rank their importance in terms of fuel cell technology. In the report it was however found that the distinctions between these barriers could not always be sustained and therefore the most simplified (with less categories than suggested by Painuly) taxonomy of barriers was selected. The research material was always searched under the scope of a more economic perspective so as to observe basically the economic barriers‟ influence on RE and fuel cell development. Finally the RETScreen software was used as part of the economic analysis to observe the economic feasibility of a fuel cell system and which barrier affects its profitability the most. Besides the J.P. Painuly analysis, there are also various other methodologies that could be used for either barrier or policy analysis. For instance a methodology that could be used is the Socio-Political Evaluation of Energy Deployment (SPEED) framework which includes the examination of laws, regulations and policy actors to address the risks and benefits of emerging energy technologies. This method can enable policy makers and other stakeholders to implement effective strategies for the deployment of new technologies. The SPEED framework however focuses more on understanding socio-political impacts on a technology and is more narrowly targeted on how state-level decisions can affect the actual technology framing and deployment. (Stephens J.C. et al, 2007) As a result the method could be used more efficiently for a policy rather than barrier analysis, which is not the main Master Thesis Project

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Introduction

topic of this Thesis. Also Function of Innovation Systems (FIS) and Strategic Niche Management (SNM) could be possible methodologies. FIS method is an efficient tool for analyzing a new technology and its consequences on the society of a country, for a certain period of time and location, whereas SNM method is used basically for more general niche projects that are referring to a wider area and not to a certain location. (Van Eijck J., Roomijn H., 2007) In our case the barrier and policy analysis was much more conducted under the scope of a more economic rather than social perspective and was not specifically applied to a certain country but more generally to the entire of Europe. Only the part of policy contribution (chapter 5) was considered for a certain country (Greece) which again though was oriented more towards the policy making in terms of legislation and economic instruments and not the society of the country. The previous mentioned methods would be more sufficient for policy rather than barrier determination and this under the scope of a more social approach. This is something totally different, accounting that the barrier analysis from a more economic point of view for RET and fuel cells, is the main element of the Thesis content. On the contrary Painuly‟s framework represents the most appropriate methodology among these that could be used for both the identification of barriers and policies (focusing more on barriers) regarding RET promotion, since their categorization already exists and can be used as a basis for further research, as it is done in this report. Regarding the scientific relevance of the Thesis, it examines the feasibility of the implementation of RET and more specifically fuel cells in Greece comparatively to other EU countries by identifying the different barriers and policies accordingly. This topic was interesting and challenging due to the recent economic problems that Greece is facing, making thus the project „novel‟, since there is not much research yet on the economics of fuel cells applied to crisis-struck Greece. The number of studies produced in recent years concerning fuel cell development, has not focused much attention on the importance or benefits of the technology and on the difficulties of achieving its market penetration. Hence, there was a rigorous need for a new methodology that investigates the economic barriers and suggests policy solutions and measures to overcome this problem. Thus, it was very important to identify the issues which affect technological progress of fuel cells and establish a mutual relationship among the different barrier categories inside this report. The project has also a strong societal relevance, despite being focused mainly on economic factors of RET. The societal relevance of the research can be reflected by answering questions that society asks or by solving problems it faces. The identification of the societal relevance of the project is one way to achieve both economic progress and therefore to push research into creating a measureable benefit for society or solving a specific problem with implications for a subgroup of society. It‟s reasonable to expect that society benefits from the results of the project which means at least a positive potential societal impact. Hereby the identification of barriers and policies as well as the comparison of the different RE market status in EU countries, could be very useful for the Greek society by making it aware of the threats related to RE progress and suggesting effective policy-making to achieve the desired technological development. The effects of this project do concentrate on particular societal parameters as well as solutions that should be considered before a technology framework is applied in a Master Thesis Project

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certain country. Upon completion of the project, the framework of actions and measures will make it possible to combine environmental protection with the sustainable use of natural resources, create prospects for development in the energy sector and establish an environmental management in production involving the creation of job opportunities.

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2 Current Problem: „Lock-in‟ effects on Renewable Energy 2.1

How „technological lock-in‟ hinders the transition to renewable energy

This chapter serves as a first chapter to describe the current situation globally regarding the energy status (of both fossil fuels and RE) but also it deals with the main problem (lock-in) based on which the economic barrier analysis was later performed. The goal of the chapter is to understand what the lock-in is, how it works and how it influences RE development in general and further how it can be applied to a certain technology (fuel cells). Modern societies consume huge amounts of energy for heating, transportation, electricity production and industrial use. Although fossil fuels are the main source for electricity production and will continue being so, since the reserves are still enough, there are places on earth (almost the 1/3 of the world’s population) with limited or no access to electricity. So the question that arises is: how can this be possible and what can be done to solve this issue. But if we expand electricity and energy use, a new problem arises: continued reliance on fossil-fuel energy will raise carbon emissions and greenhouse gases (GHG) will be increased. To avoid further increases in GHG emissions, alternative methods of producing electricity are needed to cover the increasing demands on earth. (The Colorado River Commission of Nevada, 2002) These alternatives are the renewable energy technologies (RET) that have already started being recognized and widely applied in many countries. As the population grows and nations become more industrialized, energy needs are increasing and we argue in this report that fossil fuels cannot be used to meet the growing energy demands. A trade-off between the benefits from conventional sources (coal, petroleum, oil) to society and the possibility of environmental degradation, starts causing many problems. Ignoring the trade-offs and the harmful emissions produced through burning of fossil fuels, the issue of sustainability comes to the forefront. (The Colorado River Commission of Nevada, 2002); (Foxon T.J., 2006) One argument often used in favour of RET is that continued reliance on conventional fossil fuels is impossible, because of the imminent depletion of conventional sources. This argument has become less convincing recently following the discovery of ways to technically and economically exploit shale oil and shale gas reserves as an extra source of conventional fossil fuels to supply the required quantities when needed. It is estimated that U.S. shale deposits contain 100 years of natural gas supply. Oil shale, is an organic-rich fine-grained sedimentary rock containing kerogen from which liquid hydrocarbons called shale oil can be produced. Shale oil is a substitute for conventional crude oil; however, extracting shale oil from oil shale is more costly than the production of conventional crude oil both financially and in terms of its environmental impact. Oil shale gains attention as a potential abundant source of oil whenever the price of crude oil rises or a future depletion of fossil fuels occurs. At the same time, oil-shale mining and processing are responsible for environmental problems, such as land use, waste disposal, water use, waste-water management, greenhouse-gas emissions and air pollution. (The Colorado River Commission of Nevada, 2002); (Foxon T.J., 2006) Master Thesis Project

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In line with the above, we can distinguish two scenarios. In the first scenario, conventional energy sources will be depleted rapidly (the “Peak Oil” claim holds true); in this case, the use of renewable energy sources (RET) becomes crucial. The second scenario suggests that the conventional sources are still enough and will not be depleted in the near future (thanks mostly to the shale oil and gas) but then there will be a huge environmental damage (including global warming) which can only be prevented by a shift to RET. In both cases, no matter whether we talk about crude or shale oil, a depletion of conventional fossil fuels or not, the impact on the environment is negative. So both scenarios point to the desirability of renewable sources to substitute the current ones, since they can combine both the covering of energy demands if fossil fuels are depleted and the positive contribution to the environment. (Dyni, John R., 2010); (American Chemistry Council, 2013) Furthermore there are many variations in estimating the coal, petroleum and oil reserves depending on the source of the survey and this is why there is no clear answer whether the reserves are enough or not. Another reason for this uncertainty is the rate of consumption that is related to many different factors that cannot be easily determined over the years, since it is difficult to forecast the demand and supply sides of fossil fuels. The table below shows the conventional sources’ reserves in billion barrels and how many years these can last still. It is given as a result that the petroleum, natural gas and oil reserves are still enough for 98, 166, 230 more years, respectively. So it is clear from this table that the fossil fuel reserves are not in danger of depletion yet so as to move to alternative methods of energy production, but even so they are not sustainable and this is the main reason that this transition should be made so as to contribute to a cleaner environment. (The Colorado River Commission of Nevada, 2002); (Foxon T.J., 2006) Table 1. Estimating the conventional fossil fuel reserves, their consumption and years to supply respectively (The Colorado River Commission of Nevada, 2002)

Due to all the above facts, the urgent need of alternative methods for electricity production rises to solve this problem as well as to contribute to a cleaner future environment. The interest for these renewable energy sources (RES) is increasing and the correct policies have to be adopted to substitute these new technologies for the conventional older ones and to be adopted by the society. This is Master Thesis Project

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difficult, however, since the older technologies are deeply embedded and integrated in society and cannot be replaced (without huge costs), something that makes them ‘locked-in’ technologies. But interest in RES is growing. A first reason is that RES make an important contribution to the energy balance of our economies, helping to reduce dependence on imported sources and strengthening the security of their energy supply. At the same time, RES do not produce pollution or gases which increase the danger of climate change. (CRES, 2013); (J.P.Painuly, 2000) Estimating RE potentials is a difficult task, since every energy application requires an analysis of the energy service and the amount of energy required to meet that demand. Although the Kyoto protocol suggests the 20% share of electricity by renewable energy sources (RES) by 2020 in European countries and RES is known to have a huge potential, it is still a conventional wisdom that the renewable sources can only take part at a marginal extent in the electricity generation without substituting the conventional energy generation technologies. But as big technological steps are being made, RES costs are being reduced and the energy demand is 1tremendously increasing all over the world, the RES contribution to the electricity share starts being developed and seriously considered. A good example of this RET cost reduction could be the Photovoltaics (PV) that already are more cost competitive than many people might think and will be even more by the end of 2013 by using the correct policies and market conditions. In fact over the last 20 years the cost of PV modules was decreased by 20% every time the PV volume was doubled. Prices have declined even more over the last 5 years up to 50% and as early as 2013 many countries with high irradiation numbers supporting PVs operation, will achieve the successful integration of PVs into the grid (e.g. Italy). The overall cost of a PV system includes its PV modules, structural components, inverter, installation and extra (maintenance, recycling, replacement, land costs etc) costs and based on these factors as well as the installed capacity, subsidies and feed-in tariffs for the technology over the years, its future price reduction could be approximated. Over the coming decades, investments on the order of a trillion dollars will have to be made if PV is to contribute to energy supply leading to future improvements of the technology and cost reductions. Apart from these subsidies, the R&D, knowledge level and market dynamics are also important factors that affect the cost reduction process. (EPIA, 2011); (Nemet G.E., 2005) Like the PVs almost all renewable energy technologies including fuel cells, will follow approximately the same cost reduction curve over the years maybe with a different speed rate. However there are some barriers related to the RES costs in comparison to the conventional technologies’ costs that pose a threat to their further development. Renewable energy sources currently supply more than 15% of the total world energy demand (Figure 1) and it is estimated that this will increase up to 24% by 2035. These renewable sources e.g. biomass, wind, solar energy, hydro etc (see Figure 2 for the composition of RES in Europe), are becoming even more important with a great potential to cover the electricity demands especially in regions where there is a limited access to power production methods. (Unruh G.C., 2000); (Painuly J.P., 2000) With the increasing population the current world installed capacity being around 3 million MW will have to be doubled in the next 40 years so as to meet the demands. In fact the World Energy Council assumes the contribution of renewable technologies by 2050 to be equal to that 1

If referencing appears at the end of a paragraph, then these references refer back to what has been said in this paragraph. Master Thesis Project Page 9

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of fossil fuels back in 1990 and this will increase almost 3 times by 2100, which shows that the renewables’ potential is much bigger than that of conventional technologies if implemented in the right way. (Painuly J.P., 2000) The technological potential of RET is very promising but unfortunately stopped by many institutional and environmental barriers as well as by the lock-in of conventional methods of energy. We will analyze the barriers which stop the transition to renewables and more specifically to the fuel cell technology, in chapter 3; based on this analysis, we will then identify effective policies to overcome these barriers and move to a sustainable way of living by 2020 as a near goal. The figure below shows in percentages the conventional and the renewable share in the electricity production sector with the goal to increase the RES share up to 20% by 2020 according to the Kyoto protocol. World energy growth would increasingly be met by renewable energy resources, until by about the middle of this century, more than half of the world’s energy needs would be met by the clean energy resources. We can see that there is a decreasing trend for oil/coal/gas and an increasing trend for RES share over the years and up to 2050, respectively, unlike the previous trend with the renewables’ share to be only 17.9% in the electricity production leaving in the first places the conventional sources (coal, gas, oil). (Aitken D.W., 2003)

Figure 1. Energy sources share in the electricity production over the last years (Aitken D.W., 2003)

Figure 2. Decreasing trend of oil/coal/gas and increasing trend of RES up to 2050 (estimated in amount of energy production) (Aitken D.W., 2003) Master Thesis Project

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The development of RET is hindered by the fact that the private costs of renewable energy are still higher than the private costs of conventional energy – even though the social costs of RET are lower than the social cost of conventional energy sources. This distinction between private and social costs is crucial. Private costs are those paid by private users (individuals, households, companies or other organizations) whereas social costs include not only the private costs of production and consumption, but also the “damage” or “external cost” of the technology on the society (mostly through pollution and accelerating global warming). This means that the choices that individuals make about the production or consumption of a particular energy source adds costs on other sources in the form of shorter lives, higher expenses etc. (Greenstone M., 2012); (Verbruggen A. et al, 2009) Most of the pollution externalities are to nonmarket sectors such as health, visibility, and recreation, which are not measured in the accounts but have significant influence on the society and further acceptance of the technology. These external costs, which are not counted and for which nobody is paying the bill, are not small for the conventional energy (electricity) sectors. To illustrate the size of the external costs for electricity generation we use a recent study for the USA (in 2002) by Muller, Mendelsohn and Nordhaus (2011). They define gross external damages (GED) as equal to the marginal damages of pollution emissions (the price) times the total quantity of emissions, meaning thus that GED equals to the external-environmental costs. They express the GED of a specific activity as the ratio of its value added (VA), which is equal to the income (or GDP) generated by a specific economic activity. The VA gives us an indication of the private cost of that activity (because VA equals wage cost plus profits). The social cost of an economic activity (i.e. the impact to the society through the application of a technology) will be the sum of external and private cost. If the activity generates zero pollution, its external costs (measured by GED) will be zero; only in this case, private costs will be equal to social costs. But if the economic activity generates pollution and has, therefore, positive external costs (i.e. GED> 0), then its social costs will be higher than its private costs. This discrepancy between private and social costs (caused by the presence of unpaid external costs) points to a “market failure”: since the external damage is not included in costs and prices and nobody is paying for it, the economic activity is selling its products too cheaply; the result will be over-consumption of these products and over-pollution. If, however, the polluter pays for the pollution (either by buying permits or through pollution taxes), the costs of the pollution would be part of the firm’s cost of production under standard accounting principles. The firm would have higher total cost if these external costs (GED) were fully internalized either through purchases of pollution allowances or tax payments according to the tons of emissions produced. If output prices and input values did not increase, the higher costs would mean that these economic activities would generate lower value added. In some case, it could mean that the firms and so the technology used by them deal with higher costs than the income (value added) they receive. (Muller N.Z. et al, 2011) The traditional national accounts do not measure these losses and, therefore, they overestimate net national output, which is especially true in the case of conventional fossil fuel based technologies. Master Thesis Project

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The following tables show the relationship between external (GED) and private (VA) costs in terms of a ratio for each technological sector. As the results in the two last columns show, the ratio (GED/VA) is high in the case of many sectors, but especially so for Utilities (which include electricity generation). (N.Z.Muller et al, 2011) From Table 1 it is obvious that the utility sector generates the largest GED around 63 billion dollars, which equals 34% of its value added. This estimate means that if all external pollution damage was included in the cost of the Utilities sector, its value added would be 34% lower than it was (in 2002). Put differently, the value of the external damage is about one-third of the income generated by the Utilities sector. Similarly table 2 shows that the above general sectors can be divided in further specific categories. If we consider specifically the “petroleum-fired electric power generation” and the “coal-fired electric power generation”, then we find that their pollution damages (GED) are far larger than their VA, being equal to 5.13 and 2.2 times their VA, respectively. This points to a massive market failure, because if these external costs (GED) were fully internalized either through purchases of pollution allowances or tax payments according to the tons of emissions produced, and the input values did not increase, then these industries would be having negative incomes These tables illustrate that the external pollution damage caused by fossil-fuel electricity generation is so large that, when counted and included in costs and prices, it would wipe all the income generated by the electricity firms. (Muller N.Z. et al, 2011) Table 2. Gross external damages GED and GED/VA ratio by sector (Muller N.Z. et al, 2011)

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Table 3. GED and GED/VA by industry for each sector (Muller N.Z. et al, 2011)

This is the case for conventional fossil fuel based energy technologies that combine the low production cost with high environmental-social cost (externalities), which means that although they are more competitive in terms of private cost, they do cause damage to the environment and people in a longterm period that is not at first realized. This is the reason that the conventional sources still gain the acceptance of the society and are widely used, since only the production cost unlike the external cost is taken into consideration, making thus that technologies remain locked-in. On the contrary renewable energy technologies RET combine higher private production cost with much lower external cost. This means that they are not still competitive (on a private-cost basis) over the old technologies but are much more environmentally and socially friendly. Unfortunately this issue is not yet realized and people do not choose RET according to this distinction and are only based on the cost ignoring the positive impact RET could have on them and on the environment in the future and this makes RET remain locked-out. The high production or private cost of RET is associated with the infrastructure and components’ costs that are relatively high, because the replacement of the old infrastructure is usually required as well as other extra costs related to the operation and maintenance or replacement of some of the RET system’s components. The differences in the private and social costs of different energy sources, seen in the figure below, illustrate how the low-private-cost energy sources on which we rely, deals sometimes with high external costs, something that is also the case for conventional energy technologies in comparison to RES. (Muller N.Z. et al, 2011); (Greenstone M., 2012)

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Figure 3. Comparison between private and social costs for conventional and RES technologies respectively Despite the relatively low social costs of RES, industry and consumers have little incentive to change their energy choices based on the private energy costs and the fact that this is lower for the conventional technologies. (Greenstone M., 2012) This is because conventional carbon-based technologies are comparatively inexpensive when only private costs are considered but really expensive concerning their costs to health, the climate, and national security. However the external cost of conventional technologies is estimated to be much higher than the value added that it is creating, since it has negative impacts on the society and environment. The best solution is to price carbon and other pollutants appropriately and apply the respective policies to price the external costs of conventional technologies so as for the RES to be competitive enough as well as the governmental support through subsidies to encourage and decrease the initial high investment costs of RES. (Muller N.Z. et al, 2011); (Greenstone M., 2012) The importance of government policies that can enhance the overall economic productivity of energy technologies and offer new jobs related to RES technologies should be realized before making a choice. Moreover national policies are vital to accelerate the development of the renewable energy resources. Beginning with some examples, ‘feed-in’ tariffs on top of the energy source price are used to promote the adoption of RES. However based on research, it has been shown that it takes about 60 years for the world to accept the transition from primary dependence on one resource of energy to a new resource consisting of several sources. (Muller N.Z. et al, 2011); (OECD, 2011) For instance, it took about 60 years for the transition from wood to coal, as well as another 60 years approximately from coal to move to oil and gas industry. The world has relied on fossil fuels until now as though they will be forever available and all the energy transition steps will be the tasks of future generations and of the present. But as the unlimited use of fossil fuels poses high social costs, government policies are being formulated so as to move towards a more sustainable future based on RES. (Painuly J.P., 2000) However the fossil fuels are still dominant, since their low prices encourage the government subsidies posing subsidy rates a barrier to the RES transition. Petroleum products in general attract the highest tariffs, followed by natural gas and coal. (OECD, 2011); (Aitken D.W., 2003) The IEA uses Master Thesis Project

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the “price-gap” approach, which compares domestic fuel prices to an international reference price, in order to give the extent to which different countries support the consumption of fossil fuels. Based on these results the respective support to fossil fuel technologies by the government is defined through the subsidies given to the conventional energy producers. However the broader definition of support also includes policies that suggest changes in the relative prices of fossil fuels leading to their promotion and good reputation. This is a main factor of the current energy ‘’lock-in’’ system, since government encourages fossil fuels, despite their high carbon outputs, more than new innovative technologies that are not yet efficiently proved. (OECD, 2011) A significant portion of fossil fuels is consumed by manufacturers and service providers triggering thus the question whether fossil fuels should be highly taxed considering their high external costs and gross external damages (GED) that increase even more by the increase of fossil fuel availability-production. Nevertheless high taxes are not posed to fossil fuel and subsidies are provided by the government to encourage the further consumption of fossil fuels and their lock-in. What should be done is subsidies to be provided for other alternative new technologies (RET) that have less externalities and can promise a more sustainable future. This strategy for RET could lower their cost of production that still remains high making them more cost competitive and provide an incentive for investments in this alternative energy field. It should be mentioned though that the goal is not just to tax the final consumption of fossil fuel products but the specific (potentially environmentally or socially harmful) product or activity (taxing of CO2 emissions), which stems from the use of fossil fuel conventional technologies to realise that they are related to high external-social cost unlike RET. On the other hand, RET’ private costs are referring to risk and uncertainty, energy security, capital-intensity, high costs, and long project timelines and seem to be higher than these of conventional technologies, and this is the reason that despite their low external costs RET are still locked-out. (OECD, 2011) Through subsidies given by the government to RET, their cost will be reduced over time by simultaneously increasing their installed capacity and energy production (e.g. the PV cost reduction case), proving the high potential and future market dominance of RET as a replacement of fossil fuels.

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Figure 4. Cost reduction of a RET system (e.g. PV system) and the respective projections) over the years (EPIA, 2011) The European Commission participates in the Kyoto protocol and has the target for renewable energy percentages of 20 % penetration into the electricity sector in 2020. (Aitken D.W., 2003) Unfortunately the still high costs of RES and the fear of the society to accept new technologies that are not yet widely used, really stop the transition to a renewable future making thus the people stay focused on conventional fossil fuel ways of energy production. This is what ‘’lock-in’’ syndrome is about: the society is locked into the technologies that it has trusted until now and cannot escape from them. In general, technologies are not only supported by a technological system of which they are part, but also by an institutional framework of social rules that reinforces that technological system. This can lead to the lock-in of existing techno-institutional systems, such as the high carbon fossil-fuel based energy system. In a more economic approach, technological lock-in refers to the creation of barriers to the diffusion and adoption of efficient sustainable technologies. The reason leading to this is the uncertainty of the society to achieve higher environmental quality and productivity by sacrificing the lower prices offered by current energy sources. Nevertheless, over the last years there is a growing awareness of the environmental improvement that could be achieved through the diffusion of the clean technologies that already exist, in terms of improved energy efficiency and the consequent reduction in the emissions associated with the use of fossil fuels. (Perkins R., 2003); (Unruh G.C., 2000) The literature generally remains skeptical about the prospects for escaping hydrocarbon lock-in in developed economies that rely on oil and gas as their primary source and are critical to escape the petroleum based economy. On the other hand some analysts are more optimistic about the prospects for developing countries to avoid becoming locked into the same hydrocarbon technologies that currently dominate in developed economies and this is because they do not yet have the infrastructure and need to install much of their productive capacity, so the extra costs are not so high for developing countries unlike in the developed. Clearly, lock-in has yet to make a significant impact on the mainstream ecological economics literature and there is recognition that it can definitely contribute to Master Thesis Project

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understand better the economy- environment relation. The lock-in can be defined in different terms as given below. (Perkins R., 2003) 

Technological lock-in

The successful introduction of a new technology depends on the path of its development called ‘path dependency’ including the characteristics of initial markets, the institutional factors governing its introduction and the expectations of consumers. It is really interesting to what extent the new RES technologies can replace the conventional ones. The adoption of prior technologies by the society and the skeptical attitude to the newcomers lead to lock-in of conventional technologies and prevent the new alternatives to be adopted. In fact, when there are two competing technologies and one of them achieves market dominance at the expense of the other, this is the technological lock-in that prevents new alternatives to enter the existing system. Similarly fossil fuel economies are locked in leaving thus the RES technologies out of the energy system being locked-out. (Foxon T.J., 2006)  Institutional lock-in Institutions are defined as any structure or mechanism of social order and cooperation shaping and governing human behaviour, including legislation, economic rules and contracts. The institutions can create drivers or barriers for a change (e.g. a new technological change) leading to a lock-in system. The path dependency created through institutional lock-in may interact with the drivers of the technological lock-in as well. (Foxon T.J., 2006)  Carbon lock-in A technological system is a set of components connected in a network that includes physical, social and informational elements and the lock-in for such a system is defined through the externalities, infrastructures, users etc. The carbon-based technologies that are still widely adopted by the society both in the energy and transport sectors form the carbon lock-in. Since the electricity generation and transport sectors are the most responsible for the greatest percentage of carbon emissions, they also create the carbon lock-in. The lack of governmental support and subsidies is also a reason for the carbon lock-in since that way the carbon saving technologies are not encouraged. (Foxon T.J., 2006) These barriers to the development of carbon-saving technologies illustrate the path-dependent ways of producing renewable energy that has as an effect to leave these technologies locked-out. Unlike carbon, the hydrogen-based technologies that are starting to be introduced by means of fuel cell devices (e.g. in the transport sector) find barriers to their further development, since the new infrastructures that are required and the safety concerns as well as lack of incentives for this hydrogen technology make the carbon economy remain locked-in.

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Understanding the ‘lock-in’

In short it can be concluded that the technological environment discourages radical changes and the development of alternative technologies such as RES, leading thus to locked-in technologies. However technologies are not only based on a technological system of which they are part of, but also on an institutional system consisting of social rules and legislation. This is the reason for lock-in of technoinstitutional system e.g. carbon-based energy technologies. By defining the barriers to this development and suggesting policies to promote the transition to a more sustainable world so as to overcome them, the changes could be easier adopted. (Foxon T.J., 2006) The distinction between conventional and RES technologies respectively, becomes even more clear through the following figures that illustrate the case of a component replacement (in conventional technologies) and a total system replacement by a new one (in RES technologies). When only a component replacement takes place in the existing technology (Figure 5) a new improved system is produced changing the overall quality without the need for or reengineering the rest components. This means that the main infrastructure can be kept the same, which restricts the extra costs. This is the case with conventional carbon-based technologies, which can undertake minor changes (for instance, fuel efficiency improvements) without affecting the rest of the system and as a result these small changes are easier accepted and approved by society leading to a locked-in system as discussed before. (Windrum P., 1999) On the contrary, the replacement of a whole existing system by a new one (Figure 6), will cause big changes since all the components have to be changed instead of just one like in the previous case. This implies infrastructure and institutional changes, replacement of materials and also new knowledge levels (economic, political and social) in order to understand the new introduced systems. As a result such big changes are not so easily adopted by society like in the previous case and a good example of that is the RES introduction in order to replace the conventional carbon based technologies. This is why they cannot be so competitive yet and the older technologies remain locked-in. (Windrum P., 1999)

Figure 5. Component replacement in the existing system (Windrum P., 1999)

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Figure 6. Entire existing system replacement by a new system (RES technologies to replace the conventional ones) (Windrum P., 1999) 2.3

Problem Definition: How does „lock-in‟ apply to fuel cell technology

For a new technology to replace an old one and also be approved by the consumers, the users have to be persuaded that this new technology can actually replace the older technology without having negative impacts on production levels, quality (reliability) and prices, costs and profits. The high potential of RES suggests that they can be a good alternative to replace the conventional methods of producing energy and their adoption by the users is really vital so as to move to a sustainable future where these technologies will be the primary energy production methods (e.g. fuel cell technology will be examined here). For example the most well-known way of energy storage from the intermittent renewable energy sources will be hydrogen, which can convert electricity from renewable energy into a fuel, for its further development. The transportation of that hydrogen for use in fuel cells (which work like combined heat and power/CHP devices) will then allow the original renewable energy to be delivered as power and heat upon demand. (Perkins R., 2003); (Aitken D.W., 2003) The emergence of a true hydrogen economy, based upon hydrogen for energy storage, distribution, and utilization would be a major advantage for the wide spread application of fuel cells. Furthermore there are concerns that because of the relatively low density of hydrogen it is not viable for energy storage, particularly in mobile applications, and there is also concern in regard to the safety of hydrogen. Although still there is not such an urgent need for energy storage and maybe not until 2030, the hydrogen fuel and its applications e.g. fuel cells have to develop independently from the RES transition and are encouraged by governmental programmes so as to support the introduction of intermittent RES. Unfortunately, hydrogen does not occur naturally as a gaseous fuel and must be produced from another source. Fuel cells are such a source which through the water electrolysis that demands electricity, produces hydrogen, without an initial infrastructure to be needed that would mean high costs. (Aitken D.W., 2003) ;(Holland B.J. et al, 2007) The goal is to shift towards a hydrogen rather than carbon-based economy which can be implemented by means of RES and even more the fuel-cell implementation where hydrogen can be widely used. (Aitken D.W., 2003) As fuel use has developed through time, the percentage of hydrogen content in the fuels has increased. (Holland B.J. et al, 2007) It seems a natural progression that the fuel of the future will be 100% hydrogen as illustrated in Figure 6.

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Figure 7. Trends in fuel use over the years showing a reduced oil consumption and almost 100% hydrogen containing fuels (Cook B., 2001) The best developed and most widely adopted application of fuel cells is in vehicles. The development of the automobile as the dominant mobility technology provides an example of a lock-out system, since it is path-dependent on the respective industries’ network. For instance for the car manufacturing, many different industries and factories are needed, which means that a new idea of fuel cell cars should be approved by them and is directly related to this industry network, that can stop the implementation of this idea making it remain lock-out. The internal combustion engine is the core module of the car and a change of it is for sure a huge innovation that leads to a change in performance, cost and design of the car, since other components of the car have to be changed as well. The steps of the major car manufacturers for fuel cell vehicles FCVs) have already started and are being developed rapidly over the years, but still the fuel cell performance is not so competitive in comparison to the conventional internal combustion engines. The challenge for the FCV is to have an equivalent power output to that offered by the current internal combustion engines by simultaneously greening the car and reducing the CO2 emissions. Hence the first generation of FC cars is not so capable of offering any improvements over conventionally powered cars, in terms of speed, torque and performance. (Windrum P., 1999); (Aitken D.W., 2003); (Adcock P. et al, 2008) Concerning the design of FCVs that was assumed to be different from conventional cars, major changes will not take place in the configuration of the components. The fuel cell technology determines not only design changes but also an entire infrastructure update, since especially in the transport sector FCVs require hydrogen production, supply units and hydrogen refueling facilities for charging the cars that all of them imply radical changes in the current system. For instance apart from the extra units that are needed to support the hydrogen energy system, many of the existing gasoline stations would possibly have to be replaced by hydrogen facilities. As a result it is clear that fuel cell technology is better represented by figure 6 rather than 5 due to the fact that it does not require only a component change but more radical changes that refer to the entire system. Nevertheless, still the main benefit of FCVs to reduce the harmful emissions, poses a threat to the public health and is a main disadvantage of the conventional cars. In order for this new technology to be implemented governmental support, scientific research, societal-environment groups’ support are needed so as to ‘’green’’ the car transport by meeting the demands of both the consumers and the car manufacturers. Indeed a major attraction of Master Thesis Project

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the FCV is that changes are required in the engine component but also in other fields such as in road infrastructure, lighting, car insurance and break down services so as to improve the entire car based transport sector. (Aitken D.W., 2003) ;(Windrum P., 1999) The main groups that will be influenced by the FCVs, are the consumers, car manufactures and oil companies, since the last will be able to provide the fuel sources needed for the future FCVs. This means that a network of refuelling stations (e.g. hydrogen stations) has to be installed in order to supply the fuel to cars and also a good collaboration between car manufacturers and oil companies to have a car component against the petrol and CO2 emissions produced by conventional cars until now. (Windrum P., 1999) Using hydrogen as a fuel for vehicles may lead to lower environmental problems, since it reduces the carbon emissions and vehicles could be fuelled by hydrogen in certain refuelling facilities introducing thus an oil independency. Since the turn of the millennium, filling stations offering hydrogen have been opening worldwide. However, this does not begin yet to replace the existing extensive gasoline fuel station infrastructure but hydrogen fuelling stations mainly in hydrogen highways (chain of hydrogen stations) are being explored and already used in many countries (mainly in US by now) and start to build a bridge towards a clean transportation fuel e.g. hydrogen. In general, a sustainable new market technology can take place when there is a large enough group of consumers that is attracted by it and can use it in an efficient way and the technology vis-à-vis the respective older one offering improved characteristics. (Windrum P., 1999)

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3 Technology Selection: Fuel cells 3.1 History of fuel cell technology The concept of the fuel cell was introduced for the first time in the beginning of the 19th century and it became more obvious of what it would be in 1838. William Grove invented the fuel cell in 1839 and did experiments with a fuel cell that he named as gas voltaic battery to show that current is produced through electrochemical reactions of hydrogen and oxygen. However the term fuel cell has been used first in 1889 and was used to convert coal into electricity. In 1932 professor Bacon from Cambridge developed the first Alkaline Fuel Cell (AFC) and in 1939 he demonstrated 5 KW fuel cell, while in 1959 the Bacon fuel cell was modified to 15KW power for use in an agricultural tractor. (Fuel Cell Today 1, 2013); (Cook B., 2001)

Figure 8. Grove’s first idea of fuel cell in 1839 (Cook B., 2001) After that, in collaboration with US Air Force, many fuel cell vehicles were developed and in the early 1960s NASA started developing fuel cells for space applications. The first Polymer Electrolyte Fuel Cell (PEMFC) was developed by General Electric researchers and further together with NASA and PEM with platinum catalyst was used in the Gemini space programme in mid-1960s. In the 1970s, International Fuel Cells (IFC) developed a more powerful alkaline fuel cell for NASA’s Space Shuttle Orbiter that used three fuel cell power plants to supply all of the electrical needs during flight. International Fuel Cells (IFC) made an alkaline fuel cell (AFC) of 1.5 KW power output to be used in the Apollo mission, where the AFC served both the electricity and drinking water needs for the astronauts. Right after that a larger 12KW AFC followed to give power to all space flights. (Fuel Cell Today 1, 2013) ;(Cook B., 2001)

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Figure 9. NASA AFC used for Apollo mission (Cook B., 2001) Meanwhile in the Soviet Union research for fuel cell use in military applications led to fuel cell use in submarines and Soviet space programmes. General Motors tested a hydrogen fuel cell and developed one of the first fuel cell vehicles (FCV) and later Shell created a Direct Methanol fuel cell (DMFC) which used liquid fuel to be applied to vehicles. Since the oil reserves started being diminished, the oil prices being increased and there were energy shortages, alternative methods in the transport sector e.g. fuel cells were created to run with hydrogen or ammonia to substitute the internal combustion engines in vehicles. (Fuel Cell Today 1, 2013); (Cook B., 2001) Thus in 1970s German, Japanese and US industries started testing in FCVs and developed hydrogen storage systems. At the end of the century the interest in FCVs was even bigger and many efforts were done to create hydrogen FCVs that produce zero harmful emissions. However due to the increasing energy demands, larger scale installations were needed and this is why large stationary Phosphoric Acid fuel cells (PAFC) equal to 1MW were developed by IFC for off-grid power. Being funded by the US military utilities, the molten carbonate fuel cells (MCFC) e.g. the internal reforming natural gas MCFCs that produce hydrogen, were developed and further applied to large scale power plants. (Fuel Cell Today 1, 2013); (B.Cook, 2001) In the 1980s the PAFCs continued to be developed and found later application to buses and in military power plants up to 100MW. After some decades when new PAFCs will be built, they will be used in large scale CHP systems. Moreover in 1980s the US Navy studies continued the research in transport uses of fuel cells with silent, zero emissions and high efficiency characteristics in submarines, transport and stationary applications. (Fuel Cell Today 1, 2013); (Cook B., 2001) In 1990s the PEMFCs and Solid Oxide Fuel Cells (SOFC) were used for small scale installations with the need for back-up power mainly for CHP systems. Also the California Air Resources Board (CARB) introduced the Zero Emission Vehicle (ZEV) that was the first vehicle emissions standard in the world and car-manufacturers invested in PEMFC research like in Toyota, Daimler and Ford vehicles. In 1991, the first hydrogen fuel cell automobile was developed by Roger Billings, an American businessman, inventor and developer of high-tech products and well known as a developer of hydrogen energy technologies. As the PEMFC started to run on methanol, the Direct Methanol fuel cells (DMFC) were introduced in portable devices such as in laptops and cell phones. The Molten Carbonate fuel cells (MCFC) first introduced in 1950s and highly developed in 1990s for stationary and CHP applications together with the SOFCs. (Fuel Cell Today 1, 2013); (Cook B., 2001) Master Thesis Project

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Research on fuel cell technology during the last decade was motivated by the high efficiency and low emission goals and moved to the fuel cell technologies as carbon saving methods to lock-out the fossil fuels and make fuel cells competitive so as to be easier subsidized by the government and other institutions. The European Union, Canada, Japan, South Korea, and the United States trying to fulfill these goals, encourage stationary, transport and portable fuel cell applications as well as the respective infrastructure projects so that this technology is fully realized. However these efforts were not so successful since still fuel cells are not so widely accepted and used in comparison to other renewable technologies. The only application of fuel cells that managed to gain a good reputation and quite rapidly to be developed was the FCVs, since in 2000s many fuel cell buses were manufactured encouraging the potential of FCVs. Fuel cell commercialization started being realized in 2007, when based on the market requirements; they were accepted and sold to the consumers. Especially PEMFC and DMFC power systems as additional power production units, were sold for applications such as portable units and communication systems. (Fuel Cell Today 1, 2013) Although as mentioned above the fuel cell buses were efficiently developed and used for several years, their high costs related to start-up needs, fuel cell materials and also hydrogen infrastructure needed, made it difficult for the users to continue using them since they implied a high investment cost. This is also a reason that in some cases the transport fuel cells did not gain the same acceptance as the portable fuel cells that were the most rapidly developed since 2009. Currently most fuel cell cars are mostly for rent until they can be competitive enough the conventional cars, something that is not planned to happen before 2015. (Fuel Cell Today 1, 2013) Over the last five years, the investments in transport fuel cell applications by companies started taking place while the portable uses also continued to rise with Toshiba creating a fuel cell battery charger in 2009. The global economic recession of the late 2000s had unfortunately bad effects on the fuel cell companies that could not be helped through government and profit organizations’ support and R&D to continue their business. Since then an interest on alternative fuels and fuel cells as a way to help the environment and create new job offers, made its appearance again, but in order to be implemented and find place in fuel cell applications, it will take some time since many European countries are still trying to rebalance their economies (with Greece being one of them). This report investigates the differences in barriers that stop the transition to fuel cells and in the policies applied to overcome them among the countries. (Fuel Cell Today 1, 2013) The most important historical steps that described above but in more detail can also be given in bullets as follows. (Fuel Cell Today 1, 2013) ;(Cook B., 2001); (Window on state government, 2013): 

The history of fuel cell begins with William Grove who completed experiments on the

electrolysis of water and built the first fuel cell in 1839.

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

From 1889 many efforts took place to create a fuel cell that converts coal or carbon to electricity but most of them did not succeed since the knowledge on materials of fuel cells was not enough till then. 

In 1932, Francis Bacon developed the first successful fuel cell by using oxygen, hydrogen, alkaline electrolyte and nickel electrodes and finally he produced in 1952 a 5KW fuel cell. 

In 1959, a team led by Harry Ihrig built a 15 KW fuel cell tractor.



The biggest step for fuel cell further development was done by NASA in 1950s, when fuel cells were used for space missions. AFC and PEMFC were mainly used in Apollo, Genimi and other space programmes. 

General Motors tested a hydrogen fuel cell and developed one of the first fuel cell vehicles (FCV) while Shell created a DMFC which used liquid fuel to be applied to vehicles. 

Larger scale installations were needed and this is why large stationary PAFC equal to 1MW were developed by IFC for off-grid power production. 

In 1980s the PAFCs continued to be developed and found later application to buses and in military power plants up to 100MW as well as in CHP systems. 

The major efforts were focused since then mainly on developing stationary power units and power systems for transportation applications, i.e. electric vehicles. 

In 1990s the PEMFCs and SOFCs as well as MCFCs were used for small scale installations for back-up power in CHP systems. 

DMFCs were introduced in portable devices such as in laptops and cell phones.



In 2002, U.S. car manufacturers announced a research programme called FreedomCAR to develop the hydrogen technology for the production of cars and the transition to a hydrogen economy. 

In 2003, President Bush announced the Hydrogen Fuel Initiative, a $1.2 billion programme to fund hydrogen technology development and requested more than $309 million in further funding for 2008. 

Over the last five years, the investments in transport fuel cell applications by companies

started taking place while the portable uses were strongly developed with Toshiba creating a fuel cell battery charger in 2009. 

Currently the most fuel cell cars are for rent until they can be competitive to the conventional cars, something that is not planned to happen before 2015. 

There are presently five major fuel cell types: Alkaline Fuel Cell (AFC), Molten Carbonate Fuel Cell (MCFC), Phosphoric Acid Fuel Cell (PAFC), Polymer Electrolyte Fuel Cell (PEMFC) and Solid Oxide Fuel Cell (SOFC).

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3.2 Applications of fuel cell technology

Hydrogen is a clean energy carrier with great potential for efficient power in stationary, portable and transport applications. It is also considered as a significant element of the future fuel mix for transport, reducing oil dependency, greenhouse gas emissions and air pollution. Hydrogen and fuel cell technologies were identified amongst the new energy technologies needed to achieve a 60% to 80% reduction in harmful emissions by 2050. There are several markets where fuel cell manufacturers are oriented, since there they find a big number of customers something which is challenging for the application of fuel cells. These include large stationary fuel cells for buildings, small stationary fuel cells for residential and telecommunication applications, portable power for military use and other mobile applications, for transportation applications (passenger vehicles, buses, tractors, submarines etc) and finally for hydrogen production and storage methods. (Cook B., 2001) The main categories of fuel cell applications are the following. 

For power production

Stationary fuel cells are used for commercial, industrial and residential power generation and find application to spacecrafts, parks, big buildings, military systems etc and can be found in large and small scale. There are many different types of stationary fuel cells so efficiencies can be between 40% and 60% and then they simultaneously produce heat through the cogeneration increasing thus the efficiency up to 85%. The large stationary power systems range from 100 KW to 5 MW in capacity and mainly use MCFC, PAFC, SOFC and PEMFC as fuel cell options. Because large stationary fuel cells can be installed as part of the electric grid, they can provide reliable power to a site in case of failure or blackout, which means that if the electric grid fails, the fuel cell operates as a back-up generator providing power for the building’s requirements. (Cook B., 2001); (Holland B.J. et al, 2007) ;(Karim N. et al, 2011); (Hellman H.L., Van den Hoed R., 2006) On the contrary for small stationary plants e.g. residential, small commercial buildings or telecommunications, PEM fuel cells are mainly used. Also small scale fuel cell applications can be cell phones, laptops or other mobile devices, since fuel cells are reliable, quiet and compact devices producing 1 to 5 KW power output. (Cook B., 2001) ;(Holland B.J. et al, 2007) ;(Fuel cells 2000, 2013) 

For combined heat and power production (CHP)

Fuel cells are well suited to CHP uses, because the technology produces both electricity and heat and the systems can run on conventional heating fuels such as natural gas while producing reduced CO2 emissions. These fuel cell systems can be a challenging option for feed-in tariffs (FIT), allowing any excess electricity to be sold to the grid or used supplementary to the primary electricity production e.g. by windturbines or solar cells. Combined heat and power (CHP) fuel cell systems, are used to generate both electricity and heat for homes and other buildings. The system generates constant Master Thesis Project

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electric power, and at the same time heat that can be used for further uses e.g. during summer the waste heat can be used into the ground to provide cooling or during winter it can be pumped to heat the building. Cogeneration systems have up to 85% efficiency (40–60% electric + the rest thermal). Phosphoric Acid Fuel Cells (PAFC) are the most widely used in CHP systems since they can reach efficiencies of 90% maximum, whereas the rest types MCFC, SOFC have both electrical and CHP efficiency of approximately 60%. (Cook B., 2001); (Holland B.J. et al, 2007); (Fuel cells 2000, 2013) (Karim N. et al, 2011) ;(Brown J. et al, 2006) Japan is one of the leader countries in fuel cells and has also tried hydrogen fuel cells for CHP systems, with the hydrogen coming from the reforming of natural gas and has the plan to supply heat and power to approximately the 25% of households by 2020. Moreover major Japanese industries like Toyota, Honda and Toshiba are all also working on fuel cell vehicles. (Brown J.et al, 2006)

Figure 10. Representation of a CHP system in a house by means of fuel cell stack (Cook B., 2001) 

For portable devices

Apart from large scale systems, small fuel cells (mainly PEMFC and DMFC) could replace batteries that power electronic products such as cell phones, portable computers, lighting systems and video cameras as well as for telecommunications or satellites. In portable electronic equipment fuel cells substitute the batteries offering another alternative and more sustainable method to produce power equal to some Kilowatts. An advantage of the fuel cells over the conventional batteries is their energy density as shown on the figure below and also their size, since they are smaller in volume especially the DMFCs. Rechargeable batteries will discharge over time (the colder the temperature the quicker they will discharge) something that is not the case for fuel cells, which maintain the full charge capacity almost indefinitely. Moreover the size and cost of energy storage for fuel cells is smaller than that of the batteries, making them more cost effective sometimes and also due to their materials and fuel consumption more environmentally friendly. Fuel cells can replace batteries or generators in various applications providing unlimited power for computers, military systems and other telecommunication Master Thesis Project

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and portable systems. Finally fuel cells are starting widely to be used in mobile phones and by NASA in space missions, as it was done in Apollo. (Cook B., 2001); (Holland B.J. et al, 2007); (Karim N. et al, 2011) ;(Fuel Cells 2000, 2013)

Figure 11. Comparison between compressed hydrogen devices (fuel cells) and conventional batteries used in portable devices (Cook B., 2001)



For transportation (FCVs)

One of the most important fuel cell applications is the Fuel Cell Vehicles (FCVs), with a great number of commercial sales planned to start from 2015 and then in Europe. In transport sector petroleum, about 75%, is used to fuel highway vehicles, such as cars, trucks, and buses, which though are responsible for over 60% of the carbon monoxide emissions and about 20% of greenhouse gas emissions. A transportation system powered by hydrogen and fuel cells would significantly improve our national energy security and reduce emissions of harmful pollutants and greenhouse gases. The fuel cell can use instead of petroleum, hydrogen or other ‘clean’ fuels to develop technologies that can advance fuel cell systems for highway vehicles. In the 1960s and 1970s, Americans became aware of air pollution and the increasing dependency on imported oil and thus automakers began testings with electric vehicles. Firstly the fuel cells were used in cars and buses or tractors as auxiliary power units and since then car manufacturers and factories have had the motivation to expand the FCVs’ development and sales all over the world. California Air Resources Board (CARB) created the first Zero Emission Vehicle called ZEV whereas Daimler Benz created a hydrogen and a methanol fuelled fuel cell electric vehicle in 1994 and 1997, respectively. The same was what Toyota did in 1996 and 1997 respectively. Renault, Peugeot Citroen, Volkswagen, Volvo, Honda, Chrysler, Nissan, and Ford have also announced plans to build prototype PEMFC cars operating on hydrogen, methanol, or gasoline. (Cook B., 2001); (Holland B.J. et al, 2007) ;(Karim N. et al, 2011); (Fuel cells 2000, 2013)

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Daimler Benz demonstrated its NECAR or “New Electric Car” powered by a hydrogen fuel cell and promoted hydrogen fuelling stations opened in Hamburg and Munich. The NECAR programme, made its appearance in 1994, leading to 4 prototypes of electric vehicles with a goal to prove the feasibility of a FCV and how this technology can be improved further. Incorporating a PEMFC to a car using hydrogen stored in a cryogenic tank, combines both sustainability and high speed requirements and thus NECAR 5 fuel cell by DaimlerChrysler, can be fuelled with liquid methanol that is further converted to hydrogen and carbon dioxide through a fuel processor. The efficiency of a fuel cell engine is two times higher than that of a conventional internal combustion engine whereas the carbon and other harmful emissions are much lower. It combines the low emission levels, the quietness and the smoothness with a really high performance, making them really competitive to the current conventional vehicles. There are also plans for buses, trucks and trains all powered with fuel cell engines and also bikes, boats, airplanes and submarines, where some efforts for fuel cell application have already been made. (Hellman H.L, Van den Hoed R., 2006); (Cook B., 2001); (Holland B.J. et al, 2007); (Karim N. et al, 2011); (Fuel cells 2000, 2013) 3.2.1 Most common application: Fuel Cell Vehicles (FCVs)

The car manufacturers tend to decrease the car fuel emissions, by adjusting new sustainable options to their cars, such as batteries, fuel cells etc. So hydrogen fuelled cars seem to be the most appropriate and approved by the society transport method, since these cars are fuelled in hydrogen stations without producing any harmful emissions while lowering the energy consumption. Since the turn of the millennium, filling stations offering hydrogen have been opening worldwide. However, this does not begin yet to replace the existing gasoline station infrastructure but hydrogen fuelling stations mainly in hydrogen highways (chain of hydrogen stations) are being explored and already used in many countries (mainly in US by now) and start to build a bridge towards a clean transport fuel. (Hemmes K.et al, 2010) ;(Holland B.J. et al, 2007); (Hellman H.L., Van den Hoed R., 2006) Several challenges and barriers must be realised before these vehicles can be competitive to conventional vehicles, but the potential benefits of this technology are substantial. FCVs look like conventional vehicles from the outside, but inside contain technologically advanced components such as the fuel cells connected forming a fuel cell stack and show higher overall efficiencies in comparison to other vehicle types. (Hemmes K. et al, 2010) ;(US DOE 1, 2013) Usually the Proton Exchange Membrane Fuel Cell technology (PEMFC) offering high power density by operating in low temperatures, is highly suited to automotive applications since it can offer efficient energy conversion in a compact and robust package. Air (giving the oxygen through a compressor) and hydrogen (supplied from a hydrogen station to a compressed hydrogen tank inside the vehicle), are injected into the stack and pass over the surface of the anode and cathode electrodes. Reactions occur in the electrodes, which oxidise the hydrogen producing heat, water and electrical power that drives the electric motor which moves the vehicle. (Holland B.J. et al, 2007) ;(Adcock P. et al, 2008) It Master Thesis Project

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should be mentioned though that advanced carbon materials are used for the hydrogen tank (demonstration vehicles have used 5000psi carbon-fibre wrapped tanks, and tanks have been certified recently at pressures of 10000 psi), since it is of great importance and it should offer a high security. (Davis C. et al, 2003) The generation of hydrogen by renewable energy sources (through reforming of hydrocarbons) or by nuclear power truly reduces emissions of pollutants, and so this is mainly the way to supply hydrogen to the fuelling stations, which in turn can then supply the hydrogen needed to the vehicles (tank). In between the hydrogen tank and the fuel cell stack of the vehicle there is also a battery unit so as energy to be stored and used upon demand when the fuel cell output power is not enough. For fuel cell vehicles to be economically viable, the cost of fuel cell stacks must be reduced to approximately 80EUR/KW=59 USD/KW maximum (the projected price will fluctuate from 35-75 USD/KW in 2030 as shown in table 17) compared to the cost of 1170EUR/KW achieved thus far. In order for this to happen, advances in catalyst (Pt) technology of the PEMFC should take place, since this catalyst material is related to high costs and this is a reason stopping the use of fuel cells in cars. By improving materials not only the security risks are reduced but also the costs of the car, making it more competitive to the conventional internal combustion engine cars. (Davis C. et al, 2003); (Adcock P. et al, 2008) The major components of a typical FCV as well as its connection to fuelling facilities, and the main operation of the fuel cell stack, are illustrated below.

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Figure 12. Fuel cell car components and its fuelling supply method representation, respectively (Davis C.et al, 2003)

Figure 13. The operation of a hydrogen fuel cell stack in a FCV (Rose R., 2008) Companies like Honda (Honda FCX Clarity, a hydrogen fuel cell demonstration vehicle introduced in 2008), Nissan, VW, Mercedes Benz, BMW, etc. are developing vehicles that operate using fuel cells that utilize hydrogen as main fuel. Already in 1994 the first electric vehicle with fuel cell from Mercedes-Benz (NECAR 1) was presented. From then on, the drive system has been optimized continuously in terms of size, weight and efficiency (a representation of the evolution of fuel cell technology in Mercedes Benz vehicles is given in Appendix A). The B-Class F-CELL is the first passenger car with fuel cell produced by Mercedes-Benz in late 2009. The vehicle generates the power from the chemical reaction between hydrogen and oxygen by using a Polymer electrolyte (PEM) fuel cell. Its tank can be filled with hydrogen in three minutes, providing a range of some 400 kilometres, meaning short refuelling times and thanks to its powerful 100 KW (136 hp) electric motor, a high efficiency. The vehicle's consumption amounts to just 3.3 litres per 100 kilometres without having any CO2 emissions, since the only thing to come out of its exhaust is pure water. In fact it produces 30% more power by 30% less fuel, unlike other cars. (European Automobile Manufacturers Association,

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2013); (Daimler, 2012); (Karim N. et al, 2011) The following table gives the main specifications of the Mercedes Benz F-Cell B class car. Table 4. Mercedes Benz F-Cell B class specifications (European Automobile Manufacturers Association, 2013); (Daimler, 2012) Mercedes Benz F-Cell B class Power

100KW (136hp)

Consumption

3.3 lt H2/100m

Distance range

400km

Superior torque

290 Nm

A compact fuel cell stack

PEMFC

A powerful lithium-ion battery Three 700-bar tanks for the hydrogen A compact, lightweight drive motor Cold-start capability down to minus 25 degrees Celsius

In order to observe the fuel cell potential in the transport field and to estimate it in terms of numbers, the number of hydrogen cars in Europe in the upcoming years will be determined and what percentage this will be over the total number of cars. For this estimation, the following calculation steps have been followed.

1.

Population of EU* (% of cars)=total amount of cars in EU (The population of EU and the

respective cars’ percentage was taken since 2005 and up to 2050) (United Nations, 2009) 2. 3.

% percentage of hydrogen cars in EU M,.Total amount of cars * (% hydrogen cars) = total amount of hydrogen fuel cell cars in EU

Also it is given that: 

From 2005 and then we assume that the amount of cars per 100 inhabitants to be fixed and equal to 45, so for the upcoming years we take the percentage of cars to be 45/100= 45%. (European Automobile Manufacturers Association, 2013) 

The percentage of fuel cell cars is assumed to be 0% up to 2020, but from then after this percentage is gradually increasing over the years until 2050, when it will reach almost the 50% (table below). (Manne D.J., 2006) Master Thesis Project

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According to the previous assumptions and calculation steps we get the table below that gives in numbers and percentages the total and fuel cell cars in EU respectively over the years. The population of Europe over the years so as to be able to calculate the cars mentioned above was taken from the respective Table 37 of Appendix B. The total amount of hydrogen passenger cars up to 2020 is considered to be equal to zero. Before 2020 the Netherlands will probably only have some FC vehicles but mainly for test purpose and so they are almost 0% when compared to the total amount of conventional cars. It is expected that in 2020 fuel cell costs have lowered enough for early adopters to invest in a hydrogen car, provided a commercial hydrogen infrastructure is present. With the expansion of the hydrogen infrastructure in Europe and the ongoing cost reduction in fuel cell technology the number of hydrogen cars increases rapidly between 2020 and 2030 to reach almost 50% of the total number of cars in 2050. Of course half of the cars to be fuel cell cars is a really optimistic and maybe challenging scenario that is not surely the case but this is the vision by ECN. This rapid jump in number of hydrogen cars also occurred due to government campaigning and support (ECN scenario). (Manne D.J., 2006) Table 5. Fuel cell perspective cars in Europe from 2005 to 2050, showing the potential of fuel cells in the transport sector

Inhabitants in EU

year 2005 2010 2015 2020 2030 2050

832602125 841340374 847828720 851516310 849316258 824323317

car/inhabitant total amount (%) of cars 0.45 0.45 0.45 0.45 0.45 0.45

374670956.3 378603168.3 381522924 383182339.5 382192316.1 370945492.7

% fuel cell cars in EU 0 0 0 0 30% 50%

nr of fuel cell cars in EU 0 0 0 0 114657694.8 185472746.3

As shown on the above table the number of cars in EU in 2050 increases rapidly to almost 185.5 million hydrogen cars. This fact defines essentially the importance of fuel cell vehicles (here cars were examined as a vehicle category) and the potential they seem to have in Europe over the years. In general fuel cell technology is really promising not only in terms of transport but also of other fields that were discussed above, something that makes it urgent for it to be analysed from an economic perspective so as the barriers stopping it to be overcome and the correct policies are being applied. This barriers-policies‟ framework is the main goal of the report and will be described in the next chapters. Moreover the cost of automobiles by increasing their production, will be decreasing until it can be competitive to the conventional cars (from 35-80 USD/KW in 2030) simultaneously with a decreased production of CO2 emissions coming from fuel cell vehicles unlike the other vehicle types, over the upcoming years. From figure 15 it is presented that through fuel cell vehicles a huge CO2

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emission reduction is achieved from 120gr/km to just 2-3 gr/km, something that proves the strong environmental benefits of the technology. (Carbon Trust, 2012)

Figure 14. CO2 emissions in gr/km for each vehicle category from 2010 and up to 2050 (Carbon Trust, 2012)

3.3 Technical analysis of fuel cell technology

The main idea of the fuel cell operation is based on the electrolysis; water is being electrolysed into oxygen and hydrogen by passing electric current through it and reverse; hydrogen and oxygen recombine and electric current is produced. (J.Larminie, A.Dicks, 2003) A fuel cell converts chemical energy into electrical energy. A fuel cell has two electrodes, a negative anode and a positive cathode, that are diluted in an electrolyte to produce electricity (flow of electrons). The electrolyte encourages the flow of electrons as they move from anode to cathode through a circuit and prevents the mixing of the fuel and the oxidant that enter the anode and cathode respectively. The fuel cell is an electrical cell fed by a fuel (hydrogen or hydrogen containing fuel) in order to produce power output as well as heat through electrochemical reactions. Because hydrogen and oxygen gases are converted into water through electrolysis, fuel cells have many advantages over conventional heat engines, they show higher efficiency, silent operation. If the hydrogen is produced from renewable energy sources, then the electrical power produced can be truly sustainable without harmful emissions. The membrane material used in a PEM fuel cell is a polymer and the electrode catalyst layer is applied to both sides, and is cut to the appropriate size. A common PEM material used today is Nafion, commonly known as Teflon. (Cook B., 2001); (Wipke K. et al, 2012); (Carbon Trust, 2012) In fact two half-cell reactions in the electrodes take place simultaneously, that are an oxidation reaction (loss of electrons) at the anode and a reduction (gain of electrons) at the cathode respectively. Master Thesis Project

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These two reactions can make the overall oxidation-reduction (redox) reaction inside the fuel cell and this procedure is explained later on. (Cook B., 2001); (Holland B.J. et al, 2007) At the anode, the fuel that is usually hydrogen, enters and comes in contact with the platinum catalyst (electrolyte layer on the anode) and splits into H-Pt bonds. The hydrogen molecules are broken and the oxidation reaction occurs, since each hydrogen atom gives an electron that moves through an external circuit towards the cathode giving thus electric current and hydrogen protons. The rest hydrogen proton bonds move through the electrolyte to the cathode so that the second halfcell reaction (reduction reaction) takes place. (Cook B., 2001); (Holland B.J. et al, 2007); (Karim N. et al, 2011) Simultaneously, at the cathode, the oxidant (oxygen molecules) enters and comes in contact with the catalyst layer on it to react and break into oxygen ions and electrons that will then react with the hydrogen protons coming from the anode to form water. Each oxygen atom leaves the catalyst site, combining with two electrons (which have travelled through the external circuit) and two hydrogen protons (which have travelled through the membrane) to form one molecule of water. The redox reaction has now been completed. The whole procedure with the respective reactions taking place as described before, is given below. (Cook B., 2001); (Holland B.J. et al, 2007); (Karim N. et al, 2011) Half-cell anode reaction: H2  2H+ + 2e- (oxidation reaction) Half-cell cathode reaction: 1/2O2 + 2e- + 2H+  H2O (reduction reaction) Overall reaction: H2 + 1/2 O2 H2O (red-ox reaction) The most important design features in a fuel cell are: 

The electrolyte substance usually defines the type of fuel cell.



The most common fuel for the fuel cell is hydrogen.



The anode catalyst is usually made up of very fine platinum powder.



The cathode catalyst is often made of nickel but it can also be a nano-based catalyst.

The main operating principles of a fuel cell as explained above can be represented on the following figure.

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Figure 15. Main operating principle in a hydrogen fuelled fuel cell A typical fuel cell produces a voltage from 0.6 V to 0.7 V but voltage decreases as current increases, due to several factors that determine the fuel cell losses or voltage losses (Cook B., 2001); (Holland B.J. et al, 2007): 

Activation loss: This loss is related to the energy required to start up the reaction and the fuel

cell operation. The better the catalyst the faster the reaction rate and activation energy, so the activation losses do depend also on the catalyst used. 

Ohmic loss: It causes voltage drop due to the resistances of the cell components, including materials of electrodes, resistance of electrodes and interconnections. 

Mass transport or concentration loss: The reason for this loss is the reduced concentration of hydrogen and oxygen inputs of the fuel cell over the time since they react and are depleted, causing thus voltage drop. 

Fuel crossover loss: Fuel crossover is the result of the flow of the fuel from anode to cathode that also brings the movement of electrons through external circuit. To deliver the demanded energy, the fuel cells can be combined in series or parallel to form a fuel cell stack, to produce higher voltage or higher current respectively. The cell surface area can be increased, to allow stronger current from each cell. It should be mentioned that as long as there is hydrogen supply to the fuel cell, current will be produced and also because electricity is produced chemically and not by combustion, fuel cells will show higher efficiency and also a way to efficiently exploit the waste heat. (Karim N. et al, 2011) The following figures show the fuel cell components to form a fuel cell stack configuration, consisting of several fuel cells.

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Technology selection: Fuel cells

Figure 16. Single fuel cell components to create a fuel cell stack (Karim N. et al, 2011) However the electrochemistry and the technical part of the fuel cell that describes its operation differ sometimes based on the fuel cell types as explained further below. The categories are divided in two big groups, the low-medium and high temperature fuel cells that refer to the operating temperature range of the fuel cells but the division is done according to the electrolyte material of the fuel cell as well. 

Low-medium temperature fuel cells (50-220 Celsius degrees) Polymer Exchange Membrane Fuel Cell (PEMFC)

The PEMFC is the most common fuel cell type that is used for both stationary and transportation applications, as explained before in FCVs. It has high power density while operating at quite low temperatures (30-100 Celsius degrees) to generate electricity in the range of 50-250KW and reach the highest performance below 100 Celsius degrees (boiling point of water). This fuel cell in mainly fuelled by hydrogen and its electrolyte should be flexible enough (solid ion exchange membrane used to conduct protons) to change their power output based on the hydrogen supply to be convenient for many different applications e.g. vehicles, mobile and CHP systems with more popular the automotive application. (Holland B.J.et al, 2007) ;(Cook B., 2001); (Karim N. et al, 2011); (Larminie J., Dicks A., 2003); (Hall J., Kerr R., 2002) Direct Methanol Fuel Cell (DMFC) Direct Methanol Fuel Cells (DMFCs) are comparable to PEMFCs in regards to operating temperature since they operate between 20 and 90 Celsius degrees, but are not as efficient. They use methanol in liquid form as fuel and require a relatively large amount of platinum to act as a catalyst, which makes these fuel cells expensive, and suitable for portable electronic systems of low power that require slow

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Technology selection: Fuel cells

and steady consumption of electricity over long periods. (Holland B.J.et al, 2007); (Cook B., 2001) ;(Karim N. et al, 2011); (Larminie J., Dicks A., 2003); (Hall J., Kerr R., 2002) Alkaline Fuel Cell (AFC) This is one of the oldest designs for fuel cells, used mainly for space missions around 1960s like for the Apollo mission and Shuttle Orbiter craft and the only type of fuel cell that works with a vast range of inexpensive catalysts e.g. nickel. The fact that the fuel cell materials’ costs are eliminating, makes the AFC really competitive. This type of fuel cell only works with pure hydrogen and oxygen inputs, since it can easily be contaminated by other impurities. So filtration or other cleaning procedures so as clean fuels to enter the AFC are required. This could increase sometimes the cost of AFC and this is why it is not so commercial yet apart from the space missions’ applications. Alkali Fuel Cells use a solution of potassium hydroxide (chemically, KOH) in water as their electrolyte, platinum electrodes and operate close to 200 Celsius degrees. Moreover this type of fuel cell works with micro-coating technologies unlike the PEMFC, that decrease the catalyst loading and the fuel quantities while keeping the high performance of the fuel cell. (B.J.Holland et al, 2007); (B.Cook, 2001); (N.Karim et al, 2011) ;(J.Larminie, A.Dicks, 2003); (J.Hall, R.Kerr, 2002) 

High temperature fuel cells (220-1000 Celsius degrees) Phosphoric Acid Fuel Cell (PAFC)

The Phosphoric Acid Fuel Cell has potential for use in small stationary power-generation systems as well as in transportation uses like in buses, where it was widely used. The reason for this is that it operates at a higher temperature than Polymer Exchange Membrane Fuel Cells (PEMFC), so it has a longer warm-up time and is less demanding in materials, something that makes the PAFCs suitable for cars. Also it uses phosphoric acid as the electrolyte and platinum electrode-catalysts, it operates around 200 Celsius degrees and what is important is that it is tolerant with carbon monoxide something that offers many application options for this type. (Holland B.J. et al, 2007); (Cook B., 2001); (Karim N. et al, 2011); (Larminie J., Dicks A., 2003); (Hall J., Kerr R., 2002) Solid Oxide Fuel Cell (SOFC) The SOFCs are usually the fuel cell of choice for stationary small and large systems and since they operate at a temperature of 600-1000 Celsius degrees, they are considered as high-temperature fuel cells. This can cause a disadvantage since it makes SOFC impossible to be used in some applications such as in vehicles, where the high temperatures can be a major problem and damage for the materials of the vehicle. This is why they use a hard, ceramic compound of metal (like calcium or zirconium) oxides as electrolyte in SOFCs. However this high temperature is responsible for steam production, which can directly be moved towards a turbine to drive it and through a generator create electricity, Master Thesis Project

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Technology selection: Fuel cells

posing thus a great option for not using extra devices (a reformer is not required to extract hydrogen from the fuel) and minimising the extra system costs. Furthermore an external reformer to produce hydrogen is not required since it can be produced through a catalytic reforming process inside or outside the cell in the high temperature area. (Holland B.J. et al, 2007);(Cook B., 2001); (Karim N. et al, 2011); (Larminie J., Dicks A., 2003); (Hall J., Kerr R., 2002) Molten Carbonate Fuel Cell (MCFC) Like the SOFCs, MCFCs belong to the high temperature fuel cell category and are mainly used for power or CHP stationary systems. They operate at slightly lower temperatures than the SOFCs (around 650 Celsius degrees), something that makes them a bit less demanding in materials and design and so sometimes less expansive. They include high-temperature compounds of salt (like sodium or magnesium) carbonates as the electrolyte material and this is where they take their name from. Their efficiency can be from 60 to 80% and in general it considered as high, due to the fact that the waste heat of the fuel cell can be recycled (anode and cathode recycling) so as not to be waste anymore but used to increase the system efficiency. Their nickel electrode-catalysts are inexpensive compared to the platinum used in other cells. But the high temperature also limits the materials’ possibilities of MCFCs and their applications to medium or large CHP systems for houses and other buildings. Moreover the carbonate electrolyte requires carbonate ions to move through it from one electrode to the other and so extra carbon dioxide injection is needed for the anode together with the fuel so as through the reactions, the carbonated can be produced and further move. (Holland B.J. et al, 2007); (Cook B., 2001); (Karim N.et al, 2011); (Larminie J., Dicks A., 2003); (Hall J., Kerr R., 2002) The following table shows as described above, the main characteristics for each fuel cell category.

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Table 6. Comparison of fuel cell technologies (Zegers P., 2005); (Karim N. et al, 2011); (Board of Governors of the Federal Reserve System, 2013) Type of fuel cell PEM

Applications

Temperature (Celsius degrees)

Electrolyte material

Stack size

50-100

perfluoropolymer (Nafion)

1-100KW

aqueous solution of potassium hydroxides phosphoric acid solution of potassium, lithium, sodium carbonates

10-100KW

60%

100-400KW

40%

300KW3MW

45-50%

1KW-2MW

60%

back-up power portable power distributed generation transport(vehicles)

AFC

military uses space missions

90-100

PAFC

distributed generation cogeneration electricity utility distributed generation

150-200

MCFC

SOFC

auxiliary power electricity utility cogeneration distributed generation

600-700

700-1000

yttiria stabilised zirconia (YSZ)

Efficiency (%) 60% for transport applications 35% for stationary applications

3.4 Potential of fuel cell technology

The potential of a technology is a rather difficult term to be determined exactly and this is why it should be divided into categories. In general potential is ‘’the amount of mitigation or adaptation that is not yet realized over time’’ and can be identified in levels like market, economic, techno-economic, technical and physical potential. It is obvious that RET have a significant potential and this means that it is really crucial to observe the adequacy of the potential before selecting a RET to be implemented in a country and applying a framework of barriers that stop the development of this technology. The large potential for covering the energy needs in transport, stationary and portable applications is witnessed for the fuel cell technology that involves catalytic electrochemical combustion of hydrogen and oxygen to produce electricity, heat and water offering clean energy. A combination of high power output and environmental goals is responsible for the development and introduction of fuel cells to the current energy market. However it should be highlighted that the potential, commercialization and market dominance as well as acceptance of the fuel cell technology and RET in general, are factors that vary across the countries. (Vasudeva G., 2009) The best way to approach the potential term is to divide it into categories and examine each one of them separately so as to see at the end the overall potential of a technology and whether it is feasible or not, this is also the first step before doing a framework of barriers that stop the transition to RET. (Painuly J.P., 2000); (Verbruggen A. et al, 2009); (Cook B., 2001); (Holland B.J. et al, 2007) According to the above, the Master Thesis Project

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Technology selection: Fuel cells

most important potential types, to which the potential in general refers, are the following (Verbruggen A. et al, 2009):  Market potential: The amount of GHG mitigation that might be expected to occur under forecast market conditions including policies and measures in place at the time. It is based on private unit costs and discount rates as they appear currently and as they are expected to change in the absence of any additional policies and measures. In general the market potential refers to the current usage level of the technology with the existing barriers taken counted. The market potential is the total amount of renewable energy that can be implemented in the market taking into account the demand for energy, the competing technologies, the costs and subsidies of renewable energy sources, and the barriers. The market potential may in theory be lower than the economic potential, but lower because of the different barriers prohibiting the fuel cell technology commercialisation. (Verbruggen A. et al, 2009)  Economic potential: The economic potential is the technical potential that can be exploited at competitive costs. As the difference between renewable energy technologies and conventional technologies change over time (rise in fossil fuel prices, reduction in renewable energy generation costs), the economic potential is highly dependent on framing conditions and cost competitive costs. The potential of RET to produce less greenhouse gases by simultaneously having energy savings without the externalities existing in the carbon based technologies, implies a lower cost for RET (when the external damages are considered) and so the cost competition is increased. When the RET start to become cost competitive to conventional technologies it is then when their economic potential is reinforced and reaches a peak when the average cost (AC) of fossil fuels will become higher than that of RET. Currently the AC of fossil fuel seems to be lower than the AC of RET since the externalities of fossil fuels are not taken into account and this is the reason that still fossil fuel technologies are preferred over RET that still remain ‘’expensive’’ in terms of capital costs with a low economic potential. In short the economic potential represents the amount of RE output projected when all – social and private – costs and benefits related to that output, are included in realizing negative externalities and co-benefits of all energy uses and of other economic activities are priced. For high economic potential we assume that the technology is used in an environment without failures and barriers and so in theory it should be larger than the market potential. (Verbruggen A. et al, 2009)  Technical potential: It is defined in order to reduce greenhouse gases emissions and to improve the efficiency by the implementation of a technology and other economic factors so as a technology to be competitive. It refers to the highest value of the theoretical potential. (Verbruggen A. et al, 2009): Many publications prefer theoretical, technical potentials and fail to define the market and economic potentials of RE technologies. A new set of definitions clearer to analysts and policy makers can give a solution to this. The acceptance of each potential type for the fuel cell technology is indicated in symbols below (plus for positive potential and minus for negative), as well as the different fuel cell applications according to installed size. Master Thesis Project

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Table 7. FC stationary plants’ power output and application field Scale Small

Medium Large

Electrical power 1-5KW 5-10KW 10-100KW 50-300KW 250KW-10MW

Applications micropowerdomestic domestic-residential residential commercial power station

Table 8. Potential types and their positive or negative acceptance of fuel cell technology, respectively Potential types of fuel cells Acceptance potential for meeting energy + and environmental needs potential for participation in societal, business groups market potential

-

economic potential

-

technical potential

+

-

Renewable energy sources and technologies’ future development and potential depend on a variety of conditions and factors which also affect the respective definition of potential each time. The RET development usually defines its market potential (current theoretical level) and by defining the barriers’ framework and the correct policies to overcome them, the potential types mentioned above could be improved. (A.Verbruggen et al, 2009); (J.P.Painuly, 2000) In the case of fuel cells, it is also of great importance to determine the potential, since they create an important technology for the energy market and have the potential to change the way through which power is produced by offering cleaner and more efficient alternatives to the combustion of gasoline and other fossil fuels. Fuel cells have the potential in the transport sector to replace the conventional internal-combustion engine in vehicles as well as to produce energy for stationary and portable applications, meaning that their potential is really huge and exists in many different energy fields. The main reason for their high potential is that they can produce low carbon emissions by using hydrogen leading thus to a hydrogen oriented economy, but still this potential has not yet been fully exploited due to the high costs and demanding hydrogen infrastructure required by the fuel cell technology. In order to specify the adequacy of potential and competitiveness of a new technology e.g. fuel cells in respect to another conventional technology a number of criteria-factors have to be examined: (Painuly J.P., 2000); (Carbon Trust, 2012) Master Thesis Project

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

Lifetime



Start-up time



Reliability



Fuel availability (e.g. hydrogen)



Environmental benefits (e.g. carbon and other harmful emissions)



Time needed for refuelling operation



Robustness



Portability



Safety



Operation and maintenance (O&M) and investment costs



Commercial viability and feed-in tariffs (FIT)



Current technologies available



Socio-economic impact (e.g. new jobs)

Most of the above criteria are positively fulfilled for the fuel cell technology, which makes it a promising and high potential RE technology, although it still needs some extra attention to be competitive enough to other currently used technologies. However from the above list, the criteria like start up time, fuel availability and the high costs are limiting factors and stop the transition to a hydrogen future with 20% less carbon emissions. In short, it could be concluded that three conditions have to be fulfilled in order for the fuel cell technology to be introduced successfully to the market and these are given below. (Carbon Trust, 2012); (Alternative Energy, 2013); (Cook B., 2001); (Holland B.J.et al, 2007);(Zegers P., 2005) 

Low fuel cell investment cost



Longer lifetimes



Small in KW plants (so that the lifetime tests are less expensive)

It is clear that the potential of fuel cells extends from stationary in every scale and portable applications to transport and space mission applications, providing an alternative solution for the current energy system by using hydrogen produced through renewable energy sources. It offers thus really low carbon dioxide levels and supports the hydrogen based energy system. (Painuly J.P., 2000) (Carbon Trust, 2012) Especially in the transport sector, fuel cells offer a high potential, due to the fact that fuel cell cars can save up to 50% fuel use with possible cost reductions as well. The most representative example of the high fuel cell potential is the PEM fuel cells that are widely used in FCVs with the goal to decarbonise the transport sector by means of hydrogen fuelling facilities, something that implies high investments from the side of stakeholders. With such investments and R&D activities, the growth and the potential of the fuel cells can be realised and new opportunities for Master Thesis Project

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the technology will hopefully take place in the near future. (Carbon Trust, 2012); (Alternative Energy, 2013); (Holland B.J. et al, 2007); (Zegers P., 2005) Also in the cogeneration field fuel cells are widely used to provide the waste heat along with electricity to households. However only 15-25% of households seem to be covered by this heat production, since the demand and supply ratios are often out of phase namely the electricity-heat demand ratio is 5 whereas the respective supply ratio by the fuel cell is only 1.5. This proves that the supply and demand ratios do not match each other and the potential of the fuel cell technology is not so big in the cogeneration areas in the transport field. (Zegers P., 2005) Since 2012 some steps started to take place in the fuel cell transport field and it is expected in 20142015 more Fuel Cell Vehicles (FCVs) to be produced transitioning from the current carbon based to a new clean and sustainable energy sector. (Alternative Energy, 2013); (Navigant Research, 2012) Fuel cells have been investigated as new alternative systems to be integrated in many different systems to supply heat and electricity having as a result a large production of power stacks based on PAFCs, MCFCs and SOFCs. They have the potential for cheap mass production and low grade heat and can be used as a component of a multiple system e.g. in combination with electrical heat pumps. (Zegers P., 2005) Today, fuel cells have reached a relatively high degree of development which promises an even higher future progress with high efficiencies and low environmental impact. (Cacciola C. et al, 2001) Nevertheless still quite a lot of barriers inhibit the development of fuel cells and the right policies in combination with governmental support should be considered so as to overcome the barriers and help the further promotion. After we identified the potential of RET, in the following chapter a research on the barriers that inhibit the transition to RET and fuel cells specifically will be conducted.

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PART B: Economic Barrier Analysis

PART B: Economic Barrier Analysis

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Lock-in Analysis: Barriers blocking fuel cell development

4 „Lock-in‟ Analysis: Barriers blocking RE and Fuel Cell Development

4.1

The role of economic barrier analysis

The need for enacting policies to support RE is usually attributed to a variety of barriers that prevent investments from occurring. As a result of these barriers, RE is put at an economic, regulatory and institutional disadvantage over the rest forms of energy supply. Most of barriers can be considered as market distortions or failures and economic barriers that discriminate RE. Moreover barriers are often situation specific in any country/ region but the broad barrier categories with their elements will be discussed in this chapter. Our focus starts on RE in general and further on fuel cell technology and on hydrogen (which is the main fuel) always under the scope of a more economic perspective. These specific barrier categories have been chosen based on the Painuly framework, which includes all different broad categories that affect RE promotion but of these only the most important and costrelated obstacles will be examined in the report always under the scope of their potential importance over economic factors. (Painuly J.P., 2000); (Zegers P., 2005) After the analysis the author will successfully try to comprehend the existing knowledge and material on barriers and decide which of all the barriers can be defined as the most profound one and urgent to be first overcome by also conducting a computational analysis (by using RETScreen) and observing the economic relevance of all barrier categories. Although the concept of fuel cells was introduced many years ago, it was not until the last decade that their potential started being realized and so their commercialization has not yet started on account of many factors. Like every new technology, fuel cells pass from a ‘fluid phase’ that is basically a transitional phase to a ‘steady state’ that shows the successful introduction to the market. The first fluid phase is related to a high uncertainty degree, which shows that fuel cells are not competitive to the other similar technologies and accepted by the consumers. It is in this phase that the barriers should be specified, since they are the main reason leading to this uncertainty level. After this phase and the identification of barriers, by applying the correct policies to overcome them, the technology is able to enter the steady phase by being dominant to the market. (Hellman H.L., Van den Hoed R., 2006) In this report, some EU countries (Germany, the Netherlands and Greece) will be compared, so as to find the most appropriate locations for the implementation of the technology and the right measures that should take place in the weakest of them.

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4.2

Lock-in Analysis: Barriers blocking fuel cell development

Barriers to renewable energy technology per category

As mentioned again, the barriers’ approach will start from a more general basis for RET transition and will then end up to the certain case of fuel cells, referring to barriers stopping the transition to a hydrogen economy. Barriers that prevent the penetration of RET include technical, market, institutional, political, financial, social and regulatory, most of which are inter-related to the financial barriers as it will be proved later on. In general the basis of the barriers refers to the fact that the new alternative technologies cannot be easily adopted due to the fact that they cannot save money when the total economic costs are considered. So even if they reduce carbon emissions, the carbon decrease is not counted as a benefit (example of un-priced benefits). There are also technological reasons for this non-adoption such as the fact that some of the alternative technologies have lower efficiencies than expected or lower than the conventional technologies. Finally the firm and consumer decision making, the techno-institutional lock-in, the poor governmental support, missing legislation and subsidies for renewables, the informational system and firms/agents’ conflicts also contribute to the locking-out of carbon saving technologies. (Unruh G.C., 2000) The barrier analysis can be explored at several levels and for each level we need a different analysis method. The first level is the most general – abstract – level.

The second level specifies various

barriers within a category and the third level includes the elements of each barrier. The fourth level goes more into the specific details of each barrier element and what barrier removal method should take place. This is the bottom up approach used to identify the barriers by decomposing each one of them into its own components. (Painuly J.P., 2000) The barriers in levels are given below: 

Level 1: Barrier categories



Level 2: Barriers



Level 3: Barrier elements



Level 4: Barrier dimensions

The above framework as suggested by Painuly, will be used also for the analysis of the barriers in the report, with greatest emphasis given on the economic or economic related barriers. Each category will be separately explained in the following subchapters by being divided into the main barriers and the barrier elements respectively. In all categories the barriers will be examined from a more economic perspective and only the most important of each category will be analysed. The following table presents the barriers per category that will be discussed in the further subchapters.

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Table 9. Most important barriers in categories that stop renewable energy promotion BARRIERS TO RE PROMOTION

Barrier Category (Level 1)

Market Failures/Imperfections

Market Distortions

Economic and Financial

Institutional Technical

Barriers (Level 2) Misplaced incentives Insufficient/incorrect information No market competition and high transaction costs Missing market infrastructure and organization Capital market imperfection Low priority on energy issues High investment requirements and poor funding activities Non-consideration of externalities High discount rates Long payback time Unstable macro-economic environment Lack of legal/legislative framework Lack of stakeholders, professional institutions and clash of interests Lack of R&D Lack of standards, regulation, certification Lack of skilled personnel, training and O&M facilities

Social, Cultural and Behavioural Lack of social acceptance Other

Environmental issues

4.2.1 Market failures By market failures we refer to the conditions of the market which do not fulfill all economic assumptions that define an ideal market (of “perfect competition”) for products. They can be caused by misplaced incentives and policies, unpriced goods, insufficient information etc., some of which will be further explained. (Brown M.A., 2001) To the market failures belong also the highly controlled energy sector and restricted access to new technologies, the lack of competition, the high transaction costs, the missing market infrastructure and the high investment requirements. (Painuly J.P., 2000) 4.2.1.1 Misplaced incentives Misplaced incentives do not show the real positive potential of alternative technologies, since they do not focus on the actual factors that can promote this market and distort the science and research from the renewable sector (misplaced) inhibiting so the investments in it. This problem occurs in a so-called principal-agent setting in which an agent is capable of acting on behalf of a consumer (i.e. the principal) but does not represent the best interests of the consumer. Also the involvement of other Master Thesis Project

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agents or actors in the purchase of energy technologies limits the decision making of the final consumers posing a barrier to the renewables’ adoption by them. For example, in the case of a rented housing, the landlord-tenant relation leads to misplaced incentives and what is meant by this is that if the landlord buys the equipment for a building whereas the tenant pays for the energy bills, then the tenant is influenced more than the landlord by the energy technologies that are used. In other words, the landlord does not have the incentive to invest in alternative energy technologies and purchase of energy efficient equipment. Also another example is said to be that the misplaced incentives were the rot at the core of the financial crisis whose effects continue to haunt the economy, sprang from a mortgage-backed securities business ecosystem since this was designed with incentives for growth at the expense of investor capital preservation. This can directly relate misplaced incentives to financial limitations and problematic economic issues, which also inhibit technological development. (Brown M.A., 2001) 4.2.1.2 Insufficient or incorrect information

Neoclassical microeconomic theory assumes perfect information, but in the reality this is not the case, since information is most of the times difficult and expensive to be obtained. The time and cost of collecting information is high, leading to high transaction costs also in the energy sector. This creates an insufficient knowledge level of consumers who remain unaware or badly informed about new technologies e.g. renewables. Accordingly, it is difficult for the end-users to adopt renewables in their everyday life, since this would (first of all) require big and costly efforts from their side to explore the benefits of a new renewable energy option. The lack of information is one of the most important implications with the government, universities and other energy related companies being responsible for that, since they do not provide the required informational background to the target groups. In order to increase information, more activities aiming at providing knowledge, seminars and the development of other facilities would be necessary something that would require extra costs from the side of governments and companies. This would mean that providing information about RET is also related to high costs, which make certain stakeholder groups hesitant to invest. In addition to the above, the decision making complexities are also a source of imperfect information. The consumers are not capable of estimating the costs of energy products and the difficulty in their decision- making represents a form of transaction cost that fails to define the benefits of alternative energy products. As a consequence the lack of incentives for product manufacturers and companies to provide better information to the consumers concerning the energy efficiency along with the incapability of consumers in using the energy correctly, create a crucial barrier that stops the adoption of renewable technologies. (Brown M.A., 2001) ;(Painuly J.P., 2000)

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4.2.1.3 Lack of competition and high production costs Renewable energy technologies have a high capital (private) cost despite their low societal cost (nonnegative externalities), which suggests a high product cost that increases even more when the production is not as high as expected. Due to the fact that RETs are not yet approved and widely used by consumers, their cost remains at high levels making them non-competitive over the conventional fossil fuel based technologies (The table below compares the prices of conventional and RES produced electricity). The levelised cost of energy (LCOE) represents the overall cost of electricity from the production to the load/grid connection point, including the capital, O&M, fuel costs and discount rates (or annual energy costs) over the lifetime (annual production) of the project. The internal factors affecting these costs are capital costs, fuel costs, waste and insurance costs. The following formula gives the LCOE in EUR/KWh or EUR/MWh etc and usually gives LCOEs over 20 to 40 year life. (EUFORES, 2011) In general LCOE is defined as the annualised energy cost divided by the annualised energy production. The calculation of LCOE usually uses the Net Present Value (NPV) which calculates the expenses for investment and operation during the lifetime of an energy plant as well as the incomes by discounting at the same reference point. The next formula is therefore used to estimate the LCOE. (Schlege T. et al, 2012) ∑ ∑ Where: Io=investment in EUR, At=annual total costs in EUR (variable and fixed operation, maintenance, service replacements, fuel, insurance and capital costs), Mel=electricity output annually in KWh, i =interest rate, n=lifetime in years, t=year of operation (t=1,2,...n) This LCOE method can compare different technologies on a financial basis without including FITs and is therefore a tool used to define the cost effectiveness of RET. (Schlege T. et al, 2012) Since projected utilization rates, the existing resource mix and capacity values can all vary dramatically across regions where new generation capacity may be needed, the direct comparison of the levelized cost of electricity across technologies is often problematic and can be misleading as a method to assess the economic competitiveness of various generation alternatives. In general LCOE is a concept used to compare the cost-effectiveness of renewable sources in terms of investment and periodic operating costs over their lifetime and the LCOE is the minimum price at which energy should be sold for a project to break even (NPV=0). (Reichelstein S., Roflfing A., 2013) Although the levelized cost calculations are generally made using an assumed set of capital and operating costs, the inherent uncertainty about future fuel prices and future policies, may cause plant owners or investors who finance plants, to face a big risk. Still most of RES electricity production methods remain more expensive than the conventional produced electricity. (US EIA 2, 2013); (IREA, 2013) On the other hand carbon based technologies that have been used all these years managed to have a big mass production to cover the Master Thesis Project

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increasing energy demands of the increased population by lowering their costs per unit produced. Unfortunately the still high costs per unit for RETs and the extra costs needed to change the current energy system would mean a much lower energy demand. The insufficient production suggests renewables not being able to supply energy independently but mostly as supplementary systems in order to manage to cover the energy needs. The above shows clearly that the alternative technologies are not yet competitive compared to carbon based technologies so as to substitute them or to operate along with them and be integrated in the market. The lack of competition together with the high start-up costs and LCOE of renewable technologies put a barrier to the further introduction and development of them. (Painuly J.P., 2000) Based on a historical LCOE database, the next table presents the LCOE of a variety of generation sources as estimated by the US Department of Energy (DOE) and NREL. Table 10. LCOE of conventional and renewable electricity in USD/MWh based on a maximum, medium and minimum cost scenario respectively (OpenEl, 2013)

It is shown in general that the LCOE of conventional electricity (coal and nuclear) is much lower than that of renewable electricity. Apart from wind energy and geothermal energy (close to conventional sources’ LCOE), the rest of them appear to be rather expensive, among which fuel cells (150 USD/MWh), posing a threat to their acceptance by consumers and their diffusion. Cost forecasting Master Thesis Project

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methods for RET can be developed by using the learning curves (showing the learning rates) and the progression of the technologies over a future time period (e.g. 2020-2030). As the learning rate for a technology increases, its LCOE is decreasing in order to achieve the lowest possible level up to 2020 or 2030. It will be only then that the market price of RETs will be realised and contribute to their costeffectiveness and accelerated commercialization, since the rate of returns on high investments will be faster and their payback time shorter. (Schlege T. et al, 2012) 4.2.1.4 Missing market infrastructure and organization RET miss the infrastructure needed for their implementation, unlike the conventional technologies that were created and used based on an already existing one. This implies that RET would require a new infrastructure in order to be efficiently used which means that high investments resulting to high up-front costs would be necessary. Because of no adequate infrastructure, somebody has pay for this to create it. Either the state, or the firm, or the consumer has to be charged with high costs, that they are not willing to pay for. This can result to costs limitations for RET. Also due to the unwillingness or „‟fear of the unknown‟‟ of companies and governments to invest in new technologies so as to maintain their previous profits, the cost of the final product will be very high at the end. By the term ‘’market infrastructure’’ we mean the supplementary and supporting installations which enable the technology to work, e.g. roads, connectivity to the current energy or communication grid etc. These constitute extra costs for society and pose a major constraint for RET’ expansion. (Painuly J.P., 2000) The incentives concerning RET are different among designers, producers and consumers and this conflict of interests creates an insufficient market to support new technologies. (Owen A.D., 2006) The incomplete market is a serious obstacle for the transition to renewables and can include factors like the complexity of design, construction and operation of energy sources. These issues cannot provide the correct incentives to produce efficient products and renewable products cannot be developed and accepted. (Brown M.A., 2001); (Unruh G.C., 2000) 4.2.1.5 Capital market imperfections Capital market imperfections can pose a barrier to the efficiency and diffusion of a renewable technology. Both the energy producers and consumers can have access to the capital, but at different rates of interest, since the energy suppliers always obtain the capital at lower interest rates than the energy consumers, creating thus an interest rate gap between them. These differences in rates can also cause deviations in the knowledge level of these two groups and a big financial risk to the borrower. Also the information gaps contribute to the interest rate gap and the policy involvement is needed to move the rates down and reduce the gaps as much as possible. Moreover because the energy prices are not fixed and fluctuate over certain periods, the possible uncertainty about future energy prices poses a threat to the renewable development and a risk around the final costs associated with RET. Finally another reason for the big interest rate gap is the capital availability that is not as high as needed so Master Thesis Project

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as to encourage new technologies and reduce the risk and rate gap. (Brown M.A., 2001) ;(Owen A.D., 2006) 4.2.2 Market distortions

Market distortions represent the obstacles that do not refer to the market failures but also lead to the slow diffusion of innovative technologies and slow down the rate at which the market expands usually caused by governments. An economic scenario that occurs when there is an intervention in a given market by a governing body and creates market failures (not an economically ideal situation that deviates from the perfect competition) is referred as market distortion. (Owen A.D., 2006) Market distortions are linked to externalities, imperfectly competitive or incomplete markets for energy efficient products, government intervention in local dynamics and low priority on certain issues (e.g. market issues). Since market distortions correspond to symmetric representations of particular forms of taxation, their effects on indeterminacy can be eliminated by using an appropriate fiscal policy. The list below describes some basic market distortions that are responsible for the slow diffusion of renewable energy. (Brown M.A., 2001) 4.2.2.1 Low priority on energy issues Many consumers tend not to pay attention to the energy efficiency, since they believe that the energy costs are not comparable to the other costs of goods and services. Also as mentioned previously, the high societal and environmental costs (negative externalities) of some technologies are not well understood by the consumers, which lead to low priority on energy issues and major concern on other issues that do not provide energy efficient products. These external costs though can also be translated into high overall cost when added to the initial capital costs. By not considering these costs and internalize them in the final price, low priority is given to energy savings and thus this can result to higher cost for RET than it really is, making them seems uncompetitive in terms of costs and discouraging investments in the sector. More precisely, due to the fact that the energy costs can be equal to the 15% of the income for a household case, whereas they are much lower on an individual basis, consumers tend to consider only the capital and not the external costs (the emissions related to the carbon based technologies they have been using). However, the energy emission savings for each individual-household can be important when summed across all of them and can contribute in total to a significant global reduction of carbon emissions. Renewables are seen as a contribution to diversity and security of supply as well as a critical enabler to enhancing access to a clean energy future. Nevertheless policy makers and other stakeholders (governments, companies and consumers) do not really consider the benefits of renewable technologies but only focus on their high initial costs, having thus as a priority other aspects (costs, personal savings) and not energy issues (positive impact of renewables on environment and society). (Brown M.A., 2001) Master Thesis Project

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4.2.2.2 The non-consideration of externalities Because the external costs are not reflected in the final market price and consumers are not charged with them, they do not face the real cost of the services they use. These environmental externalities of energy production can be divided in two categories: the costs of damage caused to health and environment and the costs from the impact of climate change. Among the externalities are the damages caused by atmospheric emissions of pollutants (CO2, SO2, NOx) and their impact on health, materials, crops and generally ecosystems. These costs can vary among different countries since they are measured in damage made per ton of pollutant. The Gross External Damages (GED) that represent the externalities can be a measure to see the negative impact of conventional technologies on the environment arising from greenhouse gases from electricity generating facilities. The GED can also be seen as a result of the governmental intervention which in some cases can lead to market distortions and slow RE commercialisation. Despite the fact that the GED are high for carbon based technologies, they are not considered by consumers, who only pay attention to the private costs and ignore the external costs that may increase the total market price. If the externalities were added to the future costs then by 2020, most of the renewables would be less costly than coal or gas for electricity production and definitely be preferred over the conventional technologies. (Owen A.D., 2006); (Painuly J.P., 2000); (Unruh G.C., 2000) The following table gives the external costs of electricity production in most countries of Europe estimated in Euro/KWh. For example, if the external costs of producing electricity from coal were to be factored into electricity bills, we estimate that between 2 to 15 Euro per KWh would have to be added to the current price of electricity in the majority of EU Member States. Also it is important to mention that not only local damages have to be considered but also air pollutants that are transported and cause damages hundreds of kilometers away from the source. So local and European modeling is required by encouraging or subsidizing cleaner technologies thus avoiding socio-environmental costs and internalizing them in the initial costs of the technologies. (EC, 2003)

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Table 11. External costs for electricity production in the EU (Euro/KWh) (EC, 2003)

It is shown that external costs for electricity produced from coal/lignite are the highest, whereas from RES (especially wind energy) are the lowest. Moreover in terms of countries we see that Greece presents high external costs from the use of coal/lignite, since most RES are still not in use in the country. As a conclusion the EU range varies from 2-15 Eurocents/KWh=0.02-0.15 EUR/KWh for conventional sources (coal) to 0-5 Eurocents/KWh=0-0.05 EUR/KWh for RES. The noninternalisation of high external costs of conventional sources in the overall market cost as well as the non-realisation of low external costs of RES, lead to the slow commercialisation of RETs since their final market prices are assumed to be higher than they really are, assuming thus cost barriers. For instance it is also obvious from the table that in Greece (GR) the external cost of conventional sources (coal/lignite) varies from 5-8 Eurocents/KWh=0.05-0.08 EUR/KWh=50-80 EUR/MWh, which is high and could increase much the cost if internalised so that it reflects the real high cost of conventional sources. However this is not the case and these high costs that could otherwise increase the price of fossil fuels and decrease the price of renewables are not internalised and so make the renewable technologies seem expensive to be used. 4.2.2.3 High investment requirements and poor funding activities In some cases through the appropriate legislative framework, governments can support RE by offering high FITs, easier licensing procedures and through activities and actions promoting them all over the country. On the contrary there are cases where governmental decision-making can be more an implication than a catalyst that prevents the commercialization of RETs from accelerating and diffusing. A typical example is Greece where legislation and laws for RE have been adding many obstacles to the development of RET (see chapter 5). Not only the government but also energy related Master Thesis Project

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firms and organizations are inhibiting RET development by not investing in them. As discussed previously, these high investment requirements represent a big disadvantage of RETs, since they come in conflict with the governments’ and firms’ interests that think they cannot gain any profit by investing and so do not attempt such procedures. In the current financial crisis, high investments can simply not be realised, something that makes technologies with high investment requirements very difficult to be implemented since by not investing they increase their costs for the user. Despite the climate change and negative externalities of fossil fuels, governments continue to subsidize fossil fuel based technologies (decreasing so their end costs) and make the problem of RET’ diffusion even more intense by not offering subsidies or FITs in order to make them seem more cost competitive. (Unruh G.C., 2000); (Painuly J.P., 2000) The following table presents that in all EU countries, subsidy amounts in EUR/KWh (apart from Austria, Germany and the Netherlands where subsidies in EUR/KWh have been increased) have been either remained the same or decreased from 2001 to 2010. Also Greece (explained in chapter 5) has offered low subsidies and decreased FITs to renewables (not FITs at all for fuel cells), a fact that explains why renewable energy diffusion has not been achieved yet. As a conclusion, due to the high investment requirements, the subsidy amounts given to renewable have been decreasing over the years increasing so their overall prices and discouraging investments which in turn also lead to uncompetitive prices of RET, creating thus a vicious circle associated with the costs. (World nuclear association, 2013) Table 12. Subsidies in Eurocents/KWh or millions EUR per year to renewable technologies in 2001 and 2010, in different EU countries (World nuclear association, 2013)

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4.2.3 Economic/financial barriers 4.2.3.1 High discount rates The discount rate is the interest rate charged by commercial banks and reflects either the cost of capital to the borrower or the opportunity of the investment project (if financed from own accumulated savings). The discount rate is estimated as the interest rate in discounted cash flow analysis to determine the present value of future cash flows and so it takes into account the time value of money and the risk of anticipated future cash flows. In general businesses need to consider the discount rate before deciding to spend more of their profits on buying new equipment or before giving their profit back to their stakeholders. In the case of renewable technologies, the high initial cost forces the institutions to take high loans but with high interests since the efficiency of renewables is not sure and the bank confronts a risk loaning for such new technologies by increasing the discount rates. The discount rate of renewable technologies is high which means that the present value of future cash flows is low making the technologies appear less trustworthy in the present to encourage investments. It also can increase even more the primary cost of renewables making them appear risky, less worthy in value and sometimes dangerous for companies to invest in them in the present creating a barrier to their development and use by consumers in the future. (Painuly J.P., 2000) 4.2.3.2 Long payback time Payback period refers to the period of time required for the return on an investment to "repay" the sum of the original investment and it is the time where the investment breaks even (NPV=0). (Williams J.R. et al, 2012) As mentioned in some of the above barrier elements, a major disadvantage of the renewable technologies, is their high payback time. Their high initial capital cost requires high investments in this field and a long period to become cost competitive to conventional fossil- fuel based technologies and to repay the investments made. (Painuly J.P., 2000) In a more computational approach we can calculate the payback time as (Williams J.R. et al, 2012):

Payback Time= Amount to be Invested/Estimated Annual Net Cash Flow (considering the time value of money) More precisely, the higher the annual net cash flow, the shorter the payback period (given the initial investment). On the contrary, the higher the payback time, the more time it gets for the technology to return the initial investment and the higher the risk and uncertainty of producers, investors and governments to rely on RETs and subsidise them. (Nixon W., 2010) The payback time is in general a very important criterion for the implementation of a technology, since it is related to many other factors that could affect the cost and performance competitiveness. Despite the fact that RETs have a huge potential, their payback period is either not well-known yet or rather longer than that of the conventional technologies, making renewables seem very challenging and an insecure option for the Master Thesis Project

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future energy system. The next table presents the estimated payback periods for the most common RETs depending on their plant size, as calculated in year 2009 and shows that with the last material improvements and new supplementary technologies for the renewable power plants operation, the RET efficiency might have been increased and payback times might have been decreased as well. (Nixon W., 2010) As presented on the table, most RETs have a high payback period (only windturbines have the lowest of 5-11 years), which prevents investments from occurring. Only fuel cells in the transport sector (FCVs) appear to have attractive payback times (2.5-6.5 years), which explains why it is the most profitable and mature application for fuel cells until now. On the other hand the rest fuel cell applications are not as mature as the previous, resulting thus to slower rates of return on high initial investments and to longer payback times (around 10 years). However on a general basis RETs have a rather long payback time meaning slow rate of return, inhibiting investments and fundings in the RE sector and thus implying high costs for the technologies. Table 13. Estimated payback periods for the most common RE technologies (Nixon W., 2010) RES

Payback period

solar PV (<4KW)

10-13 years

solar PV (4-10KW)

14 years

solar PV (10-100KW)

15 years

wind (<1.5KW)

5.3-11 years

wind (1.5-15KW)

2.8-9.3 years

micro CHP

7 years

fuel cell in transport

2.5-6.5 years

4.2.3.3 Unstable macro-economic environment The macro-economic environment’s influence on the renewable technologies is reflected by their contribution to the Gross Domestic Product (GDP) in a certain country. The GDP presents the value of all goods and services produced within a country in a certain year and it is an indicator of the country’s standard of living. (European Parliament, 2007) The unstable macro-economic environment especially in Europe over the last years, increases even more the risk of adopting new technologies (e.g. renewables) and the uncertainty for new investments in this energy sector. Moreover the unstable macro-economy may include high price fluctuations, payment problems, unstable currency, uncertain exchange rates and economic growth as well as missing economic policies. All the above factors can have as a consequence increased RET costs that create a more risky environment for renewable energy development. (Painuly J.P., 2000) Master Thesis Project

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4.2.4 Institutional barriers

4.2.4.1 Lack of legal-legislative framework and uncertain governmental policies Many countries have set targets for the utilisation of renewable energies in meeting their power supply needs. In order to reach their targets, many countries have designed and implemented a variety of policies, strategies and instruments. However only a few countries had implemented these to reach the EU goals. Targets are a key element for determining the expectations to any policy instrument and should reflect the vision of policy makers to develop renewable energy. A strong target should therefore be ambitious, but at the same time realistic, specific and concrete (e. g. double the share of renewable energy in electricity production from 12% in 1990 to 20% by 2020). (GmbH, BMZ, 2012) Since the renewable methods represent a relative new entrance in the energy market, there is still not sufficient legal framework to exploit them correctly and contribute to their adoption by the consumers. Due to the growing importance of renewable energy on global scale, a need for effective policies arises in many countries. Nevertheless, such a transfer of ‘good practice policies’ often stays behind expectations or leads to failure and lack of required legal framework and governmental policies able to support a new energy market. (GmbH, BMZ, 2012); (Painuly J.P., 2000); (Owen A.D., 2006); (Unruh G.C., 2000) As it will be explained later, the missing or not appropriate legislative framework for some RETs (fuel cells) in most countries (including Greece) poses a barrier to the development and financial support of RE (by posing FIT and subsidies), which makes alternative technologies have high initial costs, remain either out of legislation or not equally to fossil fuels considered stopping as a result the investments as well. 4.2.4.2 Lack of involvement of stakeholders and professional institutions and clash of their interests

Due to the increased risks concerning renewables, stakeholders are hesitant in making decisions and getting involved into the expansion of the new carbon saving technologies. There is a lack of communication between different stakeholders and lack of consultation’s culture together with a fear of opposition that make it difficult to support investments in the renewable energy sector and can lead to misplaced priorities and incentives. Due to the low risk and capital costs that carbon technologies offer, there is a locked-in carbon energy system. Stakeholders are thus more willing to invest in the fossil fuel sector, where they can have a profit much sooner, since the renewable technologies feature a longer payback time. (Painuly J.P., 2000); (Owen A.D., 2006) The competition between renewable and conventional technologies, the threat to utility dominance and profit and the lobbies against RET can create clash of interests of different sides. For instance the control over energy is regulated through certain organizations/stakeholders that represent the investors for the renewable sector whereas the consumers that are the users of these methods can have different priorities. The different interests between these two groups can make the investors reluctant to invest and the consumers to adopt, Master Thesis Project

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establishing a contradiction that poses a barrier to renewable energy. Financial or other professional institutions still are not willing to invest in renewables and to support a transition to sustainable energy. The lack of stakeholders for renewable technologies is stemming from the high risk, the underdeveloped capital markets as well as the restricted access to capital markets, insufficient regulations and lack of feedback to policy makers to promote RETs, and as a result it is associated with a lack of investments in the sector (that increase the initial costs of RET) and also with cost hurdles. (Eichman J. et al, 2009) The high risk is also associated to the high additional costs that would result as the stakeholders and organisations are increased in number, since they would require more facilities etc to get involved in the commercialization procedure. Furthermore the lack of private sector participation having as a result governmental policies or restricted regulations and a lack of competition and inefficiency can also contribute to the barriers’ creation. The same situation is observed in Greece where the lack of private sectors’ participation or the lack of Public Private Partnerships (PPP) create an uncertain environment for the promotion of RE in the country. (Painuly J.P., 2000) 4.2.4.3 Lack of R&D Whenever a niche market appears in the forefront, Research and Development (R&D) is vital in order for it to develop and be adopted by society. The term R&D refers to longer term activities in science and technology within a business to reach the desired outcome. The activities that are classified as R&D differ from company to company and are divided in two groups: the first function is to develop new products and create the appropriate knowledge about technological topics and the second function is the return on an investment. (Johansson B., Loof H., 2008) Concerning renewables, the R&D facilities and the appreciation of R&D role in technology adaption are missing and this lack is responsible for slowing down their diffusion. (Painuly J.P., 2000) R&D activities are usually conducted by specialized units, companies, research organizations, universities or state agencies and since there are still not enough of them that are related to sustainable energy or are concentrated on different fields of energy, R&D for RE in EU remains in its early stages. (Johansson B., Loof H., 2008) A representative example could be Greece, where there is lack of institutions that could support RE R&D and the still missing initiatives in this sector, cannot allow RES to expand in the country (see chapter 4). Summarising, it appears that R&D in the field of RE and more certainly hydrogen, is well supported showing strong political will. Nevertheless the only countries with the greatest R&D budgets and market stimulation policies are Germany, USA, India, meaning that still R&D funding if missing from the rest of the world. The focus on R&D budgets should be considered for technologies (fuel cells) for which there are no or few other policy support mechanisms. As the following figure indicates there was in general a decreasing trend on R&D expenditures for RE from 1993 to 2004, which is even more intense nowadays. As a conclusion from the figure, hydrogen and fuel cell technologies enjoy strong support within EU and funding is rising faster than in other new RETs, but mostly in the field of transport rather than in the stationary sector. However a steady R&D magnitude for all RETs does

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not exist and this presents a major obstacle to their successful entry in the market. (Roads2HyCom 2, 2013)

Figure 17. R&D budget in million USD for RETs until 2004 (Roads2HyCom 2, 2013)

4.2.5 Technical barriers 4.2.5.1 Lack of standards, regulation and certification

Due to the innovative character of sustainable technologies, the lack of R&D and informational background, still there are often not sufficient or adequate codes and certifications. The product quality and acceptability are also affected and lead to the difficult adoption of the technologies by society, since the required specifications for their implementation and their efficiencies cannot be determined because of the missing certification codes. This contributes to the creation of an uncertain environment regarding RET investments and introduces high commercial risks that causes their negative economic characterization. The missing regulation and certification can essentially destabilize markets by inserting uncertainties and increasing the risk perception of potential investors and buyers. (Owen A.D., 2006) This perceived risk, which translates into high potential/hidden costs or even investment failure, in turn does not allow for the establishment of a new technology thus increasing the technological lock-in. In addition to the above, the lack of institutions and provided initiatives (among the institutions that provide regulations and certifications for patents is the European Patent Office/ EPO) to further standards and the lack of facilities and infrastructure for testing new methods for electricity production make it also difficult for RETs to develop. For instance the Renewable Energy Certificate (REC) mechanism is a market based instrument to promote renewable energy and facilitate Renewable Purchase Obligations (RPO). REC is though missing usually in most countries and so it is still rather difficult for the RE development to accelerate. Through the missing process of Master Thesis Project

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certification the market based instrument necessary for renewable technologies cannot be traded to obligate entities and buyers to approve new technologies in their energy system. (Painuly J.P., 2000); (Owen A.D., 2006); (Soonee S.K. et al, 2010) 4.2.5.2 Lack of skilled personnel and training facilities The missing facilities and infrastructure required for the progress of a technology as well as the lack of skilled personnel can be a barrier to the penetration of RETs. Because of the character of these technologies and their uncertain efficiency and productivity, the lack of information concerning their operation precludes the training of appropriate skilled personnel and represents a constraint for producers. In fact for renewable technologies that have certain installation requirements and need very skilled and specialised personnel in order to be in the correct and safe way implemented so as not to create problems or accidents (e.g. for the installation of windturbines and photovoltaics that have difficult installation needs, accidents and installation mistakes can occur because of the not appropriate and skilled personnel). The missing seminars, training facilities, experts to train and the inadequate efforts also contribute to the insufficient information and awareness around this energy sector that has as a result a non-well-trained and skilled stuff required for the product acceptance. The aim is to map high-level skill deficiencies within the energy research and innovation chain, since the skills’ and entrepreneurs’ shortages are causing recruitment problems in the sector. Organisations should be looking abroad for skilled resource by interacting with young people at a very early age after their studies so that they are more likely to get to know a new technology and adopt it efficiently. This could make a significant impact on the current skills profile and improve the knowledge level around RE industry. Unfortunately Universities do not contribute to the renewable energy encouragement a lot by allowing people to do many relevant courses and there are often concerns that most courses do not match the needs of industry and job acquisition opportunities. A possible reason that leads to the lack of skilled personnel may be the fact that usually post-graduate studies are not encouraged or rewarded appropriately by the jobs offered later on. This fact leads to little research being undertaken and unqualified personnel which does not promote future technological development. Also the lack of skilled workers can mean that they have to be trained requiring extra facilities probably, something that is costly and can reduce the net benefits associated with the technology itself. (P. del Rio, Unruh G.C., 2005) There is additionally widespread concern over the declining number of engineering/science/technology students who could be the future stakeholders getting involved in the RET commercialization. Also the not sufficiently skilled teachers in schools and universities due to poor financial rewards of staying in academia (and other...) can be a reason for the lack of available training in the next generations. Furthermore the increasing industry requirements demand even more skills and less staff members, something that increases so much the competition in a way that there is never sufficient skill background to help the development of a new technological step. There are also discussions on the declining degree quality for grade awarded, something that is proved by the fact that there are both skills shortages (where there is a lack of appropriately qualified Master Thesis Project

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graduates available to be recruited) and skills gaps (where deficiencies in the skills of those graduates that are available) in the engineering market. (Painuly J.P., 2000); (PATH, 2003); (ERP, 2005) ;(P. del Rio, Unruh G., 2005) In order for the skill deficiencies to be filled in and skilled personnel to be created for RET promotion, new facilities and activities (that are currently missing) would be required to increase people awareness, information around RET and train people. However such facilities to be created a higher budget would be required, which shows how the lack of skilled personnel could be related to high costs as well. Table 14. Skill shortage categories leading to unqualified personnel for fuel cell promotion (ERP, 2005) Skill shortage areas Technical skills Mechanical skills Electronics Engineers Leadership skills Project Management Managerial skills Chemical Engineers

4.2.6 Social/cultural/behavioral 4.2.6.1 Lack of consumer and social acceptance RETs represent a very innovative idea that suggests new but unknown products on which there is not adequate knowledge yet. People that are unwilling and resistant to change since they remain used to the conventional energy system, cannot accept a new method entering it. Due to the high discount rates (because of the high risk of RETs) and also other social and cultural reasons, the consumers remain skeptical, without confidence and contribute to the slow diffusion of renewables. Furthermore the lack of social acceptance for some of the RETs may be due to the fact that new technologies are sometimes seen as ‘’alien’’ and of no use and there is preference for traditional energy leading to the carbon lock-in. The possible scene and landscape adjustments that would be caused by RE installations also affect the consumers’ opinion that do not accept such changes close to their properties and tend to decline any new facilities ignoring the potential benefits they might have and are unwilling to change their energy habits (NIMBY: Not In My Back Yard). This can be caused because of the low educational level and the high average age of the society most of the time and it is a situation that can be seen mostly in less developed countries. This obstacle can only be encountered in short–term by providing them with adequate information about the RES technologies and their benefits. Such a thing would require though new facilities to provide information and increase awareness of society which in turn are associated with high costs. Because of the missing social and Master Thesis Project

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consumer acceptance in addition to cultural/ behavioral reasons, the market size is also affected, becomes small and stops the transition to a sustainable future. (Painuly J.P., 2000) 4.2.7 Other barriers 4.2.7.1 Environmental In general, renewable energy describes the energy we can harness from renewable sources by decreasing simultaneously emissions of carbon dioxide that are the main cause of climate change. However, there should be a balance between this benefit and the potential impact of each renewable technology on the local environment. However, no energy source is completely harmless to the environment. For each technology, there is a trade-off between the wider benefits and the impact at a local level (for example for a wind farm, the main issues are the visual impact of windturbines locally as well as the impact on birds flying at this height level and on the local environment). Also, the effect of renewable energy projects on wildlife is very important and projects that may cause harm to wildlife are less likely to be chosen (e.g. windturbines are said to be partly responsible for the reduction of bats and birds in certain areas). Despite the environmentally friendly character of RETs, there is still a minor percentage of CO2 emissions produced by them, that need to be eliminated so as to be fully sustainable. The difference in harmful emissions between RETs and conventional methods is in some cases not as big as expected and so it cannot persuade consumers over the positive impact of RETs on the environment so to fully rely on them for energy production. However even environmental damages caused by technologies can be translated into high external costs (GED), which again can show how environmental can be inter-related to cost limitations for RET. Thus it is vital when designing policy instruments for more sustainable energy futures, to generate the lowest possible socio-economic and environmental impact ensuring a certain degree of economic efficiency. (Environmental Agency, 2003); (Bergmann E.A. et al, 2007)

4.3

Barriers to fuel cell technology per category

Here we consider the barriers specific to fuel cell technology. Fuel cells have the potential to substitute conventional internal combustion engines, they can be considered as a radical innovative technology, since they destroy in that way the current market and component knowledge. In order for fuel cells to compete realistically with contemporary power generation technology, they must become more competitive from the standpoint of both capital and installed cost (the cost per kilowatt required to purchase and install a power system). The high capital cost (on a $/KW basis) today has led to a significant effort focused on cost reduction. Specific areas in which cost reductions are being investigated include: material reduction and lower-cost material alternatives, reducing the complexity of an integrated system, minimizing temperature constraints (which add complexity and cost to the Master Thesis Project

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system), simplifying manufacturing processes, increasing power density, scaling up production to gain the benefit of economies of scale (volume) through increased market penetration. Also fuel cells address environmental concerns and depend on technological and market knowledge but also on a clear understanding of stakeholders (suppliers, manufacturers, governments, environmental groups, social groups and customers) and on the social aspect of this technology. Because of these challenges fuel cells face, they remain in their early development stages, where there are high risks and uncertainty making the technology appear immature and interacted with many different barriers most of which are associated with cost obstacles as it will be proved later on. (Hall J., Kerr R., 2002);(Zegers P., 2005);(Hellman H.L., Van den Hoed R., 2006) Based on the next table each barrier category along with its elements will be separately analysed right after it. Table 15. Most important barrier categories that stop fuel cell promotion BARRIERS TO FUEL CELL PROMOTION

Barrier Category (Level 1) Market Failures/Imperfections Market Distortions Economic and Financial Institutional Technical Social, Cultural and Behavioural Other

Barriers (Level 2) Lack of cost/market competition because of high costs Poor hydrogen infrastructure Lack of reliability Application diversity and complexity Immature technology without traditional performance indicators Low return on high investments and high payback time Lack of financial institutions and initiatives Lack of mechanisms and regulatory support Lack of standards, regulation, certification Fuel cell material requirements and high hydrogen prices Short lifetime Competing technologies in transport Lack of consumer and social acceptance Uncertain policy issues Environmental effects because of hydrogen production

4.3.1 Market failures 4.3.1.1 Lack of cost and market competitiveness because of high capital costs

Fuel cells cannot yet compete economically with traditional energy technologies, though rapid technical advances are being made. Although hydrogen is the most abundant element in the universe, it is difficult for it to store and distribute posing a threat to fuel cell progress, which mainly run on hydrogen. Fuel cells are currently in a pre-commercial phase with a lack of cost and performance competitiveness as well as market demand in comparison to conventional internal combustion engines. Since fuel cells have high costs with their cost reduction and market acceptance to be slow, it should Master Thesis Project

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be kept into account that in order to invest in a new technology, you have to know before if it is going to work. (Zegers P., 2005) This is mainly the reason that still there are no investments in the fuel cell industry, since the degree of uncertainty and risk as well as the not secure operation and benefits cannot make governments encourage them and investments to occur, resulting thus to high initial costs for the technology. Meanwhile fuel cells require optimization, quality enhancement and product development so as to meet the performance. Also an important problem for fuel cell promotion seems to be the difference between the interests of firms and customers, namely firms need to acquire operational experience and revenues whereas customers avoid investing in risky technologies and are interested in matching the demanding requirements with high expectations. In the market, PEM fuel cell stacks could become competitive if they reach a stack cost of 100 or even 50 USD/KW, whereas currently it exceeds 1800 USD/KW as indicated in the table below. Until recently the cost of the fuel cell stack in the automobile sector has been in the range of 500 USD per KW (for a FCV) whereas a projected competitive cost could be on the order of 35-75 USD per KW, a much more stringent criterion. Similarly for the FCV the overall cost should be declined to 60-125 USD/KW or 22-27 k$ to be competitive to conventional internal combustion engine based cars (19.5 k$ target price). (IEA, 2007) Moreover among the different fuel cell types, the MCFCs and SOFCs have often higher costs than the other types, since they require expensive ceramic materials in order to operate in high temperatures. Apart from the fuel cell type, the power density according to the type, the catalysts and materials used for each fuel cell as well as the fuel processing method can be factors that influence the overall cost of the fuel cell systems. (Painuly J.P., 2000); (Zegers P., 2005) Some cost projections for FCVs for instance, are a matter of debate to overcome the financial implications. A projection of cost breakdown (a rather high cost scenario) for PEMFCs and FCVs is provided in the tables below. It is shown from these tables that the fuel cell components vary in cost and all together are combined in order to define the overall fuel cell stack cost and further the system cost. (IEA, 2007) The costs appeared on the first column of the table (for the prototype case) will be used for further calculations in the report. Table 16. Cost projection for PEMFC stack (IEA, 2007)

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Table 17. Cost projection for PEMFC vehicles (80KW) for 2030 according to pessimistic and optimistic scenarios (IEA, 2007)

For PEMFC, the component costs are the following (IEA, 2007): 

Polymer Membranes (electrolyte): current costs reach 800 USD/m2 or 250-300 USD/KW but for large scale manufacturing, the cost is decreased to 50 USD/m2.



Electrodes: The electrode together with bipolar plates (explained next) dominate the fuel cell stack cost as they are manufactured manually. Industrial production could thus bring a cost reduction. The cost of electrodes could be reduced from 1500 to 150 USD/m2 through an increased mass production.



Bipolar plates: They are made from graphite polymer composites or coated stainless steel, having so a high cost. By using carbon polymers and low cost steel alloys, while increasing mass production the cost could be reduced to 8-18 USD/KW.



Balance of Plant (BOP): They include pumps, blowers, compressors, intercoolers, DC/DC converter, electric motor, fuel processing and storage, control valves, pressure regulators, controllers, cooling systems, preheaters etc). To be more precise, the cost of electric motors can drop from 25 to 15 USD/KW, the cost of converters-batteries is estimated at 2500 USD and for fuel storage at 600-800 USD/kgr hydrogen. In general the cost of BOP can fall from 45 USD or 55 USD/KW to less than 15 USD/KW.

While all these improvements combined could reach the target fuel cell stack cost of 100 USD/KW, further reduction to 50 USD/KW requires higher energy density, new materials and technologies. The above components’ cost in terms of the overall PEMFC stack cost, are represented in percentages in the following figure-pie.

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PEMFC stack cost (USD/KW) bipolar plates electrodes polymer membranes Catalyst Assembly Peripherals

Figure 18. PEMFC stack cost in terms of the components individual prices On the other hand, for stationary MCFC and SOFC stacks, the costs are the following (IEA, 2007): The cost of prototype or small scale production of 200-300 KW units is equal to a cost of 12,000-15,000 USD/KW with the FC stack being 50% of this. On the contrary large scale production and learning procedures can reduce the cost to 1500-1600 USD/KW, such systems though can become economically competitive a few years from now. 4.3.1.2 Poor fuel cell and hydrogen infrastructure

Fuel cells as every new technology require new infrastructure network and facilities, like distribution systems for the hydrogen supply, refuelling stations for charging the fuel cell cars etc, that imply high costs and investments. Maintenance and operation facilities also have to adapt to the new infrastructure system which means again high costs, something that always is a barrier to the development of a technology until the costs are reduced to the extent that there are sufficient facilities and skills. Moreover certain groups that are responsible for paying these costs of creating new infrastructure or for investing in the already existing infrastructure to improve it, can be pessimistic to adopt new technologies e.g. fuel cells. Since most of fuel cells require hydrogen to operate they demand a certain infrastructure including hydrogen production, transport pipelines and storage network. Hydrogen pipelines are used to connect the point of hydrogen production or delivery of hydrogen with the point of demand (e.g. hydrogen fuelling stations). Hydrogen stations which are not situated near a hydrogen pipeline get supply via hydrogen tanks, compressed hydrogen tubes, liquid hydrogen tank trucks etc. Concerning the use of fuel cell technology in transport methods (e.g. fuel cell cars) a hydrogen highway meaning a chain of hydrogen-equipped filling stations and other infrastructure along a road or highway, allow hydrogen vehicles to get charged and travel. The infrastructure costs can be also included in the BOP costs that increase the overall fuel cell system cost inhibiting thus the costs effectiveness of the technology. (Hall J., Kerr R., 2002) Thus existing supply channels will either need Master Thesis Project

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to be upgraded or totally substituted by new ones, in order to supply fuel cells but either way the implementation of fuel cell technology requires extra facilities and costs to enter the energy system. (Painuly J.P., 2000); (Hall J., Kerr R., 2002); (Milibrand A., Mann M., 2007) Using hydrogen as a fuel for vehicles may lead to lower environmental problems, since it reduces the carbon emissions and vehicles could be fuelled by it in certain refuelling facilities introducing thus an oil independency. Since the turn of the millennium, filling stations offering hydrogen have been opening worldwide. However, this does not begin yet to replace the existing extensive gasoline fuel station infrastructure but hydrogen fueling stations mainly in hydrogen highways are being explored and already used in many countries (mainly in US by now) and start to build a bridge towards a clean transport fuel e.g. hydrogen. Companies like Honda, Nissan, VW, Mercedes Benz, BMW are developing vehicles that operate using fuel cells that utilize hydrogen as main fuel. (Hemmes K.et al, 2010); (Dohle H. et al, 2002) The following picture shows the scheme of hydrogen infrastructure from the production up to the supply point. Furthermore the connection of fuel cells to the grid and their integration in buildings belong also to the infrastructure problem that stops fuel cell development. Usually medium voltage grid connections, as well as a transformer are required so that the connection to the grid is managed. The integration of the technology in buildings for either power or CHP production is also problematic, since extra costs and subsidies or administrative procedures will be required. (P.del Rio, Unruh G., 2005) These are many issues related to infrastructure. Some cross markets and some are market specific (e.g. fuel): 

Fuel Infrastructure 

Many vehicles are hydrogen-based and so consequently, an infrastructure for producing, distributing, storing, delivering and maintaining hydrogen fuel is important.





In the case of portable applications, the most likely fuel is methanol-based and so an infrastructure for producing, distributing, storing, delivering and maintaining such a device is imperative to support such a market.

Human Resource Infrastructure 

Service: This is a brand new technology crossing a diverse number of industries. Qualified service and maintenance personnel will be needed.



Development: A critical need today is for qualified technical personnel to assist in the development and commercialization of these products.

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Figure 19. Hydrogen infrastructure required to supply fuel cell cars (Fuel Cell Today 2, 2013)

4.3.1.3 Lack of reliability The fuel cell technology usually is suggested to be used as a replacement system of the combustion engines in power generators or cars. Nevertheless there is still lack of reliability over the fuel cells’ implementation. Moreover the short lifetimes of some of the fuel cell types in certain applications make stronger their lack of reliability. Although fuel cells have been shown to be able to provide electricity at high efficiencies and with exceptional environmental sensitivity, the long-term performance and reliability of certain fuel cell systems has not been significantly demonstrated to the market. Research, development and demonstration (RD&D) of fuel cell systems that will enhance the endurance and reliability of fuel cells are currently underway. The specific RD&D issues in this category include: endurance and longevity, thermal cycling capability, durability in installed environment (seismic, transportation effects, etc.) and grid connection performance. The reliability is also influenced by certain processes that are taking place in fuel cells. Firstly, the platinum (Pt) catalyst poisoned mostly in PEMFCs by sulphur or carbon monoxide impurities can cause a big problem to the operation of the fuel cell when pure hydrogen is used as a fuel. Secondly, the water management is an important parameter that should be kept into account, being the key for reliable operation of fuel cells since the oxygen and hydrogen entering the fuel cells should be humidified. However, this humidification should be controlled so that possible damages to the fuel cell are avoided by applying the correct water management and hydration investigation. Moreover, when methanol is used instead of hydrogen as fuel, we have the Direct Methanol Fuel Cells (DMFCs explained analytically in Paragraph 3.3 of chapter 3) where the methanol cross-over can also be a threat for the reliability. It is a phenomenon by which methanol diffuses through the membrane without reacting, fed as a weak solution and after reaching the air side (the cathode), immediately reacts with air causing a reduction of the cell voltage Master Thesis Project

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and the efficiency. Finally the long start-up times usually for high temperature fuel cells (MCFCs and SOFCs) that can be up to 10 hours until they reach the appropriate temperature range in order to operate, affect the system reliability and a solution to that could be the use of pure hydrogen without a reformer so that the system is simplified with reduced start-up time. (Zegers P., 2005); (Dohle H. et al, 2002) Since the lack of reliability is mainly an outcome of technical and material limitations, research on more advanced materials for fuel cells and procedures to overcome technical problems and achieve the highest efficiency, would be necessary. Such procedures though would demand more activities to be organized or new facilities to support them, both of which are related to extra costs for the fuel cell technology. 4.3.2 Market distortions 4.3.2.1 Application diversity and complexity The fact that fuel cells have many possible fields of application creates an uncertain environment with application diversity that makes it difficult to understand their use and how they can substitute conventional energy methods or batteries in power electronics or how to be used as secondary power production methods to provide supplementary energy to cover the demands (back-up power systems). Despite the fact that there is a large variety of market uses of fuel cells there is also uncertainty about which of these market applications can have positive impact on the society and effectively enter the current energy market. This diversity is not always positive since it implies a high risk and low reliability to define the most profitable niche market. Moreover the fuel cell manufacturers and developers cannot efficiently do decision-making and face the risk to choose the wrong business path leading to market failure and lost market acceptance that do not let the technology to expand. (Hellman H.L., R.Van den Hoed, 2006); (Painuly J.P., 2000) The replacement of a technology influences the stakeholders and supply firms (e.g. combustion engine suppliers) in their decisionmaking about whether to invest or not in fuel cells or if change in the configuration of the product is needed. Firms have to learn and acquire skills to understand and integrate fuel cell technology into their business as well as to balance the potential risks with the benefits they may bring to them. In order this to be achieved extra facilities and activities are necessary, something that would mean additional costs to the capital cost of fuel cells. (NFCRC, 2009) Fuel cells include a number of components with a high interdependence among them, something that makes them multifunctional systems and difficult to be realized in operation. The high degree of technological complexity of the fuel cell systems requires certain skills to understand in-depth the operating principles and the product development. In fact knowledge on thermodynamics, fluid dynamics and electro-chemistry is necessary in order to fully understand the operation and achieve a successful implementation of fuel cells. The acquirement of extra skills to understand these systems involves the creation of extra facilities to provide the required training or imply high uncertainty and risks to discourage investments in the fuel cell sector. Both of these would require high costs that increase the total market price of fuel cell systems, which reflects the significance of the economic barriers removal to achieve development. Master Thesis Project

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Regarding the fuel cell firms they have many challenges to confront, a high degree of inter-firm collaboration to reach the desired performance degree is required. In short, fuel cells are characterized as a complex technology both physically and in terms of competences and many actions and technological improvements have to take place to achieve development in the fuel cell industry. (Hellman H.L., Van den Hoed R., 2006) 4.3.2.2 Immature and emerging technology without traditional performance indicators The rapid technological improvements of fuel cells represent a main characteristic that reflects the immaturity of the technology. Although the energy density of fuel cells used in automobiles has quadrupled from 1994 to 2004, still they are in their early stage of development, where mainly R&D activities rather investments, marketing, designs and sales are taking place. Despite the high degree of immaturity, fuel cells have a great potential, especially in the transport sector, something that should force government and other investors to support the fuel cell entry in the energy market by offering subsidies to them rather than to conventional energy methods. Unfortunately such activities are still missing and what is more, technological roadmaps for the prediction of the time of commercialisation of fuel cells are postponed increasing even more the degree of uncertainty. Moreover the immaturity poses a barrier to the fuel cell firms’ decision-making for fundings and subsidies due to the high risk that is implied and creates difficulties in R&D activities that could otherwise reinforce the performance and cost competitiveness as well as the marketing and sales of fuel cells. It also prevents certain financing groups to invest in the fuel cell sector due to the high associated risks that cannot promise a fast return on investments and this can make the technology seem expensive. The high immaturity degree also increases the risk of adopting a possibly wrong technical path with no dominant design and wide acceptance by consumers and industries. (Hellman H., Van den Hoed R., 2006) Fuel cells offer renewable but without traditional performance indicators, products to prove the low carbon emissions, high quality and high efficiency as well as quiet performance. On the contrary previous conventional energy production methods include such indicators to persuade consumers about their performance and competitiveness. For instance the quiet battery electric or fuel cell vehicles despite their almost zero harmful emissions and high performance, are not widely preferred over conventional internal combustion engine cars since they do not offer indicators to prove that. Demonstration projects should take place to show the performance of fuel cell technology and increase the interest of stakeholders to invest in it. Such activities could again imply high costs though. The traditional market techniques used for conventional methods cannot be applied to fuel cells, the final products and markets are uncertain as well as the degree to which the consumers’ interest meets the market demand. Moreover consumers do not consider a new product (fuel cell) as a replacement of the current power methods (internal combustion engines) when this product is involved with high costs despite its high performance and quality. (Hellman H.L., Van den Hoed R., 2006); (Hall J., Kerr R., 2002); (Painuly J.P., 2000) The fuel cell industry has emerged the last years including many firms Master Thesis Project

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related to fuel cell components, systems and products but of all RETs entering the energy market, only a fraction (the most mature) will survive in the energy industry. Because fuel cells represent an emerging technology they will be possibly the last to be adopted by society and industry among the others. (Hellman H.L., Van den Hoed R., 2006) The fuel cell technology cannot be implemented without the existence of complementary systems (e.g. refuelling station, hydrogen storage tanks, hydrogen distribution systems etc) defined as network externalities that strongly influence the infrastructure required for fuel cells and increase their costs. Fuel cell firms should thus be concentrated not only on the fuel cell stacks’ development, but also on the supplementary hydrogen production, storage and other infrastructure units that are necessary for the entire fuel cell system operation and provide indicators to secure hydrogen related issues. 4.3.3 Economic/financial 4.3.3.1 Low return on high investments (low IRR) and long payback periods Since the costs for fuel cells remain high, a pre-commercial phase is necessary where strategies are developed successfully to provide a safe market entry. However these initial stages for fuel cells do not always occur in the respective firms for the commercialisation of the products, the costs of fuel cells cannot be reduced and this increases the investment requirements. Moreover average fuel cell systems for residential or commercial applications for simply electricity production, can have relatively low efficiencies and for that reason the payback times can be unacceptably high, close to 10 years which is an extremely long period comparatively to the fuel cell lifetime (usually 40000 hrs of continuous operation equal to 5 years approximately or 8-10 years maximum). (Staffell I., 2009) However, this is uncertain since payback time also depends on the type of fuel cell, the application where it is used and the type of fuel usage. (Barbir F., 2013); (Brodrick et al, 2002); (Neuhoff K.et al, 2011) For example fuel cells used in transport applications appear to have much more attractive returns than stationary systems and more precisely, „‟the predicted payback period is 3-4 years for both the fuel-cell-vehicle and the hydrogen infrastructure,” writes Battelle researcher Kathya Mahadevan in a fuel-cell study commissioned by the U.S. Department of Energy or up to 6.5 years in a wider range as it was presented in table 13, but in any case lower than the 10 year payback time of stationary fuel cells. In general an average payback time of 4 years is assumed for the fuel cells in vehicle uses. This clearly explains why stationary fuel cell systems have until now met much more barriers during their commercialisation path than the according transport systems. However all fuel cell applications are still involved with higher payback times than other RETs, something that inhibits investments to be supported and reinforces the cost barriers associated with the technology. (Aichlmayr M., 2008) The next table shows how the range of fuel cell efficiencies based on the fuel cell type and size is changed and the figure right after, represents how the payback time of fuel cells is affected by the costrange. The overall conclusion from this figure is that as long as the cost of fuel cells is increased, the size of the fuel cell system is increased, the competitiveness is decreasing and this could bring a Master Thesis Project

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decreased mass production of fuel cell systems, insecure performance, low efficiency and long payback times. The figure shows the relationship between the payback time in terms of the change in fuel cell cost. (Karady G. et al, 2002) In general an average range of fuel cell payback time is between 8-12 years (an average lifetime of 10 years as explained in the previous paragraph), which is a long period in respect to the lifetime as mentioned before. Therefore these values of payback time pose a bottleneck to the fuel cells’ acceptance by the users and the cost effectiveness of the technology.

Figure 20. Payback time of fuel cell systems based on their cost range (Karady G. et al, 2002) Moreover due to the low subsidies to fuel cells, the return on indivisible lumpy investments takes a long time posing an extra barrier to their technological progress. The return on investments or internal rate of return (IRR) shows the rate of return in capital budget to measure the profitability of investments. The term internal is used to show that the calculation does not include external factors like the interest rate etc. In more specific terms, the IRR is the discount rate at which the net present value (NPV) of all cash flows from an investment is equal to zero or else the net present value is equal to the initial investment and so the investment breaks even. In this case the net present value of costs equals the net present value of benefits (NPV costs=NPV benefits). The above means that the higher a project’s IRR, the better to be undertaken. In contrast to the NPV that indicates the value of an investment, the IRR shows the efficiency, yield and quality of an investment in the present. Assuming that: 

r is the IRR



(n, Cn) are the (period, net cash flows) where NET cash flow=(cash flow income or benefits) –

(cash flow outcome or costs) 

N is the total number of periods and NPV is the net present value

We set NPV equal to zero on the following formula to calculate the IRR or r. Master Thesis Project

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∑

As long as the net cash flow Cn is negative (cash flow outcomecash flow outcome) after some periods (n), when the payback time has been reached already resulting to profits from the initial investment. All terms: payback period, net present value and internal rate of return are measures for estimating the return of an investment. However the IRR seems to be the best approach. A basic assumption is that returns to the investment continue even after the payback period. (Williams J.R. et al, 2012) The steps mentioned above in order to define the IRR and payback time of a project investment will be presented in terms of a RETScreen analysis later in the report. For the hydrogen refueling infrastructure needed for FCVs, it is clear that early investors have to charge a higher price of hydrogen during the lifetime of the project than the late investors, in order to end up at a NPV equal to zero. This means that investing at a later stage will create a positive business more easily and therefore policy measures must be in place to compensate for early investors’ disadvantages. The following figure shows that the minimum price of hydrogen should be set higher (early investor disadvantage) due to the increased risk creating thus a cost difference with the later investments for which the levelised cost of hydrogen is declining over the years and the investment can break even and result to NPV=0 sooner. (Lebutsch P., Weeda M., 2011)

Figure 21. Single investor perspective resulting to changes in levelised costs of hydrogen depending on the year of investment (Lebutsch P., Weeda M., 2012) The low return on investments poses a threat to the stakeholder’s decision to invest in the technology providing them with inadequate incentives and uncertainty since they tend to support only short term markets that have a fast return on investments. In the meantime, fuel cells like other RETs should show a good performance and progress to bring benefits and revenues to the investors and stakeholders. Due to the fact that R&D activities and subsidies are missing and the payback time of fuel cells is still high, the rate of return on high investments remains low implying high costs for the Master Thesis Project

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fuel cell industry. (Hellman H.L., Van den Hoed R., 2006); (Painuly J.P., 2000) The main goal should be to accelerate the expansion of hydrogen and fuel cell use by lowering the life cycle costs identifying and eliminating the barriers impeding full technology commercialization. In this way fuel cells can lower the total cost of ownership and provide a positive return on investment by reducing both the fuel costs and carbon footprint simultaneously. Besides there is no totally risk-free investment, all investments, including those that are guaranteed to return principal, carry some sort of risk. But those who are willing to deal with the low to moderate-risk and the high return investments, can find substantially better yields than the others. To make the investment even more appealing, high returns should be received as soon as possible and not over the entire lifetime like it happens with fuel cells. (Cussen M., 2013) The table below shows the criteria according to which an investment is evaluated and these criteria for a successful investments are a positive NPV, a high IRR and a short payback time. In short all NPV, IRR and payback period factors, have not achieved the desired values yet for the case of fuel cells, something that inhibits investments in the sector and makes the technology seem non-cost competitive. Table 18. Summary of factors that evaluate an investment’s profitability Return on investment factor NPV IRR Payback period

Value >0 (positive) =0 (equal) <0 (negative) number number

Comments Acceptable (invest in project with high NPV) May or may not be acceptable (payback time) Not acceptable Invest in project with higher IRR Invest in project with short payback period

4.3.3.2 Lack of financial institutions and initiatives All fuel cell companies face challenges when it comes to financing. On the one hand, fuel cells are not self-supporting and require certain support by government and other organisations through subsidies so as to manage to be profitable. On the other hand, this would mean extra cost charges concerning the investors, something they are not always willing to do or to afford. (Carillo J., 2008) The lack of competition, immaturity and complexity reduce the potential investments in this energy sector and the interest of financial instruments that could take place in such actions to support new technologies, is decreased. It is not only the demonstration projects that are playing a crucial part in the successful commercialisation of fuel cells (mainly fuel cells in vehicles) but also the stakeholders related to them. Many organisations are making a significant contribution towards the successful development of a hydrogen infrastructure, as well as the successful establishment of fuel cell vehicles for everyday use. These organisations are mainly industry, research institutions and universities all over the world that hardly work towards the further development of fuel cell technology and acceleration of the market introduction of hydrogen technologies, in order to realize the fuel cell potential as an instrument to Master Thesis Project

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achieve a lower carbon energy system. In fact the search of financial incentives is a complicated procedure since it is influenced by many different factors. When a technology e.g. fuel cells has from the beginning high start-up costs, the unit costs have to decrease over increasing mass production, which means that this technology will have high “sunk costs” from earlier investments. (Carillo J., 2008) In this case, even if there are benefits bringing revenues, the incentives to invest are diminished. The idea of ‘’learning by doing’’ and learning curves for some technologies that show the cost reduction as a result of increasing production, also prove that there is a lack of financial incentives for fuel cell technologies. Hence, there is a lack of market pull for fuel cells, since they introduce a new idea of fuelled energy production that was totally unknown before. (Foxon T.J., 2006) ;(Painuly J.P., 2000);(P. del Rio, Unruh G.C., 2005) 4.3.4 Institutional/ Administrative 4.3.4.1 Lack of mechanisms and regulatory support Lately there is an increasing regulatory support for fuel cells in terms of investment programmes mainly in US, Japan and Europe. However the support is not sufficient and along with the missing institutions and mechanisms it inhibits the further progress of fuel cells. A good example of regulatory support is the initiative of US President Bush in 2003, who announced the Freedom Fuel Initiative of 1.2 billion funding for hydrogen automobiles based on the fact that fuel cells and hydrogen are the keys towards a sustainable future. This kind of funding support is important for fuel cell firms if we keep into account that the investment requirements for fuel cells are high with a low return ratio. Despite the fact that there are visions for a hydrogen based economy in the future both in stationary and mobile applications, there is a lack of mechanisms to help hydrogen by means of fuel cells to enter the current energy market. This lack leads consequently to insufficient information about fuel cells that would be necessary for consumers to understand the new technology and to make producers face financial and market barriers to cope with the policy makers efficiently. The not enough information about fuel cells can also mean new facilities and activities all of which are linked to high initial costs for the technology. In this case fuel cell firms should decide on what degree they should depend on regulatory and financial support so that they can continue with further movements and R&D programmes in order to reach their goal of a hydrogen fuelled future. (Hellman H.L., Van den Hoed R., 2006); (Painuly J.P., 2000) In general institutions can be defined as a ‘’form of constraint that humans devise to form a human interaction’’ and this can include legislation, contracts, codes of behavior or economic rules in order to create either barriers or drivers for the creation of a technology. To be more precise, the political institutions along with the government play a crucial role during this procedure since they are involved in many steps of the technology development and are difficult to change once implemented. In general a modern technological system e.g. fuel cell system has to follow a technological- institutional path up to the time that it enters the market. The governmental and institutional drivers trying to meet the increasing energy demands and to maintain their benefits, Master Thesis Project

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reduce the prices of conventional energy encouraging the consumers to rely on the current carbon energy system prohibiting the expansion of renewable energy sources. (Foxon T.J., 2006) The institutional barriers are leading to market failures, underdeveloped capital markets by preventing the innovative renewable energy technologies. The lack of institutions/mechanisms and regulatory bodies to enhance the renewable energy sector also cause ineffective regulations, absence of professional associations and lack of policy for RETs’ promotion. (Painuly J.P., 2000); (Unruh G.C., 2002) 4.3.5 Technical

4.3.5.1 Lack of standards, regulation and certification

The large fuel cell companies should define standards and consider before deciding, whether it is necessary to get consultation before or during product development. The regulatory landscape for fuel cells in Europe is not so positive, since fuel cell products must meet a series of directives designed for other technologies, instead of a set of European or international standards oriented for fuel cell products so as to be competitive to other similar technologies. Knowing how to approach certification can be troublesome, since it has to meet both standards and directives that a product must fulfill and the active involvement in the development of standards should aim the overall market growth but also ensure the fuel cell designs and applications. The most commonly adopted standard code to test quality amongst manufacturers’ fuel cell products is the ISO 9001 (It is the most prevalent worldwide quality management standard, which sets out requirements for the development and implementation of an effective Quality Management System and can be applied by any organization interested in improving the way it operates, regardless of the size or the sector in which it operates. ISO 9001 is now under review, with an updated version due to be available by the end of 2015.) and this is the first step on the road to conformity and certification in many technological areas. In EU, fuel cell and electrolyser products may need to be tested against the Electromagnetic Compatibility to cover certain standards. Consultation with certifiers is a step that should take place at the very beginning of project development so as to meet a smooth transition to commercialisation. VDMA (Verband Deutscher Maschinenund Anlagenbau – German Engineering Federation) is the largest engineering industry network in Europe, participating in regulation setting and certification of products before fuel cell commercialisation. Certifying and selling a fuel cell product is also necessary when a new fuel is used for the fuel cell operation e.g. methanol. (Fuel Cell Today 1, 2012) This lack of codes and standards for fuel cells is an issue that is not specific to one country but is more a global problem. Recent efforts to develop global regulations for vehicle components related to hydrogen storage without developed international standards, has added urgent need for developing international hydrogen and fuel cell standards. Always we should identify the gaps in those standards and then determine the adequacy of the existing standards. The National Renewable Energy Laboratory (NREL) developed a framework of Master Thesis Project

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the U.S. codes and standards related to hydrogen technologies and this is modified depending on the country that the technology is applied. In this code framework there are 6 categories of standards namely, for stationary applications, transportation applications, portable applications, hydrogen infrastructure, regulatory organizations and other useful hydrogen applications. The Canadian Standards Association (CSA) is responsible for a wide range of standards and code activities, including automotive components, natural gas vehicles as well as fuel cells. Much of certification work is required though for the hydrogen infrastructure (like refuelling stations for charging fuel cell electric cars) for stationary or portable power applications and other transportation needs. In order to successfully commercialize hydrogen technologies, including hydrogen fuel cell cars, there are many organizations for developing codes and standards in Canada, the U.S. and Japan but not as many in Europe where fuel cell technology is not so much developed. (Fuel Cell Today 1, 2012) Definitely the missing certification codes there concerning fuel cells pose a barrier to the development, since this lack creates high uncertainty and increases associated risks while decreasing the credibility of the technology, thus making unsafe and risky the investments in this sector. The missing investments can in turn increase the up-front costs of fuel cells and threat their cost competitiveness. (Painuly J.P., 2000); (Fuel Cell Today 1, 2012); (PATH, 2003) 4.3.5.2 Fuel cell material requirements and high hydrogen prices for production, distribution & storage

Fuel cells are electrochemical devices that produce electricity and heat which means that they require certain materials in order to operate efficiently. For instance the implementation of fuel cells in the automobile industry depends on supporting technologies and materials in order to create a functional system. To build cars, glass, rubber etc. as well as for the fuel cell stack, extra materials are required. Moreover for the roadways really huge quantities of asphalt, metals and machinery are needed and to them the extra hydrogen station infrastructure costs are added when we refer to fuel cell cars. This means that apart from the fixed costs for the production of a conventional transport system, extra material and cost requirements arise when this system transforms into hydrogen based automobile system. The question that arises is who pays for the costs of developing the new infrastructure and how the investments are accounted. (Hall J., Kerr R., 2002); (Unruh G.C., 2000) Polymer Electrolyte Fuel Cell (PEMFC) is the only low temperature fuel cell that uses solid electrolyte usually Nafion, a well-researched perfluorosulfunic acid (PFSA) that operates well in a hydrated environment. Unfortunately the conductivity of the electrolyte drops when decreasing the humidity and this is a challenge PEMFCs face concerning the materials. Great efforts have been made to improve the properties of Nafion and to suggest alternative replacement materials such as the following: modification of Nafion and similar membranes by using inorganic additives, membranes based on sulfonated hydrocarbons and acid polymer matrices. Efforts are continuing for enhancing the activity of noble metal catalysts through alloying with catalyst materials, since less expensive, non-noble metal catalysts are suggested to be used. Major research and development (R&D) programmes are testing Master Thesis Project

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the behaviour of alternative carbon-based materials or coated stainless steels. Metal or carbon powders (or porous carbon papers) can be used to provide the electronic pathways and reduce the Area Specific Resistivity (ASR) of the electrode by means of a metallic wire mesh or screen that is incorporated into the structure. Further improvements in performance were obtained during the 1960s by small crystallites (2–5 nm) of the electrocatalyst (usually platinum or Pt alloys) onto carbon powder or paper. Such programmes are linked to high costs though since extra expenses would be required. (Fuel Cell Today 1, 2012) To make matters worse for high temperature fuel cells like MCFCs and SOFCs, the material demands are even higher, since the operational high temperatures have additional requirements. In order to suffer the high temperatures more expensive porous ceramic materials for the two electrodes (anode and cathode) to avoid reaction with the electrolyte and possible thermal expansion mismatch during the high-temperature sintering process, have to be selected, something that affects the cost and performance competition of fuel cells relatively to conventional technologies. Another important component in a fuel-cell stack is the electronic conducting bipolar plate, which has the function of distributing the fuel and oxidant to the anode and cathode, respectively and providing the electrical contact between different cells connected to form the stack. For the high-temperature systems (MCFC and SOFC), appropriate stainless steel composites can be used to satisfy the technical and economic limitations and for SOFCs specifically, operating at higher temperatures (800–1000oC), more expensive bipolar plate materials can be demanded that imply a significant cost increase. It is important to note that the materials currently being used in PEMFC, MCFC and SOFC units have not changed essentially over the last 25 years and it is only in the past five years that system engineering and commercialization issues have highlighted the problems of some of the materials originally selected, triggering thus the research on new material options. It is these issues that are now driving the development of alternative materials and are demanding extra attention, skills and research. (Steele B.C.H., Heinzel A., 2001); (Ramani V., 2006) The following table shows the future R&D activities that should take place regarding the fuel cell materials for each fuel cell type that is used in certain applications.

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Table 19. R&D requirements for fuel cell materials according to the application and fuel cell type (Steele B.C.H., Heinzel A., 2001) Application

Fuel cell PEMFC, DMFC, SOFC

R&D material requirements 1.membranes with less permeability 2.new structures

PEMFC, SOFC

1. CO tolerant anodes 2.new membranes 3.more robust, thin materials

distributed CHP

PEMFC, SOFC, MCFC

1. CO tolerant anodes 2.new membranes 3. cheaper fabrication processes 4.red-ox resistant anodes

buses

PEMFC

large power units

SOFC

portable, electronic devices

micro CHP

cheaper components cheaper fabrication process

Concerning hydrogen, as no market for local production currently exists, it is difficult to estimate its actual value. In general the hydrogen price is usually defined as the hydrogen production cost (without on-site compression, storage and dispensing of hydrogen (CSD) included). There are different sources used for hydrogen production (natural gas, coal, biomass, wind energy, water electrolysis etc) which result in different hydrogen costs. It has been observed that hydrogen from hydrocarbons (natural gas) through steam methane reforming has the lowest cost and the current natural gas prices can have an impact on the resulting cost of hydrogen in fuelling facilities. Using the latest low cost natural gas price projections (2.23-3.5 USD/GJ, depending on the country) for the hydrogen analysis, the pure hydrogen production cost (without CSD) is estimated at approx. 1.8 USD/kgr or 1.3 EUR/kgr, whereas the dispended hydrogen cost (including CSD) is 3.41 USD/kgr or 2.51 EUR/kgr. These hydrogen prices deviate though from the target price of 1 USD/kgr in order for the fuel to be competitive to the conventional fuels (like gasoline). Moreover assuming that by 2020 the natural gas prices will be increased (because of the shale gas resources’ reduction) the hydrogen production price without CSD will also be higher (it will be increased to 2.10 USD/kgr or 1.55 EUR/kgr) and more generally there is a direct change on hydrogen cost based on natural gas price changes. The fact that the hydrogen price will follow an increasing trend over the next years, results in high risks and uncertainties around hydrogen technologies and discourages investments in fuel cells leaving them locked-out. Also in the fuel cell transport use (FCVs), the gasoline price (1.7 EUR/lt or 1,27 EUR/kgr in Greece) remains lower than that of hydrogen making it so seem an expensive energy carrier for vehicles. For both stationary and mobile applications of fuel cells, the hydrogen cost that will be assumed for further calculations (RETScreen) will be the above mentioned 1.3 EUR/kgr. Nevertheless the question of hydrogen cost 15-20 years from now is of critical importance in any discussion of possible hydrogen economy and can represent a major barrier. Apart from natural gas, there are also RE sources (wind energy, biomass etc) and water electrolysis for hydrogen production that create Master Thesis Project

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clean hydrogen with no extra CO2 emissions but of higher costs. Also hydrogen infrastructure is related to transport and storage costs besides production costs which are at high levels in respect to other conventional facilities. (Dillich S.et al, 2012) The transport or distribution of hydrogen to certain stations is necessary so that it can be supplied to fuel cell vehicles. This procedure adds an extra cost to the total based on the way of hydrogen distribution used. These methods can be cryogenic liquid trucks, compressed hydrogen or tubes and pipelines. Until now the pipelines have been mostly used for small distances and large loads of hydrogen but unlike their operating cost, the installation cost seems to be high. The costs of the different modes of transport of hydrogen are shown on the following table. Table 20. Cost of hydrogen transport methods (Road2HyCom, 2013) Mode of transport

Cost (USD/ kgr)

Cryogenic liquid trucks

0.18

Gas tubes

2.09

Pipelines

2.94

Then the final step is the hydrogen storage in fuel cell vehicles that can be done either in liquefied or gas form. Although the cost of liquefaction is higher than that of compression, the storing of hydrogen in liquid form has been more practical. The next table presents the different costs of hydrogen storage methods. Thus the higher the pressure, the lower the storage volume and higher the energy stored. However, as the pressure increases the thickness and thus cost of the storage tube increase. The topic of hydrogen storage is also challenging and dangerous especially in the automobile use of fuel cells, where a high pressure hydrogen tank inside the vehicle is needed adding thus a major threat of explosion. Until now gaseous storage at 350-700 bar and liquid storage at cryogenic temperature (-253 Celsius) are commercially available but still energy consuming and costly. Moreover onboard hydrogen storage for FCVs is challenging and may have an impact on hydrogen infrastructure. The target should be to store 4-5 kgr of hydrogen while minimizing volume, weight, storage energy, refueling time, costs and hydrogen on-demand release time. Also both gaseous and liquid storage of hydrogen need more space than the equivalent gasoline and also more costly tanks, which add an extra cost hurdle to fuel cells. Therefore solid storage promises advantages but still much R&D is required. (IEA, 2007) In addition to determining appropriate properties of promising materials for hydrogen storage, efforts for advanced storage system configurations are being made. Unless there is a breakthrough in the production of hydrogen and the development of new hydrogen-storage materials, the concept of a ‘hydrogen economy’ will remain an unlikely scenario. (Steele B.C.H., Heinzel A., 2001) ;(Fuel Cell

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Today 1, 2012) The next table shows the hydrogen storage options along with their characteristics and prices. Table 21. Costs of gas, liquid and solid hydrogen storage (IEA, 2007)

All the above costs (related to materials for fuel cell stack, hydrogen production, distribution and storage) when summed up to give the total hydrogen related costs (supplementary to the total fuel cell cost) represent a big amount that sometimes exceeds the initial fuel cell stack cost and increase the total system cost, thus decreasing its competitiveness. The above cost estimations have been done in the context of the Roads2HyCom, a project supported by the European Commission's Sixth Framework Programme. Its purpose is to assess and monitor hydrogen and fuel cell technologies for stationary and mobile energy applications. This is done by considering what the technology is capable of, relative to current and future hydrogen infrastructures and energy resources, and the needs of communities that may be early adopters of the technology. (Road2HyCom, 2013) 4.3.5.3 Lifetime of fuel cells The lifetime of fuel cell systems also needs to be improved since it currently causes barriers to the further commercialization of the technology, if we consider the lifetime of other RETs. PEMFCs’ lifetime depends on operating conditions (start-up temperature humidification and fuel purity) and is around 2000hours or 100000km for FCVs and 30000-85000 hours of continuous operation for stationary fuel cell systems. This shows that the lifetime of fuel cells depends on the application and usually is lower than that of other RETs (25 years for PVs and windturbines) and this is a big deviation from the target lifetime of fuel cells as well (that can reach up to 60000 hours of operation). The next table shows the average and target lifetimes of the different fuel cell types.

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Table 22. Fuel cell lifetime and performance based different types (IEA, 2007)

From a general perspective all fuel cell types, offer short lifetimes but high temperature fuel cells (MCFCs and SOFCs) usually show longer lifetimes than that of low temperature fuel cells (PEMFCs). Also the lifetimes are given in hours of continuous operation which means that when these hours are extended in a yearly period, we can take the real lifetime in years. For instance, for PEMFC vehicles the lifetime is given as 2000 hours or 100000 km so by finding the distance a car travels per year either in hours or in km/day, we could assume its lifetime in years. However the annual distance a car travels annually varies depending on the country and the consumer need. Taking Europe as an example, the average annual distance for a car is 1 hour/day or else 365 hours/year, then by dividing the operating hours to the annual needs in hours we can take the lifetime in years: 2000 hours/(365 hours/year)=5.5 years. On the contrary for PEMFC stationary systems the lifetime can increase to 30000 hours and for a use of this system 10 hours/day=3650 hours/year, this is translated to 30000 hours/(3650 hours/year)=8.2 years. For both stationary and transport applications the lifetime of fuel cells remains relatively short (under 20 years which is the lifetime of other RETs) and this means that often replacements and O&M procedures will be required, adding extra costs to the fuel cell system cost and decreasing the technology’s cost competitiveness and extending the payback to initial investments. (De La Fuente L.A., 2007) 4.3.5.4 Competing technologies in transport sector

There are a number of more mature and attractive renewable technologies in the energy sector than fuel cells, which at the moment are much more often used and preferred by consumers primarily since they provide an economically viable alternative to conventionally produced energy. However fuel cells pose an attractive solution regarding transportation which can directly compete with other according RET of this sector. One of these technologies is the electric car, which runs on a battery powered electric motor using thus electricity as its fuel and not gasoline (used by conventional cars). This car thus does not include an internal combustion engine like conventional cars and because of the battery it can be easily recharged instead of refueled when needed. Since fossil fuels are not used in this case, electric cars do not produce harmful emissions representing so a sustainable way of transportation. This vehicle category appears to Master Thesis Project

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have a high potential and comparing to other technologies, a high efficiency (33% as shown in the table) but still it seems quite costly, something that poses its penetration in the current market. On the other hand, fuel cell cars use instead of a battery, a hydrogen fuel cell, the device that takes hydrogen and generates electricity from it while the car is running. In effect, a hydrogen fuel cell is a kind of battery that makes electricity during the operation of the vehicle. The analytical operation of a fuel cell device and its application to vehicles was explained before in chapter 3. Fuel cell cars also seem to have higher efficiency (40%) and a much higher fuel economy potential than electric cars. However their high current costs, make them less of a preferred option than electric cars and therefore they need more years to market production (2-7 years) unlike the electric cars which are already in use in most EU countries, something that is an extra barrier to fuel cell promotion in the energy industry. (Davis C. et al, 2003) Consequently both electric and hydrogen fuel cell cars have as a common fact that they do not produce any pollution or carbon emissions so they can positively contribute to a cleaner environment. Albeit their environmentally friendly character, these two vehicle categories can face some limitations as well, inhibiting their wide commercialisation over conventional vehicles. One of their disadvantages is that they have the potential to create harmful emissions depending on where their fuels come from. In the electric car, electricity is mostly created in power plants by burning fossil fuels which can in fact produce the same amount of pollution that the electric car could save. Similarly hydrogen used in fuel cells of the vehicles, comes from water electrolysis, which again requires electricity to pass through the water and this electricity comes from the same sources as for the electric cars. Therefore new methods of hydrogen production are investigated recently which will use renewable sources (e.g. wind or solar energy for electricity production) resulting to zero emissions, so that the hydrogen will be purely sustainable before supplied to the fuel cells. (Lampton C., 2013) ;(Davis C.et al, 2003) A hybrid vehicle is a vehicle that uses two or more distinct power sources to move the vehicle. The term most commonly refers to hybrid electric vehicles (HEVs), which combine an internal combustion engine and an electric motor. Compared to conventional automobiles, the gasoline engine in a hybrid is smaller, less powerful and more efficient resulting to less pollution. Although the gasoline engine alone would be sufficient to power the vehicle under most circumstances, the electric motor is used supplementary when really high power is demanded. Hybrid cars can also refer to fuel cell- electric car, which is generally an electric vehicle equipped with a fuel cell. Fuel cells use hydrogen as a fuel to power the electric battery when it is depleted, which then drives the electric motor. When hybrid car includes an internal combustion engine as explained in the first case (hybrid electric car) its efficiency reaches 34% (almost equal to the electric car‟s efficiency) with little harmful emissions but with relatively high costs that inhibit its market production (2-7 years are required). (Raskkin A., Shah S., 2006) All sustainable energy technologies mentioned above are compared to the corresponding conventional in automobile applications in the next table. As identified by this table, fuel cell cars combine both sustainable fuel use, the highest fuel economy potential and highest efficiency among the others, which Master Thesis Project

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make them seem a really attractive option for „‟green‟‟ transportation. Nevertheless their costs remain at high levels (higher than that of competing technologies) reducing thus their mass production, investments in the sector and increasing the years to their market penetration more than of the rest technologies. On the contrary other similar technologies (like electric cars) seem to have already achieved a great percentage of their commercialisation, something that inhibits even more the fuel cell development in the industry. Table 23. Comparison of different automobile types (Davis C.et al, 2003) Type of automobile gasoline(conv entional) electric

Energy source gasoline

Effici ency 19% 33%

fuel cell

electricity (battery) hydrogen

hybrid

gasoline

34%

40%

Fuel economy potential moderate (50%) very high (30%) very high (150%-300%) substantial (100-200%)

Criteria emissions continuedreduced zero low to zero some zero emissions range

Current cost minimal (5%) very high (20%) very high (20%) substantial (10-20%)

Years to market production 0-5 years 2-7 years 7-12 years 2-7 years

4.3.6 Social, Cultural and Behavioral 4.3.6.1 Lack of consumer/social acceptance and undesirable social effects

In terms of aesthetic consideration consumers might find fuel cells unknown and the new products to lack appeal. We distinguish two types of acceptance (and acceptability): social and consumer acceptance. We define social acceptance as behavior towards situations where the public is faced with the placement of a technological object close to one’s home. An example of social acceptance is the public’s response to build hydrogen refuelling stations in case of fuel cell electric vehicles. On the other hand, consumer acceptance can be defined as the positive attitude of individuals towards an innovation and the intention to adopt a product or service (e.g. the adoption of hydrogen fuel cell vehicles). When it comes to certain technologies, individuals base their acceptance on the overall evaluation of costs, risks and benefits, moral factors depending on the extent to which the technology has a more positive or negative effect on the environment or society and on positive or negative feelings related to the technology. (Painuly J.P., 2000) ;(Nieuwehuis P. et al, 2006); (Huijts N.M.A. et al, 2011) In general people tend to show a resistance to changes since they are used to methods and technologies they have been using until that time (remaining thus locked-in). The inadequate information around fuel cell technology, the high costs that increase the risk for trusting the technology as well as some cultural reasons, make society hesitant in understanding and using fuel cells for energy production. This fact as a result can prevent investors and other companies from supporting the technology since it does not meet the consumer‟s desires and this in turn reduces the cost competitiveness of fuel cells and increases their associated costs. The lack of social acceptance stems Master Thesis Project

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also from the fact that the technology is usually seen as ‘’alien’’ with lack of local participation. Cultural and psychological factors play a vital role to the progress of fuel cells especially in the transport sector, where fuel cells could find application. For instance, users tend to believe today that big cars have to be a priority since they reflect the social status, forgetting thus the main characteristics that influence possibly its operation. With the idea of fuel cell electric cars, users will not pay attention that much on the sustainable operation and the zero harmful emissions but on the uncertainty of operation and possible different design of the fuel cell cars. Drivers fearing that the configuration and efficiency of the car will dramatically change, do not accept the technology inhibiting the promotion of fuel cell cars that may not meet the traditional consumer preferences. (Painuly J.P., 2000); (Hall J., Kerr R., 2002); (Nieuwehuis P. et al, 2006) The challenge is not just introducing an alternative-fuel vehicle but the consumer acceptance, the fuelling infrastructure and manufacturing capability all have to evolve at the same time. Furthermore, fuel suppliers won't build alternative-fuel stations until there's sufficient demand, but meanwhile consumers won't buy the cars until there is sufficient fuel supply. Also, production costs won't reduce until mass production is high but this happens after prices are low, something that inhibits the cost competition of fuel cells. A good idea is to try to model how people actually make decisions on which cars to use and this decisionmaking is mainly determined by the following factors (Environmental research web, 2013) ;(Nieuwehuis P. et al, 2006): 

Basic requirements: comfort, storage capacity, acceleration, reliability



Extra benefits: lower noise, more electric power, fuel supply methods, environment



Price: drivers tend to prefer cars that consume less fuel so as the pricing will be lower



Safety: consumers pay attention on the safety issues concerning the vehicles, since they want to be secure in case of an accident



Knowledge level: consumers have to be aware and well informed about a technology before using it and for this demonstration projects and other instruments would be required



Direct experience: by directly using a technology and testing its efficiency (by driving a fuel cell car) consumers can be influenced positively and change their minds and as a result this has an impact on the social acceptance. Also psychological factors influence the technology acceptance, the design of the technology, the adaption to citizens and implementation of the technology can be improved. (Painuly J.P., 2000) ;(Galich A., Marz L., 2012); (Huijts N.M.A. et al, 2011)

Understanding which key psychological factors influence technology acceptance, and how these factors are related, can improve the design of the technology, the adaption to citizens and implementation of the technology. These psychological factors that influence attitudes and behaviors in favor or against innovative technologies, are related to the specific design, the location and the actors involved in the introduction of the technology, the costs, risks and benefits, outcome efficiency and awareness of the consequences of accepting it. For example some of the convenience factors for fuel cell vehicles, including battery charging time, the range of the vehicle (the distance a vehicle can drive on a full Master Thesis Project

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tank) and the distance needed to reach a refuelling station to get charged, influenced people’s preferences considerably. In general the goal should be to promote public awareness about the positive role of fuel cell technology and try to determine the psychological factors to which the technology has to be adapted, otherwise the shift towards hydrogen based economy will always meet the rejection of consumers. Nevertheless to accelerate the adoption of fuel cells by the users, their awareness need to be increased which requires extra information providing activities and facilities that are linked to higher costs for the technology. (Painuly J.P., 2000); (Galich A., Marz L., 2012); (Huijts N.M.A. et al, 2011) 4.3.7 Other barriers 4.3.7.1 Uncertain policy issues

Although governments are over the last years oriented towards a more sustainable future in terms of the Kyoto protocol conditions and do attempt to promote the environmental protection, they do not always send clear signals concerning their high interest in RETs. Business issues such as the depreciation rate for fuel cell products and the manner banks lend money for purchasing fuel cells will affect the market introduction of products. In addition, regulatory issues concerning criteria pollutants could become more restrictive in the future, thereby facilitating the compulsory installation and use of fuel cells. Another significant boost for fuel cells' entry into the market place could be government subsidized credits or taxes and financial reward for the reduction of gases contributing to global climate change, such as carbon dioxide, which are missing though to facilitate the fuel cell diffusion. Fuel taxation policies suggest some niche applications and a highly subsidized but limited market for hydrogen, but fail to motivate a big change. However policies may not trigger investments beyond low volume production since government-industry research programmes with advanced R&D would be demanded that in turn require extra activities and so high capital costs. The absence of policies for a sustainable fuel economy inhibits extensive investments in any technology oriented to improving vehicle efficiency and decreasing related costs, including fuel cells. (De Cicco J.M., 2001) Over the next 10–15 years, fuel cell vehicle demonstrations should take place and limited applications be pursued (fuel cell buses) to contribute to the progress of fuel cells. However even by the use of fuel cell vehicles neither profitability nor significant impacts on petroleum consumption and greenhouse gas emissions seem likely and this is another reason for stopping the governmental policy help and investments in this area. The uncertain governmental policies can in this way create big risks and lack of confidence in the fuel cell sector and may also increase the cost of fuel cell based projects. (Painuly J.P., 2000); (Huijts N.M.A. et al, 2011); (De Cicco J.M., 2001) 4.3.7.2 Undesirable environmental effects because of hydrogen production

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Hydrogen energy systems may contribute to solving major environmental problems (e.g. acid rain, ozone depletion, and global climate change). Environmental impact is also associated with the energyresource utilization and as a result society is interested in sustainable development utilizes energy resources that release no or minimal emissions having no or little environmental impact. However, almost all energy resources including fuel cells, may somehow lead to some environmental impact. Despite the fact that fuel cells have the characteristic of providing almost zero carbon and other harmful emissions, there are some contradictive researches that claim that hydrogen fuel cells still can cause some undesirable environmental effects and introduce new environmental damage and as a result external costs to be integrated in the market price. (EC, 2003) For instance alternative fuel vehicles (e.g. hydrogen fuel cell electric vehicles) can still produce minor harmful emissions by the use of hydrogen. Concerning the current technologies, there are many disadvantages associated with internal combustion engines. Burning gasoline produces carbon dioxide (CO2), carbon monoxide (CO), sulfur dioxide (SO2), nitrogen oxides (NOx), and hydrocarbons that affect badly the atmosphere causing serious environmental damage. But it is not only the environmental effects of harmful emissions since public health is also threatened. On the other hand, hydrogen fuel cells convert hydrogen and oxygen into water and produce electricity in the process. However water is not the only product from a hydrogen fuel cell, but also other small amount of emissions due to the electrochemical process. A group of researchers in the US argues that fuel cells could themselves have an important effect on the environment, due to the fact that 10-20% of hydrogen would escape into the atmosphere. (Environmental Issues, 2013) They say that if hydrogen fuel cells replace the current oil based combustion technologies, there will be a hydrogen escape and so the total hydrogen deposited into the atmosphere at the Earth's surface will be increased. Today 95% of the hydrogen is either extracted from fossil fuels or made by using electrolytic processes powered by fossil fuels, thus producing minor dangerous emissions along with the savings. Only if renewable energy sources (solar, wind and others) could be used to provide the hydrogen fuel could the scenario of a truly clean hydrogen fuel could be realized. Moreover, hydrogen is an explosive gas, and if stored or transported without great attention, it could present a safety and environmental hazard. Nevertheless if hydrogen became widespread as an emission-free fuel, the users would begin travelling even more, thus increasing other ecological problems such as road building and new infrastructure causing additional harmful emissions, animal deaths and increased possibilities of the accident and human safety risk. The negative environmental damage caused by non-sustainable hydrogen can again be translated into high external costs or GED, which similarly to fossil fuels, can increase the final market price of fuel cell systems and make them seem less cost efficient than they theoretically are. (Painuly J.P., 2000); (Hall J., Kerr R., 2002); (Environmental Issues, 2013);(eHow,2013); (Dincer I., 2008) All the above categories of barriers can cause uncertainties and risks (around both the RE in general and the fuel cell sector specifically) that stop investments from occurring, inhibit companies and firms from supporting and governments from offering either subsidies or FITs. On the other hand to Master Thesis Project

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overcome such issues, extra costs would arise for the development of R&D and informative programmes and activities. In any case, these can increase the start-up costs for the technologies, something that shows the direct inter-relation of all barriers with the cost hurdles. The outcome will be the difficulty for the technologies in being adopted by consumers and diffusing in the energy market. 4.4

Predominant barrier to fuel cell promotion

As identified from the above analysis, all fuel cell barriers can be reflected into either increased costs or lower benefits for the potential investor or consumer. Each of the barrier categories refer to obstacles which either are affected by high costs directly or indirectly have an effect on related costs thus creating a vicious circle, furthering the technological lock-in. Many of these barriers result from the use of expensive or rare materials used for the fuel cell stack and some technical limitations of the technology as well as from societal and institutional problematic conditions that again affect the overall costs. Moreover the extra costs related to the hydrogen infrastructure required for fuel cells to operate, hinder the development of the technology in countries that cannot support highly priced technological steps. (Fuel Cell Today, 2011) The missing governmental support, training facilities, infrastructure and information campaigns to increase the societal interest and awareness, also lead to the slow diffusion of fuel cell systems. Finally the insufficient number of firms and organisations cannot exploit efficiently the promising RET potential. Most of these barriers have been overcome in wealthier countries of EU e.g. Germany and the Netherlands but still need to be addressed in the rest of Europe. (Painuly J.P., 2000); (OECD, 2005); The analytical comparison of these countries in terms of barriers to fuel cell promotion, will be conducted in the next subchapter. The basis, from which most of the previous limitations are stemming from, responsible for the missing acceptance and slow commercialization of fuel cells, is the still high market prices. Costs translated into value to customer are clearly the highest ranked barrier receiving the highest rank by many of the barrier categories and fuel cell applications as reflected from the above barrier analysis and its interrelation with cost problems. (NFCRC, 2009); (Eichman J. et al, 2009) Fuel cell costs are higher than that of other renewable or conventional sources resulting thus in cost-driven decisions regarding their implementation that limit investments. These costs are associated with capital, fuel usage, operation and maintenance (O&M) and equipment-infrastructure costs that remain high, when not internalizing the externalities of fossil fuels. The fuel cell stack and the fuel infrastructure cost should be considered for determining the total cost of the system, which though can depend on the fuel cell type and other criteria including operation, maintenance, installation or grid connection if necessary, capital and other extra equipment costs. (Principles of accounting, 2012) The O&M costs for stationary fuel cells include scheduled maintenance and a fuel cell stack refurbishment which are expressed as percentages of the total system cost and are influenced by the operating hours and average power output and can be considered as variable costs (variable costs are not constant and cannot be calculated since they Master Thesis Project

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depend on the output produced). Moreover the hydrogen related costs (including costs for production, distribution and storage of hydrogen) can also not be exactly calculated since they can vary depending on the sources and methods used and they can be approximated as variable costs as well. However these costs might include some scheduled, necessary maintenance procedures at certain time periods that can be added to the capital cost of the system and be referred as fixed costs (these costs are constant and do not depend on the output changes). (Lipman T.E. et al, 2002); (Principles of accounting, 2012) These costs can have a direct impact on the internal rate of return (IRR) that is used in capital budgeting to measure and compare the profitability of investments. IRR is an important indicator which depends upon cash flows and the discount rate (this is why it is also called the ‘’discounted cash flow rate of return’’). In fact it represents the discount rate at which the Net Present Value (NPV) is zero and the investment breaks even or net cash flow equals to zero. However the benefits of the investment depend on the current price of electricity which is low for fossil fuels and high for RES (because of high capital costs). For instance fuel cells are still an immature technology (in the beginning of learning curve) and therefore have high discount rates, at which NPV equals zero, and as a result high payback times. Therefore banks consider the investments in this sector as risky because they delay to be paid back (low IRR). In general assuming all the factors are equal among the various projects, the higher the IRR, the more economic reason there is to undertake the project. (Sheihi A. et al, 2012) Although in theory a firm/bank can undertake all projects available with IRR larger than the capital, the investments may be limited by the availability of funds or by firm’s ability to manage various projects. Consequently an investment with higher IRR than the cost of capital adds, is assumed to be profitable and is the first to be encouraged by the banks (by providing soft loans for instance). Concerning fuel cells, their high capital costs (ignoring the externalities of fossil fuels) as well as the high risks, high discount rates and long payback times, make banks reluctant to invest, reducing thus the profitability of investments and slowing down the technology development. (Sheihi A. et al, 2012) It can be proved through the above, the direct inter-relation between costs, payback time, rate of return and profitability of investments, which although represent different barriers, can all be affected in terms of cost. This can show undoubtedly that cost barriers remain the main factors that have a major impact on the rest of barriers as well and as a result on the rate of fuel cells‟ commercialisation. (Eichman J. et al, 2009) In order to illustrate the above economic aspects of fuel cell technology, the next computational analysis (by using the RETScreen software) presents a theoretical case study of a stationary fuel cell system (large scale) in Germany (as ‘the most mature in fuel cells’ country of EU), in order to investigate the impact of IRR and payback time on the project’s profitability and simulate the above discussed manifold framework of economic barriers.

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The case of Germany was chosen for the case study, since it is a developed country offering FIT for fuel cell produced electricity (around 11 Eurocents/KWh or 0.11 EUR/KWh=110 EUR/MWh following the example of Australia). Also in the country the inflation rate is currently stable at 1.4%. (Trading Economics, 2013); (Fuel Cell Today, 2013) Also a stationary Ballard fuel cell system (250KW per year) was chosen via RETScreen, which is considered as a large scale application (covering a range from 100KW to 5 MW) and is usually used by companies or manufacturers to sell fuel cell generated power via a purchase agreement to other corporations, municipalities or governments. Such systems can be installed as part of the grid (grid connected) to provide reliable, uninterruptable power supply (UPS) in case of grid failure or blackout. Furthermore based on the availability given in RETScreen for this certain fuel cell (hours for which the system is in functioning position) of 95% or 8322 hours, we assume an overall lifetime of 10 years for the project. The Ballard PEMFC (stationary) runs on hydrogen to produce primary power for a big industrial building in Germany possibly owned by a company (so that it can be considered as a large scale stationary use) and sell the fuel cell electricity to the municipality of Riem at a privileged guaranteed price (FIT). (J.Van Rooijen, 2006) We assumed a price for PEMFC equal to 1826 USD/KW (see table 17) or else 250*1826=456,500 USD=338,075 EUR and a price of hydrogen (produced from natural gas) equal to 1.3 EUR/kgr or else a total fuel cost of 187,462 EUR, for the fuel cell system (via RETScreen calculations). (IEA, 2007) Operation and maintenance (O&M) costs for 250KW stationary fuel cell systems include scheduled maintenance of $500, $1,000, and $1,500 every year in the three cost cases (low cost, medium cost and high cost scenario), plus fuel cell stack refurbishment costs of 20%, 33%, and 40% of the total system costs, respectively every 5 years of typical load-following operation. These costs (taking into account the most optimistic or else the low cost scenario) are calculated below (Lipman T. et al, 2004): 

Cost for scheduled maintenance requirements: 500 USD/year=362 EUR/year



Cost for stack replacement: The fuel cell stack refurbishment costs are estimated to be equal to 20% of the total system cost or else 338,075 EUR*0.20=67,615 EUR



Assuming that the fuel cell system lifetime equals 10 years and the stack replacement takes place every 5 years, this procedure will take place only once during the lifetime so the total replacement cost will be in total 67,615 EUR



The total replacement cost is divided by the years of lifetime to give an annual cost equal to: 67,615/10=6761.5 EUR/year



The overall annual O&M costs (for the 250 KW stationary PEMFC) will be: 362+6761.5=7123.5 EUR/year

By summarizing all costs together (capital costs, fuel costs and O&M costs) we calculate the total costs (outcomes) during the project’s lifetime and by subtracting from them the annual savings-income through the electricity export income (FIT), we can define the point where the cash flow of incomes equals the cash flow of outcomes (total cash flow =0 and benefits=costs) and this is the point of the xMaster Thesis Project

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axis that gives NPV=0 (investment breaks even) and shows the payback time in years. Based on the next RETScreen figure (cash flow vs years) we estimate the payback time to define the project’s profitability and whether the investments can be beneficial. The results (see next tables from RETScreen) indicate an IRR of 1.7% and an equity and simple payback time of 9.2 and 9.9 years, respectively. The difference is that the simple payback time considers only the initial investment in respect to the annual energy production to define the period of paying back the investment without considering though the time value of money, whereas the equity payback time does include the time of value of money and this is the reason that it is usually smaller than the simple (the equity payback time is also referred as discounted payback time which is ‘’the amount of time that it takes to cover the cost of a project by adding positive discounted cash flow coming from the profits of the project’’). (Boundless, 2013) In fact the time vale of money is a parameter that should be taken into consideration in every calculation and therefore the equity payback time is supposed to be a more accurate approach to estimate the profitability of an investment and the real payback time in years. (Boundless, 2013) In our case the equity payback of 9.2 years seems quite long, if we consider the lifetime of 10 years is almost equal to it, meaning that the lifetime is not enough for the project to pay back the initial investment, which is also explained by the fact that the IRR is very low or the rate of the return is too slow. Through this RETScreen analysis it can be again in numbers testified that the long payback time and low IRR of the fuel cell technology are the main factors that affect the cash flow and the investments in this energy area. Besides both parameters are directly related to the high front-up costs of the technology and so they confirm that the cost barriers remain the most important threat to fuel cell promotion. Following the tables and figure of the RETScreen analysis show the above results as calculated through the software. Table 24. RETScreen results (in the two following tables) after a financial analysis of a PEMFC 250KW stationary system to define the IRR and payback time in years of the project

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Figure 22. Cumulative cash flow graph in terms of years to present the point of NPV=0 or else of the payback time (equity payback time of 9.2 years) of the fuel cell system The above graph resulted from RETScreen, is in the shape of the next figure, which shows the areas in which an investment is considered as failure/loss (investment or cash flow is negative and costscosts). In our example the negative area indicated the occasion in which the stationary fuel cell project has not reached yet its payback time to return the costs on investments (below the x-axis where time<9.2 years) and the next area (above the x-axis where time>9.2 years) shows the time period after reaching payback time in which the project has already returned the costs on the initial investment and from that point on, it results to profit. The cross point where investment and NPV reach zero, is defined as Master Thesis Project

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the breakeven point at which the x-axis presents the payback time in years. Normally the ‘’loss area’’ should be smaller than the ‘’profit area’’ so as the investment can be profitable. (Boundless, 2013) In our example, the loss area (below x-axis) was much bigger than the profit area (above x-axis) and because of this the Ballard fuel cell system was presented as a non-profitable case study and a real life example of how cost limitations affect fuel cell promotion.

Figure 23. Break-even investment graph to estimate profitability and payback time

Clearly it was proved through the above discussion (by relying on economic papers and arguing on the inter-relation of all barriers to cost) as well as through the RETScreen computational analysis, that financial obstacles seem to be the most important category among all. The high capital cost for fuel cells is by far the largest factor contributing to the limited market penetration of fuel cell technology. In order for fuel cells to compete realistically with contemporary power generation technology, they must become more competitive from the standpoint of both capital and installed cost. (Eichman J. et al, 2009) To overcome such problems, there are policies attempting to compensate for cost-related barriers by providing subsidies or feed-in tariffs to fuel cells by the respective legislation framework while reducing financial encouragement to fossil fuels, by lowering transaction costs (related to additional time, attention to financing and uncertainties over the performance, including resource assessment, planning developing project proposals and financing packages), infrastructure and O&M costs and by promising low risk and short payback time to investors.

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4.5 Case study: Fuel cell technology in EU

In this section the fuel cell barrier framework will be applied to Europe in order to compare the fuel cell technology‟s market status of Greece with that of Germany and the Netherlands. The main goal is to discriminate the different applications and potential of fuel cells across the countries and observe how all barriers remain mostly common in all EU countries inhibiting the further fuel cell development. Keeping into account that EU follows certain guidelines regarding RE as set by Kyoto protocol conditions, all EU countries will similarly comply with these conditions by following similar directives to overcome the difficulties. However some of them being wealthier and having a stronger governmental support are more developed in terms of fuel cells implying thus a greater potential for technology development and different policy approaches. Taking as an example the effective policy making of these countries, the rest „‟less developed‟‟ can change their perspective on policy to overcome the barriers to fuel cell promotion. The competition and diversity across fuel cell technologies in the countries affect the process of commercialisation depending on the different barriers, policies and standards and can play a role and either stop or accelerate their further technological progress. Even though technological progress is evident from the growing number of fuel cell installations in various stages of R&D, there is still a high degree of uncertainty over the technology. Countries that become first adopters of fuel cells are most likely to affect the technological standards and become leaders in this sector serving as an example for other countries as well, like in the case of Germany and the Netherlands that could be representative model-countries for Greece. The goal is to draw out conclusions about which countries offer the most favourable prospects for fuel cells and how they can contribute to the fuel cell promotion in other less developed countries. (Del Rio P., Unruh G.C., 2005) ;(Vasudeva G., 2009); (Brown J. et al, 2006) 4.5.1 Fuel cells in Germany and the Netherlands: the mature technology

4.5.1.1 Fuel cell activities in Germany

Germany has shown quite a lot fuel cell activities and is considered as the country where fuel cell technology is already more mature. Some specific examples of fuel cell applications will be mentioned so as to further compare them with similar activities in other countries. Using such an approach can give us a connection of the fuel cell technological and commercial status among these countries and investments that are being made in this sector. Given the different types and applications of fuel cells in transport, portable and stationary systems, the policies of the countries can play a role in determining the technological diversity and investments in these fields of interest. In contrast to US and Japan, Europe lacks R&D activities, facilities and hydrogen infrastructure to support the commercialisation of fuel cells. However Germany and the Netherlands have been trying to rapidly Master Thesis Project

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develop RETs and can still be examined as two representative cases that have shown a significantly high potential in fuel cells. (Vasudeva G., 2009) ;(Brown J.et al, 2006) For Germany we first describe the market and technological options for fuel cells and then analyse the industry structure and government policies to draw out conclusions about what are the most favourable prospects. Currently 200 manufacturers of fuel cell systems & components are active in Germany with half of them being small manufacturers or suppliers and the other half being big companies (with fuel cells as part of a larger product acquirement). Furthermore there are more than 60 research institutes in the field of fuel cell technologies and the Universities are also highly specialized in fuel cell systems. Germany and some other EU countries are capable of competing with North America and Asia for the production of fuel cell technologies although R&D and demonstration programmes seem to be insufficient yet. Still some administrative and other obstacles have to be overcome to allow a faster market introduction and wide production of fuel cells in Germany. (Brown J. et al, 2006); (Schiel J., 2010) ;(Bedel L. et al, 2004) One of the most common applications of fuel cells in Germany is the distributed generation that allows the energy production from small scale sites lowering the environmental impact as well as the transmission and distribution costs. Another major benefit of distributed power generation is the production of heat and power (CHP) at the same time. This is highly efficient and in a big capacity of more than 80%, it can be used to cover heat and power needs of industrial applications. In Germany, there are four companies responsible for almost 80% of electricity generation and an extensive network of regional and municipal utilities. Moreover Germany has a history of creating markets for new technologies with the first one having been the wind power industry in late 1980s followed recently by the combined heat and power (CHP) development that was encouraged by the government’s legislation. Until now the most convenient type of fuel cells for residential CHP use is the PEMFC that operates between 1-5 KW and is compact unlike the high temperature fuel cells that would have much more requirements. (Brown J. et al, 2006) In Germany the fuel cell heating appliances, many of which have been installed in the country over the last years are also increasing in number. There are many manufacturers e.g. VAILLANT and SULZER, acquiring fuel cell CHP systems under real conditions and using them to supply electricity either to the site of production or to the grid. However most of these systems are not fuelled with hydrogen but with natural gas like the IDATECH system that is fuelled with liquid petroleum gas (LPG). ALPHAE is a Centre of Expertise on hydrogen and fuel cell activities including mainly energy producers, suppliers and big users. It has interviewed some of the big fuel cell manufacturers in Germany, some of which are VAILLANT, SULZER, EUROPEAN FUEL CELL, Shell Deutschland Oil Gmbh etc. in order to learn more about the systems they operate and what technologies are being used by them. These large manufacturers of fuel cells in Germany and their main activities in the hydrogen sector can be shown in the following table.

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Table 25. Main fuel cell systems under development in German companies (Bedel L. et al, 2004)

Table 26. Selected companies –all potential partners for collaboration in fuel cell sector, in Germany (Germany Trade&Invest, 2010)

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Most fuel cell manufacturers in the table produce fuel cell systems such as gas boilers that produce supplementary electricity. Nevertheless fuel cells should operate more in a thermal rather than in an electrical load mode in order for the fuel cell heating appliances to deliver the necessary heat to the site or sell it to the grid. In addition to that, usually the building’s heating demands are higher than the fuel cell heat delivery capacity, something that forces the fuel cell systems to operate in full load the entire year together with a boiler adjusted for heat production. (Schiel J., 2010) ;(Bedel L. et al, 2004 ) In chapter 3 it was mentioned that the fuel cell technology is until now used more in the transport rather than in any other sector, since many fuel cell cars and buses are already in the industry with a very optimistic scenario suggesting that by 2050 (half of all cars to be fuel cell cars). Germany will become the first country completely accessible to fuel cell vehicles in 2015, when carmakers Daimler and the Linde technology group will build 20 new hydrogen filling stations, a project running in the tens of millions of EUR. They claim that they are also willing to cooperate with other potential partners in the fuel, energy and automotive industry. Of the 30 hydrogen filling stations operating now in Germany, only seven are available to the public, but according to Daimler, at least 10 filling stations per city are required with most of them finding place in big cities like Berlin, Hamburg, Stuttgart and Munich. This will make it possible for fuel cell vehicles to reach any distant corner of Germany without fear of running out of hydrogen before finding another refuelling station. An extensive network of hydrogen filling stations is to be created so that Germany will have the most advanced hydrogen infrastructure in the world. Moreover, Daimler’s 10 A-Class hydrogen fuel cell vehicles are to be produced and the goal is to increase small fuel cell cars in number with the addition of the Mercedes-Benz B-Class fuel cell vehicles. Furthermore the project, ‘’Sustainable Bus System of the Future’’ (NaBuZ) by partners EcoBus, Daimler, and Hamburger Hochbahn, is at the initial preparation stage and the plan is to use a small, initial series of 10 fuel cell hybrid buses in Hamburg. Daimler’s and Linde's network is not subsidized by the government, but it is based on some funding programmes explained further below. (Brown J. et al, 2006);(IPHE, 2013); (Scientific American, 2013); (Bonhoff K., 2012) Firstly, it has to be noted that the launch of the National Organization for Hydrogen and Fuel Cell Technology (Nationale Organisation Wasserstoff or NOW) represents one of the most important steps in the history of hydrogen and fuel cells in Germany. The NOW started in 2008 and was composed by a supervisory board (Federal Ministry of Transport, Building and Urban Affairs), an advisory board (Federal Ministry of Transport, Building and Urban Affairs as well as energy suppliers, car manufacturers and scientific institutions) and a management committee (coordination of all projects to push hydrogen and fuel cell technologies). NOW’s main function is to initiate and evaluate projects but it also has other functions that include topics such as education and training, communication between government and industry and activities that increase the awareness for new technologies and Master Thesis Project

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products. Promoting technologies and preparing markets are tasks undertaken in a process in which the partners constantly provide each other with valuable feedback. International cooperation is another major concern for NOW. After all, using clean and economically sustainable technologies is a global challenge. The International Partnership for the Hydrogen Economy (IPHE) involves governments in these discussions. Germany chaired the IPHE in 2010–2011, with NOW running the secretariat. (Germany Trade & Invest, 2010) NOW funds more than 35 hydrogen and fuel cell demonstration projects and one of the main projects was the Clean Energy Partnership (CEP), in which NOW from 2008 to 2011 funded 48%. The launch of NOW introduced a huge increase in funding and developing hydrogen initiatives. On the basis of hydrogen and fuel cell technologies in Germany from 2000 to 2010, we can distinguish mainly three types of individual and collective actors: experts, alliances, and agencies. Experts are individuals who observe the environment for the organizations they belong to, trying to find the changes to which their organisations have to be adapted. Alliances are ‘organisational networks’ which are composed of experts that can cooperate to exchange opinions and influence the development of a new technology. Finally agencies can adopt various organizational forms such as departments, working groups, partnerships, networks etc. such as the Federal Government, CEP and NOW, the three most important agencies in Germany concerning hydrogen and fuel cell activities. (Lebutsch P., Weeda M., 2011) Secondly, the Clean Energy Partnership (CEP) is the largest demonstration project for hydrogen and fuel cell technologies in EU. Leading technology suppliers, oil, gas and energy companies as well as the majority of German vehicle manufacturers are participating in this innovative project. The projects that are being funded in Germany include tests for the system compatibility of hydrogen in everyday use and for hydrogen's clean and sustainable production, transportation and storage. CEP started in October 2003 and included German car manufacturers such as BMW, Daimler, Ford, GM/Opel, Honda, and Volkswagen, energy supplying companies such as Aral, Linde, Shell, StatoilHydro, Total, and Vattenfall and transport companies such as BVG and Hamburger Hochbahn. Furthermore, the Federal Government takes part in the CEP by means of the Federal Ministry of Transport, Building and Urban Affairs. The actors involved in the CEP aim to create a clean transport system with hydrogen and fuel cell technologies at the core by making new hydrogen filling stations and testing hydrogen-powered vehicles. (IPHE, 2013) ;(Bonhoff K., 2012) CEP covers several hydrogen filling stations as well as a number of hydrogen cars and buses, as well as a multitude of H2 applications e.g. decentralised production of hydrogen as well as hydrogen distribution, storage and supply at the filling stations. The planned fleet of fuel cell vehicles of CEP by 2020 includes the following actions (Scientific American, 2013): 

80 Daimler B-series F-CELL



20 Opel Hydrogen4



8 Volkswagen Touran, Caddy, Tiguan HyMotion, Audi Q5-HFC

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5 Toyota FCHV



Honda FCX Clarity

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7 Fuel Cell Busses (Ecobus) in Hamburg

Similar activities are also supported by Germany's National Innovation Programme (NIP). To boost technological developments and infrastructure for utilising hydrogen and fuel cells, a strategic alliance between the German government, industry and the academic community, NIP was formed in 2006. Its mission is to demonstrate the viability of hydrogen technology through demonstration and research projects. NIP has a total budget of

1.4 billion, funded 50% by industry and 50% by federal grant.

The advisory council provides a platform which is used to develop NIP flexibly and in line with market requirements. The initiatives of NIP include both mobile and stationary applications as well as a number of niche markets. (Germany Trade & Invest, 2010) Almost all individuals and actors refer to the ecological potential of hydrogen and fuel cell technologies and support their development in Germany. The project of increasing the hydrogen fuelling facilities from 15 to 50 by 2015 is one of them, and was signed by the German Federal Ministry of Transport, Building and Urban Development (BMVBS) and several industrial companies as part of the NIP. The project has also the goal to combine R&D with demonstration, fulfill the multi annual framework and includes a collaboration of politics, industry and academia, a central programme-management and a networking structure. Also NIP can include marine applications, individual projects and material handling activities, apart from fuel cell and hydrogen applications. (Bonhoff K., 2012); (IPHE, 2013) The emission reduction potential of the technologies in combination with renewable energy (hydrogen and fuel cells) related projects and bodies (among which, NOW, CEP and NIP) could be the key to the transformation of an emission producing fossil fuel based to a sustainable emission free energy system in Germany as well as in the rest of Europe. 4.5.1.2 Fuel cell activities in the Netherlands In this section the case of hydrogen and fuel cells’ penetration in the current energy market of the Netherlands will be examined. It is assumed that by 2050 up to 35-40% (in a very optimistic scenario) of all cars in the Netherlands could be hydrogen-powered and therefore sufficient incentives should be first introduced. In fact it is estimated by ECN that the cost of the FCVs is about 27,000 EUR but this will rapidly decrease to about 10,000 EUR by 2020 and will keep falling down to become comparable to the costs of conventional vehicles between 2030 and 2040. A way of funding is needed to bridge the cost gaps of FCVs until the cost gap reaches zero. When comparing FCVs with hybrid electric vehicles (HEVs) as reference vehicles, the cost of conventional HEVs is increasing slightly over the years whereas of the FCVs is declining through subsidies and other funding activities, creating a cost-gap that follows though a downward trend until it is fully eliminated. Thus figure 24 shows the cost difference between FCVs and the reference HEVs that creates a cost gap which will be eliminated Master Thesis Project

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by 2050 when the two technologies will have the same prices. This cost gap needs to be bridged to make FCVs affordable to the public by applying the correct policies. (Lebutsch P., Weeda M., 2011) Both figures below show the fuel cell cars’ penetration in the Netherlands from 2020 to 2050 according to both optimistic and pessimistic scenarios (low, medium, high) and also the fuel cell vehicles’ cost reduction potential during the same time period, respectively. From them, we could take data and results about the number of FCVs by 2050 to the amount of money needed to bridge the cost gaps between fuel cell and conventional electric vehicles so as to estimate the cost effectiveness and competitiveness of fuel cell vehicles. The ‘High’ scenario is up to 2 times more cost effective than the ‘Medium’ scenario and up to 4 times more cost effective than the ‘Low’ scenario. Also as indicated in the figure the percentage of hydrogen car penetration is estimated to be 10%, 20% and 38% for low, medium and high scenarios, respectively in 2050 in the Netherlands. These percentages claim indeed the 2 and 4 times more effective high cost scenario than the medium and low cost scenarios, accordingly. As a result the money to bridge the cost gaps is better to be spent to enable the ‘High’ rather than the ‘Medium’ or ‘Low’ scenario. This is based on the fact that for the better introduction of a new technology in the market industry, it is important to have the highest possible targets (high scenario) to achieve the best results and therefore R&D and funding budgets should be spent more to invest in the scenarios of highest expectations. (Lebutsch P., Weeda M., 2012)

Figure 24. Hydrogen cars’ penetration in percentages over the years in the Netherlands, according to different scenarios (Lebutsch P., Weeda M., 2011)

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Figure 25. FCVs’ cost reduction over the years eliminating the cost gap (Lebutsch P., Weeda M., 2011) However the introduction of FCVs in the Netherlands is not just about cars but also about hydrogen refuelling infrastructure that requires high risk investments. Policymakers, car industry manufacturers, fuel suppliers and a well coordination between them, are the key players in the investing process. Apart from the above the consumers play maybe the most important role, since the transition to a new energy system will only take place if consumers buy the new products (e.g. hydrogen fuel cell cars). Consumers will mostly look at prices and the characteristics of the cars, and their decision may be incentivized by public policy that supports FCVs and stimulates industries to commercialise. Furthermore policy makers are responsible to coordinate the actors involved in the technology and define the standards and regulations in accordance to the final products. The hydrogen suppliers need to establish a refuelling infrastructure that ensures easy and safe refuelling of cars and the consumers should finally make their choice on whether to use fuel cell vehicles or not. (Lebutsch P., Weeda M., 2011) A survey on the refuelling behaviour of Dutch motorists was also used to estimate the need for the all over the country availability of hydrogen. People were asked whether the hydrogen availability is important to them and if so, at how many stations the alternative fuel (hydrogen) should be available. The results showed that when travelling through the country, people see mostly the stations located at highways and other state roads than in remote places and so hydrogen in these stations should definitely be available to cover the demand. Nevertheless due to lack of experience, people do not yet consider fuel cells as reliable enough and even if hydrogen supply is secure they may still not rely on fuel cell cars. (Lebutsch P., Weeda M., 2011) The maps below illustrate the diffusion of the fuel cell technology across the Netherlands in the next decades (until 2050). They show that this diffusion starts from the most densely and continues to the less densely populated areas, which are located in the North-Eastern and South-Western part of the country but basically FCVs seem to exist almost all over the country, as shown on the 2050 map of Master Thesis Project

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the ‘High’ scenario. The results of the ‘Low’ scenario show that even by year 2050, the acceptance of the technology is limited to the most densely populated areas in the Western and the large cities in the Southern part of the country, close to Belgium. In year 2050, the penetration of FCVs in the Netherlands could range from 5% to more than 35% for the ‘Low’ and ‘High’ scenario respectively. For higher penetration rates, beyond 50% by 2050, the hydrogen station network has to be developed, the replacement of conventional by hydrogen cars should take place and the correct policies by producers and consumers have to be expressed to support the introduction of hydrogen technologies into the Dutch market. (Lebutsch P., Weeda M., 2011)

Figure 26. Map of hydrogen cars’ and refuelling facilities’ diffusion in the Netherlands by 2050 according to the ‘low’ (on the left) and ‘high’ (on the right) scenarios, respectively (Lebutsch P., Weeda M., 2011) The IEA (International Energy Agency) task on large-scale hydrogen delivery infrastructure, in which Germany (NOW) and the Netherlands (ECN) as well as some other EU countries, US and Japan participate, is to implement strategies in order for hydrogen technologies to enter the market. Some of the most crucial steps on hydrogen activities in the Netherlands that are of interest and supported by ECN, are the following (Weeda M., 2012): 

Fuel cell boats and buses in Amsterdam.

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The mixing of 5-20% hydrogen into the natural gas grid on the Netherlands in order for the imported or the not required quality natural gas of the country to become hydrogen enriched and more sustainable in use.



THRIVE (Towards a Hydrogen Refuelling Infrastructure for Vehicles) a project in the Netherlands that aims to help the creation and diffusion of FCVs and respective filling infrastructure.



In collaboration with industrial partners, ECN’s fuel cell technology aims at developing or updating materials, components, stacks and system components for stationary and automotive applications of fuel cells. The research areas are mainly SOFCs’, MCFCs’ and PEMFCs’ materials concerning their electrodes and electrolyte and fuel processing methods to ensure the fuel supply to the fuel cells. (ECN, 2013)

The Netherlands tries hard to push fuel cell related technologies. In fact the number of hydrogen filling stations will be increased over the next two years (2014 and 2015) in the country in order for the society to become familiar with driving on hydrogen. By the end of 2013 a new public hydrogen filling station suitable for buses and passenger cars will be completed in Rotterdam and a new filling station on the Automotive Campus NL in Helmond is in its initial phase. The new hydrogen station in Rotterdam is part of a project in terms of the European Commission’s proposal to construct fuelling infrastructure for alternative fuels, including hydrogen. There are also plans to upgrade the existing hydrogen filling stations in Amsterdam and Arnhem to turn them into more suitable stations for the latest generation of vehicles by changing the infrastructure and the fuel supply methods. At European level, the Netherlands is working together with Denmark, Sweden, France, the UK and Germany on reinforcing the significance of a European hydrogen infrastructure network and introducing it in the European economy. R&D activities on hydrogen and fuel cells in the Netherlands are mainly focused on PEMFC and SOFC technology. Also, SOFCs for stationary power and PEMFC buses are demonstrated. Dutch institutions and companies engaged in hydrogen and fuel cell R&D include NedStack, HYGEAR, ECN, Shell, Hoek Loos (a Linde company), and Air Products (US company). (Weeda M., 2012) ;(Government of the Netherlands, 2013) To make the market introduction of fuel-cell vehicles possible in the Netherlands, the government, leading companies in the gas and automotive sectors and local authorities as well as car manufacturers, producers and consumers should gain experience and become familiar with hydrogen and fuel cell related projects. Their goal should be the creation of the desired conditions for safety, high efficiency, cost and performance competitiveness of the new technologies to make it easier for the society to adopt them. Most of these actions have started to take place mainly in the transport sector by the use of hydrogen fuel cell cars and even more are planned to happen by 2020 in the Netherlands. The country has already a good position in the list of sustainable and hydrogen oriented EU countries (though in a lower level than Germany) but still more R&D, demonstrations and fundings are required to achieve the highest possible level. (Weeda M., 2012) ;(Government of the Netherlands, 2013) ;(Gnorich B., Master Thesis Project

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2008) Both Germany and the Netherlands could serve as an example for imitation for the rest EU countries (including Greece) that have not yet provided a fuel cell initiative. 4.5.2 Fuel cells in Greece: immature technology

Greece in contrast to Germany and the Netherlands hasn’t shown a great initiative for fuel cells and the technology is considered as immature yet. In this section some fuel cell actions that have taken place in Greece as well as the energy economy status of the country will be discussed, so as to compare the fuel cell potential and activities with the other 2 countries mentioned before. The comparison needs to be done in order to see the differences among the countries and how these influence the development and diffusion of a new technology. Then we would be able to determine the factors that play the most crucial role for the promotion of RETs and the measures that should take place in Greece having as an example other EU countries. First and foremost, it should be highlighted that over the last years Greece has been facing serious financial and governmental problems that led to a countrywide crisis and a high percentage of unemployment. The Greek government-debt crisis is one of the current European debt crises and is believed to have been caused by a combination of structural weaknesses of the Greek economy coupled with the incomplete tax and banking combination of the European Monetary Union. (The Economist, 2011)

The country’s unemployment is the highest in EU (near 27%), with youth unemployment

exceeding 60% and one out of three Greek households living in poverty. (The Economist, 2013); (M.Mazower, 2013) This situation had effects on various aspects of daily life, including the mental health of its citizens. To be more precise the Greek Ministry of Health reported that the annual suicide rate has increased by 40% over the last ‘in crisis’ years, since the conditions of poverty can increase the risk of mental illness, health costs, unemployment and working hours by less personnel. Greece currently continues to make overall, albeit often slow, progress under the Second Economic Adjustment Programme, with structural reforms being made in the electricity market. After the increase in the Renewable Energy special levy in July 2013, the authorities committed adjustments every 6 months so as to eliminate the debt in the RES account by end of 2014. In July the electricity prices have been fully liberalised and further changes in the electricity market have been decided in order to further lead to the adoption of the EU Target model. Other adjustments made, were the restructuring and privatisation of Public Power Corporation (PPC)-the unique electricity company until then-and the improvement of the interactions between the privatisation process and the objective of improving the electricity market structuring. To facilitate this process, the Government adopted in September 2013 new legislation that introduces a cap on the generation capacity possibly owned by a single company and ensures full ownership for ADMIE (the Transmission System Operator). Also it implemented measures in 2012 and will complete them by November 2013, to ensure the access of third parties to lignite-fired electricity generation (apart from PPC). This process will follow the Master Thesis Project

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timeline and plan designed by the Regulatory Authority for Energy (RAE) that was finally adopted in July 2013 following consultation with the Commission. In this context of reforming the energy system, issues like competition, consumer choice and sustainability of renewable energies should be considered. The Government is continuing currently its implementation of the Third Energy Package and presents a strategic action plan for policies aimed at enhancing the quality of public/private R&D and innovation in the energy sector. This will include relevant measures and legislation to improve regulatory governance and promote incentives for innovation actions in the field of renewable energy (the legislation and policy framework of Greece relevant to renewable energy will be examined in the next chapter). (EC 2, 2013) The European Commission forecasts a small return to growth of 0.6%, and a slight decrease of unemployment rate in 2014. To achieve this, a well-established coordination between society and government in Greece is required as well as investments in certain sectors to be encouraged so that the economy can start growing up in a slow rate again. (The Economist, 2013); (IEA, 2011) Although Greece has no specific national plan on hydrogen and fuel cells, the Greek public authorities, namely the General Secretariat of Research and Technology (GSRT) and the Ministry of Development, have shown interest in hydrogen as an energy carrier that is expressed through different activities. The political support to hydrogen demonstrated by the European Commission led to activities like the formation of the European H & FC Technology Platform (TP) and the European 2

Growth Initiative that includes fuel cells. Also there is a high interest of research institutions in Greece to move towards the Hydrogen economy at a national and European level and therefore an industry with the sufficient expertise for the development of hydrogen technologies might be necessary. Taking such points into account, the Greek R&D community in communication with governmental authorities started developing the concept of “Hydrogen islands” that could hopefully be applied to the non-grid connected Greek islands. The planned technologies and activities that should take place include (Hellenic Hydrogen and Fuel Cell Technologies Network, 2005): 

Hydrogen production from existing RES installations (biofuels, wind or solar energy etc)

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Hydrogen storage methods

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Hydrogen distribution through filling stations and pipelines

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Hydrogen use for electricity production or CHP production, portable and transport applications

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Additional activities (R&D, training, information seminars etc)

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A sufficient total budget (it is estimated that around 20 Million EUR would be needed)

The necessary partners for the implementation of this project are explained here. Firstly R&D institutes are required and these are the Chemical Process Engineering Research Institute (C.P.E.R.I.), the Centre for Renewable Energy Sources (CRES), National Technical University of Athens, Master Thesis Project

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University of Patras, Institute of Chemical Engineering and High Temperature Chemical Processes (ICE/HT) and Demokritos (NCSR) Institute of Materials Science. Moreover the Ministry of Development, Local authorities, Hydrogen related industries, financing institutions, regulatory authority and others take part. The University of Patras includes actions related to the hydrogen and fuel cell technologies that are the design and synthesis of materials, catalyst development, advanced electrochemical reactors, SOFCs, advanced electrodes and reforming of fuels. The Chemical Process Engineering Research Institute (C.P.E.R.I.) includes pilot plant hydrogen production units, SOFCs, Polymer Electrolyte Proton (PEM) conductors, high-temperature electro-catalytic processes. The Centre for Renewable Energy Sources (CRES) focuses on the development & demonstration of systems with integrated RES & hydrogen technologies, hydrogen production, hydrogen storage, and optimisation of RES&H2 systems. Then the National Technical University of Athens (NTUA) works on activities like hydrogen production from waste gases and from solid fuels, water-gas shift reaction catalysts and membrane separation. Also the Institute of Chemical Engineering and High Temperature Chemical Processes (ICE/HT) deals with the design, construction and testing of PEMFC components, electrochemical reactions, electrocatalysts and hydrogen production. Finally Demokritos (NCSR) Institute of Materials Science includes activities like the preparation & characterization of nanostructured materials, metallic contacts, preparation of thin/thick films and hydrogen storage methods. (Hellenic Hydrogen and Fuel Cell Technologies Network, 2005) In addition to the above some significant hydrogen and fuel cell oriented initiatives started in Greece. A high-tech company named Advent Technologies developed new materials and systems for renewable energy sources and supplied its products not only to industry (with VW in Germany being one client) but also to university labs and research institutes worldwide. The company has its departments in Athens, a research and manufacturing space in Patras, Greece, and a location in North America. The benefits of the Advent technology are mainly the low operating temperatures of fuel cells, the high carbon monoxide tolerance of the electrodes, the long term stability with low voltage drop, the high endurance under certain conditions and of course the low cost. (Invest in Greece, 2012) Moreover Air Products, in partnership with Hellas Air Pro Ltd., recently supplied a new submarine of the Hellenic Navy with hydrogen. It is an industry leader in hydrogen safety and engineering, and a global leader in hydrogen production and distribution, as well as in hydrogen fuelling stations for vehicles. Over the past 10 years, the company has developed over 70 hydrogen fuelling installations in the United States, Korea, Singapore, Japan, Italy, Germany and India. The submarine was the first fuelling activity in Greece and took place in Skaramanga, near Athens. It had a fuel cell-generated power supply, allowing it to operate entirely on hydrogen. The fuel cell, which produced electrical energy from oxygen and hydrogen, allowed the new submarine to stay under water for weeks without resurfacing or producing noise and exhaust heat, making thus the submarine undetectable. (EV World, 2007) Another fuel cell action in Greece and maybe the most important by now is the largest fuel cell installation and activation by the Centre for Renewable Energy Sources (CRES), in its wind park in Keratea, Athens. The Pilot Project for the integration of renewable energy sources into European energy sectors using Master Thesis Project

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hydrogen, known as RES2H2, involves the integration of wind energy in hydrogen technologies by means of electrolysers and fuel cells. The project, financed by the Fifth Framework Programme (FP5) of the European Commission, has installed two demonstration prototypes at test sites in Greece and Spain. The prototypes are producing clean hydrogen by using the wind energy to electrolyse water and use the energy produced for storage and supply. The fuel cell installed in this site, can produce electricity of 5KW by using totally clean hydrogen as fuel that is coming from the wind energy (only hydrogen produced by RES will be 100% sustainable with no carbon emissions). The results showed that the efficiency of the system varies from 50 to 70%. By using this specific technology we could manage the energy problem through the utilisation of renewable energy sources and protect the environment without contributing to climatic changes. The fuel cell is part of the Ηydrogen Technologies Laboratory of the CRES under the ‘’Operational Programme of Competitiveness (OPC)" and CRES is responsible for incorporating RES & Hydrogen, functioning and maintaining the unit. (CRES 2, 2006); (IPHE, 2011) Apart from the above actions, there are no other significant steps taken for the fuel cell implementation in Greece like in other countries, since the legislation to encourage the technology and decrease its initial costs, does not exist. The comparison of Greece with Germany and the Netherlands in terms of the fuel cell technology is presented below. 4.5.3 Comparing the above EU countries in terms of fuel cell technological progress

One of the tasks of the European Integrated Project (Roads2HyCom) has been to create a map of hydrogen and fuel cell related R&D technology activities in Europe. Most countries in Europe have active research programmes in the field of hydrogen and fuel cells. However Germany and UK dominate with the greatest number of organisations interested in hydrogen and fuel cell actions. In fact according to figure 27, Germany appears to have had the largest number of organisations having spent annually more than 1 million EUR on H2&FC R&D activities and UK came next, whereas small organisations in smaller countries (among which the Netherlands and Greece) spent limited amounts on this sector in 2008. The same conclusion is clear in figure 28 where the largest amount of hydrogen technologies entering the market occurred in 2008 in Germany (23%) and UK (20%) as well as in some non EU countries, whereas the Netherlands had much less entries (7%) in the same year. (Gnorich B., 2008)

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Figure 27. Annual budget by EU or non EU countries on hydrogen related R&D in 2008 (Gnorich B., 2008)

Figure 28. Hydrogen technology entries (in percentages) in 2008 in EU and non EU countries (Gnorich B., 2008)

Despite the promising potential of the hydrogen technologies in Greece, there are still quite a lot of limitations that inhibit their further promotion and make Greece less mature in the fuel cell sector than other EU countries (e.g. Germany and the Netherlands). Also as it was presented in figure 27, the annual budget of Greece on hydrogen activities in 2008, has been one of the lowest in Europe with a maximum value of 1,000,000 EUR and simultaneously a very small number of entries in the sector. On the other hand other EU countries (e.g. Germany and the Netherlands) have either presented an increased number of hydrogen technology entries or a big budget, which make them seem more developed and mature in fuel cell industry than Greece. We believe that for the widespread acceptance of fuel cells in Greece, there should be support like in Germany and the Netherlands where hydrogen actions are encouraged by the government through subsidies or feed-in tariffs (FIT) and other investing activities.

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In Germany and the Netherlands where there is a favourable economic climate with expectations of big profits, inventors are more likely to support hydrogen applications and attract further investments. Because of the economic crisis in Greece the commercialisation of the fuel cell industry has been paused and a drop in hydrogen and RET applications from 2005 to 2010 was observed. On the contrary Japan and USA continue to dominate the fuel cell market with Germany, UK and France coming next being highly competitive, whereas the Netherlands and Greece as smaller countries exist lower in the list as the figure indicates. For this reason much effort has to be done in Greece and the Netherlands to reach Germany at EU level. (IPHE, 2011) ;(Fuel Cell Today, 2011); (OECD, 2005) The European Patent Office (EPO) appears to have an impact on the fuel cell scientific competencies among the countries and encourages inventions from many European countries. Another reason for the slow development and knowledge diffusion of fuel cells in Greece is the missing international cooperation in fuel cell science among European countries. Apart from the EPO there are also public research organizations capable of inventing and patenting fuel cell related technologies. In Germany, Denmark and France as well as in the Netherlands, public sector institutions are responsible for 20% to 35% of fuel cell patents unlike Greece where such organisations almost do not exist so as to promote innovative technologies. German government laboratories have been active in patenting fuel cell inventions along with German universities that through seminars and research actions try to increase the informational background around fuel cells. This limitation of fuel cells’ development in Greece is also due to the fact that the technology has not been widely commercialized and is not exploited efficiently in the country so as to prove its high efficiency and potential. The lack of advances in infrastructure and national science policies, including R&D and research actions have contributed to the stop of the fuel cell commercialization as well. In fact, technological developments are still slow and costly in many fields because scientific knowledge has not yet provided the right answers relatively to hydrogen and fuel cell activities. (Fuel Cell Today, 2011); (OECD, 2005) As it will be explained in the next chapter of policy in Greece, R&D is very important for the fuel cell development in the country. Public funding of R&D on energy in Greece comes from two sources. The regular state budget covers the cost of permanent personnel and a percentage of operational costs, while the public investment funds provide funding on a project basis. The country’s 22 universities are the main research performers, accounting for around half of total spending on all R&D. Together, universities and public research centres are responsible for around 70% of total spending on all R&D (not only on energy), while the private sector share, around 30%, is one of the lowest among the IEA member countries. Practically almost all funding of RETs in Greece comes from the European Union through the Community Support Framework (CSF). On top of the EU funding from CSF, Greece also benefits from FP7 project funding, amounting to around EUR 7 million for the years 2007–2008. In 2009 public energy RD&D funding totaled almost EUR 16 million, as shown in the following figure. As part of the government spending cuts, it dropped by more than half to EUR 7.3 million in 2010 and to 6.3 million EUR in 2011. With limited governmental resources, it is essential to further sharpen Master Thesis Project

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priorities to maximise the cost‐effectiveness of government‟s energy R&D programmes and to focus on areas where Greece has a competitive advantage or specific needs. (IEA, 2011)

Figure 29. Governmental spending on energy RD&D from 2005 to 2011 in Greece (IEA, 2011)

From the above sections referring to the fuel cell market status in Germany, the Netherlands and Greece respectively, we could draw out the overall conclusion that the representative barriers stopping fuel cell promotion in Greece comparatively to the other two countries are: the insufficient knowledge level, lack of governmental involvement through financial support, lack funding activities and R&D funding and the economic crisis of the country. It was important to define the most important fuel cell hurdles in Greece so as to propose the required policy framework and measures to overcome them (this will be analysed in chapter 5). The most significant factors that could contribute to the solution of these problems and fuel cell promotion are explained next.

4.6

Factors contributing to fuel cell development in EU

Commercialisation efforts to diffuse RETs and more specifically fuel cells have so far remained a big challenge and there has been limited success of diffusion because of many different barriers. The market of RETs has to be analysed to identify the barriers, stakeholders and factors that contribute to the promotion process. Most manufacturers of fuel cells cannot understand why their products are not adopted and try to define which factors impede or facilitate their diffusion. By understanding the factors that influence adoption of innovative technologies the producers can explain and predict the causes that can prohibit the commercialisation and try to find solutions. In short we could say that the key elements influencing the promotion of fuel cells are mainly the technology itself, the market and Master Thesis Project

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industrial conditions, financing incentives and marketing mechanisms. These factors stimulating hydrogen technologies can reduce societal problems and create the required climate and consumer background for the development of fuel cells. (Balachandra P. et al, 2010); (Hellman H.L., Van den Hoed R., 2006) ;(Brown J. et al, 2006) A list of these factors is represented below. 4.6.1 Understanding the theory of technology diffusion and commercialization

The diffusion of fuel cell technology as shown on the figure below is usually represented by a curve that starts with small slope meaning slow start-up diffusion, continuing faster as the technology develops and slowing down again at the end where the diffusion reaches the highest possible level and stops. During this procedure of technology diffusion it is clear that there are 4 stages namely, learning, growth, saturation and decline. The two first stages represented by the two first regions (learning and growth) on the graph, indicate the fast diffusion whereas the two last regions (saturation and decline) show lower diffusion speeds and as a result a decreased probability of fuel cell adoption. At the areas of slow diffusion the main reason is the lack of knowledge of the end-users and the uncertainty that the entry of a new technology (emerging technology curve) will probably replace the previous one. However for fuel cells, the development is rather problematic since they seem to be still in their learning stage where the diffusion is decreased. The stages of a technology also play an important role for the decision-making of consumers on whether to adopt the technology and finally affect the product development. Moreover commercialisation can be divided into the research, demonstration and commercial phases. The research phase includes assessment and feasibility studies e.g. for fuel cells and the demonstration phase planning activities and information campaigns for the successful introduction of the product. Finally the commercial phase takes place where the government gets involved in the process to support the promotion of the product which is integrated in the market and gains the acceptance of society. This final phase can be divided in pre-commercial, support commercial and fully commercial fields until the product manages to be fully competitive and penetrate the market. In fact this market penetration is succeeded when the costs per unit of the product e.g. the cost per fuel cell stack decreases and mass production increases to be enough to cover the energy needs and replace the conventional technologies used before. The following figures show the technology diffusion curve with the respective areas that were discussed above and the phases of the technological diffusion procedure, respectively. (Balachandra P. et al, 2010)

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Figure 30. Technology diffusion curve in respect to time (Balachandra P. et al, 2010) The next figure shows that the first valley of death happens early in the development stage of a technology, as breakthrough research (basic and applied research) increases to achieve commercialisation (pre, support, fully commercial stages). At the first steps, basic and applied research need further capital to undergo a process of development and for the cost per unit to be reduced in order to prove that these technologies (fuel cells) are viable and cost competitive in markets, so that they can reach market penetration as their cost decreases. Especially in the energy sector the research steps are necessary to overcome the technology valley of death and new RETs (fuel cells) can quickly compete with well-developed conventional technologies. (Jenkins J., Mansur S., 2011) The valley of death exists between the demonstration and commercialisation phases of the technological development cycle. The policy concepts during this process can move the technology to a fully commercial scale. (Balachandra P. et al, 2010)

Figure 31. Technology commercialization procedure in respect to cost (Balachandra P. et al, 2010) In general commercialisation means the process in which a technology moves from the laboratory phase to the market acceptance and for this achievement certain criteria, quality and economic requirements have to be fulfilled. Fuel cells pass through an innovation chain, where commercialisation is the latest step to the adoption of the product. First of all basic research and applied research are necessary in order to convert a theoretical device into a feasible device, which then can be turned into a working device though research and development (R&D). Afterwards the engineering & manufacturing and marketing stages are applied to give a manufacturable and commercial device

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giving at the end the final product. The innovation chain is represented on the figure below. (Balachandra P. et al, 2006)

Figure 32. Innovation chain of a technology (Balachandra P. et al, 2006) For fuel cells the research and development & design steps still need process to be realised by applying R&D facilities to pass to the engineering and manufacturing steps and further to the marketing procedure to understand the commercialisation and innovation chain until the final products of fuel cells become commercial devices. As a conclusion we could say that understanding the theory of diffusion of a sustainable technology is vital, especially for the fuel cells that still remain an immature and not well-known or proved technology. These theories can contribute to learning the potential of fuel cells and accepting them as a ‘tool’ towards hydrogen economy. (Balachandra P. et al, 2006) 4.6.2 Increasing fuel cell products’ competence

The immature fuel cell technology still needs to pass through experimentation and learning stages to manage to compete with previous technologies. Fuel cell firms have to gain experience, skills and knowledge on how the products operate and successfully enter the market through various applications. Since the customers usually demand a high degree of certainty and guarantee for the products’ operation in the early stages of development, the fuel cell producers and firms have to cover these needs, encourage and make customers feel secure about the efficiency of the products before using them. Because of this, firms should develop tests and experiments, demonstration projects etc to increase the experience of customers in this sector to contribute to the faster adoption of fuel cells by them. These procedures are most important in fuel cell transport applications that are easier to be adopted by consumers, since the possible fuel savings along with the high efficiency and environmental benefits are factors that influence the preferences and decision-making of consumers to choose sustainable vehicle solutions. A major investment in this sector was announced in Germany this year concerning hydrogen infrastructure. Six partners in hydrogen mobility (Air liquid, Daimler, Shell, Total, OMV) have set up an action plan for construction of a worldwide hydrogen refueling network for FCVs. By 2023 the current network of 15 stations in Germany shall be expanded to 400 stations equal to an investment of 350 million EUR. Therefore the first 100 stations in Germany are planned for the next 4 years. An agreement in principle has been signed by representatives of all above partners on 30 Sept. 2013. Also the start of fuel cell powered production vehicles in Germany has been Master Thesis Project

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announced by manufacturers for 2015, which requires a rapid development of the hydrogen network. The plan ‘’H2 mobility’’ will work with the automobile industry to achieve these goals and innovation and research activities will be continued. The continuation of NIP for hydrogen and fuel cells is the necessary support for the market establishment and CEP for testing fuel cell vehicles and their refueling to encourage the infrastructure development. Both of them represent the two main programmes for fuel cells in Germany for which the interface to the Federal Government is the National Organization for Hydrogen and Fuel Cell Technologies (NOW). (EHA, 2013) The fuel cell firms and manufacturers have also to determine which competences of fuel cells should be updated or created and based on them find the best solutions that fulfil the best performance, cost and material requirements. They have to decide whether supplementary technologies are needed to be integrated in the entire system and focus on manufacturing and design of fuel cell stacks to achieve the desired market competences. However the firms alone cannot manage this and the cooperation with partners, investors and possibly other related companies has to be established although leaving the final decision and marketing to the consumers. The competence development is also related to the firm’s competitive position. Firms face a big risk in making market decisions regarding competence development by encouraging and making efforts on new technologies and have to decide which of them have to be patented to shift from R&D to production phase. The decisions they mainly have to make are based on the development, application and marketing of the technology by always accounting the consumers’ preferences that will afterwards determine the final design and form of the product e.g. the fuel cell vehicles‟ design. (Hellman H.L., Van den Hoed R., 2006) 4.6.3 Increasing environmental and social interest by creating the appropriate hydrogen and fuel cell climate

The oil addiction has led us to the result that the environment and population suffer from its usage. Our economic development has depended on fossil fuels for a long time, causing various problems concerning the environment (by the production of greenhouse gases and other emissions), human health, and sustainable development in general. The main concern is how on a large scale we could change the consumption needs by simultaneously creating a clean sustainable environment. Hydrogen is an attractive energy carrier for reducing the emissions of greenhouse gases and pollutants in our society, showing a big perspective in the portable, transport and stationary sectors. It is evident that there has been great interest in hydrogen related research in the European Union and could be even higher by increasing the social interest in hydrogen and fuel cell based systems. Within the last years there have been many attempts to implement the hydrogen economy in developed or developing economies. In order to support fuel cell technologies in Europe, the necessary factors that could contribute to this should be accounted such as programmes as well as demonstration projects about fuel cell systems that can inform the society about the environmental and social benefits of hydrogen based technologies. Significant efforts need to be made to increase awareness and acceptance of fuel Master Thesis Project

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cell systems among policy makers, investors and the general public and to concentrate more on safety and reliability issues of fuel cells. (Balachandra P. et al, 2006); (Hellman H.L., Van den Hoed R., 2006) Furthermore the appropriate fuel cell and hydrogen climate can be created by encouraging innovation and facilitating diffusion through stakeholders involvement that can provide education, research and finance concerning fuel cells. For the correct climate creation, entrepreneurs, knowledge diffusion, training of personnel to acquire the necessary skills as well as the governmental participation, are required. The activities to promote fuel cell technologies should include demonstrations to increase competitiveness and reliability, programmes of providing information and training facilities to upgrade skills and business plans for the successful integration of hydrogen technologies in the market. (Balachandra P. et al, 2006) Electronic means and social media are becoming very popular in transmitting information on all kind of issues and so they could also be used as tools to provide information services about all new renewable technologies (including fuel cells) and their great benefits so as to have a positive impact on the public preferences. An easier diffusion of fuel cells could be achieved through seminars, workshops, websites, training programmes, multiple demonstrations, information kiosks and publications that all of them disseminate information and present data about costs, potential, performance and implementation options to influence the decision-making of the end users. (Balachandra P. et al, 2006); (Hellman H.L., Van den Hoed R., 2006) As mentioned in the previous section, Germany is without doubt the number one fuel cell country in EU. Several stakeholders are involved in the fuel cell industry to increase the consumers’ interest and create a hydrogen climate necessary for fuel cell development. By participating in conferences (Group Exhibit Hydrogen and Fuel Cells/ Hannover Messe) Germany can deal with improving fuel cell properties and informing end-users about fuel cell benefits in the household sector. Still R&D efforts are required to deal with many open questions (applications, efficiency, reliability). The challenge for successful R&D in Germany is to shift towards customer needs to fulfil certain criteria. This would require more complex investigational methods to achieve fuel cell progress and tools that provide the users with insights into the field of material properties, stacks, fuel processing etc. Also a detailed study (Germany Hy) has been funded to identify perspectives for hydrogen as transportation fuel in Germany until 2050. It is therefore a critical aspect to shift the society’s interest to alternative ways of driving and increase theoretical expertise so as to achieve a convenient background for the successful hydrogen penetration in the German and further EU energy market. (Germany Trade & Invest, 2010) 4.6.4 Supporting entry of firms, organisations, universities and other investors

The industry of fuel cells started being developed lately but even so there are a lot of steps to take place before speaking of a commercialised technology and a very important factor that could play a role in this, is the involvement of firms, organisations and universities. Leading firms could support initiatives and depending on the fact that fuel cell systems demand a number of other technologies to Master Thesis Project

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operate (such as fuel processing, fuel storage, materials technology, chemistry and electrical engineering), they should provide components and a full equipment to support the installation and operation of fuel cells. Moreover through research of companies the expertise in the hydrogen area can be higher and better adapted to a new technology. By offering products in lower prices firms can ensure that the consumers will be likely willing to accept new entries and also by proving the advantages of fuel cells, they can create financial incentives to governmental or non-governmental bodies and financing organisations to invest. The participation of investors and government in the development of fuel cells is crucial, since they are able of financing programmes, helping the promotion, increasing the awareness of consumers and through subsidies lowering the prices of fuel cell products to be more attractive to the end users. Moreover the collaboration of universities with energy oriented companies can have great impact on the development of fuel cells. Particularly testings and experiments and research programmes about the best combination of materials for fuel cell technologies, could be organised by universities in certain equipped laboratories to investigate the performance and efficiency of fuel cells. Through the universities the interest in RETs could also be increased by means of sustainable energy related courses that would contribute to the better knowledge background of students who could serve as properly skilled personnel later on. Additionally it should be taught how conventional technologies and fossil fuels can badly influence many aspects of life and how important and urgent the shift towards a renewable of living is. There is a variety of European Universities that offer research and coursework in hydrogen and fuel cell subjects but still most of them are conducting research for the US Department of Energy (DOE). (Brown J. et al, 2006) ;(Hellman H.L., Van den Hoed R., 2006) To refer back to the German and Dutch cases, Delft University of Technology in the Netherlands and University of Duisburg-Essen (hydrogen production and PEMFC), TUMunich (SOFC) and University of Stuttgart (polymer membranes of fuel cells) in Germany, offer research groups for investigation of fuel cells. According to the National Organisation of Hydrogen and Fuel Cell Technology (NOW) in Germany, emphasis should be given to a variety of demonstration projects for different kinds of fuel cells and so the customer’s experience will be collected as regards to installation, service and maintenance. Apart from the Universities large German companies (Siemens, Opel, Daimler, and Chrysler etc) contribute to creating a beneficial hydrogen climate. They bring experts and research institutes together to let them exchange experience and promote public interest for the fuel cell matter. (Fuel cell Norway, 2006); (NOW, 2013) The four above factors accompanied by the necessary legislation and measures, can form the appropriate policy framework under which RE and fuel cell promotion can occur. A comprehensive policy analysis to overcome the barriers and help the development of RES will be conducted in the next chapter.

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4.7 Conclusions on barrier analysis Chapter 4 examined the barrier analysis in respect to RE and fuel cell promotion based on the framework proposed by J.P.Painuly, who identifies barriers in terms of categories. (Painuly J.P., 2000) Several barrier categories that have prevented penetration of RETs, have been listed in literature. Some may be specific to fuel cell technology, while others may be specific to a country or region. For this reason a comparison was made between three EU countries: Germany, the Netherlands and Greece in the report to define the different fuel cell market status, related obstacles and policy approaches. It is evident from the comparison that Greece still needs a significant number of reforms in order to reach the level of the other two countries in respect to fuel cell development. As identified by the research the most important barriers regarding the penetration of fuel cells in Greece, are the high costs over the lifetime of the system and the missing legislative framework. There are also different barriers that need to be overcome to further the implementation of fuel cells in the country through various actions performed by stakeholders including governmental policy measures. After studying all related barriers in order to define the actions-factors required to address them and further promote fuel cells, a policy analysis will be conducted in chapter 5 based on the acquired background from chapter 4.

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PART C: Policy Analysis

PART C: Policy Analysis

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5

Policy Analysis: Overcoming the Barriers

Policy Analysis: Overcoming the Barriers

5.1 The role of policy for RE promotion

The question of how to overcome the ‘’carbon lock-in’’ has to be examined by identifying the different policies that give a solution to this problem. Within a policy framework, approaches to contribute to the development, adoption and use of new alternative technologies will be analysed. The policies should be pursued to increase the awareness of society to be able to recognize the environmental degradation caused by fossil fuels and move towards renewable methods for electricity production. The policy regime should serve as a way to solve the climate problem and as a step in the development path of sustainable technologies and fuel cells, to result to their successful commercialisation. (Hall J., Kerr R., 2002) Governmental policies may affect the rate of technological change that aims at promoting the renewable technology development and innovation. The technology policy by definition is the governmental policy for promoting technological steps within a specific country or else the combination of instruments for realising the goals of promoting technological knowledge for new products and technologies. The policies require a transition towards an organisational, institutional and market innovative system that includes knowledge diffusion, R&D and the stakeholders’ involvement for the well coordination. (Balachandra P. et al, 2006) These actions include methods to overcome barriers, build human and institutional interactions, start R&D facilities and provide information and mechanisms about RETs but also create conditions for the establishment of markets, codes and certification. (Painuly J.P., 2000) By offering to the policy makers and stakeholders a picture of how a new technology will influence their activities and how it is introduced successfully in the market, we might have a faster diffusion. In order to successfully commercialise a new technology, the climate under which new entries are taking place, also plays a very important role and has to be updated to support the market transitions. (Hall J., Kerr R., 2002) For a renewable based energy system, the supportive policies can be used to attract the entry of private investors, but also to determine the level of investments. State policies can support renewable energy development by guiding markets, providing certainty in the investment market, and incorporating the external benefits of the technologies into calculations. If institutional procedures aim at a smooth but responsible introduction of renewable energy technologies, then the success rate of projects can be improved, resulting in a faster deployment at lower costs. Finally depending on the country in which the technology will be implemented, country-specific policies should be considered to internalise negative externalities of fossil fuels and show the positive impact of renewables that overcome the lock-in and contribute to more sustainable socio-economic systems. (Brown J. et al, Master Thesis Project

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2006);(Foxon T., 2006); (De Jager D., Rathmann M, 2008) In general the fundamental question is ‘’can the promising RETs overcome the lock-in of fossil fuels before a severe environmental damage occurs?’’ and if not ‘’which policies can help this and facilitate the shift towards a new sustainable energy infrastructure?’’. Development in the field of energy policy should thus be based on a strategy which includes both improvements in fossil fuel technologies and promotion of RETs. The following list of policies-measures that contribute to the diffusion of RETs (including fuel cell examples) in Greece is represented in the following sections. 5.2

Specific policies promoting RE and fuel cells in Greece

The EU policies have posed targets for member countries for the renewable energy share by 2020. Because of the crisis, Greece has been facing financial problems and this poses serious obstacles in the RET diffusion, but even so it still supports initiatives for renewable technologies and complies with EU standards. During the last decade a continuously increasing interest in renewable energy technologies, was observed in Greece as a result of legal measures, financing mechanisms, increasing environmental concerns and the rich potential of RES in the country. Electricity from renewable sources is promoted mainly through feed-in tariffs or subsidies not only in stationary but also in transport applications (an option could be the fuel cell automobiles). There are a number of policies aiming at promoting the development, installation and use of RES (e.g. the high energy efficient and sustainable buildings) in accordance with the European legislation. In addition to this, there are numerous national programmes that aim to promote the sustainable economy through the use of RES in buildings. Greece has started already to apply a range of supportive mechanisms for RETs but still the market acceptance of them is rather low due to the limited governmental support and difficulties in the grid connection of RE systems. (MEECC, 2010); (EC 2, 2013) The basis of Greece’s climate policy is the second National Climate Change Programme (NCCP) from 2002 and its revisions, the National Renewable Energy Action Plan (NREAP) and the National Energy Efficiency Action Plan (NEEAP). National policies and measures are closely linked to the European common and co‐ordinated policies and measures, including the financing mechanisms and fiscal measures supporting the implementation of projects. The impact of current and future climate policies and measures were quantified in the 5th National Communication Programme of Greece to the United Nations Framework Convention on Climate Change (UNFCCC), published in January 2010 and updated in March 2011 to take into account revised policies and measures related to the compliance with the EU 20‐20‐20 targets. (Vassilakos N.P. et al, 2003);(Ageridis G., 2009);(Reiche D., Bechberger M., 2003); (IEA, 2011)

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Many different stakeholders are involved in the commercialisation process of RETs in all countries. Stakeholders are persons or groups of people who are directly or indirectly affected by a project, have interests in a project, or have the ability to influence its outcome either positively or negatively. The key stakeholders include suppliers, customers, firms, governmental bodies, industrial agencies, environmental groups etc. that are responsible for overcoming the barriers that stop the transition to renewables and for creating the necessary infrastructure to support new energy systems. By analyzing the role of each stakeholder group, we can inform policy makers about how crucial their involvement is and how their activities impact the innovation process. Furthermore the degree to which the stakeholders consider a technology as radical or not and what changes it requires, can show the modifications that are necessary for the commercialisation. The analysis should identify the (major) stakeholder interests, activities, effects and influences. The most intense periods of stakeholder engagement occur over the phase which takes place in the first, before the implementation of the project, stages. The key aims of stakeholder engagement at this stage are to identify key issues and concerns, affecting the viability of a project and at the end of the project to know their suggestions and measures have been taken into account by accepting feedback concerning the process of the technology. (Laursen K., Salter A., 2005); (Sherriff L., 2012) The stakeholder analysis will be divided into governmental and non-governmental groups, since both of them with different ways have a direct or indirect impact on the policy making regarding RE promotion. The government is engaged in providing essential services to its citizens to facilitate technological development through instruments, action plans or legislative measures. On the other hand non-governmental stakeholders focus mainly on the financial position of their business or their benefits resulting from the project implementation. Both governmental and non-governmental sectors are inter-related and affect each other with regards to policy making. This inter-relation can be proved based on the fact that governments set the rules and guidelines with which non-governmental instruments (including companies, industries, innovators, consumers etc.) have to comply to organise their business plans and non-governmental instruments on their half participate in the formulation of these according rules and guidelines. Forms of cooperation between the Government and the nongovernmental sector reflect as follows: in legislation (consultations in decision-making on new acts, inclusion of representatives of non-governmental sector in work groups developing legislation), in the process of making and implementing national programmes, documents and strategies issued by the Government, in the financing of programmes and services of non-governmental sector, etc. (Hill M., Hupe P., 2009) (Laursen K., Salter A., 2005) Specifically for the case of Greece whenever a new law or regulation is to be issued, a public consultation between all interested parties takes place before it is accepted by the parliament, which highly affects the overall content and provisions. Based on the above the mutual influence between governmental and non-governmental groups makes it essential for both of them to be considered in the following analysis. The policies for RE promotion in Greece will be analysed according to each stakeholder group in the list below. The four main Greek stakeholder groups participating in the implementation of RE policies are: Master Thesis Project

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Governmental actors: Greek government Non-governmental actors: innovators/entrepreneurs, operators of the grid, consumers

5.2.1 Government

The governments, being one of the key stakeholders, can enable the fast development of RETs by providing financial support through subsidies and feed-in tariffs (FIT) that can make them more cost competitive and easier to replace the conventional systems. They can also contribute to the safety and certainty of a new economy and affect the public acceptance of renewables as well as define the economic and environmental issues with the increasing demand to estimate the importance of alternative solutions. Additionally they must be aware of the present status of energy production in order to cover the supply-demand requirements, define the environmental externalities of fossil fuels so as through the respective policies, measures and sustainable options to eliminate them. Furthermore government organisations should recognise the economic, environmental and societal importance of alternative technologies and attract investors to commercialise them in an appropriate way. In addition governments set the rules for technological development through these legislation procedures, incentives and technological frameworks that reflect not only the private costs but also the true costs of fossil fuels to society in terms of health and environment. (Balachandra P. et al, 2006); (Hall J., R.Kerr, 2002) Governmental policy can help overcome problems through economic instruments (taxation and subsidies/FIT) to create the climate for entrepreneurship development. (Balachandra P. et al, 2006); (Hall J., Kerr R., 2002) An important mechanism is the tax posed to carbon emissions’ production that reflects the environmental damage by fossil fuels aiming at controlling the emission level to an acceptable standard. Nevertheless the carbon taxes appear to be rather complex and difficult to be implemented and are not widely used by most of the countries inhibiting the transition from conventional to renewable technologies. In fact in 1992 the European commission tried to use the carbon taxes to more comprehensively cost all the products except for renewable sources but this decision was abandoned by the end of 1990s due to the strong opposition of the British government. Despite that, some countries like, Germany, Denmark, the Netherlands, Norway and Sweden have used the carbon taxes to control the energy consumption done through fossil fuels and to suggest new sustainable sources for energy production, the final tax rate is a product of negotiations and discussions between the stakeholders and firms that are highly influenced by taxes. (Brown M.A., 2001) To conclude, the governments should realise their major role during the commercialisation procedure of renewables and promote plans and strategies by investing in energy related agencies and encouraging funding methods to contribute to the RET widespread acceptance by society. Master Thesis Project

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Unfortunately, over the past years, the energy debate has changed and the governments do not worry so much about the costs of energy but about how the most common renewable sources e.g. wind and solar energy, can be exploited to replace many of the conventional sources. Policymakers and other environmental advocates usually point to Europe as a representative example of how governments can best encourage the use of “green” energy sources. However, it is clear that lately Europe seems to be more an example of how things should not be done. As increased government debt continues in Europe, people start to cut back on taxes that were initially a way of support for green energy sources that tend to be less efficient, less reliable, and more expensive now and for this reason the green energy investments and subsidies declined by 22% in the beginning of 2013. (EC 1, 2013) To make matters worse, Greece undergoing a severe financial-debt crisis over the last 5 years, stopped encouraging energy related projects and the Greek Ministry of Environment, Energy and Climate Change (MEECC) announced that feed-in tariff rates would be reduced by 40% for solar projects across the country and the subsidies would be cut down for green energy that they initially pushed to help the innovative energy sectors. In general Europe's debt crisis has many countries worrying more about their economies rather than climate. Governments around the world have watched Europe moving towards generous subsidy schemes to meet ambitious green energy goals and contribute to a future free of fossil fuels. But the high costs, major infrastructure challenges and austerity measures that arose by the debt crisis, made us wonder why Europe has been promising so much green policy so soon. Investments in RETs thus are needed now at a time when Greece is struggling to maintain its economy, and money for renewable energy simply is not available. The main tasks of the Greek government in terms of energy policy are pinpointed in detail below. (MEECC, 2010)

5.2.1.1 Creating guaranteed markets Due to the fact that RES are still not competitive enough to replace in total conventional methods of energy production, a solution for the energy suppliers could be to integrate part of this renewable energy into their energy mix. As a result it is important for the government to create guaranteed markets where RES could be included efficiently with relatively low costs and further to work along or even partially replace some fossil-fuel based technologies. Within a guaranteed market, the main task is to develop, supervise and operate the mechanisms constructed to manage the risks arising in connection with RES related company’s activities and services, and provide for their regulation and continuous development. In order to do so prices for electricity originating from RES which are above according fossil fuel prices, are issued and guaranteed by the government to hold for the entire lifetime of RES projects. Also governments oblige Grid Operators to sign contract with independent RES electricity producers in order to guarantee the selling of RES generated energy in the above mentioned prices. (Neuhoff K. et al, 2011); (Brown J. et al, 2006) Regarding fuel cells, since associated risks are high, a proposed measure could be the immediate consideration of a price system which could in the future promise a guaranteed market. In both US Master Thesis Project

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and Europe, the driver for fuel cell promotion is the creation of guaranteed markets that could attract investors’ interest. Thus the market would be attractive as well to suppliers and consumers and would reflect the stable benefits and performance of fuel cell so as to increase public acceptance. For the effective use of a guaranteed market we could assume that submarkets already exist and cannot be merged into one integrated market in the short or medium term, like in the case of renewable integration in the fossil fuel system. A way of creating guaranteed markets is through applying FIT systems and promising guaranteed prices for technologies, as it is explained in the next paragraph. (Painuly J.P., 2000); (Neuhoff K. et al, 2011) (Brown J. et al, 2006) 5.2.1.1.1 FIT system Since RETs are relatively new, they are much more expensive than conventional sources of energy (fossil fuels). To be competitive in the modern market, they must be accompanied with monetary benefits. One of the most common and effective of these benefits is called a Feed-in Tariff system. A FIT system was introduced first at the end of the twentieth century and was based on a pricing law that demands from the energy suppliers to pay a rate for the electricity produced by renewables. A feed-in tariff (FIT) is a policy mechanism designed to accelerate investments in renewable energy technologies, by offering long-term contracts to renewable energy producers, based on the cost of generation of each technology. The payments are made over a period of time so that the investments become profitable. Under a feed-in tariff, renewable electricity generators (which can include homeowners, business owners, farmers, as well as private investors and companies) are paid a guaranteed promotional price, which is higher than the one regarding conventional fuel, for the renewable electricity they produce. This enables a diversity of technologies (including fuel cells etc…) to be developed, providing investors a high return rate (high IRR) on their investments. (US EIA 1, 2013); (Coutoure T. et al, 2010); (Mendonca M., 2007) As of 2010, feed-in tariff policies had been enacted in over 50 countries, including Algeria, Australia, Austria, Belgium, Brazil, Canada, China, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Iran, Republic of Ireland, Israel, Italy, Kenya, the Republic of Korea, Lithuania, Luxembourg, the Netherlands, Portugal, South Africa, Spain, Switzerland, Tanzania, Thailand, Turkey and USA (FITs are used only to a limited extent around the United States and their rates differ across the States as well as the RE legislation, but they are more common internationally and are typically used in combination with one or more other incentives). Unlike FIT, net meteringexplained later- is the most common policy for renewable electricity used in US until now. (US EIA 1, 2013) The evolution of FIT also explains how the countries overcome the barriers to the RET development despite the different FIT designs and implementations they might have. An example could be the last introduced FIT system in Greece in 2010 concerning RES, since the Greek energy market was at the forefront of transformative changes, after the financial crisis and has Master Thesis Project

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been attracting investors from around the globe. FITs play an important role in this, since they reduced the costs of RES in the country (like wind and solar energy especially in the Greek islands) and encouraged them to be exploited usefully. The current tariff system was introduced by Law 3851/2010 revising the 2006 FIT system and increased the RE feed‐in tariffs. The Laws’ conditions and terms will be mentioned later in the section of the Greek legislation government analysis. The tariffs are generally valid for 20 years. The FITs of 2010 and up until now in Greece (in EUR/MWh) per renewable source are given on the table below. (IEA, 2011) It should be noted though, that relevant measures have not been taken specifically for the fuel cell technology. The result is that currently there is no guaranteed price for fuel cell based generating electricity. Table 27. Feed-in Tariffs valid since June 2010, based on Law 3851/2010 (IEA, 2011)

By considering the above table, it is clear that photovoltaics in households or small enterprises (550EUR/MWh) and solar thermal energy (264.85EUR/MWh) as well as small scale biomass plants and gas from biomass (200-220 EUR/MWh) have achieved the highest FIT prices until now, whereas wind energy has not received as high FIT rates as it would be expected when compared to other countries (it should be noted that PV generated energy FTI prices have been reduced with more recent legislations). This is strange though since Greece is a country with high wind energy potential especially in the islands and it would be anticipated that wind energy would attract much more financial support by government and companies. Master Thesis Project

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A proposed measure that could increase the implementation of fuel cells in the country would be the introduction of guaranteed prices for energy produced via this technology having as an example other countries where this measure already exists. (MEECC, 2010) For instance, Victoria has become the first State in Australia to provide a feed-in tariff for fuel cells. The Victorian Government has accepted the recommendations of the Victorian Competition and Efficiency Commission (VCEC), which began a review into feed-in tariffs in January this year. Ceramic Fuel Cells (CFC), the Australia-based company that develops fuel cell systems for homes and other buildings, was involved in the consultation process with VCEC. From 1 January 2013, the new tariff initially provided a minimum of 8 Australian cents per kilowatt hour of fuel cell electricity exported to the grid, which was based on the adjusted wholesale price of electricity. It was available for electricity generators that produce 50% or less of the emissions intensity of electricity generation in Australia: Ceramic Fuel Cells’ highly efficient BlueGen gas-to-electricity fuel cell unit was thus eligible for this feed-in tariff. It is noteworthy that BlueGen is the world's most efficient, small-scale electricity generator, delivering up to 60% electrical efficiency. At peak efficiency, BlueGen delivers approximately 13.000 kilowatt-hours of low-emission electricity per year and optional waste heat from it, can be recovered to provide 200 litres of domestic hot water per day. This increases total efficiency to approximately 85%. Its customers are already eligible to receive feed-in tariffs in Germany and the United Kingdom. Both markets have recently announced increases to their feed-in tariffs. The tariff in Germany is equivalent to approximately 14 Australian cents per KWh (or 11 Eurocents/KWh=110 EUR/MWh), while the total tariff in the UK is up to approximately 26 Australian cents per KWh (or 17 Eurocents/KWh=170 EUR/MWh). The outcome of German and UK incentives is that the commercial focus of companies such as Ceramic Fuel Cells Ltd (CFCL) is now almost entirely based in Europe. Similar measures for feed in tariffs to fuel cells could be introduced in Greece as well, having Australia as an example, to encourage the technology promotion in the country. (Fuel Cell Today 5, 2012);(CFC, 2013) However it is clear that only in the countries in which governments have a consistent political vision on sustainable energy deployment, can the FIT successfully be applied and finally positively contribute to the promotion of immature RETs e.g. fuel cells. (Mendonca M., 2007) In Greece the price support measures e.g. feed-in tariffs can create new incentives for investing in innovative technologies e.g. fuel cells which bring modifications to the institutional system. Institutional changes are usually done in terms of governmental arrangements and this is what makes them being for a long period stable, leading nevertheless to social changes. The social recognition of environmental damage or Gross External Damages (GED) coming from the dependence on fossil fuels, can thus lead to solutions for escaping from the lock-in and trigger institutional policy changes. Some of the institutional changes by FIT include high support levels, stability and certainty of new entries and the widespread diffusion of new technologies. Institutional changes may also be introduced by means of specific measures and regulations concerning science and technology policy and critical factors to facilitate the adoption of renewables. Furthermore alternative approaches and measures dealing with the reduction of carbon emissions and with charges to electricity consumers based on the Master Thesis Project

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resources used to reflect the carbon externalities in the energy system, are necessary to show the real cost of carbon based electricity production methods and the cost competitiveness of RETs instead. The Laws of the Electricity Sector, Plans for electrical and gas infrastructures for the promotion of RETs in Greece can all represent components of a new institutional system. The extent to which institutions affect the technological systems is related to the extent they determine their rate of change. The FITs used in Greece since 2010 were responsible for institutional changes in the administrative and legislative system of the country as well. FITs can have an impact on R&D as well. Although FITs are proven to be successful in encouraging renewable energy growth, they have their shortcomings, one of which is their tendency to discourage Research and Development (R&D) of renewable energy technologies. This could be solved by policies in which FIT funding contributes to R&D funding. Since FIT rates decline annually (including in Greece that is an economically problematic country), consumers are encouraged to implement renewable technologies as soon as possible to be able to use the highest possible FIT rates. For instance, the sooner a user installs a solar cell, the higher the FIT is and the more cost competitive the technology. Therefore, consumers are not waiting for better, more efficient solar cells to hit the market and the respective companies for solar cells’ production put less money into R&D. This is the case also for fuel cells since they represent an inefficient and immature technology for which R&D is important. Funding R&D in the fuel cell industry is critical in harnessing more of its potential and achieving the highest possible fuel cell efficiency. By bringing R&D in the forefront it could be a useful measure for governments to contribute for instance, 3% approximately of the FIT funding to R&D funding. Through this policy, companies would notice an increase in R&D funding which would have no influence on an individual basis (consumers). In general for most RE technologies, the budget provided by governments for FIT is larger than that of R&D and for this reason there is no other source of funding that would contribute as much to R&D. By promising through government measures, guaranteed prices (FITs) for RETs in Greece and giving part of the funding to R&D, the RE potential is becoming clear across investors and consumers, to attract their interest and promote R&D facilities more. The next figure explains the above described situation, in which a percentage (almost 3%) of FIT funding could be sacrificed for R&D procedures in terms of RE development. (ISPRE, 2009)

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FIT funding R&D funding

Figure 33. R&D funding (3%) as a percentage of FIT funding for RE 5.2.1.1.2 Net metering system Apart from FIT, other forms of creating a guaranteed market exist. Today the large number of facilities and high selling prices (FIT) has created big financial requirements by the final consumer and has brought electricity markets almost on the verge of collapse. Local governments were forced to not only drastically reduce the guaranteed selling prices, but also try to cut selling prices even in the existing plants. This is when the idea of a new RE electricity trade policy besides FIT, was introduced and this was the net metering policy. The net metering policy first started in the United States when it has been realised that the power meter reading could be reduced by making it go upside down and so the rotation of the meter goes in the opposite direction (backwards) as much as the amount of RE based electricity produced and supplied to the grid. The energy produced by systems and not absorbed by the plant (for the consumption of the building), is sent to the grid, so that the meter is turned backwards by reducing its power consumption indication. In practice, the consumer pays for the energy consumed minus the energy produced and gives back to the grid the excess energy to power other houses etc (it is like selling the excess energy to the grid operator), something that is reflected through a reduced electricity bill for the consumer to pay. If the consumer has generated more energy than used at the end of the year, the electric company can pay back the consumer for the extra power at the retail rate. After US, the first country of EU that has piloted the net metering, was Denmark in 1998 and then the same strategy was applied in Belgium, the Netherlands and Italy. Currently discussions are being made about whether such a system instead of a FIT system for renewables could be feasible also in Greece so that the government with its legislation framework and respective laws for energy, is not anymore responsible for establishing the conditions under which the RETs are implemented and the rate of FITs. (Hoffmann W., 2009) ;(U.S. DOE, 2011) The feed-in tariff (FIT) and net metering systems are both methods by which a utility company compensates a homeowner or other producer for the energy fed back into the grid but they have some fundamental differences as well. Simply put, net metering requires one meter, FIT requires two. In net Master Thesis Project

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metering one meter: to measure the final electricity consumption, while FIT requires two meters: one to measure consumption, the other to measure generation, which generally commands a higher price than the grid energy. Moreover the legislation related to RE as determined by the government, is responsible for establishing the rate of FITs for RES (e.g. Law 3851/2010 in Greece for the current FIT system) by offering usually high guaranteed prices in order to comply with the EU directives and encourage consumers to use RETs. On the contrary in the net metering system, the excess energy is supplied to the grid by the RE producers (consumers) in a price which is equal to the current electricity price per KWh set by the grid operator of a country (in EUR/KWh) which is lower than the respective guaranteed prices offered by the FIT system. The net metering strategy appears to be thus more profitable for higher RE production units that would attract higher electricity bills, the amount of energy (produced by RE units and supplied to the grid) would be higher and so the credit for energy produced subtracted from the overall energy bill and paid back to the consumer, would be higher leading thus to shorter payback times of the RE producing system. Similarly in countries, where the fixed electricity price (EUR/KWh) and the energy bills per month are high, the net metering system would be very helpful. Costs saved from the electricity bill, because of the RE produced, would be much higher and so a fixed amount of money is returned back to the consumers-producers per month, equal to the RE produced (KWh) multiplied by the respective (e,g, household) electricity price (EUR/KWh). In the first case (high RE production units) the first term (RE produced in KWh) would be higher while in the second case of high electricity price (EUR/KWh) the second term (electricity price) increases. In both cases the final price (money returned to consumers through the net metering) is much higher and so the payback time of the RE units responsible for this is much shorter. (Hoffmann W., 2009); (U.S. DOE, 2011) Greece, having a rather low final electricity price (as set by PPC and including a special consumption tax, a fee for renewable energy sources, a carbon dioxide fee, a utility fee, transmission and administrative charges) among other EU countries, would benefit more from FIT rather than net metering policy. More specifically the Public Power Corporation of Greece has proceeded to offer new lower prices, which are retrospectively effective as of 1 January 2013. Since then, Greeks are paying for household electricity around 0.14073 EUR/KWh which is one of the lowest rates in EU and also lower than the average EU electricity price (0.1758 EUR/KWh) as shown on the table below.

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Table 28. Household (consumption of 3.5 MWh/year) electricity prices in EU countries as measured in May 2013 (Europe’s Energy Portal, 2013)

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Country

per KWh Electricity

Austria

0.20147

Belgium

0.22566

Bulgaria

0.08795

Croatia

0.11325

Cyprus

0.27249

Czech Republic

0.15071

Denmark

0.29525

Estonia

0.11066

Finland

0.15718

France

0.14466

Germany

0.26527

Greece

0.14073

Hungary

0.15613

Ireland

0.22518

Italy

0.2314

Latvia

0.13942

Lithuania

0.1255

Luxembourg

0.16736

Malta

0.16986

Netherlands

0.19323

Poland

0.14618

Portugal

0.2031

Romania

0.10695

Slovakia

0.17322

Slovenia

0.15659

Spain

0.18926

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Sweden

0.20361

United Kingdom

0.17078

*Prices in table include: market price, transmission through main and local networks, administrative

charges and all taxes The only benefit that could be offered by net metering in Greece, would be the avoidance of legislative barriers and the governments’ decision making to the RE promotion, because they would not participate in the establishment of guaranteed prices (since these are regulated by the operator grid in the net metering case) as it is performed with FIT. This means that for fuel cells for which the corresponding legislation and FIT does not exist in Greece, net metering could be a solution. The conclusion is that the FIT system appears to be the best funding policy for RES in Greece until now and legislation frameworks that promote it at the highest possible level, should be always be considered in the country whereas the net metering policy would still be rather inefficient. (Europe’s Energy Portal, 2013) (PPC, 2013) 5.2.1.2 Funding R&D One of the most radical policy options that help the diffusion of renewable technologies is the Research and Development (R&D) investments that have full economic benefits that unfortunately have not been realised by private organisations and/or individual firms. R&D mainly includes basic research and experimental development to achieve scientific or technological advancement and certainty. (Deloitte R&D group, 2012) The government-funded research on R&D of renewable technologies can play a vital role in the renewable economy acceptance. Within the reinforcement of R&D in Greece, international markets and industries are focusing on product and commercialisation process enhancement and having the sufficient information, they can invest in energy efficient programmes to facilitate the technology adaptation. The role of R&D in Greece is particularly important. Due to the fact that Greece does not possess relative industry to support the wide manufacturing of fuel cells, it seems to be the only solution to import fuel cells from abroad. Even in this case however R&D funding is necessary to follow this procedure so that imported fuel cells can become economic competitive. This can be a good start to encourage start-up companies to develop their own fuel cell models later on and establish an industry around this sector that currently does not exist in Greece. This can have as a result a potential improvement of the problematic Greek economy and the creation of job opportunities as well as technological progress. (Hellmann H.L., Van den Hoed R., 2006) Furthermore the technological costs can be reduced through R&D which overcomes the imperfections and distortions in the market and achieves to create the appropriate market conditions. For a variety of reasons, markets are usually not perfectly competitive, at least not completely so. Economists use Master Thesis Project

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the term “market imperfections” to describe situations that deviate from perfect competition. These include monopoly and oligopoly markets, production with increasing returns, negative and positive externalities in production and consumption, and the presence of public goods. Similarly ‘’a market distortion’’ is any event in which a market reaches a market clearing price for an item that is substantially different from the price that a market would achieve while operating under conditions of perfect competition. Mostly we concern ourselves with the two most basic forms of market distortions, which are: Price Restrictions and Quantity Restrictions. In general any policy or action that restricts information critical to the market, monopoly, oligopoly, as well as government failures can be responsible for creating distortions. (Painuly J.P., 2000);(Suranovic S., 2010) Especially in Greece where RETs are not as mature as in other EU countries, energy oriented firms face the long payback period of renewable technologies as a shortcoming and therefore there is need for subsidised projects and funding on R&D in the pre-commercial phase of innovative technologies to show their technical potential in the market before the commercialisation phase. (Hellman H.L., Van den Hoed R., 2006) The 7th Framework Programme (FP7 in the period 2007 – 2013) is the currently applied project in EU in terms of renewable energy with a big budget for R&D to fulfill the RES targets by 2020. To reduce their energy bills, companies, individuals and government initiatives in Greece should drive R&D business opportunities for new energy saving technologies. (Deloitte R&D group, 2012) The governmental use of R&D investments and incentives for renewable energy aims at achieving commercial breakthroughs. Also the private sector has to be added to these policy instruments by promoting R&D and commercial investments in RETs. R&D funding drives innovation in renewable energy and both the government and the private sector are stakeholders in this process by supporting successful innovations that lead to enhanced productivity and decreased damage to the environment and society. Ministry of Environment Energy and Climate Change (MEECC), Centre of Renewable Energy Sources (CRES), Public Power Corporation (PPC), as well as other private companies are playing a role in developing technical or non-technical knowledge around energy issues in Greece. (IEA, 2011) The most important stakeholder of these, MEECC, was formed in 2009 and is responsible for the setting of the Greek legislation according to EU directives and energy policy in Greece. (MEECC, 2009) Apart from the above, the General Secretariat for Research and Technology (GSRT) which belongs to the Ministry of Education, Lifelong Learning and Religious Affairs (MELLRA), is the main authority responsible for the development and implementation of R&D in Greece. Before Autumn 2009, GSRT was part of the Ministry of Development. (IEA, 2011) GSRT has designed, managed and implemented successive programmes aiming at improving the evaluation of proposals and funding R&D projects by being in line with international standards. Since 1995 it has launched a process of evaluating research institutes by supervision through expert committees in Greece and abroad in order to achieve a more efficient use of resources available for R&D. National efforts on research, technology and innovation Master Thesis Project

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are based on the National Strategic Plan prepared by GSRT for the period 2007-2013. The thematic priority on energy includes the following objectives for publicly funded energy R&D in Greece: addressing climate change and ensuring compliance with the Kyoto Protocol and EU 2020 goals, Reducing dependence on crude oil in an environment‐friendly way by improving energy efficiency and developing innovative technologies for renewable energy sources, enhancing energy security by developing know‐how about interconnecting networks, especially the mainland electricity network with the networks on the islands, saving energy in industrial and household use, promoting economic activity in the energy sector by developing an energy service industry and increasing the number of energy system facilities and energy conservation system facilities. (GSRT, 2011);(IEA, 2011) After the transition of GSRT to the MELLRA, the main advisory body on R&D policy is the National Council of Research and Technology (NCRT) which comprises scientists from Greece and abroad. Greece has two main public research centres in the field of identifying specific R&D policy priorities and implementing R&D activities: CRES and Centre for Research and Technology Hellas (CERTH). R&D projects are also financed by the entrepreneurial sector of Greece. In fact over the past 20 years, funding energy R&D has remained almost constant, whereas funding specifically the renewable energy R&D has increased over the past 10 years, as the following figure presents. Instead of funding general energy projects, funding certain renewable energy projects, can be much more helpful since it can focus on only renewable energy promotion by providing the necessary scientific background required and attracting the interest of all energy related companies in Greece. It is clear from the graph below that from 1993 to 2002, the total energy R&D started to fall down unlike the R&D for renewable energy that in the same period was increasing. The R&D funding below is given in million dollars spent over the years globally. This trend is justified by the fact that in this time period the renewable resources started being considered as the key driver to a sustainable energy future and the interest in this sector arose. Similarly by funding R&D, Greece can manage to optimize its RE products and guide the SET research towards finding new ways of exploiting natural resources in a renewable manner. (Rausser G. et al, 2011);(IEA, 2011)

Figure 34. R&D funding on energy and renewable energy (in million dollars) until 2008 (Rausser G. et al, 2011) Master Thesis Project

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A prerequisite for attaining the objective of increasing the share of RES‐based electricity production in Greece is to research, develop and demonstrate integrated electricity production technologies. The aim of the research is to increase the profitability of investments while maintaining environmental equilibrium by drawing on the country's energy potential. R&D funding for fuel cells could also be helpful in Greece, since the technology there is rather immature and still requires many years to become competitive to the rest developed RETs in Greece (wind and solar energy). Research in this area focuses on dealing with the shortcomings associated with the production, storage and safe use of hydrogen, and on searching for alternative fuels. 5.2.1.3 Financial sources (providing soft loans to entrepreneurs) The search for investment and economic sources in Greece to provide financial support during the commercialisation procedure of renewable technologies is crucial. Ministry of Environment, Energy and Climate Change (MEECC), National Technical University of Athens (NTUA), Centre for RES (CRES) as well as other private companies play a role in providing financial support regarding RE projects in Greece. The Hellenic Government has taken action by passing Laws (Investment Incentive Laws 3908/2011, 3851/2010) and legislations that encourage investments in the field of RE production. Subsidies, FITs, tax relief, carbon taxation and leasing (incl. soft loans) can be used as financial tools for that. (MEECC, 2010) Apart from the FIT system which has been analyzed before other Financing tools include the following: carbon tax, tax relief, subsidies and leasing. The carbon tax can in theory restrict the carbon dioxide emissions in the country to an accepted level in order to minimise as much as possible the use of fossil fuels. However the carbon tax regime turned out to be quite complex to be applied and therefore it does not exist in most EU countries yet, including Greece. Moreover another financial source is the tax relief that is used to include exemption from payment of income tax on pre-tax profits, which result from all enterprises’ activities. Subsidies are also a tool of financial support and represent the payment by the State of a sum of money to cover part of the subsidized expenditure of the investment. Finally leasing procedures can be a financing source, e.g. soft loans given by National Fund for Entrepreneurship and Development (NFED) and the National Bank of Greece (NBG) in order the amount to be covered by a bank loan to be funded by them from credit institutions cooperating with NFED. A good example of policy in terms of financing can be the soft lending or soft financing. Soft loans are loans with a below the market rate of interest, that provide advantages that are not available with other types of loans. Sometimes soft loans provide extra benefits to borrowers such as long repayment periods or interest breaks within this period. Soft loans are usually provided by governments to projects they think are worthwhile, such as RE related works. Along with nations, businesses and even individuals may be able to secure a soft loan. (Dictionary of Business Terms, 2010) Regarding soft Master Thesis Project

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lending for RES in Greece, the loans are managed by the NBG and NFED to be given to entrepreneurs and small or medium enterprises only. The loan for RE projects among others, has been estimated to be from 50000 to 500000 EUR for a period of 5 to 10 years and an annual interest of 3.67% (lower than the common interest of 5% approximately) that is stable during the entire lending period. However such lending measures for fuel cell activities specifically, cannot be considered separately but only in terms of RET loans and this basically in more developed than Greece, countries (Germany or the Netherlands). Fuel cell along with hydrogen technologies’ soft loans can though be applied as a financing policy by the NBG and NFED like it has been done for other RETs, to encourage the technology promotion in the country, reduce its risk, and attract investors from other countries as well. (Vassilakos N.P. et al, 2003); (Hercsuth A., 2009) In order to support the Greek government in RES policy, the Centre for Renewable Energy Sources (CRES) developed certain methodologies for the assessment of renewable energy plants and their economic potential, in terms of the Operational Programme for Energy (OPE). In general there are two ways of providing public subsidies and thus financing aid to RE investment projects in Greece: the “National Development Law” (2004) and the ‘’Operational Programme for Competitiveness (OPC)’’. MEECC has created an Operational Programme for Competitiveness (OPC) that can further provide subsidies to companies that are keen to invest in energy projects and thus encourage them to invest in these technologies. The National Development Law or Law 3299/2004 (see later in Greek legislation part) was an instrument of covering all private investments in Greece, in all sectors. It had a strong regional character, since the level of public support depended strongly on the geographical region, in which the private investment took place. Based on this, regions with high unemployment rates and low incomes received the highest investment subsidies from the State. Furthermore there were many programmes administered primarily by the Ministry of Development/General Secretariat for Research and Technology (GSRT), the Ministry of Agriculture and the Ministry of Environment. GSRT started several R&D and funding related activities, cofinanced by the Greek 2nd CSF (2nd Community Support Framework), including: PAVE (programme supporting the development of industrial research and innovation in Greece), PEPER (programme supporting pilot projects), SYN (programme of R&D financing) and PENED (programme supporting the development of a project research potential). (Vassilakos N.P. et al, 2003); (Oikonomou A.) (Owen A.D., 2006) The RE sector can move from relying on conventional funding systems to project financing, where the banks take the project risk and based on the projected success can repay the amount they borrowed to invest. Financing is also improved if companies can provide a long-term market for their production and through improvements in the policy framework to ensure access to grids and a fixed structure for pricing the RE electricity. (Vassilakos N.P. et al, 2003); (Ernst & Young, 2013) For 2013, it is anticipated that the renewable power sector will seek increased project financing, because of the

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uncertainty for energy policy and global markets, to continue their development and diffusion the next years. (Fulbright N.R. 2012); (Ernst&Young, 2013); (Mintz et al, 2012) 5.2.1.4 Regulation (internalising externalities of conventional electricity production) The introduction and development of a new technology demands a certain regulatory framework by means of supportive policies and regulations that reduce risks and create incentives for investors and entrepreneurs to promote it. The consumer preferences of older over new technologies, form a system within which niche markets cannot expand through learning mechanisms and product improvement and policies cannot match the production with demand. In a climate where there is a lack of information, decision-making practices, public intervention and government activities, there are not the necessary conditions for organising the market and promote RETs. Within the regulatory policy framework, there should be flexibility that makes it easier to implement new technologies with limited risks of ineffectiveness and in terms of certain standards. By setting these standards, governments can give rights to individuals or other groups to fight against polluting carbon-based technologies in case they exceed the standards and do not satisfy the regulations. (Balachandra P. et al, 2006); (Owen A.D., 2006) As an example of successful regulatory policies, there are standards that eliminate the worst practices and products in the market but provide innovation incentives for technical progress. Through regulation procedures as a policy measure, monitoring actions and rules concerning renewable energy can be defined and established by the corresponding legislation. For instance in Greece, no renewable energy obligation is imposed by the Greek legislation (this legislation will be explained later in the section). Only national targets are set, transferring the corresponding targets set by the European Directives into the national legislation. Common examples of regulation include controls on market entries, prices, wages, development approvals, pollution effects, standards of production for certain goods and services and internalising externalities (carbon taxation). (MEECC, 2010);(Brown M.A, 2001); (Hellman H.L., Van den Hoed R., 2006) The external costs of fossil fuels are not reflected in the market cost and the consumers do not pay for these costs so as to compensate the harm causing to the environment. As a result the consumers do not face the real costs of the services they use and do not realise the disadvantages of them, since they only pay attention on the low capital needed. A policy approach that internalises the externalities of electricity production by fossil fuels should be conducted so that it reflects the realhigh costs of conventional resources and help the shift towards new resources with lower external costs. An energy tax to be imposed on the emissions coming out from fossil fuels (carbon taxation) could represent the best solution to show the estimated damages of conventional electricity technology and the potential of RETs. The existence of externalities is actually a market failure, since it prevents the market from exploiting resources efficiently from a social point of view. Master Thesis Project

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The market cost should reflect all (not only economic) but also environmental and social costs affecting the decision models in the electricity sector by trying to provide both low-cost and highreliability. The benefit of this approach is that it can internalise the externalities into the existing systems and integrate them into the planning and operation models of electricity production units by quantifying the external costs in terms of damage caused by each KWh or by each tone of emissions generated and this can be expressed as EUR/KWh of electricity or EUR/tone of pollutants, accordingly. (Painuly J.P., 2000); (Linares P.et al, 2004); (Owen A.D., 2006) 5.2.1.5 Information services The information providers are usually organisations or agencies that have no commercial interest in technologies but their goal is to facilitate the buyers’ and the suppliers’ needs by providing objectives and information including technological options and sources. The information services can include case studies, databases and awareness campaigns/seminars to supply the required informational background to the end-users to know the operation principles, benefits and advantages of renewable technologies. Many countries of Europe have already initiated informative programmes, national plans and strategies to promote renewable energy. The main concern is to educate the stakeholders and supply them with the necessary tools in order to evaluate and design the implementation of renewables and to put targets for product promotion. The strategies to create the appropriate knowledge-building serve as a policy option in which learning is reflected by increasing production volumes, R&D investments in highly promising sectors and research in certain interest fields. For the case of fuel cells, providing information is a critical aspect for the development of the technology, since it is still unknown and immature with many uncertainties that increase the risk of investing. The information around fuel cells can trigger universities and industries to form research groups to solve different problems, barriers and implications around the technology. By increasing the awareness, the participation in EU hydrogen and fuel cell related projects will be encouraged as well, so that it makes fuel cells a fast growing global market in the areas of power production, transport and portable applications. One key assumption often made in perfectly competitive models is that agents have perfect information. If some of the participants in the economy do not have full and complete information in order to make decisions, then the market is distorted. Without information, new firms would not open to force economic profit to zero in the industry and such imperfect information can create a distortion in the market (explained previously). (Suranovic S., 2010) Similarly for fuel cells, information services can contribute to the correct decision making of consumers and entrepreneurs by making them aware of the fuel cell benefits and market potential. In that way markets for fuel cells can be formed without distortions and imperfections, creating so the required conditions for fuel cells’ technological progress and firms’ investments in this field.

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Countries that are more developed in RE and can become the early adopters of fuel cell technologies and will likely influence their technological standards and regulations by promoting information services. Additionally, these can contribute to the commercialisation process and include media, consumer groups, energy service companies etc, that could influence the buyer’s decision by preparing business plans to SET entrepreneurs, bringing potential partners together, educating financers, attracting investors and suggesting investment proposals. In short information providing activities can accelerate and serve as a catalyst for the diffusion of alternative solutions to be integrated in the energy market. (Painuly J.P., 2000); (Balachandra P. et al, 2006); (United Nations Conference on Trade and Development, 2010); (De Jager D., Rathmann M., 2008) ;(Vasudeva G., 2009) As part of knowledge diffusion in Greece, information providing services can also be expressed through conferences devoted to a specific energy topic (e.g. fuel cells) and workshops which can reflect the interest of investors and government. Through such informative procedures, people can learn more about the latest technological developments and observe the progress of renewable energy so as to easier adopt it. 5.2.1.6 Legislation based on EU policies The Renewable Energy Directive 2009/28/EC (‘’The Directive’’) established an EU framework for RE promotion by setting targets for achieving 20% share of RE in the final energy consumption and 10% share in transport by 2020. These targets were incorporated in Article 1 of Law 3851/ 2010 of the Greek legislation. This Directive suggested the simplification of administrative and legislative regimes (including licenses for RE plants’ installation) and improvements to the electricity from RES. Due to the economic crisis though, member states of EU observe declined investments and funding in the sector and further measures needed to be taken under the guidance of EU. Although there was a strong initial start in EU renewables’ growth under the EC Directive, it seems that the economic crisis is now affecting the capital cost of the sector and further efforts by all countries are necessary to fulfill the 2020 targets. To compensate with this, EU has a range of policy measures (including administrative rules) to promote RE. Through the Directive it is suggested to simplify and speed up administrative procedures as well as to reduce the risks for investors and thus the cost of capital. The guidelines also define the responsibilities of legislative bodies, set minimum standards for public participation and licensing procedures that are necessary. The legal framework suggested, includes common approaches, support schemes and cooperation mechanisms for RE projects. The most representative policies that EU applied based on the Directive, are the Framework Programmes. (EC 1, 2013) (MEECC, 2013) The Framework Programmes (FP) started from 1984 with the 1st, continued with 2nd, 3rd, 4th, 5th and then with the 6th FP (2002-2006) that has now been superseded by the 7th FP, for the period 2007 to 2013. They included approaches that have been developed to support even more the ‘’green’’ initiatives as the budgets have been increasing. The Sixth Framework Programme (FP6) was the European Master Thesis Project

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Union’s main instrument for funding the research and was accessible to all public and private sectors. The main goal of FP6 was the creation of a European Research Area (ERA) as a vision for the future research in Europe. FP6 represented the priorities for the European Union’s research, technological development and demonstration activities and contributed to the main functions of ERA that are: Research and innovation, Human resources and mobility, Research infrastructures, Science and society. The framework programmes up until FP6 lasted for 5 years each, but from the FP7 and then, they started to run for seven years including estimation for 8th FP (FP8). Horizon 2020 (FP8) is the last planned financial instrument running from 2014 to 2020 with a

80 billion budget and represents the

EU’s new plan for research and innovation to create new growth and jobs in Europe. Horizon 2020 (FP8) will be complemented by further measures and further develop the European Research Area by 2014. (Cardis, 2012) ;(EC, 2012) The overview of the Framework Programmes (from 1984 to 2020), and their budgets in billion EUR, are shown in the following table. Table 29. The expenses of the European Commission (EC) on Framework programmes (FP) (Cardis, 2012)

Greece as a member state of the EU, has the obligation to harmonize its RE policies according to the 2009/28/EC in order to meet the 2020 targets. Thus the country has made efforts to reform its legislation framework by the adoption of legislative measures and the rearrangement of Ministries and other public bodies. The Greek energy sector is undergoing significant changes under the financial difficulties of the country and strongly efforts to comply with environmental policies at both EU and national level. Therefore legislative and administrative instruments should participate in the establishment of the policy framework that suggests changes in the current energy system for the promotion of renewable energy. In fact a more integrated mix of policy processes, measures and instruments is required to promote innovation in the energy sector of Greece. This mix can include sustainability criteria like a balance between benefits, costs, environmental and social impact of innovative technologies, a risk assessment tool to define the less risky options and to increase the investors’ interest to support them, growing knowledge on which instruments operate properly in the country and also readjustment of laws regarding the energy issues. Greece has formed a National Master Thesis Project

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Renewable Energy Action Plan (NREAP) to set measures for the 2020 targets and to define the RE capacity installed for the development of the sector up to 2030. The next figure shows the projected RE installed capacity in Greece per RES from 2010 to 2020 as estimated by the NREAP to reach the energy consumption targets. (MEECC, 2010); (IEA, 2011)

Figure 35. Estimated required installed capacity from different RET from 2010 to 2020 (MEECC, 2010)

This section sets out the key aims of Greek Renewable Energy legislation and explains the developments that have been of particular significance. The basic law governing RES electricity was Law 2773 of 1999 on the ‘’Liberalisation of the Electricity Market’’ and the legal framework for RES development. According to this Law, the main activities under the general term “Electricity market” are the sale and purchase of electricity and all related commercial activities (such as the generation, transmission, distribution, supply, import and export etc). In order for these activities to be lawfully performed, interested parties must obtain relevant licenses. Within this law, a new license, the so-called electricity generation license, was established which is now the first license required for any electricity-producing station, conventional or RESbased, and included the approval of environmental terms, installation and operation license. The Public Power Corporation (PPC) controlled the entire Greek electricity production, transmission, and distribution. Since the entry into force of the Electricity Market Liberalization Law, 37% of the Greek power market was legally opened to competition. The law enabled the entry of third-parties to compete with the PPC and required that tariffs would cover all costs and provide a reasonable profit. As a result, the generation, distribution, and operations concerning electricity of PPC were changed, and the Hellenic Transmission System Operator (HTSO), was established. Under this Law the Regulatory Authority for Energy (RAE) was established as well, which was the responsible body for consulting the respective Ministry before any license procedure. The independent company named Hellenic Transmission System Operator (HTSO or DESMIE per its Greek initials), was recently Master Thesis Project

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reformed into LAGIE S.A (per its Greek initials) and the responsibilities regarding the operation of the transmission system, formerly carried by HTSO, were passed to ADMIE. The HTSO or DESMIE was a company owned by the Greek State (51%) and by PPC along with the private electricity producers (49%) which was responsible for the development and maintenance of the Transmission System and Distribution Network. With both RAE and HTSO, the Electrical Energy Transaction Code of the Law was formulated to regulate the rules under which agreements between HTSO and producers were made. (MEECC, 2010); (Maroulis G., 2013); (Galani M. et al, 2012); (IEA, 2011) The changes on the grid operating system after the Law of 1999, will be explained further in the stakeholder analysis (operators of the grid). Law 3299/2004 was the ‘’National Development Law or Investment Law’’ that suggested a framework for investments in Greece and public subsidies for RE projects. The Investment Law 3299/2004 gave incentives for investments above 100000

, in all sectors of economy, giving emphasis to the small to

medium-sized companies. The National Development Law provided the following types of aid for investment projects: Free of charge funds from the State to cover part of the cost of an assisted project, Grant of leasing is the partial coverage by the State of paid installments for the acquisition of new machinery and equipment and Tax exemption which included categories of energy projects that could be excluded from tax payments. The law was valid for certain areas of Greece that were dealing with investment projects and therefore Greece was divided into certain ‘’valid for the law’’ land zones for which the law could be applied. On 25 January 2011 the Greek Parliament passed a new investment incentive law as the next of law 3299/ 2004 (Law 3809/2011) to assist private investments and formulate investment schemes to improve business, economic and technological development, business competitiveness and regional cohesion, that will be explained later. (MEECC, 2010) ;(IEA, 2011) Further Law 3389/2005, introduced a new legal framework for the implementation of Public - Private Partnerships (PPP) in Greece. This legal framework aims at regulating the implementation of projects and the supply of services through PPP schemes. Specifically, the law defines the Public Entities that can implement partnership contracts, in areas falling within the scope of their competence. Also two new administrative bodies had been established, in order to improve the preparation and management procedures of new public or private projects. The Inter-Ministerial Committee for Public-Private Partnerships (IM PPP Committee) was a governmental body that defined policy approaches, approved projects that were in accordance with this Law for the creation of infrastructure and the delivery of services by private funds. Also the Special Secretariat for Public-Private Partnerships (PPP Unit) had been established within the Ministry of Economy and Finance to identify energy related projects by supporting IM PPP Committee and Public Entities for the project’s successful finalisation. A Public Entity (Contracting Authority), wishing to implement a PPP project submits a proposal to the PPP Unit, whereby all related technical, financial and legal aspects of the project are outlined. The PPP Unit evaluates this proposal and if the criteria are met, it is included in the "List of Proposed Master Thesis Project

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Partnerships". Finally this Law defined the minimum content of a PPP contract, with a clear description of the rights and obligations of both parties, regulated specific issues, such as financing, participation of public entities in partnerships, the payment mechanism etc. (MEECC, 2010); (Maroulis G., 2013); (Galani M. et al, 2012); (IEA, 2011) An important law in the energy market was Law 3468/2006 ‘’Generation of Electricity using RES and high efficiency cogeneration of electricity and heat and miscellaneous provisions’’ (Official Gazette A’ 129/27.06.2006), to harmonize the Greek legislation with Directive 2001/77/EC of the EU Parliament and Council in terms of the promotion of RES electricity and CHP plants. In order to speed up the licensing procedures and to reform the electric energy production from renewable energy sources, the new law posed a new reality for the electricity production from RES (geothermal sources, wind farms, photovoltaic systems and hydroelectric stations). The new law simplified the licensing procedures and set new financial and administrative incentives for the promotion of RES. Also there were exemptions from the Electricity Generation License (permitted by RAE and the relevant Ministry until then) for certain RETs. However under Law 3468/2006 a further acceleration of the licensing procedure was mandatory for Greece to reach its goals based on 2009/28/EC Directive. Therefore a FIT system for RET and CHP plants, had been introduced within the Law of 2006 (see table below) that was though updated by the FITs of Law 3851/2010 later (see table 27), within which the FITs for almost all types of RETs were increased by 10-15% approximately, in comparison to these of 2006. (MEECC, 2010); (Maroulis G., 2013); (Galani M. et al, 2012); (IEA, 2011) Table 30. 2006 FIT system (in EUR/MWh) for electricity production from RES and CHP systems (CRES 1, 2006)

Law 3851/2010 (Official Gazette A’ 85) included articles aiming at “Accelerating the development of Renewable Energy Sources to deal with climate change and other regulations addressing issues under the authority of the Ministry of Environment, Energy and Climate Change” as a new version of the Master Thesis Project

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previous law of 2006 with a new FIT system for RETs. (Galani M. et al, 2012) Indeed, the Law presented the national targets for RES power production. These targets were (Tsipouri L., 2009): a. 20% RES share to the gross final energy consumption b. RES electricity should contribute to electrical energy consumption to a minimum share of 40% c. RES energy contribution to energy consumption for heating and cooling to 20% d. RES electrical energy contribution to gross electrical energy consumption for transportation to 40% minimum However the still complex licensing procedures had caused long delays in renewable energy projects. It is therefore remarkable that Law 3851/2010 has shortened the licensing process by exempting from electricity generation, installation and operation licenses, a number of RETs, making thus easier the potential investments since investors were not obligated to present specific data to receive license. This law also introduced the most recent FIT system for RETs (as presented previously in Table 27 to revise the FIT system of 2006) which is valid until now (2013). (MEECC, 2010); (Maroulis G., 2013); (Galani M. et al, 2012); (IEA, 2011) Under the Greek electricity sector legislation, the development, construction and operation of any type of renewable energy power plant was governed by numerous and extensive regulations. (Fulbright N.R., 2012);(Ernst&Young, 2013);(Kelemenis&Co, 2013) In 2010 the Regulatory Authority of Energy (RAE) introduced a new criterion to be considered at the Production Licencing stage: Projects must be compatible with the National Renewable Energy Action Plan (NREAP) which aimed at achieving the national targets for the use of energy from renewable sources. (MEECC, 2010) The criterion for the applicant to have the right to use the land, was abolished in August 2011 by Law 4001/2011 ‘’Operation of Electricity and Gas Energy Markets, for Exploration, Production and transmission networks of Hydrocarbons and other provisions’’ (published in the Government Gazette No.179, Part One, 22 August 2011). The new law transferred into national legislation the third Internal Energy Market directives. Among others, it agreed for the reformation of the grid system operators and enhanced the role of the independent regulator regarding security of supply, licensing, monitoring of the market and consumer protection. Overall, the new law improved the legislative framework for the monitoring, control and regulation of electricity and gas sectors. This new piece of legislation also reflected obligations undertaken by the Greek government according to the Memoranda of Understanding signed between Greece, International Monetary Fund (IMF), European Central Bank (ECB) and the European Commission (EC). (Maroulis G., 2013); (Galani M. et al, 2012) The Greek Parliament confirmed on January 25th, 2011 the new Investment Law, which replaced the old legislative framework regarding investments (Law 3299/2004). The new law was published in the Government Gazette on February 1st, 2011 as Law 3809/2011. The new scheme applied to investment projects in all economic sectors with some exemptions. The law had a different philosophy regarding investment projects in comparison to Law 3299/2004. The investment plans based on Law of 2011 Master Thesis Project

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were divided into three major categories: 1)General Entrepreneurship: All kinds of investment plans not falling under one of the following categories or not characterized as “special investment plans”, 2)Technological Improvement: Investment plans regarding acquisition of hi-tech equipment and implementation of new computerized procedures, 3)Regional Sustainability: Investment plans involving production activities that take advantage of specific regional characteristics and meet local needs with environmentally friendly technologies. Under the new Investment Law, the country was divided into 3 zones and enterprises were divided into three categories according to their size (large, medium, small).The percentage of the subsidy for each investment plan depended on the size of the enterprise and the region in which it will be materialized, was fluctuating from 15% to 50% as presented in the next table. (Delloitte Group, 2011) Table 31.The maximum subsidy levels based on the zones of Greece and the size of enterprises (Maroulis G., 2013)

An overview of the above most important Laws of the Greek legislation regarding RES (including additional Laws and actions that were established in between for the promotion of RE in the country), is represented in the below, whereas new legislative changes regarding renewable energy issues, are expected within the next year (2014) in Greece. (MEECC, 2010) As it is understood the Greek legislation had been constantly changing throughout the decade, a trend which continues today since and new imminent law regarding RES, has been submitted to the Parliament in late 2013. The law has not yet passed but a draft has been given for public consultation.

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Table 32. Overview of RE related laws and actions over the years in Greece (MEECC, 2010) Measure in Greece L.2773/1999 ''Liberalization of the electricity market-regulation of energy policy issues&provisions''

Type of measure

Target group

existing/planned

regulatory

investors/ public administration

existing

financial

investors

existing

regulatory/promoting RES

public adm./ companies

existing

regulatory

investors/ public administration

existing

regulatory

investors/ public administration

existing

L. 4001/2011 ''Operation of electricity and gas energy markets for Exploration, Production and transmission networks of Hydrocarbons and other provisions’’

regulatory

public adm./ companies

existing

L. 3809/2011 ''New Investment law''

financial

investors

existing

FIT scheme per KWh of electricity produced by RES (L.2244/1994, 3468/2006, 3851/2010)

financial

investors

existing

regulatory

investors/ public administration

planned

regulatory

public adm.

existing

financial/ promoting RES

investors/ public adm./ endusers/companies/ engineers

L.3299/2004 ''National Development or Investment Law'' L.3389/2005 ''Public Private Partnerships'' L.3468/2006 ''Generation of electricity from RES and through high effciency CHP and miscellaneous provisions'' L 3851/2010 ''Accelarating the development of RES to deal with climate change and other regulations in topics under MEECC''

Coverage of total primary energy consumption with systems based on RES,CHP,district heating and heat pumps for all new buildings by 31.12.2019 and new public buildings by 31.12.2014 (L. 3851/2010) Measures for buildings' energy consumption reduction in the public sector (L.3855/2010) National Strategy4th Framework Program (FP4) a) Exoikonomo, b)Exoikonomo kat'oikon, c) Action green tourism, d) Action green enterprise

existing

financial/promotion RES

investors/ public adm./engineers

completed

OPE-2nd Framework Program (FP2)

financial/promotion RES

investors/ public adm./engineers

completed

Guidelines for licensing of RES based energy on energy mix included in National RE Action Plan (NREAP)

regulatory

investors/ public administration

planned 2010-2020

OPC-3rd Framework Program (FP3)

Since 1999 the series of laws (mentioned above) have been introduced to promote activity in all energy related areas of Greece. More specifically fuel cells have been also an area of interest, but their application in the Greek energy market is yet at a very early stage of development and as part of a decentralized and green way of producing electricity, fuel cells are believed to be integrated in the Master Thesis Project

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system either as electricity production units or as combined heat and power systems for which the current legislative framework could be valid theoretically, but it is still not though. A proposed measure could be the implementation of a legislation that considers fuel cells equally to the rest RETs (wind and solar) and provides the respective laws and FITs by making easier and more competitive the fuel cells’ installation, operation and electricity generation procedure so as to encourage the consumers to use them. Consequently, for the implementation of the RES-EU directive the establishment of national targets and objectives, the involvement in the preparation of National Action Plans, cooperation of actors with national authorities, administrative measures and legislation forming, can all be actions of the government to promote the RET development in regional level (Greece). (Vassilakos N.P. et al, 2003); (Hercsuth A., 2009); (IEA, 2011) 5.2.2 Innovators/ entrepreneurs

Although innovators and entrepreneurs seem to be similar groups, there are some significant differences between them. Entrepreneurs play a vital role in creating new technologies, forming new companies and corporating innovators. Both entrepreneurs and innovators can create new businesses, technology market services, new products by facing many challenges and risks. Also both of them aim at creating meaningful changes and delivering value to customers. The main difference between them is that entrepreneurs are innovators who bet everything on just an idea facing greater risks and thus cannot afford to spend much time evaluating a range of options. Innovators on the other hand need opportunities and have more time and control over their work. (Start up Greece, 2012) Therefore organizations related to RE should start corporating innovators and entrepreneurs and be clear on how much innovation they expect from them and what they can fund. Especially in Greece, where RE is not at such a high level compared to other EU countries, organizations should encourage competition between good ideas (e.g. innovative ideas regarding fuel cells) and promote them in the country. (Phillips J., 2013) Furthermore the entrepreneurs with the support of government and financial institutions can help the market of RE by selling energy services that can lead to the good understanding of consumer needs and environment so as to shift to more sustainable options in Greece. We could highlight here the techno-entrepreneurs as a separate group that is dealing with small scale businesses, products and services and is concerned about both the environmental effects and their own benefits from RETs. When this group of entrepreneurs becomes an active adopter of new sustainable technologies, then their market penetration will be much faster. Apart from changes in the ways of investing and subsidising, entrepreneurs can be considered as the diffusion targets instead of the endusers so that the RET commercialisation procedure is oriented to the entrepreneurs’ benefits more. Since most of them do not yet see RETs as attractive solutions in Greece, there should be a climate where they play a role in creating business plans through which, all actors (namely consumers, governments and private enterprises) can win and there can be economic and social development by

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expanding the business opportunities in Greece. (Balachandra P. et al, 2006); (Hall J., Kerr R., 2002); (Painuly J.P., 2000) Entrepreneurs are crucial for a well-functioning innovation system. Their role should be to turn the potential of new knowledge development, networks and markets into concrete action to generate and take advantage of business opportunities. They can be new entrants in the market or incumbent companies who diversify their business strategy to take advantage of the new technology. (Hekkert et al, 2006) Moreover as mentioned again in the report, entrepreneurial activities are often supported through soft loans provided to entrepreneurs. For instance in Greece an Action in terms of a soft loan started in 2011 for green infrastructures and RES was co-funded by ETEAS S.A. (Hellenic Fund for Entrepreneurship and Development) and the National Bank of Greece. Therefore the Fund and Banks involved should invest and co-finance the establishment of RETs and also fuel cells, as one of them, by providing loans with favourable terms to the entrepreneurial sector to help the promotion of RE. (Start up Greece, 2012) 5.2.2.1 R&D from the perspective of firms (innovation by firms/industries) Sustainable energy technologies, with fuel cells being one of them, represent an innovation in the energy market which is usually not supply but demand driven. The innovation sources may include relationships between users, suppliers and manufacturers. The innovation firms firstly can be distinguished in firms related to the fabrication and assembly production, specialized suppliers, science based firms related to the R&D activities and the common producers that provide products related to the energy market. Also for the case of Greece, Hellenic Universities, CRES as well as private corporations can be considered as entrepreneurs in the energy sector that can contribute to knowledge development by financing R&D projects and producing tools and patents of RE. The profits (monetary or not) gained by such Greek institutions can lead to further investments and funds in R&D. In terms of fuel cells, there are many fields where R&D is necessary such as applications, costs, installation, O&M and most importantly generation and storage of hydrogen (used as fuel). All these can be subjects of learning for the fuel cell technology and so measures that promote R&D in the entrepreneurial fuel cell sector of Greece are demanded. (IEA, 2011) Also innovation firms are participating in many stages of the commercialisation chain of new products and the existence of them can definitely have an impact on the rate of development. Moreover firms can enter in some cases the market by using their engineering expertise and financial sources to sell the product. Engineers and scientists can affect the innovation procedure and use their sources of engineering and scientific knowledge to suggest potential product designs and properties to provide the required knowledge background about RETs in Greece to the consumers that lack to it. (Balachandra P. et al, 2006); (Laursen K., Salter A., 2005)

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In general the innovation firms are factors that through innovative policies trigger the sustainable solutions in the existing energy market and can often invest considerable amounts of time, money and other resources in the R&D for new innovative opportunities. Such investment increases the ability to create, use, and recombine new with already existing knowledge or else new sustainable with existing conventional technologies. The involvement of industries in producing and supplying the necessary sources for the application of new technologies, is necessary to accelerate the technological process. These industries are the stakeholders that mainly participate in the infrastructure and construction phase to facilitate the entry of new systems. (Balachandra P. et al, 2006); (Laursen K., Salter A., 2005) In the case of fuel cell vehicles, the automotive industries could participate in the diffusion of fuel cells and be capable of supplying gas services and providing the necessary tools to enable the technology implementation in the transport sector. Automakers are also related to fuel cell manufacturing companies to create the most cost and performance competitive vehicles running on hydrogen that suggest a major innovation for automakers. The correct strategies between firms and industries should take place to define the appropriate manufacturing of automobiles and support the transition from internal combustion engine to fuel cell based vehicles. Adopting the fuel cell technology can also allow automakers to meet the zero emission standards and increase the public interest and environmental concerns in sustainable solutions. Consequently, notwithstanding the fact that firms and innovators/entrepreneurs tend to pose opposition to innovative technologies and to focus on the older system, they can all certainly promote radical technologies (fuel cells) and their involvement in the commercialization process is vital, especially in Greece, where energy issues are mostly relying on governmental policy rather than on firms and companies. (Balachandra P. et al, 2006); (Hall J., Kerr R., 2002) 5.2.2.2 Public-Private Partnerships (PPP) As mentioned in the Greek legislation part, Law 3389/2005 established a legal framework for the implementation of Public-Private Partnerships (PPP) in Greece. This framework promoted sustainable energy projects, implemented privately funded projects and helped overcoming the insufficient preparation and the unsure estimation of the project feasibility. Specifically the law defined the Public Entities (Central Administration, local governmental organizations, legal entities etc.) that could implement partnership contracts with Private Entities, in the field of energy. It provided incentives for both public and private entities to be engaged in partnerships for constructing infrastructure or delivering services regarding RE and defined the obligations and financing responsibilities of both parties. Partnerships in terms of sustainable energy projects under the Law 3389/2005 (mentioned in the previous section) had to meet though the following requirements: construction and supply of energy services, contract between the participants, minimization of risks associated with the financing of Master Thesis Project

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projects, estimation of the cost and budget for management of partnership projects. The Partnership Contracts or agreements shall generally include clear and detailed descriptions of the obligations of the Parties, specifications of the services provided, costs paid by consumers for the services, regulation of the performance of the services, time-schedule for the completion of the project etc. After all, the Inter-Ministerial Committee for Public-Private Partnerships (IM PPP) should either approve or reject a possible partnership, coordinate and monitor all contract procedures and define according to the respective Laws the best conditions for the RET implementation. Among EU countries, Greece has one of the lowest rates of private‐sector participation in R&D activities may be due to the general characteristics of the Greek economy, namely the prevalence of small enterprises; traditional activity sectors and very low potential in sectors generating technological innovation. A representative example case of public-private partnership in Greece that has been proven successful and effective for RE promotion, is the ESCO (Energy Service Company) concept. ESCO represents project developers with many responsibilities: they identify, design, and finance the project, install and maintain all or most of the equipment, measure the project’s energy performance and estimate the risk that the project will have in order to inform investors. Depending on the nature of the project, the repayment of the project can be done in two ways: proportionally to the energy savings achieved from the project or by selling the energy to the utility operator. (Vassilakos N.P. et al, 2003); (Ernst & Young, 2013) To help increase private‐sector participation and promote public-private partnerships so as to contribute to RE and fuel cells development, the R&D strategy in Greece for 2007–2013 prioritises the following (IEA, 2011):  Support of actions that contribute to the conversion of knowledge to innovative products, processes and services, the creation of innovative enterprises, the support of technology, transfer to enterprises in their production processes and final products and closing the gap between technological knowledge and the market. 

Promotion of research, development and innovation (RD&I) and partnerships in areas of

national priority, concerning renewable sources and energy savings.  Introduction of the Technological Platform on Energy. The Technological Platform was established in the context of the Regional Pole of Innovation of Western Macedonia (RPIWM) in the north part of Greece. It is a union of institutions from the private and public sectors that aims at creating an environment of innovation and regional awareness in western Macedonia in the main axis of energy and increasing competitiveness of the regional economy with the development of environmentally friendly and economically feasible technologies. Particularly for the fuel cell technology, partnerships could be proven very important. The partnerships with small and large firms can overcome many difficulties of the fuel cell systems and Master Thesis Project

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promote hydrogen based technologies. A range of national laboratories and public sector research institutions can collaborate with the private sector to achieve better results in the fuel cell industry that is still very immature in the country. Various organizations involved in the fuel cell commercialisation procedure can develop testing projects to establish a hydrogen infrastructure that supports the fuel cell introduction in the energy market. Moreover universities of Greece and local energy related industries in coordination with foreign firms can contribute to meet the global energy goals by means of hydrogen use. Finally, partnerships may be formed between the government and private actors as a way to implement larger scale projects. It can be argued that PPPs present financial advantages in the production and delivery of goods, in the development of entrepreneurship and, finally, positive effects to the national/local economy and society. In general collaborative agreements among private, public or foreign actors can coordinate the activities and evenly distribute the roles and responsibilities across members and definitely serve as a tool to accelerate the diffusion of new technologies in Greece. (Hercsuth A., 2009);(Ministry of Economy and Finance, 2006); (Balachandra P. et al, 2006); (Karaiskou E., 2007) 5.2.2.3 Financing groups Financing groups (international and regional financial institutions and other relevant stakeholders, including banks, companies, individuals or corporations to assess financing needs, consider the effectiveness, and synergies of existing instruments and frameworks and evaluate additional initiatives, with a view to proposing options on an effective sustainable development financing strategy) have to get involved by providing funding to R&D programmes and scientific research that are factors contributing to technological advances. Usually most consulting or energy oriented companies include investment or financing teams that could serve as groups for deploying capital in the alternative energy sector through a broad range of financing solutions. These groups are committed to the continuous development of the energy sector, from unconventional oil and gas to the increasingly significant renewable energy sector. Financing groups should identify the attractive opportunities with high potential in the energy market (fuel cells) and invest in them to make them cost competitive. Therefore the financing groups should develop factors that influence the dominant design and performance of sustainable products and aim at their commercialisation all over the country. The financiers can force entrepreneurs to invest in renewables and they can include commercial banks, financial institutions and individual investors. The financing groups also provide funding mechanisms that affect the investments in RETs in order to achieve attractive returns (high IRR and short payback times), increase market stability and support the diffusion of renewables. The financing groups/investors need to be convinced that risks have been anticipated, realistic business and marketing strategies have been devised and management possesses the experience to execute its business plan. Providing a high level of comfort is critical with renewable Master Thesis Project

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energy projects because the perceived risks have historically discouraged investors. Awareness by financiers of up-front capital costs, operating costs, technical performance, and equipment life expectancy are essential in accurately characterizing a project. Unless investors are comfortable with the particular technology they are financing, they will be unlikely to risk their capital for renewable energy projects. In designing the financial support schemes, all market actors should be involved, like investment funds and banks and other financial associations to provide feedback on the risk of investing in innovative technologies. Nonetheless, keeping the financing of the support scheme outside the government budget is recommended, especially when a country has economic issues, like Greece. (Balachandra P. et al, 2006);(Hall J., Kerr R., 2002) 5.2.3 Operators of the grid

In order to comply with the EU directives and after Law 2733/1999 ‘’Liberalization of the Electricity Market’’, Greece was obliged to start making changes periodically in its legislative and administrative system. These changes were applied though after a long period, namely within 2011-2012. After these changes, some of the stakeholders and institutions responsible for the implementation of RES as well as operators of the grid have been reformed and a new liberization market structure was established. The following paragraphs explain the changes that formed this new structure of the operators of the grid and their main role in the RE promotion respectively. 5.2.3.1 Regulatory Authority for Energy (RAE) RAE started in 2000 as a regulator for energy institutions in Greece, as Law 2733/1999 defined. It had the role of supervising and monitoring all energy sectors, and procedures concerning license issuance. RAE was established on the basis of the provisions of L. 2773/1999, which was issued within the framework of the harmonization of the Hellenic Law to the provisions of Directive 96/92/EC for the liberalization of the electricity market. The main tasks of RAE are: monitoring the operation of all sectors of the energy market (Electricity, Natural Gas, Oil Products, Renewable Energy Sources, Cogeneration of Electricity and Heat etc.), collection and processing of information from companies in the energy sector while respecting the principles of confidentiality, participation in the preparliamentary legislative process through recommendation to the Minister of Development of the appropriate measures related to compliance with competition rules and to the overall protection of the consumers in the energy market. (RAE, 2013) 5.2.3.2 Hellenic Transmission System Operator (HTSO or DESMIE per its Greek initials)

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In Greece Law 2773/99 constituted the basic legal background. After the Law two companies, the Regulatory Authority of Energy (RAE) as well as HTSO (DESMIE) S.A. (or the so-called “Hellenic Transmission System Operator” or even simpler ”Operator”) were created at the time. HTSO was the company that handled the Hellenic Transmission System of Electric Energy in 1999 and up until 2012 DESMIE was a company with a double role. Firstly it overtook the responsibilities of P.P.C. with respect to the Transmission System, ensuring the existence of a balance between production and consumption by providing electric energy in a reliable, safe and in terms of quality acceptable way. Secondly was obligated to act like an energy stock market that arranged on a daily basis, economic transactions. DESMIE’s previous obligations were later undertaken in 2012 by Hellenic Electricity Market Operator (LAGIE), Hellenic Electricity Distribution Network Operator (DEDDIE) and the Independent Power Transmission Operator (IPTO or ADMIE) and since then DESMIE does not exist as an individual company. (Econews, 2012); (DESMIE, 2013) 5.2.3.2.1 Hellenic Electricity Market Operator (LAGIE per its Greek initials) In 2012 after the new legislative framework, part of DESMIE was reformed into LAGIE by Law 4001/ 2011, whereas some activities (defined by Art. 99/Law 4001/ 2011) have been given to IPTO S.A. or ADMIE and HEDNO or DEDDIE. LAGIE now is responsible for the rules concerning the electricity market and the daily energy planning, where a system marginal price for which electricity is sold, is given. In general LAGIE deals with the financial side of the Hellenic Energy Market and the purchase of produced energy. (LAGIE, 2013) 5.2.3.2.2 Hellenic Electricity Distribution Network Operator (HEDNO or DEDDIE per its Greek initials) HEDNO or DEDDIE was formed in 2012 according to Law 4001/2011 by the separation of the Distribution Department from PPC and in compliance to EU Directive 2009/72/EC. This company is a full subsidiary of PPC S.A. and is responsible for the operation, maintenance and development of the power distribution network of Greece (medium/low voltage lines) but is also independent in operation and management. It deals also with connections of RES system to the medium or low voltage grid and with providing reliable power to the customers. (HEDNO, 2013) 5.2.3.2.3 Independent Power Transmission Operator (IPTO or ADMIE per its Greek initials) IPTO or ADMIE was formed in 2012 by Law 4001/ 2011 to harmonize the Greek legislation with the EU Directive 2009/72/EC. It has obtained part of the responsibilities of the previous Transmission System Operator (HTSO) for the system’s operation, maintenance and development as well as for the cooperation with other operators. Although a wholly owned subsidiary of PPC S.A., ADMIE is entirely independent from its parent company in terms of its management and operation, effective

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decision-making rights, in compliance with all relevant independence requirements of Law 4001/2011 and Directive 2009/72/EC. (ADMIE, 2013) 5.2.3.3 Public Power Corporation (PPC) PPC was the only energy providing company until 1999 in Greece. Currently PPC remains the country’s biggest electricity producer and supplier, but after legislative changes its obligations have been changed when PPC was divided into subsidiaries-companies so as to turn from the monopolistic energy market to the liberization of energy market, where individuals/ energy companies can participate in the purchase and sale of electricity. Since the deregulation of the Greek energy market in 2001, PPC gave power generation licenses to independent companies and private bodies. The parts of PPC concerning power generation (Producer) and power supply (Supplier) have become operationally independent and a new organisation was formed from July 1st 2007, responsible for the Operation of Transmission and Distribution Networks (HTDSO) in mainland and all interconnected islands. PPC was the previous owner and operator of the Transmission and Distribution system, for which now ADMIE and DEDDIE are responsible, respectively. PPC can still though undertake and subsidise significant RE projects and owns almost 93% of power capacity in Greece, generated by lignite, fuel oil, hydroelectric sources. (PPC S.A., 2013) The following figures represent the reformation of the grid operators in Greece before and after the Law of 1999, respectively so as to be in compliance with the EU 2020 energy targets. The graph shows the hierarchy of the new operators of the grid that were explained above. It is important to mention before, that the Greek Power System includes: the Transmission System which contains the Interconnected Transmission Network (400kV, 150kV) covering the mainland and all interconnected islands and the Distribution Network which contains all distribution networks (15kV, 20kV, 400V), sub-transmission network (150kV) in Athens, Transmission Networks (150 kV) in the noninterconnected islands. (Dialynas E., 2007)

Figure 36. Pre-liberisation market structure based on PPC (before L. 2733/99) Master Thesis Project

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Figure 37. After liberisation market structure for the grid operating system (after L. 2733/99)

5.2.4 Consumers

The degree to which consumers accept a new technology e.g. fuel cells is critical and can define the supporting infrastructure required to produce the final product. For societal, behavioral and cultural reasons, the consumers can trigger the introduction of new markets and either help or hinder their further promotion. Since it is difficult to make the end users change from a system they are used towards a radically new one, they remain locked-in to technologies they already know (fossil fuels) and with their preferences can hinder the entry and diffusion of innovative options. (Hall J., Kerr R., 2002); (Balachandra P. et al, 2006) The consumers thus are important stakeholders participating in the policy framework for renewable diffusion, since they are the ones that contribute most to the decision-making process. Overall, consumers have a high degree of awareness and concern for renewable energy, but few are aware of their purchase options or follow through on their stated concern. Bills are the main tool for individual consumers to assess how much energy they consume and how much they have to pay for it. Therefore, new policies that minimize the energy bills by using RES, could persuade consumers to adopt them in their everyday life (see net metering discussed previously). These new devices have the potential to deliver exciting new and valuable societal, health and environmental benefits, such as enabling consumer to better manage their energy usage, reduce their carbon or receive bills based on actual consumption. These benefits may be delivered if implementation measures are designed in the

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right way and take into account consumer needs. Consumers can hence become more active players in the market. The most effective way for consumers to lower their energy bills is to reduce their energy consumption. The EU is strengthening its work in the energy efficiency area with consumer interests in mind. With access to energy efficient products and services and related funding mechanisms including for energy efficient refurbishment of existing buildings, the right information and/or through changes in behaviour, consumers can significantly improve their energy efficiency. There are a number of EU measures and programmes in place to help consumers to this end. These actions are designed to give support to citizens and improve energy efficiency and reduce greenhouse gas emissions. Unfortunately it has been observed that EU consumers are not well aware of many aspects of the market, such as their consumption, alternative tariffs and suppliers, contract terms, consumer rights, and consumer protection bodies. Hence, consumers should be provided with more suitable information that allows them to actively participate in the market. There are many EU campaigns and actions aiming at informing the end-users about RE and increasing their awareness, such as the Intelligent Energy Europe Programme (IEE) that supports numerous actions to inform and educate consumers, helping them reduce their energy use, DOLCETA that is an online consumer education project involving 27 countries of the EU, financed by the European Commission etc. In general in order to enhance the consumer benefits of EU energy policy further, the following areas could be considered for further action: implementation of the internal market legislation, protecting customers (investments and consumer incentives to reduce energy consumption that they may have), subsidies to vulnerable customer groups to investments to improve energy efficiency and guidelines for services to increase the awareness of consumers about RES. (EC, 2010); (Hall J., Kerr R., 2002); (Balachandra P. et al, 2006) When it comes to fuel cells, that are rather immature still in Greece, users can play a role in the commercialisation by encouraging sustainable ways of driving, like cars using hydrogen as a fuel by means of a fuel cell. Also they are responsible for testing the final products and comparing them to similar competitive products or conventional technologies to see their performance and efficiency. Therefore they can estimate the cost and performance of new technologies and by being well-informed and aware of the high external costs of conventional electricity producing methods, they can promote RETs that are linked with lower social and environmental challenges. Through these activities, people can overcome the fear and uncertainty linked with dangerous aspects of hydrogen and fuel cell technologies, decrease the high risk of investing in these innovative solutions and thus accelerate their diffusion and adoption as well as overcoming the Not In My Back Yard (NIMBY) syndrome that is a major reason for the consumer’s hesitation to RE. Also the effectiveness of public sector programmes, R&D facilities and training activities can influence the decisions of consumers and affect them in terms of knowledge, skills and techniques to be ready and qualified to accept new entries in the energy

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market and take the right decisions. (Painuly J.P., 2000); (Balachandra P. et al, 2006); (Frankfurt School et al, 2012) 5.3

Conclusions on policy analysis

New technologies will have to be adopted by the society and be integrated in the energy system so that they replace the old technologies or work supplementary to them. By implementing measures like funding activities, R&D programmes, information services, creating markets, institutional and administrative changes as well as triggering stakeholders and actors, we could promote the shift from a fossil fuel to a RES based environment. The general conclusion on policy in Greece is that the government, entrepreneurs as well as, companies and consumers should show great interest in RE despite the economic problems to overcome the strongest barrier to the RE commercialization (the high capital costs in combination with the missing supportive legislation of Greece for RETs). The location of the country, the legislative measures (including Laws for RE) based on EU regulations, the increased investments and the FIT system, could create conditions conducive to the promotion of fuel cells in Greece. Nevertheless the missing infrastructure required for the technology (which can be translated into high costs that the government, firms or consumers will have to pay), the high prices and the still high uncertainty degree over fuel cells, as well as the missing subsidies or FITs and legislation framework pose a threat to the further promotion of the technology in the country unlike other EU countries. In general since legislation plays a very important role in the promotion of RES in Greece, the government should also take the necessary measures to contribute to this. In general it must strengthen the co‐ordination of policy planning, implementation, monitoring and verification across ministries and agencies in support of the National Energy Efficiency Action Plan, develop and apply energy efficiency legislation that creates enabling mechanisms with a focus on policy implementation, accelerate programme implementation, prioritise policies with high energy savings potential and cost‐effectiveness, encourage energy service companies to offer energy management services to consumers, encourage the use of public transport and low‐emission vehicles (fuel cell vehicles could be promoted here) through market‐ based mechanisms. (IEA, 2011) The following table presents a summary of all the above discussed policies and measures (per stakeholder group) that can facilitate renewable energy development in Greece.

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Table 33. Summary of policies-measures in Greece for the promotion of renewable and fuel cell development Policies-measures/stakeholder for RE and fuel cell promotion in Greece

Government Creating guaranteed markets through FIT and net metering system Funding R&D Financial sources (soft loans to entrepreneurs) Regulation (Internalising externalities-carbon taxation) Information services Legislation based on EU policies

Innovators/entrepreneurs R&D in firms (innovation by firms and industries) Public-Private Partnerships (PPP) Financing groups

Government stakeholders Centre for Renewable Energy Sources (CRES) General Secretariat for Research and Technology (GSRT) Ministry for Energy, Environment and Climate Change (MEECC)

Operators-regulators of the grid Regulatory Authority for Energy (RAE) LAGIE ADMIE DEDDIE Public Power Corporation (PPC)

Consumers Testing final products and supporting RE products Being well informed and aware of fossil fuel externalities Participating in R&D programmes and RE promoting activities Overcoming uncertainty and NIMBY

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PART D: Findings & Conclusions

PART D: Findings & Conclusions

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6

Overall Conclusions and Suggestions

Overall Conclusions and Suggestions

This Thesis project presented an analysis of the main economic associated barriers to renewable energy development and the respective policies to overcome them. The analysis started on a more general basis for renewable energy sources and was next narrowed down to a case study for fuel cell technology which meets a lot of limitations during its development path. Where market imperfections are identified and producers face limited access to market-based financing, access to more affordable investment capital for RES and fuel cell development should be facilitated with mechanisms available under climate policy, investing and innovative financial instruments. The overall conclusion is that there should be guidance in EU to show the ways that allow cost efficient and effective deployment of renewables to achieve faster market integration and innovation by lowering their costs and supporting the technology maturity. Also the tools provided by the EU Renewable Energy Directives regarding cooperation mechanisms and their contribution to renewable development as well as the EU guidelines should give priority and take full advantage of the fuel cell potential through better information, financing procedures and legislation frameworks, on which EU countries will have to comply. In ensuring that RES become fully competitive, national support schemes must be able to facilitate changes in the respective markets and must be adapted accordingly, in order to pass on cost-efficiency gains to final consumers without sacrificing any performance. In the next sections the policy conclusions for both Europe and Greece as well as proposals for future work, will be summarised. 6.1

General conclusions for Europe

In Europe where the RES potential is high, the most important measures to promote renewable energy are policy approaches aiming at changes in institutional, technological, political and legislative level as well as in private and public instruments. Furthermore by improving our understanding of RET obstacles it may be possible to design more effective policy interventions in order to facilitate the success of renewable energy production methods and their adoption by European societies. The depth of policies must reflect the wide ranging diversity of barriers and country specific market conditions. Consideration should be given to ways that aim at strengthening the potential of RET and offering a secure operation in terms of the grid infrastructure. More intelligent metering systems (net metering) can be suggested so as to allow the involvement of more market players in the energy market based on the existing legislation and national support schemes. (Brown M.A., 2001) Also the European legislative framework concerning the CO2 emissions sometimes tends to negatively affect countries with less potential for harmful emissions, since it encourages there the installation of facilities responsible for them. For instance a research for Climate Change conducted by the University of Gratz (Austria) has shown that if a particular country imposes strict CO2 regulations on industries, these activities are mostly transferred to other countries more ‘’tolerant’’ with the CO2 limits, so as not to be charged for Master Thesis Project

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the excessive carbon amount they produce. Through this measure, the CO2 emissions can be decreased in some EU countries while being increased in some others, without resulting thus in a decreased total of emissions in the European Union as a whole. It is urgent for EU to take such consequences into account before applying measures or legislative changes so as to be capable of exploiting only the benefits of renewables by leading to smaller carbon footprint. (Painuly J.P., 2000); (Council of the EU, 2012) The EU's energy policy must ensure security of supply for households and companies at affordable and competitive costs, in a safe and sustainable way and comply with the 2020 and 2050 energy and low carbon policy perspectives. Any future European policy framework must provide clear targets encouraged by clear economic support to promote RET and most importantly fuel cells that still are one step behind in terms of promoting mechanisms. Europeans will have to prove that a low carbon strategy is technologically and economically feasible even under present-day conditions. (Council of the EU, 2012) As a general conclusion it might be said that EU has shown important initiatives concerning RE and this is why the worldwide interest has lately been turned into investments in this region. However our case study has shown that some EU countries are starting already to pause investments in RET something that makes the society reluctant to adopt them. For instance it has been observed that the subsidies by the German government for RE installations will charge the consumers with extra taxes from 2013 and this is the reason that Berlin decided to stop for a while funding such activities. The same policy started being followed by other countries as well, making the promotion of renewables even more challenging every year. As a result, consumers need to be made more aware of the economic, social, environmental and technological aspects resulting from RET and fuel cells, while public acceptance issues, as well as affordability of costs need to be addressed by using the correct social policy instruments. In relation to consumer awareness, empowering end-users and offering of clarifications by the European Commission in order to achieve the accurate and complete information on RES (including fuel cells) consumption within EU Member States is required. (Council of the EU, 2012) 6.2 General conclusions for Greece

Energy policy in Greece has the potential to make a significant contribution to the country‟s economic recovery. Increasing competition and reducing the role of the State in the energy sector should add efficiency and dynamism to the Greek economy. This, in turn, should generate self‐sustained employment and prosperity for the country. Among the key pieces of legislation that the EU Member States have adopted in recent years are the third Internal Energy Market Directives which oblige the Member States (among which Greece) to further liberalise their electricity and natural gas markets. The 2020 renewable energy target, the Emissions Trading System (EU‐ETS) and the EU air quality standards are pushing Greece to decarbonise its lignite‐dominated electricity sector and shift to other Master Thesis Project

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electricity producing ways that are more sustainable. More precisely, in Greece the overall energy production by RES has been increased by 24,3% since 2011, something that equals 2.53 GWh (according to Hellastat-a Greek consulting company providing statistical and financial information on many different systems) which is already more than the 20% target of Kyoto protocol. Moreover Hellastat noted that the installed energy from RE systems has been significantly increased in 2011 having reached more than 2500MWh, equal to an increase of 44% comparatively to that of 2010. Despite this substantial increase of RES penetration in the energy market of Greece, certain renewable energy technologies have been completely overlooked and not considered in almost any applications except from few experimental implementations. Fuel cells consist of such a technology since up until 2013 fuel cells in Greece have not been used in the domestic, energy production and transport sector. (IEA, 2011) During this Thesis, the reason for this lack of fuel cell implementation was researched. An effort was made to understand which of the general barriers regarding fuel cell deployment could be also applicable to Greece (by comparing it to other EU countries) and which policies are necessary to take place. The barriers were analysed from an economic point of view or based on the resulting economic impact. More certainly during this Thesis it was claimed that all barriers could be translated into cost hurdles. From the analysis performed it was identified by using certain computations that the predominant barrier regarding the fuel cells is the very high costs and slow rate of return and long payback ratio. Although social, institutional and legislative barriers were also important, the fact that the average payback ratio for a fuel cell investment was close to 10 years (when considering stationary applications) deemed such investments as not interesting to begin with. Based on the above an effort was conducted to identify the required policy measures for Greece. The analysis was done on a stakeholder basis. In order to overcome these cost related barriers and succeed in the goal of rendering fuel cells as more economically attractive and viable energy producing solutions, it was identified that the government should proceed to institutional, legislative changes based on the EU Directives. The most important measure that should be adopted was the reforming of the current legislation framework for RES in order to include specific regulations for the promotion of fuel cells in the country such as the issuing of FIT prices which could substantially reduce the overall costs of energy production via this technology. Furthermore other proposed actions for the governmental bodies can be funding R&D, allowing net metering in the country, forming regulations that internalise the external costs of fossil fuels and providing information services to increase public awareness that is currently totally missing in Greece regarding the use of fuel cell technology. Apart from the government actions it was observed through the thesis that also external bodies affect the overall policy-making and hence above actions. Such bodies can be innovators, regulators of the grid and consumers that in their turn affect fuel cell progress each in a different way. Innovators and entrepreneurs can facilitate fuel cell development through supporting R&D projects, public-private partnerships and encouraging other financing groups in related investments. The operators of the grid complying with the according legislation also have undergone structural changes and by being divided Master Thesis Project

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in different bodies, each one of them has a different goal in applying policy-making related to energy issues. Finally consumers also participate in the technology promotion procedure despite not being able to apply policy making, by being offered information services and be more aware of fuel cell benefits to easier integrate them in their life. Based on the above the author believes that by following these policies fuel cells can penetrate the Greek energy market in a timespan determined by the rate of progress of these reforms and could in the future allow for the further successful adoption of this technology by Greek consumers. As a result, the proposal of policy frameworks could play a very significant role in overcoming the debt crisis and economic barriers through the attraction of foreign investors and growth of the existing Hellenic Technical Companies. Recognising the need for investments and technological innovation, existing instruments need to be made more effective and the SET plans should be developed to continue to boost new and emerging key renewable energy technologies such as fuel cells. (IEA, 2011) 6.3

Reflection of the Thesis

6.3.1 Strong points of the project

The Thesis project outlines, with examples of countries, the criteria and conditions which might be applied into policy evaluation related to sustainable energy. With a view to preparing the basis for a post-2020 perspective for renewable energy sources, suitable options have to maintain a policy framework that will continue to be supportive for RES and address limitations and inadequacies whilst considering all the objectives of EU energy policy and aiming at social welfare. (Doris E. et al, 2009); (Council of the EU, 2012) ;(EUFORES, 2011) This Thesis showed that in order for fuel cells to provide an attractive proposition for various applications, there needs firstly to be a more complete assessment and understanding of their attainable benefits (environmentally, socially and economically) and of the barriers so as to address how important the policy contribution can be. The whole idea will hopefully be a breakthrough for Greece and serve as a ‘model’ project for future research on alternative technological possibilities that can make a significant contribution to the country’s economic recovery, which will generate self–sustained employment and prosperity. (IEA, 2011); (Mathiyazhagan K. et al, 2012) From a more general perspective, through the project, it was possible to gain knowledge that could not be obtained before, concerning the energy market in Europe (and Greece), the different fuel cell applications in the countries and the importance of energy policies. It was not known from the start that there are so many different barriers inhibiting the development of fuel cells and according legislative frameworks in the EU that affect the energy status of fuel cells and thus it was important to observe them through the Thesis. Searching for studies and literature related to the topic, was a very useful learning process through which much information and experience were gained. The stages Master Thesis Project

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followed during the writing of the report were: first to recognise information and ideas from literature, translate and comprehend them in order to select and use only the necessary data in the project, integrate and combine the data in the report and finally judge the results and recommend further improvements and suggestions. Another important element viewed as strength of the project, after the completion of the Thesis was the acquired techno-economic knowledge regarding the assessment of this technology’s parameters, which affect the viability of a relevant investment, via the use of according calculations and software packages. Also conducting a literature study shows how our project can fit into the existing literature and add to the current knowledge base by either extending or building upon previous research. Finally the most significant contribution of this Thesis to the author was the change of perspective and opportunity to realise that the establishment of a RET is a much more complex endeavour which does not strictly rely on the technology itself. Deviating from examining a technology just from a technical scope (being a Mechanical Engineer), the project has given a chance to discover real life obstacles related to fuel cells, which if are to be overcome, require much more than a sound engineering background. This is a fact that not often is realised since studies tend to be more theory oriented and usually do not include important economic and social aspects which in the end may define the future viability of a technology. 6.3.2 Limitations and weaknesses of the project

It is important to highlight the limitations and difficulties as well as mistakes encountered during the implementation of the research project, and to suggest solutions of how to improve the study. It is important to remember at this stage that all research suffers from limitations but acknowledging them should not be viewed as a weakness but as an experience through which we learn what to change later on. Firstly the fuel cell technology itself is immature in respect to other RET. This creates a lack of information, literature and data to conduct a real comprehensive analysis. This was a major limitation during the writing of the report, since many assumptions had to be considered in order to apply a more computational analysis around fuel cells. Specifically for the case of Greece, fuel cell technology has not been yet introduced. Due to this fact economic data could not be retrieved and since no manufacturers, suppliers and industries are still active in the country, no according interviews could be performed in order to validate the assumptions of this thesis. This could be a task for future research though. In a particular chapter of the Thesis Report, a quantitative research for the economic viability of a stationary energy producing fuel cell system was performed (via RETcreen software), where the lack of such relevant information was an obvious limitation due to the fact that it forced the author to use a number of assumptions based on estimated economic data obtained by international literature. Thus Master Thesis Project

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there are possible biases and errors produced in the results. In fact reference materials as a collection of information, were not sufficient for fuel cells if we keep into account that they represent a rather new technology, not widely applied and encouraged by legislation and thus by relying on previous research sources, erroneous results can be repeated. In addition, internet sources and websites that are normally the easiest way to retrieve information and documents are still not very enlightening about the fuel cell technology. Secondly, concerning the framing used in chapter 4, it was the barrier analysis as proposed by J.P.Painuly which although adequate for the level of analysis for this Thesis, lacks a number of elements viewed as weaknesses such as: the not always accurate categorisation of barriers (Level 1), repetition and not clear division of barrier elements (Level 2), the not clear fact how all possible barriers are inter-related, or which barrier dominates. Many barrier categories have been similar in the Painuly analysis, creating overlaps and uncertainties about the content of each category and therefore some have been described together in the report and finally the most binding barrier had to be observed since that was not obvious by just using Painuly’s framework. As a result this framework might have been useful as a first tool for the initial investigation of the barriers but still not so concrete to give specific and elaborate results and conclusions about fuel cells specifically. Finally in chapter 5, the policy analysis was difficult to be done for the entire of Europe and so it had to be specified for the case of Greece, because the legislative measures for RE change according to the country chosen and the time period examined. Therefore policy contribution to overcoming the obstacles only focused on Greece and was not discussed much for other countries which could provide more information on fuel cell opportunities and benefits, being more developed and not in a financial crisis. This approach could be useful, since it summarises the attitude Greece has towards RE development and the measures that could improve the current energy market of the country. 6.4 Suggestions for future work

Suggestions for eventual problems and limitations discussed before, coming from this project, are necessary to be considered by proposing improvements and changes to be applied in future research. The most important one is the improvement of the educational level of the European society (emphasis should be given on the case of Greek society) by methods of providing information (more scientific reports, dissertations and papers), that can give cultivation skills to people whose lives are attached to carbon energy systems (lock-in) and teach them how to accept renewables in a good way (Not In My Back Yard – NIMBY syndrome is a common fact among the people of small and closed societies). Based on the different national circumstances of Member States in terms of their potential to use renewable energy sources and develop energy infrastructure, the European Commission should carry out relevant analyses about the impact of RES costs on consumers and individual Member Master Thesis Project

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References

States’ economies and also about fuel cell benefits in terms of enhanced security of supply, environment and human health. (IEA, 2011) In general to speed up the progress, more projects and studies are necessary to avoid a potential negative impact on the quality of our findings and our ability to effectively answer research questions. Although there are some advanced research tools to understand fuel cell operations and theories to explain details of fuel cell processes, more case studies and scientific papers need to be produced so as to create a reliable source for further scientific research. As mentioned previously, the Painuly barrier framework was useful for the framing of the barrier analysis but it could be improved and be more detailed, clear and with a better categorisation of barriers (maybe more but different categories to be able to include all different barrier elements that are not included in the current framework). Through this, repetitions in barriers could be avoided by observing how all barriers can be better inter-related. Since in the Report the main goal was to apply the barrier framing to the fuel cell technology, it would be vital to change partly the analysis so that it will include more specific and technical barrier categories related to fuel cells. To conclude, policy frameworks should be more oriented towards designing and implementing projects that address climate change and renewable energy issues and adopting measures that can be adapted to certain countries based on their economic condition and local society level. An important challenge for environmental policy is to make best use of research results and new scientific findings in policy development and implementation by reducing the potential negative impacts of current legislation and increasing the beneficial consequences on the energy market and society. Also Action Plans and Programmes coordinated or funded by the EC could be promoted by having as priority areas RES (among which fuel cells and hydrogen use), human health and regulatory or legislative frameworks that promote RE. All policies must acknowledge the findings of recent scientific assessment and address the need for new measures and legislative frameworks in respect to hydrogen and fuel cell technologies that until now have not been equally treated like the rest of RET. It might be said as a conclusion that innovative renewable technologies are urgently needed to address major challenges in energy security, climate change and economic growth. Fuel cells and hydrogen belong to core solutions and represent key enablers in achieving 2020 targets and optimize the effect of the EU budget for growth and jobs. Following these steps, the future looks bright for fuel cells offering great prospects for the entire of Europe showing strong progress towards sustainable economy.

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Owen A. D., 2005, Renewable energy: Externality costs as market barriers, The University of New South Wales, Australia, Energy policy 34 (2006): 632-642 Painuly J.P., 2000, Barriers to renewable energy penetration; a framework for analysis, UNEP Collaborating Centre on Energy and Environment, Denmark, Elsevier Ltd, Renewable Energy Journal Volume 24 Issue 1 (2001): 73-89 Partnership for Advancing Technology in Housing (PATH), 2000, Institutional factors affecting commercialization of fuel cells, Washington D.C. Partnership for Advancing the Transition to Hydrogen (PATH), 2003, Hydrogen Codes and Standards Technical Report, Washington D.C. Perkins R., 2003, Technological “lock-in”, International Society for Ecological Economics Internet Encyclopaedia of Ecological Economics Phillips J., 2013, Separating entrepreneurs from corporate innovators, , 25 Sept 2013 Public Power Corporation (PPC), 2011, , 23 Sept 2013, Athens Quist J., Vergragt P.J., 2003, Backcasting for Industrial Transformation and System Innovations towards Sustainability: is it useful for Governance, Proceedings of the Berlin Conference, Germany Ramani V., 2006, Fuel cells, Illinois Institute of Technology, Chicago, The Electrochemical Society Interface Raskkin A., Shah S., 2006, The Emergence of Hybrid Vehicles: Ending Oil‟s Stranglehold on Transportation and the Economy, AllianceBernstein Research on Strategic Change Rausser G., Stevens R., Torani K., 2011, Managing R&D Risk in Renewable Energy: Biofuels vs. Alternate Technologies, , 20 Jul 2013 Regulatory Authority for Energy (RAE), 2011, , 23 Sept 2013, Athens Reichelstein S., Bastian A. R., 2013, Levelised Product cost: Concept and decision relevance

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Research

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and

innovation,

2013,

Framework

programmes

for

research,

, 22 Jul 2013 Roads2HyCom, 2013, Political Will - RTD Expenditure for Hydrogen and Fuel Cells, Roads2Hy Com Hydrogen and fuel cell wiki, Document Tracking ID 7458 Schlege T., Thomsen J., Nold S., Mayer J., 2012, Levelised Cost of electricity renewable energies, Fraunhofer Institut for Solar Energy Systems (ISE) Scientific American, 2013, Will Germany become first nation with a hydrogen economy, , 10 Jun 2013 Sherriff L., 2012, Delivering Renewable Energy Projects through Stakeholder Engagement, Auckland, EEA Conference & Exhibition report Soonee S. K., Garg M., Prakash S., 2010, Renewable Energy Certificate Mechanism in India, 16th NATIONAL POWER SYSTEMS CONFERENCE, Osmania University, India Staffell, 2009, FUEL CELLS FOR DOMESTIC HEAT AND POWER: ARE THEY WORTH IT?, University of Birmingham, UK Start up Greece, 2012, Favourable loans by the Fund for Entrepreneurship of ETEAN S.A. and the National Bank of Greece – Action: Thematic tourism, water desalination, waste management, green infrastructures and applications, Renewable Energy Sources, , 25 Sept 2013, Athens Stephens J.C., Wilson E.J., Peterson T.R., 2007, Socio-Political Evaluation of Energy Deployment (SPEED): An integrated research framework analyzing energy technology deployment, Elsevier Ltd, Technological Forecasting & Social Change 75 (2008) 1224–1246 Suranovic S., 2010, Policy and Theory of international Trade Version 1.0, Trade policies with market imperfections and distortions, George Washington University The Colorado River Commission of Nevada, 2002, World Fossil fuel reserves and projected depletion The

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Trading Economics, 2013, Germany Inflation Rate, , 14 Sept 2013 Tsipouri L., Official Gazette of the Hellenic Republic, 2009, TASK 1: POLICY PAPER ON RENEWABLE ENERGY AND ENERGY EFFICIENCY OF RESIDENTIAL HOUSING, A report to the European Commission Directorate-General Regional Policy, National Technical University of Athens (NTUA) U.S. Department of Energy (DOE), 2011, Net Metering Policies, , 30 Sept 2013 United Nations Conference on Trade and Development, 2010, Renewable Energy Technologies for Rural Development, New York and Geneva, Current studies on science, technology and innovation No1 United Nations, 2009, Total European continent population 1950-2050 (United Nation Estimates), , 20 Apr 2013 Unruh G. C., 2000, Understanding carbon lock-in, Instituto de Empressa, Spain, Elsevier Ltd, Energy Policy 28(2000): 817-830 Unruh G. C., 2002, Escaping carbon lock-in, Instituto de Empressa, Spain, Elsevier Ltd, Energy policy 30 (2002): 317-325 US Department of Energy (DOE) 1, 2013, Fuel Cell Vehicles, , 7 Jul 2013 US Department of Energy (DOE) 2, 2013, Hydrogen fuel cell vehicles, , 25 Aug 2013 US Energy Information Administration (US EIA) 1, 2013, Feed-in tariff: a policy tool encouraging deployment of renewable electricity technologies US Energy Information Administration (US EIA) 2, 2013, Annual Energy Outlook 2013 with projections to 2040, Washington D.C. Van Eijck J., Roomijn H., 2007, Prospects for Jatropha biofuels in Tanzania: An analysis with Strategic Niche Management, Elsevier Ltd, Energy Policy 36 (2008) 311–325 Van Rooijen J., 2006, A Life Cycle Assessment of the Pure Cell Stationary Fuel Cell System: Providing a Guide for Environmental Improvement, University of Michigan Master Thesis Project

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Varkaraki E., 2010, HYDROGEN AND FUEL CELLS R&D ACTIVITIES IN GREECE, Instabul, Turkey, Centre for Renewable Energy Sources and Saving (CRES) Vasalos I., 2005, Hydrogen and fuel cell technology in Greece, HY-CO 2ndNetwork Committee Meeting, Brussels Vassilakos N. P., Karapanagiotis N. K., Fertis D., Tigas K., 2003, Methods of financing renewable energy investments in Greece, Athens, Centre for Renewable Energy and Energy Savings (CRES) Vasudeva G., 2009, How national institutions influence technology policies and firms’ knowledgebuilding strategies: A study of fuel cell innovation across industrialized countries, USA, Elsevier Ltd, Research Policy 38 (2009): 1248-1259 Verbruggen A., Fischedick M., Moomaw W., Weir T., Nadaı A., Nilsson L. J., Nyboer J., Sathaye J., 2009, Renewable energy costs, potentials, barriers: Conceptual issues, Energy Policy 38 (2010): 850-861 Weeda M., 2012, Latest Hydrogen Achievements and Trends in the Netherlands, International Hydrogen Energy Development Forum 2012, Energy Centre of the Netherlands (ECN) Window on State Government, 2003, Hydrogen, , 30 Apr 2013 Windrum P., 1999, Unlocking a lock-in: towards a model of technological succession, MERIT University of Maastricht, the Netherlands Wipke K., Sprik S., Kurtz J., Ramsden T., Ainscough C., Saur G., 2012, National Fuel Cell Electric Vehicle Learning Demonstration Final Report, Colorado, National Renewable Energy Laboratory (NREL) World Nuclear Association, 2013, Energy subsidies and external costs, , 1 Sept 2013 Zegers P., 2005, Fuel cell commercialization; the key to a hydrogen economy Zoglopitis K., 2011, NECAR: Νew Electric Car (but also non emission car) (Mercedes Benz), , 15 Sept 2013 Master Thesis Project

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Appendices

Appendices Appendix A: Additional figures

Figure 38. Typical applications in respect to the fuel cell category (J.Larminie, A.Dicks, 2003)

The applications and size of power plants where fuel cells are used, can differ based on the type of fuel cell. On the figure above the most common fuel cell types are divided in application categories from small to large scale plants and also the advantages of each fuel cell category are represented. It is clear that DMFCs, AFCs and PEMFCs are mostly preferred for small scale (1W-10KW) plants whereas the high temperature fuel cells (MCFCs and SOFCs) are used basically for larger scale applications (from 10KW-10MW). Finally PAFCs seem to be a good solution for medium-scale plants from10KW-1MW.

Figure 39. Schematic of a fuel cell vehicle (2, 2013)

A Fuel cell vehicle or Fuel Cell Electric Vehicle (FCV) is a type of hydrogen vehicle which uses a fuel cell to produce electricity, powering its on-board electric motor. Fuel cells in vehicles create electricity to power an electric motor using hydrogen (produced in one of several ways and stored in the hydrogen tank of the vehicle) and oxygen from the air. The other electrochemical device that we are all familiar with is the battery. A battery has all of its chemicals stored inside, and it converts those chemicals into electricity too.

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Figure 40. Most significant steps in the fuel cell vehicles‟ history (Daimler, 2013)

The figure represents the most representative examples of fuel cell vehicles in different countries, something that reflects the rapid technological development they have had over the years.

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Figure 41. Evolution of Mercedes Benz fuel cell powered vehicles from 1994 until 2025 (Daimler, 2013)

Already in 1994 the first electric vehicle with fuel cell from Mercedes-Benz (NECAR 1) was presented. While in 1994 the fuel cell system of the NECAR 1 filled the entire cargo space, the whole fuel cell system of the Mercedes-Benz B-Class F-CELL is accommodated. The evolution continues from the loading space-filling fuel cell system in the NECAR 1 (1994) and the current B-Class F-CELL to the F 125 research vehicle with the fuel cell of the future (2025).

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Figure 42. Operating principle of PEMFC (Fuel cells 2000, 2013)

The representation of the most typical, running on hydrogen and oxygen, fuel cell (PEMFC), claims the generation of electricity and heat by means of electrochemical reactions taking place in the anode and cathode of the fuel cell creating an external electric circuit through which electrons flow producing that way the electricity needed.

Figure 43. Types of fuel cells with their operating principles (incl. anode and cathode fuels, moving ions and operating temperatures) (Fuel cells 2000, 2013) Master Thesis Project

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Representation of the different fuel cell types according to the fuels fed to the electrodes (anode and cathode), the moving ions through the electrolyte towards the electrodes and the operating temperatures of each type. The ions transported through the electrolyte membrane can be hydroxide, oxygen or carbonate ions based on which the fuel cell type and the materials used, can be defined.

Figure 44. Hydrogen Production from fossil fuels and renewables (Germany Trade&Invest, 2010)

Hydrogen is generated from water (at 70-80% yield) in electrolysers using power from wind or photovoltaic units and can readily be transported by pipelines to central filling stations. This will be the main source of “renewable-hydrogen” by using RES for its production and will play a key role in integrating renewable sources of energy into the energy mix. However hydrogen is more usually produced by hydrocarbons or fossil fuels (oil and gas) through steam internal reforming reactions (see reformer in the figure) as shown on the figure, which produce other by-products like carbon emissions apart from hydrogen. This hydrogen is thus non sustainable and when used for further use it cannot contribute to 0% CO2 emissions.

Figure 45. Cost structure for hydrogen supply in 2040 in percentages based on a moderate scenario for Germany (Germany Trade&Invest, 2010)

The analysis shows that the cost of the primary energy is relatively low but that hydrogen production (56% of the total future cost) and logistics (filling stations, compression or liquefaction, distribution and transport contributing by 10%,10%, 4% and 8% respectively to the total cost) will be the main cost drivers in Germany. Master Thesis Project

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Figure 46. Hydrogen energy chain (B.Gnorich, 2008)

The figure represents the potential layers of hydrogen and fuel cell technology from primary energy sources through to the end -user applications. The three main branches are: Hydrogen Production System, Hydrogen Storage and Distribution, Hydrogen Application. These branches can divide into further sub-branches to represent the different stages along the Hydrogen energy chain.

Figure 47. Roadmap for hydrogen and fuel cell activities from 2000 to 2040 (Window on state government, 2003)

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Hydrogen has the potential to solve two major energy challenges that confront America today: reducing dependence on petroleum imports and reducing pollution and greenhouse gas emissions. The complete transition to a hydrogen economy could take several decades. The transition toward a so-called “hydrogen economy” has already begun. The “technology readiness” of hydrogen energy systems needs to be accelerated, particularly in addressing the lack of efficient, affordable production processes; lightweight, small volume, and affordable storage devices; and cost-competitive fuel cells. There is a “chicken-and-egg” issue regarding the development of a hydrogen energy infrastructure. Even when hydrogen utilization devices are ready for broad market applications, if consumers do not have convenient access to hydrogen as they have with gasoline, electricity, or natural gas today, then the public will not accept hydrogen.

Figure 48. Map of Greece

The above map presents Greece (both mainland and islands) including the main most representative cities, some of which were mentioned inside the report.

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Appendix B: Additional tables

Table 34. Anode and cathode electrochemical reactions for certain fuel cell types (J.Larminie et al, 2003)

Based on the type of fuel cell, the moving ions that are transported through the electrolyte from anode to cathode and vice versa, differ. This means that the anode and cathode reactions that take place also differ among the different fuel cell types and so does the overall electrochemical reaction. This table shows these reactions for the different fuel cell types. Table 35. Fuel cell electrolyte-catalyst materials Fuel cell

Lowmedium T

PEMFC

Electrolyte Solid polymer ion exchange membrane

Catalyst Platinum/ Ruthenium

Aqeous phosphoric acid

Platinum

PAFC AFC

Aqeous solution of potassium (hydroxide)

Platinum/ Palladium

Molten carbonate of lithium/ sodium/potassium

Nickel based catalyst

Zirconia ceramic based (solid zirconium oxide+yttria)

no catalyst

MCFC High T SOFC

The table shows that the materials used for the electrolyte and catalyst for each fuel cell type are chosen based on the operating temperatures and the electrochemical reactions that will take place. Based on the electrolyte materials, the name of the fuel cell is also determined.

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Table 36. Europe population over the years for the programmes, respectively (United Nations, 2009)

The population of Europe shown above is projected to follow an increasing trend until 2025 and then it is assumed it will slightly decrease until 2050. In general the EU population from 1950 until 2050 as represented in the table is changing over the years, meaning that the energy demands are also increasing leading to more energy sources needed to be exploited (including RES). Table 37. Stages of the NECAR (New Electric Car) project (K.Zoglopitis, 2011) NECAR steps Year

Fuel

NECAR 1

1994

hydrogen

NECAR 2

1996

hydrogen

NECAR 3

1997

methanol

NECAR 4

1999

hydrogen

NECAR 5

2000

methanol

NECAR or New Electric Car is a project dealing with non -emission vehicles started in 1994 and ended up in 2000 passing through different stages as shown on the above table. The main difference is the fuel based on which the fuel cell device (inside the vehicle) operates. Master Thesis Project

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Table 38. Energy density of fuels-lower heating value (Germany Trade&Invest, 2010)

The table shows the fuel options for automobiles with their energy density values to estimate the most efficient fuel for transportation. Thanks to its high energy/ mass ratio (33.3 KWh/kgr), hydrogen will be the preferred renewable fuel for buses and light trucks with medium-load driving in stop & start mode as well as for automobiles driving long distances, presenting thus a great opportunity for vehicles running on hydrogen fuel cells. Table 39. External costs of energy in terms of health and environment (EC, 2003)

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The above table gives an overview of the health and environmental effects currently included in the analysis (current research aims at constantly enlarging this list). The areas of environmental impact are mainly human health, building material, crops, global warming and ecosystems in which the conventional electricity producing methods have major negative results, implying so an urgent shift towards RE. Table 40. Project information and site reference conditions (Riem/Germany) used for the RETScreen computational analysis (for a Ballard stationary PEMFC of 250KW)

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Appendix C: Additional information

C1. Hydrogen production methods for further fuelling of fuel cells The hydrogen used as fuel by fuel cells has to be produced from sustainable procedures by using renewable resources, so as for the fuel cells not to produce harmful emissions. The current ways to produce hydrogen before supplying it to refuelling facilities where the FCVs are fuelled, include (Window on state government, 2003); (N.Karim, J.Strickland, 2011): 

Steam methane reforming: High-temperature steam is combined with methane with the help of a catalyst to produce hydrogen. This is the most common and least-expensive method of hydrogen production today. 

Electrolysis: An electric current is used to “split” water into hydrogen and oxygen that are

separated for hydrogen supply. 

Gasification: Heat is applied to coal or biomass in a controlled oxygen environment to produce a gas that is further separated using steam to produce hydrogen. 

Renewable liquid reforming: Ethanol or biodiesel derived from biomass reacts with steam to

produce hydrogen. Master Thesis Project

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

Nuclear high-temperature electrolysis: Heat from a nuclear reactor is used to improve the efficiency of electrolysis, by splitting water to produce hydrogen. 

High-temperature thermo-chemical water-splitting: Solar concentrators are used to split water into oxygen and hydrogen. 

Photo-biological microbes: Certain microbes produce hydrogen as part of their metabolic processes. Artificial systems can encourage these organisms to produce hydrogen through the use of semiconductors and sunlight, improving their natural metabolic processes. 

Photo-electrochemical systems: These use semiconductors and sunlight directly to make hydrogen from water. 

Use of any plant biomass source (splitting xylose): The scientists were able to split the xylose (the most abundant plant simple sugar), with the help of specific microorganisms, thereby getting the hydrogen that is bound to plants. It is important that the process can be performed with any source of plant biomass, not only with specific plants. C2. Advantages and disadvantages of fuel cell technology

The Benefits of Fuel Cells  heat.

Basic fuel cells running on pure hydrogen are pollution free, giving off only electricity, water and

 Because there is no combustion in a fuel cell, fuel is converted to electricity more efficiently than any other electrical generating technology.  There are no moving parts in a fuel cell stack, making them more reliable and quieter than generators. 

Unlike batteries, fuel cell reactions do not degrade over time and can theoretically provide

continuous electricity.  Fuel cells can achieve high efficiencies at any scale, in small portable, residential, stationary and transportation uses (wide range of applications). 

Because fuel cells are clean and efficient at any size, they can be located almost anywhere.

 Fuel cells can provide more reliable power wherever electricity is needed, making the whole electric power grid more robust and reliable. 

They can be installed quickly, are fuel flexible and can be put in place incrementally.



They can offer high power density even at low temperatures.



Ability for variable flexible power output to cover energy demands.



Fuel cells can work as secondary power source along with the primary sources (wind or solar) in

hybrid sustainable power plant. Master Thesis Project

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The Disadvantages of Fuel Cells 

Fuel cells were large and extremely expensive to manufacture some years ago.

 PEMFCs and AFCs can use fuel reformers to convert hydrocarbons, such as gasoline and natural gas, into hydrogen, but this technology can lower the overall efficiency of the fuel cell.  Fuel storage and conversion solutions are being developed but they are still in their early stages of development. 

Sometimes fuel cells use expensive catalysts (e.g. platinum) and materials for the stack.



Some fuel cell types are sensitive to fuel impurities and can be poisoned (e.g. PEMFC) so pure

hydrogen is required. 

They are usually related to high costs and long payback times but to short lifetimes, making

them unreliable to attract investments. 

The hydrogen fuel based on which fuel cells operate, can be really dangerous sometimes, like in

fuel cell vehicles where hydrogen is stored and compressed in a tank of high pressure. This can be really dangerous in case of an accident.  Fuel cells produce along with water and heat, some minor amounts of carbon emissions (when hydrogen production is not produced from RES but from fossil fuels). 

Sometimes hydrogen passes through the fuel cell without producing electricity (fuel crossover).

 Still fuel cell efficiencies are not so high in respect to other RET (fuel cells are still immature and not competitive). Source: (Alternative energy, 2013); (Window on state government, 2003); (N.Karim, J.Strickland, 2011)

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