ECN publication
Policy support for large scale demonstration projects for hydrogen use in transport. Deliverable D 5.1 (Part B)
Published by: Publication date:
ECN Policy Studies 14-6-2007
ECN report number: Document type:
ECN-E--06-064 ECN publication
Number of pages: Full text:
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This research addresses the possible policy support mechanisms for hydrogen use in transport to answer the question which policy support mechanism potentially is most effective to stimulate hydrogen in transport and especially for large scale demonstrations. This is done by investigating two approaches. First, by investigating the possible policy support mechanisms for energy innovations. Second, by relating these to the different technology development stages (R&D, early market and mass market stage) and reviewing their effect on different parts of the hydrogen energy chain (production, distribution and end-use). Additionally, a comparison of the currently policy support mechanisms used in Europe (on EU level) with the United States (National and State level) is made. The analysis shows that in principle various policy support mechanisms can be used to stimulate hydrogen. The choice for a policy support mechanism should depend on if there is a need to re-duce the investment cost (€/MW), production/use cost (€/GJ) or increase performance (€/kg CO2 avoided) of a technology during its development. Careful thought has to be put into the de-sign and choice of a policy support mechanism because it can have effects on other parts of the hydrogen energy chain, mostly how hydrogen is produced. The effectiveness of a policy support mechanism greatly depends on the ability to adapt to the developments of the technology and the changing requirements which come with technological progress. In time different policy support mechanisms have to be applied. For demonstration projects there is currently the tendency to apply R&D subsidies in Europe, while the United States applies a variety of policy support mechanisms. The United States not only has higher and more support the demonstration projects but also has stronger incentives to prepare early market demand (by for instance requiring public procurement and sales obliga-tions). In order to re-establish the level playing field, Europe may also need to start applying a combination of production subsidies, investment subsidies, tax exemptions and public procure-ment in order to successfully start large scale demonstration projects and increase the chance of early market demand and leadership in the hydrogen for transport field. This however does not mean that the incentives that are currently in place in the US should be copied. Setting obliga-tions on the deployment of a new technology that is in the early phase of introduction imposes high risk and may lead to severe negative side effects such as excessive costs or a loss of public acceptance. However, opportunities exist to increase the effectiveness of the financial support mechanisms. By designing the support in a way that it tackles the technology specific barriers at the different parts of the energy chain, by keeping in mind the flexibility of policy support mechanisms and by providing industry with a long term security of support Europe can create an attractive climate for the introduction of hydrogen in transport.

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