1

Legal and Policy Issues Leading to theCommercialization of Hydrogen Technology

American Bar Association Section of Environment, Energy, and Resources

Renewable Energy Resource CommitteeJanuary 18, 2006 Teleconference

Charles M. PrattNew York, New York

American Wind Power & Hydrogen LLC

2

Hydrogen Transportation Projects – Project Sponsors

– Automobile Manufacturers– Oil Companies– Federal Government– State Governments– Hydrogen Technology Suppliers– Entrepreneurs

3

Types of Hydrogen Transportation Projects

• Vehicle Demonstrations– Usually limited to a few vehicles, and a short-term duration– Projects are often mobile, with no fixed installations– Vehicle Types: Fuel Cell or Hydrogen Internal Combustion Engine Vehicles

• Refueling Stations– Sponsored by oil companies– Sponsored by hydrogen-producing companies– The choice of a refueling station is essential to a vehicle demonstration– Will the hydrogen be delivered as a gas or as a liquid or produced on-site?

• Will Projects Be Focused on Fleets or Highways?– California is following the Hydrogen Highway approach. The goal is to

replicate the gasoline fueling infrastructure.– New York is following a fleet-based approach, under which vehicles in motor

pools, with fixed bases for fueling and maintenance, are targeted for hydrogen projects.

4

Technology Issues - Vehicles• Fuel Cell Vehicles

– Initial cost of vehicles is high– Life span of the fuel cell is shorter than normal life span of automobile. Thus, an owner

will probably have to replace the fuel cell more than once throughout the vehicle’s life span.

– Amount of money spent to date on fuel cell development is significant• Hydrogen storage issues

– Technology development curve• Hydrogen Internal Combustion Vehicles

– Bridge to fuel cell economy– No established major auto manufacturer makes HICE vehicles at this time, although Ford

has toyed with the market.– Because HICE vehicles are converted to hydrogen fueling after production, there are

significant extra costs, raising the vehicle price.• Size of Vehicles Available Now

– Small utility vehicles – Passenger cars – Pickup trucks – Shuttle buses – Transit sized, passenger buses

5

Technology Issues - Hydrogen Sources

• Purchase Hydrogen From Industrial Gas Suppliers– Cost of transport is an issue.– On-Site Production of Hydrogen

• Technology is changing– Cost of electricity is key to electrolysis– Reforming of natural gas is usually the lowest cost option.

• Strategic considerations– How important is the goal of using renewable resources?

• The choice of on-site generation compared to purchasing from a hydrogen supplier may be determined by the quantity of hydrogen required.

6

Important Requirements For Projects - Cost Issues

• Cost of Hydrogen Is High Compared to Gasoline

– Production, liquefaction, storage and transportation of hydrogen are each significant cost components

• Vehicle Application Is Not an Hydrogen Producer’s Core Business.

• Vehicle costs– Technology is not settled, so changes continue

• Vehicles have not met all governmental tests, so they are necessarily experimental and only for the early adopters.

7

Important Requirements For Projects - Sponsors

– Role of “Enthusiasts”– Role of Government– Colleges and Universities– Transit System and Airport Operators

8

Project Requirements - Project Management Checklist - 1

• Identify Key Regulatory Requirements at the Outset– Ownership of the project site makes a difference, as state property is likely to be outside

the jurisdiction of local permitting officials.– Getting the owner of the site fully involved, early, is beneficial. – Get the lease agreement signed as the first major step.

• Insurance and warranties– Who will insure for property damage, theft, fire and liability?– Who insures for drivers’ negligence?– Nature of manufacturers’ (or converters’) warranties? Time period on warranties?– Should vehicles be owned by the project sponsor, the converter or the user?

• Vehicle Registration– Which state will inspect the vehicles? – Has the VIN number been changed? – Role of state emissions inspection system?– Will the vehicles pass the computer-based inspection? What level of testing in the

converter’s home state have the vehicles been exposed to?• Are the Vehicles Crash Tested? What limitations on normal use should be

imposed?• Training of Vehicle Maintainers?

– This may be the responsibility of the vehicle supplier.

9

Project Requirements - Project Management Checklist - 2

• Who Pays for the Hydrogen?– Is there a basis for a sharing arrangement?

• Use of Fueling System by Other Owners’ Vehicles?– Initially, liability issues may preclude any such open use. Eventually,

however, permitting the public to use hydrogen fueling equipment is a goal.• Who Is Responsible for Repairs to the Fueling System?• Who Will Drive the Vehicles? What Method of Maintaining Control of the

Vehicles?• Who Is Responsible for Controlling Access to the Vehicles?• Where and in what Facility Will the Vehicles Be Serviced/Maintained?

– Is there a suitable maintenance bay available?• Who Is Responsible for Repairs to the Vehicles?

– On parts/systems modified, and on balance of vehicle? Who is responsible for maintenance?

• Who Is Responsible If the Project Vehicles Are Grounded?

10

Project Requirements - Financing

• Federal Government– Department of Energy– Federal Transit Administration– Federal Aviation Administration– Department of Defense– Environmental Protection Agency

• State and Local Governments– New York State Energy Research & Development Authority– Other states have comparable agencies.– Utility regulatory agencies– State economic development entities – Environmental agencies

• Foundations

11

Project Requirements - Local Regulatory Requirements

• Fire Department

• Vehicle Issues

• Building Code

• State of Regulations: limited regulations

12

Project Requirements - Major Issues

• Establish the Reasons for Undertaking the Project at the Outset – Demonstrate and prove the technology– Familiarize the public with the technology– Develop the market, with the aim of lowering the cost of the

components as production increases.• Indemnification of participants

– This “lawyers issue” has proved to be a major step in some projects, as no one treats hydrogen as just another fuel.

• Perception of Safety Concerns– This can lead to stricter lease and contract terms– Is hydrogen similar to CNG, such that the policies and regulations for

one should apply to the other?– The role of education may prove to be an important part of hydrogen

transportation projects.• Lease for the Site and Other Agreements with the Host

– As noted above, this is a key requirement.

13

• Choice of Hydrogen Source.– A careful assessment of the complex of decision factors will be

required, and should be performed early in the process, as it will determine a lot of other matters.

– Many of these factors are economic and may be put into a model. Enough of the factors, however, are not economic, such that a rigid model may not be feasible

– Non-economic factors: a) association with local renewable resources, such as solar or wind; b) target refill time for each vehicle and likely volume of fuel required per day; c) willingness and capability of host organization to take on operational supervision of the electrolyser; and d) space availability and licensing/permitting climate for the electrolyser.

• Simplicity in the Structure of the Project Is Important.– If projects require years to bring to fruition, participants drop out and

change. • Multi-Party Contract Management Is Difficult• Government Funding

– Avoiding holdups and breaks• Simplicity of funding sources – limited number.