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Pitch

The idea is that each household could own a renewable energy unit and use hydrogen as an energy vector to generate electricity at their home


Description

Summary

The idea of the present proposal is to create the necessary market and political framework to promote a complete change in the electricity generation system in which each electricity consumer can own its micro-scale renewable energy generation system, using hydrogen as the energy vector to transport the electricity generated from the renewable energy site to the final consumer.

Thus, the electricity produced by the renewable energy unit can be used to produce hydrogen through the electrolysis of water.  The hydrogen produced will be transported using steel cylinders at high pressure and used at homes through the installation of a fuel cell. This way, the renewable energy potential that exists unused in Latin America can be exploited without the usual grid restrictions to small and micro scale generation units.

Thus, the idea is to design an electricity generation system that:

  • Replaces huge and contaminating power generation units with small, scattered renewable energy systems.  Contamination levels are much higher when they are located in a single spot, while the same installed power distributed in a larger area generates less stress to the environment.
  • Allows the deployment of micro-scale renewable energy units. Renewable resources that until today are prevented from accessing the grid due to their scale can this way be developed.
  • Replaces the use of high and medium voltage transmission lines with hydrogen to contain and transport the electricity.  This way, transforming what is considered a natural monopoly to an open, marked-based system.  Also, it eliminates the need for micro-scale renewable energy promoters to go through the troublesome and bureaucratic processes of accessing the grid.

Eliminates the need of subsidizing renewable energy systems.

As the renewable energy systems will no longer have a disadvantage with respect to fossil fuels (as fossil fuels are actually cheaper due to their scalability) the market can act on its own to state a fair hydrogen price.


Category of the action

Reducing emissions from electric power sector.


What actions do you propose?

The idea is that the proposed project will help create the required political, technological and market framework that will enable the private sector to develop the necessary technology and related services to use hydrogen technology in the Latin American countries.  Once the market starts developing on its own, it should be possible to leave it to evolve based on the free market rules, without further support from the government.

In order to promote the use of the renewable energy generation systems based on hydrogen as the energy vector, the government will have to develop a series of policies and regulations in order to kick off the development and commercialization of the generation units, as well as to promote the purchase of these systems by household’s owners. 

Regarding the actions that would have to be taken, the following lists activities that could be implemented in order to foster the development of micro-scale renewable energy systems and the hydrogen technology:

  1. The first thing the government will have to do is to elaborate a clear vision of the electricity situation in the future for the country, as well as the timeline of its implementation.  Given that the proposed project will change completely the way the electricity generation system works, it is necessary that the government has a very clear idea of what the future situation will look like.  Also, short, medium and long-term objectives will have to be established by the government that will ensure the fulfillment of the vision.
  2. Establish an independent technical office (could be a program within a ministry) to regulate the technical specifications that the systems would have to comply to avoid accidents in the generation, in the transportation of the hydrogen and the fuel cell used at homes.
  3. Promote the interaction between local technical providers and technical representatives from more advanced countries.  This can be achieved through the organization of meetings and missions of local companies willing to implement the new technology to those developed countries already involved in the hydrogen technology (such as Germany and the USA).
  4. Provide soft loans for the purchase of the renewable energy systems and the hydrogen cell by both individual households or group of households sharing the same renewable energy project (the renewable energy systems can be owned by individuals or by group of individuals each receiving a share of the hydrogen produced, and using part of the hydrogen produced to pay for the maintenance costs).
  5. Start with pilot projects that could be implemented by the government to provide energy to public offices, schools or governmental offices located in isolated locations, for example.  These pilot projects will have to be monitored continuously in order to act as show case of the technology, to gain experience in the implementation, provide evidence of the effectiveness of the technology and help in achieving the scaling the project.
  6. Promote capacity building in hydrogen technology within the country, in order to assure the country has enough technical capacity to perform the construction, operation and maintenance of the technology used.
  7. A very well structured management team will have to be in place in order to monitor the amount of projects developed and the GHG reductions achieved (based on the hydrogen generated by each of the installed units).  This is particularly important in case the projects would like to be presented at the UNFCCC as part of the Intended Nationally Determined Contributions (INDCs).  In case of doing so, further financing can be obtained from developed countries.
  8. Support the Investigation and Development of hydrogen technology in the country.  This is another way of promoting the establishment of new capacities regarding the technology.

 

Politically, in order for the project to be implemented as designed, the following aspects are considered critical:

  1. To obtain political commitment and support from political leaders such as presidents and prime ministers will be determinant to ensure the success in the implementation of the project.  This will help in the creation of a solid national vision, in creating new institutions and ensure the involvement of high-ranked governmental leaders.
  2. Create new regulations and laws to provide of a solid mandate that will continue even after presidential elections. 
  3. Establishment of fiscal or financing incentives to promote the renewable energy technology together with hydrogen use during the starting phase of the project.  The government will have to establish which way to promote the use of the new technology during the first years of the implementation, this can be through grants, reimbursement, tax credits, tax reductions, accelerated depreciation, warranty to the loans, etc.
  4. Selection of key players to design the implementation process.  It is important to count with well-connected people working in the implementation of the program to ensure that key stakeholders both from public and private sectors are informed about the program and they can participate during the implementation process in order to increase their sense of ownership and thus, ensure further commitment towards the successful implementation of the project.
  5. Involvement of the private sector.  The private sector is critical to ensure the success of the project and thus, it is important that they participate from the beginning in the design and implementation of the project.  Further, they can also help in delivering key data that will be important for the project design.
  6. Investment in awareness raising within the community such as workshops, competitions, information dissemination through radio, television and internet.  The idea is to let the people know about the technology and change the general impression that renewable energy systems are too expensive or non-reliable.
  7. Ensure the financial resources for the complete implementation period.  The best way would be to incorporate the required allocations in the national budget.

A change of this magnitude in the electricity generation sector will for sure take a lot of time, and probably the electricity grid system and actual generation units connected to it will continue to exist to support house owners in case of failures in their own systems.


Who will take these actions?

Government will have a central role in the development of the technology during the first years, in order to create the required market situation for it to start running on its own. Governments are also responsible of establishing the technical regulations to ensure the safe use of the technology in all the steps of the process: from hydrogen generation at the renewable energy sites, to transport and final use at homes.  A special arm within the government should ensure the compliance with the regulations.

Businesses will be the primary actors as the private sector will be the one that has to develop the technology in the Latin American countries, use its already established canals to sell it and offer maintenance and other services to ensure that public will be willing to invest in the technology.

Individuals are the people that should be convinced to invest in the technology.

Banks are also a key element to develop the technology as they should offer soft loans to the individuals for them to be able to purchase the technology and pay an amount comparable to its electricity bill during a period of 20 to 30 years.

Environmental NGOs can also play an important role by using their communication channels with the general public to promote the use of the technology.


Where will these actions be taken?

In order to develop the project, the best way would be to choose a country within Latin America where to start with the implementation, and use the experiences obtained from it as an example to implement the same system in other countries in Latin America. 

Given the electricity situation in Chile, country that is actually suffering an acute electricity generation shortage as well as an important transmission constrain, it is clear that the country is in a moment where important decisions shall be made regarding the path forward in order to meet the increasing electricity demand.  At the same time, Chile is a country that has a huge unexploited potential for renewable energies, such as solar energy from the great Atacama Desert and hydroelectric potential in the Patagonian region, both of them too far away from the electricity consumption centres and thus, not fully exploited.  Further on, given the way the electricity wholesale market works, with a few companies being the mayor electricity generators and with few chances for small renewable energy generators to enter the system, the electricity prices are one of the highest in the world.  This can also help in the developing of the hydrogen-based renewable systems as they will have a lower pay-pack period.

Thus, it is recommended to begin the implementation of the project with a pilot phase in Chile, and once it has developed enough to gain experience from the process, implement it in other countries based on the experience gained.


How much will emissions be reduced or sequestered vs. business as usual levels?

Emission reductions were estimated only for Chile during the period 2020 to 2030.  In order to estimate the market penetration of the technology, information of the penetration of other goods was used as reference.  According to the graph produced by HBR (https://hbr.org/2013/11/the-pace-of-technology-adoption-is-speeding-up/), the smart phones took 10 years to reach 40% of the US market, in comparison with tablets that took 5 years to reach 5%.  Considering that the investment required for the proposed technology is much higher, a conservative value of 10% market share for 2030 was considered.  The per inhabitant electricity consumption was sourced from http://datos.bancomundial.org/indicador/EG.USE.ELEC.KH.PC) that stated a value of 3.568 MWh and the grid emission factor used was 0.36 tCO2/MWh (sourced from http://huelladecarbono.minenergia.cl/emision-para-el-sic for 2014 for the SIC System). Thus, ER for the time frame between 2020 until 2030 are 14.9 million tonnes of CO2e.


What are other key benefits?

The implementation of the project will result also in the following co-benefits:

  • Reduced environmental impacts:  the use of hydrogen will reduce the negative environmental impacts of burning fossil fuels in large cities and intensive energy consuming industries.
  • Job creation:  Given that the project could be implemented by small and medium enterprises (instead of the big energy companies existing nowadays) the project will help in the creation of new jobs related to the design, construction, selling and maintaining the technology.
  • Capacity building: the project will require the existence of highly qualified technicians to be involved in the construction and maintenance of the equipment.
  • Technology transfer: the project will allow the transfer of edge technology from developed countries to the Latin American developing countries.
  • Replicability:  the project can also be replicated in other sectors such as transportation sector by promoting the use of hydrogen in cars.


What are the proposal’s costs?

The project is composed of policy measures and political decisions, and thus, the costs are related to management costs of the personnel involved in the project (except for the pilot projects, that the cost will depend on the capacity of the renewable energy systems installed and will not be considered).  To have an approximation of the project´s costs, the NAMA “Expanding self-supply renewable energy systems (SSRES) in Chile” was used as reference (see https://unfccc.int/files/cooperation_support/nama/application/pdf/nama-seeking-support-for-implementation-re-chile-dic-2012.pdf, downloaded on 9 June 2015).  This project has an estimated cost of 60 million US$ and it is expected that the present project will have approximately the same costs.

To have an idea of the renewable system costs, the following calculations were done:

The costs for different renewable energy technologies in Chile were sourced from https://www.nrdc.org/laondaverde/international/files/chile-LCOE-report-sp.pdf, Page 12) and considering the required investment for a 5 kW system (normal household consumption), a 8.5 kW system will have to be installed to account for the 70% efficiency loss during the hydrolysis process (based on http://www.electrochemsci.org/papers/vol7/7043314.pdf, page 1) and an 85% efficiency factor of the fuel cell (based on http://www.hydrogen.energy.gov/pdfs/doe_fuelcell_factsheet.pdf).  Also, as the systems to be installed are micro-scale systems, the average costs mentioned above will be increased by 30%.  The cost of the fuel cell was sourced from the document http://energy.gov/sites/prod/files/14012_fuel_cell_system_cost_2013.pdf that is approximately 55US$/kW and thus, a 5 kW system should cost 275 US$.  Using these values, the required investments for different renewable energies considering a 5 kW consumption are:

Hydropower: aprox 35,000 US$

Wind Power: aprox 32,000 US$

Biomass: 23,000 US$

Solar PV: aprox 51,000 US$

Geothermal: aprox 51,000 US$


Time line

Short Tem:  pilot phase in Chile with projects developed by the government to learn from the experience and show to the public.  The projects should be up and running by 2020, and experience should be gained from the first two years of implementation.

Medium Term:  From 2020 to 2030 the government should launch the project to the general public, actively promoting the technology for the individuals to start engaging in the purchase of small renewable energy devices. 

Long Term: from 2030 to 2050 the technology should be already running by itself, with the private parties already involved in the production and selling of the technology and house owners willing to invest in the technology


Related proposals


References

References are included in the text.