Iceland – the first hydrogen society/economy



Transition to a Hydrogen Economy

- a strategy for sustainable development in Iceland

WWF

Iceland Nature Conservation Association

April 2001

Table of contents

1Introduction 1

The hydrogen experiment in Iceland 2

The hydrogen project 2

The project plan 3

Energy carriers 4

Why Iceland? 5

The energy transition in Iceland 6

Energy consumption 6

Greenhouse gas emissions 9

Energy potential 10

Hydro- and geothermal energy 10

Wind power 12

Landfill gas 13

Energy carriers 14

Transport pattern 15

Environmental aspects 15

Public transport 16

Economic analysis 16

Energy prices 17

Influence on the Icelandic economy 19

Markets for emission quotas 20

Conclusion Error! Bookmark not defined.

Introduction

At a conference in Iceland on sustainable future development in January 2001, the country’s environment minister, Siv Friðleifsdóttir, introduced a draft policy on sustainable development until the year 2020. Amongst other things, it stated the goal that by 2020, 20% of vehicles and vessels in Iceland will be powered by renewable energy, i.e hydrogen-based energy carriers[1]. Furthermore, the draft policy aims to make Iceland the first country in the world to become free of dependence on fossil fuels.

Compared to other nations, Iceland has been quite successful in transforming its economy into one based on renewable energy. No other country in the world uses as little fossil fuel as Iceland for space heating and electricity generation. On the other hand, the car density is one of the highest in the world and investments in the fishing fleet have mainly been in energy-intensive factory trawlers. Therefore, the use of fossil fuels in Iceland per capita is slightly above the European average[2]. For Iceland, therefore, the way to reduce carbon dioxide emissions is to replace the fossil fuel used by the transport sector and the fishing fleet with emission-free energy sources such as hydrogen.

In an article in the Economist in August 1997, MP Hjálmar Árnason gave the year 2030 as a target date for the government’s evolving hydrogen plans. The article created a buzz in the international community and Iceland’s prime minister released a statement announcing that the government was officially moving the country toward a hydrogen economy[3]. Hjálmar Árnason, who is also chairman of the Icelandic government’s committee on alternative fuel, estimated that Iceland could eliminate most of the nation’s dependency on oil by 2030.

In February 1999, on the occasion of the establishment of the Hydrogen and Fuel Cell Company (now Icelandic New Energy Co. Ltd, INE), the minister for the environment, Guðmundur Bjarnason, announced that it was “the government´s policy to promote increased utilisation of renewable energy resources in hamony with the environment.” Hydrogen is an exampel of such a resource for powering both vehicles and fishing vessels.[4]

During the last 3-4 years a number of articles about the Icelandic hydrogen project have appeared in international news magazines, the most recent one in Time Magazine for April 09 2001, Cool and Clean[5]. All these articles convey the message that Iceland will become free of fossil fuels within about 30 years, but they do not go into the details of how this transition can take place or whether Iceland is really prepared for it.

The objective of this study is to investigate whether the goal set in the draft policy for sustainable development is realistic and, if so, whether Iceland can go for a higher target in the next 20 years. In addition, an attempt is made to describe the economic premises for this energy transition in more detail. A full conversion to hydrogen will not depend on Iceland alone. Iceland can not decide the technical solutions for the vehicles or fishing vessels of the future, and in fact no one can say for certain what solutions will be found to the problem of storing. For the sake of argument, therefore, it is taken for granted that hydrogen-powered vehicles and vessels will be in mass production.

The hydrogen experiment in Iceland

The hydrogen project

The Icelandic hydrogen project began in February 1999 when an Icelandic consortium, Vistorka hf (EcoEnergy Ltd.) signed a Cooperation Agreement with DaimlerChrysler, Norsk Hydro and Royal Dutch/Shell setting up a joint venture to investigate the possibility of replacing fossil fuel in Iceland with hydrogen and creating a “hydrogen economy”. The aim of the joint venture company, originally called “the Icelandic Hydrogen and Fuel Cell Company”, now Icelandic New Energy Ltd, was to test various applications utilising hydrogen fuel cells or hydrogen energy carriers.[6]

The project plan

At a conference held in Reykjavik on 2 March 2001, Icelandic New Energy presented a six-phase plan for the introduction of a hydrogen economy in Iceland. Exactly how and when each phase will take place is now under discussion. The phases are:[7]

Phase 1: A demonstration and evaluation project of operating hydrogen infrastructure and fuel cell buses in Reykjavik. This phase is known as ECTOS, an acronym formed from the name of the project (Ecological City Transport System), which was introduced on 2 March 2001 at a conference in Reykjavik. The key elements of the project are to integrate an on-site infrastructure in the city of Reykjavík (2001), to operate three hydrogen fuel-cell buses in Reykjavík (2002-2004) and to carry out socio-economic studies parallel with the project (2001-2005).

Phase 2: Gradual replacement of the Reykjavik city bus fleet, and possibly other bus fleets, with buses powered by fuel cells.

Phase 3: Introduction of “hydrogen based” fuel-cell private cars.

Phase 4: Fuel-cell vessel demonstration and evaluation project.[8].

Phase 5: Gradual replacement of fossil fuels in the fishing fleet by fuel-cell powered vessels.

Phase 6: Export of hydrogen from Iceland to Europe.

Icelandic New Energy is preparing for Phase4, powering vessels with hydrogen, and investigating the possibility of exporting hydrogen to the European mainland.[9]

Icelandic New Energy estimates that the transformation of Iceland into a hydrogen economy could possibly be completed in 30 to 40 years[10].

Energy carriers

Most car manufacturers are working on developing vehicles driven by some sort of alternative fuel, and hydrogen-powered vehicles are just one of many possibilities. Others include cars powered by electricity, ethanol, methanol or hydrogen, and “hybrid cars”, which would use a combination of fossil fuel and some other kind of energy carrier. All these alternative fuels can be produced in different ways. Methanol, for example, can for example be produced by electrolysing water into hydrogen and oxygen and further processing the hydrogen with carbonic acid or by refining natural gas (fossil gas). The same applies to hydrogen, which can be derived from natural gas or by electrolysis of water, using energy originating from solar-, wind-, hydro-, geothermal or coal-powered plants.

The hydrogen project in Iceland is focused on electrolytically produced hydrogen stored as gaseous hydrogen or as methanol.

The first phase of the project, operating fuel-cell buses in Reykjavik and a hydrogen infrastructure, will use gaseous hydrogen that will be produced in small electrolytic plant at a single site in Reykjavik. The input supply channels i.e. for the water and electricity, are already in place, but storage and tapping facilities must be built.

Parallel with Phase 1, Icelandic New Energy will carry out a joint study with the University of Iceland, Icelandic Alloys and Elkem ASA on the possible production of methanol from the hydrogen and carbon dioxide gases emitted from a 42-MW ferro-silicon furnace at the Icelandic Alloys ferro-silicon plant in Iceland[11].

In Phase 3, the introduction of hydrogen-based fuel-cell private cars, the energy carrier will be hydrogen or methanol, depending on what the car manufacturers decide. If methanol is chosen, existing infrastructure for distribution, storage and tapping of fuel can be used[12].

Why Iceland?

According to Jón Björn Skúlason, CEO of INE, there are a few key reasons why the foreign investors in question chose Iceland as a site for the hydrogen project[13]:

1. Iceland’s electricity is generated without the emission of greenhouse gases in the energy chain.

2. The standard of living and transportation system in Iceland are similar to those in most other European countries.

3. Iceland has already experienced an energy transition, and knows the pros and cons of such a transition.

4. The population is small, so the impact of the project will be large.

5. It has North European climate.

6. The Icelandic government has announced its support for projects aimed at the increased use of hydrogen in the near future.

Iceland is not the only country where such a project is under way, however: there are several similar projects focusing on renewable energy sources in progress all around the world. There are hydrogen buses running in some cities in Europe and in California the Air Resource Board is demanding that 10% of all new cars sold in California in 2003 will be zero emission vehicles (ZEVs). Iceland is therefore not a island in that sense that’s its only there that project demonstrating hydrogen infrastructure and hydrogen as energy carrier is under way. What is unique is that Iceland is the first country in the world that can be almost free of dependence on fossil fuels.

The energy transition in Iceland

Energy consumption

Total annual energy consumption in Iceland is 121.6 PJ (ca. 34 TWh). Approximately 7.185 TWh (1999) of this is in the form of electricity. About 84% of this electricity is generated in hydro-electric plants, and geothermal sources account for about 16%.[14]

Table 1 shows the total energy pattern in Iceland, by energy carrier and activity.

Table 1: Energy in Iceland, by source and activity

|Type[15] |% |(TWh | |Activity[16] |% |(TWh |

|Oil |29 |9,9 | |Space heating |40 |13,6 |

|Geothermal |50 |17 | |Industry |27 |9,2 |

|Coal |3 |1 | |Residential |5 |1,7 |

|Hydro |18 |6,1 | |Fisheries |12 |4,1 |

| | | | |Transport |16 |5,4 |

The transport and fishing sectors account for c. 65% of the liquid fossil fuel consumed in Iceland.. This figure does not include fuel purchased by vessels and aircraft abroad. Icelandic New Energy estimates that 10% (c. 5 TWh) of the energy potential in Iceland would be needed to replace the present oil import. [17]

Even though this report focuses mostly on the fisheries and the transport sectors, there is nothing to contradict the assertion that the remaining fossil fuel used in Iceland, with the exception of coal, can be replaced by hydrogen.

In Iceland there are about 150,000 private cars, 1,600 buses and 17,000 trucks, lorries, etc. [18] If the 20% goal presented in the draft on sustainable future is achieved, then 30,000 cars, 320 buses and 3,400 trucks, lorries, etc, will be powered by hydrogen by the year 2020.

Table 2 shows the breakdown of electricity consumption between power-intensive industries and the general market.

Table 2: Electricity consumption in Iceland

|Year |Power-intensive industries [19] |General market |Total |

| |(GWh/year) |(GWh/year) | |

|1994 |2,304 |2,470 |4,774 |

|1995 |2,391 |2,676 |5,067 |

|1996 |2,451 |2,662 |5,113 |

|1997 |2,823 |2,758 |5,581 |

|1998 |3,471 |2,805 |6,276 |

|1999 |4,284 |2,901 |7,185 |

|2000* |4,805 |3,065 | |

|2005* |5,176 |3,365 | |

|2010* |5,176 |3,677 | |

|2015* |5,176 |3,992 | |

|2020* |5,176 |4,373 | |

*Forecast from the Icelandic Energy Forecast Committee[20]

The load factor[21] for power plants generating electricity for power intensive industries is approximately 90%, while that for the general market power plants is approximately 65%[22]. This is mainly due to mismatch in supply and demand in time. This mismatch depends on daily variations (day and night) and seasonal variations (summer and winter). The plants runs on full capacity during peak hours (daytime) but nights are off peak hours because electricity can not be stored.

Increased electricity demand in order to produce hydrogen can, therefore, be met in two ways in order to meet the 20% goal set in the draft government policy. 1) by producing energy in off-peak hours, storing it, for example as hydrogen, and using it at peak hours. 2) by building new power plants which will then have the same load factor as the existing power plants for power intensive industries.[23]

Greenhouse gas emissions

Energy is a basic requirement for social and economic welfare in modern industrial societies. Energy production, however, has some major consequences for the environment, such as production of radioactive waste and emissions of CO2 and other greenhouse gases. For this reason, energy consumption is often measured in carbon dioxide emission or CO2 equivalents.

Power-intensive industries in Iceland, which today consists of two aluminium smelters and one ferro-silicon plant, are the largest CO2 emitters in Iceland (33%), with the transport sector and the fishing industry in second and third place, accounting together for 48% of the emissions.

Table 3: Emissions of greenhouse gases in Iceland.

Emissions per year Emissions by sources in 1999 Emissions in 1999

|Year |CO2 |GHG[24] | |Source | | |GHG |% |

| |[1000 ton] |[1000 ton GWP[25]]| | | | | | |

|1994 |2,292 |2,809 | |Industry |33 % | |CO2 |80 % |

|1995 |2,305 |2,860 | |Geothermal heat |4 % | |CH4 |8 % |

|1996 |2,395 |2,935 | |Household |1 % | |N2O |6 % |

|1997 |2,494 |3,068 | |Fisheries |23 % | |HFC |2 % |

|1998 |2,500 |3,114 | |Transportation |25 % | |FC |4 % |

|1999 |2,706 |3,410 | |Others |14 % | |SF6 |~ 0 % |

Source: Environmental and Food Agency of Iceland[26]

Energy potential

Hydro- and geothermal energy

It is currently estimated that the economically harnessable hydro-electric energy potential in Iceland is about 35-40 TWh/year. Taking environmental factors into account, the hydro-electric potential is, at the most, 30 TWh per year. Harnessable geothermal energy is estimated at 200 TWh/year, mainly for space heating. Geothermal electricity is estimated to be about 20 TWh/year with present technology. Added together, the total electricity potential that could be harnessed from hydropower and geothermal sources is estimated at 50 TWh[27].

Others have estimated that the total harnessable energy (hydro and geothermal) is no more than 25 TWh when environmental factors are taken into account[28].

As mentioned above, enough energy potential exists in Iceland to support the energy transition to a hydrogen economy. What is more interesting is that already today there is enough capacity to replace 20% to 40% of the fossil fuels used in the fisheries and the transport sectors.

If the power plants providing electricity for the general market were to achieve the same load factor as the ones serving the power-intensive industries, then hydrogen could be produced during non-peak hours and stored until it is needed. Thus Iceland already has the electricity to replace 22% of the fossil fuels consumed by vehicles and vessels.[29]

All other things being equal, Iceland will not need to build new power plants before 2020 in order to reach the goal expressed in the draft on a sustainable future. The difference between a 100% load factor and the present one, i.e. the unused energy, is 2 TWh or approximately 40% of the energy needed for total transition of the fishing fleet and the transport sector to hydrogen[30].

Wind power

The production cost of wind energy is determined by the investment cost, which is directly related to the estimated rate of return. Investment costs have decreased significantly over the last decade and the experience curve shows that when doubling the capacity of wind energy the price is reduced by 20%[31], and wind power may turn out to be the cheapest new source of electricity when low rates of interest are used in calculations.

On average the real interest rate over the last 13 years paid by the National Power Company was 4.6%. Using a 5% real interest rate, an investment cost of $600 per installed kW and depreciation over 25 years, the investment cost per annum is $42 per kWh. The average load factor today is 2,500 kWh/kW which gives a investment cost of USD 0.017 per kWh. Variable costs are estimated at USD0.005 per kWh, resulting in a total cost of USD 0.022 per kWh.[32]

There is a trend towards larger wind energy power plants, and during the last two years the standard size of such power plants has increased from 500 to 1,500 kW. Another prevailing trend in some countries is to place new installations further off shore. The higher engineering and installation costs are partly compensated by higher average wind speeds, and thus larger annual production per installed generator capacity. Iceland, located on the Atlantic ridge in the middle of the Atlantic Ocean and sparsely populated, can install coastal wind power stations with the capacity of the off-shore stations.

Further cost reductions will be possible as experience accumulates. But there are also technological breakthroughs that may help reduce costs in greater leaps. One such leap in cost reductions may well be the Windformer system which ABB has presented. ABB believes potential cost reduction for investment and maintenance can be as high as 30%. ABB also estimates that the average size of wind power plants will be 3,5 MW.

With a load factor of 70%[33], each wind power plant using ABB technology can generate about 22 GWh[34] per year. This means that about 240 wind power plants are needed to produce the 5 TWh of energy needed to replace the fossil fuel from the transport and fisheries sector.

Landfill gas

Upgraded[35] landfill gas, like natural gas, or methane gas, is used world wide for generating electricity, central heating and to power vehicles. In Iceland it is only relevant to use methane to power vehicles because of the abundance of geothermal and hydropower energy for central heating and electricity production. Methane can either be used to power IC engines or can be refined to hydrogen and used in fuel cells.

There is one site in Iceland that upgrades landfill gas for powering vehicles. The annual production potential is currently about 1,500 tonnes of methane which is about enough to power 1,500 private cars but today only a handful of cars are powered by gaseous methane. Methane potential is expected to increase to 4,500 tonnes in 2012 and remain constant at that level for 20 years[36]. One tonne is needed to power a private car for a year. This means that it will be possible to power 4,500 private cars (3% of all private cars in Iceland) [37] using methane gas.

Methane is a potent greenhouse gas with a global warming potential (GWP) of about 21 times CO2. If the methane is not used then it must be burnt at the landfill site in order to reduce its GWP. Each kg of methane burned forms 7 kg of CO2[38]. By using methane for powering vehicles, Iceland can reduce its CO2 emissions in GWP by 2%[39].

Energy carriers

Hydrogen will be produced by electrolysis and sold locally at hydrogen stations similar to today’s petrol stations. The hydrogen will be manufactured overnight and ready to use the next day. This means that there will be no distribution costs of the hydrogen to the selling site. The situation will be completely different if methanol becomes an intermediate energy carrier. Methanol will only be produced at one or two sites and has to be distributed to the retail outlets.

There is no biomass in Iceland for methanol production, but methanol could be produced from hydrogen and carbon oxides emitted from aluminium smelters and the ferro-silicon factory in Iceland. Reusing the carbon from the power-intensive industry may have some positive environmental effects, especially if the methanol intermediate requires less energy to power the vessel and car fleet than gaseous hydrogen needs. However, this will not lead to a total reduction in CO2 from Iceland, but only a delay, and the emission would be shifted from industry to vehicles resulting in fuel cell cars that are not entirely emission free.

Transport pattern

Transport in Reykjavik is centred heavily on private cars, and the use of public transport is minimal. The transport structure favours the private car and there are few facilities specially built for public transport. It is estimated that the number of privately-owned cars will increase by 50% in the next 20 years, which could lead to considerable problems in the future.

Environmental aspects

The fuel cell will reduce or solve many of the environmental problems caused by the transport sector, such as emissions of non-methane volatile organic compounds, sulphur and nitrogen oxides, particles and greenhouse gases and the formation of tropospheric ozone. There are, however, serious social, environmental and health-related problems that hydrogen or fuel cells will not solve.

Hydrogen is just a form of energy. Its impact on the environment or public health will depend on how it is stored, e.g. as gaseous or liquid hydrogen or as methanol. Only as gaseous or liquid hydrogen will it be emission-free, since some CO2 emissions will follow if methanol is used as an energy carrier. Other serious, and rarely discussed, problems are the traffic impact on the urban environment, and problems such land exploitation, congestion, noise, accidents and chemical releases.

Land use for the communication infrastructure, traffic congestion are growing and ever more apparent problems in Reykjavik and the neighbouring communities. Building new roads will often provide only short-term solutions, since there is a latent demand for infrastructure use and it will therefore only solve the problems temporarily.

Adding to the communication infrastructure for private cars is also an expensive way to meet the peak demand, which exists for no more than a few hours a day. The main noise from the traffic is caused by the tyres, not the engines, so even though fuel cells are quiet, noise will continue to be a major problem. Other problems are chemicals like cadmium, lead and toxic organic compounds, for example in tyres. It has been estimated that the traffic volume in Reykjavik will increase by 20-30% over the next 20 years. Problems like congestion and noise in Reykjavik will therefore increase in the future.

As a consequence of the above, hydrogen is not a panacea to all traffic-related environmental problems caused by private transport in Reykjavik. It appears that investment in public transport is needed in order to avoid the traffic congestion which constantly occurs during peak hours despite ever-increasing investment in the road system.

Public transport

These problems can only be solved by new techniques and/or a changed transport pattern. In this report a changed pattern, i.e. with increased public transport, is of interest for several reasons. The basic infrastructure exists today and an entirely new one is not needed. Traffic congestion in small cities like Reykjavik is usually caused by relatively few vehicles because each additional car, above a certain critical level, causes an increased accumulated travel time for all others cars. Improving public transport, or encouraging drivers to use it, can be more cost-effective for eliminating congestion than building new roads or infrastructures. It is easier to control emissions from relatively large sources (buses) than small (private cars) and it is usually more cost effective.

Economic analysis

Estimating the entire cost of the energy transition is impossible at this stage because the future costs of new technologies are not known. But some crucial indicators can show if it is economically possible or feasible.

Energy prices

The fuel cell is assumed to be two to three times as effective as the conventional IC engine.[40] On the other hand hydrogen or hydrogen-based fuel can have higher production cost than traditional fossil fuels. The production cost of hydrogen depends almost entirely on the price of electricity. Table 4 shows current prices from the National Power Company in Iceland.

Table 4: Current electricity prices from the National Power Company

|Type of energy |ISK |

|General market[41] |2.86 |

|Power intensive industry[42] |0.97 |

|Secondary electricity[43] |0.753 – 1.853 |

One 160-dm3 barrel of oil produces about 1,700 kWh in a combustion engine and its price rises from USD 20 to USD 50. Taking an average of USD 25 a barrel, this gives a price of USD 0.015 per kWh. Árnason[44] et al. have estimated that with electricity priced at USD 0.02 per kWh, hydrogen can be produced at price three times higher than oil per kWh. On the other hand, since the fuel cell is 2-3 times more effective than the IC engine, fuel cells utilizing hydrogen generated hydroelectrically are becoming competitive against gasoline and oil, (not counting the distribution costs).

These calculations are based on an electricity price that is twice as high as that paid by power-intensive industry or almost three times the price for secondary electricity. It is reasonable to assume that the electricity price could be in the range of USD 0.0075 to USD 0.01 per kWh instead of USD 0.02 as it would be produced during non-peak hours, utilizing unused capacity. Thus, it could be sold at least for the same price as is offered to power-intensive industry or it could even be considered as secondary energy, at least during the phase of transition. If this were the case, hydrogen could very well compete with fossil fuels.

Icetec[45] has estimated that if methanol is used as an intermediate energy carrier and the electricity price is USD 0.01, that the production cost of methanol will be USD 0.05 to USD 0.06 per kWh[46]. At present, methanol is not as competitive an alternative as gaseous hydrogen.

It is obvious from an environmental point of view that renewable energy sources must replace the fossil fuels. Hydro-electric energy has until recently been considered as “environmentally friendly”. Nevertheless, there is rising public opinion, both in Iceland and world-wide, questioning the desirability of hydro-power plants and dams because of their environmental impact.[47] In addition, an untouched natural environment is believed to have a growing economic value. //Hence, it may even turn out to be more profitable to conserve sites which today are considered as fit for hydro-power development. In other words, it is quite possible that Iceland will have to revise its energy policy and opt for other sources of energy such as geothermal or wind power.

Wind energy is not yet competitive to oil or hydropower but might become so in the not too distant future. Alternative energy is getting cheaper and experience shows that cost declines by about 20% for each cumulative doubling of production[48]. Oil prices are also expected to rise in the future, not because current oil reserves will run out, but rather because the world will consume oil faster than it can be extracted from the ground, according to the International Energy Agency[49].

Alternative sources like wind power are therefore assumed to be competitive in the near future.

Influence on the Icelandic economy

The transition from fossil fuel to renewable fuels, mainly hydrogen, will have positive influence on the Icelandic economy, both directly and indirectly.

In the year 2000, Iceland had a foreign trade deficit of USD 740 million (ISK 68 billion)[50]. In 2000 the fossil fuel import was about USD 185 million (ISK 16.5 billion) or a quarter of the deficit. On top of these savings, the energy transition will raise GDP, depending on electricity price, by up to USD 100 million or 1.5% of 2000 GDP level of 7.3 billion dollars.

Domestic energy production will both reduce the foreign trade deficit and have a positive influence on GDP. It will also have the considerable advantage that Iceland will depend primarily on domestic energy instead of energy from the politically unstable Middle East, as studies have shown that economies are more sensitive to price changes than to energy prices per se.[51]

Oil accounts for about 4.7% of the consumer price index in Iceland, which directly affects long-term interest rates. Also, higher oil prices contribute to higher interest rates and jeopardise economic stability. Furthermore, using domestic energy will contribute to stabilising the fishing industry, which generates 60% of Iceland’s exports; in 1999 the fishing fleet used about 300,000 m3 of oil[52].

Markets for emission quotas

One of the most important mechanisms in order to achieve the goals of the Kyoto Protocol is to create markets for CO2 emission quotas. Iceland could market some 1,300,000[53] to 2,000,000 tonnes of carbon dioxide per annum if this amount were saved by the transition to a hydrogen economy. Multinational companies and some states have tried to estimate the market price per emitted tonne of CO2.

British Petroleum (BP) has an internal market for emitted tonnes of carbon dioxide with price at about USD11.3 per tonne.[54] Using BP’s price, the environmental saving resulting from the transition to hydrogen will be about USD 14.7 to 22.6 million. For comparison the carbon tax in Sweden is USD 180 for private consumers per ton of carbon, or USD 45 per ton of carbon dioxide, which is four times the saving based on BP’s figures.

Whether these savings can be realised on some emission markets in the future remains to be seen, but it is a clear indicator of the environmental cost these emissions are causing.

Conclusion

Iceland is not the first country to set a goal for replacing fossil fuels with other energy sources. After the oil crisis in 1973, Brazil experienced declining profits in its sugar producing regions. Domestic ethanol production was seen as a solution to these problems and government subsidies favouring ethanol for powering vehicles were adopted. It took some ten years from the initiation of the “ethanol programme” to raise the share of ethanol cars to 96% of all cars sold in Brazil in 1985.[55]

The strong commitment by the Brazilian government was crucial for the rapid expansion of the ethanol program[56]. All the premises for a rapid conversion from fossil fuels to renewable fuels exist in Iceland. There is no lack of energy, no new power plants are required for the early phase of the transition and hydrogen technology is becoming commercially feasible. With a moderate increase in the number of fuel-cell cars in Iceland over the next ten years, and given that almost all new cars as of 2015 will be fuel-cell cars, then more than 50% of all cars in Iceland will be hydrogen powered by the year 2020. If 50% of all cars in Iceland use renewable energy, the government goal set out in the draft policy paper for sustainable development can be achieved without replacing fossil fuel in even a single fishing vessel. Therefore the government should revise its goal and set a more ambitious one of at least 30% to 40%.

To reach a goal of 30-40% replacement the Icelandic government would have to set out a clear programme for replacing fossil fuels with hydrogen in close co-operation with local authorities. In this report it has been pointed out that all the premises for rapid transition do exist. There is enough energy production capacity to replace 20-40% of the fossil fuel used today. This is also economically feasible by utilising unused capacity for the energy transition instead of depending on imported fuel. This would reduce the foreign trade deficit by 25% and increase GDP by about 1.5 %. This is in fact a win-win situation for both the Icelandic economy and the global environment.

The Icelandic government must subsidise the transition in some way. Our recommendations are using the market mechanisms such as carbon dioxide taxes or rewarding those using renewable energy. It would even be more effective to use the available over-capacity in the electricity power system to encourage the transition. If the electricity price for hydrogen produced by electrolysis were the same as that offered to power intensive industry, then gaseous hydrogen would be competitive to gasoline in terms of price. In this way the government could encourage the transition during the initial phase of the transition. After the transition is completed the electricity price for hydrogen producer would be based on the quantity purchased.

On the other hand, methanol must be subsidized, if it is to become an intermediate energy carrier. The best way to do that is probably by imposing carbon taxes on all fossil carbon. Because methanol contains much less carbon than gasoline, or even no fossil carbon, it will then become more competitive, compared with gasoline, than it is today. Carbon taxes or reduced fuel taxes for vehicles using renewable energy could to some extent be financed by increased revenues from the National Power Company, which is owned by the state (50%), the City of Reykjavik (45%) and Akureyri municipality (5%).

Another potential economic advantage is the future trade in emission quotas for greenhouse gases. If all carbon dioxide saved by the transition to a hydrogen economy could be sold on emission markets the possible gain would be somewhere between USD 14 and 22 million.

A basic requirement for all these gains is a rapid transition towards the hydrogen economy. It has been shown that it is quite possible to replace 50% of fossil fuels for private vehicles in the next 20 years, given full commitment by the government and the use of existing technology.

The energy transition will lead to a win-win situation for both the global and, to some extent, the local environment and the Icelandic economy. The transition will not, however, solve environmental problems such as land use, traffic congestion, toxic wastes or part of the traffic noise problem. It has been estimated that traffic in Reykjavik will increase by 50%. Furthermore, Reykjavik is expanding, so the transport level, measured in person-kilometres[57], will increase in the future and so will these problems. More roads will only lead to increased demand for the infrastructure as long as access to the roads is free, and experience has shown that nowhere in the world has any city succeeded in building away these problems.

The only way to reduce these problems is an enhanced transport pattern with a focus on a public transport service. Public transport would also support the energy transition because of city buses’ low energy efficiency[58]: hydrogen-powered city buses would have a greater competitive advantage over those powered by gasoline than would be the case in any other category of vehicle. Another important aspect is that it is much easier to control emissions from a few large emission sources like buses than from many small sources like private cars. Reykjavik and its neighbouring local authorities could therefore support the hydrogen transition by building up the public transport system in these areas.

Together the government and the local authorities in the Reykjavik area could achieve a more ambitious goal than the one set in the draft policy for sustainable development. It is reasonable to believe that about 40% of the fossil fuels can be replaced by hydrogen in the next twenty years and that an economy almost free of reliance on fossil fuels could be a reality 35 years from now. Indeed, this fits in well with the ambitions of Icelandic New Energy, which has said that the transition could be completed in 35 years.

-----------------------

[1] Sjálfbær þróun á nýrri öld, Stefnumörkun 2001-2020”; Umhverfisráðuneyti Íslands; 2001

[2] Iceland is slightly above the European average in emissions of carbon dioxide and was on the same level as Russia per capita in 1999.

[3] Dunn S.; The Hydrogen Experiment; World Watch November/December 2000; World Watch Institute.

[4] Árnason B, Sigfússon ThI;”Iceland – a future hydrogen economy”; International Journal of Hydrogen Energy 25; 2000.

[5] ; 09.04.2001

[6] ; press release “Iceland – A hydrogen based economy” ; 17-02-1999

[7] Árnason B, Sigfusson ThI, Skúlason JB; Creating a non-fossil energy economy in Iceland; Icelandic New Energy; March 2001

[8] Probably methanol-powered vessels, se endnote //´árnason, sigfusson// and personal communication from Skúlason.

[9] Árnason B, Sigfusson ThI, Skúlason JB; Creating a non-fossil energy economy in Iceland; Icelandic New Energy; March 2001.

[10] Skúlason JB; personal communication

[11] Árnason B, Sigfússon ThI;”Iceland – a future hydrogen economy”; International Journal of Hydrogen Energy 25; 2000.

[12] Árnason B; Personal communication; 12.04.2001

[13] Skúlason J.B.; “Iceland as the first hydrogen society”; Landsvirkjun; 2000

[14] Landsvirkjun; Annual report 1999.

[15] Árnason B, Sigfússon THI, Skúlason J B; “Creating a non-fossil energy economy in Iceland”, Icelandic New Energy; 2001.

[16] Árnason B, Sigfússon ThI;”Iceland – a future hydrogen economy”; International Journal of Hydrogen Energy 25; 2000.

[17] Árnason B, Sigfússon THI, Skúlason J B; “Creating a non-fossil energy economy in Iceland”, Icelandic New Energy; 2001.

[18] skraningarstofan.is

[19] One ferro-silicon plant and two aluminum smelters

[20] Raforkuspá 2000-2025; Orkuspánefnd; 2000

[21] Load factor is the average load divided by the maximum or peak load

[22] ðsemi/upp.htm; 01.03.2001

[23] Theoretically these could be wind-, solar-, geothermal- and/or hydro electricity plants

[24] Greenhouse Gases

[25] Global Warming Potential. GWP is an index showing the greenhouse effect of several gases. CO2 is the base for the index, i.e. one is the greenhouse effect of one kg CO2 over 100 years. All other GHG are then expressed in CO2 equivalents.

[26] hollver.is/mengun/GHL/losun.htm; 19.02.2001

[27]Sjálfbær þróun á nýrri öld, Stefnumörkun 2001-2020”; Umhverfisráðuneyti Íslands; 2001

[28] Halldórsdóttir K, Jóhannsson Á S; Tillaga til þingsálykturnar um sjálfbæra orkustefnu; Þskj. 302 – 274 mál; 126 löggjafarþing 2000-2001.

[29] Total energy generated for the general market was 2,9 TWh, with load factor of 65%. Power-intensive power plants had a load factor of 90%. (90 / 65 –1) * 2,9 = 1115 and the estimated need for the transition is 5 TWh.

[30] For the transition 5TWh are needed, 2 TWh is 40% of that.

[31] World Energy Assessment, United Nations Development Programme; 2000

[32] Thomas Kåberger Ecotraffik AB; personal communication.

[33] 2500 kWh/kW / 3600 kWh/kW

[34] 70%* 8,760 hours a year *3.5 MW

[35] Landfill gas contains about 60% methane at the site. For powering vehicles it has to be upgraded to a concentration of 97% methane.

[36] Ögmundur Einarsson; handouts from a conference held by ICETECH on 8. September 1999 at Grand hotel in Reykjavik

[37] Because the fuel cell is twice as effective as an IC engine,, about 9000 fuel cells can be powered by the same amount methane.

[38]The molecular weight of methane is about 16 g while carbon dioxide is approximately 48 g per mole. Replacing the hydrogen in one kg of methane with oxygen will therefore produce 7 kg of carbon dioxide.

[39] CH4 production is estimated at 4,500 tonnes, with a GWP of 21. For each tonne of CH4, 7 tonnes of CO2 are formed, with a GWP of 1; this means a reduction of 14 in GWP per tonne of CH4, or 63,000 tonnes in GWP, which is 1.8% of the total GWP emissions in Iceland.. It will also replace some fossil fuel, so the total reduction will be at least 2% in GWP.

[40] It can vary considerably between engines powered by diesel oil or gasoline.

[41] Average price for the general market 1990-1999; source ðsemi/upp.htm

[42] Average price for power-intensive industry 1990-1999; source ðsemi/upp.htm

[43] lv.is; 01.03.2001

[44] Árnason B, Sigfússon THI, Skúlason J B; “Creating a non-fossil energy economy in Iceland”, Icelandic New Energy; 2001.

[45] Icelandic technological R&D and educational institution (Iðntæknistofnun)

[46] Guðmundur Gunnarsson; Framleiðsla metanóls úr kolsýru frá Svartsengi; Iðntæknistofnun 1999.

[47] See Dams and Development, A New Framework for Decision-Making, The Report by the World Commission on Dams, EARTHSCAN, November 2000, London

[48] World Energy Assessment, United Nations Development Programme; 2000

[49] World Energy Assessment, United Nations Development Programme; 2000

[50] hagstofa.is

[51] World Energy Assessment, United Nations Development Programme; 2000

[52] Rúnarsson G, Orkunotkun og Fiskveiðar, Fiskifélag Íslands 2000.

[53] Emissions in 1999 amounted to 2,706,000 tonnes and the transport sector and fisheries accounted for 48% of this. If liquid fossil fuels are replaced entirely the reduction will be 2,000,000 ton.

[54] Tomas Kåberger, Ecotraffic AB, personal intervjuw.

[55] Azar C, Lindgren K, Andersson BA, Hydrogen or methanol in the transport sector; Department of Physical Resource Theory; Chalmers University of Technology; Sweden; 2000.

[56] At present, there are no ethanol production subsidies and the sales of ethanol vehicles are almost down to zero. Still the production of ethanol is greater than ever, due the fact that gasoline has to be blended with 22-24% ethanol.

[57] One person-kilometre is one person traveling one kilometre.

[58] City buses transform only 15-20% of the fuel energy into work.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download