152 R. M. URIU
buy an FCEV; but until there are enough FCEV’s on the road, companies
will not want to build costly HRS. Until this chicken and egg dilemma is
solved, auto companies will not be able to produce at a scale large enough
for them to lower vehicle production costs.
Another set of obstacles involves the difficulty of producing and transporting green hydrogen. While hydrogen is the most abundant element
in nature, it must be extracted from other elements through processes
that are costly and can be energy intensive. Most of today’s hydrogen
is derived from fossil fuels, especially methane, and so this is not yet a
truly green resource. More and more companies are using electrolysis
to produce green hydrogen, but the process is still expensive. Gaseous
hydrogen is not dense, so transporting and storing it in this form is difficult and costly, and newer processes to make hydrogen denser or more
easily transported are still complex and expensive (Romm 2004; Zubrin
2007).
Even if the industry can solve some of these obstacles, it will not
succeed unless it can solve all of them simultaneously. If even one link
in the chain fails, the entire approach is likely to fail. For instance, even
if demand rises, firms might not be able to lower prices enough to be
competitive. Even if production increases, the industry might not be able
to produce enough hydrogen at a low enough cost, and so on. The list
of potential bottlenecks is long. 2
Even if these technical issues can be solved, the industry would
then need to achieve commercial viability, which I define as a selfsustaining market where an industry is able to thrive without the need
for government support or subsidies. To achieve this, the industry will
need to produce and sell at a large enough scale so that production costs
can be lowered. Commercial viability thus presents a chicken and egg
dilemma: until products reach a level of demand where companies can
mass produce, costs will remain high; but products will never be in high
demand if they remain too costly. Further, firms will see the possibility of
profits only after this dilemma is solved; until then, they will be reluctant
to invest in a risky industry.
This industry is thus a classic case of a “market failure,” in which there
is a disconnect between private incentives and public needs. Faced with
technological obstacles, high costs and the likelihood of failure, firms will
not have an incentive to make the needed investments in R&D or product
development. This may be especially true when it comes to technologies
buy an FCEV; but until there are enough FCEV’s on the road, companies
will not want to build costly HRS. Until this chicken and egg dilemma is
solved, auto companies will not be able to produce at a scale large enough
for them to lower vehicle production costs.
Another set of obstacles involves the difficulty of producing and transporting green hydrogen. While hydrogen is the most abundant element
in nature, it must be extracted from other elements through processes
that are costly and can be energy intensive. Most of today’s hydrogen
is derived from fossil fuels, especially methane, and so this is not yet a
truly green resource. More and more companies are using electrolysis
to produce green hydrogen, but the process is still expensive. Gaseous
hydrogen is not dense, so transporting and storing it in this form is difficult and costly, and newer processes to make hydrogen denser or more
easily transported are still complex and expensive (Romm 2004; Zubrin
2007).
Even if the industry can solve some of these obstacles, it will not
succeed unless it can solve all of them simultaneously. If even one link
in the chain fails, the entire approach is likely to fail. For instance, even
if demand rises, firms might not be able to lower prices enough to be
competitive. Even if production increases, the industry might not be able
to produce enough hydrogen at a low enough cost, and so on. The list
of potential bottlenecks is long. 2
Even if these technical issues can be solved, the industry would
then need to achieve commercial viability, which I define as a selfsustaining market where an industry is able to thrive without the need
for government support or subsidies. To achieve this, the industry will
need to produce and sell at a large enough scale so that production costs
can be lowered. Commercial viability thus presents a chicken and egg
dilemma: until products reach a level of demand where companies can
mass produce, costs will remain high; but products will never be in high
demand if they remain too costly. Further, firms will see the possibility of
profits only after this dilemma is solved; until then, they will be reluctant
to invest in a risky industry.
This industry is thus a classic case of a “market failure,” in which there
is a disconnect between private incentives and public needs. Faced with
technological obstacles, high costs and the likelihood of failure, firms will
not have an incentive to make the needed investments in R&D or product
development. This may be especially true when it comes to technologies