FIGURE G-4 Estimated effects of the price of natural gas on the cost of hydrogen at plants of three sizes using steam methane reforming. Costs based on current technology. NOTE: SD = stream day.

However, this increase would not necessarily increase losses from the natural gas system.

Advantages and Disadvantages

There are several advantages to generating hydrogen from natural gas. Feedstock availability is quite widespread, since an extensive pipeline distribution system for natural gas already exists in the United States and natural gas is available in most populated areas of the country. Further, there is extensive commercial experience, and natural-gas-to-hydrogen conversion technology is widely used commercially throughout the world and is at an advanced stage of optimization in large plants. If centralized, large-scale natural gas conversion plants are built, CO2 can be captured for subsequent sequestration, although its separation and capture are probably not economically feasible with small, distributed hydrogen generators. Furthermore, the committee believes that small-scale reformers at fueling stations are one of the technologies most likely to be implemented in the transition period if policies are put in place to stimulate a transition to hydrogen for light-duty vehicles.

The primary disadvantages of using natural gas are that it is a nonrenewable, limited resource, and increasing amounts are projected to be imported in the future to meet U.S. market needs—which runs counter to the DOE’s goal of improving national security. Also, natural gas prices are volatile and are very sensitive to seasonal demand. Over the past 12 months, for example, the price has varied from $2.70 to more than $9.50/million Btu,14 and there has been an upward trend in the U.S. wellhead gas price since 1998. This variability becomes even more important given that SMR economics are sensitive to natural gas price.

Research Needs and the Department of Energy Program

Distributed generation of hydrogen from natural gas in fueling facilities could be the lowest-cost option for hydrogen production during the transition. However, the future cost of this option is uncertain, given the technical and engineering uncertainties and special requirements that demand priority attention in the DOE program, as it is advanced by contract research organizations.

Distributed generation of hydrogen as envisioned has never before been achieved because of two particular requirements: (1) the mass production of the thousands of generating units, incorporating the latest technology improve-

14  

See NYMEX Henry-Hub NATURAL GAS PRICE, available online at http://www.oilnergy.com/1gnymex.htm#year. Accessed December 10, 2003.



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