Fuelling Debate - A Case for a Hydrogen Economy

This case study by Ryan Lambert, graduate student at the University of California at San Diego, under the supervision of Professor Philip M. Parker at INSEAD, looks at developments surrounding hydrogen-generated energy. It focuses on the possible benefits and market potential of such innovations as the pressure mounts from environmental and governmental groups for the investigation of new and cleaner energy sources for the future. The case examines the market opportunities and structures, and looks at the challenge of meeting consumer expectations of the new hydrogen infrastructure.

by Philip Parker, Ryan Lambert
Last Updated: 23 Jul 2013

Is America or Iceland best equipped for the future? If you were to take a long-term overview of energy resources, Iceland might be a surprisingly good bet. In addition to national security issues stemming from dependence on foreign oil, America currently faces international criticism as the world’s largest polluter of CO² emissions, as well as political pressure from domestic automakers and energy suppliers. Iceland, on the other hand, with its vast geothermal energy resources, is well positioned to exit the complex nexus of politics and struggle that oil now represents.

The country is on the fast track to the systemic use of hydrogen in all public, private and commercial vehicles by 2030. If all goes to plan, Iceland could become the Kuwait of the North – a country able to grow rich on hydrogen sales to Europe and the US. And it is not alone. Indeed, hydrogen fuel technology is already being implemented in several locations across the globe. Honda has recently leased the first of five fuel cell vehicles to the city of Los Angeles and DaimlerChrysler has just begun the deployment of up to 30 fuel cell buses to be used in 10 European cities. By US government estimates, current research funding and private partnerships will make it practical and cost-effective for a large number of Americans to choose to use hydrogen fuel cell vehicles by 2020.

All that is required to create the hydrogen energy infrastructure is a scaling up from the existing hydrogen industry. But is this easier said than done? Can and will businesses and government work to achieve this? A few companies, like Ford Motor Co. and BMW, have plans to introduce hydrogen cars with modified internal combustion engines in the near future. Though these will remain more ‘concept cars’ than production models, they represent cost-effective bridging technology to speed the development of an essential hydrogen infrastructure, providing detailed information about the vehicle’s performance and engineering, as well as testing market acceptance of this technology by the public.

Yet, from an industry standpoint there continues to be cost, infrastructure and value chain issues. Furthermore, international codes and standards need to be developed. Should automakers develop bridging technologies or wait for cost-effective fuel cells to arrive? Can companies begin implementation in niche markets or should they wait for government assistance to capture larger shares of consumer markets? Most critical of all, where will the profitable market opportunities emerge? Will citizens be skeptical about new technologies? Are they willing to see their tax dollars marked for industry subsidies? Will the new hydrogen infrastructure offer the performance, safety, and convenience required to meet consumer expectations?

This case study by Ryan Lambert, graduate student at the University of California at San Diego, under the supervision of Professor Philip M. Parker, the Eli Lilly Chaired Professor of Innovation, Business and Society at INSEAD, examines if and how those involved can make it work.

INSEAD 2003

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