Hydrogen refueling station infrastructure roll-up, an indicative assessment of the commercial viability and profitability

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Hydrogen refueling station infrastructure roll-up, an indicative assessment of the commercial viability and profitability Ioan Iordache a,b,*, Dorin Schitea a,b, Mihaela Iordache c a

National Research and Development Institute for Cryogenics and Isotopic Technologies ICIT, Rm. Valcea, Romania Romanian Association for Hydrogen Energy, Rm. Valcea, Romania c National Research and Development Institute for Industrial Ecology INCD-ECOIND, Rm. Valcea, Romania b

article info

abstract

Article history:

The aim of this paper is to evaluate the roll-out of a hydrogen refuelling station (HRS)

Received 6 September 2016

infrastructure in Romania. The work contributes to a preliminary, indicative assessment of

Received in revised form

the commercial viability and profitability of a hydrogen refuelling station network roll-out.

19 December 2016

For this concrete case were provided scenarios with a 200,000 fuel cell electrical vehicles

Accepted 21 December 2016

(FCEVs) fleet and 150, 250 and 350 HRS. The results refer to: the annual number evolution of

Available online xxx

HRSs based on the inputs provided by user; the annual number evolution of FCEVs; annual total hydrogen sold, kg; annual capital expenditures on HES procurement (CAPEX); cash

Keywords:

flow after interest and debt payment representing the cash flow available for equity

Hydrogen infrastructure

holders; annual debt service coverage ratio (ADSCR); net present value (NPV) at the end of

Hydrogen mobility

period, key metric to assess the overall profitability of the investment. First scenario in-

Hydrogen refuelling station (HRS)

dicates positive values for net present value (NPV) that means it is commercial viable. For

Romania

this case a series of sensitive analyses has been realized. In the majority of this analyses NPV shows positive values and ADSCR is greater than 1.1. The analysis of the roll-out of a hydrogen refuelling station network in Romania indicated that the main negative influence of the infrastructure development program seems to be the unfavorable economic conditions than technical issues. © 2017 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved.

Introduction The road transport sector is heavily dependent on fossil energy sources. The fossil fuels are a non-renewable natural resources and are the cause for major concern. The greenhouse gas emissions from the mobility sector are severe, along with emission of others atmospheric pollutants: nitrogen

oxides (NOx), volatile organic compounds (VOC) or carbon monoxide (CO). The direct carbon dioxide emissions (CO2) from the transport sector are second after electricity at the both global and European level [1]. The electrification of mobility is an indispensable element of a wider strategy for achieving the reduction of greenhouse gas emissions. The fuel cell electrical vehicles (FCEVs) are

* Corresponding author. National Research and Development Institute for Cryogenics and Isotopic Technologies ICIT, Rm. Valcea, Romania. Fax: þ40 250732746. E-mail address: [email protected] (I. Iordache). http://dx.doi.org/10.1016/j.ijhydene.2016.12.108 0360-3199/© 2017 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved. Please cite this article in press as: Iordache I, et al., Hydrogen refueling station infrastructure roll-up, an indicative assessment of the commercial viability and profitability, International Journal of Hydrogen Energy (2017), http://dx.doi.org/10.1016/j.ijhydene.2016.12.108

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Nomenclature ADSCR CAPEX CO CO2 FCEV FCH2 JU GIS HRS H2ME NPV RES NOx VAT VOC

annual debt service coverage ratio capital expenditure carbon monoxide carbon dioxide fuel cell electrical vehicle Fuel Cell hydrogen 2 Joint Undertaking Geographic Information System hydrogen refuelling station Hydrogen Mobility Europe net present value renewable energy sources nitrogen oxides value added tax volatile organic compounds

considered the most promising technology next to battery and plug-in hybrid vehicles for meeting the emission targets [2]. In various countries across the world and European Union also, hydrogen records an increased recognition as fuel for transportation and energy carrier. The hydrogen-based mobility faces two challenges: developing a considerable amount of cost-competitive FCEVs and an infrastructure for hydrogen production, distribution and refueling. The development of an adequate hydrogen refueling station (HRS) network is necessary to meet the expectations and needs of the FCEV owners. The implementation of hydrogen supply infrastructure will require considerable capital expenditures and holds large risks and uncertainties. The market development rather than technology development is currently considered to be the main barrier for the roll-out of FCEVs. The hydrogen refueling infrastructure will gradually expand from densely populated areas, major cities and highway, into less urbanized areas and eventually rural areas. The critical phase consists in bridging the gap between isolated demonstration clusters and a pre-commercial stage. In the initial stage, the hydrogen refueling infrastructure will face underutilization of the stations capacity due to small number of FCEVs. There are general expectations that will take at least 10 years from the start of development for HRS operations to become cash-flow positive [3]. The implementation of hydrogen in mobility sector offer multiple benefits to other sectors also: energy, residential, industry, gas networks, etc. The introduction of FCEVs and afferent refueling infrastructure will improve the utilization and efficiency of existing electricity grids and development of renewable energy sources (RES) [4]. The diversity of hydrogenbased mobility is not limited only to integrated RES-hydrogenelectricity networks for decarbonizing the economic sectors [5,6]. Even though there are still many discussions on this subject otherwise, the installed nuclear power capacities can continue to work in profitable conditions without curtailments, supplying hydrogen for mobility and power-to-gas [7]. Also, the conversion of gas network to transport hydrogen or hydrogen in mixture with natural gas will offer potential benefit for integrated systems [8]. The introduction of fuel cell electric vehicles can contribute to mitigate pollutant emissions from the light duty vehicle, especially the atmospheric

concentrations of ozone and fine particulate matter [9]. Regarding hydrogen-based mobility, the public largely agree that the environment is beneficiary of substituting hydrogen for oil in mobility, but costs of FCEVs seemed prohibitive to some [10]. The people accept to share the responsibility for environmental damage and a small portion accepts that for a transient period hydrogen to be produced from natural gas [11]. Other research shows that public attitudes are more open and informed [12,13]. The hydrogen mobility has strong supporters at international level and here is included Japan, South Korea, USA, and at the EU level: Germany, UK, France and some Nordic countries [14e16]. But in the last period, the stakeholders from others countries also became interested by hydrogen mobility. It is worth mentioning the effort made by the scientific community from these countries to study and communicate in the scientific literature the hydrogen mobility potential. Here it was inserted some example in alphabetical order. Boudries et al. have realized a study about hydrogen as a fuel in the transport sector in Algeria [17]. Rahmouni et al. used a combination of spatial data in a Geographic Information System (GIS) with a techno-economic models for future prospect of hydrogen demand in the mobility sector for the same country [18]. Australia present a unique opportunity for hydrogen use in road transport applications: vast renewable and nonrenewable energy resources that can be used for hydrogen production, decline of oil production, very low population density and need for vehicles with long range capability, issue that is problematic for battery vehicles, a growing truck and bus fleets and need to find a way to decrease the greenhouse gas emissions from the transport sector [19]. Ajanovic has analyzed the future utilization of hydrogen from RES, an alternative fuel in transport in Austria, in a dynamic framework until 2050 [20]. Posso et al. estimate the potential benefits for hydrogen production via electrolysis from hydropower and the use of hydrogen in fuel cell vehicles for public transport in Ecuador [21]. Ahmed et al. reviewed the prospectus of introducing hydrogen as fuel for transport in Malaysia in response to climate change and energy security with focus on sustainable mobility [22]. The Norwegian energy system is high dependently from hydropower electricity, a substantial reduction of greenhouse gases emissions has to be obtained from the transport sector. For this specific situation, Rosenberg et al. analyzed the feasibility for the market penetration of FCEVs on a long term, 2050 [23]. South Africa is an active country in the international hydrogen community and wants to accelerate its presence in hydrogen economy. The hydrogen refueling infrastructure is a topic addressed by researchers from this country also [24]. Sweden is an active country in Hydrogen Mobility Europe (H2ME), a pan-European flagship project that will run until 2020. In this condition the Swedish research groups have an active presence with studies regarding energy and economy analysis about renewable hydrogen utilization in road transport sector [25e27]. In the present work, the study is limited to analysis of hydrogen refueling station (HRS) network as part of hydrogen refueling infrastructure for an East European country. The case study can be considered as a model for any similar country that has experienced a decline of oil production and has become a net importer of fuel. The scope is to estimate the

Please cite this article in press as: Iordache I, et al., Hydrogen refueling station infrastructure roll-up, an indicative assessment of the commercial viability and profitability, International Journal of Hydrogen Energy (2017), http://dx.doi.org/10.1016/j.ijhydene.2016.12.108

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key performance indicator for the business cases referring to HRS roll-out. Others details about cost, durability and performances challenges associated with the use of the hydrogen and fuel cell for transport applications were highlighted in the literature [28]. Also, the literature have comparative examples for hydrogen refueling stations with different capacities per day or different hydrogen generation technologies [29]. Specific to HRS infrastructure, in the early construction phase, the hydrogen transport from production to distribution may be a large cost factor [30]. Finally, but not at the last, the one important advantage for hydrogen mobility is the current progresses for fuel cell technology. There are numerous technological advances and successful commercial endeavors during the past two decades [31]. There are a number of assumptions, approximate estimates and forecast subjects to uncertainties. The generated results are indicative and do not replace any much more in-depth analysis. The implementation of hydrogen into the Romania mobility sector offers the possibility to provide a number of advantages: sustainable development, valorization of local resources and economic competitiveness. The synergy with energy market and integration with renewables are positive elements and were discussed by authors in previous papers [32,33].

The Romanian mobility landscape Romania is a country in Southeast Europe with 19.94 million inhabitants, and is the seventh most populous member state of the European Union. The scenarios for a hydrogen economy, in general, and for a hydrogen vehicle fleet and refueling infrastructure, take in consideration a series of issues such as: the presence of a national policy or program, producers and consumers interests, actual infrastructure of transport and refueling, costs, trends, similarities with others markets, aspects regarding integration in European and international market, etc. A part of these aspects will be discussed in next paragraphs. The Romanian fleet increased from 5,500,644 vehicles in 2007 to 6,600,325 vehicles in 2015. From this amount, the number of cars varied from 5,541,718 to 5,153,182 for the same period of time, and also the number of new cars, up to 2 years old, has varied between 124,550, as minimum, and 883,687, as maximum. The number on new cars decreased constantly until in year 2013, but in the last two years this number constantly increased. The cost of FCEVs will decrease from 200,000 Euro, as reference price in 2014 to 70,000 Euro in 2017, and less than 30,000 Euro after 2030 [34,35]. If considering fleet in Romania, we found that the cars with prices in the limits of these values represent approximately 0.1% from total cars and slightly less than 5% of new cars. These analyses are usefully for estimations of the potential volume of FCEV's fleet. The hydrogen for mobility is a long term investment and requires a concomitant development of both FCEVs and HRS network, this is not a new affirmation, and it can be found in many scientifically reviews [36e39]. The nucleation centers for this development will be big cities where the market is ready to absorb this type of investments. In this condition is usefully to have some elements for comparisons with

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Bucharest, the capital of Romania, the biggest city from the country, with a population of almost two million inhabitants. The number of cars in Bucharest increased from 869,824 vehicles in 2007 to 956,664 in 2015, which represents a proportion of 19e25% from total number of cars from Romania. Regarding the proportion of the new cars, from Table 1, can be observed a very higher values, between 45% and 61%, for Bucharest, comparing to the total amount from Romania. If these numbers are added to the amount of the metropolitan area and the other cities around it, the proportion of the new cars can increase with other 5e10%. The Central and East European countries are relative strongly differentiated in terms of maturity of their e-mobility market and there is no best-practice example. Romania is characterized by a low customer awareness (demand) and almost non-existent supply. Romania have a high score in the operating environment category compared with neighboring countries. This index is generated especially by the number of big cities with more than 100,000 inhabitants. There are also several players interested in e-mobility and government setup, a special working group for development of e-mobility in Romania, subsidies for electrical vehicles purchases was recently introduced, also [40]. In Romania 965 electrical and hybrid vehicle were purchased until 2015 inclusive: 234 in year 2013, 236 in year 2014 and 495 in year 2015. Although, increases from year to year, this number is not satisfactory yet [41]. The first electrical vehicles distributed in Romania were: Citroen-C-Zero, Mitsubishi i-MiEV, Renault Kongoo Z.E. and Renault Fluence Z.E [42]. From statistical data, was found that the average age of Romania's fleet in 2013 is around 10.6 age, and this value was increasing for period 2009e2013 [43]. These correspond for the period when the number of the new cars purchased in Romania decreased (Fig. 1). Because in the last years the number of purchased new car increased, these values are expected to turn accordingly. In a much documented study was realized the assumption that the FCEVs penetration of European fleet will be situated between 5% and 50% in 2050 [44]. At the level of European hydrogen community there is no doubt that hydrogen will play an important role in the future energy scenario [45]. Hydrogen mobility struggles to impose due to the difficulties in terms of infrastructure diffusion which is tightly connected with the investment effort required in an unstable economic framework [46]. Taking in consideration this study and the specific data, the authors prescribe that proportion of FCEVs will be situated between 5% and maximum 15% for Romania in 2050. The penetration rate is approximate with 0.1% for the immediate period of time 2020/2025. These assumptions take into account the proportion of new cars, the cost evolution of FCEV and the proportion of this cost-segment in the current national market and the nucleation role of Bucharest on the future electro-mobility market.

Methodology For this work was used a methodology from a study for Fuel Cell Joint Undertaking (FCH2 JU) and promoted by Hydrogen Europe [47]. The tool, detailed described into anterior indicated

Please cite this article in press as: Iordache I, et al., Hydrogen refueling station infrastructure roll-up, an indicative assessment of the commercial viability and profitability, International Journal of Hydrogen Energy (2017), http://dx.doi.org/10.1016/j.ijhydene.2016.12.108

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Table 1 e The Romanian fleet, number of cars and new cars in Romania and the capital city, Bucharest. Year

Romanian fleet

No. of cars

New cars

2007 2008 2009 2010 2011 2012 2013 2014 2015

4,500,644 5,071,697 5,323,960 5,418,989 5,482,654 5,710,773 5,985,085 6,270,615 6,600,325

3,541,718 4,013,721 4,230,635 4,307,290 4,322,951 4,485,148 4,693,651 4,905,630 5,153,182

805,642 883,687 740,946 510,934 296,264 149,327 124,550 197,741 209,676

Fig. 1 e The average age of the fleet in Romania.

references, is an instrument designed to display key business case outputs of roll-out for hydrogen refueling stations. The tool is based on a number of assumptions, approximate estimates and forecast subjects to uncertainties. The output results are computed based on the input parameters entered by the authors. The instrument contributes to a preliminary, indicative assessment of a commercial viability of the hydrogen refueling infrastructure roll-out in different countries. The generated results are indicative and do not replace any assessment of the commercial viability of potential hydrogen refueling station (HRS) roll-out scenarios based on a much more in-depth analysis of the respective specific national markets. The tool has initiated by joint efforts of a consortia of industrial players from the vehicle, stationary technology and fuel sectors to explore option for putting into place HRS network in different countries across Europe. The realization of a minimal and critical HRS network is an essential precondition for kick-starting hydrogen-based mobility. The methodology has selected three parameters which are likely to influence the specific or national HRS rollout business cases: (1) population density (inhabitants/km2), a higher population density results in a higher potential number of FCEVs per HRS, which can improve the station utilization; (2) vehicles density (number of cars per 1000 inhabitants), a higher vehicle density also results in a higher potential number of vehicles per refueling station; and (3) new car purchased prosperity (annual number of new car registrations per 100 inhabitants), a higher number of new cars purchases implies that the FCEV market uptake can take place faster. These parameters were summarized in a simple index which

No. of car in Bucharest (%) 869,824 985,714 980,593 934,932 901,014 892,551 900,707 923,805 956,664

(25%) (25%) (23%) (21%) (21%) (20%) (19%) (19%) (19%)

New cars in Bucharest (%) 396,715 (49%) 444,567 (50%) 364,736 (49%) 235,281 (46%) 133,123 (45%) 84,879 (56%) 76,460 (61%) 117,159 (59%) 123,629 (69%)

has achieved as ranking of EU member states. According to the index, countries were divided into four groups. A high position in the ranking indicates a high population and vehicle density, and a high level of new car purchases, which means more favorable conditions for the hydrogen refueling infrastructure roll-out. The resulted indexes created a map of the HRS infrastructure potential across the UE. Romania is situated in the lower part of the classification that means not favorable pre-conditions for the HRS roll-out at this moment. The input parameters are divided in three patterns. Two of them are optional and are referring at the initial HRS network, length of the national highway network and number of cities from country by population size ranges, and the second determines the ramp-up HRS network curves, when the user requires to enter the number of HRS and FCEV. The user sets the number of HRS for initial basic network, first year, and the number of HRS that should be in operation at the end of the period of 15 years. The number of HRS is held constant for first five years, this is based on idea that utilization rate will be lower in first part of infrastructure development due to the low number of the hydrogen vehicles. The user also must sets the number of FCEV for the first year of the vehicle roll-out and the end of development period, the year 15. It makes the mention that the first year of the vehicle roll-out is the year 2 of the development period, the sales are supposed to start after will be put in place a minimum number of HRSs. The third category of input parameters must be completed in order to perform the calculations and provide the resulted outputs. The following parameters have to be entered: management cost for program, annual basis, in Euro; cost equity, in percent [%]; cost debt [%]; share of equity financing of asses [%]; share of debt financing of asses [%]; applicable corporate tax rate [%]; HRS procurement cost in year 1, in Euro; average annual distance driven per FCEV, in km; value added tax (VAT) [%]; and average national Diesel retail price in year 1, in Euro. The methodology assumptions: the HRS roll-out program is implemented through a joint venture partnership characterized by shared ownership, shared returns and risks, and shared governance. Debt issuances and repayment are based on a projected financing structure; capital structure is based on yearly CAPEX financing of a certain percentage split of equity debt. Debt assumed to be issued each year for CAPEX financing with a 12-year maturity and equal annual redemption payments. Annual interest payment start from first year, there is no grace period assumed. Average fuel consumption of FCEV decreases over time. A life time of HRS is assumed to be 15 years and depreciation is computed accordingly.

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Hydrogen sales price is assumed to be 10% below cost for Diesel, on a per km basis, to ensure competitiveness. Diesel is subject to fuel tax and VAT, hydrogen sales are exempt from fuel tax, but are subject to VAT. This tool provides an overview of key performance indicator for the business cases referring to HRS roll-out projects in different countries, depending in particular on the size of the HRS network and the FCEV roll-out curve. The assessment serves as an analytical step towards more in-deep detailed discussions on the potential pathways for development and financing the hydrogen refueling infrastructure and HRS network. The purpose of this methodology is to provide an indicative landscape of the commercial challenges of rolling-out a hydrogen refueling infrastructure in different EU countries. The detailed list results consist of: (1) the annual number evolution of HRSs based on the inputs provided by user; (2) the annual number evolution of FCEVs; (3) annual total hydrogen sold, kg; (4) annual capital expenditures on HES procurement (CAPEX); (5) cash flow after interest and debt payment representing the cash flow available for equity holders; (6) annual debt service coverage ratio (ADSCR), indicator typically evaluated by banks when they assess the bankability of a project measures, the extent to which cash flows are sufficient to cover interests payment and debt repayment, amount above one indicates that the flows are enough to meet service obligations; (7) net present value (NPV) at the end of period, key metric to assess the overall profitability of the investment, values greater than zero indicates that the project is commercial viable; and (8) equity and debt ratio, in percent at the end of period.

The hydrogen refueling stations network infrastructure in Romania, a case study The success commercialization of FCEVs and creation of a mature market imply the development of a HRS network with a minimum number of stations in initial stage that must be increased constantly in the pre-commercial stage, in reference to a desired number of vehicles on the street. There will be the next key challenges: (1) extremely high investment and an initially low rate of utilization, (2) long time for the capital recovery, (3) high risk regarding the expected number of FCEVs and (4) decrease in revenues expected in the maturity stage market. The hydrogen refueling stations network infrastructure development is a vital element for hydrogen mobility boosting. The case studies can differ from country to country and the results depend by the specific situation. But, nothing replaces a thorough and inclusive assessment of a national hydrogen strategy [47]. The existing national and/or European demonstration projects will have deployed approximately 70 HRS across Europe at the end of 2016: 2e4 in Netherlands, 10 in UK, approx. 20 in Scandinavia countries and approx. 50 in Germany, more details are indicated in Table 2 [48].

Roll-up scenarios for Romania For Romania the authors proposed a basic scenario with a minimum three HRS in first year and increase constantly for a

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period of 15 years. The number of FCEV increases also from 5000 to a 200,000 for a 15-year program. Regarding the number of HRSs the authors analyzed the number of HRS proposed for Germany and UK and those proportions from total numbers of the existing refuelling stations. In above mentioned countries the proportion of proposed number of HRS is situated between 6% and 14% from total number of refuelling stations. In Romania there are approximately 2600 refuelling stations [49]. If it is extended, the proportion of the two countries mentioned above to the number of refuelling stations from Romania, will be between 150 and 350 HRSs, with an average of 250 HRSs. In the others words, the authors proposed three scenarios for Romania. In all cases the initial number of HRS is 3 and the final numbers are: 150, 250 and 350. The remaining conditions are the same: number of FCEVs at the end of year 15th period are 200,000; the management cost for the joint venture action is 1.5 M Euro per annum in first two years, 1.0 M Euro annually for next three years, 0.6 M Euro annually for next two years, 0.3 M Euro annually for others three years, 0.1 M Euro annually for others three years and negligible in the last part of the program; the cost of equity is 12%; the cost of debt is 7%; the share of equity financing of assets in 30% and the share of debt financing of assets in 70%; the applicable corporate tax rate is 30%; the initial HRS procurement cost is 0.85 M Euro; annual procurement price reduction of HRS is 0.6%; annual average distance driven per FCEV is 11,000 km; VAT is 24% and Diesel average price, including tax, is 1.45 Euro/liter, Table 3. The business case results for scenario with 150 HRSs developed in 15 years and 200,000 FCEVs are presented in Table 4. The hydrogen mobility ramp-up parameters, HRS and FCEV, increase moderate in the first years of the program and accelerate in the last part. The total quantity of hydrogen sold at the end of program will be 16,456 tonnes, from which 3965 tonnes (24% from total) are expected to be sold in the last year. The cash flow after interest and debt payment is expected to be positive starting with 6th year. Another important parameter for the project bankability is annual debt service coverage ratio (ADSCR). It is one of key parameter indicator evaluated by banks when they assess an investment. It measures the extent to which cash flows are sufficient to cover the interest payments and debt repayments. The values greater than one indicate that the cash are high enough to meet debt service obligations, and values greater than 1.1 indicate that a very basic bankability criterion has been met. The ADSCR meets both conditions starting in the sixth year. The net present value (NPV) is a key metric to assess the overall profitability of an investment from an equity investor's point of view. It represents the difference between discounted cash in-flows and out-flows over the project's entire lifetime. The values greater than zero indicate that the investment is profitable. As long as accumulated discount cash flow after interest payment and debt repayment are lower than the accumulated discounted equity investments the NPV is negative. The NPV is zero where the two curves intersect, and starting with that year this indicator is positive. Fig. 2 give a graphical illustration of the NPV's key components, and for above discussed scenario NPV is positive starting with the year 13th. The results for the second business case scenario for a number of 250 HRSs are indicated in Table 5, excepting the

Please cite this article in press as: Iordache I, et al., Hydrogen refueling station infrastructure roll-up, an indicative assessment of the commercial viability and profitability, International Journal of Hydrogen Energy (2017), http://dx.doi.org/10.1016/j.ijhydene.2016.12.108

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Table 2 e Scenarios on total hydrogen fueling stations in EU countries. Year

2015e2020 2020e2025 2025e2030

Country Austria

Denmark

France

Germany

UK

Netherlands

Sweden

15 45 100

11 -//-//-

52 300 600

150 450 1.000

65 330 1.150

30 -//-//-

6 -//-//-

Table 3 e The inputs parameters for Romanian business case, basic scenario with 150 HRSs at the end of program. No. 1 2 3 4

5 6 7 8 9 10 11 12 13 14

Input parameters

Value

Duration of Joint Venture program, years Number of operational HRS (year-1; year-15) Number of FCEVs on road (year-2; year-15) The management cost for the joint venture action, M Euro (year-1; year-15) Cost of equity, % Cost of debt (interest rate), % Share equity, % Share debt, % Applicable corporate tax rate, % Annual procurement price reduction, % HRS procurement cost, M Euro Average annual distance driven per FCEV, km VAT, % Diesel retail price, Euro per liter

15 3; 150 5000; 200,000 1,5; 0

12.00 7 30 70 30 0.6 0.85 11,000 24 1.45

number of HRSs, the input parameters are identical like in first scenario. Similar, like in the first scenario, the ADSCR is above 1.1 starting with the sixth year. But the NPV is negative, which means, overall, the program is not profitable. One cause can be the insufficient number of FCEVs and the amount of hydrogen sold does not provide sufficient income to cover all the program expenses. Indeed, if the number of FCEV is increased at 300,000 units in 15 years of the program, the amount of hydrogen sold increases from 16,456 tonnes to 24,684 tonnes. In those conditions the NPV increases from 6881 M Euro to 7115 M Euro, and is positive starting with the year 13th, too.

The results for the third business case scenario for a number of 350 HRSs are indicated in Table 6, excepting the number of HRSs, the input parameters are identical like in first two scenarios. Similar to first scenarios, the ADSCR is above 1.1 starting with the sixth year, and, similar to second scenario, the NPV is negative, that means, overall, the program is not profitable. The cause is also the insufficient number of FCEVs. If the number of FCEV is increased to 400,000 units in 15 years of the program, the amount of hydrogen sold increases from 16,456 tonnes to 32,912 tonnes and the NPV increases from 18,047 M Euro to 9324 M Euro. It is a positive starting with the year 13th, too. The variant where the number of FCEV is increased to only 300,000 results are negative as well. The above indicated result shows the demand of correlation between the hydrogen fleet and refuelling infrastructure. There must be enough HRSs to cover a certain number of FCEV, but from the point of view of profitability the number of HRSs may be also limited. There were analyzed three business case scenario with 150, 250 and 350 HRSs. The results have indicated that only the first is commercially available, NPV > 0. In the next paragraphs are realized a series of sensitive investigations based of the same methodology with different input parameters, varied in order to check the commercial viability of specific business case.

The sensitive analyses, one variable For the Romanian basic scenario with 150 HRSs there are realized some supplementary sensitive analyses. One sensitive analyze verifies the situation when the number of sold FCEVs decreases by 15%, 30% and 50% at the end of the program, Table 7. For first decrease, the program is commercially available, NPV > 0, but for last two this parameter is negative. In contrast, ADSCR has positive values for all three situations in the last year of program. This means that the number of

Table 4 e The business case result for Romanian, basic scenario with 150 HRSs at the end of program. Indic.

Year 1

HRS 3 FCEVs, thousands 0 0 Total H2 sold, t CAPEX, M Euro 2.55 Cash flow, M Euro 1.96 ADSCR 6.16 NPV Equity ratio (end of period) Debt ratio (end of period)

2

3

4

5

6

7

8

3 5 463 0 1.28 4.85

3 6.6 607 0 0.94 2.73

3 8.8 795 0 0.75 2.1

3 11.7 1041 0 0.5 1.2

4 15.6 1372 0.83 0.26 1.83

6 20.6 1809 1.64 0.87 2.84

9 27.4 2384 2.45 1.82 3.55

9 13 36.5 3142 3.24 2.79 3.7 8174 M 33.8% 66.2%

10

11

12

13

14

15

19 48.4 4142 4.83 2.99 2.99 Euro

28 64.3 5458 7.20 5.29 3.38

41 85.4 7193 10.34 9.11 3.82

61 113.4 9479 15.82 14.12 4.04

90 150.6 12,491 22.80 22.03 4.19

150 200 16,456 46.88 30.11 3.58

Please cite this article in press as: Iordache I, et al., Hydrogen refueling station infrastructure roll-up, an indicative assessment of the commercial viability and profitability, International Journal of Hydrogen Energy (2017), http://dx.doi.org/10.1016/j.ijhydene.2016.12.108

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Fig. 2 e The evolution of NPV, basic scenario with 150 HRSs at the end of program.

Table 5 e The business case result for Romanian, basic scenario with 250 HRSs at the end of program. Indic.

Year 1

HRS 3 FCEVs, thousands 0 Total H2 sold, t 0 CAPEX, M Euro 2.55 Cash flow, M Euro 1.96 ADSCR 6.16 NPV Equity ratio (end of period) Debt ratio (end of period)

2

3

4

5

6

7

8

9

10

11

12

13

14

15

3 5 463 0 1.28 4.85

3 6.6 607 0 0.94 2.73

3 8.8 795 0 0.75 2.1

3 11.71 1041 0 0.5 1.2

5 15.6 1372 1.65 0.1 1.25

8 20.66 1809 2.46 0.56 1.86

12 27.44 2384 3.26 1.35 2.40

19 36.45 3142 5.67 1.85 2.20 6881 34.2% 65.8%

30 48.41 4142 8.86 2.40 1.97 M Euro

47 64.30 5458 13.61 3.24 1.86

73 86.38 7193 20.64 5.60 1.96

114 113.4 9479 32.42 8.28 1.93

177 150.6 12,491 49.52 12.39 1.89

250 200 16,456 57.04 19.08 1.98

FCEV is a critical element and a severe decrease (30e50%), in term of potential units to be sold, has disastrous effects on the program. Another analyze studies the influence of the average annual driving distance of a FCEV, in initial case, when the input parameter was 11,000 km per year. Also were taken into account three supplementary values for 10,000, 12,000 and 14,000 km per year. For all situations the programme is commercially viable. The first is a non-favorable situation and the last two generate additional income, Table 8. This means that program is still viable for a moderate drop of hydrogen demand (9%).

Table 7 e Sensitive analyses, the decreases of number of FCEVs sold. Variable: no. of FCEVs in 15th year Initial 15% 30% 50%

200,000 170,000 140,000 100,000

NPV (M Euro)

ADSCR in 15th year

8174 3796 700 6963

3.58 2.99 2.38 1.59

Table 6 e The business case result for Romanian, basic scenario with 350 HRSs at the end of program. Indic.

Year 1

HRS 3 FCEVs, thousands 0 0 Total H2 sold, t CAPEX, M Euro 2.55 Cash flow, M Euro 1.96 ADSCR 6.16 NPV Equity ratio (end of period) Debt ratio (end of period)

2

3

4

5

6

7

8

3 5 463 0 1.28 4.85

3 6.6 607 0 0.94 2.73

3 8.8 795 0 0.75 2.1

3 11.7 1041 0 0.5 1.2

5 15.6 1372 1.65 0.1 1.25

8 20.6 1809 2.46 0.56 1.86

13 27.4 2384 4.08 1.19 2.13

9

10

11

21 34 55 36.5 48.41 64.30 3142 4142 5458 6.48 10.47 16.81 1.53 1.72 2.71 1.90 1.62 1.61 18,047 M Euro 33.8% 66.2%

12

13

14

15

89 85.38 7193 27.05 3.84 1.54

143 113.4 9479 42.70 5.07 1.45

230 150.6 12,491 68.39 6.48 1.36

350 200 16,456 93.76 7.85 1.29

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Table 8 e Sensitive analyses, the influence of the average annual driving distance of a FCEV. Variable: average annual driving distance of a FCEV Initial (0%) 9% þ9% þ27%

NPV (M Euro)

8174 4863 11,471 18,059

3.58 3.22 3.95 4.37

In above analyzed situations for cases are discussed technical issues, as a result of some modified financial issues, like: HRS procurement cost, cost of debt and VAT. The HRS procurement cost was varied in both directions, decreasing at 0.8 M Euro, and increasing at 0.9 M Euro, respectively 1.0 M Euro, and the results are shown in Table 9. The simulation shows that with the HRS procurement increasing until moderate limits (18%), the investment becomes less profitable, but still attractive from a commercial perspective. Another parameter taken into economic studies is the interest rate with initially value of 7%. In Table 10 are proposed other tree values 8%, 10% and 12%. For all situations the NPV has positive values, but these decreases with the increase of the interest rates. The same can be affirmed for ADSCR, after modifications of initial interest rate it keeps the values between 3.40 and 2.83. The simulation denotes that with debt increasing to moderate limits (12%) the investment becomes less profitable, but still attractive from a commercial perspective. The accelerated market introduction of hydrogen technologies can be done through incentive measures. The fiscal facilities are one of the options, and decrease or cancellation of VAT is the most convenient example. In Table 11 were analyzed the effects of VAT, the VAT values are present and past values in Romania. The most important result is recorded for the year with positive NPV moves from the final to the middle of the program, this means that a favorable economic environment help such type of program.

Table 9 e Sensitive analyses, the HRS procurement cost variation.

Initial (0%) 6% þ6% þ18%

Variable: VAT

ADSCR in 15th year Initial VAT Decreasing

11,000 10,000 12,000 14,000

Variable: the HRS procurement cost (M Euro)

Table 11 e Sensitive analyses, VAT decreasing.

NPV (M Euro)

ADSCR in 15th year

8175 9134 7.214 5944

3.58 3.39 3.40 3.10

0.85 0.80 0.90 1,00

24% 19% 9% 0%

Variable: cost of debt Initial Increased interest rate

7% 8% 10% 12%

NPV (M Euro)

ADSCR in 15th year

8174 7768 6957 6147

3.58 3.40 3.08 2.83

ADSCR in 15th year

Year with NPV>0

8174 12,644 22,742 33,480

3.58 3.95 4.77 5.66

13th 11th 9th 7th

The sensitive analyses, multiple variables Up to this point of sensitivity analysis were varied individually, one by one, different initial conditions for scenarios with 150 HRSs. In the next paragraphs the authors have modified simultaneous more parameters. The analyses imply the most adverse conditions of the options mentioned above: 10,000 km average annual distance driven per FCEV, 1.0 M Euro HRS procurement cost and 12% interest rate. These unfavorable aspects are counterbalanced in our analyses by a friendly market approach, the cancellation of VAT. The results are indicated in Table 12 and Fig. 3. Form the analyzed data can be observed that the values of NPV are all time positives and the values of ADSCR indicate a bankable investment if there is an incentive scheme market, without VAT.

The sensitive analyses, sub-100 HRS The last sensitivity analysis takes into account one specific situation: a limited number of HRSs, less than 100, and the case where the number of FCEVs are lower than previous versions, also. The positive value is proposed for millage, the annual driving distance is maintained at the maximum value of the previous scenarios (14,000 km) and VAT 0%. The group of peoples that drives FCEVs is more compact, but more enthusiastic. For the some 15-year program the number of HRSs increase constantly from 3 HRSs in first year to only 50 at the end of the program. The number of cars increases constantly from 5000 in second year to 100,000 at the end of the program, scenario a1 in Table 13. Two more amendments refer to the final number of vehicles, decreased to 50,000 in scenario a2, respectively initially number of vehicles, decreased to 1000 in scenario a3. The NPV is monitored at the end of the program and the year when the value becomes positive. A new series of scenarios, noted from b1 to b3 and c1 to c3, in Table 13, keep the same parameters excepting the HRSs number, which is varied to 75 and 100 at the end of the program.

Table 12 e Sensitive analyses, the multiple variable analyses. Conditions

Table 10 e Sensitive analyses, cost of debt increasing.

NPV (M Euro)

Adverse:  FCEV:10,000 km/year  HRS: 1.0 M Euro  Cost of debt: 12%

Stimulative:  VAT 0%

No. of FCEVs in 15th year

NPV (M Euro)

ADSCR in 15th year

200,000 (100%) 170,000 (85%) 140,000 (70%)

22,727 12,270 9624

3.45 2.91 2.37

100,000 (50%)

359

1.64

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Fig. 3 e Sensitive analyses, NPV and ADSCR variation for analyzed situations: a) 200,000 FCEV, b) 170,000 FCEV, c) 140,000 FCEV and d) 100,000 FCEV. Input conditions, 10,000 km/year per FCEV, 1.0 M Euro per HRS, cost of debt 12% and VAT 0%. Please cite this article in press as: Iordache I, et al., Hydrogen refueling station infrastructure roll-up, an indicative assessment of the commercial viability and profitability, International Journal of Hydrogen Energy (2017), http://dx.doi.org/10.1016/j.ijhydene.2016.12.108

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Table 13 e The sensitive analyses, sub-100 HRS. Scenarios

Variables No. of FCEVs

a1 a2 a3 b1 b2 b3 c1 c2 c3

NPV

No. of HRSs

2nd year

15th year

1st year

15th year

5000

100,000 50,000

3

50

1000 5000 1000 5000

100,000 50,000

75

100,000 50,000

100

Driving distance (km/year)

Firs year with positive value

15th year (M Euro)

14,000

8 9 15 7 9 e 7 11 e

28.34 10.65 0.00 23.84 6.14 4.70 19.29 1.59 9.35

1000

Discussions The above presented results indicate that for a well-designed and proportioned HRS infrastructure, the main constraints seem to be economical and financial ones rather than technical. The most important technical issues are the slower or less growth curve for FCEVs followed by annual distance driven per vehicle, both of them have direct influence regarding the quantity of hydrogen sold and implicitly the rate of HRS utilization. The economic support initiatives are: low taxation, small initial investment cost, low cost of debt and low management cost. The underutilization of HRS determines the negative cash flows which is visible for first years. The insufficient cash flow to cover debt service or interest payments increases the initial risk of the program, so in this pre-bankable stage the public support is key element. Although the bankable stage generates enough cash flow to cover the financial obligations there is a transition phase between initial and final stages of program where the risk level is still high. The investment is expected to be profitable in the last part of the program. Once the infrastructure utilization rates increase, the program becomes profitable and the investors are likely to enter the market. A good forecasted number of vehicles in concordance with the number of stations, 200,000 FCEVs and 150 HRSs for this study, makes possible to conduct analyses of sensitivity. In Romanian case study, a series of parameters was possible to be analyzed in individual or multivariable manners. The decreasing of annual distance driven per vehicle to 10,000 km per year, has negative economical influences, but still remains business viable, while the increasing to 12,000 or 14,000 km per year improves the profitability. The variation of financial inputs as initial investment cost (CAPEX) e cost of equity, cost of debt, tax, etc. - influences into a negative manner the program profitability. The NPV can decrease from 8174 M Euro (100%) to 5944 M Euro (73%) for 18%, increasing of CAPEX to 6147 (75%) M Euro, if cost debt (interest rate) increase from 7% to 12%. Even there is a favorable economic environment, VAT 0%, the cumulative adverse conditions decrease the business profitability. The VAT cancelation increases the NPV from 8174 M Euro to 22,727 M Euro (278%), but the accumulation of most unfavorable conditions can decline NPV to 359 M Euro (4%). Both indicators, NPV and ADSCR, decrease with

economic crunch, but until NPV tends to become zero, the ADSCR remains well above the critical value of 1.1. The sensitivity analyses with only one variable indicate them direct influence on the business case and the multivariable analyzes give an overview of its economic profitability and viability. The sub-100 HRS analyses conclude that a program with a smaller number of HRSs is profitable from economic point of view. Scenarios showed that the critical factor is the number of cars allocated per refueling station. If the allocated cars per station decrease, the profitability of the business decreases, also. The situation is more obvious when not only the FCEV final number is reduced, the negative influence has a smaller FCEV initial number, also. This last situation is explicable due to a reduced number of cars in the first years of the program, which implies less hydrogen consumption, which means a lower level of the HRS utilization, and implicit less profitability.

Conclusions The electrification of the mobility is key solution for a decarbonization of the transport sector and the hydrogen mobility is a part of this solution. The hydrogen mobility requires an adequate refuelling infrastructure. The key element of the viability and profitability of HRS network roll-out is the correlation between the increasing number of operating HRSs and the FCEV fleet dimension. The Romanian market trends indicate positive forecast for a number of 150 HRS and 200,000 FCEVs. The business case assessment was realized for the roll-out of HRS network in 15 years program. The viability and profitability of this scenario is underlined with a series of sensitivity analyses as well. A stimulating policy stipulates a series of financial schemes, such as reduced VAT and low interest rate, and contributes to the interest for such development investment.

Acknowledgements The authors thank National Authority for Scientifically Research, Development and Innovation from Romania http:// www.research.ro. The work has mainly carried out under the contract no. 1636/2016 (23N).

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