This paper investigates the potential benefit of coordinating local initiatives in Europe in the transport sector and provides an evaluation of the JIVE programs with respect to FCEB. Our main argument is that the deployment of green technologies in transport faces a double challenge: a need to decrease its cost and a chicken and egg issue due to the network externality between vehicles and infrastructure. The first component of the challenge requires high volumes suggesting at least a European perspective while the second part suggests a regional/local perspective as exemplified by the multiplication of geographic clusters. Cities play a significant role in the latter due to their commitments towards zero emission urban transport.
Our analysis clearly demonstrates that at the current level of cost it would not be economically justified to deploy FCEB. The abatement cost for reducing CO2 emissions would be higher than 1000 €/tCO2. Considering the local pollutants (NOx and PM 2.5) and their social costs as impacting the health of population in high density areas would decrease the abatement cost to 300 €/tCO2, a level still much higher than the current level for the social cost of carbon. It follows that a substantial cost decrease is a necessary condition for justifying the deployment of FCEB. This condition is exemplified as a possible decrease in the purchasing price of FCEB from 700 k€ in 2018 to 450 k€ in 2025 for a standard 12m bus. Such a decrease would be consistent with a learning rate of 10 % associated with an annual market growth of 50 %.
We evaluate the potential of EU programs to achieving such volumes. As a matter of fact, EU has been engaged in support programs for the deployment of FCEB since 2001. However, while earlier programs remained essentially demonstration programs with a total of 114 FCEB deployed, the JIVE programs initiated in 2017 provide a change in scale triggering the deployment of more than 1000 buses. JIVE programs allocate a subsidy of 200 k€ per FCEB to cities that secure national/local financial support and engage into a long-term plan for the deployment of FCEB. 18 European cities are participating to JIVE. The benefits from JIVE is accruing through better information along three stages: Financing, Planning the HRS, Planning the Bus Operations. However, the vital importance of Government Policy Frameworks that incentivize or mandate Zero Emission public transport is a constant refrain when it comes to cities’ willingness to find the funds to subsidize the new technology to encourage transport operators.
Altogether it seems that the JIVE program remains short relative to the objective of triggering a high enough demand, much lower than the required 50% annual growth rate combined with a 10% learning rate, even if we expect that future EU programs will consolidate the powering up phase initiated by JIVE for the FCEB deployment.
A detailed analysis of the value chain for FCEB, from the energy source to produce green hydrogen to the assembly of buses, suggests that the analysis should take a broader perspective. Firstly, there may be mutualization of components across various product lines for the production, storage and delivery of green hydrogen to HRS, and for the critical parts such as the fuel cell, the electric drive system and the hydrogen high pressure tanks. Secondly, one should go from a European to a world perspective and consider global strategies to analyse competition between incumbents and many entrants attracted by the potentially highly profitable emerging market associated with green hydrogen.