Written by Prognog Staff

Hydrogen is the most perspective energy source to be used in future probably and thus economics of hydrogen fuel cells is quite an important issue today. This paper targets the above issue and considers the following aspects: opportunity cost factors, supply and demand, role of government and impact on USA taxes concerned with economics of hydrogen fuel cells.

United States of America is the largest energy consumer in the world – it spent hundreds billion dollars on oil production and consumption, research and innovation in order to provide energy supply for the nation. But this money could be spent for the rapid research of hydrogen fuel cells and possibly give a good result in the form of cheap and effective technologies. This is an example of opportunity cost or the cost of a forgone opportunity.

Of course it is very difficult to make a more or less precise assessment of the opportunity cost concerning the oil and hydrogen energy sources in financial terms and that is why such assessment is not used in economics. But why is opportunity cost issue is so important and why it is raised ultimately? To answer these questions it is necessary to understand that growing needs of our society can not be satisfied because of lack of resources.

Modern technologies allow to produce energy by extracting oil from the deepest entrails and of course such production is more expensive. Despite of growing prices on energy the demand grows also and increased demand increases prices even more. One day most people just could not afford using oil as a primary source of energy and it will result in economic crisis if another energy sources would not be mastered. For this reason scientists search new energy sources taking into consideration its price, availability and cleanness. Demand on one or another energy source depends on consumers’ income, tastes, wealth, inflationary expectations and future expectations. It means that hydrogen will be purchased only by those people who can afford it, who like it (from the point of ecology, convenience, prevalence etc), who need it (e.g. to fill up a car powered by hydrogen) etc.

If there would be a clear and marked trend to use hydrogen as the energy of future the demand would also increase because people would buy hydrogen powered cars and need fuel. Supply of hydrogen is affected by the following non-price factors: availability of resources and production techniques – if technology would be not too expensive but effective and based on the resources which are available in abundance then supply will be significant and vice versa; taxes and subsidies – if the government would establish very high tax rate on production or distribution of hydrogen then such business will not be profitable and fetching, in the opposite subsidies and low tax rate will cause supply increase by attracting investors.

Government plays important role in the economics of hydrogen fuel cells. First of all government finances its own research programs on effective technologies of production, transportation and storage of hydrogen. By the way modern technologies allow quite affordable hydrogen production but the storage and transportation technologies are too expensive and it makes hydrogen not so attractive and perspective. In order to get new effective technologies government should stimulate commercial researchers and producers by instituting prizes, granting subsidies and lax credits, decreasing tax rates and providing discounts for them. In addition government can draw together the researchers and give them a basis for cooperation by organizing scientific conferences on the fuel issuer etc. Another way how a government can stimulate hydrogen research and application is by regulating tax rates on oil and gas production. High tax rate will cause a desire to use another energy sources and consequent research programs. Low tax rates will make no difference to energy producers so far.

Burning hydrogen is considered to be ecologically clean but its production is concerned with atmospheric pollution and this in turn requires regulation on governmental and legal basis, in other words, the allowed pollution amounts must be determined by the international law. In addition, the world community is not aware of all effects of burning and producing hydrogen processes and future researches may reveal new facts of pollution or other harmful effects and thus the law should make certain restrictions and limitations in accordance to which hydrogen producers are subjects to licensing and active government regulation.

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