Business & Politics

Implications for Insurers and Investors

Reference Points for Insurers

The Political Dimension

Implications for Insurers and Investors

Return on Investment

Evaluation Process

Codes and Standards

Insurability

Hydrogen will, in one way or another, become an important player in our energy system and the question for investors is not if, but when. Major turn-of-the-century stock exchange investments by car manufacturers in fuel-cell companies are an example of the potential for significant return on investment although the price of fuel cells was high at the time.

When one considers making an investment in an existing company or a new venture, the experience of the company in hydrogen technologies, the qualifications and knowledge of its personnel, the involvement of government programs, and participation in hydrogen demonstration projects all help in the evaluation process.

In any new venture, making sure that stakeholders are involved from the onset to check conformity to standards and safety during design and manufacturing phases will help avoid retrofits, enhance public acceptance and prevent problems that can be difficult to detect at a later stage. These stakeholders, of course, include regulators, other civil authorities, and the public.

New hydrogen energy projects require the same insurance coverage as other projects. The prime interest of insurers is that equipment and personnel remain safe. The safety trail to protect an investment and ensure insurability includes:

Thorough documentation.
Regulatory compliance.
Specification compliance.
Verification by inspection.
Testing and analysis at the system and component levels.
Mitigation programs such as the proper evacuation plan of a facility.

The use of safety devices such as reliable hydrogen and fire detectors are also integral parts of any hydrogen safety program.

Reference Points for Insurers

There are two reference points for insurers for new hydrogen projects. First, hydrogen is used extensively on a daily basis in large quantities in the process industry such as in refineries and ammonia synthesis. Second, hydrogen risks can be compared with those of natural gas.

Many regulations are in place for large scale use of hydrogen and, where new practices are involved, we can draw on the experience with natural gas. In addition, there is an active program for development of new international standards for the newer energy applications underway with ISO Technical Committee 197.

The status of new standards should be checked regularly. In the case of new projects, a proper safety assessment, involving the identification and the likelihood of potential failure modes and mitigation procedures can assist in identifying problem points and ensure that steps have been taken to address them.

While the proponents and managers of new hydrogen projects are expected to understand hydrogen, its safe handling and past problems and how they were solved, another reference point for new projects with new technologies is well-documented demonstration projects. Involvement in demonstration projects may not be profitable, but it gives public exposure to new products and technologies…reveals real and potential problems…and evaluates them at little cost in a realistic environment.

The Political Dimension

The Issues

The Environment

Influence

An Educated Public

Energy is the very backbone of our standard of living. Indeed, our economy depends on reliable and competitively priced energy supplies. Energy is also a major trading commodity, since Canada and the United States are leading producers/exporters of hydrocarbon fuels, uranium, electricity and coal. Any issue pertaining to the energy sector has, therefore, major political and social ramifications. Furthermore, as concerns grow over the consequences of climate change and the depletion of hydrocarbon fuels, the use of clean and renewable energy carriers will become a center-stage issue.

The United States and Canada are among the worst per capita emitter of CO2, which is mainly responsible for global warming. The Kyoto commitments require a 6% reduction of the 1990 levels by 2012, that represents a 21% reduction from the present situation. This will imply fundamental changes in energy production and use, but also new opportunities for business, economic growth and jobs. It is in this context that hydrogen presents itself as a political and social issue.

The constituency served by politicians and public service officials is concerned with:

Quality of life issues (environmental benefits).
The cost of hydrogen and its impact on their standard of living.
The risk to life and limb when hydrogen is used as an alternative fuel.

By being supportive of standards writing efforts and regulation, legislators can have a major impact on hydrogen technologies. Various pollution regulations such as the California vehicle emission laws have been, to a large degree, responsible for the phenomenal growth in interest in fuel cells and hydrogen by the major car companies, the oil companies and the public at large. This has led to the development of impressive new fuel cell technologies and to vastly improved zero emission vehicles such as that achieved by the hydrogen-fueled demonstration vehicles now being shown by many of the major automobile manufacturers.

The political arena can also play an important role in educating the public about hydrogen issues through public hearings armed with correct information. Political support for a strong hydrogen research, development and demonstration program is also essential to the rapid development and deployment of hydrogen technologies in commercial systems, with the benefits they bring to society.