Hydrogen powered innovations - Insight into the Attitude of Consumers towards Hydrogen as an Energy Carrier

Table of Contents

Appendix

1 Introduction
1.1 Aim of the Thesis
1.2 Structure of the Thesis
1.3 Research Process
1.4 LINDE AG

2 Theory
2.1 Diffusion of Innovations
2.1.1 The Innovation Decision Process
2.1.2 Adoption Criteria
2.1.3 Factors that influence the Diffusion of Innovations
2.2 Consumer Behaviour
2.2.1 The Theory of Reasoned Action TRA
2.2.2 Attitude-Behaviour Paradigm

3 Hydrogen
3.1 Characteristics
3.2 The Innovation
3.3 Challenges

4 Diffusion of Hydrogen and Energy Innovations
4.1 Actual Status
4.2 Existing Consumer Research on Energy Adoption
4.3 Surveys about Attitude towards Hydrogen as an Energy Carrier

5 Survey on the Attitude towards Adoption of Hydrogen
5.1 Exploratory research
5.2 Development of hypotheses
5.2.1 Person centred hypotheses
5.2.2 Hypotheses regarding the Ajzen Model
5.2.3 Hypotheses regarding the Rogers’ Model
5.3 The Model
5.4 Operationalization of Theoretical Constructs
5.4.1 Independent Variables
5.4.2 Dependant Variables

6 Results
6.1 The Sample
6.2 Descriptive Statistics
6.3 Multivariate Statistics
6.3.1 Regression Model I: Attitude towards hydrogen
Summary Attitude
6.3.2 Regression Model II: Pull Effect
6.3.3 Regression Model III: Willingness to pay
Summary Willingness to Pay
6.4 Discussion of Results
6.4.1 A general view
6.4.2 Hypotheses
6.4.3 A new Model for Hydrogen Attitude-Adoption Criteria
6.5 Further Research
6.6 Limitations

7 Transition into Marketing Strategy

8 Summary

9 Literature

10 Appendix

List of Figures

Figure 2-1 Model of Innovation decision process

Figure 2-2 Variables that determine the rate of adoption of innovations

Figure 2-3 The Theory of Reasoned Action

Figure 3-1 Hydrogen production processes

Figure 3-2 Hydrogen’s’ supply chain

Figure 4-1 Worldwide H2-filling Stations

Figure 4-2 Global changes in energy systems

Figure 4-3 Fuel shares of world total primary energy supply

Figure 5-1 The Model: factors that influence the intention to buy hydrogen

Figure 6-1 General public perception of diverse attributes on hydrogen as a fuel

Figure 6-2 Relevance of different items referring the public’s energy consumption

Figure 6-3 Actual (perceived) and target values (the ideal fuel) of the main attributes of hydrogen as an energy carrier

Figure 6-4 Importance of different criteria which could influence the adoption decision of hydrogen powered innovations

Figure 6-5 Path diagram of relationships between independent and dependent variables

List of Tables

Table 1 Summary of hydrogen surveys

Table 2 First word which comes to mind when the word “hydrogen” is mentioned

Table 3 Operationalization of “opinion leadership”

Table 4 Operationalization of RangeEn

Table 5 Operationalization of „subjective norm”

Table 6 Operationalization of “climate reactive” and “organizations”

Table 7 Operationalization of the Rogers’ criteria

Table 8 Operationalization of “innovative”

Table 9 Operationalization of “energy imports”

Table 10 Operationalization of “availability” and “zero-emissions”

Table 11 Other factors influencing the attitude

Table 12 Operationalization of behavioural Intention

Table 13 Socio-demographic characteristics of the sample

Table 14 Willingness to pay and interest in hydrogen technologies among the public

Table 15 Comparison of regression results. Dependant variable: Attitude

Table 16 Comparison of regression results. Dependant variable: PullEff

Table 17 Comparison of regression results. Dependant variable: WTP

Appendix

Appendix 1 Questionnaire

Appendix 2 Description of the used variables

Appendix 3 Descriptive Statistics

Appendix 4 Correlation Matrix

Appendix 5 Tolerance levels

Appendix 6 Regression model Pull Effect

Appendix 7 Mean Comparison

List of Abbreviations

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1 Introduction

Nowadays a technology push isn’t enough for the success of innovations; people make this success happen! An insight into the consumer behaviour can help to evaluate the market potential of a coming technology even before it enters the market. The success of innovations is not only the challenge of research and development; it is the capacity of foresight.

We are facing the future of narrow primary energy sources, rising energy costs and increasing regional political and economical instability due to the dependence on energy imports. Now, more than before, the need for a new, renewable, energy carrier is evident. Especially for the transport sector, which constitutes more than 30% of the world’s energy consumption and consumes more than 60% of the world’s oil production (IEA 2007; EC 2006), alternative solutions are evidently needed.

Sustainable mobility is nowadays essential for the world economy (WBCSD 2004); adding the severe problem of climate change, seeking for C02-free renewable energy sources has become a priority for scientists all over the world. Among the candidates for this new fuel are bio diesel, bio ethanol, solar power and hydrogen. Hydrogen has the potential of becoming oil’s successor and spread out throughout the world in this new hydrogen based economy.

The timeline for this new energy age has not been set, and it depends on many factors: policy, research, suppliers and demand. (IEA 2005) A new energy policy has been set (DTI 2007; EEG 2000; EC 2003; IEA 2006), many countries want to become energy independent and secure the future of coming generations. Producers and scientists are developing new technologies based on renewables; consumers, the demand side, with their choices, will play a strong role in the diffusion of these innovations. From the producer side, it is very important to gain information about the consumer side in order to develop a better marketing strategy.

This work was developed with the Linde-hydrogen marketing department, with the goal to gaining deeper insights of potential early adopters in order to deploy strategies which place hydrogen as a leader in the renewable energy market. Focused on hydrogen based innovations, at this early stage, it is very important to achieve a positive attitude towards the innovation. A positive attitude could enforce adoption when launching the product (s) to the market.

The research question of this study is to analyse how the attitude towards hydrogen from potential consumers is formed, and so to determine adequate marketing strategies, which can influence the attitude towards intention to adopt. With a large-scale survey relevant data will be obtained and through statistic analysis, marketing managers will be provided with information about the customers and their needs. These recommendations will empower the marketing department with market intelligence for implementing marketing strategies and programs aimed at satisfying consumer needs.

1.1 Aim of the Thesis

The aim of this thesis is to analyse and measure the potential of commercial diffusion of hydrogen as an energy carrier in a future market. The results of this work can contribute to develop an adequate marketing mix that meets exactly the needs of the targeted consumer sectors. The awareness of the demand can be used to create an adequate pull on the consumer side and so bring innovative hydrogen applications faster and successfully to the market.

The following research questions shall be answered at the end of this thesis:

- How is the attitude formed of those interviewed, towards hydrogen as an energy carrier?
- Which factors influence this attitude?
- How can a positive attitude be achieved through an adequate marketing mix?
- Can this attitude engender a “pull effect”?
- Are early adopters willing to pay more for hydrogen? If so, how much?

1.2 Structure of the Thesis

This thesis is structured in three main parts: theory (chapters 2, 3 and 4) empirical research (chapters 5 and 6) and analysis (chapters 6 and 7). In the second chapter the theoretical frame is given, followed by the innovation “hydrogen” which is explained in chapter 3, following, in chapter 4 a brief résumé of energy adoption research supplemented with the existing surveys on hydrogen as an energy carrier, is compiled; then the practical side, in chapter 5, comprehends with the developing of a questionnaire, model of the attitude and survey design; Afterwards, in the sixth chapter, the results of the empirical research are given and analysed: description of the sample, descriptive and multivariate statistics. This thesis ends with a few words of advice to Linde for implementing the gained information in the marketing policy.

1.3 Research Process

The research process for this thesis can be defined as follows:

The problem was first approached during the author’s internship by Linde. Meetings with the hydrogen marketing department lead the author to seek for experts in innovation research at the TU-München. The problem: the uncertainty of the attitude of consumers towards hydrogen as an energy carrier. With them a large-scale survey was planned in order to gain data from the public about their attitude towards hydrogen; the data was obtained online and through paper-questionnaires. After that, data and literature were reviewed and analyzed; multivariate statistic methods lead to explain, through the obtained data, the mechanisms of attitude formation by consumers. In the last chapter of this thesis the findings of this piece of marketing research were presented.

1.4 LINDE AG

The present work was made in collaboration with Linde AG. The Linde Group is a world-leading industrial gases, medical gases and engineering company with around 49,000 employees working in more than 70 countries worldwide. Following the acquisition of The BOC Group plc, the company has gas and engineering sales of around 12 billion euro per annum. The strategy of The Linde Group is geared towards earnings-based growth and focuses on the expansion of its international business with forward-looking products and services. (Linde 2007)

The Linde Group is divided in two main divisions:

- Linde-Gas

The Linde Group is a world leader in the international industrial gas market. Linde offers a wide range of compressed and liquefied gases as well as chemicals, and is therefore an important partner for a huge variety of industries. Linde gases are used, for example, in steel production, refining, chemical processing, environmental protection and welding, as well as in food processing, glass production and electronics. (Linde 2007) Linde-Gas is also investing in the expansion of their fast-growing Healthcare business, i. e. medical gases, and is a leading global player in the development of environmentally friendly hydrogen technology.

- Linde-Engineering

The Engineering Division is successful throughout the world, with its focus on promising market segments such as olefin plants, natural gas plants and air separation plants, as well as hydrogen and synthesis gas plants. Lindes’ process engineering know-how is planning, project development and construction of turnkey industrial plants. Linde plants are used in a wide variety of fields: in the petrochemical and chemical industries, in refineries and fertiliser plants, to recover air gases, to produce hydrogen and synthesis gases, to treat natural gas and also in the pharmaceutical industry (Linde 2007).

2 Theory

The aim of this work is to analyse the attitude forming process towards hydrogen technologies and how this attitude could eventually influence the further adoption.

A global view on how the innovation diffusion process over time occurs is given by Rogers’ Diffusion of Innovations. (2003) He also sets a focus on the individual’s decision process in which the individuals recognise a need for a product, generate an awareness of the product based on its attributes and then decide to either consume or reject the product.

As a customer-oriented company, the Linde-Group ads value to its products through the buying process (Lohse 2007).The buying process (Peattie 1992), has been widely documented and follows the process of rational choice, where the evaluation of alternatives is based on an evaluation of costs against benefits. This is a cognitive process influenced by varying perspectives, such as available information, quality or value.

However, rational choice does not incorporate the fact that individuals also utilise their emotional perspective and may choose to either ally or distance themselves to goods or services they like or dislike (Hansen 2005; Faiers 2006). A deeper insight on the psychological features in the buying process is given by Kroeber-Riel (2003), Ajzen (1980 1991 and 2001) and Davis (2003).

Therefore two main theories shall be explained for the further development of the innovation decision process of hydrogen as an energy carrier:

- Diffusion of Innovations
- The Theory of Planned Behaviour

2.1 Diffusion of Innovations

The most quoted author in innovation-diffusion-research is Rogers (2003); his work gives an overview of how innovations diffuse though certain challenges over time among the members of a social system (Rogers 2003:5).

2.1.1 The Innovation Decision Process

Before exploring the factors that determine the adoption of an innovation, it is reasonable to hint at the innovation-decision-process formulated by Rogers (2003: 170). Focusing on an individual’s behaviour, Rogers describes this process as “the process through which an individual passes from gaining initial knowledge of an innovation, to forming an attitude toward the innovation, to making a decision to adopt or reject, to implementation of the new idea, and to confirmation of this decision”. A scheme of the innovation decision process is pictured in Figure 2-1.

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Figure 2-1 Model of Innovation decision process Rogers (2003:171) modified by author.

The first two stages (in colour), are determining for the third stage: the decision. The focus of this work is set on stages one and two, before going into details in the determining stages of this thesis, a brief description of each stage shall be given:

1.1.1.1 Knowledge

The first stage of the innovation-decision-process is the knowledge stage, where an individual is exposed to the innovation, and gains understanding of how it works (Rogers 2003:171). Whether the consumers first feel a need for the innovation and then seek a new product, or if they perceive new products, gain awareness and then start evaluating the new product, is still a task of research.

In terms of energy innovation, consumers might feel, through the rising fuel prices (IEA 2004) and C02-emisions (IEA 2004; WBSDC 2004; BMU 2006; EEG 2000) that there is a need for a new energy carrier. H2-Companies, research institutes and the government^[1], argue that most consumers do not perceive this need and therefore lighthouse projects might help to create consumer awareness^[2].

For consumers who are aware, knowing how an innovation works, and how to use it, might increase the acceptance of sustainable innovations. Knowledge might be correlated with acceptance (Tomforde 2004; Loose 2003). Consumers, who are facing new technologies, tend to be sceptical about their ease of use (Davis 1989) until they familiarize themselves with the new products and benefits that they might bring to them and to their environment.

1.1.1.2 Persuasion

In the persuasion stage of the innovation-decision-process, the individual forms a favourable or unfavourable attitude towards the innovation (Rogers 2003:174). Attitude formation is a complex process, in which the individual evaluates the innovation. This process is constituted of three components: affection, cognition and behaviour. (Kroeber Riel 1996:168; Trommsdorf 2002:143) A deeper view on psychological aspects constituting consumer attitude will be given in the next chapter.

The way potential adopters perceive an innovation and form an attitude determines the rate of adoption. The importance of the adoption criteria, described below, has to be considered.

1.1.1.3 Decision

At the decision stage the potential adopter engages in activities that lead to a choice to adopt or reject an innovation (Rogers 2003:177). Adoption is the decision to use the innovation; rejection the decision to reject it.

1.1.1.4 Implementation

Implementation occurs when the potential user becomes a user. The stages before the implementation are a strictly mental exercise of thinking and deciding. Here, attitude is put into action, behaviour begins. The time frame for this stage can vary, since some innovations are rejected immediately after being implemented (Hausschildt 2003; Rogers 2003) and others need some time until usage is confirmed.

1.1.1.5 Confirmation

In the last stage of the innovation-decision-process, the adopter seeks reinforcement for the decision already made (Rogers2003:189). Individuals try to avoid or reduce cognitive dissonance (Festinger 1957) and by doing this, confirm the decision of adoption.

Relevant for this study, are in the wide view, the first two stages: Knowledge and Persuasion (attitude formation). In a narrow appreciation, we will have to focus only on the first stage, since the observed innovations are still not available at the market and a user can just imagine this perception^[3]. Although an approach on the Rogers’ adoption criteria: triability, observability, perceived relative advantage, risk and complexity is included in the survey. The adoption criteria are described below:

2.1.2 Adoption Criteria

There have been a number of studies of innovative technology adoption, but there is an author who seems to have wide influence on the discussion of adoption and diffusion of innovation. Everett Rogers’ (2003) book “Diffusion of Innovations” is regularly mentioned in market transformation models. This book is the classic reference for discussion of innovative technology adoption and its diffusion through society.

In his book, Rogers defines five factors that are crucial in influencing the adopter’s decision process of adopting an innovation. Important for the process is how these attributes of the innovation are perceived by the adopter. The perceived attributes are: relative advantage, compatibility, complexity, triability and observability (Rogers 2003, S. 223 ff.). These aspects are briefly explained below.

1.1.1.6 Relative Advantage

Relative Advantage refers to the degree to which a decision maker perceives an innovation being superior as the persisting technology i.e. faster, bigger, more durable, and environmental friendlier. The greater the advantage of the technology over the old technology, the more likely is it to be adopted. Here the reference is the actual technology, the comparisons of other new technologies among them which are trying to take the place of the actual technology are not considered. Not only economic benefit, but also increased safety, higher prestige levels, and convenience (Guagnano 1986) could bring an advantage in relation to the persisting technology.

1.1.1.7 Compatibility

Compatibility refers to how an innovation is perceived as consistent with the existing values, past experiences, and need of potential adopters. A new idea that fits the potential adopters’ environment and values without changing it can be easily accepted. For example: if a user can simply tank bio-diesel without modifying his car; it has high compatibility; otherwise, if a change in fuelling technology requires modifications from the normal tank, then this innovation is less likely to be adopted.

1.1.1.8 Complexity

Complexity refers to the degree to which an innovation is perceived as relatively difficult to understand and use. Complex innovations can be a great barrier for innovations, if an innovation is not user friendly, the user may have difficulties and get frustrated when trying it, this reveals in the rate of adoption.

1.1.1.9 Triability

Triabiliy refers to the degree in which an innovation may be experimented on a restricted field. Trying a new idea is perceived as very important especially for early adopters, since they cannot rely on reports or peer information from the new product.

1.1.1.10 Observability

Observability refers to how the benefits of an innovation are visible to others. If a non-user perceives that the early adopters have advantages of a new application, then it is more likely that they become adopters, too. For example: if we see how households with solar panels profit from the saved energy, then this innovation becomes more attractive for us.

1.1.1.11 Risk

The risk item does not belong to the Rogers’ criteria, but it cannot be separated from an innovation. “Risk is the expected probability of economic, personal or social problems resulting from adoption” Bauer (1960).

2.1.3 Factors that influence the Diffusion of Innovations

Besides the perceived attributes of the innovation, described above, there are many factors that influence the rate of adoption of innovations. While some innovations achieve a rate of adoption higher than 70%; for example, internet: from 1990 to 2006 about 70% of Americans adopted internet^[4] ; other innovations might not reach 20% adopters. An overview of the factors that influence the rate of adoption^[5] is given in Figure 2-2.

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Figure 2-2 Variables that determine the rate of adoption of innovations (Rogers 2003:222)

1.1.1.12 Perceived attributes of the Innovation

As the attributes described above, resuming can be assumed that:

- The greater the relative advantage is perceived by the members of a social system, the bigger the rate of adoption.
- The more compatible one innovation is with the actual values and norms,
- The less complex an innovation is perceived,
- The easier it is to communicate and perceive the innovation’s benefits,

…the bigger the rate of adoption.

1.1.1.13 Types of Innovation Decision Process

Three types of innovation-decision are differentiated (Rogers 2003:221):

- Optional: one individual decides whether or to not adoption the innovation

- Collective: the decision is taken by consensus of the majority in the social system

- Authority: the decision makers outside the social system impose the adoption

1.1.1.14 Communication Channels

Information is carried through communication channels from unit to unit within a social system. The most outstanding channels for the diffusion of innovations are mass media and interpersonal communication. Mass media are more relevant in the knowledge stage, because there is a need for promoting the product; interpersonal communication gains importance in the attitude phase, a second opinion is usually consulted.

1.1.1.15 Nature of Social System

Here the influence of norms and the density of the communication channels of the social system are taken to account.

1.1.1.16 Effect of Agents’ Promotion Efforts

The efforts of the diffusion-agents are crucial in the first stage. Successful efforts lead to persuasion of the opinion leaders. When a certain amount of opinion leaders adopt and the critical mass is reached, the innovation continues to spread automatically.

2.2 Consumer Behaviour

Many attempts have been made to explain how consumers (Kroeber-Riel 1996 and 2000; Trommsdorf 2002; Rosenberg 1960; Kotler 2007) act and why they make decisions. Views vary from marketing (Kotler 2004; Meffert 2003) to socio-psychology (Kroeber-Riel 1996; 2000). For statistical analysis of the consumers way of thinking the most quoted author is Ajzen. He links consumer behaviour theories with the operationalization, transferring via questionnaires, processing the consumers’ decision to paper and from paper to theory.

Not just exploring the consumers’ way of thinking about hydrogen, but also developing a theory from representative data was the goal of this study. Therefore, the psychological component has to be included for exploring why individuals could accept the innovation hydrogen. Davis (1989) developed a model of technology acceptance: the Technology Acceptance Model. (TAM), this model is appropriated for information systems and is and extension of the Theory of Reasoned Action (TRA) proposed by Ajzen & Fishbein (1975 & 1980) which is still state-of-the-art for many behavioural studies. Further development of this theory has been carried out by Ajzen (1991 and 2000) who added the control component to the TRA and gave this new model the name of the Theory of Planned Behaviour (TPB). For this work, the most relevant approach and the theory which was used for the “hydrogen-attitude-model” displayed in chapters 5 and 6, was the TRA; an insight into this theory is given below.

2.2.1 The Theory of Reasoned Action TRA

The fathers of this theory are Ajzen and Fishbein (1980); they propose a model in which human behaviour is explained. It predicts the occurring of a specific behaviour assuming this behaviour is intentional. This model is displayed in and represents the influence of the two components: Attitude towards the Behaviour and Subjective Norms towards the intention of performing this behaviour. The Behavioural Intention is the predecessor stage before the expected behaviour.

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Figure 2-3 The Theory of Reasoned Action (Ajzen & Fishbein 1975:16)

1.1.1.17 Behaviour

The Behaviour is the expected action; the target behaviour, which is defined carefully in terms of its Target, Action, Context and Time (TACT) (J.J Francis 2004).

Let us assume, for example, following expected behaviour: “Early Adopters, acquiring Hydrogen-Powered Innovations as alternative to Oil-Powered Applications, when they are available at the market”. Here the target would be the early adopters, the action, acquiring this hydrogen-powered innovations, the context, oil not available any more and time, when they are available at the market

1.1.1.18 Intention

Even if a direct interrelation between intention and actual behaviour is not always seen a couple of researchers have empirically testified the opposite (Devinney et al 2007). The main current agrees that consistent behaviour is normally to be expected (Festinger 1957; Rogers 2003:189). Therefore, a positive intention to demonstrate a specific behaviour is very significant for marketing. Once the intention is shown, the probability of doing this behaviour is very high.

Ajzen found that there is a high correlation between:

- Attitude to the Behaviour- Behavioural Intention
- Subjective Norm- Behavioural Intention
- Perceived Behavioural Control – Behavioural Intention + Behaviour

1.1.1.19 Attitude towards the Behaviour

The attitude^[6] towards the behaviour is the person’s overall evaluation of the behaviour. An attitude cannot be seen as general; normally an attitude is built as a bundle of attributes. Ajzen weighs each attribute, which is composed of two components having interaction, as follows:

- Beliefs about the consequences of the behaviour (behavioural beliefs) (ei)
- Judgements about each these features of the behaviour (outcome evaluations) (bi)

The beliefs about the consequences are what the individual expects about one specific attribute. In order to build the attitude towards the behaviour the behavioural beliefs link the belief to a certain outcome (Ajzen 1991: 120). The formula for the attitude is displayed in equation (1).

(1) illustration not visible in this excerpt

A. - the persons’ Attitude

b.- salient beliefs

e. - subjective evaluation

This shall be outlined in the next example:

Salient belief b1: “if I purchase an hydrogen-powered application, I could help reducing C02-Emisions.” (I agree / disagree).

Subjective Evaluation e1: “reducing CO2 emissions would be...” (desirable / undesirable)

All attributes (salient beliefs) bi are weighed with the outcome evaluations ei; the sum of all weighed attributes gives the aggregated attitude.

1.1.1.20 Subjective Norms

Subjective norms refer to the social pressure, which the person perceives to perform or not perform, the target behaviour. The pressure of society to the individual consists of two components (Ajzen 1991:121) which interact as follows:

- beliefs about how other people, who may be in some way important to the person, would like them to behave (normative beliefs) (ni)
- positive or negative judgements about each belief (motivation to comply) (mi)

(2) illustration not visible in this excerpt

SN. - Subjective norm

n. - normative beliefs

m. - the person’s motivation to comply

An example for normative beliefs n would be: “I feel pressure from my peers/family to do something good for the environment” (I agree / disagree)

Motivation to comply m would be: “in regard to my decision to adopt environmental friendly innovations, doing what my friends recommend is…” (Important / unimportant) for me.

All normative beliefs ni are weighed with the motivations to comply mi; the sum of all weighed normative beliefs gives the aggregated subjective norm.

2.2.2 Attitude-Behaviour Paradigm

There is not unity regarding the effect of a good attitude towards the behaviour and the actual behaviour, empirical research has found just the opposite (Vermeir & Vermeke 2004; SDC 2003; Kraus 1995). An individual might just express his attitude because of its social expectance, most people would, for example, affirm a negative attitude towards terrorism even if they have another point of view. This work will help to find a relation between attitude and behavioural intention, but this behavioural intention cannot guarantee the actual behaviour.

3 Hydrogen

3.1 Characteristics

Hydrogen (H2) itself isn’t new; it has been existing as long as the earth and even before that. It is one of the most abundant elements in the universe. The sun is mainly composed of hydrogen; the fusion reaction^[7] brings light and heat to earth every day. Today we find hydrogen in the earth mostly as a compound. The biggest natural sources of hydrogen are water (H2O) composed of hydrogen and oxygen, and hydrocarbons (CnHn) composed of hydrogen and carbon.

Since H2 cannot be found pure in the planet earth, it has to be freed from the compound by inducing energy, which breaks the chemical bond. In nature we usually find hydrogen in water, bio-mass and fossil fuels. Every energy source can be used to make hydrogen, the main known ways to manufacture hydrogen are presented in Figure 3-1:

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Figure 3-1 Hydrogen production processes (Richter & Wagner 2007: 483)

Independent of the energy source, the hydrogen-freeing reactions are:

(3) Water Hydrolysis: illustration not visible in this excerpt

Water + Energy Û Hydrogen + Oxygen

(4) Thermo chemical Conversion (Kaltschmitt 2001: 272 f.):

illustration not visible in this excerpt

Organic compounds + Energy Û Hydrogen + Carbon Oxides

Hydrolysis refers to releasing the two hydrogen atoms in the water molecule by inducing energy. Thermo chemical conversion means obtaining hydrogen by breaking the C-H or C-O bond into hydrogen, carbon (and oxygen) compounds like hydrocarbons and bio-mass.

A lot of energy has to be induced order to break the hydrogen bond. This energy can be stored and can be released by burning hydrogen; the energy concentration of hydrogen (120 MJ/kg) is three times higher than the energy stored in gasoline (44 MJ/kg) or diesel (43 MJ/kg). This enormous capacity of storing energy enables a substitution path to batteries. Conventional batteries can store energy and release it later. The problem with batteries is that the storing capacity is not too high and the metals used in batteries cause environmental hazards. Hydrogen instead, reacts cleanly with oxygen, releasing nothing else than water and, very important, power. The chemical reaction of hydrogen combustion is showed below:

(5) Hydrogen Combustion: illustration not visible in this excerpt

Hydrogen+ Oxygen Û Water + Energy

This reaction can occur as a burning reaction in conventional engines or as inverse electrolysis releasing electricity as it occurs in fuel cells (DOE 2004). The chemical and physical properties of hydrogen, combined with the challenge of researchers all over the world facing the need for cleaner ways of obtaining, storing and transforming energy, opening the door for innovating with hydrogen as an energy carrier.

3.2 The Innovation

As the world’ s largest hydrogen plant manufacturer and leading gas company in Europe, Linde has been delivering hydrogen for a number of applications since the 1910s, for example in the chemical, petrochemical and food industry^[8]. One typical hydrogen application in the food industry is the hydrogenation^[9] of oils and fats of low melting points.

This new application: Hydrogen as an Energy Carrier is relatively new and very promising. Hydrogen is not a primary source of energy like oil, solar power, bio-mass, etc, which are available as natural resources and can be exploited by men and converted into energy. As a (second) energy carrier, like electricity, hydrogen has to be manufactured (Johnston et al 2005). You can give energy to hydrogen, store it and use it a later point of time. Hydrogen is storable electricity! The way to hydrogen is very diverse: it can be produced by using different paths ranging from conventional fossil fuels to alternative energy sources, such as solar, wind and watercraft. The technology exists, but in order to achieve sustainable mobility, there are still some challenges to encourage.

3.3 Challenges

Hydrogen has been in use as an industrial gas since more than one hundred years; depending on the production process it could achieve a sustainable way of fuelling the economy. Even when the technology exists, there is still something retarding the diffusion of hydrogen. But, what is slowing this move into the hydrogen economy? According to Johnston (2005) there are four main factors that are slowing down the adoption:

- Production
- Costs
- Small amount of consumer applications
- Storage
- Distribution
- Public Perception

The hydrogen way from “well to consumer” is pictured in Figure 3-2; the pathway and the challenges are explained below:

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Figure 3-2 Hydrogen’s’ supply chain (Linde Hydrogen Solutions 2007)

1.1.1.21 Production

Today´s hydrogen is produced for the industry and the production is either onsite at oil refineries or by companies from the chemical industry. The most common production method is Steam Reforming (SMR) in which steam is used to reform natural gas. Once reformed, the hydrogen becomes the feedstock for oil refining and other applications such as plastics, resins and solvents. The chemical reactions of the SMR are:

(6) Steam Reforming illustration not visible in this excerpt

Methane + Steam Û Carbon Monoxide + Hydrogen

(7) Shift reaction illustration not visible in this excerpt

Carbon Monoxide + Steam Û Carbon dioxide + Hydrogen

The most disturbing fact about this path of hydrogen is that CO2 is emitted contributing significantly to the greenhouse effect. The second widespread technology is “partial oxidation”, also from fossil fuels.

Sustainable hydrogen production can only be achieved when hydrogen is obtained from renewable sources of energy: windcraft, solar power, tidal energy, geo-thermal energy can generate electricity and this electricity can be used to produce hydrogen from water following the following chemical reaction:

(8) Water Hydrolysis illustration not visible in this excerpt

Water + Energy Û Hydrogen + Oxygen

Water Hydrolysis is the most promising approach to obtain sustainable hydrogen; today’s challenge is the high cost of renewable energy. The real challenge is to provide CO2-free-hydrogen cost effectively (Richter & Wagner 2005). When renewable technologies mature, this path to hydrogen will be cost efficient. There are other promising sustainable technologies like hydrogen, produced by cyan bacteria and bio-mass gasification (Steinberg 1996).

1.1.1.22 Storage

Due to its low density, hydrogen has to be compressed and/or be liquefied in order to achieve a high energy density. High pressures und low temperatures afford much energy; also the hydrogen tank and filling system are much heavier than conventional tanks. Concrete goals (DOE 2007) have been set in R&D to enable efficient hydrogen storage. This opens a range of storage challenges, only when the prototypes mature and mass production starts will a rational price^[10] be met.

1.1.1.23 Distribution

The great advantage of hydrogen is that existing infrastructure could be easily made suitable for hydrogen distribution (Moulijn et. al 2001): today’s hydrogen industrial distribution channels can be used for hydrogen distribution in the early stage; with increasing hydrogen volumes combined with decreasing gasoline usage, the existing pipelines, trucks and gasoline stations would be filled with hydrogen.

Distribution of hydrogen has to be adapted to the source of hydrogen production: with centralized production, the fuelling stations could be provided with hydrogen tankers similarly as today’s gasoline stations. Distribution of hydrogen produced offsite can be made in large scale (bulk); or in small scale (bottled). Onsite production, on the other hand, reduces distribution efforts because of the proximity to the customer at the expense of production costs due to small scale (Reijerkerk 2001).

Whether hydrogen is distributed in pipelines or in trucks; liquid or as pressurized gas; onsite or offsite is a strategic task and will rely much on costs involved.

1.1.1.24 Public Perception

The challenge of improving public perception in favour of hydrogen is the most important issue linked to this work. History relies on negative incidents which enhance bad relations to hydrogen: the Hindenburg disaster in 1937, the H-bomb, the typical “detonating gas” reaction which most of pupils learn in chemistry lessons and the explosion of the Challenger in 1986…

Lately we have found that other applications of hydrogen lead to a more positive attitude from the public; “hydro” comes from Greek and means water^[11], in almost every language we find this etymological relation. Water is related to “life” and this water-relation causes a very positive effect on the attitude (Tomforde 2004; Loosen 2003). Other items are discussed in the results section. Education from the Government, H2-Producers, and the automotive industry as key figures, play a big role in in influencing a positive reaction to the perception of hydrogen.

4 Diffusion of Hydrogen and Energy Innovations

At which stage of the diffusion process are we? What efforts have to be made in order to achieve a critical mass and boost the diffusion rate of hydrogen applications? The following pages will give an overview of the actual lighthouse hydrogen diffusion projects, hydrogen policy, research and consumer energy and hydrogen adoption research.

4.1 Actual Status

The first Pioneer who saw the energy potential of hydrogen was Jules Verne:

“Water is the coal of the future. The energy of tomorrow is water broken down into hydrogen and oxygen using electricity. These elements will secure the earth’s power supply for an indefinite period.^[12] ”

Verne’s vision was far ahead of his time; his dreams set the precedent for many technology breakthroughs: the submarine, spacecraft, airplanes…With the vision of changing from an oil economy to an hydrogen based economy, most industrialized countries have set concrete pathways to enhance the hydrogen economy. The European Hydrogen Association (EHA) (2006) set an implementation plan, invested € 7.4 billion, involving the public and private sector. The timeline set by the EHA (2006: 8) expects the market entry between 2008 and 2020; the DOE (2002) also set a pathway to a transition to the hydrogen economy to 2030 in the U.S.A.; in Iceland, the transition has already begun.

We can say that the diffusion process has already started; we are in the early stage, there are several applications powered by fuel-cells^[13] or combustion engines like forklifts, backup power systems and cars which enable energy storage and mobility. Since the focus of this study is set on mobility, a short overview of the diffusion clusters will be given.

We have some clusters in the automotive industry: the CEP^[14] (Clean Energy Partnership) in Berlin is demonstrating how hydrogen technology works; in California the Fuel Cell Partnership^[15] is promoting hydrogen powered vehicles’ commercialization; within the Clean Urban Transport for Europe^[16] (CUTE) there are nine European cities with 27 hydrogen buses demonstrating the feasibility of this transportation system; in Iceland the initiative Icelandic New Energy^[17] has already integrated hydrogen powered buses in the public transportation system. All over the World, see Figure 4-1, there are 123 H2-filling stations, including demonstration projects, research centres and integrated solutions. Compared with the 15.036 public gasoline stations which exist in Germany^[18] (MWV 2006), the amount of hydrogen stations is still negligible.

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Figure 4-1 Worldwide H2-filling Stations (LBST 2007; fuelcells.org 2007)

The automotive- and energy industry are very involved and interested in the diffusion process: almost all of the major car companies have active programs to develop hydrogen vehicles (Solomon 2006). Two multinational oil corporations: BP and Shell have established business units focused on hydrogen R&D. In addition to oil companies, the gas retail industry (Hydrogenics, Linde, Air Products, Praxair and Air-Liquide) is involved in several hydrogen initiatives.

The importance of marketing is very important at this stage, on the one hand the technology is being pushed onto the public in lighthouse projects, on the other hand consumer awareness is being gained and with it, a pull effect is desired. We are in the early stages of the innovation decision process: knowledge and persuasion.

4.2 Existing Consumer Research on Energy Adoption

Adoption of energy has been linked to mankind since the discovery of fire. Since then, there have been many energy ages: wood, watercraft, wind craft, coal, oil, nuclear power…

The first criteria for energy supply to change along history, was the distance to natural resources, and later, performance. When supply shortened (Howe 1987), settlements looked for a new energy source; when a new technology was discovered^[19], the switch occurred also. A graphic overview of the historical shares is given on Figure 4-2.

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Figure 4-2 Global changes in energy systems (IEA 2004;Shell 2002;Schieve 2005)

At the beginning of mankind, bio-mass (wood) was the only source of energy. With industrialization, coal became more and more a standard, after coal came oil; then other technologies emerged and energy sources diversified. Nowadays the global energy supply depends not only on one energy carrier; we rely on an energy mix as seen on Figure 4-3.

As the diagram illustrates, fossil fuels (oil, gas, coal and uranium for nuclear power) have the largest share in energy supply. The development from renewable resources to generate power (burning wood, using watercraft and windmills…) to the exploitation of fossil fuels started in the 19th century and has been increasing since then, as they seemed to be ever lasting. illustration not visible in this excerpt

Figure 4-3 Fuel shares of world total primary energy supply (IEA 2004)

Since the mid 70’s with the first oil crisis, mankind became aware that fossil fuels were not endless and a new trend started: sustainability^[20] (Hausen 1987). Renewable energy came again to word, and large research has been done as to why, when and where individuals or institutions adopt it. Change criteria from non-renewable energy sources to renewable energy can be categorized in the next items:

- Natural Resources
- Environmental Concern
- Energy Policy
- General Structure
- Energy Savings
- Risk Perception
- Pioneering

Natural Resources

The accessibility of natural resources seems to be the strongest factor for energy adoption, (Bhate and Lawler 1997). Natural and energy resources are different in every country in the world, while in Russia gas corporations enable the supply of energy for the whole Russian territory and in the middle east oil exploitation seems to be never ending. In countries like Brazil (Rosillo-Calle et. al 2001) with vast wood and forest resources, bio- fuels are being produced in a big scale.

In Africa biomass (wood) is still the primary energy source. Some states have gone through an urbanising process including electrification during the last decades like Zimbabwe. Campbell et. al. (2003) researched the main reasons for switching from wood to electricity in Zimbabwe. Most of the households having connection to electricity use it, even if the price for electricity is higher than the price for wood.

Another good example is Iceland. As an island with no fossil fuel resources, Iceland has tapped the needs of its 307672 inhabitants^[21] with hydroelectric and geo-thermal resources (Solomon and Banerjee 2006).

A determining factor in consumers’ energy consumption rate is the climate: while in regions with extreme winter conditions households have to pay for heating, in tropical regions the amount of energy needed is less and constant. Through this extra need and cost, cold regions are more conscious about the price of energy and develop a sense for energy conservation that cannot be found in southern regions.

Environmental Concern

Although there is no profile of the environmental friendly consumer (Bhate 1997; Peattie 1992) environmental concern has been included in almost every energy adoption research as a factor, which enhances adoption (Bird et al 2002).

Environmentally concerned consumers’ values^[22] are really strong and turn the decision in favour of the environment, even if the choice affects the consumers’ pocket. Values can also influence the needs; a need to buy green energy might be occasioned by the values of the person (Faiers et al 2007).

Bang et al. (2000) found correlation between willingness to pay and environmental concern: even if the consumers do not have enough knowledge about renewables, green power purchasers are motivated by altruism and employee moral (Wiser et al. 2001).

Energy Policy

Generating energy from renewable energy sources is, with the exception of large hydropower, combustible biomass (for heat) and larger geothermal projects (>30 MW), not as cost effective as generating energy from fossil resources (IEA 2006). Until the gap is closed, so that renewable energy technologies mature and the supply is secure, the development and market introduction from renewables has to be financed by the government or by taxes. Alternative energy policies (DTI 2007; EEG 2000; EC 2003; IEA 2006) facilitate consumer and institutional investment in renewable energy generation systems. Many researchers have testified that energy policy accelerates consumer adoption; herewith a brief overview:

The Netherlands achieved through funding market stimulation: that a total of 675000 customers, representing more than 6% of the total population^[23], switched to green energy providers between 1995 and 2002 (Bird et al. 2002).

Despite having one of the weakest solar radiation indexes in the world, (Greenpeace 2006; HelioClim 2007) Germany’s consumers’ solar energy diffusion rate was the world’s highest in 2003 (Jacobsson and Lauber 2006). This contradiction was caused due to the German renewable energy policy (EEG 2000).

The experience curve can be enhanced by providing producers with production facilities (Neij 1997); R&D support, University exchange, supplying facilities, financing... Advanced industries in the learning curve have lower production costs and can therefore offer lower prices (Bass 1980).

General Structure

Renewable energy technologies should be considered as solutions to concrete energy problems, rather than as an innovation in search for an application. As solutions are often coming from outside, (the engineer installing bio-gas in a farm; a German installer assembling solar roofs in Latin America…) they might be perceived as incompatible to the system (Rogers 2003). When technologies come from a foreign country, the social frame in the hosting land has to be examined in order to avoid social neglect. Acceptance increases through technology cooperation (Mallet 2007).

Another big issue is that structures are often changed (Tsoutsos 2005) by renewables. Renewable energy innovations are to a certain point, disruptive^[24] (Christensen 1997) (eg. change from DC to AC in the electricity industry; switching energy supplier from conventional to green applications…). With new energy technologies emerging, oil evidently reaching its peak and oil prices which are exploding; this disruptive character is seen as a risk factor for the oil supplying industry (Birol 2007).

This innovative character of renewable energy is not just technological, but systematic. It involves changes in diverse aspects of the economic and social context. The role of networking between economic, technological regulation agencies and of the interaction between users and producers is critical to achieve sustainable integration into the system (Tsoutsos 2005).

On the demand side of the system, deployment of new energies depends on the motivation of the public, the change of values and convenience. Consumers’ view on renewable energy differs: from approval to disapproval. Even when renewable energy is usually perceived as good there are always confusing items: windmills as landscape disturbing (Wüstenhagen et al 2007); bio-mass as polluting due to the local emissions (IEA 2007); Bio-diesel as the channel for gene-manipulated corn; Bio ethanol as the most endangering agent for the rainforest (Rosillo-Calle et. al 2001).

On the supply side, new skills are required; workplaces are created, new business opportunities appear. Deregulation of the energy market (EEG 2000) opens the door for new suppliers.

Energy savings

A great argument for switching to a new energy technology like energy conservation lamps is private cost savings. Consumers are generally only willing to install energy conservation technologies, when the return of investment is relatively fast (Faiers and Neame 2006). Large users like housing associations consider investing in energy conservation, because of the savings. Turrentine (2007) discovered while interviewing American households that fuel economy was not only correlated with availability and price. Rational decisions include other values like resource conservation. Energy conservation has to be learnt, (Seligman et al 1983) and new habits cannot be established overnight.

Risk Perception

Switching to new technologies brings always risk and uncertainty with it. Investors perceive a solar installation as complex and risky, (Guagnano et al 1986) the investment in new technologies, which might become obsolete in the future, brings another contribution to uncertainty.

[...]

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^[1] Nationales Innovationsprogramm: http://www.bmvbs.de/Anlage/original_959572/Nationales-Innovationsprogramm-Wasserstoff-und-Brennstoffzellen-technologie.pdf

^[2] Wir müssen auch auf Leuchtturmprojekte setzen, mit denen wir in der Welt beweisen können, auf welchen Gebieten wir vorne sind –Glos http://www.dwv-info.de/publikationen/OverviewDE.pdf

^[3] In accordance with Block (2007) Department of Technology and Innovation management, oral conversation.

^[4] www.internetworldstats.com

^[5] rate of adoption is the relative speed with which an innovation is adopted by members of a social system

^[6] “Attitude is the way that an individual views, or behaves towards an object, often in an evaluative way” (Moore 2001)

^[7] In a fusion reaction, the nuclei of two light atoms (hydrogen) fuse together to form heavier ones (helium), releasing large amounts of energy. (EFDA 2007)

^[8] Linde 2007: http://www.linde-gas.com/International/ Web/LG/COM/likelgcom30.nsf/ docbyalias/ nav _ hy drogen

^[9] unsaturated bonds (double bonds) between carbon atoms are reduced by attaching a hydrogen atom to each carbon atom. By doing this, the fats become saturated and more solid (e.g. margarine)

^[10] Today’s hydrogen production price lies between U.S. $ 10000-20000 (DOE 2001); conventional fuel-tank’s price is aproximately U.S. $ 10. (Kautex 2004)

^[11] http://www.wordinfo.info/words/index/info/view_unit/3111/?letter=C&spage=11

^[12] in Jules Verne (1874) The mysterious Island

^[13] Fuel cells are electrochemical devices that convert the chemical energy of a reaction directly into

electric energy. (DOE 2004)

^[14] http://www.cep-berlin.de

^[15] http://www.cafcp.org/

^[16] /www.fuel-cell-bus-club.com

^[17] http://www.ectos.is/newenergy/en/

^[18] MWV: Mineralölverband: http://www.mwv.de/cms/front_content.php?idcat=14&idart=50

^[19] See for example the introduction of nuclear power in the 1950s

^[20] Definition of sustainability: “The ability of current generations to meet their needs without compromising the ability of future generations to meet their own needs”. (Hausen 1987) online: http://www.un-documents.net/wced-ocf.htm

^[21] see Iceland-statistics: http://www.statice.is/temp_en/Dialog/SaveShow.asp

^[22] Values are beliefs that an individual holds and which will guide their behaviour (Faiers et al 2007)

^[23] Netherlands population is composed of 16,570,613 citizens. (Central Intelligence Agency. The Worls Factbook 2007) https://www.cia.gov/library/publications/the-world-factbook/geos/nl.html#People

^[24] “Disruptive innovations are those that substitute the existing system”