Hydrogen is gaining widespread popularity as a renewable energy source and clean fuel. Even the oil industry giant, Saudi Aramco, has identified huge potential for hydrogen fuel.
But does this mean that hydrogen powered vehicles will soon dominate the US market?
Not any time soon, in our opinion.
Even the most optimistic forecasts predict only limited penetration of the overall market by 2030, with more widespread adoption taking until 2050 and beyond.
In this post we explore some of the reasons why.
The Allure of Hydrogen and Fuel Cells
Hydrogen fuel cells will compete with battery electric vehicles (BEV) in the future, and hydrogen-sourced electricity is being pursued as a backup for wind and solar.
Characteristics such as fast refueling (like gasoline and diesel) and high energy density (i.e. lighter than batteries) make fuel cells an attractive solution for heavy duty and commercial vehicles.
Regions including the U.S., China, Europe, and Japan are recognizing this trend and focusing policy efforts on developing fuel cell technology, hydrogen supply chain, and fueling infrastructure.
Total Cost of Ownership
Even when ignoring the environmental benefits of switching to hydrogen fuel (i.e. zero end use emissions), fuel cell electric vehicles (FCEVs) are forecast to become cheaper to own than battery electric vehicles (BEVs) and vehicles with internal combustion engines (ICE) within the next 10 years.
A 2020 report by Deloitte and Ballard titled Fueling the Future of Mobility forecast the total cost of ownership (TCO) of FCEVs will drop almost 50% in the next ten years, falling below that of BEVs by 2026, and below ICEs before the end of the decade.
This is driven by a combination of technology maturation and economies of scale, as well as improvements in hydrogen fuel costs (see below) and infrastructure.
Contrary to popular belief, platinum makes up less than 1% of the cost of a fuel cell stack. This is much less than vehicle batteries, in which materials such as lithium and cobalt make up a much more significant portion of total costs.
Subsidies and incentives for FCEVs are currently lower than those for BEVs, primarily due to limitations in the hydrogen production process.
In the future, renewable energy sources such as wind and solar are expected to play a larger role in the hydrogen production process, at which point the energy efficiency of FCEVs will see dramatic improvement.
So, given such favorable economics, what’s stopping fuel cells from dominating the sector?
The Hydrogen Supply Chain
In Hydrogen 101: Basics of Hydrogen Supply Chains, the team at Bennett Jones explains the three most common processes for producing hydrogen:
- Grey hydrogen is produced from fossil fuels, primarily natural gas, and makes up 95% of current global hydrogen production. The most common method is steam methane reforming, which creates carbon dioxide and hydrogen.
- Blue hydrogen is produced by the same process as grey hydrogen but is paired with carbon capture and storage (CCS) to reduce carbon intensity by up to 90%.
- Green hydrogen is produced by electrolysis, breaking water molecules into hydrogen and oxygen using an electric current. To be considered green hydrogen, the electricity must come from renewable sources, making the production process carbon free.
According to a September 2020 report from Alberta's Transition Accelerator, grey hydrogen is the least expensive to produce at roughly $1.00/kg (~$7.40/mmBTU), with green hydrogen being the most expensive at $2.24-5.36/kg (~$17-40/mmBTU) and blue hydrogen falling somewhere in between.
Houston based advisory firm, TPH Energy, recently produced similar estimates, reporting current delivered costs for green hydrogen at $3.79/kg (~$28/mmBTU) and forecasting a delivered cost of $2.41/kg (~$18/mmBTU) by 2030.
Compare those values to current Henry Hub natural gas prices of about $2-2.50/mmBTU and you can see why compressed natural gas (CNG) is going to remain a more affordable option for a long time to come.
Once hydrogen has been produced, there are several options for transporting it to market:
- Pipelines, which require compression of hydrogen
- Trucks or rail, which require compression or liquefaction of hydrogen
- Chemical tankers, requiring conversion of hydrogen into more stable compounds such as methyl cyclohexane (C7H14) or ammonia (NH3)
Lower concentrations of hydrogen can be blended with natural gas, transported through existing natural gas pipelines, and separated at its destination. However, to transport larger quantities of pure hydrogen, purpose-built pipelines will be necessary.
Compression or liquefaction requires power, which, depending on the source may impact carbon intensity.
And, while transportation by pipeline offers the greatest economy of scale, trucks and rail increase flexibility and are less constrained by the challenges of building new infrastructure.
The Infrastructure Challenge
A major expansion in hydrogen fueling infrastructure will be needed to allow widespread adoption of fuel cell-powered vehicles.
Last week, the electric vehicle manufacturer Nikola announced plans to build hydrogen infrastructure in Germany together with fellow manufacturer IVECO and the pipeline operator, OGE.
OGE already operates a 12,000-kilometer natural gas pipeline network in Germany and Nikola is building heavy-duty commercial vehicles powered by hydrogen fuel cells and batteries. The three companies will work together to extend hydrogen pipelines and fueling stations across the country, creating fueling locations for fuel cell-powered vehicles.
The US must make a massive investment in the green hydrogen sector to decarbonize its electricity, transportation, and industrial sectors, as well as enact policy changes to grow to its full potential in the decades to come.
That’s the conclusion of a major report called The Roadmap to a U.S. Hydrogen Economy, sponsored by major oil companies, automakers, hydrogen producers and fuel cell manufacturers, pushing for the US to follow the lead of the European Union.
The report forecasts that hydrogen from low-carbon sources could supply ~14% of the country’s energy needs by 2050 and play a major role in decarbonizing the transportation sector, particularly for vehicles requiring long ranges and fast refueling times such as long-haul trucks.
While the report doesn’t put a specific dollar number of the investment needed, it highlights the need to build hydrogen production and transportation infrastructure to make it available to end users, as well as codes and standards to regulate the growing supply chain, and research into still-nascent technologies.
Major challenges lie ahead. To reach the report’s goals, the number of fuel cell vehicles will have to grow from today’s roughly 2,500 to nearly 1.2 million by 2030, and the number of hydrogen fueling stations would have to expand from about 100 today to more than 4,300.
CNG and Hydrogen in Parallel
A 2014 report by Sandia National Labs explored the Intersection of Hydrogen Fuel Cell and Natural Gas Vehicles and cautioned that while natural gas is often described as a bridge to the hydrogen economy, the growth of alternative fuels and vehicles will continue to be unpredictable.
It anticipates multiple generations of vehicles and fueling infrastructure will coexist, and that corresponding large-scale infrastructure will be built and rebuilt over time.
Aggressive deployment programs for natural gas vehicles have shown that getting enough vehicles on the road can create the market conditions for the development of unsubsidized fueling infrastructure.
In contrast, FCEV advances have been stimulated by zero emission vehicle mandates, so corresponding government investment will be required to build early infrastructure on the way to a self-sustaining market.
As TPH summarized, the potential for hydrogen is huge but the hurdles are significant and meaningful scale is likely multiple decades away. The hurdles to large-scale adoption are significant, beginning with cost and extending to transportation and storage.
Our Take
In our view, hydrogen fuel cell vehicles won’t represent serious competition to ICE vehicles for many years, especially if they are fueled by low-carbon intensity CNG.
So, if you’re driving a gasoline or diesel-powered truck – or even operating a fleet of them – we highly recommend converting it to run on CNG.
Waiting for the hydrogen economy to unfold or jumping on the EV bandwagon (read more on the realities of that option here), is going to push your carbon emission reduction plans back for many years or cost you a lot of money, or both.
