After years of claims that hydrogen fuel-cell technology was about to debut—only to be delayed—it appears we now have a firm date: 2015.
That’s when Toyota, Honda and Hyundai plan to introduce hydrogen fuel-cell electric vehicles (FCEV) to the mass market, and California hopes to open the first network of about 37 hydrogen-fueling stations in the country.
The hard part? Getting those fueling stations open.
Unlike battery electric vehicles (BEVs) or natural-gas-powered vehicles (NGVs), there are very few FCEVs on the road so far, so demand has been tough to nail down. And there are huge costs on the supply side, with the average for building a hydrogen-fueling site at $2 million. Compare that to compressed natural gas (CNG) fueling, which costs $600,000 to more than $1 million to install and is facing infrastructural headwinds of its own.
But proponents of hydrogen believe it is a truly better alternative to gasoline and diesel, CNG—considered a “bridge fuel”—and even BEVs. It’s the seeming simplicity of the fuel cell, which takes hydrogen from the fuel tank and oxygen from the air to generate an electric current. Put enough of these fuel cells together and they can power a car battery. The only emissions? Heat and water vapor.
As concerns about climate change have the federal government and some states looking at transportation fuels that produce fewer greenhouse gases, hydrogen seems one of the best options out there. California, home to most of the country’s few publicly accessible hydrogen stations, has devoted nearly $1 billion through various initiatives to get the fuel off the ground.
Of course, as with all alternative fuels, the rollout is all in the details, especially when it comes to the fueling infrastructure. Players in the hydrogen space are tackling the build-out from different directions.
Site Specific
Kalibrate Technologies, Tulsa, Okla., which performs fuel-pricing and site analysis, was awarded a contract in March by the National Renewable Energy Laboratory (NREL) to determine how many hydrogen stations would be required for the initial infrastructure in California, and to identify the best sites and alternate locations.
Although universities in California had developed models for forecasting hydrogen fuel demand and infrastructure build-out, Kalibrate saw an opportunity to include real-world data in the analysis. It is approaching its analysis similar to how it would assess a conventional fueling site, crunching 80 different data points about the sites. This includes weighing the competition—at the time only nine stations in the entire state of California—and demand, which is almost nonexistent.
“With hydrogen, there are too many unknowns to build a predictive model like we have for conventional fuels,” explains Debbie Miggins, Kalibrate’s vice president of business development. “We need about 20 or more hydrogen stations to be open for business and to understand their sales before we can build hydrogen volume forecasting into our conventional predictive model.”
Because of this lack of existing infrastructure, Kalibrate is using a combination of an analog ranking model to prioritize locations and geographic information system (GIS) segmentation to divide the market into hydrogen station trade areas.
It will tap into existing survey data of more than 8,000 gas stations in California, including volumes and lot size. This is because adding hydrogen to an existing station is much more favorable economically than a new build. And it will crunch traffic counts and consumer variables.
As of press time, Kalibrate and NREL were more than halfway done with their infrastructure analysis. The team has statistically analyzed 22 variables that represent demand and supply. Thus far, three variables have risen to the top as most important in selecting a location for a hydrogen fueling station:
- The number of households with income greater than $100,000 per year within a 2-mile trade area. This is because higher-income households will likely be the earliest adopters of FCEVs, which will cost a small premium over conventional vehicles.
- The number of gas stations within the 2-mile trade area. The more gas stations, the more demand for fuel within the trade area.
- The projected number of FCEVs purchased by consumers residing in the 2-mile trade area.
"The biggest challenge is getting the right balance of supply and demand,” says Miggins, who says the chicken-and-egg scenario is highly relevant for hydrogen.
"Consumers won’t adopt this new vehicle technology if they can’t be assured that they can drive freely without concerns about where they can refuel their vehicle,” she says. “Retailers won’t build hydrogen stations unless there is enough demand to make their facilities financially viable.”
CONTINUED: Which Should Come First?
First Things First
Trying to crack this chicken-and-egg issue from another angle is FirstElement Fuel, a newly launched developer of hydrogen fueling stations that was recently awarded a $27.6 million grant by the California
Energy Commission to set up 19 hydrogen stations in the state. Further backed by a $7.2 million loan from Toyota Motor Corp., these sites, all slated to be open by fall 2015, would pave the way toward FirstElement’s goal of having 40 sites or more up and running within the next five years.
The first should open in spring 2015. “We all believe fuel-cell vehicles can change the world and that the only thing standing in the way is a lack of fueling infrastructure,” says Shane Stephens-Romero, chief development officer and principal of FirstElement Fuel, Newport Beach, Calif.
Before forming FirstElement, Stephens-Romero and co-founder Tim Brown, COO and principal, worked together at the University of California-Irvine on models for developing the hydrogen fueling infrastructure.
They connected with Joel Ewanick, a former marketing exec for GM and Hyundai, who now serves as chairman and CEO.
From Stephens-Romero’s perspective, three issues have held back hydrogen: lack of mass-produced FCEVs, inconsistent support among policymakers and no one to spearhead construction of retail fueling sites. While the first two roadblocks were cleared with Honda, Toyota and Hyundai’s upcoming FCEV models and California’s hydrogen initiative, the last seemed to lack a leader.
“No one really wanted to step into the space and develop the retail interface with the customer,” likely because of the significant costs involved, says Stephens-Romero. “We went out to integrate all of the pieces of the supply chain for hydrogen so we could create that retail package with the consumer.”
Making It Work
FirstElement has been reaching out to gas station owners that fit a few key criteria, including being in major metropolitan markets such as San Francisco, San Diego and Los Angeles; and having enough room on their lots for the hydrogen fueling equipment. It identified these sites after running its own market analysis, focusing on areas where the expected early adopters of FCEVs live.
Why existing gas stations over new builds? As Stephens-Romero explains, they already have established relationships with consumers, and it also helps blunt the development costs.
“That’s the easiest way to go right now—it’s retail-friendly and customers are used to it,” he says. “It also eases a lot of the permitting issues because we’re going into an existing fueling site at this early stage.” However, in the future, fueling sites could fit nicely into nontraditional spaces such as shopping centers, because hydrogen does not produce fumes the way gasoline or diesel does.
FirstElement oversees the construction, operation and maintenance of the hydrogen fueling sites, paying the retailer a flat monthly fee to lease space on the forecourt. Stephens-Romero declined to share the lease specifics but says that, for now, “this business model is not a money maker” for FirstElement.
“We’re trying to build up and enable a market for the vehicles here, and we’re taking the long-term view that in the future, there’s money to be made here. We recognize it’s going to be an effort to break even in the next five years,” he says. “For that reason, independent gas-station owners are not in a place where they’re ready to take on that uncertainty and risk themselves.”
The fueling equipment—a compressor and storage tank—takes up about 700 square feet. That’s small enough that it would take up less space than alternative uses such as a car wash, yet large enough that the station owner earns a decent lease fee. The dispenser itself would be next to the compressor and storage tank, or positioned next to the gasoline pumps. An attached chiller cools the compressed gas down to -40 Celsius, which shrinks it and enables a fill in 3 to 5 minutes.
Beyond space, all the gas station would need is an electrical hookup, which in many cases FirstElement would upgrade to 220-volt. While construction takes only three to six weeks, permitting could take three to nine months, depending on how familiar the local government is with hydrogen.
While early electric-charging stations did not charge users to encourage a quicker adoption of the technology, FirstElement does plan to levee a price on the gas. “In the early stages, it’s challenging to get a competitive price because we’re building up this infrastructure that will likely be underutilized in the early years,” says Stephens-Romero. “We’ll try to sell hydrogen for a price similar to gas on a per-mile basis.” FirstElement expects prices for hydrogen to come down soon and fall significantly below gasoline.
Fueling up with hydrogen will be similar to other gaseous fuels, such as CNG. And payment will be familiar to motorists: running a credit card or tapping a phone over a bar code to activate payment, hooking up the nozzle to the car, then filling up.
Beyond California, Stephens-Romero sees the Northeast as a great prospect, particularly New York, New Jersey, Connecticut and Massachusetts, where there is a burgeoning fuel-cell industry. The only thing missing: a hydrogen cheerleader.
“There needs to be policy that supports this growth in the early stages because it is a challenging business model in the first five years,” he says. “In terms of a market, there’s definitely opportunity. If the policy support comes in, there will definitely be a successful build-out of hydrogen and FCEVs in other parts of the United States.”
CONTINUED: A Retail Believer
Retail Believer
Maurice Abdel Messih has been in the gasoline business for more than two decades and owns three gas stations, two in Los Angeles and one in Nevada, branded Shell, Arco and 76. Despite the conventional pedigree, he is a firm believer in alternative fuels, having at one point considered installing electric charging stations at his stores. But after hearing about a friend’s range issues with his electric car—a $100,000 Tesla Model S—he was swayed to hydrogen. “He said, ‘It’s a fantastic car, but during the day my business takes me places … and I just don’t have time for 2 hours to charge the battery during the middle of the day.’
“Whereas hydrogen,” Messih continues, “would be able to be dispensed like gasoline. I can go to any hydrogen station and fill up.”
FCEVs can have a range of 300 to 400 miles on a full tank, similar to gasoline-powered vehicles. However, there are far fewer fueling locations—which is where Messih comes in. He signed on recently with FirstElement to install hydrogen fueling at one of his Los Angeles sites, which has the ideal customer base for the alternative fuel.
“I’m right near Playa Vista. … All of these tech geeks live in that area,” he says. “Going green and all of this, it’s truly the area to be in. So my station was ideal for hydrogen.”
Interestingly, some years back, Shell had approached Messih about installing hydrogen fueling. The major oil helped lead the development of the first hydrogen fueling sites in California. But Messih was scared off by plans to install large hydrogen storage tanks underground. FirstElement’s setup involves a small aboveground tank. It will also build protective walls to separate the tank from nearby houses at the fire marshal’s request. The entire footprint is 20 feet by 30 feet.
Like Stephens-Romero of FirstElement, Messih is realistic about the short-term business case for hydrogen, saying he would not put it in unless someone else was footing the bill. A study by the University of California-Davis found that it would take $100 million to $200 million in investment, supporting 100 fueling stations for about 50,000 FCEVs, to make hydrogen cost-competitive with gasoline on a cost-per-mile basis.
Regardless, Messih believes someone needs to take the first step.
“We just need to get it started,” he says. “Once it starts, you see the success. I’m a believer of hydrogen. … We are the starters; we are going to make it happen.”
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