Determining the best location for a gasoline station is fairly straightforward. You examine local demographics and traffic patterns, plus the surrounding competition and their fuel volumes, among other factors. But where do you position sites to sell a fuel that does not (yet) have much—if any—demand?
That is the conundrum for proponents of fuel-cell electric vehicles (FCEVs). The motor of these vehicles is powered by a battery charged by a reaction between compressed hydrogen and oxygen. Several automakers—Toyota, Honda and Hyundai, among others—are introducing FCEVs over the next couple of years, and a few hundred are already on the road. But the fueling infrastructure is in its infancy, and it’s considered the biggest roadblock to a successful debut of the alternative fuel.
In California, the national launching point for hydrogen, the goal is to have 48 fueling sites open by the end of 2016. Determining where to put these sites has occupied the minds of government, academic and industry minds for the past several years. The most likely locations will be at already existing gas stations, because it is a more economical option than a new build. One team is hoping its experience in the conventional petroleum fuels industry will provide a practical, real-world edge for site selection to better ensure a strong start for the alternative fuel.
A Proxy for Demand
In 2014, the National Renewable Energy Laboratory (NREL) contracted with Kalibrate Technologies to help it rank the viability of more than 30,000 potential hydrogen-fueling locations in California. Tulsa, Okla.-based Kalibrate had built much of its business conducting such sophisticated analyses for the gasoline and diesel retail industry; in approaching this project, it leaned on the same statistical modeling expertise.
But while data inputs for modeling gas locations are abundant, that’s not the case for hydrogen, where a few key elements are unknown. First: determining the right dependent and independent variables in the site-ranking analysis. In statistics, the independent variables influence the dependent variable.
To guide it in its site-ranking analysis, Kalibrate decided that potential hydrogen demand would be the best dependent variable, but it had no known figure to plug in.
“Because there is no hydrogen infrastructure ... you have to find a proxy for hydrogen demand,” says Ian Thompson, senior vice president of global solutions consultancy for Kalibrate. “How do you model something for which there is no data whatsoever?”
The team ultimately settled on two potential candidates for demand: total household gasoline expenditure based on place of residence, and gasoline volume in a trade area.
“We looked at those two because the hydrogen experience, in terms of filling up, the process [and] miles-per-gallon equivalent is very similar to gasoline, and dissimilar to electric,” Thompson says.
The team then decided, with agreement from NREL, that gasoline expenditures was the best fit. That’s because total gas expenditures correlate highly with variables that influence hydrogen fuel consumption, says Selen Onel, a Kalibrate research scientist.
The Income Factor
From there, Kalibrate’s analysts began to whittle down a list of more than 20 key independent variables that would best affect potential demand. These included everything from the number of FCEVs on the road to the number of gas stations with enough room for a hydrogen-fueling infrastructure.
“We looked at elements of supply, demand and then some of the logistics: the size of the lot, the likelihood of getting a permit,” Thompson says. “This is really comprehensive modeling, but not just purely theoretical. It was also the practical application of that modeling.”
The Kalibrate team and NREL ultimately landed on key independent variables that best explained gasoline expenditure—the proxy for future hydrogen demand. (See “Top Hydrogen-Fueling Infrastructure Variables,” p. 172.) The most important determinant: the number of households with an annual income of more than $100,000.
In fact, this was one key area in which the Kalibrate analysis differed from earlier academic research and influenced its ranking of locations, placing San Francisco—because it has one of the highest per-capita incomes in the state—as the top market for hydrogen fueling, above west Los Angeles, Silicon Valley, Orange County and San Diego.
One surprise for the Kalibrate team was how one of the least desirable traits in gasoline station site selection—redundancy—was actually highly desirable for hydrogen.
“Usually when you are building a network, redundancy would have been eliminated and cannibalization or volume transfer between stations would have been minimized,” says Onel. “But while building the hydrogen network, we tried to keep the redundancy because of the concern of maintaining fueling availability for customers in the early market, to support vehicle adoption.” Also, because the hydrogen-fueling infrastructure is new, it may not be as reliable as the one built around traditional fuels.
Kalibrate presented its findings at an annual California Department of Conservation meeting, along with its suggestions for additional research.
“There’s undoubtedly further refinements that could be made for the model for California, but we’re hoping that as hydrogen refueling expands geographically, Kalibrate can support NREL and [U.S. Department of Energy] in that endeavor,” Thompson says, citing the Northeast as the next hydrogen market. In addition, this particular site-ranking project was based purely on demand. A future study could factor in financial elements and, as the market grows, delve into station sizing and the right number of hydrogen dispensers. “It’s a very nascent industry, really starting off at the ground level,” Thompson says. “If we can help the industry now, we can help even more as the industry develops.”
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