Navigant Research Blog

Fuel Cell Vehicles Set to Arrive – with Fueling Stations

— September 5, 2014

Heading into the 2015 launch of commercial fuel cell vehicles (FCVs) from Toyota and Honda (Hyundai’s is already out), California and Japan appear to be leading the race to build infrastructure.  In the past 12 months, the governments in California and Japan have each made a firm commitment to support extensive refueling networks.  Japan set a target of building 100 stations by March 2016.  California has committed to providing up to $20 million annually in support of a 100-station network.

Those timelines are aggressive given that, up to now, hydrogen stations have taken 18 months or more to build.  In California in particular, the timeline for building a hydrogen fueling site has been very lengthy, 24 months and even more.  This is one reason that the state has lost its leading position as a first market for FCVs.  A year ago, it looked like Europe was going to step up, with the United Kingdom announcing its own H2Mobility program to follow on the one that Germany established to develop and execute a hydrogen roadmap.  However, both of these programs are moving rather slowly.  By contrast, California secured a funding commitment from the state of up to $20 million per year in September 2013.  Now, the state is moving forward at a much faster pace.   In May, the California Energy Commission (CEC) announced awards for 28 stations, to be built by November 2015, for a total of around $46 million.

New Entrants

Of course, being first also means being a guinea pig for this market, which still faces a good deal of uncertainty in terms of potential demand.  I’ll be outlining FCVs sales prospects through 2023 in my upcoming report, 2014 Fuel Cell Annual Report.  Participants in the buildout of California’s first nine stations learned some lessons that are now being implemented.  One of the most critical differences is that the CEC is using its funding to provide support for operations and maintenance in addition to station construction.  This represents a tacit admission that the stations will be a cost center for owners and operators for the first years of the market.  The CEC awarded $300,000 to four current stations to support ongoing operations.

Another striking difference with the new 28 stations is that only 3 of the 28 awards are going directly to industrial gas companies (IGCs).  In place of IGCs, new entities have sprung up specifically to build and manage retail hydrogen fueling; these entities were given 23 awards.  Startup FirstElement Fuel received awards to build 19 stations.  The company was launched with funding support from Toyota and IGC Air Products but is open to working with any IGC that wants to use a third party to operate a retail station.  The company plans to become an operator of hydrogen fueling networks, similar to electric vehicle (EV) charging network operators.  FirstElement secures a retail gas station where there is real estate available to add a hydrogen pump and takes responsibility for the station once it’s up and running.  This removes risk from both the gas station owner and from the IGC providing the hydrogen.

Quite a bit of risk remains for the CEC in placing much of the responsibility for stations needed in 2015 on one company.  But the good news for the FCV market is that some early lessons learned are paying off in terms of new ways to tackle the problem of providing fuel to potential FCV drivers.

 

Japan Doubles Down on Fuel Cell Vehicles

— July 13, 2014

Two recent announcements out of Japan have dramatically cut the price that Japanese drivers will pay for a fuel cell car.  Toyota unveiled its completed design for the fuel cell vehicle (FCV) it will put on the market in 2015.  More importantly, the company revealed the price would be around ¥7 million, or $70,000.  This is a big drop from the $100,000 price tag floated, alarmingly, a few years ago.

A day earlier, Japan’s prime minister Shinzo Abe called for subsidies of FCVs beginning next year.  A part of the government’s economic growth strategy, these incentives reflect the hydrogen energy roadmap adopted by Japan’s trade ministry.

As described in my Fuel Cell Vehicles report, I’ve long said that the two impediments to fuel cell cars taking hold in the market are cost and infrastructure.  Automakers like Honda and Daimler have already shown that the technology works, resolving early issues such as cold-start capability.  FCVs will also deliver on the key performance characteristics that make them intriguing, as compared to battery electric vehicles: range and refueling.  The Toyota FCV will have a 420-mile range and refuel in 3 minutes.

The Post-Fukushima Strategy

For longtime fuel cell technology followers, I am stating the obvious.  The potential benefits of fuel cells in transportation have been well-understood for years.  Honda, General Motors (GM), Daimler, Hyundai, and Toyota have all shown they can make cars that meet those performance targets.  Nevertheless, in the U.S. media, the perception persists that fuel cells were made obsolete by the successful introduction of plug-in electric vehicles (PEVs).  In Navigant Research’s recent white paper, The Fuel Cell and Hydrogen Industries: 10 Trends to Watch, I noted that the U.S. media would continue to tie these two technologies together – and would misunderstand the rationale for pursuing them both.  Sure enough, this article asserts that the Japanese government’s goal is to crush Tesla.

Not quite.  The Japanese government’s plan is to promote technologies and fuels that will help ensure the country never has another experience like the Fukushima disaster in 2011.  The Japanese government also wants to grow the economy by supporting domestic industries.

The Market Will Decide

To take a phrase from President Obama, Japan has taken an “all of the above” approach in pursuing these two goals.  Nissan and Toyota have done well in the PEV market.  But fuel cells offer an alternative for consumers who may find that a plug-in car doesn’t meet their driving needs.

Japan has also made a huge commitment to fuel cells that provide residential power.  The country’s residential fuel cell program has supported the deployment of over 42,000 combined heat and power (CHP) fuel cells in Japan.  Manufactured by Toshiba, Panasonic, and Eneos Celltech, these residential units are sold through gas companies like Tokyo Gas.  After Fukushima, when the plant’s backup diesel generators were rendered useless and employees scavenged car batteries to power monitoring equipment, the Japanese government set a requirement that the fuel cells be capable of starting up when the power is off.  While these fuel cells employ a different technology from automotive fuel cells, the CHP program demonstrates both Japan’s commitment to pursuing whatever technology the country believes will support its energy resiliency (utilizing domestic expertise) and its willingness to support that technology in its early market introduction.

Japan has already committed to building 100 hydrogen fueling stations in key metro areas.  The country’s energy companies are partnering in that effort.  Note that the Japanese government is also supporting the automaker deployment of 12,000 charging stations in Japan.  Again, it’s not an either/or prospect for Japan.  The announcement on the FCV subsidies will put the cars at a price point where they might have a chance in the market.  If the infrastructure is in place to make fueling reasonably convenient, then it will be up to consumers to decide whether FCVs will succeed in the market or not.  Success will be measured over many years, not in 18 months.

 

In Europe, Fuel Cell Vehicles Accelerate

— July 16, 2013

Fuel cell cars have taken a beating in public perceptions in the United States over the past 4 years.  First, the Obama Administration significantly cut funding for the Department of Energy’s fuel cell vehicle technology program, and shifted the department’s focus to the plug-in electric vehicle (PEV) market.  Then, the launch of commercial PEVs and the steady growth of PEV sales cemented the impression that FCVs are a dead technology, made obsolete by PEVs.  As a result, Europe is now the hub of fuel cell vehicle and infrastructure development activity globally, supplanting the United States, which had led the way in this sector in the late 2000s.

The European Union, along with the national governments of Germany, the Nordic countries, and the United Kingdom, have made a clear commitment to prepare for FCV commercialization in 2015.  The main drivers for European interest in FCVs (as well as PEVs) are aggressive 2050 GHG emissions targets set by the EU; the growth of renewable energy, with hydrogen seen as a way to use excess renewable energy capacity; and economic growth, with Germany in particular seeing FCV development as a way to support its auto industry.  In addition, the PEV market has not taken off as quickly in Europe as it has in the United States, and there is some skepticism about how large a market share PEVs will ultimately take.  As a result, European governments are developing roadmaps to deploy hydrogen infrastructure in time for the automakers’ 2015 introduction plans.

Fuel Cell Light Duty Vehicle Sales by Region, World Markets: 2020-2030FCV Sales Chart

(Source: Navigant Research)

Of course, it doesn’t really matter which region is “leading” and which may end up following, as long as the world market does in fact take off – except that the current lack of activity in the United States means that very few vehicles will be brought to its shores when commercial FCVs are introduced in 2015-2016.  In the new Navigant Research report, Fuel Cell Vehicles,  I forecast that fewer than 1,000 FCVs will be sold in the United States in the first 2 years, virtually all in California.  This is well below the tens of thousands of PEVs first introduced in the United States in 2010 and 2011.  But FCVs simply will not be introduced where there is no infrastructure in place to support them.  Although the FCV market will grow much more slowly than the PEV market, Europe will start out ahead of the United States and stay there.

 

Toyota Bets on Fuel Cell Vehicles

— October 26, 2012

Toyota declared in September that it’s watering down its battery electric vehicle (BEV) plans by cutting back the production of the small Toyota eQ (known as the Scion iQ stateside).  The company has been hesitant on the idea of powering a vehicle solely by battery and currently only has plans to sell the updated RAV4 EV in California, so the move is not that surprising.  Instead Toyota is emphasizing its plans for fuel cell development.  The company currently operates a test fleet of fuel cell vehicles based on the Highlander SUV, and plans to deploy its first mass-market FCV in 2015.  Pike Research’s 2011 Fuel Cell Vehicles Report forecasts that the North American market for fuel cell vehicles will grow from around 9,600 vehicles in 2015 to more than 53,000 in 2020.

In retreating on BEV development, Toyota is making the bet that hybrids and plug-in hybrids are the greatest growth opportunity in the near term, and hydrogen vehicles, not BEVs, will be the greater opportunity for the future.  Considering the lackluster sales performance of BEVs vs. hybrids (HEV) and plug-in hybrids (PHEV) over the last 2 years, it seems like a safe bet.

Sales of Plug in Vehicles, North America (2011 & 2012)

Type

2011

2012 (YTD)

(Since 1/1/2011) Cumulative

HEV

268,807

322,516

591,323

PHEV

8,272

25,944

34,216

BEV

9,966

6,802

16,768

Source: Pike Research

Most BEVs skirt the edge of a 100-mile range, stretching up to the $100,000 Model S, from Tesla, which can go nearly 300 miles on a single charge.  EV advocates and battery manufacturers have long insisted that a battery breakthrough on the horizon will triple battery ranges while drastically reducing battery costs.  Regardless of how far the BEV can go on a full battery, however, it still takes hours to recharge instead of the minutes it takes to refill a conventional gas vehicle.

Toyota’s hydrogen vehicles can already achieve ranges and refill times comparable to conventional gas vehicles, but they have challenges of their own, including high vehicle costs, high fuel costs, and a lack of refueling infrastructure.  The costs of the vehicle technologies and fuel can be reduced through economies of scale, but the real challenge lies in infrastructure development requiring hefty investments.  According to the U.S. Department of Energy’s Alternative Fuels Data Center (AFDC), there are nine publicly available hydrogen refueling stations in the nation, mostly in southern California.  By comparison, there are more than 4,600 publicly available EV charging stations.

The ultimate question is which technology will develop faster.  Will hydrogen infrastructure be added in a manner that makes advanced vehicle battery development unnecessary, or will batteries achieve a breakthrough that makes refueling with either liquid or gaseous sources obsolete?  Toyota’s actions indicate that its executives believe a battery breakthrough is unlikely.  If the company is right, its efforts will pay off handsomely; if not, the Japanese maker will cede increasing portions of the alternative fuel market share to smaller and more enthusiastic EV believers such as Nissan, Renault, and Tesla.

 

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