Background

The world is moving toward zero-carbon transportation, and right now the two most publicized candidates for powering movement are electricity and hydrogen. Electric vehicles have an early lead, but a network of automakers and energy companies are hedging their bets by developing technology for hydrogen-powered transport. Having spent a few weeks at a previous internship looking at the economics of hydrogen, I don’t think that EVs have anything to worry about. In this post, I’ll talk explain why by looking at hydrogen’s current penetration and economics. I’ll also talk about where I think hydrogen does have a distinct advantage.

Products

Before we dive into the broad market trends, it’s helpful to understand the product itself. A battery electric vehicle (BEV) contains a large battery that provides electric power to motors which drive the car. BEVs don’t have a tank to fill up, so you can’t put gasoline (or hydrogen) into it. A fuel-cell electric vehicle (FCEV) also contains a battery, but it’s relatively small in size and energy storage capacity. Hydrogen is pumped (much like gasoline) into a tank, and a hydrogen fuel cell uses the H2 to generate electricity. The electricity can recharge the battery, and everything else is the same – in both cases, the battery delivers electric power to motors which drive the wheels. A hydrogen car is fundamentally an electric car; the only difference is between a large battery and no hydrogen equipment (BEV) and a small battery with hydrogen equipment (FCEV). At its core, hydrogen isn’t an energy source, it’s an energy storage medium.

Because of FCEVs are still electric vehicles, FCEVs also have the instant torque and quiet operation of BEVs. The primary difference to the end user is that you can charge a BEV at home (so you’ll wake up every day with a full battery); you can recharge an FCEV much faster. Owning an FCEV requires little change in behavior, owning a BEV requires a change. Note I’m ignoring plug-in hybrids (of the gasoline or hydrogen kind).

Current Penetration

There’s a chicken-and-egg problem when it comes to hydrogen: there aren’t that many fueling stations, so not many consumers are willing to buy FCEVs – which means that there isn’t an incentive to build expensive fueling stations in the first place. The best data that I can find indicates that there are 39 hydrogen fueling stations open and available to the public for refueling as of December 2018 (Sources: California Fuel Cell Partnership (CAFCP) and the US Alternative Fuels Data Center (AFDC)). Interestingly, there were also 39 stations open in January of 2018, so the net change in hydrogen fueling stations over the past 11 months was 0. Also, all of the stations are in California, so there’s a major geographic limitation to the hydrogen refueling network as it stands today.

As an owner, hydrogen is incredibly limiting, but EVs have orders of magnitude more locations to charge. Over 2,000 fast-charging locations (each with capacity for several cars) exist in the US alone for any EV to use; Tesla has around 600 additional locations (again, each with capacity for several cars). To visualize how stark of a difference this is, here’s a map from the AFDC of hydrogen fueling stations in the continental US:

And here are the fast-charging locations in the continental US (again, map from the AFDC):

Electric vehicles run on electricity, and electricity transmission and distribution infrastructure exists worldwide. Even if you don’t live in an area with a fast charger nearby, you can still charge an EV overnight at your home using a regular wall outlet. The massive infrastructure advantage that EVs currently enjoy is a huge factor in why FCEV adoption has been so slow.

Data on the number of FCEVs sold is relatively hard to find, but nothing looks promising. The US FCEV count is 5,658 as of December 2018 according to the CAFCP. We know that the Toyota Mirai didn’t hit 3,000 sales in the US until January 2018 thanks to MotorTrend and TheDrive. Internationally, the picture isn’t any rosier.

Economics

Compounding today’s poor infrastructure are today’s poor economics. When it comes to fueling, hydrogen is more expensive than both gasoline and electricity. Today, refueling an FCEV costs roughly $70: $14 per kilogram times the 5 or so kilograms the tank can store. That tank will take you around 350 miles, which means that the fuel cost per mile is about $0.20. By comparison, hybrids (e.g. Honda Insight, Toyota Prius, Hyundai Ioniq) and electric vehicles (e.g. Teslas and the Chevy Bolt) have fuel costs around $0.05 per mile. Just for fun, I also found the fuel costs for a Ford Raptor ($0.15 per mile), a Toyota Land Cruiser ($0.16 per mile), and a Lamborghini Huracan ($0.19 per mile).

None of this affects the end user, for now. Manufacturers have shouldered the cost of hydrogen fuel during the leasing periods for owners, so the true cost of owning and operating an FCEV hasn’t yet fully affected purchasing decisions. But unless the cost for hydrogen declines heavily over time, consumers would probably just stick to hybrids/EVs for more environmentally-friendly commuting.

There’s a lot of detail that I’m glancing over – how exactly the cost of hydrogen breaks down into production, transmission, and storage; the different methods for each and their associated economics; and how those costs are expected to decrease in the future. I might cover that in a later post, but nothing really changes hydrogen’s competitiveness.

Parallel Industries

So the economics of hydrogen aren’t favorable compared to the economics of electricity (or gasoline, for that matter) today. Moving forward, I think that this lead will continue, but Ali Izadi-Najafabadi says it best:

“Unlike lithium-ion batteries for electric vehicles, there is no existing parallel industry for fuel cells that accelerates the speed of cost reduction.”

Some history: Elon Musk became convinced of the technological feasibility of a modern EV from a company named AC Propulsion. That company realized that 18650 battery cells had steadily improved over time, and that if you combined thousands of those battery cells into one larger pack, you could build a high-capacity battery relatively easily. But the improvement of the 18650 cell wasn’t being driven by automotive companies, it was improved upon by laptop manufacturers. The consumer electronics, energy storage, and EV industries all benefit from advances in battery technology, and these industries have some deep pockets. The companies benefitting from hydrogen that put R&D dollars towards fuel cells don’t have the same budgets as the consumer electronics giants like Apple, Samsung, and Lenovo. R&D towards batteries will probably be higher than R&D towards hydrogen, and while that doesn’t guarantee anything in the future, it does favor the batteries.

Hydrogen’s Advantages

Hydrogen’s obvious advantage over batteries is refueling/recharging times. Charging up a battery takes roughly an hour; fueling a tank of hydrogen takes minutes. With passenger vehicles, this doesn’t matter too much, since overnight charging is usually possible. However, when assets (cars, forklifts, planes, trucks) have 100% utilization, the time required to charge a battery may cut into revenue-generating activities. In these situations (e.g. autonomous delivery truck, autonomous taxis, etc.), the cost differential between hydrogen and electricity just needs to be lower than the revenue gain for hydrogen to win out, assuming that battery swaps are infeasible (the capital expenditures required to purchase a second battery, for example, may make this financially the case).

Hydrogen’s other key advantage is energy density, whether by weight or volume. I can think of two places where weight and space matter a lot: shipping and aviation. For planes, lowering weight is key to reducing fuel costs, and you don’t have the space necessary for massive batteries. With maritime shipping, again, batteries take up space and weight that could be occupied by revenue-generating cargo. Furthermore, in both of these industries asset utilization is critical. If battery pack swaps end up as infeasible for planes and ships (perhaps due to difficulty accessing the battery), then fueling up a plane with hydrogen would be an order of magnitude faster than charging a battery.

Conclusion

Hindered by poor infrastructure and economics, FCEVs aren’t as compelling as BEVs when it comes to clean transportation. Still, hydrogen’s advantages in refueling speed and energy density may give it an advantage in certain industries as autonomy increases asset utilization.