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The topic of hydrogen as a future energy source has become a divisive topic with many touting its potential contribution to decarbonising the global economy while others controvert it as “hopium” and a waste of investment capital. Regardless of your stance, with over US$320 billion in projects announced in the past 12 months, it won’t be long till we discover if hydrogen has a role to play. One of the areas where hydrogen is expected to make an impact is in mobility. Over the past few months, I have noticed increasing momentum in this area with expanding media coverage and announcement of projects. ABSI this week looks at the use of hydrogen in motor vehicles.
It is important to appreciate that the idea and execution of hydrogen as a fuel source isn’t new; in fact, it dates back to the early 19th century and predates the use of gasoline. The first recorded development of a hydrogen internal combustion engine (HICE) was by Belgian engineer Etienne Lenoir in 1860. However, given the difficulty in producing pure hydrogen, the technology gave way to the traditional gasoline ICE and the rest was history.
Fast forward to the late 90s/early 00s and there was a growing interest in exploring hydrogen as a potential alternative fuel for automobiles due to its potential to reduce greenhouse gas emissions and dependence on fossil fuels. Several developments took place during this time including the development of concept cars from several automakers including Toyota, Honda, Hyundai, and BMW. As an alternative to HICE, the fuel cell came to prominence which used electric motors and produced only water as a byproduct. Ultimately though the issue of hydrogen supply was the overbearing issue and the technology once again failed to launch.
JCB unveiled its new hydrogen engine. Source: H2 View
Another 20 years later and it may be three times the charm for hydrogen as a mobility fuel. Many pundits deride the third coming as another failed attempt, however, the same could be said for battery electric vehicles (BEVs) yet after a number of failures to launch, have grown exponentially in recent years and are making a meaningful impact on the sector. Like the BEV industry, the same tailwinds are helping hydrogen on its way and that is the globally accepted need to reduce greenhouse gas (GHG) emissions and the falling cost of renewable energy.
As a result of the potential of hydrogen vehicles, new startups are jostling to become the next Tesla Motors. Due to the inherent advantages of hydrogen over BEVs, these upstarts are targeting commercial vehicles which are required to carry heavy loads and run consistently for 12-24 hours per day. Progress is slowly being made with companies such as H2X Global recently winning a SEK70m tender to supply hydrogen garbage trucks in Sweden, Nikola Motors awarded US$42m to build truck refueling infrastructure in California, and Wrightbus recently receiving a £30m order for a fleet of hydrogen buses.
H2X garbage truck range. Source: H2X Global
Being late to the dance on BEVs, the incumbent automakers are keeping a close eye on the industry and many have already either started producing vehicles or are aiming to time the launch with the widespread deployment of hydrogen infrastructure and supply. Toyota and Hyundai have passenger vehicles for sale while BMW is currently piloting around Europe a hydrogen version of its X5 SUV.
The detractors of hydrogen as a mobility fuel usually cite three major flaws - production, infrastructure, and economics. The first two are relatively similar and will take some time to solve at a large scale. A hydrogen council study reports that over 1,000 hydrogen production projects have been announced to come online by 2030. LINE Hydrogen is one such company looking to bring commercial-scale hydrogen production to the Australian market, as early as the end of 2023, and recently received EPA and DA approval for their maiden project in Tasmania. Their offtake will go towards hydrogen mobility for heavy vehicles. Like production, hydrogen refueling infrastructure is slowly coming online and is helped along by the ability to incorporate hydrogen pumps at existing fuel stations. According to H2Stations, 130 new stations went into operation in 2022 with thousands more in development and set to open in 2023.
On the economics front, I looked at existing vehicles on the market, namely the Toyota Mirai. First released in 2015, the latest edition of the Mirai is advertised to cover a range of 402 miles or 643 kilometers on its 5.6kg 700 bar tank giving it a fuel efficiency of 0.87kg/100km. California is one of the most advanced economies for hydrogen with infrastructure in place that would allow a vehicle to comfortably traverse in the state. According to GLPAutogas, the avg. price in July 2023 is ~US$29/kg, therefore a Mirai would cost US$25/100km. Compare this to a gasoline Camry XV70 3.5L, which is rated for fuel efficiency of 9.5L/100km and with gasoline priced at ~US$1.20, costs a user ~US$11.40/100km. EVs are the cheapest alternative with the Model 3 officially rated for 13.1kWh/100km and the avg. cost per kWh being US$0.25 meaning a user can get 100km for ~US$3.28. However, it should be noted that this isn’t a direct comparison as there is a time factor to consider with BEV charging taking considerably longer than gasoline or hydrogen vehicles.
A 2022 Toyota Mirai. Source: Toyota
From the quick back-of-envelope calculations, the current economics of hydrogen in vehicles don’t stack up but with added supply and future taxes on carbon, it won’t be long till the price of hydrogen is at parity with traditional gasoline vehicles. At current prices, hydrogen would need to sell at ~US$13/kg for parity in the US. In the UK and Europe, where gasoline prices are more expensive (currently £1.5/L), hydrogen price parity would be at ~£16.4/kg or ~US$21/kg at current forex rates.
The noise around hydrogen will continue to grow louder across the decade as more projects come online and the infrastructure continues to develop. Personally, I have always advocated for initial green hydrogen production to go to industries that currently use grey hydrogen such as fertiliser production. However, given mobility is one of the largest contributors to global GHG emissions, it is a worthy industry to target for zero-emission alternatives. BEVs are doing a great job in the retail vehicle space but have failed to make a meaningful impact on the commercial front. Hydrogen producers have an opportunity to not only make a meaningful contribution to net zero by targeting mobility uses but also provide one of the largest ROIs for its shareholders by selling on strong margins.
Don’t expect the story to end here.
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