California’s hydrogen mobility market evolves into heavy-duty applications – S&P.
Hydrogen’s emerging applications in California’s mobility market are challenging current infrastructure needs as the state explores the best end-uses for applications of the lower-carbon fuel and seeks to increase its competitiveness with incumbent fuels.
The state’s aggressive EV policies and various incentive programs allowed California to become the nation’s most active hydrogen mobility market.
The US Department of Energy announced the successful securing of initial funds for the ARCHES and Northwest Hydrogen Hubs, marking the official launch of these clean hydrogen hubs and making them the first in the country to receive funding for their projects. Both hubs have identified mobility as a potential end-use for the hydrogen they will produce.
California’s favorable policies and incentives for decarbonization in mobility have not prioritized one technology, yet hydrogen’s application has found support through it – though still in its early stages, as evidenced by limited infrastructure and vehicle sales compared with battery-electric vehicles. As of the first quarter of 2024, light-duty fuel cell electric vehicles made up less than 1% of zero-emission vehicles sales.
The state continues to increase the number of end-uses for hydrogen fuel outside of on-road vehicles – testing its use in aviation, rail and marine transportation.
However, bringing the lower-carbon fuel alternative to scale faces barriers such as current lacking infrastructure, commercial costs higher than its incumbent fuel’s energy cost equivalent, and decarbonizing the molecule throughout its lifecycle.
Premium price of hydrogen
Platts, part of S&P Global Commodity Insights, assessed the average cost of hydrogen fuel at the pump for light-duty vehicles in July 2024 at $33.26/kg, having increased 112% since the start of the assessment in September 2021.
Consumers have been burdened with the rising costs of hydrogen fuel at the pump, which is nearly three times higher than gasoline on an energy equivalent cost for light-duty vehicles. This hindered the widespread adoption of fuel cell technology in the light-duty vehicle sector.
The state’s policies target 100% emission-free fuel in medium- and heavy-duty vehicles by 2045, combined with more competitive fuel prices, making the potential scale of hydrogen within these heavy-duty applications foreseeable.
The private sector has witnessed significant growth in the use of hydrogen in heavy-duty applications. While heavy duty applications have lower rates, which are typically fixed through contracts and purchased in higher volumes, the current price of hydrogen for heavy-duty vehicles ranges at $7-$15/kg, which fluctuates wider than with the modeled willingness to pay values for hydrogen fuel in heavy duty trucking at $10.60-11.30/kg, according to a Commodity Insights analysis.
Despite being more competitive with its incumbent diesel fuel than its light-duty counterpart, the heavy-duty sector still faces challenges in achieving the desired market pricing for hydrogen fuel.
On July 18 a source indicated to Platts an indicative offer of $8.75/kg for delivered hydrogen fuel sold into transit buses in California. The source also mentioned that a public refueling station in the Port of Oakland was selling hydrogen for fuel cell trucks below $15/kg, including subsidies and with origin out of state.
In contrast, both prices were on the higher end compared with the target price quoted from market sources for low carbon delivered hydrogen in these applications, ranging $5-7/kg for trucks and $9/kg for transit buses, according to Commodity Insights data. The DOE has set a target price for dispensed hydrogen at $7/kg by 2028, specifically aimed at heavy-duty vehicles.
Pricing for hydrogen refueling for rail applications has been heard in the range of $7-$20/kg, hovering above the market target price range of $5-6/kg – due to lack of steady and sufficient supply, according to Olivia Arant, Chief of Office of Assets and Equipment at Caltrans.
However, the target price indicated by the market for the aviation sector ranges for hydrogen at $6-12/kg, with the willingness to pay at the lower end of $4.81-6.60/kg for aviation applications taking into consideration jet fuel energy efficiency.
While fuel cell technology, which operates with more efficiency in aircraft, has not yet been approved by the FAA, early adopters of the technology are encouraging market interest. The fuel cell technology was scaled up from the automative industry to fit into aircraft, according to a conversation with Commodity Insights.
Marine applications for hydrogen are still in the emergence. However, market interest for hydrogen is growing as the maritime industry tests various alternative fueling options to decarbonize.
Developing the infrastructure
One of the challenges driving prices higher for the fuel is refueling station availability and supply constraints.
There are currently little over 60 public hydrogen refueling stations for light-duty vehicles with several offline due to supply disruptions in Southern California.
California’s Energy Commision also approved a $1.9 billion investment February 2024 for their Clean Transportation Program. The money is to be allocated to develop infrastructure for light, medium, and heavy duty zero-emission vehicles – and will support the hydrogen refueling network within the state. The program has allocated funding for 96 more public hydrogen refueling stations, according to California’s Energy Commission.
Air Products, which actively operates six hydrogen refueling stations in Southern California, announced plans to build commercial, multi-nodal hydrogen refueling stations connecting Northern to Southern California at the California Hydrogen Convention at the Los Angeles Convention Center May 29. Each high-capacity station will be able to fuel up to 200 heavy-duty trucks or 2,000 light-duty vehicles per day.
Several players within the heavy-duty vehicle end use sector have announced the next steps to expand their refueling networks, including Nikola and First Element Fuel.
Meanwhile, within aviation, adoption of the technology proves more complicated and labor intensive than vehicles due to the aircraft’s size. Hydrogen is currently recommended for medium-haul flight use cases, according to Arnaud Namer, former COO of Universal Hydrogen.
Regarding the infrastructure and on-site refueling challenges faced,
Eremenko, Universal Hydrogen’s former co-founder and CEO said:
hydrogen fueling uses modular capsules compatible with existing freight networks and airport cargo handling equipment, making every airport in the world hydrogen-ready.
Despite Universal Hydrogen ceasing operations, other market players have continued to invest in hydrogen for aviation, with American Airlines committing to a conditional purchase of 100 hydrogen-powered engines from ZeroAvia, according to a company statement.
Hydrogen-powered rail faces similar refueling infrastructure challenges as the aviation industry, also using a mobile refueling station for the initial hydrogen-powered locomotive beginning service in California in the Central Valley route. The use of mobile refueling stations is necessary, per Caltrans’ strategy, to determine optimal refueling station locations based off usage patterns and demand.
As of now, Air Liquide’s Las Vegas hydrogen production site is providing hydrogen for California’s rail initiative, per the company’s statement. Additionally, market sources have shared with S&P Global Commodity Insights their interest in selling green hydrogen into California’s mobility market.
In October 2023, Caltrans signed a contract with Stadler US, Inc. to purchase four zero-emission hydrogen-hybrid Fast Light Innovative Regional Trains (FLIRT) H2s, with options for 25 additional trainsets, Arant told Commodity Insights. The agreement marked the debut of North America’s first intercity hydrogen-powered rail, with service anticipated later this year.
Following the first commitment, Caltrans followed up in January 2024 and exercised options for six additional trainsets. The first few trainsets will be delivered between 2027 and 2029 and run on a 120-mile route in the Central Valley, Arant said. Caltrans plans to achieve a 100% ZE passenger rail fleet by 2035.
The marine hydrogen fuel sector is still in its infancy. The first commercial vessel “Sea Change”, powered fully by hydrogen fuel cells, was announced this year by SWITCH Maritime. Although the permitting process for hydrogen fuel systems in maritime vessels is still underway with the US Coast Guard, the ferry is expected to demonstrate the viability of hydrogen as an alternative fuel within the marine sector.
The ferry will conduct a pilot service in the California Bay Area before transitioning into a permanent route.
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California’s hydrogen mobility market evolves into heavy-duty applications – S&P. source
