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Hydrogen Refueling's Profitability Problem

Christopher Robinson, Research Director
August 3, 2021

Fuel cell electric vehicles (FCEVs) have long remained the power train of tomorrow, but today, battery-electric powertrains have displaced fuel cells as the immediate answer to reducing transport emissions. A key reason for the lack of fuel cell vehicle adoption in transport is infrastructure. 

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Thus far, some automakers have led the push by building fuel cell vehicles, but many government targets set for hydrogen fueling stations were missed widely, as few companies stepped in to build supporting fueling infrastructure. Refueling infrastructure remains a significant limitation to an increased market share of fuel cell powertrains. Stations will not be built until they can be proven profitable, and in this blog, we're taking a deep dive into the economics of operating a hydrogen fueling station.

For this model, we use station cost data acquired through the U.S. Department of Energy's (DOE) hydrogen program and interviews with others to estimate the capital costs associated with hydrogen fueling stations and assume a 5% annual maintenance cost with a 10-year station lifetime. We also consider two station types. Gaseous tube trailers (GTTs) are slightly cheaper and use hydrogen stored in gas tanks, which are switched out when capacity is low or used to refill on-site storage. Liquid hydrogen tankers (LHTs) fill on-site permanent storage of liquid hydrogen, gasifying the hydrogen in the station before refueling. We calculate the net present value of a station by considering margins of $1/kg, $2/kg, or $4/kg taken by the station operator and plot each scenario as a function of station utilization by daily hydrogen storage capacity. Lastly, to account for future cost reductions, we also consider a scenario with capex reduced by 50% compared to today. The assumptions for each station are shown below:

Hydrogen Refuelings Profitability Problem

H2 Refueling Stations GTT

lht h2 refueling stations

From these results, we can draw several conclusions:

  • LHT stations should be more profitable. Compared to GTT stations, LHT stations reach profitability at lower utilization rates and generally generate larger profits. The U.S. DOE calculated that GTT capital costs are roughly two-thirds of LHT station costs, but LHT stations have twice as much hydrogen storage capacity and twice as many fueling nozzles. This means greater losses when stations are unprofitable at low utilization rates, so LHT should only be deployed when there is confidence in high utilization rates.

  • Cheap hydrogen is much more important than lower capex. In both GTT and LHT stations, doubling the margins on hydrogen is more effective at increasing profitability than halving the station's capex.

  • Utilization and margins are the keys to profitability. This somewhat obvious conclusion has had a major impact on the future of hydrogen in transport. With no viable path to profitability supporting personally owned light-duty vehicles, one of the first profitable use cases of hydrogen as a transport fuel was in forklifts, and today, the significant activity is in heavy-duty transport applications. Driving up utilization by picking the right application is a more promising strategy than increasing margins. Hydrogen can be cost-competitive with a $3.20/gallon gas price at around $8/kg, a target difficult to achieve when taking a $4/kg margin.

 

Those interested in the hydrogen refueling space are encouraged to seek out low capital cost refueling stations like GTTs or solutions like NanoSUN's as a fueling solution for piloting hydrogen fuel cell vehicles but ultimately look toward LHT or GTT stations with on-site generation (not considered in this analysis due to a lack of data) as the likely fueling station of the future. However, the station is ultimately not the barrier in the hydrogen economy, and those focused on enabling a larger hydrogen economy should remain focused on enabling low-cost hydrogen production.

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