Fuel Cell Cars and the Shale Revolution
Carmakers’ Persistence with Fuel Cell Cars Could Still Pay Off
Being effectively snowed in last week gave me some time to catch up on my reading backlog, including an article in the Washington Post’s “Capitol Business” edition on “Are We Ready for Hydrogen Cars?” Published in conjunction with this year’s DC Auto Show, which I missed, it mentioned a new fuel cell model from Hyundai for the California market, while providing some background on a technology that looked much more like the next big thing a decade ago than it does to many, now.
We can’t talk sensibly about the prospects for fuel cell cars to become practical without discussing the cost of fuel cell components, the infrastructure to deliver H2 to vehicles, and the suitability of various options for storing it safely onboard. However, I was surprised the article failed to mention a new factor that might do more than anything else to improve the odds for this technology: shale gas.
Why Fuel Cells?
In the mid-1990s, when fuel cell vehicles (FCVs) first appeared on my radar, they seemed like an ideal alternative to the gasoline engines in most passenger cars, offering zero tailpipe emissions and very low lifecycle, or well-to-wheels emissions of all types. Onboard hydrogen (H2) storage, whether as a gas, liquid or chemically adsorbed in another material, enabled higher energy density than then-current batteries, giving an FCV significantly greater potential range than a comparable electric vehicle (EV). And like electric cars, they also provided a useful pathway for bringing energy from a wide variety of sources into the transportation market, which was and still is dominated by petroleum products. Cost and technology readiness were the biggest barriers, along with non-existent retail H2 infrastructure.
Energy remains the key to FCVs, because H2 is an energy carrier, not an energy source. Standing up a competitive fleet of FCV models thus requires plentiful and preferably low-cost energy sources from which sufficient H2 can be produced and distributed. As recently as just a few years ago, this looked like a very tough challenge. Most H2 used industrially is generated by chemically reforming natural gas, US production of which was in decline, resulting in high and volatile gas prices. Generating H2 from electricity looked even worse, because power prices were climbing and seemed likely to increase steadily in the future, as natural gas prices rose and higher-cost renewables were phased in. And with US electricity generation dominated by coal, H2 from electrolysis–cracking water into its components using electricity–looked more like a way to shift, rather than reduce vehicle emissions.
Like many other aspects of the North American energy scene, this picture has changed radically in the last several years, mainly due to the shale gas revolution. We now have abundant gas at reasonable prices, and it’s also holding down electricity costs. (Renewables are also reducing wholesale electricity prices, though not necessarily the full cost of electricity, because they still depend on subsidies and mandates that don’t show up in wholesale prices.)
All of this creates the potential for cheaper H2 sources than fuel cell developers expected recently. Moreover, US natural gas prices have diverged from oil prices and are now at a significant discount to oil. Wellhead gas today trades for the equivalent of $35 per barrel, compared to oil at over $100. Gas-derived H2 could end up with advantages in both cost and end-use efficiency over gasoline.
A Changing Competitive Environment for Advanced Vehicles
Of course the availability of natural gas isn’t the only thing that has changed for fuel cells in the last decade, from a competitive perspective. Automakers such as GM, Toyota and Honda have introduced various new fuel cell models. The most recent one I had an opportunity to drive was a fuel-cell version of the Chevrolet Equinox compact SUV in late 2007. It seemed like a very normal car in most respects.
Unfortunately, H2 distribution for FCVs has had a somewhat checkered history, as the Washington Post article notes. Providing fuel for FCVs is a much more involved and expensive undertaking than setting up a network of recharging points for EVs. How many H2 stations will suppliers build before FCVs appear in large numbers, but how many FCVs can carmakers sell before sufficient infrastructure is available to serve them? California still has just a handful of public H2 stations, after years of development.
Energy trade-offs dominate the competition between FCVs and EVs. The former have longer ranges between refueling than moderately-priced EVs–the Tesla Model S has excellent range–and can be refueled in much less time than even high-voltage EV recharging can achieve. However, FCVs are much more dependent on refueling infrastructure than EVs, which can recharge at home. And thanks to robust federal support for battery R&D and production, including from the 2009 stimulus, along with extremely generous federal and state EV tax credits, EVs have gained significant awareness and initial market penetration since the current administration took office and scaled back federal support for fuel cells.
Conclusions – The Race Is Far from Over
EVs may have an edge over fuel cell cars, for now, but EV sales remain disappointing and they must compete with more convenient, mainstream hybrid cars, with and without plug-in capability. They must also compete with conventional gasoline and diesel cars that become more efficient every year, reducing EVs’ advantages in operating costs and lifecycle environmental impacts. Given all that, there’s still ample time for another technology like FCVs–or natural gas vehicles (NGVs)–to scale up, if they can get costs down and overcome infrastructure hurdles. Those are big ifs.
Nor is it the case that EVs and FCVs are mutually exclusive in the automotive market. Fuel cell cars are fundamentally electric vehicles, and most will likely also be hybrids, with regenerative braking and traction batteries. So advances in EV architecture, battery capacity and cost, and safety also benefit FCVs. That makes it seem even likelier that our future vehicle mix will be quite diverse, with EVs and FCVs coexisting with NGVs, various hybrids, and much more efficient gasoline and diesel models than today’s.
2015 EIA Energy Conference
June 15-16, 2015 - Washington, D.C.
Platts North American Crude Oil Summit
February 26-27, 2015 - Houston, TX