Hydrogen Fuel Finally Graduating From Lab to City Streets

Photographer: Patrick T. Fallon/Bloomberg

A Daimler AG Mercedes-Benz F-Cell vehicle is fueled at a public hydrogen pumping station in Fountain Valley. California is participating in an eight-state effort to get 3.3 million zero-emission cars on the road by 2025, powered by either fuel cells or batteries. Close

A Daimler AG Mercedes-Benz F-Cell vehicle is fueled at a public hydrogen pumping... Read More

Close
Open
Photographer: Patrick T. Fallon/Bloomberg

A Daimler AG Mercedes-Benz F-Cell vehicle is fueled at a public hydrogen pumping station in Fountain Valley. California is participating in an eight-state effort to get 3.3 million zero-emission cars on the road by 2025, powered by either fuel cells or batteries.

Once relegated to the realm of science projects, hydrogen fuel cells are starting to displace fossil fuels as a means of powering cars, homes and businesses.

On June 10, in the latest addition to mainstream fuel-cell use, Hyundai Motor Co. will begin deliveries of a consumer SUV in Southern California. The technology is already producing electricity for the grid in Connecticut. AT&T Inc. is using fuel cells to power server farms, and Wal-Mart Stores Inc. uses hydrogen-powered fork lifts. Later this summer, FedEx Corp. will begin using hydrogen cargo tractors at its Memphis air hub.

“This is the most exciting time for fuel cells in my career,” said Daniel Dedrick, head of hydrogen and combustion technologies at Sandia National Laboratories in Livermore, California. The hydrogen market “is starting to accelerate.”

Fuel cells produce electricity from hydrogen in a process that dates back to the 1830s, yet high costs have historically made the technology better suited for Apollo space missions and Soviet submarines. In recent years, the technology has made big strides, and prices are falling. And because the process produces little or no greenhouse gases, hydrogen power stands to get a boost in the wake of President Barack Obama’s recent call for tighter controls on carbon emissions.

Early Days

It’s still early days for hydrogen power. Prominent skeptics, including former Energy Secretary Steven Chu and Tesla Motors Inc. Chief Executive Officer Elon Musk, have questioned whether the technology will ever catch on.

Hydrogen currently provides less than 1 percent of power worldwide, while coal and gas produced 67 percent of U.S. electricity in 2012, according to the Energy Information Administration. Chu, who was appointed by Obama, called for a 44 percent reduction in funding for hydrogen research.

“People have been working to improve fuel cells for over 150 years, and it’s still not commercially viable,” said Joseph Romm, a senior fellow at the Center for American Progress, a Washington-based think-tank.

There are only about 1,000 cars and buses in operation worldwide today using hydrogen technology. There are nine hydrogen filling stations in California, with 48 more under development. California promises to boost that number to about 100 over the next several years. By comparison, there are 160,000 traditional filling stations across the country.

Hydrogen Infrastructure

Advocates argue the hydrogen landscape could quickly evolve as corporations’ use of hydrogen spreads. The infrastructure for corporate fuel cells has been quietly spreading. Across the U.S., there are now tanks of hydrogen and fueling systems for fleet vehicles and forklifts. There are pipelines delivering the fuel to refiners that use it to make gasoline. As more companies adopt hydrogen power, the needed equipment will come, said Andy Marsh, chief executive officer of Plug Power Inc. (PLUG) in Latham, New York.

Yet even industry leaders say that, without a national pipeline network, it will be a long time before the nascent industry will enjoy widespread development.

“You have to get critical mass to build a business case,” said Ed Kiczek, global business director for hydrogen at Air Products and Chemicals Inc. in Allentown, Pennsylvania, the world’s largest supplier of hydrogen. “That could be 30 years away.”

Shops Buying

For now, local pockets of hydrogen use are flourishing. Plug supplies fuel-cell powered forklifts for customers including Wal-Mart, the grocery chain Kroger Co. and Bayerische Motoren Werke AG. Plug also provides hydrogen-fueling systems. Once a company has a flock of its forklifts at a warehouse, it’s a short leap to installing larger fuel cells that can produce both hydrogen on site and electricity for the entire building, Marsh said.

The company is supplying the systems for FedEx’s airport tractors in Memphis, another location where stationary fuel cells might eventually become either a primary or back-up source of electricity.

AT&T is the largest non-utility fuel cell customer in the U.S.. It has 17.1 megawatts of fuel cells operating at 28 sites in California and Connecticut. The systems offer cleaner power that’s more consistent than electricity supplied by the grid, said John Schinter, the company’s assistant vice president of energy and smart buildings.

“For us, reliability is so critical and these help us ride through power disruptions,” Schinter said. “We deploy fuel cells in our high-cost markets, so these actually reduce our operating costs. We’re definitely planning to expand.”

Autos Next

Proponents of hydrogen say all this activity will soon spill over to the auto market, and it’s already happening in Southern California. Hyundai will begin deliveries of its fuel-cell Tucson SUV next week. Honda Motor Co. already offers one there and Toyota Motor Corp. will follow next year.

“The shift to hydrogen is inevitable, and it’s happening faster than we expected,” said Amory Lovins, founder of the Rocky Mountain Institute, a non-profit clean energy research organization based in Snowmass, Colorado.

Not everyone agrees. Elon Musk, a longtime critic of fuel cell technology, particularly in automobiles that compete with Tesla’s Model S, revisited his opposition to the power-generating devices earlier this week.

“I’m not the biggest fan of fuel cells,” Musk said at the company’s annual meeting in Mountain View, California, on June 3. “I usually call them ‘fool cells.’”

California’s Push

Even so, California is participating in an eight-state effort to get 3.3 million zero-emission cars on the road by 2025, powered by either fuel cells or batteries. Also participating are Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont, which together account for 25 percent of all U.S. auto sales.

Some analysts are predicting steady if modest growth. Automakers may be selling 1.76 million fuel-cell vehicles a year worldwide by 2025, according to Deloitte Tohmastsu Consulting.

Cars that run on hydrogen can typically go more than 250 miles (400 kilometers) on a tank of the gas and then must be refilled. They differ from battery electric vehicles like Tesla’s Model S or the Nissan Motor Co. Leaf, which use lithium ion batteries to store electricity. When those batteries are drained, they must be recharged.

Nearing Profitability

After decades of losses, fuel cell makers are finally closing in on profits. Ballard Power Systems Inc. (BLDP) expects to report break-even earnings before interest, taxes, depreciation and amortization for 2014, after posting one profitable year since 1992. The Vancouver-based company supplies power systems used in buses and Plug’s forklifts.

FuelCell Energy Inc. (FCEL), a supplier of large stationary systems that run buildings and factories, said yesterday it will have break-even EBITDA by the end of this year. The company’s systems are running the world’s biggest fuel-cell power plant, a 59-megawatt facility in South Korea, and the first utility-scale plant in the U.S., in Bridgeport, Connecticut.

Investors are taking note. Plug is up more than 1,000 percent in the past year, the best performer on the Nasdaq Composite Index. (CCMP) Ballard has doubled and FuelCell has gained 49 percent, compared with a 23 percent gain for the broader market index.

In the future, suppliers may tap excess power from wind and solar farms to make hydrogen, reducing the carbon emissions that come when it’s derived from gas, said Michael Beckman, vice president of hydrogen fueling at Linde AG (LIN), the world’s largest industrial gas supplier.

“In three to five years you will see that become more prevalent,” Beckman said. “Wind and solar can make hydrogen cheap when the grid doesn’t need the power.”

To contact the reporter on this story: Christopher Martin in New York at cmartin11@bloomberg.net

To contact the editors responsible for this story: Will Wade at wwade4@bloomberg.net; Reed Landberg at landberg@bloomberg.net Rick Schine

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.