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California Energy Markets / Bottom Lines

[September 1, 2017 / No. 1452]

Hydrogen Fueling Station Network Progressing, but Hitting Challenges

California's hydrogen fueling and fuel-cell electric-vehicle markets showed impressive growth over the past year, but challenges remain as the markets move from the demonstration phase to broader commercial deployment, according to a new report from the California Air Resources Board.

CARB's 2017 Annual Evaluation of Fuel Cell Electric Vehicle Deployment and Hydrogen Fuel Station Network Deployment, required under AB8, shows that between April of 2016 and this past April, California registered 1,300 fuel-cell electric vehicles, bringing the total number of FCEVs on the road in the Golden State to just over 1,600. Over the same period, nine new retail hydrogen fueling stations opened, bringing the total number to 29; the number of hydrogen fueling stations is expected to grow to 34by the end of this year. A February grant solicitation from the California Energy Commission is expected to add another 16stations, set to open in 2019.

These stations provide critical fueling opportunities in first-adopter markets, according to the report, and with multiple stations in some markets there is additional coverage and redundancy. With new stations in the San Francisco Bay Area, Coalinga, Orange County, San Diego and the Truckee and Santa Barbara areas, drivers can now travel between Northern California and Southern California, as well as to popular vacation areas on the coast and in Tahoe, said Andrew Martinez, an air resources engineer at CARB, on an Aug.29 webinar focusing on the report findings.

But network development has been slower than previously anticipated, and manufacturers' responses to a survey related to the report show a decrease in short- and long-term deployment plans for FCEVs. The pace of hydrogen fueling-station deployment is now one year slower than previously expected, according to the report.

"Even though there has been a significant amount of progress, some stations still present a significant amount of difficulty," Martinez said.

The pace of hydrogen fueling-station deployment is now one year slower than previously expected.

Challenges station developers are encountering include crafting mutually acceptable lease agreements with site owners and a lengthy process for planning and permitting. In some cases, developers have had difficulty procuring equipment or it has taken longer than expected to test and validate a station before commercial operation.

Between November of last year and March, the CEC issued stop-work orders on nine stations it had previously funded because the station developers had made little progress and the state was bumping into deadlines for spending the funds; the orders have been lifted for some stations for which developers have shown viable and feasible plans to complete the work. The CEC's February funding solicitation included critical milestones and enforcement procedures to ensure the same delays would not happen again.

As the report notes, there is a strong connection between the deployment of station infrastructure and the deployment of more hydrogen fuel-cell vehicles, and automakers have stressed the fact that larger FCEV deployments can take place only with accelerated station deployment and development timelines. It's a critical point, as California has set a goal to have 1.5 million zero-emission vehicles on the road by 2025 in order to help with state greenhouse-gas reduction targets.

Comparison of Statewide Hydrogen 
Fueling Station Projections

One thing stakeholders are looking at to boost station deployment is alternative funding mechanisms. The hydrogen fuel-cell vehicle and station market has made the transition from the demonstration phase to the commercial phase, Martinez said, and funding programs need to adjust to make the most efficient use of state dollars.

"Building hydrogen fueling demand in order to make sure market dynamics are able to move this from a heavily state funded effort to a self-sustaining industry" is the goal, Martinez said, while maintaining grant funding options where it makes sense. Lowering the perceived risk in terms of private investment could serve to increase the amount of private money that is leveraged with state dollars, he said.

Another area that must be addressed is station dispensing capacity, especially after the 2021-2022 time frame, as long-term FCEV deployment plans indicate a need for greater hydrogen dispensing capacity.

Under business-as-usual assumptions, the state has assumed it can help build out eight stations a year with a dispensing capacity of 180 kg/day, with the $20 million allocated to the industry under AB 8 grant programs. But dispensing capacity for all but one of the 16 stations funded under the CEC's February funding round, GFO-15-605, provide dispensing capacity of at least 300 kg/day.

"More importantly, continued or even accelerated station network development is expected to incentivize greater FCEV deployment," the report said. "With many core market areas still without sufficient coverage and backup fueling options, halting or slowing investment in hydrogen fueling stations will push auto manufacturers' FCEV deployment plans further into the future."

One of CARB's recommendations in the report is that the state work with stakeholders to evaluate strengths and weaknesses of alternative funding mechanisms to enable more than eight stations a year that have 300 kg/day dispensing capacity, with the same $20 million annual investment by the state. Loan loss reserves, loan guarantees, certificates of guarantee and additional coordination with private investors or entities could all be considered. And with renewable hydrogen production capability a priority, some kind of incentives for sustainable hydrogen production could also be considered. A more widespread FCEV deployment could depend on how the state and industry meet these challenges.

And to increase consumer interest in buying FCEVs and decrease the cost of ownership, continued incentives, such as the state cash rebate, the federal tax credit (which is currently lapsed), local incentives, and the promise of free fuel from auto manufacturers could make FCEVs more attractive to a wider array of potential customers. -Mavis Scanlon

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