Hydrogen is the single most abundant substance in the universe. Perhaps due to this abundance, we sometimes forget how useful hydrogen is. From being used in the very first internal combustion engines as an inflammable fuel, to powering flight by airships, hydrogen has once again taken center stage in mankind’s quest for energy sources, in the form of fuel cell applications.
We are taking a comprehensive look at hydrogen and its role to power the future of mobility. This first paper focuses on an introduction of hydrogen and fuel cell technology, as well as a deep dive into a total cost of ownership view of fuel cell, battery-electric, and traditional internal combustion engine vehicles. We took a bottom-up approach of a Total Cost of Ownership (“TCO”) analysis across the regions of US, China, and Europe, across a 13-year timespan.
Our approach looks not only at detailed build costs for a Fuel Cell (“FC”) vehicle, down to the nuts and bolts of drivetrain, fuel system, and others, but also at operational costs such as fuel, infrastructure, maintenance, and so forth. We believe that this approach is not only unique in the marketplace, but also offers our readers a perspective that can be applied to almost any operational business model. Indeed, we applied our model to 3 specific case scenarios of Fuel Cell Electric Vehicle (“FCEV”) use today – focusing on an logistics operator in Shanghai, a drayage truck operator in California, and a bus operator in London.
Our TCO analysis shows consistent and highly encouraging results. Even when ignoring qualitative benefits of hydrogen (i.e. zero-emission at the use end, among others), FCEVs are forecasted to become cheaper from a TCO perspective compared to Battery Electric Vehicles (“BEV”s) and Internal Combustion Engine (“ICE”) commercial vehicles over the next 10 year period in all use cases.
This is driven by a combination of vehicle build cost declines as technology matures and economies of scale improve, as well as other factors such as hydrogen fuel costs, infrastructure, and so forth. It is unsurprising, then, to also find that major governments across the world are focusing their efforts on these pieces to drive hydrogen technology and use forward into the future.
In our high-level TCO analysis, our results show that, in 2019, FCEVs are approximately 40% and 90% more expensive than BEVs and ICE vehicles, on a per 100km basis considering acquisition and operational costs together. From an acquisitions cost perspective, the higher cost is primarily due to high cost of the fuel cell system, as well as a markup on other components due to lower economies of scale. From an operational cost perspective, the higher cost is primarily driven by the cost of hydrogen fuel.
However, the TCO of FCEVs is forecasted to be less than BEVs by 2026, and less than that of ICE vehicles around 2027. Overall, we estimate that the TCO of FCEVs will decline by almost 50% in the next 10 years. This is driven by several factors. From an acquisition cost perspective, fuel cell systems are forecasted to decrease in cost by almost 50% in the next 10 years.
The fuel cell system is relatively light in terms of materials cost but high in manufacturing costs, due to high technological requirements.
For example, contrary to common thinking, the cost of platinum makes up less than 1% of cost of the fuel stack system. This is compared to battery vehicles, in which commodity-type raw materials, such as lithium and cobalt, makes up a significant portion of total costs.
The relative raw-materials-light fuel cell system leaves significant room for cost improvements in the future, together with dramatic improvements in economies of scale.
Another large factor in terms of decrease in operational cost is the cost of hydrogen, which is forecasted to decrease significantly across all geographies in the future. This is due to the increased usage of renewable energies to produce hydrogen (which is less than 5% of hydrogen production today), as well as buildout of supporting infrastructure and transport mechanisms.
Our TCO forecast is furthermore relatively conservative in several aspects. For example, as history would show with emerging technologies, production costs often decrease much more dramatically than forecasted. We have also not included any government subsidies and incentives (acquisition, infrastructure, or operational) in the TCO model. When looking at the specific case scenarios in Shanghai, California, and London, the crossover of FCEVs with BEVs and ICE vehicles are much faster, due to a variety of subsidies on FCEVs in each geography, or additional taxes on ICE vehicles or fuel. Indeed, we have also been quite conservative on pricing pressure on ICE vehicles in the future, which could be driven up significantly from quantitative (cost of fuel, higher emission standards), or qualitative (restrictions on entering city areas, or planned banning of pure ICEs) perspectives. Therefore, it is likely that FCEVs will become cheaper than BEVs and ICE vehicles from a TCO perspective sooner than 2026.
Our high level analysis in this paper can allow the reader to start garnering some insights into the incredible complexity of the hydrogen value chain and possibilities for improvements in the next years to come. For example, today, the subsidies and incentives of FCEVs are higher than ICE vehicles, but lower than BEVs today due to inefficiencies in the hydrogen production process. In the future, where renewables energies such as wind and solar play more part in the hydrogen production process, the energy efficiency of FCEVs will see dramatic improvement. For example, renewable energies (or even nuclear energy) are affected by seasonality and peak usage cycles, resulting in overcapacity of electricity production which is often wasted. The marginal cost of renewable energies is near zero, which results in their being priced below prevailing market – even negatively priced in certain countries in Europe.
This wasted energy can be captured by hydrogen as a clean and efficient alternative.
From a lifetime emissions and environmental impact perspective, FCEVs are also cleaner than BEVs and ICE vehicles, with even more room for improvement as hydrogen production and delivery matures. The production or FCEVs are also significantly cleaner than BEVs due to very low requirements on raw materials, compared to the mining and heavy usage of heavy metals such as lithium and cobalt for BEVs.
At the end of life process, FCEVs are also easier (and more economically attractive) to recycle than BEVs.
As Bill Gates famously said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
Fuel cell is not a new topic. It can be traced back to 1839 when it was firstly invented by a Welsh scientist by the name of William Grove. However, the first time fuel cell vehicles were in the international spotlight was during the oil crisis in the 1970s 14. In the next few decades, carmakers from different countries spent various degrees of efforts developing fuel cell vehicles.
The year 2014 was marked by the world’s first commercialised fuel cell vehicle by Toyota, representing a culmination of years of R&D efforts. From then on, in the eyes of the public, fuel cell vehicles were no longer experimental, but were recognised as one of the key driving technologies of the future of mobility.
In the next five years (till now), countries such as China, US, Japan, and various countries in Europe focused have their efforts on driving this technology forward. Through a combination of governmental policy, technology advancement and industrial involvement, fuel cell applications are now entering into a golden era of advancement.
According to the Hydrogen Council, transportation is one of the most critical applications of hydrogen and fuel cell technology. From the perspective of most countries with FC initiatives, FCEVs are seen as a critical pathway to meet goals both in terms of energy strategy as well as decarbonisation goals. Using hydrogen in fuel cells in mobility have been explored since 1966.
Like any new technology, nascent development has been slow primarily due to a lack of existing infrastructure to support wide adoption. However, the very real benefits of fuel cell technology have led governments around the world to continue exploring it as a form of green and emission-friendly energy. Fuel cells for transportation include a wide range of use cases. Some of these applications, such as trains, unmanned aerial vehicles, and e-bikes are still quite early in development with limited deployments to date.
Passenger and commercial vehicle applications of fuel cell technology are perhaps one of the areas showing highest signs of promise for widespread adoption. To most consumers, fuel cell vehicles
sound incredibly complex and sophisticated. However, when broken down into pieces, fuel cell vehicles are quite simple. Partially because of this simplicity, fuel cell technology is used in a wide variety of vehicle types.
Currently, FCEBs are one of the most widely adopted fuel cell applications for buses. This is due to most of them being publically operated, as well as predictable operation patterns. Buses typically feature regular, predictable routes, which requires few refuelling stations. Additionally, bus operators are significantly influenced by actions taken by public authorities, making it a proper choice for early application of fuel cell technology.
Moreover, FCEB acts as a highly-visible, green-society initiative of public transportation. However, challenges remain for widespread adoption of FCEBs. Firstly, the price of hydrogen is still expensive if compared to fossil fuels. Secondly, although fuel cell system are generally reliable, technical problems may arise due to the technology being relatively new compared to ICEs, which may cause inefficiencies for operators; the same may apply to maintenance and parts replenishment, although these issues are forecasted to be alleviated as adoption matures.
There are a variety of activities surrounding deployment of fuel cell light and medium-duty trucks among major markets studied, which offers an interesting comparison to buses, as most of these deployments are privately operated (albeit with government support). Fuel cell technology is regarded as a strong contender for inner and inter-city logistics for several reasons.
From a technology standpoint, fuel cell trucks typically exceed 150 km in range, enabling them to accomplish most of the inner- and inter-city deliveries of goods. Secondly, fuel cell trucks can meet stricter environmental requirement and noise regulations in urban areas, which encourages the government and fleet operators to accelerate its adoption. Thirdly, compared with BEVs, FCEV have very short refuelling times, which greatly improves the operational efficiency of a logistics fleet.
Freight transport accounts for large portion of total traffic flow in urban areas (e.g., 8-15% 129 in Europe), making fuel cell technology a promising way to reduce emissions. It is expected that in the near future, the application of fuel cell light and medium truck in inner- and inter-city logistics will continue to grow, especially in China where development of commercial infrastructure is proceeding at a rapid pace.
Considering the high pollution and greenhouse gas emissions, heavy-duty trucks are regarded as a promising segment to develop zero-emission vehicles. The development of fuel cell heavy duty trucks are relatively lagging behind other applications.
Most major OEMs are in the R&D stage, and only limited products are launched or being tested. The relatively slow development of fuel cell heavy duty truck can be attributed to a combination of high vehicle cost, high hydrogen cost (to carry heavy loads over long distances) and limited refueling infrastructure.
On the positive side, fuel cell heavy duty truck could offer faster refueling times compared with battery electric trucks, which is essential for fleets to reduce the downtime in their daily operations. FC heavy duty trucks are also able to travel longer distances than battery electric trucks with similar specifications. Fuel cell technology is becoming increasingly mature and optimised for heavy duty applications.
Ultimately, fuel cell heavy duty truck could provide range and refuelling time closed to conventional vehicles, while also benefiting from zero-emissions. This provides fuel cell heavy duty vehicle a great potential to displace diesel and battery electric heavy duty truck in the long term.
No discussion of new and emerging technologies can be complete without deep analysis of its commercial viability. To compare and contrast the economic efficiency of fuel cell vehicles, we built a Total-Cost-of-Ownership model that examines FCEVs in detail, in relation to BEVs and ICE vehicles. We took a highly-granular bottom-up approach of building a vehicle by analyzing the cost of each of its components. Furthermore we analyzsed operational considerations and costs, such as fuel, maintenance, infrastructure, etc.
The operator may not care about detailed component prices, but rather a retail cost of the entire vehicle. However, this would present a rather limited view of the whole picture. The reason for such a deep level TCO analysis is to understand exactly what components are driving current and future costs, both from a vehicle-build and operational perspective.
Once this is understood, we can then apply nuances of different operators and business models, such as a logistics fleet operator, drayage truck operator, and an intra-city bus operator.
When taking a current snapshot, it is unsurprising that FCEVs are more expensive compared to BEVs and ICE vehicles. The TCO of FCEV is around 243 USD per 100 km, while that of BEV and ICE vehicles are 166 and 125 respectively. The biggest costs differences come from the energy module. Current fuel cell system is still expensive and costs approximately 1,500 USD per kw, which makes up around 73% of energy module cost and around 13% of total fuel cell vehicle cost. Other than the fuel cell system itself, hydrogen tanks also make up around 15% of the energy module costs. When taken together, these two components result in the majority of cost increases over the other two vehicles. However, as with any emerging technology, component costs continue to decrease in price.
Other than the energy module, the component mark-up costs for FCEVs and BEVs also play significant roles in their overall price. However, as expected, this component cost is lower for BEVs, due to its earlier commercialisation and being closer to mass-market status. The industry consensus from our interviewed experts suggest that FCEVs might reach full scales of economy within the next 10 years, which in our model would eliminate this additional component mark-up.
Fuel cost makes up the largest proportion of FCEVs operational costs due to high hydrogen prices, while BEVs have the cheapest fuel cost due to low electricity costs (which, coincidentally, is a major selling point for passenger BEVs). Compared to ICE vehicles, electric vehicles have less maintenance costs due to simpler mechanics of its electric motor. However, fuel cell and battery replacement costs for FCEVs and BEVs add an additional burden to the operator. This is due to capacity attenuation of the fuel cell system (which lasts approximately 25,000 hours currently), as well as for the battery pack (typically replaced every 5 years for commercial vehicles).
As expected, these replacement costs are driven down rapidly as technology matures for new energy vehicles.
Another large component of operational cost stems from infrastructure build costs for FCEVs and BEVs. For example, a hydrogen fuelling station for such a fleet in our framework costs approximately $6-7 million. Similarly, BEV infrastructure requires a large amount of investment; large scale operations even require grid and substation modifications, as well as opportunity charging stations. Infrastructure costs would differ quite dramatically by operating model, but this framework presents an illustrative perspective for the reader to consider.
We have forecasted ICE operational costs to be relatively stable over the next 10 years. However, this may not be the case as jurisdictions across the world continue putting pressure on the use of fossil fuel vehicles. For example, ever-tightening restriction standards on emissions may cause engines and catalytic convertors to spike in costs. Other qualitative restrictions, such as bans from entering city regions, for instance, may have a pronounced impact on operators not currently reflected in this TCO analysis.
Various countries have also announced plans to ban pure ICE vehicles by 2030-2050. The TCO of FCEVs is forecasted to be less than ICEVs by 2026, and less than that of BEVs around 2027. Overall, we estimate that the TCO of FCEVs will decline by almost 50% in the next 10 years.
Fuel cell system price is highly related with purchase cost as well as parts replacement cost. We forecast cell system pricing from 1,500 USD per kw in 2019 to 600 USD per kw in 2029 166. The fuel cell system is relatively light in terms of materials cost but high in manufacturing costs, due to high technological requirements.
This leaves significant room for cost improvements in the future, together with dramatic improvements in economies of scale. Furthermore, the lifecycle of fuel cell systems are also expected to improve quite significantly in the future.
Currently, the lifecycle of a fuel cell system is approximately 25,000 hours, but is forecasted to reach 30,000 hours by 2026.
With these two factors combined together, FCEVs will be affected not only by decreases in purchase cost, but also maintenance and parts replacement cost. We estimate the total maintenance and parts replacement cost will decline over 60% in the next 10 years.
Operators of key subsystems across the world are already enjoying the benefits of FCEV, which is at a relatively younger stage of development than battery-powered BEVs and certainly ICEs. We have demonstrated that FCEVs are cleaner and more environmentally friendly across their entire lifecycle than BEVs and ICEVs, with more improvements to come as hydrogen production shifts toward a broader role in renewable energy development.
What exactly is a Hydrogen Fuel Cell Electric Vehicle?
Similar to the majority of modern day vehicles, fuel cell vehicles are comprised of four basic component categories: propulsion system, chassis, automotive, electronics and body. The propulsion system provides electricity to power the car through a fuel system and electric motor. This power is derived from hydrogen, which is stored in pressurised tanks in the vehicle. A fuel cell stack converts this energy to electricity, which is supplemented by a battery to drive the electric motor. This is not dissimilar to BEVs, although FCEVs have batteries with much smaller battery capacity.
Whereas BEV batteries are used to store the entirety of the power used to move the car, FCEVs only use batteries to smooth fuel cell power fluctuation: absorb extra electricity when power requirement is low and release more power when required.
Theoretically, BEVs have higher energy efficiencies, but the heavy battery weight minimises this advantage especially for heavy duty vehicles in long distance transit. BEVs must add more battery capacity for every additional mile the vehicle should operate, which adds extra weight. For example, Tesla’s electric heavy truck model is estimated to reach 4.5t of battery weight.