Today, the California Hydrogen Business Council (CHBC) has released its official report on its “Financing the 101st station” workshop, held on June 14-15 in Pasadena, CA. The CHBC convened 28 experts in the field who, over two days, discussed presentations and experiences related to financing, fueling station models and automotive plans for fuel cell electric vehicles (FCEVs).

Jeff Serfass, Executive Director of the CHBC, stated that “one of the clearest results of the workshop is that the market has to evolve more for private financing to kick in and for public funding in California to end.” He added that “only with a supportive national policy for vehicle deployment and infrastructure, will the nation will see the benefits of the billions of dollars invested by private industry. We can’t expect each state to provide the kind of funding being applied in California, and there is a limited future for FCEVs in the U.S. if they are sold only in California.”

The determining factor for low financial viability is the low fueling throughput in the early years, when the low volumes of vehicles refueling reduces financial feasibility.

Craig Scott, National Manager, Advanced Technologies Group at Toyota Motor North America, Inc. added that “Hydrogen provides unique benefits in the energy space, particularly for transportation. Government and industry have the power to reduce greenhouse gases by creating zero emission light and heavy duty transportation and public transit future. Fuel cell electric vehicles are an essential part of that zero emission future.”

The summary conclusions in the report are:

• Building out the hydrogen fueling infrastructure is a very challenging task.
• In the early days when vehicle numbers are low, the financial economics of station installation and operation are not attractive.
• Eventually station economics will become sufficiently interesting to attract private capital, but that will take a number of years, even in California.
• But in the meantime, substantial government support will continue to be required, both in California and other zero emission vehicle (ZEV) states, as well as at the federal level.
• There are various ways that such support could be provided in addition to providing capital grants for station construction and operation, e.g.:
• Tax incentives
• Low cost loans
• Loan guarantees
• There may need to be innovative thinking on the best model for sizing and locating stations:
• Siting at existing gas stations may not be the best option.
• Small stations located where vehicle traffic is high, like big box stores, could be attractive.
• Mobile refuelers and even community and home refuelers are potential attractive options.
• Creative, compelling stories and messaging through various social media channels, on the importance of building a fleet of hydrogen fueled vehicles and accompanying hydrogen fueling infrastructure are a top priority, both for the hydrogen industry and the nation.

The report on the “Financing the 101st Station” workshop is a product of the California Hydrogen Business Council. The workshop was created under the leadership of the Board of Directors with sponsorship from four leading companies in the hydrogen and fuel cell space. The CHBC gratefully acknowledges the support provided by sponsors Toyota Motor North America Inc., Air Liquide, Linde Group and American Honda Motor Company Inc. and looks forward to working with all California zero emission transportation stakeholders in the next steps toward private financing of stations.

The report can by requested by emailing Emanuel Wagner at ewagner@californiahydrogen.org. The Executive Summary can be found below.

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Executive Summary

The Board of Directors of the California Hydrogen Business Council, with its automobile manufacturing and hydrogen production Directors, among others, decided to create a workshop to develop financeable business models for building hydrogen fueling stations, as California state funding would be expected to trend downward. With Toyota leading the sponsorship, Air Liquide, Linde and Honda also joined in as sponsors to support the staff work and venue expenses to conduct a high level meeting of finance experts. Essential to creating the design of the event, and creating the invitation list, was a dedicated Steering Committee listed on the previous page.

As CHBC staff and the Steering Committee proceeded, it became clear that attracting the finance community would be difficult. One prospective participant said rather clearly that if we showed him a model with cash flow able to support the debt and yield a return to investors, with several years of operating experience, then he would be interested. The development of the hydrogen infrastructure can’t do that yet. In fact, at the careful, deliberately measured rate of sales of fuel cell vehicles, from a purely financial point of view, early stations purely servicing cars are not good investments, though they remain critical for getting the FCEV marketplace going and for addressing the environmental challenges of transportation.

The early presentations, designed to provide the context for the issues and discussions, provided depth to everyone’s understanding, and one presentation in particular promoted discussion among the participants that the list of economic factors that have to fall in place is really rather simple. Based upon a 200 kg per day station:

• Vehicles/station ratio – must be 400 vehicles clustered around one station at a .5 kg/day/vehicle average consumption
• Margin on hydrogen sales – needs to be $3 per kg or better
• O&M cost – needs to be $100,000 per year or less
• Capital cost of station – must be $1,000,000 or less

These variables can vary as different station and networking models are considered.

Other contextual information focused on the fact that gasoline retail stations don’t make their money selling gas, but on other convenience store and car washing revenues, as well as real estate appreciation. Maybe the gasoline station is not the right model to emulate. Fewer and fewer consumer purchases take place at physical locations these days. We need to think about hydrogen fueling differently, and there are many ideas expressed in this report that deserve consideration.

Perhaps we need to seek out sources of capital that have a strategic interest and willingness to share, with the automakers and the hydrogen providers, the business risks in some tri-party agreement. Different private financing models need to be identified.

However, we also need to realize that there is public value in the creation of the infrastructure that warrants government funding, as the California Air Resources Board (but no other ZEV state) has been demonstrating, and a “moon shot” or national highway system approach to funding and establishing a national fueling network should be considered.

A conclusion of this Workshop is that public funding will need to continue for some time, longer than currently envisioned in California, not ending at 100 stations. It is also believed that national policy needs to be supportive of the FCEV deployment and infrastructure problem if we are to see the benefits of the billions of dollars invested by private industry and government funding to date. We can’t expect each state to provide the kind of funding applied in California, and there is no future for FCEVs in the U.S. if they are sold only in California.

Putting federal policies and infrastructure funding in place will require a politically active industry, and it will also require a succinct story that industry has not successfully articulated. The story needs to lay out the unique benefits of hydrogen in the energy space, particularly for transportation, that government and industry can’t limit the damage of greenhouse gases without creating a zero emission light and heavy duty transportation and public transit future, and that fuel cell vehicles are an essential part of that zero emission future. The story also needs to dispel the misinformation about hydrogen that continues to propagate in some settings and put FCEVs into a positive light vis-à-vis BEVs.

In summary:

• Building out the H₂ fueling infrastructure is a very challenging task.
• In the early days when vehicle numbers are low, the financial economics of station installation and operation are not attractive.
• Eventually station economics will become sufficiently interesting to attract private capital, but that will take a number of years, even in California.
• But in the meantime, substantial government support will continue to be required, both in California and other ZEV states, as well as at the federal level.
• Tax incentives
• Low cost loans
• Loan guarantees
• There may need to be innovative thinking on the best model for sizing and locating stations:
• Siting at existing gas stations may not be the best option.
• Small stations located where vehicle traffic is high, like big box stores, could be attractive.
• Mobile refuelers and even community and home refuelers are potential attractive options.
• Creative, compelling stories and messaging through various social media channels, on the importance of building a fleet of H₂ fueled vehicles and accompanying H₂ fueling infrastructure are a top priority, both for the H₂ industry and the nation.

There are a number of possible next steps presented in the Conclusion section. The California Hydrogen Business Council will work with other interested organizations and experts to convene a briefing on these results and to discuss next steps towards addressing the financing challenges of the hydrogen infrastructure. This workshop group concluded that it would like to get back together, possibly on a regular basis, to report on progress and developments and to engage with players missing at the Workshop, both locally and internationally.

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About the California Hydrogen Business Council

The California Hydrogen Business Council is comprised of organizations and individuals involved in the business of hydrogen. Its mission is to advance the commercialization of hydrogen in transportation, goods movement, and stationary power markets to reduce emissions and dependence on oil. More information at www.californiahydrogen.org.