California’s hydrogen fueling station network has continued to add new, highly capable stations in the past year while the number of Fuel Cell Electric Vehicles (FCEVs) on-the-road continued to increase.
Growth in these industries continued despite significant events within and outside the industry (most recently the onset of COVID-19) that led to a slower development pace than previously estimated. There have been observable impacts on progress over the past year due to these stressors, but State and industry members have continued to move beyond these challenges and build a foundation for accelerated growth.
The hydrogen fueling industry is responding favorably to the State’s maturing support mechanisms. The California Air Resources Board (CARB)’s Low Carbon Fuel Standard’s (LCFS) Hydrogen Refueling Infrastructure (HRI) credit provision has initiated the development of nine additional stations. The California Energy Commission released its latest Grant Funding Opportunity (GFO) 19-602 to solicit applications to co-fund new hydrogen fueling stations, with awards expected to be announced imminently. The new solicitation is a multi-year effort designed expressly to enable multi-year network plans expected to help station designer/operators make larger purchase orders, support development of the upstream station equipment supply chain, and unlock economies of scale. These are necessary steps to move California’s hydrogen fueling and FCEV industries out of the current early adopter phase and into the broader mass-market.
California has set hydrogen infrastructure targets with the goal of developing and growing FCEV and hydrogen fueling market scale. Assembly Bill 8 (AB 8; Perea, Chapter 201, Statutes of 2013) requires the establishment of at least 100 hydrogen fueling stations to launch the FCEV market in the state. More recently, Executive Order B-48-18 (EO B-48-18) tasked these same agencies with working towards a network of 200 stations by 2025. Achieving the goal of 200 stations by 2025 puts the state on a path to achieve economies of scale and future growth that does not depend on State incentives. Recent estimates point to the AB 8 grant process enabling the establishment of as many as 122 stations in California’s hydrogen fueling market. The combination of LCFS HRI credits and GFO 19-602 are the State’s strongest support mechanisms for reaching the 200-station goal.
Industry stakeholders continue to take action toward larger hydrogen markets within California. Hydrogen fuel providers have invested in expansion of hydrogen fuel production and distribution facilities to serve California’s developing FCEV market. Collaborative hydrogen industry organizations have announced efforts to increase the use of renewable, low-carbon, and sustainable resources in the production of hydrogen.
The challenge before the public and private stakeholders of California’s hydrogen and FCEV industries now is to ensure that progress not only continues but accelerates. Of particular importance, CARB finds that the FCEV market may soon experience an acceleration out of the earliest market development phase, and that the shift to broader consumer adoption depends on expanded and accelerated station network deployment. Furthermore, since the passage of AB 8, Governor Brown established EO B-48-18 that calls for 200 hydrogen stations by 2025. CARB therefore recommends that the Energy Commission fully leverage all funds available for hydrogen fueling station development through its current multi-year funding solicitation GFO 19-602.
Successful expansion of the FCEV market will rely on several complementary factors in addition to the development of hydrogen fueling infrastructure. New supply chains and manufacturing capacity, especially at large scale to support market acceleration, need to develop. Consumer awareness and acceptance of the new technology needs to grow. The network of facilities that produce hydrogen fuel (especially renewable hydrogen) specifically for transportation uses needs to expand and mature, enabling lower prices paid by the consumer and building resiliency of supply. Consumer incentives may need to fill the affordability gap as the market matures.
This report provides CARB’s analysis of the current status and near-term projections of FCEV deployment and station network development and the actions necessary to maintain progress and enable continued future expansion. This report provides recommendations to the Energy Commission regarding future station development co-funding through AB 8 that ensures positive retail customer experiences and supports further FCEV deployment. Of particular importance, CARB finds that the FCEV market may soon experience an acceleration out of the earliest market development phase, and that the shift to broader consumer adoption depends on expanded and accelerated station network deployment.
Findings from the report:
Finding 1: California’s hydrogen fueling network includes 42 Open- Retail stations due to a mix of growth and contraction in the past year while the network under development has expanded through the LCFS HRI program
As of July 3, 2020, California’s hydrogen fueling network includes 42 Open-Retail stations, one more than this time last year.
Over the past year, the funded station network has also grown. Nine new station projects across northern and southern California, including one in Palm Springs, have begun planning and development as indicated by their inclusion in the LCFS HRI program. Together with the five newly opened stations and ongoing progress at the remaining stations in development, these have been positive advancements in the network over the past year. At the same time, the developer of the proposed Santa Nella station gave notice that the project will not move forward. The total network grew to 71 open and planned station projects (counting stations funded by AB 8 and stations initiated by the LCFS HRI provision).
Finding 2: All stations funded and in development are projected to be Open-Retail by the end of 2022, even though progress in the past year exhibited delays and may be further affected by COVID-19
While important new additions were made to the Open-Retail station network over the past year, the pace of development was slower than previously projected. Figure ES 2 shows that eight fewer stations achieved Open-Retail status by the end of 2019 than were previously estimated. The station network did experience significant operational challenges over the summer of 2019 due to a disruption in the hydrogen supply network for California.
This meant that several stations struggled to secure hydrogen fuel for customers and many temporarily ceased retail operations until the supply disruption was resolved. Therefore, the stations that were already open were most severely impacted by the supply disruption. However, there may have been some additional impacts on stations that were still in development. Station operators that were managing the impacts of the supply disruption on fueling customers were also often the same entities developing new stations at the same time and therefore faced elevated strain on their organizational resources to address several challenges
at once. At the end of 2019, 44 stations (including the three awaiting a return to Open-Retail status) were included in California’s hydrogen fueling network instead of the projected 52.
There may be further delays related to the COVID-19 pandemic that has affected economies worldwide. The latest pre-COVID projections show that up to 58 stations may achieve Open-Retail status by the end of 2020. Four more stations may open in 2021 and an additional nine in 2022.
However, some station developers have indicated that COVID-19 may cause some near-term delays of up to six months, especially for station development projects under permitting review or stations awaiting equipment delivery from regions heavily affected by COVID-19. Using this as a worst-case estimate, CARB finds that up to eight stations that may have opened in 2020 under business-as- usual assumptions may therefore open in 2021 instead. Projections for additional station openings in 2020 are between six and fourteen. Estimates for new stations opening in 2021 are between four and twelve.
Finding 3: Auto manufacturer projections for FCEV deployment have shifted one year compared to prior estimates while maintaining the projected pace of acceleration
Based on the Department of Motor Vehicles (DMV) registration data, CARB estimates that the on-road FCEV fleet is 7,1724 as of April 1, 2020. Based on the most recent survey of auto manufacturer FCEV deployment projections, California’s FCEV fleet will grow to 27,000 and 48,900 in 2023 and 2026, respectively. These data are summarized in Figure ES 3. Red triangles show April registration data, with the most recent information highlighted by the large triangle. Data from auto manufacturer surveys are shown by the blue and orange shaded areas for Range of Mandatory and Optional Period data and the most recent values are highlighted by the corresponding diamonds labeled as End-of-Period Estimates. The ranges for each period represent the range of projections for each year based on the data from all past surveys that addressed that year. For example, projections for the year 2021 are addressed by Mandatory Periods in survey years 2018-2020 and Optional Periods in survey years 2015-2017.
The latest projections for future deployments based on auto manufacturer survey responses continue last year’s trend of anticipating FCEV deployment growth one year later than previously projected. Whereas observed shifts in projections were previously focused on the Optional Period, the most current survey anticipates this shift in both the near-term Mandatory and mid-term Optional Periods of the survey. While the schedule of projected deployment has changed, the pace of acceleration on the shifted schedule remains similar to prior years.
The rate of vehicle deployment between April 2019 and April 2020 was also 20 percent lower than the prior-year according to the registration data. FCEV registrations in April and October have historically been lower than projections. This is true also for April 2020 registrations, though the situation is likely influenced by the difficulties presented by the hydrogen supply disruption in the second half of 2019 and the onset of the COVID-19 pandemic in early 2020. Even though registration data so far maintain a gap between actual and previously projected deployments, the match has been improving over time as April registrations in the period 2014 to 2020 have grown closer to the range of Mandatory Period projections for the same year. Registrations in April 2015 were only 27 percent of prior end-of-year projections; in 2020, April registrations are 73 percent of prior end-of-year projections.
Finding 4: Auto manufacturer survey responses align with projected station deployment
Since the publication of the California Fuel Cell Partnership’s A California Road Map, private and public stakeholders have recognized that FCEV deployment pace is in part dependent on the pace of station network development. State efforts to support hydrogen fueling station network growth, including AB 8, have adopted this thesis. The program was built upon the concept that fueling infrastructure development leads to FCEV deployment. Seven years into the program, it appears that auto manufacturer intentions for future FCEV deployment largely confirm this philosophy.
During the summer of 2019, CARB began a process of formal interviews with individual auto manufacturers. These interviews were prompted by CARB’s desire to review the 2019 auto manufacturer survey results and gain a more detailed understanding of the factors that affect on-the-road FCEV deployment and projections for future FCEV deployment. Through these interviews, multiple auto manufacturers commented that they remain committed to FCEVs in California and globally as a priority within their overall ZEV strategies. However, deployment projections are often led by auto manufacturers’ own evaluation of station development progress and projections of future station development pace. Deployment projections for FCEVs in any market are assessed on this basis and consider the context of similar developments in markets around the world. Auto manufacturers clearly state that changes in station network development pace (positive or negative) and other events that affect the network health (such as the 2019 hydrogen supply shortage) directly impact the associated projections of future FCEV deployments in California.
In addition to direct discussion with auto manufacturers, CARB finds that the history of FCEV deployment and station development projection data demonstrate a strong correlation. For example, the Road Map highlighted a total open station count around 60 (specifically 68 in the Road Map) as an important marker of significant station network development. This magnitude of network development was characterized as the minimum number of stations to launch FCEV deployment and was associated with a notional cumulative vehicle deployment potential of 10,000- 30,000 FCEVs.
Using these milestone markers, Figure ES 4 demonstrates how FCEV deployment projections closely track station network development projections. The expected date of achieving the 60+ station milestone has been revised from 2016 (as reported in 2014) to the current estimate of 2021. The development of this trend over time is similar to the progression of the projected date at which 10,000 – 30,000 FCEVs would be deployed; the bottom of the green bars indicates the projected year of achieving 10,000 FCEVs on the road while the top of the bar corresponds to 30,000 FCEVs.
For example, the 2015 Annual Evaluation estimated that 60+ stations would be achieved in 2018. In addition, the 10,000 FCEV milestone was projected to be crossed at the same time (2018), while
30,000 FCEVs were projected for 2020. In each of the next two reporting years (2016 and 2017), the projected date for achieving all three of these milestones increased by one year. In several years, the changes in the trends of these milestones are identical. For the milestone of 10,000 FCEVs, the projected date matches exactly with 60+ stations for all reporting years except 2014.
The correlation between these trends in projection data, in combination with confirmation through formal discussions with auto manufacturers, underscores the impact of station network development on the ability to deploy FCEVs in the future.
Finding 5: Historical FCEV deployment data appear to follow a similar new technology adoption trend as battery electric vehicles and validate State efforts to continue funding hydrogen fueling stations
New technologies typically follow phased adoption that moves from a limited market of first adopters to broad, mass-market potential6. Deployment of the new technology typically exhibits points of acceleration as the market develops through successive phases of adoption. The current generation of Battery Electric Vehicles (BEVs) first launched in late 2010 with the introduction of the Nissan Leaf, and historical deployment data exhibit at least two of these accelerations. FCEVs were first broadly available to California consumers in 2016 and are currently in the earliest adoption phase. Significant State investment in hydrogen fueling station development has helped enable this early market deployment and further investments will provide the greatest benefit if FCEVs exhibit similar progression through market development phases. CARB has analyzed historical FCEV deployment trends and future FCEV projections based on annual survey data to assess whether each of these phases correlates well to the market development example presented by historical BEV deployment.
The success of the FCEV market will depend on transitioning out of the earliest adopter phase and into the more widespread appeal, just as the BEV market has achieved. The critical feature of this transition is an acceleration of deployment or a “bend in the curve.” Acceleration of deployment indicates a successful transition to a new phase of market development through broadening consumer acceptance. The California market for BEVs achieved the first such bend within four to five years after launch. Looking into the future, responses to annual auto manufacturer surveys indicate an acceleration in FCEV deployment over the next few years. If these vehicles are delivered to California on schedule as indicated by auto manufacturers, then the FCEV market will make a crucial acceleration in deployment as BEVs did seven years prior. The two technologies may target or eventually achieve different market sizes in terms of vehicle volumes and have different growth rates, but a successful and sustained technology launch requires accelerating market progression to increasingly larger groups of adopters, and both ZEV technologies exhibit this potential.
Both the historical record and projections demonstrate that the FCEV market development is accelerating according to a schedule that would be expected based on the example provided by BEVs seven years earlier. Ensuring that the FCEV market continues to expand and develop out of the earliest first-adopter phase and into the broader consumer market will depend on several supporting factors, including station deployment, expansion of available FCEV makes, and models, reduction in the hydrogen sale price, and availability of consumer incentives.
Given the magnitude and pace of the light-duty fleet turnover that will be required to meet California’s various climate change mitigation and air quality improvement goals, the State continues to need to invest in all ZEV technologies that show promise of market growth and long-term success. BEVs and FCEVs remain complementary technologies in this regard and similarly demonstrate market expansion potential. FCEVs continue to show promise as part of the overall ZEV strategy for public and private stakeholders. Turning that promise into reality depends fundamentally on many factors including station development.
Finding 6: Acceleration of station network development is essential in the immediate future to reach State and industry goals
The newly released GFO 19-602 is expected to help the State make considerable progress towards the goals of AB 8 and has the potential to deliver more than the minimum 100 station target. CARB also sees potential for the LCFS HRI program to work with the AB 8 grant funding mechanism and provide a means to reach the goal of 200 stations by 2025 outlined in Executive Order B-48-18.
However, this potential progress will require strict adherence to station development timelines, especially given the short time left in the AB 8 program and the typical time required for stations to achieve Open-Retail status. Even achieving the minimum 100 stations by January 1, 2024 leaves little room for station development delays. As Figure ES 6 shows, achieving the goal of 200 stations by 2025 requires significant acceleration. Supporting broader targets such as the California Fuel Cell Partnership’s Revolution goal of 1,000 stations by 2030 requires a pace of development not yet seen within the industry. Mechanisms to accelerate station development appear necessary. The new structure of GFO 19-602 will help make funds available on a pace that helps support this acceleration more directly than past funding cycles, but there is also significant effort necessary to shorten station construction and permitting.
Since the total statewide capacity of the funded network is closely matched to the projected FCEV deployment, it implies that the funded station network does not support the deployment of more vehicles than projected. Since 2014, all Annual Evaluations have similarly demonstrated that the hydrogen demand associated with auto manufacturer FCEV projections matches or exceeds funded network capacity. This directly implies that the funded network capacity represents a restriction on the number of FCEVs projected in annual surveys and is a clear indication that additional station funding remains necessary through the AB 8 program.
The close match between network capacity of the 71 funded stations and projected FCEV fuel demand also implies that auto manufacturers’ projections of future FCEV deployment potential do not account for additional network growth beyond the 71 funded stations through either the LCFS program or GFO 19-602, which is currently under review for grant awards for future station development. Taken together, these station funding mechanisms have the potential to increase the number of stations within the time horizon of the survey to at least 100 stations, but these considerations do not appear to be reflected in the responses. This is congruent with discussions CARB completed with auto manufacturers about their 2019 survey responses and more general FCEV plans8.
At more finely detailed regional and county levels, projections indicate that localized capacity deficits will occur by 2023 and extend into 2026 without adding new fueling capacity. As the network has developed over time and new markets are activated, the need to continue growth in these areas has increased. Core market areas in the Greater Los Angeles, Orange County, San Diego County, San Francisco Bay Area, and Sacramento regions see a need for additional station coverage and capacity even as development has progressed the most in these areas. Additional coverage and capacity needs are becoming apparent in the San Joaquin Valley, Central Coast Range, and Inland Desert regions9. A new priority area around the popular vacation and destination city of Palm Springs has also been identified. Needs for capacity growth in these areas may be partially or fully addressed by new stations funded under GFO 19-602, depending on where applicants choose to focus their efforts.
If the AB 8 program at least meets the minimum required 100 stations by the close of 2023, CARB estimates the full network will enable approximately 10,000 to 20,000 more vehicles to be deployed in California beyond current projections. However, greater acceleration is required to achieve the goals of EO B-48-18; the AB 8 and LCFS HRI programs serve as the primary means available to achieve these goals and both must be leveraged to develop as many stations as possible.
Maximizing the funding available through GFO 19-602 and funding more than 100 stations total through AB 8 remains necessary to improve the chance of successfully meeting goals outlined in EO B-48-18. CARB estimates that a station network of 200 stations could enable up to 175,000 FCEVs on the road by 2025. This rate of growth is congruent with a market development pace and scale necessary to ultimately achieve fueling network self-sufficiency within the decade.
Finding 8: Sourcing of renewable energy and feedstocks to support California’s growth in hydrogen fuel demand continues to grow due to industry efforts and State incentives
Evaluation of the minimum renewable content of fuel sold at California’s retail hydrogen fueling station network continues to demonstrate compliance with the 33 percent renewable requirement of Senate Bill 1505 (SB 1505; Lowenthal, Chapter 877, Statutes of 2006) [48]. Station operators have historically met or exceeded this requirement, and revised evaluations continue to find this to be the case presently and for the near future. Partly due to the requirements of the LCFS HRI program, the currently open and funded station network is expected to dispense at least 40 percent renewable hydrogen, as shown in Figure ES 8. This is expected to continue, as the minimum renewable content required for both GFO 19-602 and the LCFS HRI program is 40 percent. As the hydrogen fueling station industry has largely embraced the LCFS program (especially the HRI provision),
CARB expects that most stations in the future will continue to enroll in the program and dispense hydrogen with at least 40 percent renewable sourcing. Some operators of Open-Retail stations have recently reported that they’ve achieved 100 percent renewable implementation at all their stations in California in recent quarters. While this cannot yet be assumed for future operations, the combined capacity of these operators’ stations demonstrates that California’s network has recently been dispensing up to 90 percent renewable hydrogen [49] [50]. Given that station operators indicate this may be a temporary situation, Figure ES 8 does not depict the recent quarters of 90 percent renewable implementation. Instead, the figure depicts the minimum renewable amount guaranteed by the requirements of AB 8 funding solicitations and the LCFS HRI program as appropriate for each funded station.
A minimum requirement of 33 percent renewable content per SB 1505 is currently only applicable to stations receiving State funding but will apply to all stations in the State regardless of funding source once the total annual hydrogen fuel dispensed in the state exceeds 3.5 million kilograms in a year. Accounting for the revised station capacities and future vehicle projections, CARB now estimates the 3.5 million kilogram threshold will be reached near the end of 2021, not accounting for any fuel dispensed to vehicles outside the light-duty vehicle market.
Conclusions
The period of June 2019 to June 2020 has been challenging for developing the hydrogen fueling and consumer FCEV industries in California. Progress has continued in these markets, but prior estimates of station development pace have not been met in some cases and FCEV deployment appears likely to continue at a slightly slower pace than previously projected based on annual auto manufacturer surveys. Despite challenges encountered over the past year, the on-the-road FCEV population has grown and auto manufacturers continue to communicate their intentions that the market will continue to grow into the future. Station network development continues to be a driving force in auto manufacturers’ considerations for future FCEV market potential in the state, and discussions with these companies provide assurance that difficulties experienced in the early market may be overcome with accelerated network growth in the present and future.
The hydrogen fueling station network is expected to continue to grow over the next few years, which will enable FCEVs to be deployed at least at the pace that auto manufacturers have most recently indicated through the annual survey process, if not more. Ongoing discussions with industry representatives indicate that accelerated station deployment can result in future FCEV population growth faster than has been communicated to date. Auto manufacturers continue to express their commitment to the deployment of FCEVs, but acknowledge that station development continues to be the primary consideration in their vehicle plans. Continued and accelerated development of hydrogen fueling stations will be necessary for auto manufacturers to act with increased confidence in California’s market and plan on deploying larger numbers of FCEVs in the state. Applications to the Energy Commission’s latest solicitation, focused on accelerating towards hydrogen station industry economies of scale (GFO 19-602), are currently under review. As funding awards are announced and station development begins, the auto manufacturers may see greater opportunity for future FCEV deployment within the state.
California’s goals for hydrogen fueling stations and ZEV deployment are the most aggressive in the country. Given the status of network development and FCEV deployment, achieving these targets requires considerable effort. AB 8 has set a goal of at least 100 Open-Retail hydrogen fueling stations by January 1, 2024, and EO B-48-18 expands that goal to 200 stations by 2025. Both of these targets require acceleration of station network support programs and the on-the-ground station development process. CARB recommends utilizing AB 8 funds to support the development of as many stations as possible beyond the 100 stations minimum target in order to advance the California station network as close as possible to the 200 station goal of EO B-48-18. It also appears that additional innovation in both the private and public sectors may be necessary to ensure these targets remain achievable. Developments over the next year may provide further insight into the mechanisms and efforts that will prove successful and may illuminate a path towards greater FCEV market expansion through and beyond the current early adopter market phase.
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