Hydrogen stations: planning and investment in California

A California Roadmap

Catherine DunwoodyCalifornia Fuel Cell PartnershipSeptember 30, 2013

FCEV market launch: 2015-2017

We are preparing for fuel cell electric vehicle market launch in California beginning in 2015. Automakers have made their announcements and we are preparing hydrogen stations so their customers can get fuel as conveniently as they do today with gasoline. Fuel cell buses are poised to enter the commercial market too, and we are supporting larger scale deployments to achieve serial production and reduce costs. Today I’ll focus on our work to coordinate rollout of cars and stations.

Stations must come first• 68 stations provide coverage to enable market

launch» Supports customer convenient fueling in early markets» Enables travel throughout early market regions and

state

For passenger vehicles, the stations must come first. In 2012 CaFCP published A California Road Map. The roadmap represents the collective thinking and expertise of CaFCP members, including automakers, government and station providers, and uses the modeling expertise of our university partners at UC Irvine and UC Davis as well as NREL. It is the result of over 1 1/2 years of collaborative discussions and analysis.

Building a statewide networkMap of 68 Hydrogen Fueling Stations: Existing, In Development

and Needed

Los Angeles Area

Bay Area

The roadmap shows how to build a statewide network of stations that gives the first FCEV customers in five early market clusters convenient access to fuel. The cluster locations were determined using a combination of data sources such as customer demographics, confidential OEM market assessment, existing advanced vehicle registrations and distribution of current clean vehicle rebates. The roadmap also shows stations in popular destination areas, like Lake Tahoe and Santa Barbara. And it provides connector stations that enable travel throughout the state.

Emeryville

West Sacramento

CupertinoFoster CityMountain View

Open

In Development

Funded in 2013

Target areas for future funding

Northern CAPublic Hydrogen Stations

August 2013

We have one station, Emeryville, open in the San Francisco Bay Area today. Three additional stations were funded earlier this year. Many more are required to fully build out this cluster.

BurbankTorranceNewport BeachIrvineFountain ValleyWest LAThousand PalmsHarbor City

Beverly HillsDiamond Bar (upgrade)HawthorneHermosa BeachIrvine (upgrade)Irvine NorthSan Juan CapistranoLos Angeles Santa MonicaWest LAWestwood

AnaheimChinoMission ViejoWoodland Hills

Open

In Development

Funded in 2013

Targets areas for future funding

California Fuel Call Partnershipwww.cafcp.org/stationmap

Southern CAPublic Hydrogen Stations

Most of our public stations in California are located in Southern California, and many more are in development. You can keep track of our progress by visiting our station map located on our website.

Working with fuel retailers

NACS Magazine, August 2013

Most hydrogen stations in California are located at retail fuel stations. These fuel stations are owned by small- and medium- sized businesses who have several stations or who blend and deliver fuel to independent stations. For the most part, the big oil companies are out of the retail business in California. Station owners are interested in selling new fuels like hydrogen because gasoline sales are declining due to more efficient vehicles. They are interested because it is a potential new market, but are hesitant because the business model is different.

EIN cash flow model• Offers a station-level view and allows user to consider multiple

scenarios

www.einow.org

To better understand the fuel retailer perspective and to estimate the cost of a 68 station network, we worked with Energy Independence Now to develop a cash flow model with academic and stakeholder input. Our aim was to view selling hydrogen fuel in the same way a fuel retailer looks at selling gasoline today. A retailer gets a loan to install new equipment, and expects to incur negative cash flows for a period of time until their revenues exceed expenses and they become profitable.

EIN cash flow model• Offers a station-level view and allows user to consider multiple

scenarios

www.einow.org

One of the key results is that the break-even point for hydrogen will be much longer than station owners are willing to tolerate. This is because FCEVs are just entering the market, yet the stations need to be there even if they are underutilized in the early years. This is why government incentives are so important to launch this new market.

H2NIP: FCEV deployment scenarios

2010 OEM surveys

From a station owner’s perspective, they see significant uncertainty as to when they can expect full utilization of a hydrogen station. The period of under utilization will vary greatly depending on how quickly automakers ramp up FCEV sales, and of course how quickly customers buy cars. The analysis shows that the rate of FCEV market uptake significantly impacts the ability of a H2 station owner to make a return on their investment.

This scenario is based on a vehicle survey conducted by CaFCP, CARB and CEC in 2010. It is our most recent survey data.

H2NIP: FCEV deployment scenarios

2010 OEM surveys

CARB ZEV likely compliance

The second scenario is based on the California Air Resources Board’s ZEV regulation in which they project a “likely compliance scenario that results in approximately 10,500 FCEVs by 2017 and about 100,000 by 2023.

H2NIP: FCEV deployment scenarios

2010 OEM surveys

CARB ZEV likely compliance

¼ ZEV likely compliance

The third scenario is a much slower rollout that represents a “worst case scenario” a fuel retailer might include in their business case analysis. It could reflect a single, poorly situated station that customers avoid, or an overall failure of FCEVs to gain market traction.

Hydrogen Network Investment Plan

CaFCP and several members engaged Energy Independence Now to develop a hydrogen network investment plan that would address fuel retailer and other market participant concerns and risks. They used this input along with a H2 NIP model (based on their original cash flow model) to evaluate and recommend incentives and network strategies to promote successful market launch and transition to self-sustaining business model

Some of their findings include:• All market participants (autos, fuel station providers, investors)

need to know the government will sustain investment all the way to and through market launch, and they need to see a clear plan to implement these investments (sufficient funding and state plan)

• Investors and station providers need more transparent FCEV projections (surveys)

• Automakers need to know stations will remain open through market launch (MAGs)

• Fuel station providers need assurance they can avoid operating losses in the early years (MAGs)

• Coordination among stakeholders is essential (station data monitoring, OEM location vetting, partners to help implement)

There are many more analyses and recommendations regarding specific incentive tools, but this presentation highlights just a few:

H2 NIP: Capital cost share essential

Govt.(65%

)

Private

Cost

Share

Better for Consumer

Better for Station Provider

Core Market, ZEV Likely Compliance, $2m 500kg/day Delivered Gas Station, Built in 2015:

*Market Assurance Grants not included Appropriate Cost-Share Depends on Many Factors

Cost share of capital investment is absolutely necessary in early market. Early market stations cannot make money without this support because early stations are more expensive and they sell less fuel. This output from the H2 NIP model shows how station capital cost and fuel price impact return on investment for a core market station that receives a 65% cost share, assuming vehicles roll out according to the ZEV likely compliance scenario. California has offered at least 65% cost share for its funding opportunities, and this analysis demonstrates it will be important to continue funding at this level to enable hydrogen sales at a price competitive with gasoline.

H2NIP: Important to cover O&M

Core market, 500 kg/day station, $2M station (65% cost share), $9/kg H2 ($5.50 wholesale) – $2.18 net margin

ZEV likely compliance (10,500 FCEVs by 2017):

FCEV market growth is a significant uncertainty for early station providers. If everything goes according to plan, a core market station may lose money for a couple of years, and an incentive to cover O&M costs during that time is enough to bump up the returns to an acceptable level.

H2NIP: Market assurance grants

Core market, 500 kg/day station, $2M station (65% cost share), $9/kg H2 ($5.50 wholesale) – $2.18 net margin

¼ ZEV Likely Compliance (2,625 FCEVs by 2017):

But what if FCEVs come slower than expected, or a particular station location is less attractive to consumers? A market assurance grant would mitigate this downside risk by assuring station owners they will remain “whole”, although the payments should always be less than what they would earn by selling fuel. MAGs could be funded by government and others who want to ensure station operators don’t get discouraged and close stations prematurely.

H2NIP: Incentives vary by market

Different types of station markets (core, emerging and connector) require different incentives. A 500 kg/day station in a core market (one that has lots of FCEV customers in early years) will need less capital cost share and less O&M support from the MAG fund than a 100 kg/day station in a connector market, such as the I-5 station between Southern and Northern California. In fact, it may be difficult to obtain proposals for the connector stations and these may need a different approach.

Open Today:• Burbank• Emeryville• Fountain Valley• Harbor City• Irvine #1• Newport Beach• Thousand Palms• Torrance• West LA #1

In Development:• Beverly Hills• Diamond Bar• Hawthorne• Hermosa Beach• Irvine #2• Los Angeles • San Juan Capistrano• Santa Monica• West LA #2• West Sacramento• Westwood• Woodland Hills• Mountain View• Mission Viejo• Cupertino• Foster City• Chino• Anaheim

Hydrogen stations in California

State investment today has brought us to this point. Today California has a small network of public hydrogen stations, and since 2010 has invested over $35M with station developers to expand that network. With investments to date we can expect between 25-30 public hydrogen stations in place by 2015. We are almost halfway to our goal.

30, however, is not the 100 that we estimate is necessary to build the initial network.

New California funding for hydrogen

The California legislature recently passed Assembly Bill 8, and Governor Brown has publicly stated he will sign it. The bill authorizes extensions of existing programs to fund alternative fuels and air quality improvement programs that support California’s work to achieve clean air, reduce carbon emissions and shift away from petroleum fuels. One element of the bill allocates up to $20 million per year to fund at least 100 hydrogen stations. The California Air Resources Board survey’s automakers each year to determine their following 3 model-year projections for FCEVs, and with the California Energy Commission they evaluate progress toward achieving a network of stations that provides the coverage and capacity to support FCEVs. The bill allows the State to use innovative financing mechanisms to support the early market and achieve at least 100 stations.

This is a significant commitment from the State of California, integral to achieving the goals set forth by Governor Brown in his ZEV executive order and action plan.

California ZEV Action Plan

• By 2015: California major metropolitan areas “ZEV-ready” with infrastructure and streamlined permitting

• By 2020: California ZEV infrastructure can support up to 1 million vehicles» Including widespread use of ZEVs for freight and public transit

• By 2025: Over 1.5 million ZEVs in California

20Visit www.cafcp.org/toolkits/cities to download the ZEV Action Plan

The ZEV Action Plan calls out specific actions for hydrogen. Governor Brown’s staff have taken a strong leadership role to coordinate state agencies and stakeholders to implement both plug-in and fuel cell electric vehicles. We are preparing local governments to deploy infrastructure by providing permit guidance and support, co-funding investments in infrastructure, coordinating planning activities and reaching future customers so that we can grow ZEVs in the California to exceed 1.5 million in the next 10-12 years.

Enabling a successful hydrogen station network will be essential to achieving California’s ZEV goals. Automakers are producing excellent fuel cell vehicles, and we know customers will embrace FCEVs if they can fuel as conveniently as they do today. There is a lot of work ahead, and we have the tools in place to make it happen.

MembersAir LiquideAir ProductsAlameda-Contra Costa Transit

District (AC Transit)Automotive Fuel Cell CooperationBallard Power SystemsCalifornia Air Resources BoardCalifornia Department of Food and

AgricultureCalifornia Energy CommissionCalifornia State University-Los

AngelesCenter for Energy Efficiency and

Renewable Technologies (CEERT)

ChryslerDaimlerEnergy Independence NowGeneral MotorsHondaHydrogenics

HyundaiInstitute of Transportation Studies, UC

DavisLinde North America, Inc.National Fuel Cell Research Center, UC

IrvineNational Renewable Energy Laboratory

(NREL)NissanPowertech LabsProton OnSiteSandia National LaboratoriesSouth Coast Air Quality Management

DistrictSouthern California Gas CompanySunLine Transit AgencyToyotaU.S. Department of EnergyU.S. Department of TransportationU.S. Environmental Protection AgencyU.S. HybridVolkswagen

www.cafcp.org