Transportation is the second largest source of global CO2 emissions (after energy generation), and in 2022 produced almost 8 gigatonnes of CO2.1 Transport sector emissions are predominantly attributable to road transport vehicles, which produced 5.87 gigatonnes of CO2 in 2022.2
Accordingly, investment in green road transport vehicles – particularly light passenger vehicles – represents an important step in the global transition to net-zero emissions.
Industry have advanced two possible solutions: battery powered electric vehicles (EVs)3 and hydrogen fuel cell vehicles (HFCVs).
Hydrogen Fuel Cell Vehicles
Much has been said about EVs. By contrast, HFCVs – being vehicles running on electricity produced from hydrogen fuel cells – are relatively unknown to the public.
Vehicle manufacturers, by contrast, are demonstrating interest in HFCVs and companies such as BMW, Honda, Hyundai, and Toyota have invested in this emerging technology.4 For instance, BMW and Toyota announced a partnership in September 2024 to develop a hydrogen fuel cell powertrain technology which can be used in future car models from both companies.5
Despite these investments, the feasibility of hydrogen as a fuel source for road transport has been questioned, particularly in the context of light vehicles (as opposed to heavy vehicles). For example, the Grattan Institute has advised that investment in hydrogen powered light passenger vehicles is futile as EVs present a much more compelling economic case and already dominate market share.6
This raises the question of whether there is a place for hydrogen as a fuel source for any future mix of light passenger vehicle transport (or road transport more broadly).
The Advantages of Hydrogen Fuel Cell Technology
The key advantages of hydrogen fuel cell technology are that it allows for faster refuelling, greater range, and a lighter chassis than battery EVs.7 These attributes make the technology a particularly attractive prospect for long-haul heavy freight transport in comparison to current EV technology, with the benefits of transporting greater payloads for longer distances and with shorter refuelling times. However, these comparative advantages are being challenged by advancements in EV technology, with improvements in battery capacity and the development of battery-swapping technology for heavy vehicles.8
The attributes of HFCVs may also be suitable for the provision of fleet vehicles to niche markets, such as bus, taxi, and security patrol fleets, where vehicles are required to be in constant operation.9 This application is being explored in Australia through state government investment in hydrogen bus pilot programs10 and car manufacturers trialling the introduction of light HFCVs through private leasing agreements.11 Again, however, the viability of such programs will continue to be challenged into the future as electric bus prices fall.12
The Limitations of Hydrogen Fuel Cell Technology
The production and transportation of hydrogen for use in HFCVs is high and involves a multi-stage process requiring electrolysis, compression or liquefaction, storage, transportation, and the development of refuelling infrastructure.13 Each of these stages requires significant energy input as well as other associated costs, resulting in an average cost of hydrogen gas between $7/kg and $16/kg.14
Accordingly, HFCV may remain financially unviable for manufacturers, with the long-term feasibility of these vehicles reliant on a marked fall in the price of hydrogen.15 To match the affordability of driving an EV this figure would need to drop to $2/kg or below.16
Although the increasing deployment of renewable energy generation is likely to cause a longer-term fall in the cost of energy input for the production of hydrogen, this fall would also cause a decrease in the cost of running an EV. Although the deployment of EVs require significant infrastructural investment, this investment is arguably lesser than the infrastructural investment involved with HFCV deployment (including supply, storage, maintenance, and refuelling infrastructure).17
This is evidenced by the current standing of hydrogen fuel infrastructure in California, one of the leading investment hubs for such infrastructure globally. Despite significant funding by California to subsidise the development of hydrogen refuelling stations since 2008, targets for the number of new stations have been reducing and existing stations have suffered closures due to endemic maintenance issues.18
In addition to the disparity in existing infrastructure, the uptake in EVs versus HFCVs by consumers is also vastly disparate. In Australia, only six HFCVs were acquired by consumers in 2023, all through leasing agreements.19 By comparison, more than 87,000 EVs were sold over the same period.20 This variance in market share domestically is also reflective of the international market. Even California, a global leader in hydrogen refuelling infrastructure, saw consumers continue to favour EVs, with over 380,000 purchased in 2023, compared to only 3,143 HFCVs.21
Finally, for HFCVs to be truly ‘green’, the energy inputs required for hydrogen fuel must also be green. At present, a significant portion of hydrogen is produced from natural gas.22 This, in addition to the energy requirements of compression, storage, and transport, means that HFCVs will not be a green method of transport until all inputs are sourced renewably. While electric vehicles may also rely on a grid that is not sourced entirely from renewably generated electricity, the growth in renewable energy generation and distributed energy resources demonstrate that it is feasible for EVs to be entirely renewable energy generated.
What’s next for HFCVs?
Although the evidence demonstrates challenges for the mass adoption of HFCVs in the light passenger vehicle market, HFCVs may nonetheless have a role to play in niche subsectors of the green road vehicle market (such as with long-haul transport and vehicle fleets). This position was touted in the Australian Government’s National Hydrogen Strategy 2024, which identified hydrogen as a solution to transitioning to the long haul transport sector.23
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.
1‘Transport’, International Energy Agency (Web Page) <https://www.iea.org/energy-system/transport>.
2Ibid.
3ABC News, ‘Global Electric Vehicle Sales Surge in 2022, IEA Reports’ (2023) ABC News https://www.abc.net.au/news/science/2023-04-27/electric-vehicle-ev-sales-increased-globally-2022-iea-outlook/102266800.
4Emilia Terzon, ‘Toyota is pushing hydrogen cars but will they ever be as cheap to run as EVs?’, ABC News (Web Page, 29 January 2024) <https://www.abc.net.au/news/2024-01-29/toyota-hydrogen-cars-future-electric-vehicles-uptake-challenges/103390084>.
5BMW Group ‘Hydrogen Pioneers: BMW Group and Toyota Motor Corporation take collaboration to the next level to offer Fuel Cell Electric Vehicle (FCEV) options for passenger cars.’ (Press Release, 5 September 2024) <https://www.press.bmwgroup.com/global/article/detail/T0444790EN/hydrogen-pioneers:-bmw-group-and-toyota-motor-corporation-take-collaboration-to-the-next-level-to-offer-fuel-cell-electric-vehicle-fcev-options-for-passenger-cars>.
6Grattan Institute, Hydrogen: hype, hope, or hard work? (Report No 2013-13, December 2023) 15, 17, 19.
7‘New report to accelerate Australia’s hydrogen-powered transport future’, CSIRO (News Release, 21 August 2023) <https://www.csiro.au/en/news/All/News/2023/August/New-report-to-accelerate-Australias-hydrogen-powered-transport-future>.
8‘Hydrogen cars left at starting line as EV sales take off’, InDaily (Web Page, 18 March 2024) <https://www.indaily.com.au/business/energy/2024/03/18/hydrogen-cars-left-at-starting-line-as-ev-sales-take-off>.
9Terzon (n 4).
10Matt Baumgartel, Adriaan van der Merwe and Megan Chau, ‘Hydrogen as a Transport Fuel’, Hamilton Locke (Web Page, 16 August 2022) <https://hamiltonlocke.com.au/hydrogen-transport-fuel/>.
11Terzon (n 4).
12InDaily (n 8).
13John Poljak, ‘Why does $4/kg hydrogen cost the customer $30/kg?’, LinkedIn (Web Page, 17 March 2024) <https://www.linkedin.com/pulse/why-does-4kg-hydrogen-cost-customer-30kg-john-poljak-rrvvc/>.
14Terzon (n 4).
15Ibid.
16Ibid.
17Todd Woody, ‘Few Stations and $200 to Fill Up: Life on California’s ‘Hydrogen Highway’’, Bloomberg (Web Page, 4 April 2024) <https://www.bloomberg.com/news/features/2024-04-04/california-s-hydrogen-fuel-cell-cars-lose-traction-against-battery-models?cmpid=BBD040624_GREENDAILY&utm_medium=email&utm_source=newsletter&utm_term=240406&utm_campaign=greendaily>.
18Ibid.
19Terzon (n 4).
20Ibid.
21Woody (n 17).
22Ibid.
23Department of Climate Change, Energy, the Environment and Water, National Hydrogen Strategy 2024 (Report, September 2024) 10.
