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Can Hydrogen Trucks Kill Diesel Demand?

Irina Slav

Hydrogen, once touted as the fuel of the future and then slipping into near oblivion as electric cars gained popularity, may still have a future as a fuel, just not for passenger cars. Hydrogen, it seems, could become the preferred fuel for a category of vehicles that currently account for a significant share of oil demand: long-haul trucks.

S&P Global Platts Analytics recently made the case for hydrogen fuel as an economical replacement of diesel in semi trucks by arguing that it was potentially a cheaper alternative to both electric trucks and compressed natural gas vehicles.

The author of the analysis, Zane McDonald, argued that hydrogen technology was the only one that could achieve price parity with diesel engines by 2030, not least thanks to help from the federal government, which has a comprehensive hydrogen program spanning everything from power generation to fuel cells.

Right now, McDonald notes, no alternative to the diesel engine is competitive on cost or performance. Yet like its competitors, hydrogen technology for cars is developing. To be fair, so is diesel technology, with substantial fuel efficiency improvements expected in the next decade, up to 30 percent. Yet hydrogen is gaining prominence.

German Bosch, for example, recently said it had invested in a hydrogen truck manufacturer—Nikola—and had started work on components for hydrogen powertrains. Bosch is the world’s largest supplier to the automotive industry and has stayed out of the hydrogen space until now. This makes the announcement all the more significant, boosting the credibility and potential of hydrogen fuel cell tech.

If a single company, the largest in the industry, is not enough of an example, there are three large economies with ambitious hydrogen vehicle plans, too. China, Japan, and South Korea are all betting big on the fuel cell for the future.

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China wants to have 1 million hydrogen vehicles on its roads by 2030. That’s up from a tiny 1,500. For context, China’s annual car sales are about 28 million. Japan currently has 3,400 hydrogen vehicles on its roads and wants this to increase to 800,000 by 2030. That’s out of a total 5 million vehicles sold in the country every year. South Korea, for its part, is even more ambitious than Japan: it is a much smaller car market than its island neighbor, but it wants to have 850,000 hydrogen cars on the road by 2030.

Early 2017 saw the launch of the Hydrogen Council, a group involving several leading automakers as well as Shell and Total, seeking ways to make hydrogen more commercially viable. The council allocated $1.4 billion to the development of energy storage and fuel cell project development until 2020, and has high hopes for the future. It seems the investment is beginning to pay off already.

The main benefits of hydrogen are its abundance and the fact it emits no harmful chemicals. The challenges are cost and scalability. Researchers are addressing these challenges, trying to make fuel cell technology cheaper and easier to scale. According to the S&P Global Platts analysis, this work will eventually pay off, at least in the commercial vehicle segment. That’s an important segment for the oil industry given the demand for fuel it generates. It seems hydrogen has the potential to disrupt this key market for the oil industry by replacing fuel demand with demand for hydrogen. It may only be a matter of time before this replacement happens.

By Irina Slav for Oilprice.com

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