Fuel Cell Vehicles Might Not Be as Clean as You Think

Car makers such as Toyota, HondaHyundai, BMW, Nissan, and Mercedes are becoming promoters of hydrogen fuel cell vehicles, as are many celebrities and politicians. A key example is former California governor Arnold Schwarzenegger, who earlier proposed building 200 hydrogen stations in the state and creating a "hydrogen highway" by 2010. Ultimately only 23 stations were built, of which nine are available for public use. More recently, current California governor Jerry Brown signed into law a $200 million bill (paid for by raising vehicle registration fees) that aims to open 100 stations by 2024, at a cost of $2 million each. 

The reason for the push is that California has a zero emission vehicle (ZEV) mandate that requires 15% of cars sold in the state to be emission free by 2025. California is also spearheading a coalition of eight states that aim to have 3.3 million ZEVs on the road by 2025.

However, a major reason automakers are pushing so hard on hydrogen fuel cells is not based on expectations of large market adoption, but on misguided (though well meaning) government regulations. As this article will explain, the push for fuel cell cars may end up actually harming the stated goals of the environmentalists who advocate for them, by diverting much-needed financial resources from more efficient and cleaner technology. 

The problem with current regulations
California's ZEV mandate was designed with two goals in mind: clean the air and cut down greenhouse gas emissions, 40% of which come from the state's vehicle fleet.

Though these goals are noble, the way the laws are written is not. Specifically, current regulations attempt to favor fuel cell technology over battery electric technology, though as I'll later explain, electric cars are more efficient, economical, and represent all around superior

Tesla Model S source: Tesla Motors

technology. For example, in California today, a Tesla model S receives four ZEV credits while a Hyuandai Tucson fuel cell receives 26.

While that efficiency rating certainly beats a regular car's 15%-20% efficiency, it falls short of 59%-62% efficiency of electric cars like the Tesla S (89 mpge) or the Nissan Leaf (114 mpge).That's $130,000 in ZEV credits for a vehicle the operates at 40%-50% efficiency and gets an EPA rated 50 mpge (miles per gallon equivalent) rating.

In other words, automakers are being incentivized to promote fuel cell vehicles, despite their lower efficiency, often as mere compliance cars -- low production models designed to meet ZEV quotas that allow them to continue selling gas cars in California. As evidence consider that Hyundai is only planning on leasing (not selling) 1,000 vehicles through 2015, most of those in Europe. where regulations also highly favor fuel cell vehicles. 

Beginning in 2005, Honda leased its FCX Minivan in California, a grand total of 24 vehicles. Between 2008 and 2010 Honda leased 200 FCX Clarity's, split between Japan and California. 

Toyota FCV source:

Europe and Japan are also where Toyota plans to market its FCV fuel cell car starting in 2015. The FCV is expected to cost $70,000 in Japan, but sales will surely be helped by the generous $20,000 tax credit the Japanese government offers for fuel cell cars, (electric car tax credit $8,500). In Aichi prefecture (home to Toyota's global headquarters) the state government adds an additional $10,000 in tax rebate, bringing total tax incentives to a 43% of the purchase price. A Japanese government panel is even suggesting the government should provide free hydrogen fuel. 

The problem with these skewed regulations and incentives is that they promote a technology that is inferior in terms of economics, practicality, and environmental benefits. 

Why electric cars are better for the environment
The main problem with fuel cells is the fuel. Around 95% of US hydrogen is made through steam reformation of natural gas, a process that is 68% efficient according to the Colorado School of Mines. Electric hydrolysis, the splitting of water through electricity, is another option, but is also about 70% efficient. 

The 40%-50% efficiency for fuel cells applies only after the hydrogen is in the tank. One also has to take into account how the hydrogen is made. If from natural gas (which releases as much CO2 as burning it), then one must take into account the energy needed to store, transport, and compress the hydrogen into the tank. 

If hydrogen is made from electricity then the 30% energy loss from hydrolysis means that fuel cells will never be as environmentally friendly as electric cars, no matter how the electricity is produced.

Another thing to take into account is cost of infrastructure. A hydrogen refueling station costs $2 million, while a DC fast charging station costs around $80,000. So for the cost of just one hydrogen refueling station you could have almost 25 EV charging stations, and potentially help get far more gas cars off the road.

Simply put, fuel cell vehicles are diverting much-needed financial resources from more efficient and environmentally friendly EVs and could be indirectly harming efforts to help the environment. This is largely a result of misguided government policies and regulations that attempt to promote a certain technology rather than achieve emission targets.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 10, 2014, at 4:51 AM, cove3 wrote:

    Motley Fool ceaselessly pumps Tesla directly and indirectly with articles like this. This is no accident as it owns Tesla stock, so they're not exactly arm's length. Left out is anything that contradicts this

    1, There will be 59 fueling stations in California by October 2015. and 100 thereafter

    2. It isn't only California that have made a strategic decision towards fuel cells. Japan, Toyota, and Toyota all have indicated this. When government and big players make strategic decisions, I tend to listen

    3, The cost of fueling stations is not 2 million and is coming down due to technology and relaxed standards that enable 18% of gas stations to install stations

    4. Tesla batteries will never be able to power trucks, buses, trains, or construction vehicles, nor generate home heating or electricity, things governments worry about but not Motley Fool

    Motley Fool is the Fox News of Finance.

  • Report this Comment On August 10, 2014, at 5:58 AM, weaponz wrote:

    @cove3 -

    Except a few things:

    1) 59 fueling stations? just 120,941 more to go! The problem is again the infrastructure is too expensive and with no in-home refilling you need as many hydrogen stations as gas stations. And don't forget hydrogen costs more than gasoline.

    2) You listed Toyota twice. And Japan is just supporting Toyota but reality is they are not getting far. According to Toyota, there won't be an affordable fuel cell car until 2025+. Aka Tesla will already have their affordable car on the market for almost a decade until an affordable Fuel Cell car arrives.

    3) Right, the cost is more like 5 million (and this is only for 1 or 2 pumps not a full station), it gets to 2 million after the government subsidies. According to Toyota they hope that in a few decades they can get the cost down to 1 million.

    The gas stations can't afford it, you crazy? gas stations are going bankrupt as their business is worth less than their land. Before, gas stations were owned by oil companies, they dumped them as they were not very profitable. Gas stations earn almost nothing on gas, they earn money on their convenience stores and the like. They can't afford installing hydrogen pumps, too expensive.

    4. Nonsense, BYD and Proterra already make battery powered buses. There are already delivery and local trucks powered by batteries. Trains can run on batteries just fine too.

    Fuel Cells have their uses, don't get me wrong. Just not in cars, not only are they inferior to BEVs in almost every single way. They simply won't even get to the market quick enough to compete.

  • Report this Comment On August 10, 2014, at 4:35 PM, AdamGalas wrote:

    Some important considerations when considering fuel cell station costs:

    1. The costs are coming down but they are down from $4 million per station to $2 million.

    2. Ev charger costs are not just dozens of times lower their costs are still coming down.

  • Report this Comment On August 10, 2014, at 6:09 PM, AdamGalas wrote:

    The only way fuel cells can even compete with regular cars is based on increased efficiency but automakers are working hard to improve gas cars and as I recently wrote in an article, that new tech means gas cars may remain on the road for 100 years.

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Adam Galas

Adam Galas is an energy writer for The Motley Fool and a retired Army Medical Services Officer. After serving his country in the global war on terror, he has come home to serve investors by teaching them how to invest better in order to achieve their financial dreams.

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