Fuel cell technology, once deemed a distant possibility by the Obama administration in 2009, has made significant strides in the past 14 years. The cost of fuel cell vehicles (FCVs) has dropped by over 65% in the last decade, particularly for buses, thanks to innovations and production improvements. This increased affordability has made hydrogen-powered FCVs a more attractive option for everyday use. As a result, the global FCV market is projected to grow from $2.5 billion in 2022 to over $30 billion by 2032, with an annual compound growth rate of more than 25%. Several factors are contributing to this rapid growth, including stricter vehicle emission regulations, government investments and subsidies in FCV development and green hydrogen, the growing adoption of passenger FCVs in Asia (especially Japan and South Korea), and the efficiency advantages of FCVs over electric vehicles for long-haul and bulk transportation. With reduced costs for commercial use, governments worldwide have set ambitious targets to increase the number of FCVs on the roads, leading to a higher demand for hydrogen to power these vehicles.
The push for green hydrogen and FCVs has attracted the attention of companies and venture capital firms. VC firms invested $2.6 billion in 192 hydrogen startups in 2022, and the number of annual VC hydrogen deals has more than tripled since 2014. Major international companies, seeking to reduce their carbon output, have also been entering green hydrogen deals. For example, Amazon signed an agreement with Plug Power to supply 11,000 tons per year of green hydrogen for its transportation and building operations starting in 2025. Similarly, Walmart struck a deal with Plug Power to supply enough green hydrogen to fuel up to 9,500 machines across their distribution and fulfillment centers. These are just a few examples of the increasing investment in green hydrogen and FCVs by companies. Moreover, hydrogen-related companies are receiving substantial government subsidies to ensure their ability to meet the growing demand. In July 2023, Nikola Corporation, a global leader in zero-emissions transportation and energy infrastructure, received $58.2 million in grants to support seven hydrogen refueling stations along the California freight corridors.
California has been at the forefront of the hydrogen push, subsidizing and aggressively expanding the state’s hydrogen infrastructure in recent years. By the end of 2022, there were approximately 62 hydrogen refueling stations across the state, capable of supporting a fleet of about 51,000 light-duty FCVs. Former California Governor Jerry Brown set a target in 2018 to expand the network to 200 stations by 2025. This investment has resulted in a significant increase in the average daily hydrogen dispensed per quarter in California, rising over 7500% since 2016. Given that California has the largest state GDP ($3.5 trillion economy, larger than most developed countries), its hydrogen initiatives are setting the trend for the rest of the United States. However, a limited supply of reliable hydrogen remains a challenge to further growth in the market. The California Fuel Cell Partnership has emphasized the need to ensure refueling stations do not frequently run out of supply. Consequently, there is a growing focus on scaling-out green hydrogen production to meet the demand. The cost of producing green hydrogen is expected to decrease significantly over the next decade, making it more competitive in various sectors. McKinsey estimates that clean hydrogen will become cheaper to produce than the current grey (dirty) hydrogen method, with a production cost of approximately $2 per kilogram. Government subsidies and support are crucial in driving down these costs further.
Hydrogen is poised to play a crucial role in achieving the global net-zero targets, with its potential to power vehicles emitting only water vapor, stabilize renewable energy grids, decarbonize heavy industries, and revolutionize the energy landscape. The convergence of favorable factors, such as increased environmental awareness and policy-driven incentives, has paved the way for the widespread adoption of hydrogen. This shift is no longer a distant possibility but a tangible reality gaining momentum each day.
Please note that the original article contained disclosures and additional information that have been omitted from this rewrite.