The Rise Of The Hydrogen Electric Car

China‘s State Council has announced last month a proposal to promote the development and construction of fueling stations for hydrogen fuel-cell cars. It was a Friday, and too late to trade on the news. On Monday, Chinese punters were ready: In the first few minutes of trading, fuel cell-related stocks gained more than $4 billion in market value, with several hitting their daily limits. The bullishness lasted all week. It’s likely to run for much longer. In less than a decade, the Chinese government has used subsidies and other policies to create the world’s largest market for battery-powered electric vehicles. That market isn’t without problems and limits, so the government is looking to diversify its bets on carbon-free transportation. Fuel cells, a technology that’s being hotly pursued in other East Asian countries (as well as the  U.S.), is their favored means of doing it. Chinese investors, having seen the opportunities created by the support for battery-electric vehicles, are right to get in early.

Fuel cells, like batteries, generate electricity that can drive a motor and vehicle. The similarities mostly stop there. Batteries are large, heavy and require charging by electricity that may or may not be generated from renewable resources. By contrast, fuel cells generate electricity (and, as a byproduct, heat and water) when hydrogen interacts with oxygen. They don’t need charging; instead, they require onboard hydrogen tanks, which are both lighter and capable of holding far more energy than a battery (allowing them to travel further). And unlike batteries, which can require hours to charge, vehicles powered in this way can be refueled in minutes, similar to traditional internal combustion engines.

Of course, if it were so easy, hydrogen vehicles would already dominate battery-powered cars (and internal combustion engines, too). Several crucial bottlenecks have inhibited their growth. First, fuel cells are the most expensive components in the car, and for years they’ve made the technology uncompetitive with battery electrics. For example, the Toyota Mirai – the Japanese company’s signature fuel-cell vehicle – sells for around $70,000 (unsubsidized). Meanwhile, Chinese battery-electric vehicles can sell for less than $10,000. Second, fuel cells might be clean-burning but hydrogen is often generated from fossil fuels, including coal. That’s problematic if the goal is carbon reduction. And third, hydrogen infrastructure – everything from pipelines to fueling stations – is both expensive and rare. In China, the cost of a hydrogen station is around $1.5 million. That’s a tough investment to make, especially when there are fewer than 5,000 fuel-cell vehicles operating in the country.

Ultimately, success will require overcoming significant technical and market hurdles. China‘s success in building a battery-electric industry guarantees that it’ll be in the race, if not the eventual leader, in this next stage in decarbonizing transport. For Chinese investors, that’s a bet worth making.

Source: https://www.bloomberg.com/

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