Written by Alastair Hayfield, research director with Interact Analysis. This is one in a series of periodic guest columns by industry thought leaders.
Despite strong marketing, a large self-reported order book and important industry partners such as Bosch, hydrogen fuel cell truck developer Nikola Motor still needs to get the trucking industry to take it seriously.
Comparisons with Tesla and its location in the notoriously conservative U.S. truck market haven’t helped its position. Still, the recent $1 billion investment round in the Phoenix, Ariz., startup led by London-based CNH Industrial, parent of truck maker IVECO, is an encouraging move. That vote of confidence by a global industry player should temper those who question the ability of Nikola to execute on its business model and introduce hydrogen-fueled heavy-duty trucks.
Nikola will benefit significantly from production expertise, purchasing power, verified parts and logistics through this new venture. This is a major advantage for Nikola, which is looking to scale and build credible products. Other start-ups may be seeking similar major brand investments. This may spark future tie-ups or consolidation within the start-up space.
CNH Industrial has lagged behind other commercial truck companies with its vehicle electrification development. A fuel cell truck uses an electric powertrain. But it replaces the battery with a fuel cell stack that converts hydrogen into electricity to power the vehicle.
CNH has pursued a strategy focusing on natural gas to meet emission goals. With the increasing number of low and zero-emission zones, particularly in Europe, and ever-tightening regional emission norms, CNH now views electrification as the most viable option for the future. The Nikola investment gives CNH access to a raft of technologies from Nikola that will help jump-start its electrification program.
Notably, Nikola’s advances in software-over-the air and infotainment will give CNH an advantage with regard to vehicle connectivity and intelligence, a coming battleground for commercial vehicle vendors. Nikola, or fleet owners, will add functionality and fix issues remotely. This means less downtime and the ability to add functionality or integrate fleet management directly into the truck. Errors with software are a major cause of vehicles requiring service.
CNH’S GLOBAL REACH
CNH’s experience and network in Europe will provide a channel for Nikola to grow in a market where its products will have stronger demand. One of the key challenges for start-ups in the commercial vehicle space is providing regional service and support. By partnering with CNH, Nikola lessens the risks for customers. The partnership gives Nikola access to an established, regional vehicle sales and support network. This is an approach taken by Chanje in the U.S., where it has partnered with Ryder System to provide national sales and service support.
The partnership offers other advantages to CNH. Just as it helps Nikola enter the European market, CNH needs an entry into the U.S. where it lacks a commercial vehicle business. That puts CNH at a disadvantage to its European commercial vehicle rivals – Daimler and Volvo. Both have significant U.S. market share through their respective ownership of the Freightliner and Mack brands. CNH now has a starting point to compete in the U.S.
Moreover, CNH Industrial’s experience with its CNG network provides an advantage in building a hydrogen fuel network – particularly with site optimization and also existing facilities that are capable of being used for liquid hydrogen refueling.
Forecasters expect the uptake of hydrogen fuel cell trucks to be slow out to 2023, with a significant ramp-up out to 2030. The move by CNH to bring the hydrogen fuel cell capability of Nikola into Europe is likely to drive the adoption of the technology and possibly accelerate market adoption.
LOW AND ZERO EMISSION ZONES
Broadly speaking, U.S. 2010 and Euro 6 engine emission standards are comparable in stringency for NOx and particulate matter. The U.S. has a green-house gas standard in place. Europe has only just agreed to implement a program of CO2 reduction out to 2030. However, one major – and constantly changing – difference is the prevalence of low and zero-emission zones in Europe. With the exception, perhaps, of California, North America has no specific regions or cities with low or zero-emission zones. By comparison, Europe has multiple cities with existing or proposed low or zero-emission zones.
These zones are typically political in nature – driven by the desire of local elected officials to respond to poor air quality. Several major cities have announced plans to phase out diesel and gasoline vehicles completely within the next ten years. For the commercial vehicle market, this is helping to drive the transition to electric powertrains in Europe. Fleet operators will have to pick between paying penalties/daily fees to enter particular cities or cease using those routes, an unlikely option. This is driving operators to invest in cleaner vehicles.
HYDROGEN IN OTHER APPLICATIONS
Researchers are developing hydrogen fuel cell technology for trains and marine applications in Europe. Porterbrook and The University of Birmingham will test a hydrogen train – HydroFLEX – in the UK.
Alstom is running hydrogen trains in Germany, GE and Holland’s Nedstack have entered into a partnership to develop hydrogen fuel cell power systems for cruise vessels. Ballard Power Systems is establishing a Marine Center of Excellence dedicated to fuel cell marine applications in Denmark. ABB will provide a power and propulsion solution for a newbuild vessel operating along the Rhône river in France to run entirely on hydrogen fuel cells. And ABB and SINTEF are testing/modeling the technology needed to scale fuel cell power technology such that it can be used for main propulsion power in commercial and passenger ships.
These trials and commercial programs matter to the truck market because they simultaneously prove the technology at a very large scale and in extreme environments. They also provide impetus to increase fuel cell production and reduce costs. This type of technology transference provides a boot-strap whereby the fuel cell industry can benefit from exposure to multiple applications, driving down costs and validating the technology more quickly.
CHEAP AND CLEAN HYDROGEN
The unfortunate problem for proponents of hydrogen is that much – over 90 percent – of global hydrogen is produced by the reformation of natural gas, coal or oil. This so-called brown hydrogen requires the extraction of natural resources and the emission of CO2. While vehicles powered by this hydrogen are locally green, they are reliant on a process that harms the environment at the fuel source.
Producers make only a small fraction of hydrogen via electrolysis – the splitting of water molecules to produce hydrogen using electricity. But this is not without issues. It is expensive and therefore difficult to justify economically versus diesel or natural gas. The electricity used in the electrolysis process may come from a non-renewable source such as a coal-fired power plant. This makes the use of hydrogen less than a perfect choice.
The good news is that recent research shows that hydrogen produced via electrolysis is currently cost-competitive with natural gas in niche applications and will be cost-competitive when produced from renewable energy in 2030. The drivers of this are two-fold. The cost of technology required for electrolysis is falling significantly. At the same time, the price of renewable power, particularly from wind, is declining.
In Europe, there are already plans in place to introduce thousands of heavy commercial vehicles fuelled by hydrogen. Hyundai announced an agreement with H2 Energy to establish the Hyundai Hydrogen Mobility joint venture in Europe. The automaker will deliver about 1600 commercial hydrogen fuel cell vehicles in Switzerland by 2025.
Greenstat, a company based in Norway, wants to get 1,000 fuel-cell electric long-haul trucks on Norwegian roads by 2023. A grant €40 million from the EU’s Connecting Europe Facility supports the project, which totals 600 buses. The grant will deploy 200 hydrogen fuel cell electric buses in each of Denmark, Latvia and the UK by 2023.
These fleet commitments give credibility to the technology. And that gives other fleet operators the confidence to invest in the technology.
Editor’s note: Alastair Hayfield is a research director with Interact Analysis. His focus is on the global commercial vehicle market, with a particular focus on vehicle electrification and autonomy.
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