New Delhi: As part of our series, ‘The Alternatives in Propulsion Technology’ wherein we delve deeper into the spectrum of alternatives, namely Hydrogen-ICE, FCEV, CNG, Ethanol-Methanol, Hybrid systems, and BEVs. In one of our previous articles on H2ICE, we dealt with the relevance of hydrogen mobility for heavy vehicle segment decarbonisation. Here we will focus on the hydrogen technology of the future, which is Fuel cell based electric vehicle (FCEV), the emergence of hydrogen in the sustainable mobility spectrum.FCEVs provide certain advantages over BEVs in the heavy trucking segment, which warrant their consideration for sustainable mobility. They include a higher range, shorter charging times as well as lower weight penalty. However, one key constraint which has impacted the adoption of fuel cell vehicles has been the higher upfront costs than the ICE as well as BEV vehicles.
As of 2023, for the heavy vehicle segment, our analysis shows that the price for FCEVs is ~6X that of ICE vehicles. With the fuel cell prices expected to decline over the decade by as much as ~40%- 70%, FCEVs can emerge as a suitable option for electrification of the heavy vehicle segment. In the interim, H2ICE adoption can help drive the growth of the hydrogen refuelling ecosystem, which will then further help drive FCEV adoption.
Comparison of FECV with BEV and H2ICE
In case of heavy vehicle segments, the higher gravimetric energy density of hydrogen means that the payload penalty as compared to a BEV is significantly reduced. Apart from lower payload penalty, FCEVs have the advantage of lower refuelling times, typically ~10-20 mins compared to ~60- 90 mins for a typical heavy duty truck (330 KWh) using a fast charger (240 KW). In the context of charging of heavy duty vehicles, it is also important to note that in a country such as ours, provisions for fast charging, especially for heavy duty vehicles will pose a challenge for the grid and will need significant investments for grid upgradation or the use of battery storage system, both of which will involve additional costs.
To provide a perspective, a fast charging station for heavy duty vehicles with 240 KW fast chargers and 10 charging points will have an hourly energy consumption similar to that of 10 households on a monthly basis (average monthly household consumption in Delhi ~260 KWh). This becomes even more challenging if we consider the geographical spread of such stations especially in semi-urban and rural areas.
The choice between FCEV and H2ICE requires a more nuanced approach. While H2ICE vehicles provide a more economically attractive solution from an acquisition costs perspective, due to the efficiency gains in FCEVs, which have a tank to wheel efficiency of ~40% compared to ~25% for H2ICE vehicles, from a 10 year TCO perspective, FCEVs are more attractive. As the prices of fuel cell stack fall by 2030, the attractiveness of FCEVs will improve further.
But in country such as ours, the higher acquisition costs will weigh on the FCEV adoption especially on account of a fragmented industry structure with several owner-drivers or fleet operators with less than 5 trucks thereby making the upfront cost continue to be a drag on demand for FCEVs, hence H2ICE will serve as an important interim solution.
Further, due to inherent characteristics of both technologies, there are use cases where one would be preferred over the other. FCEVs have higher efficiency at low and medium loads and thus would be suitable for long haul trucks and buses which are primarily being used on expressways and highways. As FCEV efficiency reduces during high load applications, H2ICE will be preferred for heavy duty applications in rougher terrains such as mining and other off-highway applications.
Thus while H2ICE can serve in the interim while FCEV costs reduce, there are specific applications which will continue to utilize these. As both the powertrains require the same type of hydrogen refuelling infrastructure, H2ICE adoption will help bring down the costs for FCEVs and vice versa. Further, both also share similar hydrogen storage technologies, thus greater adoption of both the types of vehicles, will help reduce storage costs due to scale effects.
Challenges to FCEV adoption
Although EV penetration in the 2W, 3W and passenger vehicle segment has been increasing, decarbonization in the heavy vehicle segment continues to be a challenge for the country. FCEVs can play a key role in the long term decarbonization of this segment. Our analysis reveals that by 2030, on a 10 year TCO perspective FCEV will achieve parity with ICE vehicles at a hydrogen retail price of ~ USD 5/ kg. India is already planning large scale production of green hydrogen for both industrial and mobility applications under its National Green Hydrogen mission and the country stands favourably on both the factors that are critical to the cost of green hydrogen production i.e. the renewable energy costs and the electrolyser capex.
With majority of the country receiving average global solar insolation > 4 KWh/m2/day and ~58% of the land area receiving average global solar insolation > 5 KWh/m2/day (considered solar hotspots), India boasts of some of the lowest renewable costs globally, which are further expected to fall further with rising domestic module production and optimization in operation and maintenance costs. For electrolysers, the government is already offering incentives of ~INR 4,400 crore for electrolyser production within the country, which is expected to drive domestic production, thereby reducing costs.
With the expected fall in green hydrogen costs, hydrogen based mobility will increasingly become a contender in the decarbonization push for the heavy vehicle segment. Given the relevance of FCEVs, several players have already developed products or are developing products for this segment e.g. TATA motors had in 2021 won a tender to supply 15 FCEV buses to IOCL. The company supplied the first of these buses last year, which are being assessed for potential mass transit solutions for intra and intercity commute. Last year, Bharat Benz in collaboration with RIL, also displayed an intercity luxury concept coach powered by fuel cells with a range of ~400 kms.
The opportunities
While FCEVs hold significant potential, their widespread adoption faces certain critical challenges. Firstly, as discussed earlier for FCEVs to be competitive with traditional ICE vehicles even in 2030, the hydrogen retail prices need to be lower than USD 5/kg. Secondly, vehicle adoption will be dependent on the development of an adequate refuelling network and lastly there needs to be an aggressive reduction in acquisition cost of FCEVs to make these a viable alternative to existing ICE vehicles. Given the prevalent ownership structure in the heavy vehicle segment consisting of a large number of owner-drivers, along with unorganized and organized fleets, the upfront cost reduction becomes paramount.
High costs of green hydrogen
Hydrogen costs will impact the adoption of either of the hydrogen mobility options. The current LCOH (levelized costs of hydrogen) in India vary from USD 4 – USD 9/ kg which translates to pump prices of USD 9- USD 12/kg (ex-taxes). For FCEVs to become viable by 2030, these prices need to be below USD 5/kg. As discussed previously, the two costs levers in terms of reduction in Renewable Energy (RE) and Electrolyser prices are critical for achieving LCOH reduction.
Depending on the mode of production, the open access charges also become crucial in driving RE costs. Thus, rationalization of grid charges would be an important lever to reduce RE costs.
Hydrogen refuelling network
Hydrogen production and refuelling footprint will depend on multiple factors including the LCOH for hydrogen production and distance between production and demand centres. The transportation between the production and demand centres will be influenced by the trade-off between the quantity transported and the capex for a particular transportation option. The high capex of hydrogen refuelling stations will further add to the cost of hydrogen to end consumer and thus will have a bearing on the refuelling network footprint as well.
H2ICE adoption will play a critical role in ensuring that a meaningful refuelling network exists in the country for hydrogen vehicles, which will aid FCEV adoption. As discussed in our previous article, a cluster based approach targeting major highways for establishing refuelling network, will help in optimizing the infrastructural spend.
FCEV acquisition costs and vehicle availability
One of the key factors that will drive FCEV adoption is the reduction in vehicle acquisition costs. With the current FCEV prices for heavy duty vehicles at ~6X to an equivalent ICE vehicle, with fall in fuel cell and storage tanks prices, these are expected to reduce to ~2 X by 2030. However, for the fall in fuel cell prices to translate to the Indian market, there is a need for domestic ecosystem development. Partnerships between global fuel cell manufacturers and domestic OEMs, such as that between TATA Motors and Cummins, with a focus on domestic manufacturing will not only help reduce costs but can also establish the country as an export base for global manufacturing.
Conclusion
The adoption of FCEVs will majorly be determined by the cost curve the technology takes vis-à-vis the other powertrain options being considered in the market. As previously discussed, domestic manufacturing can be a key enabler of potential fuel cell cost reduction. There are two key factors which can catalyse domestic manufacturing development, securing fuel cell technology and raw material supply chains. Unlike EV battery technology and manufacturing, it is the European and American players who dominate PEM (proton exchange membrane) fuel cell ecosystem and given the geopolitical scenario, this can provide an opportunity for India, wherein Indian players can tie-up with global players for domestic manufacturing.
Another factor, which can drive domestic fuel cell manufacturing is the growth of the hydrogen electrolyser manufacturing within the country. Since the core PEM technology remains the same, there is a potential opportunity for electrolyser manufacturers to diversify into fuel cell products.
In terms of raw material, we are now seeing efforts to increase domestic production of critical battery minerals, with the government holding auctions for 20 blocks of critical minerals such as lithium, as well as efforts towards collaboration with countries in South America including Chile, Bolivia, Peru and Argentina, which are rich in mineral reserves. For fuel cells, platinum group metals are an important raw material. In terms of geographic concentration, ~70% of the world’s annual production of platinum and ~80% of the iridium production is concentrated in South Africa. Thus, efforts must be made to secure the supply chain for these materials.
Lastly, to ensure that players are incentivized to invest in developing these capabilities and there is sufficient demand in the market, government support to this technology in the initial phase will be needed. Steps such as pilots with FCEV e.g. those conducted by IOCL can be expanded to develop products more suited to Indian needs. Going further, inclusion of FCEVs into government programs such as that for decarbonization of 800,000 intercity and intercity buses, can serve as a catalyst to kick start the FCEV journey in the country.
(Disclaimer: Ashim Sharma is Senior Partner and Group Head at NRI Consulting & Solutions, and Nishant Shekhar is Manager, NRI Consulting & Solutions. Views are their own.)
