California lawmakers agreed to allocate 15 percent of funds from a $1 billion climate program to help companies build fueling stations for hydrogen cars and trucks.
After months of debate, Rep. Eloise Gómez Reyes, D-San Bernardino, said lawmakers and Gov. Gavin Newsom had agreed to a compromise on funding. An estimated $106 million will be spent on new hydrogen fueling stations by July 2030, according to the California Hydrogen Coalition.
The state Senate and Assembly are expected to vote on the deal tonight as part of a bill that would reauthorize fees for the Clean Transportation Program, which funds infrastructure for zero-emission vehicles. The fees are paid by car owners: $2 for vehicle registration fees and $4 for smog reduction fees.
The 15 percent exclusion comes even though almost no one drives hydrogen-powered fuel cell vehicles: Californians only own about 12,000 of them, about 1 percent of the 1.1 million zero-emission vehicles currently on the road.
Currently only two hydrogen models, the Toyota Mirai and the Hyundai Nexo, are sold at dealerships and sales are sluggish. Many large car manufacturers have announced that they will only produce battery-powered cars.
The new stations would also be available for hydrogen-powered medium and heavy trucks. However, some experts say electric trucks represent strong competition in this segment, so the future market for hydrogen refueling stations is uncertain.
Teresa Cooke, executive director of the California Hydrogen Coalition, called the agreement a victory. The lobbying group of hydrogen advocates and suppliers, which includes Chevron, Shell and Toyota, among others, originally asked for almost three times the amount they would receive now: they wanted about $300 million to build a state-run network of a thousand gas stations, which In their opinion, it would also encourage more people to buy zero-emission cars.
“However, it is just the beginning and we now have much more work to do with this technology and in this policy area,” Cooke said.
A spokesman for Newsom said the governor supports the funding agreement. “This is a big problem in the fight against climate change. It will help build more electric vehicle chargers and hydrogen refueling stations, improve their accessibility and reliability, and reduce air pollution,” said Alex Stack. “Governor Newsom looks forward to it reaching his desk.”
But Ethan Elkind, director of the climate program at the Center for Law, Energy and the Environment at the University of California, Berkeley, told CalMatters that the provision is “largely a waste of money” for an “industry that hasn’t proven it.” After more than a decade of subsidies in California, it’s worth it.”
Elkind added that while the state could have more hydrogen trucks in the future, there is “a much more pressing need to expand electric truck chargers, which the state is really behind in rolling out.”
“It’s a shame that lawmakers had to make this compromise with hydrogen interests,” Elkind told CalMatters, “but that’s the nature of sausage making.”
Because the program raises money through vehicle registration and other fees, the funding bill needs two-thirds of lawmakers’ votes to pass: 54 of 80 in the Assembly and 27 of 40 in the Senate.
The program will provide approximately $1.2 billion for all zero-emission vehicle infrastructure by 2035. Funds have been specifically earmarked for hydrogen filling stations since 2013, when lawmakers approved an annual provision of 20 percent for them.
But since then, electric vehicles have dominated the market for zero-emission cars, and environmentalists say the reserve for hydrogen technology should be eliminated entirely so more money goes to battery charging stations. Only 1,767 hydrogen fuel cell cars were sold in California this year. Last year, sales fell 20 percent, although sales increased this summer. Californians already own more than 760,000 battery-powered electric cars and the number is rising.
To date, the California Energy Commission has spent $202 million on hydrogen fueling stations. State funding has helped create a network of 65 hydrogen fueling stations, 20 of which are in Los Angeles County. Driving a hydrogen car outside of California is virtually impossible: There is only one other public hydrogen filling station in the United States, and it’s in Hawaii.
Energy Commission staff have warned lawmakers that there won’t be enough hydrogen cars on the road to take advantage of the new gas stations that have already been allocated state funding.
By 2027, the number of filling stations will triple, a quadrupling of the number needed to support even the “best-case volume expected by vehicle manufacturers,” the commission said. They also warned that they had not received enough offers from hydrogen station developers to spend all the money already allocated by lawmakers.
The plan includes provisions that would provide funding for other projects if there are not enough offers from hydrogen infrastructure developers.
Like battery-powered cars, hydrogen cars produce no emissions. However, the electricity to run their engines runs on compressed hydrogen gas, which is often derived from natural gas, a fossil fuel, according to the California Air Resources Board.
Major oil and gas companies see hydrogen as a potential way for their industries to remain viable in a decarbonized future. Some companies are exploring ways to make hydrogen a green energy source by splitting water using renewable energy electrolyzers. But this technology is still much more expensive than the current process that uses fossil fuels.
Energy companies are also experimenting with capturing emissions from the natural gas process and then storing them underground. But these carbon capture techniques are not yet widely used.
Electric cars rely on electricity from carbon-emitting power plants, but California is expanding its power grid to be more environmentally friendly. According to a government mandate, electricity must be 100 percent renewable and carbon-free by 2045, with the majority coming from solar and wind power.
The renewed funding comes after energy giant Shell canceled a $40.8 million deal to build up to 50 hydrogen car fueling stations in California.
In July, the company decided not to apply for state funding because the project was not economically viable, according to an email obtained by CalMatters through a public records request.
The email, signed by Shell official Abhishek Banerjee, cited a number of factors for canceling the project, including difficulties in obtaining permits and finding decarbonized hydrogen, construction costs and other factors.
The email also said that “political and economic uncertainty in the early stages of launch poses significant risk to future investments,” Banerjee wrote. “These barriers must be overcome to enable future Shell investments in this market segment.”
A Shell spokesperson said the company remains “active in the hydrogen sector in California and around the world,” adding that it is “critical to achieving our net zero goal and shaping a future low-carbon energy system.”
Reyes and Sen. Lena González, D-Long Beach, initially ran pilot projects that would have eliminated the hydrogen exclusion entirely. But they failed to garner enough support from their fellow Democrats, so Reyes amended his bill in June to dedicate 10 percent of the program’s funding ($10 million per year through July 1, 2030) to paying for hydrogen refueling stations are provided. This measure also failed to convince Democrats, who wanted more funding for hydrogen. Eventually the amount was increased to 15 percent to get more votes.
The conflict in parliament threatened to jeopardize the future of the program, which is an important source of money for the construction of new charging stations for electric cars. Funding for the program will expire next year if lawmakers don’t approve a plan this year.
The program, launched in 2007, had invested nearly $1.6 billion in alternative fuels, charging stations and other clean vehicle technologies as of March of this year. It is considered an essential source of funding for California’s transition. The state estimates that nearly 1.2 million battery-powered car chargers will be needed by 2030. There are currently only about 88,000 installed.