Hydrogen could have a significant impact on the transportation sector, even though sales of fuel-cell cars have been minuscule to date.

More than 9 million hydrogen fuel-cell passenger vehicles could be built to support aggressive targets in markets such as California, China, Japan and South Korea, according to a new market report published by Wood Mackenzie.

In the short term, however, hydrogen is more likely to be used for heavier vehicles such as buses and heavy-duty trucks, said report author Ben Gallagher, a subject-matter expert in carbon and emerging technology for Wood Mackenzie's Energy Transition Practice.

As it stands, hydrogen fuel cells have barely registered an impact on the global automotive market. WoodMac estimates there were around 17,000 hydrogen fuel-cell vehicles on the road worldwide at the end of last year, nearly half of them in the U.S.

Globally, that equates to less than 0.02 percent of the 947 million or so passenger cars that were in use around the world in 2015, based on estimates from the International Organization of Motor Vehicle Manufacturers.

“There’s probably that number of cars...on Fifth Avenue,” said Gallagher. “It’s a very, very small market.”

Buses and trucks a better fit for hydrogen?

Wood Mackenzie’s research shows the market is expanding rapidly from its small base, however, adding 7,574 units during the course of 2019, a 246 percent increase on the year before. Still, there's little chance of hydrogen fuel cells vying with electric vehicles for now.

There are 5.3 million electric vehicles on the road worldwide, said Gallagher, with many countries offering strong incentives for the acquisition of battery-powered cars. For hydrogen to catch up will require tremendous policy support, particularly while there aren’t enough vehicles on the road to warrant massive fueling station build-out programs.

The fact that such hydrogen fueling stations are being built at all — WoodMac estimates there are 410 public and private facilities worldwide, a number set to grow to 629 based on current announcements — does not seem to make sense to support a tiny number of car owners. But Gallagher said refueling station build-outs are also aimed at scaling up the fuel-cell manufacturing industry and providing local jobs. “And it’s a way to provide some additional stability and volumes for electrolyte vendors,” he noted.

Further, while low sales volumes might not warrant public support for hydrogen fuel cell passenger vehicles, there are "other applications that might be a better use case in the near term,” said Gallagher.

Buses and trucks would fall into this bracket, since they need heavy battery packs for electrification and tend to travel to and from a central base where it could be economically viable to build a hydrogen refueling station.

In 2017, a report by Roland Berger for the European Fuel Cells and Hydrogen (FCH) Joint Undertaking highlighted transport in two out of five business cases for hydrogen.

One involved heavy-duty transport including trains, buses and large trucks, where automotive manufacturers including Toyota and fuel-cell vehicle specialists Esoro and Nikola Motor Company are active. Among bus makers, Solaris, Van Hool and VDL are studying hydrogen-fueled products.

A second use case researched by the FCH was light- and medium-duty transport applications, from cars and delivery vans to garbage trucks and construction equipment. Roland Berger’s report highlighted a fuel-cell delivery van pilot by parcel service UPS in Long Beach, California in 2017.

It also noted that fuel-cell-based garbage truck pilots had been undertaken in Germany, the Netherlands and the U.K.

Hydrogen: Possible hedge against oil and metal shortages?

In countries such as the U.S., Gallagher said policymakers might want to support hydrogen fuel-cell vehicle adoption and refueling station build-out programs for national security reasons.

“Depending on how reliant you might be on global oil imports, hydrogen could be a way to mitigate the impact of some sort of supply disruption,” he said.

WoodMac is a "little bit skeptical" about the supply of lithium-ion and precious metals in the decades ahead, Gallagher added. "There’s not a significant amount of investment in mining for precious metals today. If there’s a supply issue, this becomes a reasonable alternative.”

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A recent Wood Mackenzie research insight looks at hydrogen mobility benchmarks and the current size of the global hydrogen mobility market, and tracks announced projects and deployments.