Shell announced the closure of its seven light-duty hydrogen fueling stations in California, marking a retreat from the state's burgeoning hydrogen fuel market, as reported by S&P Global Commodity Insights. This decision, effective Feb. 6, comes amidst ongoing supply disruptions, other station closures and escalating hydrogen prices, further straining the developing fuel cell electric vehicle (FCEV) infrastructure in the state.
The closures reduce the number of operational light-duty hydrogen refueling stations in California to 61, per the latest figures from the California Energy Commission, which monitors FCEV sales and station availability.
Shell attributed its exit from the light-duty hydrogen market to "hydrogen supply complications and other external market factors," as noted in a statement on the Hydrogen Fuel Cell Partnership's hydrogen station tracker website. However, the company will maintain its heavy-duty refueling stations within the state.
The hydrogen supply chain in California is currently grappling with multiple challenges, including increased costs of feedstocks due to geopolitical tensions, such as Russia's invasion of Ukraine, unexpected operating expenses, and a decline in the value of Low-Carbon Fuel Standard (LCFS) credits.
Brian Murphy, a senior hydrogen and low-carbon fuels analyst at S&P Global Commodity Insights, said the demand for hydrogen has not grown as anticipated, complicating the financial viability of refueling stations, particularly with LCFS credit prices remaining below $100/mt since mid-2022.
The announcement follows a series of station closures in 2023. California's largest hydrogen provider, True Zero, closed 10 stations in October, and other providers like Iwatani and Messer followed suit in the subsequent months. These disruptions have led to a surge in hydrogen prices, with Platts assessing the pump prices at a record $34.11/kg on Feb. 1.
The light-duty FCEV market faced a tough year globally in 2023, with sales declining in key markets like South Korea, Japan and Germany. Although California saw a 10% increase in FCEV sales year over year, a significant sales drop in the fourth quarter and stagnant hydrogen usage since Q2 2022 indicated high fuel prices are deterring vehicle usage. FCEV sales accounted for just 0.7% of California's total light-duty zero-emission vehicle sales in 2023.
Looking ahead, Murphy suggested the demand from heavy-duty FCEVs, including buses being delivered to municipalities, may catalyze market growth through 2030, shifting the focus away from light-duty FCEVs.
