In the annals of zero emission vehicle startups there are innumerable failures. The Canadian/UK firm First Hydrogen is inevitably going to be one of them. I write this article not to hasten their demise, but to ask a set of questions about how this type of thing gets funded, gets press, gets the appearance of traction and the like. Think of it as an aid to investors and politicians involved in other inevitable failures.
The firm came to my attention in the summer of 2023, when a big announcement was made that they had secured land in Shawinigan, Quebec, birthplace of former Canadian Prime Minister Jean Chretien and location of a remarkable string of fires that consumed hotels and inns, eight of the fifteen established in the town over its history. Remarkably, only one person, an associate of Chretien’s whose inn had received a C$615,000 loan from the government while Chretien was PM, was ever charged with arson and he was acquitted as the evidence was entirely circumstantial.
Shawingan is a moderately picturesque town of 49,600 located halfway between Montreal and Quebec City on the Saint-Maurice River. Formerly a fairly vital industrial hub due to the hydroelectric dam, with pulp and paper, chemical, textile and aluminum industries taking advantage of the energy, it’s been in decline since the 1950s. Its growth industry is retirement homes, with a full third of its population over 65, its average age eight to nine years higher than Canadian cities like Vancouver, Toronto and Montreal and its population slowly shrinking.
But it still has that 200 MW hydro dam that’s been in operation since 1910, meaning its carbon debt is long paid off. When I heard that a firm was going to be building an electrolysis facility there with their own money, I had my doubts but saw no evidence of any particular governmental largesse, so shrugged and moved on. As a place to build a green hydrogen facility, there are worse choices. Quebec needs fertilizer too, although fertilizer giat Yara doesn’t make any fertilizer in the province right now, instead importing it via a terminal on the St. Lawrence. Quebec is blessed with lots of green electricity but no fossil fuel reserves to speak of, so the location preferences for ammonia-based fertilizer have flipped in its favor and perhaps something will happen as a result. Not what First Hydrogen has in mind, however.
A bit about First Hydrogen
What I hadn’t realized was that First Hydrogen was actually a hydrogen vehicle wannabe. They built a prototype with a lot of professional help from vehicle engineering and test firm AVL with, of course, a Ballard fuel cell in the mix. Engineering firm Arup was also engaged. As I noted in a recent article, Ballard has been going from failure to failure for 44 years and has lost $1.3 billion of other people’s money since 2000. AVL, per its history, has been quite happy to take fuel cell vehicle wannabe’s money for years now, and I’m sure Arup doesn’t mind the revenue either.
A bit f history on First Hydrogen. It was apparently founded in Vancouver in 2007, so it’s a 16-year old organization, although there’s precious little indication it did much until recently. A Vancouver real estate and construction mogul, Balraj Mann, who appears to have started or owns about 20 firms which do building-related things, founded First Hydrogen and is the Chair and CEO.
That Vancouver location means that he is in the weird BC bubble that continues to think hydrogen for energy is an amazing thing, but as Ballard’s litany of abandoned trials and partnerships with OEMS like Audi and Ford shows, that’s because all of the initiatives that start are publicized as heavily as possible, but the failures are swept under a very lumpy rug in Ballard’s headquarters.
BC has a little ecosystem of hydrogen going on, with AVL having a fuel cell division here, Greenlight Innovations building and selling fuel cell test benches to firms that foolishly get into the business including Hyundai whichwas their biggest customer last time I talked to the Managing Director and a few others.
Clearly the US Inflation Reduction Act leaning into hydrogen and Canada unlocking purse strings in a matching action unlocked more foolish money as in April of 2022, First Hydrogen managed to get a trivial amount of money finally, C$6 million. This year they managed to scrape another $2.9 million out of unnamed investors. In the road vehicle startup space, $9 million is chump change, orders of magnitude off of the required capital. And for establishing a hydrogen manufacturing concern?
Manufacturing green hydrogen in Shawinigan?
Let’s look at the fiscals of the purported hydrogen manufacturing facility first. They received the land from the city of Shawinigan. As the quick look at it above showed, it’s a shrinking, rural town desperate for investment. The odds that First Hydrogen received the land for free or close to it are high. Good enough. There is exactly no skilled workforce to speak of in he town, so they’ll have to import, well, everybody, but it’s a nice enough town and only a couple of hours’ drive from a great city.
They are asserting a 35 MW electrolysis facility. Let’s assume that they go with the cheaper alkaline electrolyzer, which per the IEA is running around US$400 per kW of capacity excluding balance of plant, so that’s US$14 million or C$18.6 just for the electrolyzers, more than double their entire capitalization. The balance of plant of roughly another 27 components is important too, and includes an actual building, so call it double that easily.
What about electricity costs? Well, there’s a reason to build green hydrogen facilities in Quebec and that’s because industrial rates are advantageous and the electricity is green. But cheap doesn’t mean free. They would be getting electricity under Hydro Quebec’s Rate L industrial category at C$0.03503 per kWh and $13.779 per peak kW. That latter means the 35 MW electrolyzer plus likely another 5 MW of balanceof plant draw for 40 MW would cost them a committed C$550,000 per month, which would burn through their C$9.9 capitalization in 18 months, if they had any of it left over after building the plant, which they won’t.
Hydro Quebec likes 95% utilization power draws, otherwise they start charging serious peaking surcharges, so let’s assume that First Hydrogen’s 40 MW total draw is at that utilization rate. That turns into a million a month in energy costs. Water in Quebec is dirt cheap even with the new rates of $35 per million liters, so it’s a rounding error of costs.
In an hour at full utilization they would manufacture about 727 kilograms of hydrogen. Just the electricity costs turn into C$2.96 per kilogram. The capital cost, amortized over the roughly 10 years of the electrolyzers, adds another $0.58 per kilogram, making it C$3.55 or US$2.70. This is, by the way, the absolute best cost case that is likely, and things like heavily inflated executive compensation — see below — will mae the cost per kilogram go up too.
That’s actually a really good cost for manufacturing green hydrogen, the best economics I’ve seen anywhere (making me suspicious I missed something). At only about three times US per kilogram costs from steam reformation of fossil methane, it’s much better than costs pretty much anywhere else will be. This part of First Hydrogen’s business case is actually reasonable, even if they are short tens of millions of dollars to build it and $1,550,000 per month for just the electricity to run it.
Add 10% financing and 10% profits as notional numbers and that’s about C$4.30 or US$3.24 per kilogram, undelivered.
If only there were anything in Shawinigan to consume the hydrogen as storing and moving hydrogen around is very expensive. There isn’t. Remember, there are no fertilizer plants in Quebec, never mind in Shawinigan. There are two refineries — remember that the single biggest consumer of hydrogen on the planet is the oil industry to hydrotreat, hydrocrck and desulfurize crude oil — but they are in the suburbs of Quebec City and Montreal, 90 to 120 minutes driving down the highway.
Delivering hydrogen by tanker truck is expensive. Even with black or gray hydrogen at $1 to $2 per kg manufacturing costs, when delivered by truck hydrogen costs in the range of US$11 or $15 CAD. Assuming the same pre-profit gross up, that puts delivered hydrogen by truck at around C$17 to $18 at the refineries. I suspect that they won’t be buying it at those prices, as they will prefer to have the federal and Quebec governments pay them to make blue hydrogen and sequester the carbon, turning a problem into an opportunity to suck back more oil and gas subsidies.
Is this unusual? No. Black or gray hydrogen dispensed in California and Europe costs between US$17 and $35 per kilogram at the pump. In Canada, HTEC runs the hydrogen refueling stations. It’s another dead end BC company in the little bubble here. At its BC stations, the locally electrolyzed hydroen using BC’s cheap and low carbon electricity costs C$14.70 per kilogram or US$11, making it the cheapest pumped hydrogen I’m aware of, and still vastly more expensive per kilometer than just using electricity more directly via batteries. At least, when there’s enough of it, as HTEC is careful to say that sometimes they have to deliver gray hydrogen from steam reformation. I assume that 90% or more of BC’s pumped hydrogen from HTEC stations is gray so that they can maximize their profits.
Basically, there’s nothing anywhere near Shawinigan that needs green hydrogen and delivering it anywhere makes it very expensive. That’s why 85% of hydrogen is manufactured at the point where it is consumed, and the vast majority of the rest is piped relatively short distances to high volume consumers from steam reformation plants, as is the case in Edmonton and in Germany.
Building hydrogen fuel cell delivery trucks in Shawinigan?
And so we get to the second half of First Hydrogen’s failure in moton, creating demand. With the money that they won’t have after building a green hydrogen manufacturing facility, they are going to build a fuel cell delivery van assembly factory in Shawinigan, one capable of delivering 25,000 vehicles a year. Just establishing a light electric truck facility — something potentially sensible to do — can cost US$11 million or C$15 million, according to one internet source, once again greater than their entire current capitalization. Fuel cell trucks are much more complex, so add costs to that.
Their prototype van is a 3.5 metric ton van, a standard size for package and light deliveries. This class of vehicle averages about 60 kilometers a day of driving per US statistics, assuming six days of operation per week. That’s a bell curve of course, so some undoubtedly drive much further, but extreme range is likely to be 400 km, which is what Ikea in Austria requires for some routes apparently.
They aren’t 24/7 vehicles, so depot charging of electric versios is trivial. They aren’t semi trucks, so electric versions can recharge at any fast charger, and there are hundreds of fast chargers dotted around the place already. There are already 400 km range electric vehicles available in this class, for example, BrightDrop with its US$85,000 price tag. That firm is a subsidiary of GM, which actually knows how to manufacture trucks and has strong relationships with automotive component manufacturers like Magna.
I brought up Ikea earlier for a reason. They acquired five hydrogen fuel cell trucks from Quantron, because that firm was incompetent to make a 400 km battery electric van it seems. The government of Austria had to fund the acquisition because the entire package including the refueling station cost €4.8 million, or C$7 million. That’s C$1.4 million per truck.
That’s absurdly high, isn’t it? But a million US of governmental money per truck or bus is about average for hydrogen trials, per my assessment of the ongoing stagings of the Odysey of the Hydrogen Fleet tragicomedy.
Odyssey of the Hydrogen Fleet infographic by Michael Barnard, Chief Strategist, TFIE Strategy Inc, icons by ChatGPT & DALL-E
Odyssey of the Hydrogen Fleet infographic by Michael Barnard, Chief Strategist, TFIE Strategy Inc, icons by ChatGPT & DALL-E
Much of that is for a hydrogen refueling station. The only one that currently exists in Quebec, on the outskirts of Quebec City, cost C$5.2 million, is able to refuel a single car at a time and was installed to fuel 50 Toyota Mirais the Quebec government leased four years ago as a light vehicle experiment. That experiment ended late this year with the cars returned to Toyota and no information forthcoming. The refueling station is still there, attached to an Esso station, but there are only 20 registered hydrogen vehicles left in all of the province, so it’s barely used.
At least there’s one in a reasonably sized urban area serving a population of 737,000 people. So there’s that. The next nearest multmillion dollar stations are, of course, in British Columbia, which has five of them serving that province’s 5 million citizens. Most are sitting idle most of the time, as there are only 195 fuel cell vehicles registered in the province and many are second cars for people who work in the hydrogen industry. Ballard convinced a bunch of its employees to lease Toyota Mirais a couple of years ago and the general manager of Greenlight Innovations leased one as well. Yes, after decades of pushing the hydrogen transportation rope uphill with lots of provincial and federal money, there are fewer than 200 fuel cell vehicles in the province. Meanwhile, there are about 110,000 battery electric vehicles already, and rising quickly.
What other contextual data is worth considering when assessing First Hydrogen’s hyperbolic claim of building 25,000 fuel cell delivery vans a year?
Well, Ballard, after 44 years remember, states that there are only 3,700 fuel cell trucks and buses in operation with itstechnology inside. Also globally, there are only 40,000 fuel cell fork lifts in operation, about 3% of the battery electric forklifts purchased globally in 2021 alone. Most of those had US Department of energy funding for the very expensive refueling infrastructure and initial purchases, and have just persisted in buying more as they expanded. The demand for fuel cell vehicles is staggeringly absent, even in hotbeds of hydrogen delusions like BC.