Hydrogen Van Agency ‘First Hydrogen’ Fated To Fail However What Questions Does It Increase?

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Within the annals of zero emission automobile startups there are innumerable failures. The Canadian/UK agency First Hydrogen is inevitably going to be one among them. I write this text to not hasten their demise, however to ask a set of questions on how any such factor will get funded, will get press, will get the looks of traction and the like. Consider it as an assist to traders in different inevitable failures.

The agency got here to my consideration in the summertime of 2023, when an enormous announcement was made that that they had secured land in Shawinigan, Quebec, birthplace of former Canadian Prime Minister Jean Chretien and site of a exceptional string of fires that consumed inns and inns, eight of the fifteen established within the city over its historical past. Remarkably, just one particular person, an affiliate of Chretien’s whose inn had acquired a C$615,000 mortgage from the federal government whereas Chretien was PM, was ever charged with arson and he was acquitted because the proof was completely circumstantial.

Shawinigan is a reasonably picturesque city of 49,600 positioned midway between Montreal and Quebec Metropolis on the Saint-Maurice River. Previously a reasonably important industrial hub because of the hydroelectric dam, with pulp and paper, chemical, textile and aluminum industries profiting from the power, it’s been in decline for the reason that Nineteen Fifties. Its development trade is retirement houses, with a full third of its inhabitants over 65 and its common age eight to 9 years greater than Canadian cities like Vancouver, Toronto and Montreal, and its inhabitants is slowly shrinking.

Nevertheless it nonetheless has that 200 MW hydro dam that’s been in operation since 1910, that means its carbon debt is lengthy paid off. Once I heard {that a} agency was going to be constructing an electrolysis facility there with their very own cash, I had my doubts however noticed no proof of any specific governmental largesse, so shrugged and moved on. As a spot to construct a inexperienced hydrogen facility, there are worse selections. Quebec wants fertilizer too, though fertilizer large doesn’t make any fertilizer within the province proper now, as a substitute importing it through a terminal on the St. Lawrence. Quebec is blessed with a number of inexperienced electrical energy however no fossil gasoline reserves to talk of, so the placement preferences for ammonia-based fertilizer have flipped in its favor so maybe one thing will occur there.

A bit about First Hydrogen

What I hadn’t realized was that First Hydrogen was truly a hydrogen automobile wannabe. They lastly constructed a prototype with quite a lot of skilled assist from automobile engineering and take a look at agency AVL with, after all, a Ballard gasoline cell within the combine. Engineering agency Arup was additionally engaged. As I famous in a current article, Ballard has been going from failure to failure for 44 years and has misplaced $1.3 billion of different individuals’s cash since 2000. AVL, per its historical past, has been fairly blissful to take gasoline cell automobile wannabe’s cash for years now, and I’m positive Arup doesn’t thoughts the income both.

A little bit of historical past on First Hydrogen. It was apparently based in Vancouver in 2007, so it’s a 16 yr outdated group, though there’s valuable little indication it did a lot till not too long ago. A Vancouver actual property and building mogul, Balraj Mann, who seems to have began or owns about 20 corporations which do constructing associated issues, based First Hydrogen and is the Chair and CEO.

That Vancouver location means that he’s within the bizarre BC bubble that continues to assume hydrogen for power is a tremendous factor, however as Ballard’s litany of deserted trials and partnerships with OEMS like Audi and Ford exhibits, that’s as a result of the entire begins are publicized as closely as doable, however the failures are swept below a really lumpy rug in Ballard’s headquarters.

BC has just a little ecosystem of hydrogen occurring, with AVL having a gasoline cell division right here, Greenlight Improvements constructing and promoting gasoline cell take a look at benches to corporations that foolishly get into the enterprise together with Hyundai which was their greatest buyer final time I talked to the Managing Director and some others.

Clearly the US Inflation Discount Act leaning into hydrogen and Canada unlocking purse strings in an identical motion unlocked extra silly cash as in April of 2022, First Hydrogen managed to get a trivial sum of money lastly, C$6 million. This yr they managed to scrape one other $2.9 million out of unnamed traders. Within the highway automobile startup area, $9 million is chump change, orders of magnitude off of the required capital. And for establishing a hydrogen manufacturing concern?

Manufacturing inexperienced hydrogen in Shawinigan?

Let’s take a look at the fiscals of the purported hydrogen manufacturing facility first. They acquired the land from the town of Shawinigan. As the fast take a look at it above confirmed, it’s a shrinking, rural city determined for funding. The chances that they acquired the land without cost or near it are excessive. Adequate. There’s precisely no expert workforce to talk of within the city, so that they’ll must import, properly, all people, however it’s a pleasant sufficient city and solely a few hours’ drive from an incredible metropolis.

They’re asserting a 35 MW electrolysis facility. Let’s assume that they go together with the cheaper alkaline electrolyzer, which per the IEA is operating round US$400 per kW of capability excluding steadiness of plant, that’s US$14 million or C$18.6 only for the electrolyzers, greater than double their complete capitalization. The steadiness of plant of roughly one other 27 parts is necessary too, and contains an precise constructing, so name it double that simply.

What about electrical energy prices? Properly, there’s a purpose to construct inexperienced hydrogen services in Quebec and that’s as a result of industrial charges are advantageous and the electrical energy is inexperienced. However low-cost doesn’t imply free. They’d be getting electrical energy below Hydro Quebec’s Fee L industrial class at C$0.03503 per kWh and $13.779 per peak kW. That latter means the 35 MW electrolyzer plus probably one other 5 MW of steadiness of plant draw for 40 MW would price them a dedicated C$550,000 per thirty days, which might burn by their C$9.9 capitalization in 18 months, if that they had any of it left over after constructing the plant, which they received’t.

Hydro Quebec likes 95% utilization energy attracts, in any other case they begin charging severe peaking surcharges, so let’s assume that First Hydrogen’s 40 MW complete draw is at that utilization price. That turns into one million a month in power prices. Water in Quebec is grime low-cost even with the brand new charges of $35 per million liters, so it’s a rounding error of prices.

In an hour at full utilization they might manufacture about 727 kilograms of hydrogen. Simply the electrical energy prices flip into C$2.96 per kilogram. The capital price, amortized over the roughly 10 years of the electrolyzers, provides one other $0.58 per kilogram, making it C$3.55 or US$2.70. That is, by the best way, the very best price case that’s probably, and issues like closely inflated govt compensation — see under — will make the fee per kilogram go up too.

That’s truly a extremely good price for manufacturing inexperienced hydrogen, the very best economics I’ve seen wherever (making me suspicious I missed one thing). At solely about 3 times US per kilogram prices from steam reformation of fossil methane, it’s a lot better than prices just about wherever else shall be. This a part of First Hydrogen’s enterprise case is definitely affordable, even when they’re brief tens of thousands and thousands of {dollars} to construct it and $550,000 per thirty days for simply the electrical energy to run it.

Add 10% financing and 10% income as notional numbers and that’s about C$4.30 or US$3.24 per kilogram, undelivered.

If solely there have been something in Shawinigan to eat the hydrogen, as a result of storing and transferring hydrogen round could be very costly. There isn’t. Bear in mind, there aren’t any fertilizer crops in Quebec, by no means thoughts in Shawinigan. There are two refineries — keep in mind that the only greatest shopper of hydrogen on the plant is the oil trade to hydrotreat, hydrocrack and desulfurize crude oil — however they’re within the suburbs of Quebec Metropolis and Montreal, 90 to 120 minutes driving down the freeway method.

Delivering hydrogen by tanker truck is pricey. Even with black or grey hydrogen at $1 to $2 per kg manufacturing prices, when delivered by truck hydrogen prices within the vary of US$11 or $15 CAD. Assuming the identical pre-profit gross up, that places delivered hydrogen by truck at round C$17 to $18 on the refineries. I think that they received’t be shopping for it at these costs, as they’ll desire to have the federal and Quebec governments pay them to make blue hydrogen and retailer the carbon, turning an issue into a possibility to suck extra oil and fuel subsidies.

Is that this uncommon? No. Black or grey hydrogen allotted in California and Europe prices between US$17 and $35 per kilogram on the pump. In Canada, HTEC runs the hydrogen refueling stations. It’s one other lifeless finish BC firm within the little bubble right here. At its BC stations, the domestically electrolyzed hydrogen utilizing BC’s low-cost and low carbon electrical energy prices C$14.70 per kilogram or US$11, making it the most cost effective pumped hydrogen I’m conscious of, and nonetheless vastly costlier per kilometer than simply utilizing electrical energy extra instantly through batteries.

Principally, there’s nothing wherever close to Shawinigan that wants inexperienced hydrogen and delivering it wherever makes it very costly. That’s why 85% of hydrogen is manufactured on the level the place it’s consumed, and the overwhelming majority of the remainder is piped comparatively brief distances to excessive quantity customers from steam reformation crops, as is the case in Edmonton and in Germany.

Constructing hydrogen gasoline cell supply vehicles in Shawinigan?

And so we get to the second half of First Hydrogen’s failure in movement, creating demand. With the cash that they received’t have after constructing a inexperienced hydrogen manufacturing facility, they will construct a gasoline cell supply van meeting manufacturing facility in Shawinigan, one able to delivering 25,000 autos a yr. Simply establishing a lightweight electrical truck facility — one thing doubtlessly smart to do — can price US$11 million or C$15 million, in response to one web supply, as soon as once more larger than their complete present capitalization.

Their prototype van is a 3.5 metric ton van, a regular measurement for package deal and light-weight deliveries. This class of car averages about 60 kilometers a day of driving per US statistics, assuming six days of operation. That’s a bell curve after all, so some undoubtedly drive a lot additional, however excessive vary is more likely to be 400 km, which is what Ikea in Austria requires for some routes apparently.

They aren’t 24/7 autos, so depot charging of electrical variations is trivial. They aren’t semi vehicles, so electrical variations can recharge at any quick charger, and there are a whole lot of quick chargers dotted across the place already. There are already 400 km vary electrical autos out there on this class, for instance, BrightDrop with its US$85,000 price ticket. That agency is a subsidiary of GM, which truly is aware of how one can manufacture vehicles and has robust relationships with automotive part producers like Magna.

I introduced up Ikea earlier for a purpose. They acquired 5 hydrogen gasoline cell vehicles from Quantron, as a result of that agency was incompetent to make a 400 km battery electrical van it appears. The federal government of Austria needed to fund the acquisition as a result of your complete package deal together with the refueling station price €4.8 million, or C$7 million. That’s C$1.4 million per truck.

That’s absurdly excessive, isn’t it? However one million US of governmental cash per truck or bus is about common for hydrogen trials, per my evaluation of the continuing stagings of the Odyssey of the Hydrogen Fleet tragicomedy.

A lot of that’s for a hydrogen refueling station. The one one which presently exists in Quebec, on the outskirts of Quebec Metropolis, price C$5.2 million, is ready to refuel a single automobile at a time and was put in to gasoline 50 Toyota Mirais the Quebec authorities leased 4 years in the past as a lightweight automobile experiment. That experiment ended late this yr with the vehicles returned to Toyota and no info forthcoming. The refueling station remains to be there, hooked up to an Esso station, however there are solely 20 registered hydrogen autos left in the entire province, so it’s barely used.

Not less than there’s one in a fairly sized city space serving a inhabitants of 737,000 individuals. So there’s that. The following nearest multimillion greenback stations are, after all, in British Columbia, which has 5 of them serving that province’s 5 million residents. Largely are sitting idle more often than not, as there are solely 195 gasoline cell autos registered within the province and plenty of are second vehicles for individuals who work within the hydrogen trade. Ballard satisfied a bunch of its staff to lease Toyota Mirais a few years in the past and the final supervisor of Greenlight Improvements leased one as properly. Sure, after a long time of pushing the hydrogen transportation rope uphill with a number of provincial and federal cash, there are fewer than 200 gasoline cell autos within the province. In the meantime, there are about 110,000 battery electrical autos already, and rising shortly.

What different contextual information is price contemplating when assessing First Hydrogen’s hyperbolic declare of constructing 25,000 gasoline cell supply vans a yr?

Properly, Ballard, after 44 years keep in mind, states that there are solely 3,700 gasoline cell vehicles and buses in operation with its know-how inside. Additionally globally, there are solely 40,000 gasoline cell fork lifts in operation, about 3% of the battery electrical forklifts bought globally in 2021 alone. Most of these had US Division of power funding for the very costly refueling infrastructure and preliminary purchases, and have simply endured in shopping for extra as they expanded. The demand for gasoline cell autos is staggeringly absent, even in hotbeds of hydrogen delusions like BC.

How a lot hydrogen will a 3.5 ton van require? In any case, that’s First Hydrogen’s demand development technique, so they have to want loads. Now let’s flip to the Rivus white paper that First Hydrogen rigorously cherry picks quotes from to make it sound just like the take a look at was a roaring success.

How did their prototype fare in testing?

Rivus is, or maybe was, a very good firm to check a hydrogen van. It’s on the UK’s greatest fleet administration corporations with garages throughout the UK, managing fleets for lots of the most important operators within the nation. It has the hardest use instances amongst its portfolio, together with deep outliers over 600 kilometers of each day driving. As a reminder, the typical is 60 kilometers for this class of car. The Ikea case examine can also be price as they’ve 56 battery electrical supply autos and solely acquired 5 gasoline cell autos for these longer routes (and keep in mind, battery electrical vans fully able to masking the identical distance can be found, so this wasn’t a rational selection, simply free cash from the federal government).

Once I say was a very good firm, shortly after Rivus accomplished the 4 week trial and returned the only working prototype to First Hydrogen, the agency closed half of its services within the nation.

Regardless, Rivus picked three routes that had been serviced by gasoline or diesel vehicles. Over the 4 weeks, the van operated for 47 hours, masking 1,200 kilometers. That’s a median of 25 kilometers per hour and 54 kilometers per working day, by the best way. It’s deeply unclear if any of those routes couldn’t be dealt with trivially simply by decrease vary battery electrical autos, they might simply have to cost up on the depot at evening as a substitute of going to a fuel station as soon as per week.

The gasoline cell operated solely 40% of the time, and that was solely as a result of First Hydrogen specced a smaller, weaker battery than would go in a traditional battery electrical automobile. Nearly all gasoline cell autos are literally battery electrical autos with advanced and failure inclined hydrogen tanks and gasoline cells as vary extenders, and the First Hydrogen design isn’t any totally different.

They consumed 3.3 kilograms of hydrogen for each 100 km of driving. How does that examine to the output of the proposed Shawinigan plant? Properly, on the price of 726 kg per hour, that’s 22,000 kilometers of driving, which is to say as greater than a single common supply van drives in a yr. They’d have to have over 9,000 supply vans operating to eat the hydrogen of the Shawinigan plant.

Anything? Oh sure, refueling issues. The Rivus facility was proper subsequent to one of many grand complete of 15 hydrogen refueling stations in the entire UK. One of many issues that hydrogen transportation varieties declare is a bonus of hydrogen is quick refueling, identical to a fuel station, as if recharging in a depot in a single day wasn’t less expensive and simpler for autos which common 60 kilometers per day.

However if you decide on the ‘quick refueling’ declare, it falls aside, as Rivus found. Hydrogen refueling services solely ship a couple of kilograms earlier than large pumps spool up and repressurize the hydrogen again to 700 atmospheres. That’s tremendous for Toyota’s 5 kg hydrogen tanks, however with the ten.3 kg tanks, refueling took 3 times as lengthy. That is even worse for heavy items autos by the best way, which could want 100 kg of hydrogen for his or her longest ranges. The US NREL has managed, in a rigorously designed facility, to handle pumping of hydrogen at 700 atmospheres as shortly as diesel, however at business pumps 100 kg would take 60 to 90 minutes. There’s no indication that NREL’s large take a look at rig will flip right into a commercially viable pumping station when the only hose pumping stations which might be presently in use price thousands and thousands.

Anything? Yeah, it was too costly to function, virtually twice as a lot as a battery electrical automobile.

“Rivus evaluation discovered that – in the meanwhile – the First Hydrogen automobile struggles with price comparisons to BEVs and diesel vans. At present hydrogen costs of £9.23 per kilo, the automobile price 31p per mile to gasoline. At 40p per kWh, a fully-electric LCV would price 18ppm, whereas a diesel would price 22ppm if the pump worth was £1.46 per litre.”

That’s clearly grey hydrogen being pumped, by the best way, as on the £0.40 per kWh famous, a kilogram of hydrogen would price £22 only for the electrical energy. All the time ask the place the hydrogen is admittedly coming from as a result of it’s ceaselessly thoughts boggling. For instance, the Whistler, BC hydrogen bus trials of 2010 to 2014 trucked it from Quebec, a diesel-powered spherical journey of roughly 9,000 kilometers for a load adequate to energy a bus for about 10,000 kilometers.

After all, the identical electrical energy would energy 27,000 battery electrical supply vans at a fraction of the fee per kilometer and a a lot decrease price per automobile. There’s a purpose why there are solely 3,700 buses and vehicles globally working with Ballard gasoline cells in them, and fewer than 10,000 gasoline cell autos in China in comparison with round 1.2 or 1.3 million battery electrical buses or vehicles within the nation.

First Hydrogen, after all, claims that the outcomes had been amazingly optimistic and point out not one of the main downsides in any respect. One of many few males on the Board of Administrators with out the CEO title, Chief Industrial Workplace Allan Rushforth, claims hydrogen goes to get cheaper, which as this evaluation exhibits is nonsense. He additionally claims that chilly climate testing will actually spotlight the strengths of their van, ignoring the fact that gasoline cell autos create water that freezes and disables them until rigorously managed, one thing that occurred with the defunct Whistler, BC bus fleet ceaselessly.

Different pink flags about First Hydrogen

Are there some other pink flags about First Hydrogen that needs to be talked about? Properly, how about that per their web site and LinkedIn, they’ve solely 16 individuals related to the agency, and three of them, males after all, have the title of Chief Govt Officer. To place this in context, there are precisely seven Fortune 500 firms which have multiple particular person with that title, and so they every have two co-CEOs. Some other doubling up? Sure, along with the Chair, there’s an Govt Chair. This 16 particular person agency has 4 individuals with CxO titles, a vastly prime heavy govt construction and associated compensation.

Public paperwork point out that the Chair, Balraj Mann, is getting about $480,000 a yr, and keep in mind that there are two males with the CEO title and presumably excessive salaries as properly. Then there are the non-executive Board members who’re being compensated handsomely for his or her time one assumes. Bear in mind additionally that Mann owns one other 20 or so corporations and is listed as CEO of not less than 4 of the them. A fractional CEO of an organization that has zero income and approaching zero probability of any income is price virtually half one million per yr?

It’s pretty apparent why I began this piece with the observe that First Hydrogen was inevitably going to fail, and it needs to be clear why now. They’ve nowhere close to the cash to do what they are saying they will do, what they are saying they will do is mindless, and their projections about scale of the electrolysis facility and the variety of autos that they will manufacture is mindless. Their companion Ballard has misplaced a median of $55 million a yr since 2000 as a result of nearly nobody is shopping for gasoline cell autos until some authorities ponies up one million or extra per truck or bus. As quickly as the federal government stops funding the hydrogen, each trial ends.

The pink flags are big and flapping in a gale drive wind with this agency.

But First Hydrogen raised virtually C$9 million and have a bunch of governmental luminaries displaying up at their announcement in Shawinigan and apparently believing that they will do that. Is that as a result of it’s arduous to seek out out something I’ve listed above? No, it’s all public info.

Is that as a result of the governmental luminaries and Mayor of Shawinigan know one thing I don’t? No, that’s unlikely both. What’s more likely is that they haven’t any clue about any of this, by no means did the slightest bit of labor with Google and spreadsheet, didn’t ask any rational transportation analyst to assessment it, didn’t have any flunkies run Google or a spreadsheet, and mainly simply purchased what First Hydrogen was promoting. In any case, the agency has a former Ballard govt and a former Ford govt on the Board, in addition to a Quebec public affairs director who’s clearly good at creating press and getting connections in that province.

Remarkably, this agency managed to go public in 2020. And sure, regardless of having nothing however seed funding and earlier than that they had a single prototype automobile, they managed to attain a inventory worth of virtually C$5.15 per share in September of 2022 and a peak market capitalization of 1 / 4 of a billion {dollars}, albeit Canadian ones.

Clearly the prototype automobile that they had in testing within the early summer time of 2023, the October thirtieth, 2023 observe day for fleet house owners and press didn’t impress retail traders, as their inventory worth has dropped by two-thirds, again to its nonetheless far overvalued present degree. Their second elevate being half of their first elevate probably didn’t assist.

Caveat emptor and don’t spend tax {dollars} on it

It’s completely doable that everybody concerned is totally honest, regardless of their claims and marketing strategy being full and simply dismissed nonsense. In any case, there’s the continuing bubble of hydrogen for power delusion that’s persevering with and Mann is a Vancouver participant, the place the hydrogen for power bubble continues to be periodically reinflated, with a number of corporations distorting the the native economic system. As my native contacts inform me, Ballard is paying huge bucks for electrochemists and chemical engineers, contributing to the previous years’ large losses.

Mann is clearly a deeply shrewd enterprise particular person and has achieved very properly for himself. Clearly he’s doing very properly for himself with First Hydrogen, no matter whether or not it succeeds of fails, properly on his approach to harvesting one million {dollars} out of the corporate. He began the agency in 2007, after which received adequate individuals on board with adequate expertise to make it look credible and draw $9 million in funding thus far based mostly on tissue paper and thumb tacks. That he has no background in power, transportation or hydrogen aside from this, in addition to no STEM credentials I used to be capable of finding, may imply that he truly thinks this can be a affordable firm.

The previous Ballard govt is, after all, properly linked within the hydrogen bubble and undoubtedly is being supported in his cognitive biases strongly in consequence. The UK technical director, one of many couple of STEM certified individuals within the agency it appears, is an engines man for his complete profession, so strongly aligned with molecules for power.

And I can’t inform you the quantity of people that have tried to make the argument that as a result of governments are creating hydrogen for power methods and main corporations are toying with it, that I’m clearly improper in my empirical, factual and logical analyses and assessments.

Clearly the individuals who put in $9 million and the retail traders who personal FYHD did zero due diligence upon the claims and marketing strategy, although it’s trivially straightforward to do. The fundamentals of this text took half-hour to seek out, trying solely at publicly out there information, though I do have a robust background in transportation repowering and the precise prices of producing hydrogen.

However for governmental varieties in BC, Quebec and Ottawa, please don’t throw any extra taxpayer cash at First Hydrogen or hydrogen for power normally. And for traders eying First Hydrogen or corporations prefer it, caveat emptor. Your cash is yours to waste nonetheless you see match, however it could possibly be a lot better used elsewhere for those who truly wish to have it develop and do one thing worthwhile.