Shell permanently closes light-duty hydrogen fueling stations in California amidst supply disruptions: S&P GCI

New Delhi [India], February 13 : In a development impacting the emerging hydrogen fuel cell electric vehicle (FCEV) market, Shell has announced the permanent closure of its fueling stations catering to light-duty vehicles in California.
According to S&P Global Commodity Insights (GCI), the decision comes amidst supply disruptions, escalating pump prices, and a challenging global landscape for FCEV markets.
Effective February 6, Shell ceased operations at all seven of its light-duty hydrogen fueling stations across California, as disclosed in a statement posted on the Hydrogen Fuel Cell Partnership's hydrogen station tracker website.
However, the company will maintain its heavy-duty refueling stations in the state, signaling a strategic shift in its hydrogen fueling operations.
The closure of these seven stations marks a setback for the California market, reducing the number of active light-duty open retail stations to 61, according to the latest data from the California Energy Commission.
Shell attributed the closures to "due to hydrogen supply complications and other external market factors," indicating challenges beyond operational logistics.
Hydrogen supply in California is grappling with multiple hurdles, including the escalating costs of feedstocks triggered by geopolitical tensions such as Russia's invasion of Ukraine, unforeseen station operating costs, and a decline in Low-Carbon Fuel Standard credit values.
Brian Murphy, Senior Hydrogen and Low-Carbon Fuels Analyst at S&P Global Commodity Insights, emphasized the mismatch between hydrogen demand and projected growth, making it financially challenging for refueling stations to sustain operations.
"Supply is available, but hydrogen demand has simply grown much more slowly than projected, making it challenging for refueling stations to recoup costs, especially with Low-Carbon Fuel Standard (LCFS) credit prices below USD 100/mt since mid-2022," said Murphy.
The announcement of Shell's station closures in 2024 follows a series of similar closures in 2023. True Zero, California's largest hydrogen provider, shut down 10 stations in October 2023, while Shell, Iwatani, and Messer closed several stations in November and December, all citing supply challenges.
These disruptions have contributed to a surge in hydrogen prices at the pump, reaching a record high of USD 34.11/kg in California as assessed by Platts, a division of S&P Global Commodity Insights.
Reflecting on the global FCEV market dynamics, Murphy noted a challenging year for light-duty FCEV sales in 2023, with declines observed in South Korea, Japan, and Germany.
While California saw a modest 10 per cent year-over-year increase in sales, data from the Hydrogen Fuel Cell Partnership revealed a significant drop in sales in the fourth quarter of 2023.
Despite new sales, Murphy highlighted a plateau in hydrogen usage since Q2 2022, indicating that high pump prices may be discouraging owners from driving longer distances. FCEV sales accounted for a mere 0.7 per cent of total light-duty zero-emission vehicle sales in California in 2023, signaling a need for strategic reevaluation in the market outlook.
Looking ahead, Murphy suggested that demand from heavy-duty FCEVs is poised to drive growth in 2024, particularly with the delivery of buses to municipalities.