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Fueling the Future of Mobility Hydrogen and fuel cell solutions for transportation Volume 1 Deloitte China Powering the Future of Mobility | Executive summary Executive summary Jointly written and published by Deloitte vehicle, down to the nuts and bolts of results show that, in 2019, FCEVs are and Ballard, this white paper seeks to drivetrain, fuel system, and others, approximately 40% and 90% more introduce the wondrous technology but also at operational costs such expensive than BEVs and ICE vehicles, of fuel cell vehicles, as well as their as fuel, infrastructure, maintenance, on a per 100km basis considering commercial applications. Through in and so forth. We believe that this acquisition and operational costs depth research and analysis, this paper approach is not only unique in the together. From an acquisitions provides answers to the most pertinent marketplace, but also offers our cost perspective, the higher cost questions from industry executives readers a perspective that can be is primarily due to high cost of and laypeople alike - how economically applied to almost any operational the fuel cell system, as well as a viable are fuel cell vehicles, and what is business model. Indeed, we applied markup on other components due their impact on the environment? our model to 3 specific case scenarios to lower economies of scale. From of Fuel Cell Electric Vehicle (“FCEV”) an operational cost perspective, the Hydrogen is the single most use today – focusing on an logistics higher cost is primarily driven by the abundant substance in the universe. operator in Shanghai, a drayage truck cost of hydrogen fuel. Perhaps due to this abundance, operator in California, and a bus we sometimes forget how useful operator in London. However, the TCO of FCEVs is hydrogen is. From being used in forecasted to be less than BEVs the very first internal combustion Our TCO analysis shows consistent by 2026, and less than that of ICE engines as an inflammable fuel, to and highly encouraging results. Even vehicles around 2027. Overall, we powering flight by airships, hydrogen when ignoring qualitative benefits estimate that the TCO of FCEVs will has once again taken center stage in of hydrogen (i.e. zero-emission at decline by almost 50% in the next mankind’s quest for energy sources, the use end, among others), FCEVs 10 years. This is driven by several in the form of fuel cell applications. are forecasted to become cheaper factors. From an acquisition cost from a TCO perspective compared perspective, fuel cell systems are In this three-part series, we take a to Battery Electric Vehicles (“BEV”s) forecasted to decrease in cost by comprehensive look at hydrogen and Internal Combustion Engine almost 50% in the next 10 years. and its role to power the future of (“ICE”) commercial vehicles over the The fuel cell system is relatively mobility. This first paper focuses on next 10 year period in all use cases. light in terms of materials cost but an introduction of hydrogen and fuel This is driven by a combination high in manufacturing costs, due to cell technology, as well as a deep of vehicle build cost declines as high technological requirements. dive into a total cost of ownership technology matures and economies For example, contrary to common view of fuel cell, battery-electric, of scale improve, as well as other thinking, the cost of platinum makes and traditional internal combustion factors such as hydrogen fuel costs, up less than 1% of cost of the fuel engine vehicles. We took a bottom- infrastructure, and so forth. It is stack system. This is compared up approach of a Total Cost of unsurprising, then, to also find that to battery vehicles, in which Ownership (“TCO”) analysis across major governments across the world commodity-type raw materials, such the regions of US, China, and Europe, are focusing their efforts on these as lithium and cobalt, makes up a across a 13-year timespan. Our pieces to drive hydrogen technology significant portion of total costs. approach looks not only at detailed and use forward into the future. The relative raw-materials-light build costs for a Fuel Cell (“FC”) In our high-level TCO analysis, our fuel cell system leaves significant 1 Powering the Future of Mobility | Executive summary room for cost improvements in perspectives. Therefore, it is likely in Europe. This wasted energy can be the future, together with dramatic that FCEVs will become cheaper than captured by hydrogen as a clean and improvements in economies of scale. BEVs and ICE vehicles from a TCO efficient alternative. Another large factor in terms of perspective sooner than 2026. decrease in operational cost is the From a lifetime emissions and cost of hydrogen, which is forecasted Finally, we also cover in this paper environmental impact perspective, to decrease significantly across all some of the energy efficiency, FCEVs are also cleaner than BEVs geographies in the future. This is due hydrogen production, greenhouse and ICE vehicles, with even more to the increased usage of renewable gas and other environmental impacts room for improvement as hydrogen energies to produce hydrogen of fuel cell technology today and production and delivery matures. (which is less than 5% of hydrogen going forward. Although this is not The production or FCEVs are also production today), as well as build- a highlight of this paper, but rather significantly cleaner than BEVs due out of supporting infrastructure and Volume 3* where we shall explore to very low requirements on raw transport mechanisms. the hydrogen value chain in more materials, compared to the mining detail, our high level analysis in and heavy usage of heavy metals Our TCO forecast is furthermore this paper can allow the reader such as lithium and cobalt for BEVs. relatively conservative in several to start garnering some insights At the end of life process, FCEVs are aspects. For example, as history into the incredible complexity also easier (and more economically would show with emerging of the hydrogen value chain and attractive) to recycle than BEVs. technologies, production costs often possibilities for improvements in the decrease much more dramatically next years to come. For example, As Bill Gates famously said, “We than forecasted. We have also today, the subsidies and incentives always overestimate the change not included any government of FCEVs are higher than ICE vehicles, that will occur in the next two years subsidies and incentives (acquisition, but lower than BEVs today due and underestimate the change that infrastructure, or operational) in to inefficiencies in the hydrogen will occur in the next ten. Don't let the TCO model. When looking at the production process. In the future, yourself be lulled into inaction.” We specific case scenarios in Shanghai, where renewables energies such as hope this white paper series proves California, and London, the cross- wind and solar play more part in the useful for our readers, and that our over of FCEVs with BEVs and ICE hydrogen production process, the efforts, however small, may prove as vehicles are much faster, due to a energy efficiency of FCEVs will see part of catalyst for change for a more variety of subsidies on FCEVs in each dramatic improvement. For example, economically sound business model geography, or additional taxes on ICE renewable energies (or even nuclear for businesses, and a greener world vehicles or fuel. Indeed, we have also energy) are affected by seasonality for all of us. been quite conservative on pricing and peak usage cycles, resulting in pressure on ICE vehicles in the future, overcapacity of electricity production which could be driven up significantly which is often wasted. The marginal from quantitative (cost of fuel, higher cost of renewable energies is near emission standards), or qualitative zero, which results in their being (restrictions on entering city areas, priced below prevailing market - even or planned banning of pure ICEs) negatively priced in certain countries Note: *The three volume series include: 1) Hydrogen and fuel cell solutions for transportation; 2) Hydrogen and fuel cell applications now and future; 3) Evolution and future of hydrogen supply chain 2 Content Introduction to fuel cell technology 5 Overview of fuel cell vehicle applications 22 Total cost of ownership analysis 35 Comparison of energy efficiency and environmental impacts 67 Conclusion and looking ahead 89 Reference 91 Contact Us 101 3 Powering the Future of Mobility | Introduction to fuel cell technology 4 Powering the Future of Mobility | Introduction to fuel cell technology Introduction to fuel cell technology 1.1 What are fuel cells? similar to burning gasoline today 3. oxygen to the other (Figure 1). The two Broadly speaking, a fuel cell is an However, this did not prove to be quite electrodes are separated by a material electrochemical reactor that converts successful, due to safety concerns as called the electrolyte, which acts as a the chemical energy of a fuel and an well as low energy density 7. Rather, in a filter to both stop the cell reactants oxidant directly to electricity 1. More modern fuel cell, hydrogen is a carrier mixing directly with one another and to recently, the word fuel cell has been of energy, by reacting with oxygen to control how the charged ions created used almost exclusively to describe form electricity 4. during the partial cell reactions are such a reactor using hydrogen as the allowed to reach each other. primary source of energy 2. The reaction between hydrogen and oxygen is astoundingly simple, and Hydrogen molecules first enters the Hydrogen has a long history of being can be represented by the following hydrogen electrode (called the anode) 2 5 used as fuel for mobility. More than formula: 2H2+O2=2H O.

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