California’s Hydrogen Economy Dealt A Hammer Blow By Shell’s Exit

Rather suddenly if not entirely unexpectedly, global energy giant Shell (LON: SHEL) has called time on fueling hydrogen passenger cars in California, the only U.S. state where the fuel is available feasibly for mid-to-long distance driving ranges.

In a circular to customers last week, Andrew Beard, Vice President of Shell Hydrogen, said the company's fuel trading entity stateside - Equilon Enterprises - will no longer be operating "hydrogen light duty passenger fueling stations" in California due to "supply complications and other external market factors."

Beard also announced the permanent closure of seven hydrogen stations in the state, most of which happen to be in the San Francisco Bay Area. Given there are currently only 55 hydrogen passenger retail fuel stations statewide, Shell's decision effectively knocked 12% of fueling options offline for drivers of hydrogen fuel cell cars in California.

Last year, Shell also cancelled previously announced plans to build 48 new hydrogen passenger retail fuel stations in California, an initiative for which it had been awarded $40.6 million of government grants in 2020.

It's a far cry from the fanfare with which Shell entered the U.S. hydrogen fueling business in 2005 after opening its first pilot station in Washington, D.C. with a launch attended by then U.S. President George W. Bush.

Shell's latest decision, while not fatal for the market, still represents a hammer blow for hydrogen fuel cell passenger technology which is struggling to takeoff in California, as well as the wider country.

There have been several reports in the American automotive media of hydrogen fueling stations facing supply problems in California since last summer.

Its left hydrogen car drivers with high fuel prices from stations operating to erratic hours, often out of fuel, and with long waiting times for refueling. That's if the options offered by the California Hydrogen Fuel Cell Partnership's interactive map are anything to go by.

And in any case, most of these stations happen to be around Greater Los Angeles and the San Francisco Bay Area with very few options in between. None of this paints an encouraging picture for the very small U.S. hydrogen fuel cell passenger car market largely dominated by Japanese and Korean automakers like Toyota, Honda and Hyundai.

After nearly two decades of trying, the total number of hydrogen fuel cell cars either sold or leased in California is less than 18,000 units as of January 2024. That's in a state that saw 14.3 million automobile registrations in 2021.

As for Shell, it has been public knowledge for quite some time that the energy giant is scaling down its low carbon operations, especially hydrogen. Market chatter about its decision first surfaced in the second half of 2023.

Shell officially confirmed this in October with its hydrogen light mobility unit seeing two of its four general manager roles merged and hundreds of job cuts. The FTSE 100 energy giant did though reiterate its support for hydrogen-fueled heavy goods vehicles both in the U.S. and worldwide.

But if Shell has deemed that betting on the future of the hydrogen passenger car market in California, and the state's wider hydrogen economy, was not worth it, then it does not augur well for the industry's future stateside.