By: Diana Zhou, Josh Giegel, and Katie Lee
The world is racing to cut carbon emissions, but we have yet to crack the nut on how to decarbonize long-haul trucking. While battery electric vehicles have dominated the passenger vehicle market, there are fundamental constraints with battery chemistries when it comes to longer routes with heavier payloads that make the adoption of electric trucks very challenging. While some OEMs like Tesla are paving forward with electric trucks, other majors like Volvo Trucks, Daimler, and Hyundai are investing in hydrogen as a promising technology to bridge the gap.
How real are the challenges facing electric trucks today? Do we expect the technology to improve over time, or will there be an impasse where the fundamental physics don’t allow us to move forward? And what would it really take to power long-haul transportation with hydrogen?
The Eclipse Venture Equity team analyzed these questions with one of our Venture Founders, Josh Giegel, the co-founder and former CTO/CEO of Virgin Hyperloop, and here are our major takeaways.
Hydrogen trucks outperform BEVs today between the ranges of greater than 350 miles, but the technical moat will be difficult to maintain.
We compared the three vehicle types — hydrogen fuel cell electric vehicles (“FCEV”), battery electric vehicles (“BEV”), and internal combustion engine (“ICE”) or diesel trucks — using a Levelized Cost of Driving (“LCOD”) metric to calculate the cost per mile over the vehicle’s lifespan. LCOD calculates the cost to drive a vehicle per mile over the vehicle’s lifespan. It includes capital vehicle costs and fuel costs, but does not include maintenance and labor, which we assumed to be nominal when comparing FCEVs with BEVs. We normalized this with a LCOD/Payload value since fleet operators can be compensated by carrying more payload. We also ran a second analysis for 2030 based on the current pace of advancements in battery density and hydrogen storage technology.
Figure 1. How hydrogen, electric and diesel trucks perform by driving range
Source: Josh Giegel, Eclipse Ventures.
Originally, we believed that the mass of the battery within BEVs would limit their payload and range. This is commonly described as the EV death spiral — a heavier battery is needed to increase range, and at some point, diminishing returns would render a BEV too heavy and too expensive to be economically viable. However, we found that this was not true, and that BEVs are more limited volumetrically.
What we saw from this analysis was that today, FCEVs (assuming a $6/kg for hydrogen production today) perform similarly to diesel trucks for ranges of less than 950km, but worse than BEVs for ranges of less than 600 km. However, over the next 10 years, we predict that BEV’s advantage will be quickly diminished as hydrogen production costs also decrease, despite improvements in battery technologies. To realize these gains and to increase FCEV adoption, there must be significant advances in hydrogen storage or energy conversion technologies to create a bigger moat.
Hydrogen vehicles bypass significant operational challenges faced by BEVs.
Charging time: BEVs already have lower LCOD than diesel trucks for routes of less than 600km. Today, they are better equipped to run repetitive circuits with set routes and down-time for charging, and we would expect to see more widespread adoption of BEVs for these use cases.
Migrating to BEVs without the longer-range capabilities would require fleet owners to significantly change the way they operate their fleets due to the long charging times – something that is very difficult to do. For a long-haul fleet that depends on around-the-clock utilization, having a vehicle charging for 90 minutes cuts into revenue-generating drive time and profits on an already-slim margin. Hydrogen trucks on the other hand — which have similar charging or refueling times as ICE trucks of roughly 15 minutes — would not require these operational changes.
BEVs can catch-up though. Until autonomous trucks become reality, a BEV only needs to have a range equivalent to what an average truck driver can drive in a day or approximately 500 miles or 800 km, assuming charging can happen overnight (not a trivial assumption). Given recent battery advancements, this seems to be well within the realm of possibility by 2030.
All-weather performance: Even with the latest battery technologies, fleets testing out the latest battery-electric trucks are still experiencing performance degradation of up to 40% in the melting Arizona heat or through the blizzards in the Sierra mountains. This lack of reliability in extreme weather situations can significantly impact a fleet’s operations, which makes operations and planning much more difficult. Hydrogen fuel cells have shown less degradation in inclement weather, which could prove strategic in the future for transportation resiliency.
However, many challenges remain for hydrogen adoption.
Due to the momentum that has been building over the last decade around electric vehicles, hydrogen trucks need to demonstrate significant advantages over electric vehicles to gain widespread adoption.
We talked to many fleet owners and operators who have evaluated both hydrogen and electric vehicles for their fleets to better understand key factors driving their decisions. Ultimately, few were willing to pay a green premium; the adoption of these vehicles simply boils down to cost and concerns regarding the availability of refueling and charging infrastructure.
For the economics to work, the price for hydrogen production would need to fall to, at a minimum below $4/kg, and ideally even lower to below $2/kg. The current price for hydrogen starts at around $6/kg (depending on the methods of production), and the additional hydrogen production tax credits of $3/kg from the Inflation Reduction Act (IRA) may help get us there. This is why the IRA is so important to commercializing this technology.
What’s next?
There are many challenges that face the widespread adoption of battery electric and hydrogen fuel cell trucks, but we believe one of these is key to solving the future of decarbonized long-haul transport. While hydrogen has its challenges from an infrastructure perspective, we have seen some instances where BEVs face fast charging rates of over $0.55/kWh, corresponding to more than $8.50/gal diesel and thus may be challenging from a cost perspective. Fundamentally, significant technological advances must be made for hydrogen fuel cell vehicles to provide them with a long-term advantage over BEVs.
Have any comments or questions on any of our analysis, or disagree? Feel free to reach out! Thinking of a company or want to start one that tackles any of these challenges? Please reach out to diana@eclipse.vc. We’d love to talk to you. We’re continuously refining our knowledge of this space and always open to hearing new ideas.
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