Toyota’s New Production Scale, Hydrogen-powered Fuel Cell Vehicle: Niche Vehicle or Paradigm Shift?

October 10, 2014

In September, Toyota unveiled its new hydrogen-powered Fuel Cell Vehicle (“FCV”). The 2015 FCV, Toyota’s first production scale hydrogen fuel cell vehicle, is set to hit the market by mid-2015. Though this technology has the potential to offer clean, zero-emission passenger vehicles, many questions linger about the potential success of hydrogen, including whether there will be widespread consumer acceptance, how to deal with the lack of current infrastructure, and how the potential rise of hydrogen fuel cell vehicles and other electric vehicles will affect the current system of building and maintaining our roadways.
Hydrogen fuel cell vehicles are essentially electric vehicles that generate electricity using hydrogen gas. Hydrogen fuel cell vehicles generally work by mixing hydrogen gas with oxygen in a fuel cell, and this generates electricity, heat, and water. These vehicles produce none of the pollutants that typical internal combustion engines produce.
Currently the federal government generates significant revenue from fuel taxes that help finance highway projects and maintenance via the Highway Trust Fund. For example, tax is collected in the amount of 18.4 cents per gallon of gasoline sold and 24.4 cents per gallon of diesel sold. These are considered “user taxes” because the tax is passed along to the consumer by higher fuel prices. However, the current tax structure under the Highway Trust Fund does not take into account vehicles that run solely on hydrogen or electricity or some other non-conventional fuel source.

Though potential drivers of hydrogen vehicles will still use the roadways, a rise in hydrogen vehicles (and other electric vehicles) could correspond to reduced revenues available for building and maintaining America’s roads.

It is likely these consumers will be taxed in a different way (for example, through increased electricity consumption); however, those tax revenues are not used for maintaining roads. The federal government must ensure that its policies keep up with the ever-changing technology landscape by taxing hydrogen fuel at a similar proportion to the taxes on gasoline, diesel, and other conventional fuels.
Another consideration surrounding hydrogen fuel cell vehicles is the fuel itself. Hydrogen fuel poses issues with infrastructure and the environment. The federal government will need to ensure policies are in place to both promote infrastructure development and minimize environmental issues. Because the current infrastructure for providing gasoline to consumers cannot be used for hydrogen, infrastructure development will likely be very expensive and time consuming. Hyundai has also developed a hydrogen fuel cell vehicle, but the company notes that infrastructure development in the United States has been slow and requires the “government’s financial support.” Further, most existing hydrogen refueling stations are located in California. The viability of hydrogen fuel cell vehicles could hinge on the type and extent of government support in establishing a network of hydrogen fueling stations.
Though the operation of hydrogen fuel cell vehicles is very clean, with heat and water the only byproducts, there are some concerns surrounding the production of hydrogen fuel. Hydrogen is an abundant element present in water, hydrocarbons, and biomass. Hydrogen extraction can be completed through various means using power from various sources, including cleaner, renewable energy sources. However, one common method of hydrogen production is through cracking methane, which produces large amounts of greenhouse gases. Another common method derives hydrogen from natural gas, producing carbon dioxide as a by-product. It is clear that the federal government, likely via the Environmental Protection Agency, must ensure that hydrogen fuel is produced in an environmentally conscious manner; otherwise the potential benefits of hydrogen fuel cell vehicles may be minimized compared to more conventional fuels.
In order for hydrogen fuel cell vehicles to become a large part of America’s auto industry, the federal government must act to ensure hydrogen is produced in an environmentally friendly manner, provide subsidies or other economic incentives to promote infrastructure development, and maintain revenue streams that go toward highway projects and maintenance. Given this government involvement, it is possible hydrogen fuel cell vehicles will change the landscape of the auto industry.