Shell permanently closes light-duty hydrogen fueling stations

Shell permanently closed its fueling stations for light-duty hydrogen fuel cell electric vehicles (FCEV) while the developing California market is already facing supply disruptions, other station closures and high prices at the pump.

The company announced it will no longer operate any of its seven light-duty hydrogen fueling stations in California effective Feb. 6, according to a statement posted on the Hydrogen Fuel Cell Partnership's hydrogen station tracker website. The company will continue to operate heavy-duty refueling stations in the state.

These seven closures reduces the number of active light-duty open retail stations in California to 61, according to the latest data from the California Energy Commission, which tracks FCEV sales and stations.

The Shell stations are closing "due to hydrogen supply complications and other external market factors," according to the statement.

Hydrogen supply in California is facing a number of challenges, including rising costs of feedstocks resulting from Russia's invasion of Ukraine, unforeseen station operating costs and a drop in Low-Carbon Fuel Standard credit values, according to an S&P Global analysis.

"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 LCFS credit prices below $100/mt since mid-2022," said Brian Murphy, Senior Hydrogen and Low-Carbon Fuels Analyst at S&P Global Commodity Insights.

This is the first announcement of station closures in 2024 following a year of similar announcements. In October 2023, California's largest hydrogen provider True Zero announced the closure of 10 stations. Shell, Iwatani and Messer also shuttered several stations in November and December, all citing supply challenges.

The disruptions have contributed to higher hydrogen prices at the pump, providers say. Platts, part of S&P Global Commodity Insights, assessed hydrogen pump prices in California at a record high of $34.11/kg on Feb. 1.

FCEV sales

2023 was a difficult year for the light-duty FCEV market globally, Murphy said.

Murphy said FCEV sales declined in South Korea, Japan and Germany in 2023. Sales increased about 10% year over year in California, according to data from the Hydrogen Fuel Cell Partnership, with a significant drop in sales in the fourth quarter of 2023.

"Despite new sales, LCFS data shows that hydrogen usage has plateaued since Q2 2022, suggesting high pump prices are leading owners to drive fewer miles," Murphy said.

In 2023, FCEV sales made up the smallest share of light-duty zero-emission vehicle sales in California at 0.7% of total sales, according to data from the California Energy Commission.

"In our outlook, demand from heavy-duty FCEVs begins to pick up in 2024 as the first buses are delivered to municipalities, and this market will likely drive growth through 2030 rather than light-duty FCEVs," Murphy said.