Nikola, Hyliion defend divergent paths to zero-emission trucking

Use of RNG grows

Renewable natural gas (RNG) starts as a biogas from the decomposition of organic matter, such as wastewater, food, green waste and farming. It is cleaned and processed into biomethane that is injected into the pipeline. When used as a transportation fuel, RNG has a negative carbon intensity, said Deanna Haines, director of energy and environmental policy at SoCalGas. 

About 40% of the natural gas used in transportation comes from renewable feedstocks, according to a July white paper by Gladstein, Neandross & Associates Clean Transportation and Energy consultants.

Milton founded natural gas fueling system designer dHybrid Systems, which he sold to Worthington Industries (NYSE: WOR) in 2014. 

“I think you need to focus on complete zero emissions,” he said. “And if [Hyliion] goes that route, I think they’ll have a chance of survival. If they stick with natural gas, it’s going to be a very tough road.”

Amy Davis, president of the New Power division at engine supplier Cummins Inc., (NYSE: CMI) said a natural gas-electric hybrid is “a great green solution for energy.” Davis previously worked on Cummins’ joint venture with Westport Fuel Systems Inc. (NASDAQ: WPRT) that supplies natural gas powertrains to practically all major truck makers. 

Hyliion ‘long’ on RNG

In an interview with FreightWaves, also on Aug. 31, Healy said RNG is a “here and now” fuel that relies neither on invention nor a source of electricity to make it.

“Renewable natural gas makes a ton of sense, and the costs are just so much lower than diesel and of hydrogen, so I’m long on renewable natural gas,” he said.

But it is open to multiple ways to make the electricity for the ERX driveline system that goes into production in 2022. One fleet customer wants a hydrogen-powered fuel cell version. So, Hyliion is partnering with French automotive fuel cell systems maker Faurecia and Symbio, a joint venture of Faurecia and Michelin, for fuel cell technology and production.

“It’s not going to be our primary path,” Healy said. “But it’s very doable.”  

“The thing I still can’t wrap my head around is the cost. If hydrogen prices come down and if stations become available, then hydrogen makes a lot of sense,” Healy said. “We’ll be able to take our Hypertruck power platform and slide a hydrogen fuel cell into it” instead of the natural gas generator.

Hyliion will not build hydrogen fueling stations.

Building a hydrogen fueling network

Those stations are key to Nikola’s business plan for fuel cell trucks. They also cost a lot. In its March 2020 investor deck, Nikola said a single station capable of fueling 210 trucks a day would cost $16.6 million. Its planned network of 700 stations would cost roughly $11.6 billion, Nikola plans to match the station locations to freight corridors its truck customers travel. 

“All 700 locations have been well thought out. And every one of them have pre-sold routes,” Milton said. “The whole discussion around [the cost of] infrastructure is just a fear tactic.”

Most of Nikola’s roughly $900 million in cash is committed to a new truck assembly plant under construction in Coolidge, Arizona. Funding for the stations needs to come from another source.

“The financial groups just don’t care,” Milton said. “They’re like, ‘Look, you pre-sell the route with the trucks, we’ll give you whatever money you want for as long as you want.’”

Nikola thinks its common approach to making hydrogen via electrolyzer — using an electrochemical reaction to break water into oxygen and hydrogen — will help reduce the cost.  

Hydrogen fuel prices currently range from $12.85 to more than $16 per kilogram (kg), according to the California Fuel Cell Partnership. The most common price of $13.99 per kg equates to $5.60 per gallon of gasoline. That translates to an operating cost of 21 cents per mile.

“We’re below $4 a kilogram now, and we’re working on a target between $2 and $3 a kilogram,” Milton said in an online press conference July 22.

Skipping the infrastructure costs

Hyliion has practically zero infrastructure costs because 700 natural gas fueling stations already exist around the U.S.

That means that the $560 million in funding that Hyliion will receive when its reverse merger with special purpose acquisition company Tortoise Acquisition (NYSE: SHLL) closes will fully fund its business plan. The merger is expected to close by the end of September.

“The interest we’ve been getting from fleets supports that as well,” Healy said. “We should be good from a cash standpoint, not needing to go raise [funding] again. If we were trying to build out hydrogen stations or even natural gas stations, the money wouldn’t be enough.”

Hyliion plans to deliver 20 diesel-electric hybrid drive systems with Dana Inc. (NYSE: DAN), its electrification partner, before the end of the year. Penske Truck Lease took delivery of one of three trucks it ordered. C.R. England Inc. and Eagle Transportation Services Inc. have pending orders for multiple trucks.

Idealease is using one of Hyliion’s diesel-electric hybrids to allow its customers to check out hybrid propulsion. Healy would rather place trucks in fleets than add demonstration units. 

“These 20 trucks we’re shipping this year are going right into fleet operations,” Healy said. “We’re not trying to put a whole ton of demo vehicles out there.”

Related articles:

Hydrogen fuel: Linchpin of electric truck maker Nikola’s business

Hyliion partners with Idealease to spotlight Class 8 hybrid trucks

Republic Services orders 2,500 electric refuse trucks from Nikola

Click for more FreightWaves articles by Alan Adler.