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Business, Opinion, Santa Monica, Columnist, Government

Hydrogen Fuel Plan Still Tilts Toward Huge Corporations

Thomas B. Elias, Columnist
Santa Monica Mirror Archives
Thomas B. Elias, Columnist

Posted Dec. 29, 2012, 5:05 pm

Tom Elias / Mirror Columnist

Six months after pulling back about $12 million worth of grants to help build refueling stations for the hydrogen fuel cell cars due to debut by 2017, the California Energy Commission is ready to take applications for new grants.

The problem: Revised rules issued by the commission appear at first glance to cut out the favoritism that sullied last spring's stymied grants, but the new rules still seem likely to place all or almost all the money in the same hands that would have received the cancelled grants. They also encourage a modicum of pollution over completely clean air.

The grants commissioners tried to dole out last spring required prior approval for any prospective refueling location from at least one of the eight big carmakers that will produce the first hydrogen cars.

Oddly enough, all but one station approved by those billion-dollar-plus corporations – Mercedes Benz, Nissan, General Motors, Toyota, Honda, Chrysler, Volkswagen and Hyundai – would have belonged to two other huge international companies, German-based Linde Group and Pennsylvania-based Air Products & Chemicals Co.

The Energy Commission only pulled back its millions after this column exposed the fact that smaller operators were systematically excluded, including some that proposed making H2 fuel from water – almost the ultimate in pollution-free renewable energy.

The money has been lying around ever since, and now the commission is about to accept applications for new grants using the same funds, plus more, for a total of about $28.5 million. It all comes from the state vehicle license tax.

But as always, the devil is in the details. And some see the details as particularly devilish in the commission’s new “program opportunity notice,” a 49-page document ( calling for grant applications to be submitted by Jan. 24.

That date, for example, is no problem for the two big industrial gas suppliers who, like the car companies and the Energy Commission are members of the California Fuel Cell Partnership organization, where membership costs almost $90,000 per year. They have sufficient staff to complete complex documentation quickly for every service station to which they’d like to add a hydrogen pump or two. But smaller firms reported they had difficulty getting staff to work on those applications through the holiday period.

“A Feb. 17 deadline date would be much more fair to small companies like ours that will sell purely renewable hydrogen,” said Paul Staples, president and project director for Eureka-based Hygen Industries. “They can still reset that due date.”

The new plan also names new areas for the refueling stations, while eliminating other places targeted in previous versions, another advantage to big companies with multiple operatives to recruit service station owners.

Because at least one large company signed up a few stations in the new areas several weeks before those locations showed up in any commission documents, there’s also a possibility commission insiders tipped off outfits they favor for the grants.

The Energy Commission has also changed the amount it plans to reimburse builders of the new hydrogen stations, without which no one would likely buy fuel cell cars, no matter how efficient they are or how they look and perform. Where grants were once intended to fund 70 percent of building costs, that figure is down to 65 percent in the newest filing and a 5 percent bonus for completing projects within 18 months of approval has disappeared from the plan.

The reimbursement difference won’t hurt the big fellas much, but makes it tougher for smaller guys to compete.

The new plan also requires state approval for any loans a company takes out to build a station, and gives state government veto power over any subsequent station sale.

“That is unacceptable,” says Staples. “Lack of outright ownership makes it harder for small businesses to attract venture capital and project investment.”

Taken together, the rules the Energy Commission seeks to impose would apparently assure most control of hydrogen refueling by the same companies on whom the commission originally planned to bestow almost all its grant money.

One way to sum this up is to say that, as the apocryphal Mr. Dooley observed more than 100 years ago, “The more things change, the more they stays the same.”

Another way to say it: Stymie state bureaucrats in their efforts to favor their cronies one way and they’ll try to find another way to give the same money to the same people and companies. Devilish details, indeed.

The bottom line: While the newest plan on its face looks like a big improvement over the one abandoned last spring, it still favors the same big companies and their fossil-fuel derived H2 over outfits wanting to use the cleanest form of hydrogen fuel.

ADDENDUM: Alison apRoberts, information officer with the California Energy Commission, disputes Thomas Elias' column:

• ApRoberts said the column claims the Energy Commission favors "fossil-fuel derived H2 over outfits wanting to use the cleanest form of hydrogen fuel." In fact, ApRoberts said the solicitation does the opposite by providing a preference for renewable hydrogen projects. Up to $3 million is specifically designated for 100 percent renewable hydrogen fueling stations, and applicants proposing more than 33 percent renewable hydrogen will be scored higher in the competitive application process.

• Elias writes that the California Energy Commission "requires state approval for any loans a company takes out to build a station." ApRoberts said approval is only required when state funds are at stake. She said to protect public dollars, Energy Commission approval is required to use state-funded equipment as collateral for a loan.

Elias said he stands by his column.

"The bottom line is that when only $3 million out of $28 million is reserved for non-fossil-fuel derived H2, it's clear there is little emphasis on that," Elias says.

"There are no stations I know of now being built without use of state funds. In any case, I'm not writing about any stations that are not partially state-funded. So she's actually stipulating that what I said is correct. In this kind of arrangement, full ownership of facilities partially funded by the state normally passes to the companies getting the grants after a number of years. But in this case, the CEC is attaching strings beyond that full ownership switch, which my sources tell me makes it more difficult for them to get loans for the remainder of the construction-installation costs. The big companies with the deep pockets and the fossil-fuel derived H2 probably will not need loans to build these stations/install pumps in existing stations, so this is yet another way of favoring the big guys and their fossil-fuel derived H2."

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Dec. 29, 2012, 11:02:59 am

John Bailo said...

Sounds like they're arguing with the Golden Goose. No one is going to invest money in anything if there isn't any starter infrastructure. The little guys will make their money in add-on and enhancement technologies...not in generic station building.

Dec. 30, 2012, 8:02:58 am

ROBERT L. MIiddleton P.E. said...

DOE has a lot of good efforts with internal HYDOOGEN combustion, that could help Hydrogen into today fleets.

Dec. 31, 2013, 8:12:10 am

David porter said...

Our hydrogen energy company offered to pay for all of the infrastructure but we found that collusion, favoritism, bribes, kickbacks and private sector job offers rigged the hydrogen fundingin favor of the big players listed above per federal investigations. So we sued DOE for corruption and will sue the other bad guys in this article next. Corruption cant survive transparency. The karma is coming back on the bad guys in 2013.

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