Fortescue & Nikola Insane Green Hydrogen For Trucking Play In Waterless Arizona Desert
Green hydrogen is absolutely essential for decarbonizing the massive global warming problem that is current hydrogen use. Our current 120 million tons is a global warming problem on the scale of all of aviation. You would think that fixing that would be the highest priority, and that deeply irrational alternatives would be laughed out of legislatures and boardrooms.
Oh, no. Not in the early 2020s, when there is no new market or option for hydrogen that can’t be taken seriously by far too many people. Hydrogen infused water? Sure, that’s actually selling. Hydrogen infused beer and cider? It’s actually been done. Hydrogen blimps that transport the gas to where it is needed using the hydrogen as lift and then… ummm… uh… lie deflated on the ground? Yup, there’s a firm that has this cockamamie idea.
But sometimes something pops up on my radar screen that just leaps beyond the merely silly into being something that surely must be a joke.
This morning’s edition of that is a Fortescue/Nikola green hydrogen manufacturing facility in the Phoenix-bedroom community of Buckeye, Arizona, a small town with incredibly outsized growth plans. Let’s tear this apart a bit.
Nikola, of course, is the truck manufacturing startup that’s fated to fail. It was fated to fail when it was founded by now convicted fraudster Trevor Milton. That firm couldn’t make up its mind about whether it was pretending to build battery electric or hydrogen fuel cell trucks, and settled for hydrogen under Milton. I ascribed that to his past selling natural gas.
You may remember the video of the truck rolling serenely and quietly along a highway that turned out to be serene and quiet because the powerless truck had been towed to the top of a hill and was rolling down it. Par for the course for hydrogen for energy plays, which as I discussed with Dr. Bruce McCabe on his FutureBites podcast recently are mostly Potemkin Villages.
The company is now selling some electric trucks but it’s still pushing the nonsense idea of hydrogen for trucking uphill, just as it did in its fraudulent advertising a few years ago. In this, it’s supported by the US hydrogen strategy which I’ve analysed a couple of versions of and was established by Congress with the requirement to make hydrogen from gas and coal, preserve fossil fuel infrastructure then given to the Department of Energy instead of the Department of Commerce. Yeah, not irrational at all, but not a rationality that includes addressing climate change or hydrogen’s decarbonization.
And it’s supported by the US transportation blueprint, also something I assessed, which is better positioned than the hydrogen strategy as it’s actually led by the right Department, but still throws a lot of love at the bad idea of hydrogen for trucks and other vehicles instead of accepting the reality that all ground transportation will electrify and leaning into that heavily. Nikola is not alone in its delusions.
Nikola has its headquarter in Phoenix Arizona, a sprawling city in the drought-stricken US southwest, blessed with sunshine, cactus and absurd amounts of empty space because it’s uninhabitable without 24/7/365 climate control, including for vehicles.
I’ve written about the Phoenix region a couple of times as I assessed the implications of climate change on different areas around the world. I’ve recommended that anyone with real estate in the area sell by the end of the 2020s because after that it’s going to start getting very risky and go into a steep decline.
Why? History, global warming and water.
When water rights in the US southwest were being allocated, the region was in about the wettest cycle in a thousand years. It didn’t last long and now pretty much the entire southwest corner of the massive country is back into its normal parched conditions. As a bit of a hint about this, if you vaguely remember the award-winning Jack Nicholson film Chinatown, it was set in the 1930s and the entire plot of murder, corruption, deceit and violence was fueled by water rights.
Global warming rolling in hasn’t helped in any way. One thing increased heat does is evaporate any water on the surface faster. It tends to dump much less regular amounts of snow on mountains, leading to dry springs and flood springs, and neither is conducive to collecting enough water to get through the summer and winter. That’s been happening and it’s going to get worse. In the coming decades, the heat in Arizona will be spiking increasingly into the range where walking around outside unprotected can be lethal.
Enter Buckeye, Arizona. While Phoenix is pretending that it has a sustainable water plan as it sucks aquifers dry, doesn’t replenish them and ignores global warming’s inevitable impacts, the bedroom community of Buckeye to the west is pretending that there’s going to be an enormous amount of water, it just takes good old American ingenuity to get it to the city.
Right now the city has about 120,000 residents in its vast, sprawling and desolate landscape. But that’s not enough for them. They want to grow to 1.5 million over the coming years, in a geography that doesn’t have nearly enough water for the people already there. They’ve expanded their municipal boundaries to be as large as the city of Phoenix. Unlike Phoenix, which requires new homes to be able to have a guaranteed 100 years of water from existing aquifers — delusional, but at least a pretense of governance — Buckeye’s territory requires none of that.
They are trying to establish a desalination plant on the Gulf of Mexico, 150 miles as the Ukrainian crow flies, across the border in Mexico itself, and then build a couple of hundred miles of dedicated tubing through the border itself and through protected lands to fuel their intended sprawl, their Ponzi scheme of suburbs that are fated to become valueless, empty and decay slowly in the arid heat.
You would think that a region like this, without natural gas for blue hydrogen or water for green hydrogen, would just accept that it’s not going to be manufacturing hydrogen, wouldn’t you? No, just like the good burghers of Buckeye, who think water grows on the trees they also don’t have, 40 organizations founded SHINe, the Southwest clean Hydrogen Innovation Network. Don’t blame me for the capitalization or acronym, that’s directly from their website.
What organizations? The usual suspects. Hydrogen firms including Nikola, Air Liquide, Hyve 1, Phoenix Hydrogen. Southwest Gas which won’t have a business in the future unless hydrogen is pumped into buildings at absurd expense and risk instead of natural gas. The electrical utilities which want to use the nuclear plants in the region to do something that will allow them to stay open and make more money. Universities, which love good grant money to think about things. A state department of energy.
What were they hoping for? It was established to try to get some of that great US inflation reduction act moolah flowing into the southwest. Yes, a region where making hydrogen makes zero sense tried to set itself up as a hydrogen hub under the IRA. Not that the hydrogen hubs were sensible or will produce useful results for the most part, with four of seven being set up for fossil derived hydrogen and at least California’s $12 billion devoted mostly to the dead end of hydrogen for transportation, but at least the federal government had the sense to not throw hydrogen money into Arizona and Nevada’s deserts to be burned in a bonfire of the inanities.
You’d think this would be the end of the story. Clearly this entire thing with Nikola is going to keep rolling downhill until it reaches the sharp turn before the gully when its non-working steering will lead to it plunging through the flimsy guardrail. Clearly Buckeye’s delusions of massive urban sprawl will dry up. Surely no one will be making green hydrogen amidst the rock and sand of the southwest.
Enter Australian mining giant Fortescue, chaired by Andrew “Twiggy” Forrest, a man who can’t seem to love hydrogen for energy plays enough. Forrest loves the IRA and has focused his efforts on harvesting as much of those subsidy dollars as his organization can even while the mining side announced last year that all their mines would be electric without any hydrogen, thank you very much.
Among its many brilliant ideas, Nikola created a project called the Phoenix Hydrogen Hub. That appears to consist of a shell company, 920 acres of desert and some renderings. That was sufficient to get it invited to apply for US DOE grant money, which is the point of all this.
Fortescue acquired the hub from Nikola in July of 2023. Presumably the idea is that Nikola was too busy building trucks to also develop a hydrogen manufacturing facility, and Fortescue is perfectly suited to develop it and provide hydrogen for Nikola’s massive fleet.
So much wrong with this. So much wrong.
They are going to be sucking ground water out to make the hydrogen. How much? Well, they are projecting making 11,000 metric tons of hydrogen a year. Each kilogram of green hydrogen requires nine liters of water. A liter of water weighs a kilogram because metric for the win. So that’s about 100,000 metric tons of water consumed every year, or about 110,000 US tons.
That’s about 26 million gallons of water every year. In a desert. Where water is going to become scarcer and scarcer. That’s about 500 detached home’s worth of use annually under Phoenix area’s water restrictions. For hydrogen.
Next up on the stupidity scale is the question of where Nikola’s trucks are going to be. Are they all going to be in Phoenix and region? No, you have to go far and wide to find people stupid enough or in areas throwing governmental money at hydrogen trucks to get customers.
One of the big announcements was that J.B. Hunt ordered 13 trucks from Nikola. Only three of those were hydrogen trucks with the rest being actually useful battery electric trucks. There are no hydrogen truck refueling stations in all of Arizona, but there are lots of electric vehicle chargers. Hunt is apparently going to be using the trucks in the Phoenix region and in California, and I’m pretty sure that the hydrogen ones will be in the Golden State where they can actually get (very expensive) hydrogen and nowhere near Phoenix.
Another announcement was for PGT Trucking. It had signed a letter of intent to buy 100 Nikola fuel cell semi tractors to haul its flat beds, but so far it’s bought a single battery electric Nikola. Not a growth customer for hydrogen demand in the Phoenix area, as it has 30 depots spread far and wide across the USA.
AJR Trucking, which does some logistics for the US Postal Service as well as port-oriented drayage in California ordered 50 fuel cell trucks in May. It was hoping to get some of them at the end of 2023, but there’s zero indication that any have arrived. They are going to operate them in the parts of California that already have heavy vehicle hydrogen refueling stations, nowhere near Phoenix again.
As a reminder, a recent assessment I did found that California’s hydrogen refueling stations were being fixed about 20% more of the time than they actually were pumping hydrogen, and maintenance on them was costing 30% of the capital expenditure to build them every year. If AJR follows through, the odds that they will have deeply dissatisfied customers on top of extreme fuel costs is very high. I wouldn’t be surprised if they had quietly canceled their order and no one felt it was wise to put out a press release.
IMC ordered 50 fuel cell trucks at the end of January 2024 for its California operations hauling containers from ports to warehouses and back. They had battery electric trucks and weren’t getting 300 mile ranges. Of course, they bought Volvo battery electric trucks with inadequate ranges — because Volvo and other OEMs are persisting in jamming batteries and motors into existing semi ladder frames instead building them from scratch as Tesla does — and instead of putting an order in for 500 mile range Teslas, they put bad money into Nikola fuel cell trucks instead. And, of course, nowhere near Phoenix.
If you are noting a trend that there are only homeopathic amounts of hydrogen trucks and none of them are in Phoenix where Fortescue is supposed to be building a green hydrogen manufacturing plant, you would be observing reality.
Is this a problem? It sure is. Distributing hydrogen is very expensive. The US DOE’s most recent estimate is that delivering hydrogen by liquid or gaseous hydrogen tank truck will be US$8 to $11 per kilogram. That’s just the average cost to put hydrogen in the truck, drive it to a refueling station and pump it into tanks at the station. That is not the cost of the hydrogen itself.
And that’s from local storage centers for manufactured hydrogen near refueling stations, effectively Amazon distribution centers in urban industrial parks but for hydrogen.
That’s not the cost for trucking it from Phoenix to the one US state that became fixated on hydrogen when it was the only game in town a quarter of a century ago. Let’s see. 320 miles of highway from Buckeye to San Diego. 345 miles to Los Angeles. 715 miles to Oakland. The cost per truck load will be a lot more than $11 per kilogram. If this actually came to fruition, and I’m 99% sure it will end up withering away, the odds are great that the trucks driving those routes would be diesel trucks as well, just as the trucks delivering green hydrogen 4,500 kilometers from Quebec to Whistler BC for their long-abandoned fuel cell bus fleet were.
Fortescue and Nikola are pretending that hydrogen trucks running through Phoenix will be the consumers of the hydrogen. But there aren’t going to be any hydrogen trucks in Phoenix to speak of. The city is committed to zero emissions buses, but they are looking at battery electric first, and if they have any sense they’ll be dodging the hydrogen bullet. Sanity is much more likely to prevail now that they’ve lost the hydrogen hub.
Among other things, Phoenix should look at California’s hydrogen bus fleets, whose actual maintenance costs are 50% higher than even their diesel buses, never mind their much cheaper to maintain battery electric vehicles, something I found when looking at the state’s hydrogen transit efforts recently.
So, there’s no water. There are no hydrogen trucks to put hydrogen into anywhere near the Fortescue facility. There never will be. The nearest place where hydrogen is clinging onto a trucking market is hundreds of miles away and it will be very expensive to truck the hydrogen to it.
11,000 tons is enough for a fleet of about 500 hydrogen trucks to refuel with 60 kg of the gas every day of the year. The odds that Nikola will manage to build and deliver 50 hydrogen trucks approaches zero.
Why? Well, as of November it was given an 81% chance of going into receivership. Its stock has been trading under the delisting clip level of US$1.00 per share since the beginning of November. It’s sold vastly more battery electric trucks, but because it’s wasting so many resources on hydrogen and fuel cells, its battery trucks are shoddy and required a major recall of 209 trucks to completely replace the battery packs at great expense.
Exactly why would Fortescue think that this was remotely worth doing? It’s like asking why anyone does any business with Ballard when the company has lost an average of $55 million a year since 2000, $1.3 billion in total, has never made a profit and its stock is trading at 2% of its March 2000 peak. Clearly both Nikola and Ballard are extremely bad bets, yet they limp along.
A big part of that is bad policies by governments which keep throwing money at hydrogen fuel cell efforts. I’ve documented the global efforts around this in a series I call The Odyssey of the Hydrogen Fleet, which starts with lobbyists and rent-seekers convincing gormless but well-meaning governmental apparatchiks to put a lot of money in a pot earmarked “hydrogen transportation only”. Then fleet operators salivate at the size of the pot, typically a million per van or bus and $15 million per two-car train, and put a tender that can only be satisfied with hydrogen bids. Then they get the silly things, realize how hard it is to keep them running — see California’s maintenance costs and effort across vehicles and refueling stations above — and as soon as the government funding dries up, ditch the things and go electric.
I’m sure Fortescue’s plans for the Phoenix Hydrogen Hub rest on exactly one thing, whether the DOE will pony up a big chunk of change, US$1.3 billion, to build it. It made it through phase 1 review apparently, but I haven’t been able to find out if it’s still in the hopper. If Jigar Shah and the Loans Program Office have any sense, they’ll use the big red stamp with “Rejected” on it.
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