Small fleet, high costs – the hydrogen bus payback dilemma

As cities around the world – often under political and social pressure – seek with increasing urgency to decarbonise the transport sector, fuel-cell electric buses are increasingly emerging as a promising technological solution for sustainable public transport. These vehicles generate electrical energy through the reaction of hydrogen and oxygen, emitting only water vapour during operation. At the point of use, this certainly means zero local emissions, which is particularly advantageous for urban transport. However, the economic viability of the technology still raises serious questions, making a thorough examination of total cost of ownership – or TCO – essential, taking into account every factor from investment through operation to maintenance. This is particularly important when a transport operator is preparing long-term investment decisions, as not only the current vehicle purchase price matters, but also all expenditure over the entire lifecycle. This issue was explored in a study published last year by the American Rutgers University, which examined the economic sustainability of fuel-cell technology through the examples of two bus fleets of different sizes.

The TCO approach used in the study aims to take account of every factor that incurs costs throughout the vehicles’ entire service life. This includes vehicle procurement, infrastructure development (such as hydrogen refuelling stations or hydrogen production units), fuel or energy prices, maintenance and operating expenditure.

The study examines two scenarios. One analyses the costs of an already operational fleet of 5 buses, starting in 2023 and over a 10-year period. The other models a future fleet of 100 buses that would enter service in 2028, likewise assuming a decade of operation. In both cases, the costs of vehicle procurement, the construction and maintenance of infrastructure, energy supply, and operation and maintenance were assessed, while different hydrogen supply alternatives were compared.

The researchers evaluated several hydrogen supply alternatives, including hydrogen produced by on-site electrolysis and hydrogen production methods based on steam reforming – with and without carbon capture. They also examined options involving purchased hydrogen transported from external sources, considering different forms of delivery (gaseous or liquid) and different production technologies (grey, blue and green hydrogen).

In the small-fleet scenario, each vehicle covered an average of 320 kilometres per day. According to the study, conventional diesel technology remains the most cost-effective solution in this size category. Total cost of ownership – in other words, all expenditure from vehicle procurement through operation and maintenance to fuel – is significantly lower for diesel buses than for any hydrogen alternative. According to the study, the most favourable hydrogen option, externally sourced grey hydrogen delivered in gaseous form, has a TCO 21.24% higher than diesel.

The carbon dioxide emissions of diesel vehicles in this model are 2.84 kg/mile (≈1.77 kg/km), comprising two components: 2.16 kg/mile (≈1.34 kg/km) generated directly during combustion, and 0.68 kg/mile (≈0.42 kg/km) associated with fuel production and transport. For the grey hydrogen solution, total emissions are 2.30 kg/mile, or approximately 1.43 kg/km. This arises solely from hydrogen production (typically through natural-gas reforming), transport and storage, as a fuel-cell vehicle emits no carbon dioxide while operating.

The most environmentally friendly alternative is hydrogen produced through on-site electrolysis. The associated carbon dioxide emissions in this case are 2.09 kg/mile (≈1.30 kg/km), arising solely from generating the electricity used by the electrolyser. In the case of the small fleet, the electricity used for electrolysis is not ‘green’, but comes from a mixed grid source, which is why the CO₂ emissions figure is relatively high. If the electrolyser were powered by renewables, emissions would fall dramatically and this solution could represent a genuinely zero-emission alternative.

In the large-fleet scenario, the researchers examined a future operating model comprising 100 buses, which would start in 2028. The buses would again cover more than 300 kilometres per day, with a ten-year operating period assumed. The larger fleet makes it possible for hydrogen-related investments – such as refuelling stations or hydrogen production equipment – to achieve better returns, as the costs are spread across more vehicles.

The analysis shows that hydrogen alternatives become increasingly competitive in this size category. According to the study, by 2028 there will already be solutions that may be cheaper than diesel buses, and after a few years every hydrogen option could become more favourable in cost terms. The lowest-cost solution was the local production of hydrogen from natural gas using a simple method without carbon capture (so-called ‘grey hydrogen’).

Significant differences can also be observed in the carbon dioxide emissions of the various solutions. For grey hydrogen, emissions are 2.30 kg/mile (≈1.43 kg/km), for blue hydrogen 1.14 kg/mile (≈0.71 kg/km), while the lowest figure is associated with green hydrogen produced by on-site electrolysis: 0.95 kg/mile (≈0.59 kg/km). The latter figure applies to the 2028 large-fleet scenario, when, according to the study’s assumption, 50% of grid electricity will already come from renewable sources. Under current conditions, for example in the small-fleet model, the same technology results in emissions of 2.09 kg/mile (≈1.30 kg/km), because the electrolyser is powered predominantly by fossil-based grid electricity. This clearly demonstrates that the carbon intensity of ‘green hydrogen’ depends heavily on the origin of the electricity used to produce it. The study stresses that although this solution may become the most environmentally friendly in the future, it currently still involves high investment and operating costs.

In the case of 100 buses, diesel technology appears to be the least favourable choice not only environmentally but also financially. The researchers also supported this with computer simulations, showing that diesel is the most expensive option and that its costs are also the most unpredictable.

The research’s final conclusion is that under current market and technological conditions, fuel-cell technology cannot yet offer an economical alternative to conventional diesel buses on a small scale. However, once the fleet reaches 100 vehicles or more, the picture changes significantly. At this point, several hydrogen supply models offer more favourable economic and environmental indicators overall. In particular, the version of on-site steam reforming equipped with carbon capture stands out, as even at the current state of technology it can provide favourable costs, low emissions and adequate operational reliability.

Over the longer term, however, electrolysis is also becoming an increasingly promising alternative. According to the study, the efficiency of electrolyser equipment was still only around 73% at present, but could reach 82% by 2028, while some developments could even enable efficiencies of 88% or more. This technological progress alone can reduce total cost of ownership, but the even greater turning point will come if the wider availability of green electricity also brings a significant reduction in electricity costs. The study stresses that as the energy source becomes ‘greener’ – that is, as the share of renewable energy sources increases – producing green hydrogen will also become increasingly cheaper and more environmentally friendly.

Overall, the study’s message is clear: hydrogen-based technologies are not yet competitive under all circumstances, but developing infrastructure, regulatory incentives and technological advances form a combination that brings fuel-cell public transport ever closer to becoming a sound long-term alternative to diesel-powered systems, both economically and environmentally.