California legislators have reduced state funding for new hydrogen filling stations after being warned by state authorities that there was insufficient demand to warrant further investment.

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Bill AB-126 had allocated $20m from the state’s $100m-a-year Clean Transportation Program (CTP) — which is funded by a “smog abatement fee” on petrol and diesel cars — to grants for the building of new hydrogen filling stations.

But the new amendment, passed by the Senate and Assembly late last Thursday, reduces that figure to “no less than 15% annually” of the money from the CTP (also known as the Alternative and Renewable Fuel and Vehicle Technology Fund) — and sets an end date of 1 July 2030.

As Hydrogen Insight wrote last month, when an earlier version of the bill was debated in the state assembly, the lead author had tried to win support of her Democrat colleagues to scrap the subsidies entirely, arguing that they were a “waste of money” and actually supported “fossil fuel industry businesses”.

In a joint report published earlier this year, the California Energy Commission (CEC) and the California Air Resources Board (CARB) pointed to the poor sales of fuel-cell electric vehicles (FCEVs) despite subsiding H2 filling stations since 2004.

“If global automakers do not produce new hydrogen FCEV models and drivers do not embrace these vehicles, then publicly funded hydrogen fuelling stations will not become self-sufficient and the current public funding allocation, 20% through the CEC’s Clean Transportation Program for passenger, light-duty hydrogen fuelling stations, may become stranded,” the report warned.

“Allocating more public funding to passenger, light-duty hydrogen FCEV infrastructure may exacerbate the potential for stranded publicly funded assets.”

After Democrats informally rejected the scrapping of the funding, the bill's lead author, state representative Eloise Gómez Reyes (who was majority leader until July this year), sought to reduce the annual funding from 20% of the CTP to just 10%, but a compromise of 15% was eventually reached.

Half of this funding — expected to be around $15m a year, but dependent on actual income from drivers — must be “used to fund hydrogen-fueling stations that directly benefit or serve residents of low-income communities and disadvantaged communities”, according to the amended bill.

This seems curious considering the high costs of buying hydrogen cars and H2 fuel in the state. According to Hydrogen Insight calculates, it is now almost 14 times more expensive to run a Toyota Mirai (the most common fuel-cell car in the state) than a Tesla Model 3.

The small print of the bill does, however, provide a get-out clause that allows the CEC to create “an alternative schedule” to the current annual funding rounds.

“The commission shall release a competitive grant funding opportunity for annual funding identified in paragraph (1) at least annually and 90 days after the start of the fiscal year, unless the commission’s executive director or the lead commissioner for transportation concludes based on substantial evidence in the record, including from party filings, that an alternative schedule for the release of a competitive grant funding opportunity is warranted.”

The CTP was launched in 2008 with the aim of installing at least 100 publicly available hydrogen filling stations across the state, but despite spending more than a $1bn on the programme, there are only 53 such facilities operating in California today — and five were closed by Shell last month.

The oil giant has also scrapped previously announced plans to build 48 new hydrogen filling stations in the state, citing “political and economic uncertainty” and a “significant risk in further investment”.

According to the CEC, each filling station built so far in California has required $1.5m in state funding.

Wording in the bill about “at least 100 publicly available hydrogen-fueling stations” has been removed in the amendment and replaced it with “a sufficient network of hydrogen-fueling stations”.

The amendment also provides an end date for the CTP for the first time, making it “inoperative” on 1 July 2035, and repealing it on 1 January 2036.