Industry views: could fuel retailers benefit from embracing ultra-low emission technology?

by 25 January 2017
Industry views: could fuel retailers benefit from embracing ultra-low emission technology?

The automotive industry has experienced rapid technological developments in recent years, with the major innovative milestone being the rise of electric and hydrogen powered vehicles. Increasingly motorists want more from their vehicles than just functionality and comfort – there is now a desire to have a less damaging effect on the environment, and lower overall running costs.

Electric cars

Electric car ownership increased from just 3,500 electric vehicles (EVs) in 2013, to over 80,000 in 2016 according to Next Green Car, with over 45 plug in models currently available on the market in the UK. This figure could experience a significant rise, with manufacturers such as Nissan, Renault and Mitsubishi working together to produce electric vehicles. Bloomberg New Energy Finance has predicted EV’s will be cheaper than conventional cars on total ownership basis by 2022, and IHS Markit predict that by 2040 one third of vehicle sales will be electric.

To entice consumers into buying low emission vehicles the UK government are providing grants of 35% towards the cost of a plug in car, and 20% towards the cost of a plug in van.

A recent breakthrough by scientists developing a new super capacitor increasing the range and decreasing the charging times of electric car batteries will make them even more viable; bringing electric cars on par with their petrol and diesel competitors both for range and refuelling times.

Hydrogen fuelled cars

Hydrogen fuelled vehicle ownership is also expected to rise, with the UK government predicting that there will be over 1.5 million hydrogen powered vehicles on the road by 2030. Although there are only a few manufacturers in the UK, car giants such as BMW, Audi and Mercedes are all developing models.

Shell are one of the first major oil companies to implement hydrogen fuelling in their estate, with four hydrogen refuelling facilities planned in the UK in Gatwick, Beaconsfield, Cambridge, and Cobham. The Beaconsfield site will be the first hydrogen refuelling station in the UK integrated into an existing fuel forecourt. This follows Shell’s hydrogen fuel projects in Germany where they have a number of hydrogen fuelling stations, and have recently entered a joint venture with car manufacturers, energy companies and gas manufacturers to develop a network of 400 refuelling stations by 2023.

The future

It has recently has been reported that car giants BMW, Daimler, Ford and Volkswagen Group (including Porsche and Audi) are joining together to develop 400 electric car charging sites on roads across Europe by 2020.

The UK government are planning on investing heavily in the low emission transport market over the next 10 years, with high subsidies and government funded projects. In the 2016 Autumn statement, the Chancellor pledged to invest £390 million in ultra-low emission vehicles (ULEV) by 2020-2021. This included £80 million for ULEV charging infrastructure and £150 million in low emission buses and taxis. These government subsidies reduce the risk and strengthen the economic viability of investing in hydrogen fuelling.

A global initiative to drive forward the use of hydrogen fuel has just been announced following the World Economic Forum in Davos, and the Hydrogen Mobility Europe project aims to have 65 hydrogen refuelling stations by 2020, and 1,150 by 2030. A recently published report by Information Trends claims that there will be 5,000 hydrogen fuelling stations worldwide by 2032.

How will this affect the fuel industry?

In the last 40 years, more than 75% of petrol stations in the UK have closed. With fuel prices increasing, margins falling and supermarkets dominating the market, fuel retailers need another revenue steam to stay ahead – and relevant.

It is clear that this technology is coming, and due to its potential to take away petrol revenues from independent forecourt operators, it would be prudent to look for ways to profit from it. A forecourt with electric charging points could benefit from extra spend in store while the customers are waiting for their cars to charge – especially if there is a good coffee and food to go option with seating available. The ACS however point out that it might be more beneficial to install charging points at workplaces or leisure facilities as that is where the greater demand lies. This may change with the introduction of the super fast charging technology mentioned above; when charging times are equal to petrol refueling times consumers may well require this facility at petrol stations, particularly motorway service stations.

The PRA noted in their market review last year regarding the introduction of hydrogen as an alternative more sustainable fuel source for vehicles that ‘the aim is to have hydrogen sold alongside other vehicle fuels on petrol forecourts, ideally with hydrogen dispensers on the same islands as petrol/diesel dispensers.’ As shown by Shell’s efforts it won’t be long before this aim becomes a reality, and the savvy retailer will see the benefits of embracing this dispensing technology – not only will it attract new customers to their forecourts but it will also demonstrate a level of forward thinking and innovation.

However, it would appear that without the investment of a major oil company like Shell, or significant government assistance, the average independent forecourt operator will not see the benefit or feasibility of investing what could be £1 million per site to introduce hydrogen fuelling capability. The government is so keen to make this technology viable that they considered forcing forecourts to adopt it – but until that time it seems unlikely that independent forecourt operators will invest autonomously in the integration of hydrogen refuelling stations into their sites.

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