Their vehicles are attractive, the product offerings have grown in number, the “reservations” are in, the enthusiasm is palpable, the novelty factor is there, and they promise to deliver the clean wave of the heavy trucking future with high tech. Nikola is a hit. And, it’s still all on paper.
Analysis upon analysis of the Nikola story tends to focus on the financial feasibility of launching a vertically-integrated hydrogen fuel company such as the one it is marketing itself to be some day, from stations that produce and deliver the hydrogen fuel, to vehicle sales and maintenance sites, to the heavy trucks themselves. “This is the unlevered IRR of infrastructure capex; this is how many billions in sales interest have been generated; these are the details of the total cost of ownership leases; these are the target costs of the critical inputs of electricity and water in order to produce affordable hydrogen fuel in the first place.”
Beyond the economics of it all, there are other real concerns to be examined. Namely, how cleanly can Nikola actually “decarbonize” the trucking industry in the United States?
As a recent piece by Barron’s points out, hydrogen fuel currently costs $16 per unit. Founder Trevor Milton hopes to bring this down to around $2-3 per unit, comparable to a gallon of unleaded gasoline in many parts of the country. In order to do that, Nikola will have to source cheap electricity and water, as those are the two elements that the company is going to need a inordinate amount of; they have opted to create hydrogen fuel by splitting water via electrolysis, as opposed to the steam-methane reformation of natural gas.
Creating hydrogen fuel via water electrolysis is incredibly energy intensive. Where will that electricity come from? On its website outlining the advantages of hydrogen fuel, Nikola indicates that it will utilize solar power at its own stations (which will not be close to sufficient), along with supplemental grid power. Separately, in an interview with publication Ars Technica back in April 2019, Nikola’s vice president of hydrogen technology, Jesse Schneider, mentioned they would leverage renewable and low-carbon options such as hydropower, followed by fossil-fuel powered options probably offset with carbon credits.
Existing electrical grid utilities charge according to their own costs, without any markup to the end consumer, by law.¹ Electricity from a utility source that is cheap enough to make for economical hydrogen fuel production may be low-carbon hydroelectric or nuclear, yes, but there are a limited number of those kinds of facilities in the United States. Much of the electricity may have to come from the burning of cheap fossil fuels such as coal or natural gas. In that case, the increased need for energy, now to generate hydrogen fuel, would increase the amount of fossil fuels burned every year. Even a Tesla is only as clean as the source of the electricity that recharges it.
Will carbon offsets really rectify that reality? Detractors would question that. Also, wouldn’t buying carbon offsets increase costs somewhat, the same costs they say they are trying to minimize?
Then there’s the water. But never mind the cost of that water, what about the supply? The hydrogen-powered future painted by Nikola will depend on “filtered, fresh water,” the same water that most hydropower facilities, the general public, agrarian operations, aluminum refineries, and food and beverage conglomerates depend on.
How will the acquisition of that water be accomplished? Will the company pull this raw input from natural sources itself or pipe it in from public utilities, once again? And what would be the impact on that infrastructure and all current water customers, in the latter case? For instance, certain regions ration their water supply, alternating days on which customers can irrigate their lawns and/or farmland. This is but one minor example. How does an unprecedented water-hungry operation such as Nikola fit into this kind of established paradigm with its production and refueling stations?
Interestingly enough, such an organization as Nikola may have more in common with aluminum refineries than we realize. They too require such massive amounts of electricity and water that they establish themselves near energy-generating facilities such as hydroelectric plants and acquire freshwater from a variety of sources, including that “which is supplied by external suppliers via water pipes, from site-owned groundwater sources or from rivers or lakes.”² But, unlike Nikola’s stations, aluminum refineries don’t follow a business model where they need to pepper the entire country’s landscape.
Coincidentally, Nikola has already stated it may seek to locate some of its stations near hydroelectric plants for the energy they can provide relatively cleanly, though this would serve only a tiny fraction of stations Nikola has projected geographically. At any rate, will the company also likewise tap groundwater sources, or rivers and lakes, to feed its water needs?
Given the sheer scale of what Nikola has set out to do, could that not exacerbate existing water scarcity issues? Global water scarcity is already enough of a genuine concern that assessments of water scarcity impacts (WSI) and water scarcity footprints (WSFP) have been conducted on hydroelectric plants, as well as mining and refining operations. One wonders what the result would be of adding Nikola’s aggressive plans to the mix.
Perhaps the concerns raised here are overstated. Surely someone will argue that Nikola could eventually build out its own clean energy farms, or just wait until enough public utility companies have upgraded their infrastructure to clean tech and are but shadows of their former, dirtier selves, bringing the cost of such energy down due to economies of scale. Nikola’s not producing anything right now anyway. Meanwhile, the byproduct of a hydrogen fuel cell, Trevor Milton would have us believe, is “clean” drinking water. Maybe he can convince all of us to consume water from the host of vehicles we purchase from his company, instead of the tap. Either way, until real plans (and yes, figures) are also up for discussion, there are more reasons than the purely monetary to be Nikola-skeptic at this time.
Specifically, depending on how the electricity and water are sourced, the hydrogen-powered future envisioned by Nikola—if it ever gets off the ground, that is—could become just another case of luring folks in with a slick veneer, a situation of clean facade but dirty out back. That would be unfortunate. Their strategy warrants further due diligence on the part of investors, regulators, and the general public.