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NB Startup Gets $34.6M for Hydrogen Stations

A Newport Beach-based company nabbed more than half of the grant money awarded by the California Energy Commission to build hydrogen refueling stations.

FirstElement Fuel Inc. is set to receive $27.6 million through the state’s Alternative and Renewable Fuel and Vehicle Technology Program to build 19 of 28 stations, based on grants announced earlier this month.

“We want to create a business model that is scalable to other U.S. markets and throughout the world as the fuel cell market grows,” said FirstElement Chief Executive Joel Ewanick. “But to be very frank, it’s not a very good business right now. There is a reason why venture capitalists shy away from building this infrastructure—there’s not enough cars to justify the existence of these stations. It’s a poor investment, and without the state of California, it would be an impossible investment.”

Ewanick’s resume includes stints as global chief marketing officer of General Motors Co. and vice president of marketing at Fountain Valley-based Hyundai Motor America Inc.

He also did consulting work for Costa Mesa-based Fisker Automotive Inc. and served as the luxury hybrid automaker’s interim chief commercial officer.

Ewanick founded FirstElement with co-presidents Tim Brown and Shane Stephens-Romero, former University of California-Irvine researchers.

FirstElement also got a $7 million “arm’s length” loan from Toyota Motor Sales U.S.A. Inc. in Torrance to cover the operation and maintenance expenses.

“Solutions are being found through collaboration between government, academia, carmakers and energy providers,” Bob Carter, Toyota’s senior vice president of Automotive Operations, said in a news release. “Stay tuned, because this infrastructure thing is going to happen.”

FirstElement proposal called for a network of stations dispersed along major traffic corridors and regional centers—two in Los Angeles and one each in Costa Mesa, Laguna Niguel, San Diego and other cities.

“We developed what we call ‘the network,’ so when you buy a car in Los Angeles, you are able to use that car to drive to San Francisco or go to Lake Tahoe skiing, on the very first weekend,” Ewanick said. “We have a station in Harris Ranch, which is halfway from San Francisco and Los Angeles, that allows us to connect the two cities. It won’t generate enough revenue to sit on its own for many years, but we thought it was essential as a part of an overall plan to allow people to use their cars the way they use their current gasoline engines. Even though we lose money by putting stations in places like Tahoe or on I-5, the other stations in Los Angeles and San Francisco carry their weight, and help balance out the overall business.”

Former Stations

The locations, set to open in the fall of 2015, will be built at former gas stations, he said. That will allow the company to take advantage of customers’ familiarity with the site and avoid challenges on permits.

Ewanick said he anticipates it will take about five years after the stations are built for the number of hydrogen-fueled cars to rise “to a point where we’ll start to break even. We are in this for the long haul. We developed a 10-year business model, and we have 10-year leases with stations where we are putting these pumps.”

FirstElement was among eight companies who shared the $46.6 million in grant money. McKinleyville-based HyGen Industries LLC won the contract to build a fourth OC location, in Orange.

FirstElement’s win was among the first of several award cycles to come.

The state’s goal is to establish a 100-station network to support the full commercialization of fuel cell vehicles, backed by a $200 million investment.

“It’s going to be many years to fulfill our dreams; this is a great first step,” Ewanick said. “The technology itself has been around for a long time. What we are really looking at now is marketing of the fuel itself and how to make the transition from gasoline to hydrogen power seamless, so that the consumers don’t think about the fact it’s a different kind of fuel, or that the car is different. It should be car against car. It shouldn’t be price of fuel, location of fuel, or how to fuel the car—all that should be seamless and go away and should be just about driving a car.”


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