Cummins is a top maker of heavy-duty diesel engines but the company is gearing up for a zero-emissions future with big plans to supply hydrogen-electric power systems and electrolyzers that make the clean fuel. And while its core market is trucks, trains and buses look like a bigger commercial opportunity in the near term.
The Columbus, Indiana-based manufacturer, which supplies diesel engines for boats, heavy-duty pickups, delivery vehicles, buses and semis, laid out a comprehensive strategy in its “Hydrogen Day” presentation, covering its production of fuel cells, stationary power systems, fuel tanks and electrolyzers to help companies make their own hydrogen. Cummins is testing hydrogen-powered big rigs, but expects both transit operators and steelmakers needing to lower their carbon emissions to be the best early markets, Chairman and CEO Tom Linebarger tells Forbes.
“Everyone knows that we need to get out of carbon fuels. The question is when do the economics get right either because of regulations or other things? The economics are right for subsidized areas,” he says. “Trains, buses that’s where the action is because it’s point-to-point, which means you have a hydrogen fueling station at this end, hydrogen fueling stations at that end and you’re done. You don’t want a bunch of stations. You want high usage so that when you put this investment in you’re using a lot of the fuel.”
Cummins’ intensified focus on hydrogen comes as investment into the elemental fuel surges across the transportation industry. Zero-emission hydrogen fuel cell cars from Toyota, Honda, Daimler and Hyundai have been on the road for more than a decade, but the rise of battery-electric cars, championed by Elon Musk and Tesla, and limited number of hydrogen fuel stations has made the technology less compelling for passenger vehicles. However, the lower weight and rapid refueling time that hydrogen fuel cell power systems offer relative to batteries have made them increasingly appealing for heavy-duty vehicles. Multibillion-dollar plans are taking shape in that industry, led by Toyota, Hyundai, Daimler and startup Nikola, and Cummins sees a big opportunity to be a key supplier.
Fuel cells make electricity on demand with only water as a by-product and have been touted as a clean vehicle option for decades, though high costs, durability and a lack of hydrogen fuel stations have limited their appeal. And while Elon Musk has harshly criticized hydrogen “fool cells” for years, grousing about their inefficiency relative to batteries, a growing number of manufacturers sees significant potential for them, particularly as production of hydrogen made from renewable sources, rather than natural gas, becomes viable.
In the case of Musk’s view, “I would just say that those that have one answer, are going to advocate and advocate for their answer,” Linebarger said. Additionally, both for large-scale energy storage and industrial applications, there’s going to be a huge increase in hydrogen use in the years ago. “There will be as much hydrogen used in steel plants and in (oil) refining, as there will be in transportation. You’re not gonna solve those with batteries.”
Sales of electrolyzer equipment to make hydrogen should reach $400 million annually by 2025, Cummins said.
The company could benefit from a change in U.S. policies with the election of Joe Biden to replace Donald Trump as president. Biden is prioritizing policies that cut carbon emissions and promoting far greater use of electric vehicles to help tackle climate change, while Trump prioritized carbon energy production and eliminated tough fuel economy rules. However, Cummins hasn’t yet had a formal discussion with the incoming administration about hydrogen technology.
Since Cummins has diesel and battery electric systems, as well as hydrogen, “our idea is to try to be the most honest broker we can about what each of the technologies offers,” Linebarger says. “I’ve already made a contact with the Biden administration and we’re continuing to try to advocate for them to say, ‘this needs to be part of your thinking.’”
Ultimately, Cummins will supply hydrogen powertrains for heavy-duty trucks, but that market will take longer to develop as further cost reduction is needed to achieve parity with diesel power systems, says Amy Davis, who leads the company’s new power division.
“This is why we have focused on a market like trains where the powertrain and the fuel costs represent 50% of the total operating costs and are much lower than the heavy-duty truck market, which is above 80%,” she said during Cummins’ briefing. The company has partnered with European industrial conglomerate Alstom to supply a fuel cell power system for its Coradia iLint commuter train that’s already operating in Germany.
Relative to trucks, “trains run on fixed routes and require lower infrastructure in terms of hydrogen refueling, this will be another key factor, Davis said. “In addition, support for public subsidies exists and the incremental cost to purchase a hydrogen train is lower than the cost of electrifying rail lines. All of these factors drive varied adoption rates, greater adoption in early years and applications such as trains and buses, with heavy-duty trucks falling farther out on the curve.”
Shares of Cummins fell 2% to $231.86 in New York on Monday.