David v. Goliath & the Fight for California Renewables

Last week I went on a trip to California.  It was mostly a personal trip for my good friends’ 10 year anniversary, which was held at a private car collection in Scotts Valley.  There were old Ferraris, Porches, Mercedes, and race cars.  It was a wonderful and classy cocktail attire affair.   I had a great time seeing all my old friends there.

Once that was over I popped down to southern California for a business trip.  I met with a former colleague and friend whom I had worked with in a previous life 10 years ago when I lived there.  We drove around to dozens of different fueling station locations throughout the greater LA are and inland empire. It was really nice to be there again and see the sites.  I was surprised at how much things have changed.

One of the first notable observations was that all of the “76” brand gas stations (the ones with the orange ball) now have 100% renewable diesel instead of diesel. The traditionally orange pumps are half green - literally!  This was really cool to see and something I could have only dreamed of 10 years ago.   Nowadays, you can’t even find petrol diesel there anymore.  It’s all Renewable! Which is great, IMO.

According to Will Faulkner of Carbon Acumen’s recap of Valero’s earnings call this week, “Renewable diesel sales volumes averaged 3.5 million gallons per day in the third quarter of 2024, which was 552,000 gallons per day higher than the third quarter of 2023…With respect to the renewable diesel segment, we still expect sales volumes to be approximately 1.2 billion gallons in 2024…” -Homer Bhullar (Valero, VP IR & Finance).  Volumes just continue to grow for this great fuel.

I drove by a Hyla station, by Nikola, near the Ontario airport.   They had two Plug Power mobile re-fuelers on site, a fleet of semi trucks; class-8 Fuel Cell Electric Vehicles (FCEV).   

I stopped by a gas station with Propel biofuels [Diesel High Power Renewable (HPR)] brand, compressed natural gas (CNG) and hydrogen.  But the H2 is non-operational, as is unfortunately the case with a lot of previously built hydrogen stations in California.    

As a matter of fact, of the 86 open and planned light duty stations, only half are open (43 exactly as of 9/11/24) according the California Fuel Cell Partnership website.  18 are in permitting, 2 are in construction, and 19 are “currently unavailable.”   

The network hasn’t recovered from the supply disruption at the end of last year, when multiple hydrogen production facilities went offline for unplanned maintenance events at the same time, and prices rose drastically.   

In an attempt to address this, the California Energy Commission (CEC) just announced a new grant solicitation for light-duty hydrogen stations in late September with $10M for new stations in Sacramento and San Francisco, and $5M for seven (7) temporarily non-operational stations in So-Cal.    

I was surprised to hear that there is more money available for stations that were previously funded with grants, but are now non-operational.   There is even an operations and maintenance (O&M) component to the grants, then and now, to help backstop owners cost to keep the market alive while the vehicle volumes and sales catch up.  One would have thought that the stations would have had enough capital to make any repairs needed, and/or make money on fuel volumes.  But the price is over $30/kg in many places.

Shell Oil recently mothballed 15 of the stations they’d built in California after the hydrogen shortage at the end of 2023.  I believe the economics must not have been favorable enough for their new CEO want to continue operating them.

As of October 2023, many True Zero hydrogen stations are not operating due to supply chain disruptions, with the company reportedly closing around 10 stations in California citing issues with hydrogen supply as the primary reason. This follows similar closures by other hydrogen providers like Shell and Iwatani in the same period.

So what happened to all these stations in CA?

A "slump in LCFS credit prices and issues with the on-site hydrogen refueling modules called H2Station supplied by Nel to California's hydrogen stations. Shell also used Nel's H2Station, and Iwatani Industries has filed a lawsuit against Nel alleging that the modules are defective.”  This is not the first time I’ve heard of issues with NEL equipment.   First Element (True Zero) and Shell’s stations (the majority of H2 stations in CA) used Nel’s H2 Station for the sites technology.   

David v. Goliath

“Phillips 66 Told to Pay $604.9 Million in Trade Secrets Case”

While in southern California catching up with my former colleague at Propel Fuels (my former employer) we were discussing the lawsuit between Propel and Philips 66, the major oil company.

Interesting timing, the suit was just concluded on 10/16.  The Verdict:  Propel won the suit and is being awarded $604 million dollars.  Philipps 66 was found guilty of stealing trade secrets from Propel, the leading renewable fuel retailer on the west coast.     

Four years ago Philips 66 and Propel were in merger / acquisition.  During the course of due diligence a lot of sensitive information was shared about Propels’ business.   Propel alleged that Philipps 66 stole this information and then used it to further their own renewable fuels business.

The state court jury found “that Phillips 66’s conduct was malicious, meaning the verdict could be tripled under California law.”

Philips 66, pulled out of the take-over negotiations in 2022, but there was a non-disclosure agreement (NDA) in place. But Philips apparently then used the confidential information, including proprietary strategies, which had been shared, including sales marketing and financial data.

“‘Propel did what many innovators cannot do — it stood up to a much larger adversary and persevered through a long process to vindicate its rights,” Michael Ng, lead trial counsel for Propel Fuels, said in a statement Thursday.”

Propel (David), stood up to Philipps 66, aka big oil (Goliath), and won.  A small victory for renewable fuels advocates.  Congratulations!

To me, the branding doesn’t look at all the same.  See “Propel Country, Diesel HPR” v. 76 Renewable Diesel pumps and you’ll know what I mean.  But, hey the jury sided with Propel, and that’s the verdict.

The trial took five weeks, in Alameda county.   It is likely that Philips will appeal,  I believe.

Philips 66 said Propel didn’t show any evidence to prove it stole proprietary information.   Propel, stated that Phillips’s went from being a “lagger” to a “leader” in renewable fuels in California.

I look forward to getting back out there more in the future to continue building the state and the country’s renewable hydrogen station infrastructure.  Even in the midst of some rough times for the industry, I am encouraged to see some positive developments in the way of the Propel suit being won, and sustainable aviation fuel (SAF) fueling the 49ers’ flight this month as well.   Here’s to hoping the positive momentum can continue!

Adam