Nikola plans to buy cheap power in Arizona to make hydrogen
Nikola Corp., a troubled electric-truck startup, plans to enter into an agreement with an Arizona utility to supply cheap electricity it needs to produce hydrogen for a planned fueling network.
The proposed contract between Nikola and Arizona Public Service Co., a unit of Pinnacle West Capital Corp., was disclosed in a Dec. 11 filing requesting approval from Arizona utility regulators.
The deal would mark a significant step for a startup that’s faced a series of setbacks since going public in June and whose business plan rests on being able to produce hydrogen fuel cheaply. Nikola shares gained as much as 5.8% on the news and traded up 3.3% to $17.03 as of 1:45 p.m. Wednesday in New York.
In an April filing, Nikola outlined an estimated cost of producing hydrogen at around $2.50 per kilogram, which it based on securing wholesale electricity at a rate of 3.5 cents per kilowatt hour. The rate APS proposes is around 2.7 cents per kilowatt hour.
“This rate schedule enables Nikola’s planned deployment of fueling facilities in Arizona in support of zero-emission hydrogen fuel-cell electric trucks,” Nikola said in a statement.
APS said the proposed “special contract rate” will help Nikola develop its planned hydrogen network in the state. “We believe approval of this agreement will be an economic and environmental win for all of Arizona,” it said in a statement.
Nikola plans to bundle the cost of hydrogen fuel and maintenance with its own fuel-cell semi trucks as part of a seven-year or 700,000-mile lease. To achieve this, the Phoenix-based company aims to build a network of 700 fueling stations across North America in the next eight to 10 years.
But Nikola has said it needs a partner. The startup was in advanced talks with oil major BP Plc before they fell apart following a short-seller report that raised questions in September about Nikola’s transparency. In November, Mark Russell, Nikola’s chief executive officer, reaffirmed a goal of naming a hydrogen-infrastructure partner by year-end but warned it could slip in to early 2021.