Are Heavy-Duty Vehicles at Crossroads? A Real Options and Innovation Diffusion Perspective on Hydrogen Fuel Cell Versus Battery Electric Trucks

The transition from diesel to zero-emission heavy-duty vehicles (HDV) is a critical decision for industry stakeholders, shaped by uncertainty, technological competition, and irreversible investments. This research examines how fleet operators navigate the choice between fuel cell hydrogen (FCH) and battery electric (BE) HDV, considering market dynamics, policy incentives, and infrastructure development. Using a real options framework, we capture the value of waiting for new information before committing to decarbonization, while integrating innovation diffusion models to account for adoption patterns. We determine when a fleet should switch to FCH HDV and how many vehicles to adopt at the trigger. Our approach provides insights into optimal investment timing, policy effectiveness, and the factors driving the large-scale deployment of clean HDV. JEL Classification: Q42, Alternative Energy Sources; Q48, Energy: Government Policy; R40, Transportation Economics: General; C15, Statistical Simulation Methods: General; D81, Criteria for Decision-Making under Risk and Uncertainty