[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                             THE PATH TO A
                            HYDROGEN ECONOMY

=======================================================================

                                HEARING

                               BEFORE THE

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 5, 2003

                               __________

                            Serial No. 108-4

                               __________

            Printed for the use of the Committee on Science


     Available via the World Wide Web: http://www.house.gov/science

                                 ______





                   U.S. GOVERNMENT PRINTING OFFICE
85-417                       WASHINGTON : 2004
_______________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800, 
DC area (202) 512-1800 Fax: (202) 512-2250 Mail: stop SSOP, Washington, 
DC 20402-0001






                          COMMITTEE ON SCIENCE




             HON. SHERWOOD L. BOEHLERT, New York, Chairman

LAMAR S. SMITH, Texas                RALPH M. HALL, Texas
CURT WELDON, Pennsylvania            BART GORDON, Tennessee
DANA ROHRABACHER, California         JERRY F. COSTELLO, Illinois
JOE BARTON, Texas                    EDDIE BERNICE JOHNSON, Texas
KEN CALVERT, California              LYNN C. WOOLSEY, California
NICK SMITH, Michigan                 NICK LAMPSON, Texas
ROSCOE G. BARTLETT, Maryland         JOHN B. LARSON, Connecticut
VERNON J. EHLERS, Michigan           MARK UDALL, Colorado
GIL GUTKNECHT, Minnesota             DAVID WU, Oregon
GEORGE R. NETHERCUTT, JR.,           MICHAEL M. HONDA, California
Washington                           CHRIS BELL, Texas
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland         SHEILA JACKSON LEE, Texas
W. TODD AKIN, Missouri               ZOE LOFGREN, California
TIMOTHY V. JOHNSON, Illinois         BRAD SHERMAN, California
MELISSA A. HART, Pennsylvania        BRIAN BAIRD, Washington
JOHN SULLIVAN, Oklahoma              DENNIS MOORE, Kansas
J. RANDY FORBES, Virginia            ANTHONY D. WEINER, New York
PHIL GINGREY, Georgia                JIM MATHESON, Utah
ROB BISHOP, Utah                     DENNIS A. CARDOZA, California
MICHAEL C. BURGESS, Texas            VACANCYcontents deg.
JO BONNER, Alabama
TOM FEENEY, Florida
VACANCY





                            C O N T E N T S

                             March 5, 2003

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Sherwood L. Boehlert, Chairman, 
  Committee on Science, U.S. House of Representatives............     8
    Written Statement............................................     9

Statement by Representative Ralph M. Hall, Minority Ranking 
  Member, Committee on Science, U.S. House of Representatives....    10

Statement by Representative Nick Lampson, Member, Committee on 
  Science, U.S. House of Representatives.........................    11

Prepared Statement by Representative Michael C. Burgess, Member, 
  Committee on Science, U.S. House of Representatives............    11

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science, U.S. House of Representatives............    12

                               Witnesses

Mr. David K. Garman, Assistant Secretary for Energy Efficiency 
  and Renewable Energy, U.S. Department of Energy
    Oral Statement...............................................    12
    Written Statement............................................    14

Dr. Alan C. Lloyd, 2003 Chairman for the California Fuel Cell 
  Partnership
    Oral Statement...............................................    26
    Written Statement............................................    28
    Biography....................................................    35

Dr. Joan M. Ogden, Research Scientist, Princeton Environmental 
  Institute
    Oral Statement...............................................    36
    Written Statement............................................    51
    Biography....................................................    72
    Financial Disclosure.........................................    73

Dr. Lawrence D. Burns, Vice President, Research Development and 
  Planning, General Motors
    Oral Statement...............................................    74
    Written Statement............................................    76
    Biography....................................................    93

Donald P.H. Huberts, Chief Executive Officer, Shell Hydrogen
    Oral Statement...............................................    93
    Written Statement............................................    95
    Biography....................................................   101

Discussion
  Industry's Opinion on Government Policy Options................   102
  DOE's Opinions on Government Policy Options....................   103
  Sources of Funding for the Hydrogen Initiative.................   104
  Role of Partnerships in the Hydrogen Initiative................   104
  Role of the Office of Science in the Hydrogen Initiative.......   105
  Safety Concerns and Precautions for Hydrogen Usage.............   106
  Cost of Hydrogen vs. Natural Gas Pipelines.....................   107
  Direction of Hydrogen Research Efforts.........................   107
  Importance of Hybrids as an Intermediate Step to Fuel Cell 
    Vehicles.....................................................   108
  Potential Benchmarks for Hydrogen Vehicles and Fossil Fuel 
    Engines......................................................   109
  Possibility of the Failure of a Hydrogen Economy and Potential 
    Alternate Plans..............................................   110
  Sources of Funding and Cost Estimates..........................   111
  Abundance and Cost of Natural Gas..............................   111
  Written Statement of UTC Power (Submitted by Mr. Larson).......   113
  Best Use of Scarce Resources (Submitted by Mr. Akin)...........   115
  Timetable for Conversion to Alternate Energy Sources...........   116
  Necessity of Competition to Speed Development..................   117
  Development of Codes and Standards.............................   118
  Additional Cost of Carbon Sequestration........................   118
  Ability to be Hydrogen Reliant by 2040.........................   119
  Effect of Policy on the Research Agenda........................   121
  Advice From the Panel as to What the Government Needs to Do to 
    Further a Hydrogen Economy...................................   122
  Details of the Decision-making Process at the California Fuel 
    Cell Partnership.............................................   123
  Re-allocation of Funds at DOE in Order to Account for the 
    Hydrogen Initiative..........................................   125
  Timetable for Stationary vs. Vehicle Fuel Cell Usage...........   125

             Appendix 1: Answers to Post-Hearing Questions

Mr. David K. Garman, Assistant Secretary for Energy Efficiency 
  and Renewable Energy, U.S. Department of Energy................   130

Dr. Alan C. Lloyd, 2003 Chairman for the California Fuel Cell 
  Partnership....................................................   135

Dr. Joan M. Ogden, Research Scientist, Princeton Environmental 
  Institute......................................................   136

Dr. Lawrence D. Burns, Vice President, Research Development and 
  Planning, General Motors.......................................   139

             Appendix 2: Additional Material for the Record

Guidance for Transportation Technologies: Fuel Choice for Fuel 
  Cell Vehicles..................................................   142


                     THE PATH TO A HYDROGEN ECONOMY

                              ----------                              


                        WEDNESDAY, MARCH 5, 2003

                  House of Representatives,
                                      Committee on Science,
                                                    Washington, DC.

    The Committee met, pursuant to other business, at 10:30 
a.m., in Room 2318 of the Rayburn House Office Building, Hon. 
Sherwood L. Boehlert (Chairman of the Committee) presiding.


                            hearing charter

                          COMMITTEE ON SCIENCE

                     U.S. HOUSE OF REPRESENTATIVES

                             The Path to a

                            Hydrogen Economy

                        wednesday, march 5, 2003
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

Purpose

    On Wednesday, March 5, 2003, at 10:00 a.m., the House Science 
Committee will hold a hearing on the President's Hydrogen Initiative, 
which is intended to lay the foundation for making the transition to an 
economy powered by hydrogen. If the widespread use of hydrogen is to 
become a reality, significant advances must be made, not only in 
vehicle technology, but also in hydrogen production and the 
infrastructure necessary to deliver it. The hearing will focus on the 
barriers to a hydrogen economy, and how the President's Initiative 
could address those barriers.
    The hearing will focus on several overarching questions:

        1) LWhat are the greatest hurdles the country will face in 
        converting to a hydrogen economy? To what extent is a federal 
        effort needed to clear the way?

        2) LWhat specific and comprehensive goals are needed for the 
        Hydrogen Initiative to ensure the fastest possible development 
        and widespread utilization of hydrogen?

        3) LWill technology research alone lead to a transition to 
        hydrogen, or will it be necessary to apply policy tools? How 
        should a research and development effort take these policy 
        choices into account?

Background

    In his State of the Union speech, President Bush announced the 
creation of a new Hydrogen Initiative--a $1.2-billion, five-year 
research and development program to develop the technology and the 
hydrogen infrastructure for vehicles whose only emissions would be 
water vapor.
    The Hydrogen Initiative would build on FreedomCAR, a $500 million 
research program announced last year by the Administration to develop 
fuel cell powered vehicles. Both programs would be operated by the 
Department of Energy (DOE).
    Under the President's plan, hydrogen would be consumed in 
automobiles powered not by internal combustion engines but by fuel 
cells. And because the sources of energy used to produce hydrogen would 
be domestic sources--like natural gas, coal, or renewable energy--
converting to a ``hydrogen economy'' could greatly reduce our nation's 
dependence on foreign oil. According to the President, the Hydrogen 
Initiative will lead to a reduction in imported oil of 11 million 
barrels per day by 2040.
    To successfully make the conversion to a hydrogen economy, the 
FreedomCAR and Hydrogen Initiatives must overcome several serious 
technical and economic challenges. There is no way, for example, to 
safely or economically store enough hydrogen on board an automobile to 
provide a driving range of 300 miles--the minimum that auto companies 
say consumers expect from a car. Also, if consumers are ever to 
purchase a hydrogen fuel cell powered car, an infrastructure much like 
that which exists for gasoline, with a fuel station every few blocks, 
may be necessary.
FreedomCAR
    The FreedomCAR (for ``Cooperative Automotive Research'') program, 
upon which the Hydrogen Initiative expands, is a research partnership 
with Ford, General Motors, and Daimler/Chrysler. FreedomCAR itself 
arose out of an earlier program, called the Partnership for the Next 
Generation Vehicles (PNGV), begun under the Clinton Administration. 
FreedomCAR's goal is to reduce the cost and improve the efficiency of 
automotive components by 2010.
Hydrogen Roadmap
    While FreedomCAR focuses on vehicle-specific technologies, the 
Hydrogen Initiative focuses on technologies for hydrogen production and 
the infrastructure necessary to deliver it. The Initiative itself is 
based on recommendations from the President's National Energy Policy 
and the National Hydrogen Roadmap.\1\
---------------------------------------------------------------------------
    \1\ www.eere.energy.gov/hydrogenandfuelcells/pdfs/
national-h2-roadmap.pdf
---------------------------------------------------------------------------
    The roadmap was developed at a series of meetings sponsored by DOE 
that brought together stakeholders from various industries (including 
the automobile, petroleum, electric power, and fuel cell industries and 
industrial gas suppliers) and state and federal governments to discuss 
the challenges for a hydrogen economy. The roadmap, released in 
November 2002, identifies seven areas presenting specific challenges 
for a hydrogen economy:

         LReducing the cost of hydrogen production.

         LCreating an expansive infrastructure to supply 
        hydrogen.

         LLowering the cost and improving the performance of 
        methods to store hydrogen.

         LReducing the cost of fuel cells.

         LDeveloping applications for using hydrogen in 
        consumer products (including not only automobiles, but also 
        stationary fuel cells to power buildings and consumer products 
        such as laptops and cell phones) with the same or better 
        performance as conventional products.

         LEducating the public about the environmental and 
        energy security benefits and safety concerns.

         LDeveloping model codes and standards, for buildings, 
        for example, that would allow for the use of hydrogen as a 
        fuel.
Next Steps
    Relying heavily on the hydrogen roadmap, DOE is now creating a 
detailed research and development plan (which will be reviewed by the 
National Academy of Sciences). A few details have emerged about the 
overall focus of the Initiative, which according to DOE will focus on 
improving the technology in three critical areas: hydrogen storage, 
hydrogen production, and fuel cell technology.
    According to DOE, to make hydrogen competitive with current 
technologies the Initiative must increase the performance of hydrogen 
storage technologies by a factor of three, reduce hydrogen production 
costs by a factor of four, and reduce fuel cell technology costs by a 
factor of ten. Achieving such goals will require breakthroughs in 
technology, rather than mere incremental advancements.
    The Initiative will also expand DOE's currently-small programs to 
educate the public about hydrogen and to develop codes and standards to 
facilitate the adoption of hydrogen technologies. New codes and 
standards are particularly important as current regulations treat 
hydrogen as a hazardous material, and would likely be a significant 
barrier to widespread adoption.
    DOE's goal is to advance hydrogen and fuel cell technologies to the 
point that would allow industry to make a decision by 2015 as to 
whether or not to bring those technologies to market.

Issues

    While many interest groups, companies, and scientists support the 
development of technologies to allow the Nation to convert to an 
economy powered by hydrogen, the President's Initiative has left many 
questions unanswered.

What effect will the choice of fuel used to create hydrogen have on the 
environment, economy, and on energy security? Hydrogen is not a source 
of energy itself--like oil. Rather, like electricity, it must be made 
from sources of energy. For example, hydrogen can be produced by 
reforming natural gas or electrolyzing water using electricity 
generated from any other source of energy, including nuclear power. 
While hydrogen fuel cells produce no pollution, the use of coal to 
produce the hydrogen could result in greater emissions of carbon 
dioxide than combusting traditional fuels. Making hydrogen from 
electricity produced by wind power, while more expensive, would produce 
no such emissions. If oil were used, the country would realize little 
benefit in energy security. And finally, if natural gas were the main 
source of hydrogen, it could affect the price of other products in 
which natural gas is used, such as chemicals.
    To assess the overall benefits and costs of hydrogen--and the 
multiple options for how it may be produced, transported, and stored--a 
complete life-cycle analysis (also called a well-to-wheels analysis) 
must be conducted. It is unclear, however, how DOE plans will 
incorporate such analyses.

Will technological factors alone be enough to provide the incentives 
needed to convert to a hydrogen-based economy, or will policy changes 
be necessary? DOE's goal is to reduce the costs of hydrogen 
technologies so they are competitive with those of traditional fuels. 
Once the technologies reach this stage, DOE plans to allow industry to 
commercialize them. But the commercialization of fuel cell vehicles 
will never occur without the simultaneous development of an 
infrastructure to deliver hydrogen fuel. And, in a classic ``chicken-
and-egg'' conundrum, the necessary infrastructure will never be built 
without a clear market for the hydrogen. Developing that 
infrastructure--an undertaking estimated to cost more than $200 
billion--and encouraging simultaneous markets to use hydrogen, will 
clearly require government coordination and involvement.
    Even after reducing the other hurdles to hydrogen use, hydrogen is 
still likely to cost more than conventional fuels unless government 
policies create significant incentives to use it. Those could include 
tax and other incentives, but the most effective tool would be through 
regulations that make clear the social costs (e.g., from pollution, 
greenhouse gas emissions, dependence of foreign sources of oil) of 
competing fuels. The Administration has given no sense of how policy 
tools figure in its plans to move to a hydrogen economy.
    It is not clear what role policy considerations will play in DOE's 
plans to develop hydrogen technologies.

What is the likelihood all the technical challenges will be met? The 
number and magnitude of the technical challenges that must be overcome 
to enable a future economy based on hydrogen fuel are great. How to 
store hydrogen safely and at high densities presents enormous technical 
challenges. It is unknown whether it would make more sense to build 
large, centrally located facilities to produce hydrogen or place 
smaller hydrogen-production devices closer to the site where it will be 
used. Also, the capability does not now exist to produce large numbers 
of fuel cells cost competitively. It is unclear what benefits the 
Hydrogen Initiative would provide if some of these technical challenges 
prove insurmountable.

How does the Hydrogen Initiative affect funding for other programs? The 
FreedomCAR and Hydrogen Initiatives are expected to cost $1.7 billion 
over five years. The President called for $273 million for these 
programs in the FY04 request, an increase of $88 million over levels 
appropriated for existing hydrogen programs in FY03. However, this 
increase appears to have come largely at the expense of other energy 
efficiency and renewable energy programs. The two programs cut most 
significantly, which promote industrial efficiency and the use of 
biomass, could have near-term impacts on reducing both petroleum usage 
and emissions. Unless additional funding is provided to renewable 
energy and energy efficiency programs at DOE in general, the projected 
increases in the FreedomCAR and Hydrogen Initiatives will likely result 
in more cuts to such programs.

Legislation

    The Committee has introduced legislation (H.R. 238), which includes 
provisions amending the Spark M. Matsunaga Hydrogen Research, 
Development and Demonstration Act of 1990 (42 U.S.C. 12401) and the 
Hydrogen Future Act of 1996 (42 U.S.C. 12403) (introduced and passed 
under the sole jurisdiction of the Science Committee), whose 
authorizations have expired. The text of H.R. 238 is largely based on 
language approved by the House and the Senate conferees as part of last 
year's energy conference negotiations, but disagreements on other 
issues in the bill prevented final passage. The witnesses have been 
asked to provide written comments and suggestions on the hydrogen 
language in H.R. 238, and be prepared to answer questions on the bill. 
A brief summary of those provisions is attached to this charter.

Witnesses

    The following witnesses have been confirmed for the hearing:

        1. LDavid Garman, Assistant Secretary for Energy Efficiency and 
        Renewable Energy, Department of Energy.

        2. LAlan C. Lloyd, Ph. D., 2003 Chairman, California Fuel Cell 
        Partnership.

        3. LJoan Ogden, Ph.D., Research Scientist, Princeton 
        Environmental Institute.

        4. LDr. Larry Burns, Vice President, Research, Development and 
        Planning, General Motors.

        5. LDon Huberts, Chief Executive Officer, Shell Hydrogen.

Questions to the Witnesses

    The witnesses have been asked to address the following questions in 
their testimony:
David Garman:

         LAt a briefing earlier this year, the Department 
        indicated that a posture plan for the hydrogen initiative was 
        being developed at DOE. Please update us on the status of the 
        plan. Does the plan contain specific budget structures and 
        program goals? Will market penetration milestones be part of 
        the program, or will the Department limit its strategic 
        planning to technical milestones? What industry and stakeholder 
        input is being solicited for the plan?

         LWhat specific and comprehensive goals are needed for 
        the hydrogen initiative to ensure the fastest possible 
        development and widespread utilization of hydrogen? Does the 
        department intend to create goals for the full range of 
        hydrogen technologies, from production to utilization including 
        stationary and mobile applications?

         LWhat additional steps will DOE take to ensure that 
        the benefits of this federally funded research effort reach 
        average consumers in the shortest possible time?

         LIs funding for the future expansion of the hydrogen 
        initiative expected to come from within the Office of Energy 
        Efficiency and Renewable Energy, or from other areas?

         LIs life-cycle cost analysis being used to evaluate 
        the various hydrogen technology options, such as including the 
        cost of sequestration for hydrogen production from fossil 
        fuels?
Alan C. Lloyd:

         LWhat obstacles has the Partnership faced in putting 
        hydrogen vehicles and infrastructure ``on the ground''? How 
        have you overcome these obstacles, and how do you plan to do so 
        in the future?

         LWhat elements should be included in the Department of 
        Energy's hydrogen program to both effectively develop hydrogen 
        technologies and promote their adoption?

         LWhat are the greatest hurdles the country will face 
        in converting to a hydrogen economy? To what extent is a 
        federal effort needed to clear the way?
Joan Ogden:

         LWhat are the most significant barriers to the 
        widespread adoption of hydrogen as an energy carrier?

         LYou have written that, ``Economics alone are unlikely 
        to lead to a switch from current fuels to hydrogen.. . .If a 
        hydrogen economy is implemented, it will be in response to 
        strong political will.'' (From p. 74 of your Physics Today 
        article). What types of policy tools will be necessary to 
        ensure a transition to hydrogen? How should a research and 
        development plan take these policy choices into account? When 
        do we need to consider these policy options in order for them 
        to be effective?
Larry Burns:

         LIn what time frame does GM expect hydrogen technology 
        to become widely available? Does GM expect technology advances 
        to make hydrogen technology cost-competitive with conventional 
        technology? When?

         LWhat technologies, including non-vehicle 
        technologies, does GM see as the most promising for near-term 
        use of hydrogen? Does GM plan to market any of those 
        technologies?

         LWhat does GM see as the federal role in the 
        conversion to a hydrogen economy? How much is GM's own research 
        dependent on federal involvement in the hydrogen research and 
        development effort?

         LThe Department of Energy has indicated that the 
        President's hydrogen initiative will allow industry to make a 
        go/no-go decision on hydrogen technologies around 2015. Do you 
        agree? What technical and policy factors will most influence 
        GM's decisions on whether to rely on hydrogen technologies?
Donald Huberts:

         LIn what time frame does Shell Hydrogen expect 
        hydrogen technology to become widely available? Do you expect 
        technology advances to make hydrogen technology cost-
        competitive with conventional technology, and, if so, when? 
        What are the greatest hurdles the U.S. faces in converting to a 
        hydrogen economy? Can such a conversion occur absent government 
        incentives or regulation?

         LWhat technologies, including non-vehicle 
        technologies, does Shell Hydrogen see as the most promising for 
        near-term use of hydrogen? Does Shell Hydrogen plan to market 
        any of those technologies?

         LWhat can the U.S. Federal Government do to facilitate 
        the development of and transition to a hydrogen economy? Is the 
        Department of Energy's Hydrogen Initiative adequate? To what 
        degree does Shell's own investments in hydrogen R&D depend upon 
        the involvement of the U.S. Federal Government?
    Chairman Boehlert. It is a pleasure to welcome everyone 
here this morning to the Congress' first hearing on the 
President's Hydrogen Initiative. I think the President deserves 
applause from across the political and ideological spectrum for 
his forward looking proposal. Whenever anyone thinks we should 
be doing right now to promote clean air and energy 
independence, we should all be able to agree that moving 
forward toward a hydrogen economy is what we need to strive for 
in the future. And the President has signaled in a forceful and 
prominent way that he is willing to commit the resources to 
help develop the technology for a hydrogen economy.
    The Hydrogen Initiative is the kind of forward looking 
investment that the Science Committee has always promoted on a 
bipartisan basis. I look forward to adding the language to 
authorize the initiative in the Science Committee's portion of 
the comprehensive Energy Bill that is now slated to come before 
the House in the first week of April.
    We have tentatively scheduled the Science Committee's 
markup of our portion of that bill, known as H.R. 238 on March 
20.
    I should note that industry also seems seriously committed 
to research and development work on hydrogen. I am pleased with 
the announcement that GM and Shell have just made about their 
joint efforts to develop and demonstrate hydrogen fueling and 
vehicles. We need to see how hydrogen might work in everyday 
settings in the real world.
    But our enthusiastic support for the Hydrogen Initiative 
doesn't mean we don't have any questions about it. Both the 
Administration and Congress are going to have to do a lot more 
work to figure out exactly how to shape the Initiative. Here 
are some of the key questions we need to ask.
    How will we pay for the incentive Initiative? Much of next 
year's proposed funding comes from cutting other renewable 
energy R&D programs. That is not acceptable.
    What specific areas will the Initiative focus on and who 
will perform the research? We will have to choose among 
hydrogen sources and among different technologies. And we will 
have to decide where the federal contribution can do the most 
good.
    What kinds of demonstration projects will truly advance the 
transition to a hydrogen economy? The projects need to be true 
tests of the technology, not one-of-a-kind distractions that 
never get replicated.
    What policy tools will need to be deployed to enable the 
transition to a hydrogen economy and how will policy decisions 
affect the nature of the research that gets conducted now? No 
transportation revolution in American history has occurred 
without massive government involvement, whether that meant 
building canals, giving land to the railroads, developing 
aircraft and airports, or constructing the interstate highway 
system to name just a few examples. It would be absurd to think 
that hydrogen will be an exception.
    I think that last point is critical. The magic of the 
marketplace alone is not going to create a hydrogen economy, at 
least not anytime soon. It addition to the huge technical 
hurdles, switching to hydrogen may entail enormous costs. We 
need to start thinking now about what policies will be 
necessary later because that may help determine which research 
areas the government might best invest in, and there must be 
investment.
    Moreover, the regulatory climate will have an enormous 
impact on the timing and nature of the hydrogen economy. 
Hydrogen will be a cost-competitive fuel in the coming decades 
only if one takes into account the social costs of current 
fuels, such as the pollution they generate and the dependence 
on foreign oil they promote.
    And the nature of future regulations will likely effect 
what sources of hydrogen we chose, and whether concerns about 
greenhouse gases have to be factored in to the design of 
hydrogen technologies. If we are going to make the right 
decisions about our research dollars now, we have to have a 
better idea of what our environmental concerns will be later.
    So we have got a lot of tough thinking ahead of us. I am 
pleased that we have such a distinguished panel with us to help 
us get started. And I invite the panelists to take their places 
at the witness stand. Mr. Hall.
    [The prepared statement of Mr. Boehlert follows:]
            Prepared Statement of Chairman Sherwood Boehlert
    It's a pleasure to welcome everyone here this morning to the 
Congress' first hearing on the President's Hydrogen Initiative.
    I think the President deserves applause from across the political 
and ideological spectrum for his forward-looking proposal. Whatever 
anyone thinks we should be doing right now to promote clean air and 
energy independence, we should all be able to agree that moving toward 
a hydrogen economy is what we need to strive for in the future. And the 
President has signaled in a forceful and prominent way that he is 
willing to commit the resources to help develop the technology for a 
hydrogen economy.
    The Hydrogen Initiative is the kind of forward-looking investment 
that the Science Committee has always promoted on a bipartisan basis. I 
look forward to adding language to authorize the Initiative in the 
Science Committee's portion of the comprehensive Energy Bill that is 
now slated to come before the House in the first week of April. We have 
tentatively scheduled the Science Committee's markup of our portion of 
the bill, known as H.R. 238, on March 20.
    I should note that industry also seems seriously committed to 
research and development work on hydrogen. I'm pleased with the 
announcement that GM and Shell have just made about their joint efforts 
to develop and demonstrate hydrogen fueling and vehicles. We need to 
see how hydrogen might work in everyday settings in the real world.
    But our enthusiastic support for the Hydrogen Initiative doesn't 
mean that we don't have any questions about it. Both the Administration 
and the Congress are going to have to do a lot more work to figure out 
exactly how to shape the Initiative.
    Here are some of the key questions we need to ask:

        1) LHow will we pay for the Initiative? Much of next year's 
        proposed funding comes from cutting other renewable energy R&D 
        programs. That's not acceptable.

        2) LWhat specific areas will the Initiative focus on and who 
        will perform the research? We will have to choose among 
        hydrogen sources and among different technologies, and we will 
        have to decide where the federal contribution can do the most 
        good.

        3) LWhat kinds of demonstration projects will truly advance the 
        transition to a hydrogen economy? The projects need to be true 
        tests of the technology, not one-of-a-kind distractions that 
        never get replicated.

        4) LWhat policy tools will need to be deployed to enable the 
        transition to a hydrogen economy and how will policy decisions 
        affect the nature of the research that gets conducted now? No 
        transportation revolution in American history has occurred 
        without massive government involvement, whether that meant 
        building canals, giving land to the railroads, developing 
        aircraft and airports, or constructing the interstate highway 
        system to name just a few examples. It would be absurd to think 
        that hydrogen will be an exception.

    I think this last point is critical. The magic of the marketplace 
alone is not going to create a hydrogen economy, at least not anytime 
soon. In addition to the huge technical hurdles, switching to hydrogen 
may entail enormous costs. We need to start thinking now about what 
policies will be necessary later because that may help determine which 
research areas the government might best invest in.
    Moreover, the regulatory climate will have an enormous impact on 
the timing and nature of the hydrogen economy. Hydrogen will be a cost-
competitive fuel in the coming decades only if one takes into account 
the social costs of current fuels, such as the pollution they generate 
and the dependence on foreign oil they promote.
    And the nature of future regulations will likely affect what 
sources of hydrogen we choose and whether concerns about greenhouse 
gases have to be factored into the design of hydrogen technologies. If 
we're going to make the right decisions about our research dollars now 
we have to have a better idea of what our environmental concerns will 
be later.
    So, we've got a lot of tough thinking ahead of us. I'm pleased that 
we have such a distinguished panel with us today to get us started. Mr. 
Hall.

    Mr. Hall. Mr. Chairman and Members of the Committee, thank 
you. It seems like it is only last week that we were in 
conference on energy legislation after more than a year and a 
half of working out how to get a comprehensive match on energy 
policy. These efforts failed, but they didn't fail because of 
any lack of duties of this committee. They didn't fail because 
of any lack of duty of the House itself. We passed the Bill, 
sent it over to them; we were in Session for day and night for 
a long, long time and came up with a zero. I think that 
legislation again this time, the very comprehensive research 
and development section of that bill could become the 
centerpiece of the legislation had it passed. And one good 
thing about that bill was that we have a President and a Vice 
President that understand energy. And we have a President and 
a--a President who will sign that type of legislation if we get 
it to him.
    So, I look forward to working with you in the weeks ahead 
to recreate the legislation with the hope and expectation that 
this time we are going to put a bill with their provisions in 
it and on the President's desk. Today, we have a hearing on 
hydrogen and it is appropriate that we start there since the 
President has announced new initiatives in that area.
    Last year, the Department of Energy rolled out the 
FreedomCAR Program to develop the technologies necessary to 
produce the hydrogen powered vehicles. We were concerned about 
the Department not paying sufficient attention to the 
infrastructure issues, and apparently they heard us because 
this year they are rolling out infrastructure programs, the 
Freedom Fuel Program.
    It is clear to me that without a hydrogen fuel 
infrastructure, these vehicles will never hit the streets, and 
we will never be able to realize that all the emissions savings 
possible unless we make the commitment to develop a hydrogen 
infrastructure.
    There are huge unanswered questions associated with the 
proposed infrastructure. Many of these questions, as you have 
stated very well, will involve costs and safety. Other 
questions center around how it is going to be setup. For 
example, will we rely on pipelines, or tank trucks, or tank 
cars to transport the hydrogen? Will it be distributed on a 
more centralized system to be developed?
    We hope to get into many of these type of questions with 
the fine panel we have here today. Before I yield time to Mr. 
Lampson, I want to thank the panel for being with us today and 
on such short notice. We look forward to receiving your 
testimony and appreciate your helping us to understand better 
these complexes. With that, Mr. Chairman, I need to yield just 
a minute or so, or two minutes, or five minutes, or 10 minutes 
to Nick Lampson for any comments he may have. I ask your 
unanimous consent that the rest of the Committee urge you to 
grant that permission.
    Chairman Boehlert. In the spirit of bipartisan cooperation, 
I am pleased to grant it.
    Mr. Hall. After all of my things I said, I get a little 
something out of that, don't I?
    Chairman Boehlert. The gentleman's time is extended for two 
additional minutes.
    Mr. Lampson. How about 30 seconds will be fine, Mr. Ranking 
Chairman; I thank you. And Mr. Chairman, I appreciate the time. 
I come from Southeast Texas, which has sometimes been called 
the energy capital of the world, so it is a real privilege to 
be able to serve as a ranking Member on the Science Energy 
Committee. And I am particularly pleased with what we are 
getting ready to listen to this morning on the use of hydrogen, 
because we do produce so much hydrogen in that area. As we 
learn how to distribute this across the country I think it is 
going to be something extremely important for that area that 
continues to be the energy capital of the world.
    So I just wanted to add my thanks and appreciation for the 
panel to be coming, and I look forward to what you have to say. 
And I yield back my time. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Burgess follows:]
        Prepared Statement of Representative Michael C. Burgess
    Thank you Mr. Chairman, and thank you for having this hearing.
    With global oil reserves low after a two-month Venezuelan strike 
and trepidation about the effect on oil prices of a possible war with 
Iraq, gas prices are extremely high. The United States is especially 
vulnerable to international price fluctuations since we import 
approximately 55 percent of the oil we consume daily from foreign 
sources. Americans are reminded of the need for energy independence 
every time we pay exorbitant prices to fill up our cars.
    President Bush, during his State-of-the-Union Address, proposed a 
bold FreedomCAR and Hydrogen Fuel Initiative and estimated that the 
first car driven by a child born today could be powered by hydrogen 
technology. The President's budget would allow $1.2 billion in research 
funding for hydrogen-powered automobiles and hydrogen fuel technology.
    The goal of this new FreedomCAR program is to make hydrogen fuel 
cell technology a viable, affordable and convenient technology that we 
can use to power our automobiles. There are many benefits, including a 
cleaner environment, the possibility that research can spur further 
technological innovation, and especially greater energy independence.
    As a member of both the Science and Transportation and 
Infrastructure Committees, I recognize the unique challenges that we 
face as we discuss the possibility of converting into a hydrogen-fueled 
economy. We must discuss the appropriate role for the Federal 
Government in this process and examine our focus on FreedomCAR and 
hydrogen-based infrastructure, but we must do so within the context of 
a comprehensive energy policy. Our approach to energy policy must be 
comprehensive in nature so that we ensure achievement of our goal of 
national energy independence. In addition, we must also take seriously 
our responsibility to ensure that taxpayer dollars are spent wisely and 
must keep this in mind as we discuss the President's Hydrogen 
Initiative.
    So, again, Mr. Chairman, I thank you for this hearing in which we 
can address some our concerns.

    [The prepared statement of Mr. Costello follows:]
         Prepared Statement of Representative Jerry F. Costello
    Good morning. I want to thank the witnesses for appearing before 
our committee to discuss the President's Hydrogen Initiative, which is 
intended to lay the foundation necessary for making the transition to 
an economy powered by hydrogen. The President's Hydrogen Initiative 
envisions the transformation of the Nation's transportation fleet from 
a dependence on foreign oil and petroleum to the use of clean-burning 
hydrogen. Today, most hydrogen in the United States and about half of 
the world's hydrogen supply is produced from natural gas.
    However, the President plans to change this. On February 27, 2003, 
the President announced his Integrated Sequestration and Hydrogen 
Research Initiative entitled FutureGen. This project is a $1 billion 
government/industry partnership to design, build, and operate a nearly 
emission-free, coal-fired electric and hydrogen production plant. The 
prototype plant will serve as a large-scale engineering laboratory for 
testing and will expand the options for producing hydrogen from coal.
    As the Administration begins to consider locations for the new 
plant, I would hope they would consider Southern Illinois. The region 
is rich in high-sulfur coal reserves and the Coal Center at Southern 
Illinois University Carbondale (SIU-C) has been doing extensive work 
with hydrogen and coal. In addition, the geology of the region is well 
suited to the carbon-trapping technology to be developed. Carbon 
dioxide could be captured and sequestered in underground geological 
formations called aquifers. I am particularly interested in hearing 
from our witnesses the benefits of this new program and a timeline or 
target goal for expecting results.
    A greater reliance on hydrogen requires modification of our 
existing energy infrastructure to ensure greater availability of this 
new fuel source. The President's Initiative has left many questions 
unanswered, but I am hopeful our witnesses here today will provide more 
insight into the funding and technology challenges facing the Hydrogen 
Initiative.
    I again thank the witnesses for being with us today and providing 
testimony to our committee.

    Chairman Boehlert. Thank you, very much. With that, let us 
get right off with our very distinguished panel. This is the 
first hearing any place on Capitol Hill about this hydrogen 
initiative, and we have an expert panel of witnesses that I 
look forward to hearing from, consisting of David Garman, 
Assistant Secretary for Energy Efficiency and Renewable Energy 
at the U.S. Department of Energy, Dr. Alan C. Lloyd, 2003 
Chairman for the California Fuel Cell Partnership, Dr. Lloyd. 
Dr. Joan Ogden, Research Scientist, Princeton Environmental 
Institute. Dr. Larry Burns, Vice-President, Research 
Development and Planning for General Motors. And Don Huberts, 
Chief Executive Officer for Shell Hydrogen. We look forward to 
your testimony. We ask that you summarize in five minutes or 
so. The Chair is not going to be arbitrary on that. This is too 
important a subject to let 300 seconds be sufficient to have 
you say what you need to say to all of us, but we look forward 
to a very valuable and informative hearing. We start with you, 
Mr. Garman.

 STATEMENT OF DAVID K. GARMAN, ASSISTANT SECRETARY FOR ENERGY 
   EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY

    Mr. Garman. Thank you, Mr. Chairman, and thank you for this 
opportunity to discuss the advantages of a hydrogen energy 
economy and the pathway that gets us there. We envision a day 
when energy can be affordable, abundant, reliable, virtually 
pollution free, and carbon neutral. And the President's 
National Energy Plan explicitly recognizes the role that 
hydrogen can play.
    The President's Plan was released in May 2001, and 
important elements of that Plan related to hydrogen have been 
expanded upon with the FreedomCAR Partnership, announced in 
January 2002, the President's Hydrogen Fuel Initiative 
announced during his recent State of the Union Address, and the 
FutureGEN zero-emission coal fired electricity and hydrogen 
power plant initiative announced just last week. Mr. Chairman, 
your Committee has really demonstrated some key leadership on 
hydrogen. And by my count, I think I have appeared five times 
on hydrogen or hydrogen related technology in the last 19 
months.
    Chairman Boehlert. I give you frequent appearance points.
    Mr. Garman. With your guidance and under your Oversight, we 
have worked with industry, academia, the environmental 
community, and other stakeholders over the last two years to 
build a strong analytical foundation for these initiatives. And 
if I could just put it bluntly another way, these ideas were 
not cobbled together on the way to the podium for the State of 
the Union message. Instead, they converged to make possible a 
future where the primary energy carriers in our economy are 
hydrogen and electricity, eventually generated using 
technologies that do not emit any pollutants or carbon dioxide.
    We don't want to become overly dependent on any one method 
of generating electricity or hydrogen, and the advantage of 
hydrogen is that it can be produced from a variety of primary 
energy sources, including renewables, nuclear, and fossil 
energy. And the question why hydrogen and why now? One real 
driver for change is the situation that confronts us with 
regard to oil dependence in the transportation sector. The 
current gap between total U.S. consumption and net production-
able oil is roughly 11 million barrels per day. And this is a 
gap that we are unable to close with either regulation, or new 
domestic production, or even both. Although promoting 
efficiency in the use of oil and finding new domestic sources 
of oil are important short-term undertakings, under the long-
term a petroleum free option is eventually required.
    That is why the President, during his State of the Union 
Address, announced a ground breaking plan to transfer our 
nation's energy future from one dependent on foreign petroleum 
to one that utilizes hydrogen, which is the most abundant item 
in the universe. He has challenged us to be bold and 
innovative, to change our dependence on foreign energy, and to 
do this through hydrogen fuel cells.
    So our work is underway in earnest. And fortunately, we are 
not starting from scratch. We have a technology roadmap, a 
recently completed fuel cell report to Congress, regular 
progress reporting, and an internal posture plan, all of which 
have been in development for the past year or longer. Many on 
this panel have been participants in the development of some of 
these plans. And frankly, we realize that this is an initiative 
that is beyond the political time horizon of this 
Administration, and we have to lay a solid foundation for 
future Administrations that follow. So we want to be 
transparent and accountable in our planning, and we expect to 
achieve results.
    I will attempt to summarize these documents in just two 
slides.
    [Slide]
    Mr. Garman. First, we envision the transition of a hydrogen 
economy occurring in four phases. In phase one, government and 
private organizations will research, develop, and demonstrate 
critical path technologies prior to investing heavily in 
infrastructure. This phase is now underway and will enable the 
industry to make a decision on commercialization on vehicles in 
2015. The Fiscal Year 2004 Budget currently before Congress 
currently is consistent with the completion of a technology R&D 
phase by 2015.
    In phase two, transition of the marketplace could begin as 
early as 2010 for applications such as portable power and some 
stationary applications, and even earlier in rich applications 
where hydrogen related technologies meet or exceed consumer 
requirements. If an industry decision to commercialize fuel 
cell vehicles is made in 2015, mass market penetration of these 
vehicles can occur in 2020. As these markets become 
established, government can foster further growth by playing 
the role of early adopter and by creating policies that 
stimulate the market.
    As markets are established, this leads to phase three, 
expansion of markets and infrastructure. The start of phase 
three is consistent with the positive commercialization 
decision in the year 2015. That will attract investment and 
infrastructure for fuel cell manufacturing, hydrogen production 
and delivery.
    And phase four, which will begin around 2025 is the 
realization of the hydrogen vision, when consumer requirements 
will be met or exceeded, national benefits in terms of energy 
security and improved environmental quality are being achieved, 
and industry can achieve adequate return on investment and 
compete globally.
    If the transition unfolds as we have envisioned, this graph 
illustrates what happens to oil demand in the light duty 
vehicle category and when it happens. This scenario results in 
11 million barrels per day by 2040 compared to what would 
otherwise be consumed in that year. We currently import today 
between 10 and 11 million barrels per day.
    Mr. Chairman, the path to a hydrogen economy is guided by a 
strong national commitment by the President and by leaders in 
Congress, a diversified technology portfolio, and an approach 
that relies on public/private partnership. We are excited about 
the prospects for this future, and we look forward to working 
with Congress, and this committee, and the private sector to 
make it happen. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Garman follows:]
                 Prepared Statement of David K. Garman
    Mr. Chairman, Members of the Committee, I appreciate the 
opportunity to testify before you today on ``The Path to a Hydrogen 
Economy.''
    Energy is the life-blood of our nation. It is the mainstay of our 
standard of living, our economy, and our national security. The 
President's National Energy Plan, entitled ``Reliable, Affordable and 
Environmentally Sound Energy for America's Future,'' is the blueprint 
for the energy future we seek, and it makes several recommendations 
with regard to hydrogen. Specifically, it directs the Secretary to 
develop next generation energy technology, including hydrogen; it 
recommends that our research and development (R&D) programs related to 
hydrogen and fuel cells be integrated; and it recommends that 
legislation reauthorizing the Hydrogen Energy Act enjoy the support of 
the Administration.
    Since the release of the President's energy plan in May 2001, the 
President and Secretary Abraham have unveiled several exciting new 
initiatives related to hydrogen. Most notable are the FreedomCAR 
partnership announced in January 2002; the President's Hydrogen Fuel 
Initiative announced during the State of the Union address in January 
2003; and the ``FutureGEN'' zero-emission coal-fired electricity and 
hydrogen power plant initiative announced just last week. Each of these 
initiatives plays a particularly important role in a hydrogen energy 
future. Each will help make possible a future in which the principal 
``energy carriers'' are hydrogen and electricity, eventually generated 
using technologies that do not emit any pollutants or carbon dioxide.
    Our present energy picture is significantly different than a 
potential hydrogen energy future. A diagram developed by Lawrence 
Livermore National Laboratory [Figure 1] represents the current 
``energy flows'' in the U.S. economy. It should not be regarded as a 
highly precise representation of these flows, but it is extremely 
useful in helping policy-makers visualize complex energy data.



    The primary energy inputs, including coal, oil, natural gas, 
nuclear, and renewable energy are shown on the left. The relative sizes 
of the lines or ``pipes'' represent the relative contributions of the 
primary energy inputs, the impacts of energy conversion, and the end 
uses.
    Using this it is easier to visualize how the energy flows move 
toward electricity generation or through the different sectors of our 
economy. The diagram makes clear some inescapable features of our 
current energy economy:

         LWe enjoy a diversity of primary energy inputs, 
        although there are imbalances;

         LWe are heavily dependent on oil, coal, and natural 
        gas;

         LThe transportation sector is almost entirely 
        dependent on oil, a majority of which is imported;

         LA large amount of energy is rejected or wasted, and 
        transportation is the least efficient of the three sectors of 
        our energy economy;

         LLooking more specifically at oil as we do in the next 
        graph [Figure 2] we see that there is an imbalance between 
        petroleum demand for transportation and domestic production, 
        and that automobiles and light trucks are the dominant driver 
        behind that demand.
        
        

    In the early 1990s, the petroleum required just by our highway 
vehicles surpassed the amount produced domestically. The ``gap'' 
between production and transportation demand is growing--and is 
projected to keep growing. The current gap between total U.S. 
consumption and net production of oil is roughly 11 million barrels per 
day. Promoting efficiency in the use of oil, and finding new domestic 
sources of oil, are both important short-term undertakings. But over 
the long-term, a petroleum-free option is eventually required.
    Our energy challenge is further complicated by another important 
factor--the pollutants and carbon dioxide emissions resulting from our 
use of energy. We have made tremendous progress in reducing pollutant 
emissions from our cars and trucks as well as our stationary power 
sources, and we will continue to make incremental gains through 
regulatory approaches such as the Tier II standards. But for true 
efficiency gains, we must reach to develop a wholly new approach to 
energy.
    In his recent State of the Union address, President Bush announced 
a groundbreaking plan to transform our nation's energy future from one 
dependent on foreign petroleum, to one that utilizes the most abundant 
element in the universe--hydrogen.
    Hydrogen can be produced from diverse domestic sources, freeing us 
from a reliance on foreign imports for the energy we use at home. 
Hydrogen can fuel ultra-clean internal combustion engines, which would 
reduce auto emissions by more than 99 percent. And when hydrogen is 
used to power fuel cell vehicles, it will do so with more than twice 
the efficiency of today's gasoline engines--and with none of the 
harmful air emissions. In fact, fuel cells' only byproducts are pure 
water and some waste heat.
    But ultimate success in the mass-market penetration of hydrogen 
fuel cell vehicles requires a hydrogen-based infrastructure that 
performs as well as the petroleum-based infrastructure we now have.
    Our current gasoline/hydrocarbon infrastructure has been forged in 
a competitive market. It is ubiquitous and remarkably efficient. It can 
deliver refined petroleum products that began as crude oil half a world 
away to your neighborhood for less than the cost of milk, drinking 
water, or many other liquid products you can buy at the supermarket. We 
are currently bound to that infrastructure. We have no alternative. 
Eventually replacing it with something different will be extremely 
difficult. But that is what we must do if we expect to achieve success 
with the FreedomCAR partnership. Drivers must be able to go anywhere in 
America and to refuel their hydrogen-powered vehicle before they will 
be comfortable purchasing one.
    That is why the President, in his State of the Union address, 
proposed that we in the Federal Government significantly increase our 
spending on hydrogen infrastructure R&D, including hydrogen production, 
storage, and delivery technologies, as well as fuel cells. Over the 
next five years, we plan to spend an estimated $1.7 billion on the 
FreedomCAR partnership and Hydrogen Fuel Initiative, $1.2 billion of 
which is for the Hydrogen Fuel Initiative, which includes resources for 
work on hydrogen and fuel cells. Of the $1.2 billion figure, $720 
million is ``new money.''
    We will not build the infrastructure. The private sector will do 
that as the business case becomes clear. But as we develop the 
technologies needed by the vehicles, we will also develop the 
technologies required by the infrastructure. In cooperation with DOT, 
we will convene the parties needed for technology partnerships, we will 
collaborate on the needed codes and standards, and we will promote 
international cooperation in this effort.
    There is growing worldwide interest in hydrogen and fuel cell 
technology, as reflected in the dramatic increase in public and private 
spending since the mid-1990s in the U.S. and elsewhere. We estimate 
current investments across the U.S. government agencies to be well over 
$200 million, about $120 million of which is for hydrogen and polymer 
electrolyte membrane (PEM) R&D. In 2003, the Japanese government nearly 
doubled its fuel cell R&D budget to $268 million, and in March 2003 
will launch a joint government/industry demonstration of hydrogen fuel 
cell vehicles, including the deployment of more than seven new hydrogen 
refueling stations. Governments and companies in Canada, Europe, and 
Asia are also investing heavily in hydrogen research, development and 
demonstration. For example, ten new hydrogen refueling stations will be 
built in Europe over the next few years to fuel hydrogen-powered buses. 
By comparison, the U.S. currently has approximately ten hydrogen 
refueling stations, and plans several more as appropriate to fund 
limited ``learning'' demonstrations to help identify R&D needs to make 
hydrogen and fuel cell technologies cost competitive and 
technologically viable.
    Understandably, there is an aspect of economic competitiveness to 
all this as well. A recent report by PricewaterhouseCoopers projects 
global demand for all fuel cell products (in portable, stationary, and 
transportation power applications) to reach $46 billion per year by 
2011 and to grow to more than $2.5 trillion per year in 2021. The 
United States should strive to be a leader in hydrogen and fuel cell 
technology development and commercialization in order to secure a 
competitive position for future energy technology innovations, new 
products, and service offerings. Without a change in direction, the 
more than 19 million barrels per day of petroleum projected to be 
imported to the U.S. by 2025 will cost our economy an estimated $188 
billion per year (based on EIA projections) in real 2001 dollars.
    Consistent with the questions posed by the Committee in its letter 
of February 20, 2003, I will now elaborate further on our approach, the 
benefits we expect, the technology challenges we face, the timing of 
the transition toward a hydrogen economy, and the budget we believe is 
needed to meet our goals.

Approach

    In November 2001, about the time I was first testifying before this 
committee on the subject of hydrogen, we began a formal hydrogen vision 
and ``roadmapping'' effort. Working with industry, stakeholders and 
academia, the Department developed a national approach for moving 
toward a hydrogen economy--a solution that holds the potential to 
provide virtually limitless clean, safe, secure, affordable, and 
reliable energy from domestic resources.
    To realize this vision, the Nation must develop advanced 
technologies for hydrogen production, delivery, storage, conversion, 
and applications. The National Hydrogen Energy Technology Roadmap, 
which we released in November 2002, identifies the technological 
research, development, and demonstration steps required to make a 
successful transition to a hydrogen economy.
    This past fall, the Department also developed an internal Hydrogen 
Posture Plan (Plan) to support the President's Hydrogen Fuel 
Initiative. The Plan identifies specific technology goals and 
milestones that would accelerate hydrogen and fuel cell development to 
enable an industry commercialization decision by 2015. My Office of 
Energy Efficiency and Renewable Energy led the development of the plan 
in collaboration with the Office of Fossil Energy, the Office of 
Nuclear Energy, the Office of Science and the DOE's Office of 
Management, Budget, and Evaluation.
    The Plan integrates the Department's planning and budgeting for 
program activities that will help turn the concept of a hydrogen-based 
economy into reality. More specifically, the Plan outlines the 
Department's role in hydrogen energy R&D in accordance with the 
National Hydrogen Energy Roadmap. The Plan is currently in draft and 
under policy review. The development of the plan could not directly 
involve industry and other non-government stakeholders because of the 
inclusion of fiscal year 2004 through 2008 budget planning. Their input 
to other efforts such as the Hydrogen Roadmap, the Hydrogen Vision, the 
FreedomCAR Partnership Plan, and the Fuel Cell Report to Congress 
(which included four workshops with industry) has been considered in 
the development of the Posture Plan.
    To ensure that the Department continues to conduct its hydrogen 
research in a coordinated, focused, and efficient manner, the DOE 
Hydrogen Working Group that developed the Posture Plan will continue to 
function. This Working Group will be chartered to meet regularly and 
perform the following functions:

         LEvaluate the progress of the Department's hydrogen 
        and related activities with regard to milestones and 
        performance goals;

         LStrengthen information exchange on technical 
        developments;

         LHelp ensure that the various activities (e.g., 
        budgeting, execution, evaluation, and reporting) remain well 
        coordinated;

         LProvide suggestions for management improvements and 
        stronger technical performance; and,

         LCoordinate, through the Office of Science and 
        Technology Policy, with other agencies (e.g., DOD, DOT, NASA, 
        Commerce) conducting similar R&D activities to ensure our 
        efforts our complementary and not duplicative.

    In anticipation of an energy bill this year, the Department is also 
preparing to form a Hydrogen Technology Advisory Committee (HTAC). This 
advisory group, composed of a diverse group of experts from industry, 
academia, and other stakeholders, would provide input to the Secretary.
    My testimony today draws heavily from DOE's planning efforts 
including the Posture Plan, the FreedomCAR Partnership Plan, the 
Hydrogen Roadmap, and the Fuel Cell Report to Congress. These documents 
describe how DOE will integrate its ongoing and future hydrogen R&D 
activities into a focused Hydrogen Program. The program will integrate 
technology for hydrogen production (from fossil, nuclear, and renewable 
resources), infrastructure development (including delivery and 
storage), fuel cells, and other technologies supporting future hydrogen 
fueled vehicles. Successful implementation of the Administration's 
integrated plans and activities is critical to the FreedomCAR 
partnership and Hydrogen Fuel Initiative. Coordinating hydrogen 
activities within DOE and among the federal agencies will improve the 
effectiveness of our research, development, and demonstration (RD&D) 
activities and strengthen its contribution to achieving the technical 
milestones on the road to a hydrogen economy.

Benefits

    The Administration has committed to a large investment in hydrogen 
and fuel cells because it is convinced that the potential benefits of 
moving to a hydrogen economy are enormous. We can eventually eliminate 
our dependence on foreign energy sources. We can also maintain our 
transportation freedoms, the mobility that is so important to our 
quality of life and healthy economy. We can dramatically improve our 
air quality by eliminating polluting emissions from vehicles. Finally, 
hydrogen-powered vehicles can benefit our economy by reducing the 
financial drain associated with foreign energy purchases and by 
sustaining a strong international competitiveness in the transportation 
arena.
    The development of hydrogen and fuel cells promises clear economic 
and environmental benefits to the United States. Diversifying our 
energy resources, particularly through the expansion of hydrogen in 
transportation, will stimulate new markets and strengthen U.S. 
flexibility and economic resiliency in many other sectors. Achievement 
of hydrogen technology goals, complemented by supportive regulations 
and policies, will pave the way for hydrogen's rapid growth as an 
energy carrier over the next several decades. The full extent of life-
cycle cost and environmental benefits will become clearer as 
development and validation progresses with respect to the various 
production, conversion and distribution options.
    To be successful we must make sure that we not only overcome the 
technical barriers, but also that these technologies are affordable and 
accessible to the average consumer. It will only be through a sweeping, 
market-driven replacement of current technologies that the desired 
societal benefits can be reached.
    Essential to rapid success and full technology utilization is the 
involvement of those industries that will have critical roles in the 
decisions to commercialize and in the manufacture of the necessary 
products. The development effort is shared by industry, both the 
automotive manufacturers and the energy companies, through their 
participation in the FreedomCAR Partnership and in the Hydrogen Fuel 
Initiative.
Energy Diversity
    Hydrogen can be supplied in large quantities from domestic fossil, 
nuclear and renewable resources. This mix of currently available and 
developing technology could provide a transition from traditional to 
next generation energy technologies benefiting society with reliable 
and affordable energy in the near- and long-term. Hydrogen and fuel 
cells can catalyze the establishment and utilization of a viable 
transportation market for nuclear energy, domestic coal supplies, and 
renewables. [Carbon capture and sequestration can further reduce 
emissions from high carbon sources of hydrogen such as coal.] The fact 
remains, though, that our nation possesses the necessary resources to 
produce large quantities of hydrogen.
Transportation
    Every day, eight million barrels of oil are required to fuel the 
over 200 million vehicles that constitute our light duty transportation 
fleet. By 2025, the Nation's light vehicle energy consumption is 
projected to grow to as much as 14 million barrels per day of petroleum 
or its energy equivalent. Fuel cell vehicles could provide more than 
twice the efficiency of conventional vehicles. Figure 3 shows a 
projection of the possible effect of introducing hydrogen-fueled 
vehicles on our nation's oil consumption. With the assumptions used in 
this scenario, hydrogen fueled fuel cell vehicles could make dramatic 
reductions in petroleum use. This scenario results in 11 million 
barrels per day savings by 2040 compared to what would otherwise be 
consumed in that year.



    The Federal Government's role is to accelerate hydrogen and fuel 
cell development to enable industry to make a commercialization 
decision by 2015. But the manufacture and marketing of hybrid, fuel 
cell or other advanced vehicles will be industry's responsibility. The 
government's role, however, can be broader than the removal of 
technical barriers and the reduction of technology costs. In 
cooperation with DOT, we can also contribute to the pace of both 
industry and market acceptance by overcoming institutional barriers 
such as those associated with achieving common codes and standards 
necessary for safe use of hydrogen and fuel cell technologies.
Fuel Cells for Stationary Power
    Hydrogen can also be used in stationary fuel cells, engines and 
turbines to produce power and heat. In order to meet our growing 
electrical demands, the Energy Information Administration estimated 
that electricity generation will have to increase by two percent per 
year (EIA Annual Energy Outlook 2002). At this rate, 1.5 trillion kWh 
of additional electricity generation capacity will be needed by 2020. 
Along with aging infrastructure, requirements for reliable premium 
power, and market deregulation, this increasing demand opens the door 
for hydrogen power systems and potential societal benefits. For 
example, using ten million tons of hydrogen per year to provide 150 
billion kWh of the Nation's electricity (just ten percent of the added 
generation) could avoid 20 million tons per year of carbon dioxide 
emissions. DOE will also support work in the area of fuel cells for 
portable power. While not important to overall petroleum reduction, 
these units will provide early operating and manufacturing experience, 
and should contribute to the reduction of fuel cell cost for PEM fuel 
cells.

Technology Challenges

    Let me now review the challenges to be faced and how these 
challenges are to be met. Achieving our vision will require a 
combination of technological breakthroughs, market acceptance, and 
large investments in a national hydrogen energy infrastructure. Success 
will not happen overnight, or even over years, but rather over decades; 
it will require an evolutionary process that phases hydrogen in as the 
technologies and their markets are ready. Success will also require 
that the technologies to utilize hydrogen fuel and the availability of 
hydrogen occur simultaneously.
    Some of the significant hurdles to be cleared include:

         LLower by a factor of four the cost of producing and 
        delivering hydrogen;

         LDevelop more compact, light weight, lower cost, safe, 
        and efficient hydrogen storage systems that will enable a 
        greater than 300 mile vehicle range;

         LLower by a factor of ten the cost of materials for 
        advanced conversion technologies, especially fuel cells;

         LMore effective and lower cost (by a factor of at 
        least ten) carbon-capture and sequestration processes (a 
        separate program critical to fossil-based production of 
        hydrogen);

         LDesigns and materials that maximize the safety of 
        hydrogen use; and,

         LThe development of needed codes and standards as well 
        as the education of consumers relative to the use of hydrogen.

    The Department has drafted a work breakdown structure associated 
with each of the critical areas identified in the Roadmap (production, 
delivery, storage, conversion, and end-use), and has identified 
milestones and decision points that are part of the effort. Examples of 
key program milestones that support FreedomCAR and achievement of a 
hydrogen economy include the following:

         LOnboard hydrogen storage systems with a six percent 
        capacity by weight by 2010; more aggressive goals are being 
        established for 2015;

         LHydrogen production at an untaxed price equivalent to 
        $1.50 per gallon of gasoline at the pump by 2010;

         LPolymer electrolyte-membrane automotive fuel cells 
        that cost $45 per kilowatt by 2010 and $30 per kilowatt by 2015 
        and meet 100,000 miles of service life; and,

         LZero emission coal plants that produce hydrogen and 
        power, with carbon capture and sequestration, at $0.79 per 
        kilogram at the plant gate.

    In the near future, we plan on partnering with energy companies to 
establish more specific goals related to technology and components 
needed to produce and distribute hydrogen using various fossil, nuclear 
and renewable pathways. In this exercise, we will be looking at the 
full range of hydrogen technology areas covered in the Roadmap.
    Advances in other technologies will also be necessary for the 
ability of a hydrogen-fueled vehicle to realize its full potential. 
These include:

         LImproved energy storage, (e.g., batteries that are 
        more durable, cheaper, and better performing);

         LMore efficient and cost effective electric motors;

         LInexpensive and more effective power electronics; 
        and,

         LBetter materials for lighter, but strong, structural 
        members.

    These technologies will enable hydrogen-fueled vehicles to be more 
efficient, and to help lower the vehicle cost to the consumer.
    In the near- to mid-term, most hydrogen will likely be produced by 
technologies that do not require a new hydrogen delivery infrastructure 
(i.e., from distributed natural gas). As RD&D progresses along 
renewable, nuclear, and clean coal and natural gas production pathways 
(including techniques for carbon sequestration) a suite of technologies 
will become available in the mid- and long-term to produce hydrogen 
from a diverse array of domestic resources. The economic viability of 
these different production pathways will be strongly affected by 
regional factors, such as feedstock availability and cost, delivery 
approaches, and regulatory environment.
    For hydrogen to become a viable fuel, advanced hydrogen storage 
technologies will be required, especially for automotive applications, 
where a driving range of at least 300 miles is needed. Current storage 
systems are too heavy, too large, and too costly. Technologies to 
convert hydrogen into useful energy--fuel cells and combustion 
technologies--must also be further improved to lower cost and improve 
performance.
    Detailed analysis of life-cycle costs and benefits for alternative 
hydrogen production pathways, carbon sequestration, and other elements 
will continue. ``Well-to-Wheels'' analyses conclude that the energy and 
environmental benefits depend greatly on how hydrogen is manufactured, 
delivered and stored, and on the economic feasibility of sequestration 
for fossil feed stocks. The results of these studies will help in 
making down-select decisions and to ensure that the relative merits of 
specific hydrogen pathways are evaluated properly and in comparison 
with other energy alternatives. Out-year planning will identify needs 
for RD&D on production and storage technologies, delivery 
infrastructure, and education and safety/codes and standards. Public 
education of consumers and local code officials must also be pursued 
concurrently with the RD&D.
    Finally, industry must develop and construct the infrastructure to 
deliver hydrogen where it is needed. We will work with the DOT to help 
industry develop a safe, efficient, nationwide hydrogen infrastructure. 
The hydrogen distribution infrastructure can evolve along with the 
conversion and production technologies, since much of the 
infrastructure that is developed for fossil-based hydrogen will also be 
applicable to renewable- and nuclear-based hydrogen. We will partner 
with industry to develop infrastructure in pilot projects, and industry 
will expand locally, regionally, and ultimately nationally.

Transition to a Hydrogen Economy

    We consider the transition to the hydrogen economy as occurring in 
four phases, each of which requires and builds on the success of its 
predecessor, as depicted in Figure 4. The transition to a hydrogen-
based energy system is expected to take several decades, and to require 
strong public and private partnership. In Phase 1, government and 
private organizations will research, develop, and demonstrate 
``critical path'' technologies and safety assurance prior to investing 
heavily in infrastructure. This Phase is now underway and will enable 
industry to make a decision on commercialization in 2015.



    The FY04 Budget currently before Congress is consistent with 
completion of the technology RD&D phase by 2015.
    Phase II, Transition to the Marketplace, could begin as early as 
2010 for applications such as portable power and some stationary 
applications, and as hydrogen-related technologies meet or exceed 
customer requirements. If an industry decision to commercialize 
hydrogen fuel cell vehicles is made in 2015, mass-market penetration 
can occur around 2020. Consumers will need compelling reasons to 
purchase these products; public benefits such as high fuel use 
efficiency and low emissions are not enough. The all-electronic car 
powered by hydrogen fuel cells (such as the General Motors Hy-wire) is 
one example of an approach to greater value delivery; it could offer 
the consumer improved performance through elimination of mechanical 
parts and greater design flexibility through the ``skateboard'' 
approach with ``snap-on'' bodies.
    As these markets become established, government can foster their 
further growth by playing the role of ``early adopter,'' and by 
creating policies that stimulate the market. As markets are established 
this leads to Phase III, Expansion of Markets and Infrastructure. The 
start of Phase III is consistent with a positive commercial decision 
for vehicles in 2015. A positive decision will attract investment in 
infrastructure for fuel cell manufacturing, and for hydrogen production 
and delivery. Government policies still may be required to nurture this 
infrastructure expansion phase.
    Phase IV, which should begin about 2025, is Realization of the 
Hydrogen Vision, when consumer requirements will be met or exceeded; 
national benefits in terms of energy security and improved 
environmental quality are being achieved; and industry can receive 
adequate return on investment and compete globally. Phase IV provides 
the transition to a full hydrogen economy by 2040.

Budget Outlook

    The Administration's FY 2004 Budget puts the program on track to 
meet the 2015 milestones. The Office of Energy Efficiency and Renewable 
Energy's (EERE) budget request of $256.6 million to support the 
President's FreedomCAR partnership and the Hydrogen Fuel Initiative 
breaks out as follows:

         LHybrid Vehicle Technologies    $91.1 million

         LFuel Cells    $77.5 million

         LHydrogen    $88 million

    Note that there is an additional $16.2 million requested by the DOE 
Offices of Fossil Energy ($11.5 million) and Nuclear Energy ($4 
million), and the Department of Transportation ($0.7 million), for 
hydrogen production and delivery activities. Additionally, there is $47 
million requested in DOE's Office of Fossil Energy for cross-cutting 
fuel cell systems and related technical issues.
    The President outlined $1.2 billion over the next five years for 
hydrogen and fuel cells to advance a commercialization decision by 15 
years, from approximately 2030 to 2015. This does not include amounts 
for carbon sequestration under the FutureGEN and related activities, 
nor does it include ongoing hydrogen and fuel cell R&D at other federal 
agencies (except for a subset of DOT spending). While the bulk of the 
effort will be within my office, the DOE Offices of Fossil Energy and 
Nuclear Energy, and the Department of Transportation will undertake 
significant efforts. In addition, we will work with the DOE Office of 
Science to explore how fundamental science can be applied to solve 
hydrogen and fuel cell barriers, and will coordinate our infrastructure 
work with DOT.

Conclusion

    Mr. Chairman, it will take a great deal to achieve this vision of a 
hydrogen energy future we are all talking about this morning. It will 
require careful planning and coordination, public education, technology 
development, and substantial public and private investments. It will 
require a broad political consensus and a bipartisan approach. Most of 
all, it will take leadership and resolve.
    The President has demonstrated his leadership and resolve. ``With a 
new national commitment,'' said the President during his State of the 
Union address, ``our scientists and engineers will overcome obstacles 
to taking these cars from laboratory to showroom, so that the first car 
driven by a child born today could be powered by hydrogen and pollution 
free.''
    A few days later at an event on energy independence featuring new 
uses for fuel cells including automobiles, the President reiterated his 
commitment to his new Hydrogen Fuel Initiative stating, ``The 
technology we have just seen is going to be seen on the roads of 
America. And it's important for our country to understand that by being 
bold and innovative, we can change the way we do business here in 
America; we can change our dependence upon foreign sources of energy; 
we can help with the quality of the air; and we can make a fundamental 
difference for the future of our children.''
    We believe that the benefits the President envisions are attainable 
within our lifetimes and will accrue to posterity, but they will 
require sustained work and investment of public and private financial 
resources. We at the Department of Energy welcome the challenge and 
opportunity to play a vital role in this nation's energy future and to 
support our national security in such a fundamental way.
    This completes my prepared statement. I would be happy to answer 
any questions you may have, either now or in the future.

    Chairman Boehlert. Thank you, very much. We will go to Dr. 
Lloyd. We will have to take a break to respond to the Call of 
the House. Dr. Lloyd.

     STATEMENT OF DR. ALAN C. LLOYD, 2003 CHAIRMAN FOR THE 
                CALIFORNIA FUEL CELL PARTNERSHIP

    Dr. Lloyd. Good morning, Mr. Chairman and members of the 
Committee. My name is Alan Lloyd, and I am Chairman of the 
California Resources Board, and as you indicated, I am also 
Chairman of the 2003 of the California Fuel Cell Partnership. 
My immediate predecessor in that role as Chairman, was in fact 
Don Huberts from Shell. And also from--to say that the 
partnership is a voluntary cooperative effort to demonstrate 
fuel cell vehicles and fuel--vehicle fueling options in a 
collaborate environment. And I am testifying today on behalf of 
the Partnership. I would also say that four of the five 
panelists are, in fact, working in that Partnership.
    The Partnership was created in 1999. Eight auto 
manufacturers, four energy providers, two technology providers, 
fuel cell companies, six government agencies, and ten associate 
partners, they are listed in my written testimony. I think the 
goals of the Partnership to demonstrate fuel cell powered 
electric vehicles on a day-to-day real-world driving conditions 
are not just our own. We test a variety of fuels and 
demonstrate the viability of an alternate fuel infrastructure, 
exploring the path to commercialization, and the key issue 
there of increased public awareness of fuel cell electric 
vehicles.
    Our energy members are working through the challenges of 
developing fuel infrastructure for fuel cell vehicles. 
Similarly, we are working very closely with the auto members. 
But given that of the brevity here, I would defer significant 
comments on infrastructure and the automotive technology there 
to my colleagues Don Huberts and Dr. Burns.
    The members of the Partnership have successfully placed 26 
fuel cell vehicles, 23 light duty, and three buses, and seven 
hydrogen fueling stations in California to day. The challenge 
that we have encountered have been overcome through the 
diligent attention of our members to technical success, 
collaboration, and raising public and stakeholder awareness. 
The Partnership expects to have up to 60 hydrogen vehicles and 
at least three additional stations operating in California by 
the end of 2004.
    The challenges to a broader implementation of fuel cell 
vehicles and fueling are four fold. The technical challenge on 
the vehicle, cost, both infrastructure and the vehicle 
expanding infrastructure, and education of the stakeholders. 
And as I indicated, more details are provided in my written 
testimony.
    The hydrogen fueling stations that have been successfully 
set in California to date have been a result of Partnership 
members working closely with local officials, including fire 
and building departments and hazardous materials officers to 
make them aware of the properties of hydrogen, general safety 
precautions, how to respond in an emergency. Once local 
officials are properly informed, a fueling station can be 
permitted and cited with full community support.
    The other issues relating to product standards, 
infrastructure expansion, I think is critical to the work in 
the Partnership here with the Society of Automotive Engineers 
and others. I would mention as an example as a station which is 
being used in renewable hydrogen--well not, just renewable 
hydrogen, this case is one of the transit stations where we 
have electrolysis of water providing hydrogen for some buses. 
That is augmented by a station we have with the partnership 
which uses hydrogen, which is brought in. And that is used at 
either 3,500 and 5,00 PSI.
    The important pieces on education I have indicated in my 
written testimony. I think public awareness, educating 
emergency responders, developing student curriculums I think is 
very, very important.
    I think addressing specifically the Bill before you in the 
Hydrogen Future Act; I think this is a good beginning. I think 
the commercialization of hydrogen fuel cells is a matter of 
national security, of which the motivation behind the Hydrogen 
Future Act. Security of energy supplies economic security, 
national security, and environmental security. Obviously, these 
huge stakes require us to be bold, innovative, and courageous.
    Our goal of commercializing hydrogen fuel-cell systems for 
energy supply and for transportation will require great 
economic change, and also social change. It can only be 
accomplished by the kind of public/private collaboration of 
what--in which the Partnership is one example.
    The President's recent policy announcement, has given the 
effort unprecedented momentum. The proposed revisions in of the 
Matsunaga Act, soon to be the Brown-Walker Act, provide us a 
framework for such a program. We know all too well how much our 
security is related to our limited sources.
    In respect to funding levels, President Bush has proposed 
1.2 billion for fuel cell vehicles and related hydrogen 
infrastructure for the next five years. Our members have 
supported this initiative enthusiastically. It provides an 
authorized level of about 500 million for fuel cells and 700 
million for hydrogen between Fiscal Year 2004 and 2008.
    I hope the Committee will adjust its authorities in both 
Title I and Title II. Chairman Boehlert has spoken favorable of 
the Program. I think this is a chance for the Committee to show 
its collective support.
    The Program outlined by the President for transportation 
and stationary fuel cell research and development, and hydrogen 
infrastructure has received the most attention, but achieving a 
hydrogen economy will require a comprehensive program. The 
large industry coalition outlined a plan in its document Fuel 
Cells and Hydrogen Path Forward. The document is consistent 
with the President's proposal, but identifies additional needs 
for research and in fuel cells as well as tax incentives, buy-
downs, and non-financial incentives to encourage investment in 
a hydrogen infrastructure and fuel cells.
    I think buying and using units may encourage the private 
sector to buy and use these units is the best way to facilitate 
the introduction to fuel cells and hydrogen. The Partnership is 
working together to develop and demonstrate hydrogen fueling 
infrastructure. There are technology needs in this area, but 
also we need sufficient resources to develop, test, and choose 
the best approaches.
    The Committee might want to modify the Bill language to 
recognize this priority and better focus the government's 
hydrogen activities.
    Similarly, on the fuel cell side, I would like to urge the 
Committee to give greater emphasis to demonstration for the 
government facilities and in the private sector. I can not 
stress that sufficiently because unless you get out there and, 
so to speak, kick the tires, the public doesn't get comfortable 
with that. We don't understand some of the issues. And both of 
these benefits would benefit the kind of integrations and 
cooperation that the Bill envisions.
    I think it is also important that the government give 
priority or stimuli to uniform and balanced International 
Standards for health and safety, and for working with industry 
on international component commercial standards. I note in the 
Bill we talked about quality measures. We found in the 
development of electric vehicles in California markets that 
voluntary consensus was impossible to achieve, for example, 
vehicle charging techniques.
    Speaking as a former Chair of the DOE's Hydrogen Technical 
Advisor Committee, I----
    Chairman Boehlert. Dr. Lloyd, could we ask you to wrap it 
up, we have to respond to the House? Okay, it appears that you 
and I collaborated on our opening statements, but I can assure 
the audience the independent thought.
    Dr. Lloyd. Okay, how much--how long do I have?
    Chairman Boehlert. One minute.
    Dr. Lloyd. Okay. I think as a member of the Chair--a former 
Chair of the DOE Technical Advisory Committee, I think it is 
important that that committee has its resources. I was 
frustrated when I was Chair that the recommendation of the 
Panel didn't get to the highest levels of DOE. I have 
confidence that as outlined here, if that authority is given, 
then in fact some of the additional Committee's Oversights and 
generation of reports may not be necessary.
    [The prepared statement of Dr. Lloyd follows:]
                  Prepared Statement of Alan C. Lloyd

Invited Testimony guidelines

    The testimony should describe the barriers to a hydrogen economy, 
and how the California Fuel Cell Partnership (CaFCP) is working to 
overcome those barriers. In particular, the Committee would like you to 
answer these questions:

        1) LWhat obstacles has the CaFCP faced in putting hydrogen 
        vehicles and infrastructure ``on the ground''? How have you 
        overcome these obstacles, and how do you plan to do so in the 
        future?

        2) LWhat elements should be included in the Department of 
        Energy's hydrogen program to both effectively develop hydrogen 
        technologies and promote their adoption?

        3) LWhat are the greatest hurdles the country will face in 
        converting to a hydrogen economy? To what extent is a federal 
        effort needed to clear the way?

Testimony to the Committee on H.R. 238

    Good Morning, Mr. Chairman and Members of the Committee. My name is 
Alan Lloyd. I am the Chairman of the California Air Resources Board 
(ARB).
    This year, 2003, I am also serving as the Chairman of the 
California Fuel Cell Partnership (CaFCP), a voluntary, cooperative 
effort to demonstrate fuel cell vehicles and vehicle fueling options in 
a collaborative environment. Per your request, I am testifying on 
behalf of the California Fuel Cell Partnership.
    California's active participation and support of the CaFCP is based 
on the potential of hydrogen fuel cell vehicles to help us attain 
health related air quality goals, as well as the energy security goals 
of our state and nation. Fuel cells operate on hydrogen, which can be 
derived from domestic resources and renewable energy. The only emission 
from a compressed or liquid hydrogen fuel cell vehicle is water. With 
the proper level of federal assistance, fuel cells can provide the 
long-term solution to the Nation's air quality and energy security 
problems.
    The CaFCP was established in April 1999. Its members include:

        1. LAuto manufacturers

            LDaimlerChrysler

            LFord

            LGM

            LHonda

            LHyundai

            LNissan

            LToyota

            LVolkswagen

        2. LEnergy providers

            LBP

            LExxonMobil

            LShell Hydrogen

            LChevronTexaco

        3. LFuel cell companies

            LBallard Power Systems

            LUTC Fuel Cells

        4. LGovernment agencies

            LCalifornia Air Resources Board

            LCalifornia Energy Commission

            LSouth Coast AQMD

            LU.S. Department of Energy

            LU.S. Department of Transportation

            LU.S. Environmental Protection Agency

    Ten Associate Partners assist with specific expertise to help meet 
the Partnership's goals:

        1. LHydrogen and fuel station suppliers

            LAir Products and Chemicals, Inc.

            LPraxair

            LPacific Gas & Electric

            LProton Energy Systems, Inc.

            LStuart Energy Systems

            LZ-Tek

        2. LMethanol fuel supplier

            LMethanex

        3. LTransit agencies

            LAC Transit, San Francisco Bay area

            LSunLine Transit Agency, Palm Springs area

            LSanta Clara Valley Transportation Authority, San 
        Jose

    Former chairs include:

         LJohn Wallace (retired), Ford Motor Co., 2000

         LFerdinand Panik (retired), DaimlerChrysler, 2001

         LDon Huberts, Shell Hydrogen, 2002

    The goals of the CaFCP are:

        1. LDemonstrate fuel cell-powered electric vehicles under day-
        to-day, real world driving conditions

        2. LTest a variety of fuels and demonstrating the viability of 
        an alternative fuel infrastructure

        3. LExplore the path to commercialization

        4. LIncrease public awareness of fuel cell electric vehicles

    The CaFCP maintains a ``fuel neutral'' position regarding the 
choice of feed stock fuel for fuel cell vehicles. It's the common sense 
thing to do at this stage of exploration, in order to gain insight and 
experience with all potential fuels. Our Energy members are working 
through the challenges of developing a fuel infrastructure for fuel 
cell vehicles. Their efforts include the installation of our ``home'' 
hydrogen station in West Sacramento, several small hydrogen stations 
that use natural gas reformation or electrolysis of water technologies, 
and a methanol station--methanol is a hydrogen carrier fuel that can be 
reformed to provide hydrogen. During this early stage, all of the 
vehicles have been powered by hydrogen. We will also be testing liquid 
fuels rich in hydrogen--methanol and a cleaner form of gasoline--so 
that we can learn more and determine what will best serve a successful 
commercial launch.
    The members of the CaFCP have successfully placed 26 fuel cell 
vehicles (23 light-duty vehicles and 3 buses) and 7 hydrogen fueling 
stations (West Sacramento, Richmond, Irvine, Palm Springs area, Los 
Angeles, Torrance--Honda and Toyota) in California to date. The 
challenges that we have encountered have been overcome through the 
diligent attention of our members to technical success, collaboration 
and raising public and stakeholder awareness. The CaFCP members expect 
to have 60 hydrogen fuel cell vehicles and at least 3 additional 
hydrogen stations (Davis, Auburn and LAX) operating in California by 
the end of 2003. In 2004, our transit agency associate partners will 
begin operation of seven 40-foot fuel cell buses.
    We believe we have made a great beginning. With additional pilot 
fleet demonstrations that will prepare markets for a nationwide 
transition, we are hopeful that we can help achieve the dream of an 
energy future based on hydrogen.

[What obstacles has the CaFCP faced in putting hydrogen vehicles and 
infrastructure ``on the ground''? How have you overcome these 
obstacles, and how do you plan to do so in the future?]

    The challenges to a broader implementation of fuel cell vehicles 
and fueling are four-fold: vehicle technical challenges, cost, 
expanding the fueling infrastructure and education of stakeholders.
Vehicle technologies
    The auto companies are addressing a number of challenges including 
onboard hydrogen storage, all-weather start-up and durability. I won't 
speak to these in detail, but suffice it to say that the vehicles being 
tested in California, while vastly improved over the versions available 
only a couple of years ago, are still early prototype or very limited 
production vehicles for early fleet trials. The good news is that all 
of the auto companies are confident and diligently working to resolve 
the remaining technical challenges.
Cost
    The cost of fuel cell technology needs to come down. Fuel cells and 
fuel cell vehicles are hand built today at great cost. While General 
Motors has established a cost target of $500 per kilowatt for fuel 
cells in stationary power applications in 2005, to be competitive with 
internal combustion engine vehicles, the cost must be reduced to 
perhaps $50 per kW. Achieving these cost targets will require advances 
in materials, manufacturing, and, most importantly, sufficient demand 
to reduce the cost of components. The CaFCP is not collectively 
addressing the cost challenge however, each member faces this hurdle 
everyday.
Infrastructure
    A fueling infrastructure for fuel cell vehicles must be 
established. This provides significant challenges including codes, 
standards, and expansion strategies.

1. Codes and Standards

    Virtually all the auto manufacturers have announced plans to begin 
vehicle demonstrations using compressed hydrogen fuel rather than 
producing the hydrogen onboard the vehicle by reforming another fuel. 
Providing hydrogen for consumers will require significant investment, 
massive public education, and modification of health and safety codes 
and recommended practices. Current codes and standards for hydrogen 
were not written with vehicle fueling in mind.
    The hydrogen fueling stations that have been successfully sited in 
California to date have been the result of CaFCP members working 
closely with local officials, including fire and building departments 
and hazardous materials officers, to make them aware of the properties 
of hydrogen, general safety precautions and how to respond in an 
emergency. Once local officials are properly informed, fueling stations 
can be permitted and sited with full community support.
    Regarding codes and standards pertaining to facility designs, we 
successfully permitted a unique headquarters facility in West 
Sacramento more than two years ago. The 55,000 square foot building 
houses hydrogen-safe work bays for the auto partners and Ballard, 
office space for CaFCP personnel, and has hydrogen and methanol fueling 
station on-site. We learned a lot in that process, and now are 
conducting a study with an engineering design firm to determine how 
such facilities, as well as parking structures and home garages, should 
be designed to accommodate hydrogen-fueled vehicles in the future. The 
goal is to ensure safety while minimizing the modifications and costs 
needed.
    As we move forward to install a broader fueling infrastructure, 
uniform national and state codes and will be important to streamline 
the siting and permitting process--and to allow fueling stations to be 
sited as commercial establishments. For example, the West Sacramento 
hydrogen station was required to be placed 75 feet from the 
headquarters building. Fortunately, there was enough space to 
accommodate the distance but this space requirement would prohibit 
hydrogen fueling stations in a commercial setting. Several of the CaFCP 
members are participating in code setting organizations such as the 
International Code Council (ICC) and National Fire Protection Agency 
(NFPA) to this end.

2. Product Standards

    A related area is component standards or recommended practices. 
Another challenge that was addressed by the CaFCP members was the lack 
of commonality of hydrogen refueling nozzles. The CaFCP members worked 
with the Society of Automotive Engineers (SAE) to give feedback for 
establishing a common standard for hydrogen fueling nozzles. In 
addition we have collected real-world data on hydrogen fueling of the 
vehicles and provided that to SAE. That same data was later utilized by 
SAE to improve upon the standard (pressurized) tank design used in 
natural gas vehicles to accommodate hydrogen in fuel cell vehicles.

3. Infrastructure expansion

    In order to expand the range of the hydrogen fuel cell vehicles, we 
are faced with the challenge of increasing the hydrogen fueling 
infrastructure. The CaFCP operates a ``home base'' fuel station at our 
headquarters in West Sacramento which is supplied with liquid hydrogen 
by Air Products & Chemicals and Praxair. Small stations are being 
placed throughout California to increase the distance a hydrogen 
vehicle can travel from ``home.'' We believe that these stations will 
create a network so that fuel cell vehicles will be able to move 
throughout California.
    An example of one such station is the CaFCP hydrogen satellite 
station--approximately 70 miles southwest of Sacramento at the Richmond 
Operating Division of AC Transit. The Stuart Energy appliance 
technology uses water electrolysis to generate hydrogen fuel on-site 
for vehicles. The advantages of the distributed hydrogen generation 
system is that it is convenient, easy to install and available 
immediately. The station is capable of supplying the fueling needs of a 
small fleet of vehicles on a daily basis. The entire integrated station 
consists of a high-pressure, high-purity hydrogen generator, a storage 
unit, and a hydrogen fuel dispenser that resembles a common gasoline 
dispenser. To fuel a vehicle, the driver simply swipes a ``smart'' card 
to activate the dispenser and attaches the nozzle to their vehicle's 
tank. The computer controls the amount and pressure of hydrogen that is 
dispensed and automatically shuts off when the tank is full. The entire 
procedure closely resembles today's consumer fueling procedure.
    Setting up a network of fueling stations dedicated to compressed 
hydrogen for fuel cell vehicles creates a stranded investment risk for 
developers. One of the CaFCP members, SCAQMD, has a plan to mitigate 
some of the risk by equipping new CNG stations with subsystems that are 
capable of dispensing hydrogen. The result will be a network of 10 to 
12 stations with the potential to refuel hydrogen. When fuel cell 
vehicles are introduced into nearby fleets in the 2004 to 2007 
timeframe, these stations can then be geared up for actual hydrogen 
refueling with the addition of a compressor specifically designed for 
hydrogen.
    The CaFCP bus program is being used to expand the hydrogen network 
for the CaFCP vehicles and educate the public on the safety and 
reliability of fuel cell vehicles. SunLine Transit Agency demonstrated 
the Ballard ZEbus (Zero Emission bus) hydrogen fuel cell bus for one 
year and currently operates a second fuel cell bus in regular fare 
service. The buses have provided officials and riders alike with an 
opportunity to experience the pollution-free transportation technology 
of the future and drew visitors from around the world. Since April 
2000, SunLine has generated hydrogen on site from two sources--solar 
power and natural gas.
Education
    The CaFCP and its members have placed a strong emphasis on raising 
awareness of fuel cell vehicles and fueling. Education is the key to 
acceptance of hydrogen fuel by the public, the government and industry. 
Our focus has been in three main areas: the public, stakeholders, and 
students.

1. Public awareness

    Awareness of fuel cells is growing. According to a recent survey 
conducted for CaFCP, a growing number of Californians look with favor 
on the development of fuel cell vehicles. Notably, the public by a wide 
margin approves of government support for pre-commercial demonstration 
of fuel cell technology and the development of alternative fueling 
stations. The CaFCP program reached 200,000 people in 2002. The three-
day Central Coast Road Rally allowed 100,000 people to get close to the 
vehicles; to date, 7,000 riders/drivers have personally driven in FCVs 
fueled with hydrogen at CaFCP events.

2. Emergency responders training

    Emergency responders are one of the first groups which the CaFCP 
has focused its education efforts. CaFCP created an Emergency Response 
(ER) guide for hydrogen fuel cell vehicles to supplement the U.S. DOT 
ER guide that does not contain hydrogen vehicle information. In 
addition the CaFCP has created a training program to educate first 
responders on general hydrogen safety as well as detailed hydrogen 
vehicle information, critical to safety in case of an accident. Last 
year we trained 35 responders representing 5 local agencies in the 
Richmond area (the location of our hydrogen satellite station). The 
feedback from the trained responders was that they believed the 
information to be critical to address this new technology. This year we 
plan to train 300 first responders located in areas where the fuel cell 
vehicle fleets will be located (10 agencies in the LA and San Francisco 
Bay regions).

3. Student curriculums

    An educational challenge facing California and the Nation is having 
enough qualified researchers and trained technicians. The CaFCP is 
working to create excitement among our next generation of drivers with 
science competitions and by provides learning kits to help middle and 
high school teachers find the best resources--including classroom 
curricula--for introducing to students the scientific principles of 
fuel cells and their fuels. SunLine Transit Agency and AC Transit have 
incorporated fuel cell technology into their apprenticeship training 
programs for heavy-duty vehicle mechanics. SunLine has also worked with 
the College of the Desert to design a curriculum to train future 
technicians in an alternative-fuel technology program. The curriculum 
is posted on the NREL AFDC website.\1\
---------------------------------------------------------------------------
    \1\ http://www.ott.doe.gov/educational-tools.shtml

[What elements should be included in the Department of Energy's 
hydrogen program to both effectively develop hydrogen technologies and 
---------------------------------------------------------------------------
promote their adoption?]

    The Committee has before it H.R. 238, which includes revisions to 
the Hydrogen Future Act. This is a good beginning. The 
commercialization of hydrogen and fuel cells is a matter of national 
security, the motivation behind the Hydrogen Future Act:

         LSecurity of energy supply, since hydrogen can be made 
        from abundant domestic sources;

         LEconomic security, since every million barrels of oil 
        we import each day at $30 per barrel costs us $10 billion a 
        year, not to mention the cost of securing those supplies;

         LNational security, since a hydrogen future would 
        reduce or eliminate oil-related international tensions and 
        provide a mechanism for more equitably sharing the benefits of 
        access to energy among all nations;

         LEnvironmental security, since fuel cell systems 
        running on hydrogen reduce and can even eliminate conventional 
        pollutants and net greenhouse gases.

    These huge stakes require us to be bold, innovative and courageous. 
Our goal of commercializing hydrogen and fuel cell systems for energy 
supply and for transportation will require great economic change, and 
also social change. It can only be accomplished by the kind of public-
private collaboration of which the CaFCP is only one example.
    The President's recent policy announcements have given the effort 
unprecedented momentum. The proposed revisions of the Matsunaga Act--
soon to be the Brown-Walker Act--provide us a framework for such a 
program. But I would urge the Committee to take the opportunity to add 
to the structure, to be bold, while the opportunity is ripe.
    In fairness, the authorities in the Matsunaga Act expired in 2001, 
and thus the programs embodied in Brown-Walker were developed several 
years ago. We know all too painfully how much our nation has changed 
since then. We know all to well how much our security is related to oil 
and its sources. Therefore, even though the Committee's markup schedule 
is ambitious, I would urge you consider the following changes.

        1. LFunding levels.

                a. LPresident Bush has proposed 1.2 billion for fuel 
                cell vehicles and related hydrogen infrastructure over 
                the next five years. Our members have supported this 
                initiative enthusiastically. It implies an authorized 
                level of about $500 million for fuel cells and $700 
                million for hydrogen between FY 2004 and FY 2008. I 
                hope the Committee will adjust its authorities in both 
                Title I and Title II. Chairman Boehlert has spoken 
                favorably of the program; this is a chance for the 
                Committee to show its collective support.

                b. LThe program outlined by the president for 
                transportation and stationary fuel cell research and 
                development and hydrogen infrastructure has received 
                the most attention, but achieving a hydrogen economy 
                will require a comprehensive program. A large industry 
                coalition has outlined a comprehensive plan in its 
                document, Fuel Cells and Hydrogen: The Path Forward.\2\ 
                That document is consistent with the President's 
                proposal but identifies additional needs for research 
                in high-temperature fuel cells, as well as tax 
                incentives, buy downs and non-financial incentives to 
                encourage investment in a hydrogen infrastructure and 
                fuel cells. In conjunction with the President's $1.2 
                billion, these programs if fully authorized would total 
                $2.5 billion over five years overall, a level 
                comparable to the authorization in H.R. 238 for other 
                mainstream energy research programs.
---------------------------------------------------------------------------
    \2\ Fuel Cells and Hydrogen: The Path Forward, B. Rose, February, 
2003. Available online at: www.fuelcellpath.org

        2. LProgram Focus. Buying and using units, and encouraging the 
        private sector to buy and use units, is the best way to 
---------------------------------------------------------------------------
        facilitate the transition to fuel cells and hydrogen.

                a. LThe members of the CaFCP are working together to 
                develop and demonstrate a hydrogen fueling 
                infrastructure. There are technology needs in this 
                area, but also we need sufficient resources to develop, 
                test and choose the best approaches. The Committee 
                might wish to modify the bill language to recognize 
                this priority and to better focus the government's 
                hydrogen activities.

                b. LSimilarly, on the fuel cell vehicle side, I would 
                like to urge the Committee to give greater emphasis to 
                demonstrations, both at government facilities and in 
                the private sector. Both these activities would benefit 
                from the kind of interagency cooperation that the bill 
                envisions; interagency programs would also help expand 
                the type and range of vehicles in use beyond passenger 
                cars. Now is not the time to limit our options.

                c. LIt is also very important that the government give 
                priority to stimulating uniform and balanced 
                international standards, for health and safety, and 
                work with industry on international component and 
                commercial standards. We found in the development of 
                electric vehicles for California markets that voluntary 
                consensus was impossible to achieve in, for example, 
                vehicle charging techniques.

        3. LOther areas.

                a. LSpeaking as a former chair of the Hydrogen 
                Technology Advisory Committee, I was pleased to see it 
                reauthorized.

                         i. LI would caution that it needs resources to 
                        do its job.

                         ii. LMy greatest frustration, however, was 
                        that its recommendations received insufficient 
                        attention from the U.S. DOE.

                        iii. LThe pending bill does have a mechanism 
                        for assuring that the recommendations at least 
                        are read, but that mechanism will need to be 
                        enforced.

                         iv. LWith a strong and visible HTAP, there 
                        would be no need in my opinion for additional 
                        National Academy of Sciences review nor for at 
                        least some of the reports and analyses required 
                        of the Secretary.

                b. LCost share is often extremely difficult for 
                entrepreneurs.

                         i. LThe cost share waiver language in the bill 
                        is a good start at addressing this problem. The 
                        Committee may wish to allow the Secretary to 
                        waive the cost share not only for high risk 
                        programs, but also for extraordinarily high 
                        reward programs.

                        ii. LI might also suggest the Committee 
                        consider a small ``Innovation Fund'' along the 
                        lines of the SBIR program, though perhaps with 
                        a higher program cost limit.

                c. LI would be remiss if I did not also encourage the 
                Committee to include enhanced air quality as one of the 
                stated goals of this program. A healthful environment 
                is a national consensus goal and a matter of national 
                security.

[What are the greatest hurdles the country will face in converting to a 
hydrogen economy? To what extent is a federal effort needed to clear 
the way?]

    The Federal Government will play a critical role in converting the 
United States into a hydrogen economy. Only an active partnership among 
the Federal Government, states, private industry and, ultimately, the 
public, can marshal the financial and human resources to do the job. 
The goals of the Federal Government's hydrogen and fuel cell vehicle 
programs should include reducing the cost of hydrogen generation and 
storage and providing purchase incentives for other public and private 
entities that want to be early adopters of this technology.
Cost reduction of hydrogen generation and storage
    A successful hydrogen economy will require efficient and cost-
effective hydrogen production and storage technologies. The CaFCP is 
investigating different hydrogen production technologies at satellite 
stations provided by the associate partners. Stuart Energy and Proton 
Energy Systems manufacture electrolyzers that use water and electricity 
to produce hydrogen. PG&E and Z-Tek reform hydrocarbon fuels to release 
their hydrogen content. The issue of hydrogen production is not only 
being examined in the United States. The Clean Urban Transportation in 
Europe (CUTE) fuel cell bus program consists of 3 buses in each of 10 
cities. Each project will produce hydrogen fuel by a technique that 
makes sense for the area that the project is located. The hydrogen will 
be produced from sources ranging from biomass to hydrocarbon fuels. 
Some of the hydrogen production techniques that produce the least 
emissions are the most economically challenged. The Federal Government 
is the only stakeholder that can sponsor the research and development 
necessary to reduce the cost of these clean technologies and get them 
into the market.
    The Federal Government's hydrogen program must focus on finding 
better ways to store hydrogen that will allow fuel cell vehicles to 
drive greater distances on a single fueling. Consumers demand a driving 
range that is currently not possible with the present, feasible, 
hydrogen storage onboard vehicles. Auto manufacturers need lightweight, 
high capacity, and affordable hydrogen storage to make fuel cell 
vehicles successful in the marketplace. This is one of the biggest 
challenges to the commercialization of hydrogen fuel cell vehicles and 
should not be underestimated or under funded.
Support for demonstrations (early adopters)
    The Federal Government has the ability to stimulate the early 
market for hydrogen as a transportation fuel by promoting hydrogen fuel 
cell vehicles for government fleets and providing early buy-downs for 
public fleets. While we believe the Partnership is the leading test 
effort in the world for fuel cell vehicles and hydrogen, California 
recognizes that a commercial strategy must of course be national. 
Therefore, additional pilot fleet demonstrations are necessary and the 
federal program should be national in scope.
    The CaFCP sponsored a study that was completed in 2001 to examine 
the commercialization process for fuel cell vehicles using different 
fuels--hydrogen was one of the scenario studies.\3\ The process for 
commercialization (no matter the fuel) includes a demonstration phase, 
a pilot phase, a decision to commercialize, and mass production. Fuel 
cell vehicles are emerging from the demonstration phase and must be 
placed in pilot fleets in order to continue down the path of 
commercialization.
---------------------------------------------------------------------------
    \3\ Bringing Fuel Cell Vehicles to Market: Scenarios and Challenges 
with Fuel Alternatives, Bevilacqua-Kinght, Inc., October, 2001. 
Available online at: http://www.cafcp.org/event--roundtable.html
---------------------------------------------------------------------------
    Two CaFCP members, Honda and Toyota, have already placed vehicles 
into government and university fleets in California. Several other auto 
members have expressed a desire to place fuel cell vehicles in fleets. 
The numbers of vehicles are small and the states need close cooperation 
and support from the Federal Government in order to place significant 
numbers of vehicles.
    For example, the U.S. DOT played a key role in placing orders for 
seven fuel cell buses that will arrive in California next year by 
assisting in the attainment of federal funds. The State of California, 
like many states, does not have the financial resources to support 
these very expensive pilot programs without federal assistance. Our 
transit bus demonstration program has been funded by over $16 million 
in local and state grants, but will need more federal funding to 
sustain the demonstration and evaluation periods beyond 2006. Fuel cell 
transit buses have the potential to become commercial in the next ten 
years. However, the initial buses are expensive and may not have the 
reliability of everyday buses. We project that we will need another 
generation of fuel cell bus demonstrations with improved fuel cells and 
more efficient packages. I believe there is a significant value to the 
Federal Government sharing the cost burden and gaining experience in 
California that can be shared in other states to maximize the payoff of 
every demonstration program dollar. I would like to urge the Committee 
to support--to the extent of its jurisdiction--multi-year funding under 
U.S. DOT for ongoing development of fuel cell bus programs as outlined 
in the National Fuel Cell Bus Technology Program initiative.
    Speaking as a member of the CaFCP, the State of California, our 
biggest challenge is placing significant numbers of hydrogen fuel cell 
vehicles within the State. The numbers of vehicles that we expect 
within the next five years do not warrant a significant increase in the 
capacity of the hydrogen fuel infrastructure that is not already 
planned. I believe it is of paramount importance for the State to work 
closely with U.S. DOT for hydrogen fuel cell buses, U.S. DOE and U.S. 
Department of Defense for hydrogen fuel cell vehicles and U.S. EPA to 
certify the vehicles in order to be placed in fleets. The U.S., not 
just California, is competing with Europe and Asia (particularly Japan) 
for the limited numbers of hydrogen fuel cell vehicles that the auto 
companies have the resources to provide in the early years. Presently, 
the only hydrogen fuel cell vehicle that has gone through the full 
development process, certification, and is built on line at a small 
volume factory is Honda's FCX. I congratulate Honda and admire the 
leadership they have shown.

Conclusion

    We must be dedicated in our efforts today to make hydrogen our fuel 
for tomorrow. It will take sustained cooperation between government 
agencies, industry leaders and nations on the leading edge of new 
technologies. Many challenges must be addressed but there are none that 
cannot be overcome. The ARB is participating in the CaFCP to ensure 
that the State of California takes advantage of every opportunity to 
accelerate a conversion to a hydrogen future. We cannot succeed without 
the support of the Federal Government.
    I appreciate the opportunity to testify today and urge you to do 
all that the Federal Government can to make the future fuel--hydrogen, 
the fuel of today. Thank you for your time and attention.

                      Biography for Alan C. Lloyd
    Alan C. Lloyd, Ph.D., was appointed as Chairman to the California 
Air Resources Board by Governor Gray Davis in February 1999.
    The Air Resources Board (Board), a branch of the California 
Environmental Protection Agency, oversees a $150 million budget and a 
staff of nearly 1,100 employees located in northern and southern 
California. The Board consists of eleven members appointed by the 
Governor with the consent of the Senate. All members serve ``at the 
pleasure of the Governor'' on a part-time basis, except the Chairman, 
who serves full-time.
    The Board's mission is to promote and protect public health, 
welfare and ecological resources through effective reduction of air 
pollutants while recognizing and considering effects on the economy. 
The Board oversees all air pollution control efforts in California to 
attain and maintain health-based air quality standards. In addition, 
the Board gives financial and technical help to 35 local districts 
establishing controls on industrial emissions. The Board is also 
responsible for the control of motor vehicle and consumer products air 
pollution, and the identification and control of toxic air 
contaminants.
    Dr. Lloyd most recently served as the Executive Director of the 
Energy and Environmental Engineering Center for the Desert Research 
Institute at the University and Community College System of Nevada, 
Reno. Previously, Dr. Lloyd was the chief scientist at the South Coast 
Air Quality Management District from 1988 to 1996, where he managed the 
Technology Advancement office that funded public-private partnerships 
to stimulate advanced technologies and cleaner fuels.
    As Chairman, Dr. Lloyd is committed to cultivate a mindset and an 
attitude throughout government, industry and society that zero- and 
near-zero emission technologies can be put to use now or in the 
immediate future to help the state meet its air quality goals. He 
initiated the environmental justice focus within the agency and led the 
efforts resulting in the adoption of the Environmental Justice Policy 
and actions to be followed up by the Board.
    Dr. Lloyd has given many presentations to national and 
international audiences, focusing on the viable future of advanced 
technology and renewable fuels, with attention to the urban air quality 
challenges faced by California and to the impact on global climate 
change. He is a major proponent of alternate fuels, electric drive and 
fuel cell vehicles eventually leading to a hydrogen economy. Dr. Lloyd 
has also authored many articles on alternative fuels and air pollution 
control technology, including Fuel Cells and Air Quality: A California 
Perspective; Electric Vehicles and Future Air Quality in Los Angeles; 
Air Quality Management in Los Angeles: Perspectives on Past and Future 
Emission Control Strategies; and Accelerating Mobile Source Emission 
Reductions: California's Experience and Recommendations to Developing 
Counties.
    Dr. Lloyd is the 2003 Chairman of the California Fuel Cell 
Partnership and is a co-founder of the California Stationary Fuel Cell 
collaborative. He is a past chairman of the U.S. Department of Energy 
Hydrogen Technical Advisory Panel (HTAP).
    Dr. Lloyd, 61, earned both his Bachelor of Science in Chemistry and 
Ph.D. in Gas Kinetics at the University College of Wales, Aberystwyth, 
U.K.

    Chairman Boehlert. Thank you very much, Dr. Lloyd.
    Dr. Lloyd. Thank you.
    Chairman Boehlert. We must go now. We will recess for 
approximately 15 minutes, and during that period you can confer 
with the high-level DOE Official to your right.
    [Recess]
    Chairman Boehlert. Before we start, I ask unanimous consent 
of a former colleague of ours, Dick Chrysler of Michigan be 
permitted to sit on the dais, not to ask any questions but to 
observe. And he doesn't have any special interest in this other 
than as a citizen. Mr. Chrysler, you are welcome to take a seat 
up here. And we will resume. Dr. Ogden, you are up. And then 
speak closely.

 STATEMENT OF DR. JOAN M. OGDEN, RESEARCH SCIENTIST, PRINCETON 
                    ENVIRONMENTAL INSTITUTE

    Dr. Ogden. Let us see, I guess the screen is up there. 
Well, good morning. It is a real pleasure to be here. My name 
is Joan Ogden. I am a research scientist at Princeton 
University, with a background in physics, and for the last, 
approximately, 15 years; I have conducted a number of technical 
and economic assessments of hydrogen and fuel cell energy 
systems. So today I am going to talk to you a little about what 
I see the prospects for large scale use of hydrogen in the 
future energy system.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Could you click that for me Larry, please, the next one? 
Thank you. First I am going to just mention a little about 
different options for producing hydrogen and delivering it. 
Hydrogen is actually widely used in the chemical and oil 
refining industries today, and about one percent of U.S. 
energy, and five percent of our natural gas use goes to making 
hydrogen. As you might expect, technologies for high scale 
hydrogen production, storage, and delivery by truck and 
pipeline are in commercial use today. And the merchant high in 
infrastructure delivers enough hydrogen by truck and pipeline 
to fuel perhaps one percent of U.S. cars, if they were all run 
on efficient fuel cell vehicles or hydrogen vehicles.
    Current hydrogen technologies are now being developed for 
use in energy systems. Most of the hydrogen is made from 
natural gas today, but there are a number of options for 
producing and delivering hydrogen. Dr. Garman mentioned these, 
most of them could be implemented using commercial or near 
commercial technology. In the longer term, you could make 
hydrogen from fossil fuel, such as natural gas or coal, 
possibly with the capture and sequestration of CO2, 
so it doesn't go into the atmosphere, renewables, such as bio-
mass. That would energy crops or wastes, wind, solar, or 
nuclear power. Hydrogen would cost more than current gasoline, 
but you could use it more efficiently.
    In your testimony, there are a couple of figures that show 
a number of different hydrogen production options. I just might 
mention of the ones shown in that written testimony of probably 
the nuclear term of chemical are not as far along. That is 
really in the laboratory stage. Most of the others are based on 
commercial or near-term technology.
    Using hydrogen in vehicles can reduce emissions and oil 
consumption compared to the conventional fuels. And I won't go 
on about this because it is very nicely shown in the graphs by 
Dr. Garman. But I might say that hydrogen vehicles using 
hydrogen from renewable, de-carbonized fossil or nuclear 
sources could have near zero emissions of greenhouse gases and 
air pollutants on a well-to-wheels basis. That is all the 
emissions involved in extracting the feedstock, producing 
hydrogen and using it.
    Externalities we think could become an important driver for 
hydrogen in the future. It is uncertain today what exact value 
you should assign to the cost of things like global warning, 
but hydrogen vehicles can offer what appear to be the lowest 
overall externalities cost of any option, and we think this may 
make it--help make it very competitive in the future.
    One of the barriers to a hydrogen economy, the current lack 
of a hydrogen infrastructure; unlike gasoline or natural gas, 
hydrogen is not delivered to consumers today. It is not so much 
a matter of the technology breakthrough being needed to do it; 
it is more of a matter of matching supply and demand as the 
system grows in a cost-effective way. Currently hydrogen end-
use technologies like fuel cells costs a lot. Some of the 
technologies could be more mature, let us say, adapting 
existing hydrogen technologies for a hydrogen energy economies 
could speed progress, particularly in areas like hydrogen 
storage onboard vehicles, small scale hydrogen production 
systems for use in refueling stations, and for fossil-hydrogen 
as a long-term option, CO2 sequestration.
    And finally, I would say there is a lack of policies of 
reflecting the external cost of energy presently. I think that 
policies would probably be required to bring about a hydrogen 
economy, including evaluation of externalities. Let me rather 
rephrase that to say I see a world where hydrogen is widely 
used as one where externalities be much more important than 
they are now. I think it will involve a real paradigm shift. I 
would see political will and policies in markets sort of 
evolving together, reflecting a profound change in how we view 
energy as a society.
    And we have begun to debate on that now, which I am very 
glad to see. I think it is a process that will take place over 
time. Certainly there are factors that could accelerate the 
adoption of hydrogen, with technical breakthroughs and things 
like storage that might make it easier to handle hydrogen and 
potential market pull of fundamentally new products and 
services that could be enabled by hydrogen in fuel cells. And I 
expect some of the other folks on the panel will talk some 
about those.
    Policies that might encourage use of hydrogen, the first 
couple of these are already happening, R&D on key concepts. The 
R&D programs are certainly addressing some of these; 
demonstration of hydrogen production infrastructure in end-use 
technologies through efforts like the California Fuel Cell 
Partnership. They also say there could be arousal for policies 
to encourage buy-down of hydrogen technology such as fuel cell 
and infrastructure. And finally, I would say policies to value 
externalities, emissions standards that be bates any number of 
things could help encourage the use of hydrogen.
    Just to mention, as everyone knows here, hydrogen is a 
long-term option. We will be in this for the long-haul, even 
for optimistic scenarios that might take several decades before 
hydrogen could impact emissions on a global scale. That having 
said, in the near-term it is important to do what we can now in 
terms of encouraging more efficient use of fossil resources, 
and the more efficient eternal combustion engine vehicles to 
address these while we are developing things like hydrogen and 
fuel cells, which we are going to need for the longer term.
    In conclusion, I just say, hydrogen and fuel cells, 
although they are long-term, they are potentially a very high 
pay off, and I think they deserve significant government 
support now. Insurance, if nothing else, so they will be ready 
in 15 to 20 years if we want to deploy them on a very wide 
basis. And I would like to see a comprehensive strategy on 
policies based on encouraging use of more of clean, efficient 
technologies available in the near-term, coupled with longer 
term strategy we seem to be embarking on, which would involve 
development of hydrogen fuel cells. Thank you.
    [The prepared statement of Dr. Ogden follows:]
                  Prepared Statement of Joan M. Ogden

INTRODUCTION

    Globally, direct combustion of fuels for transportation and heating 
accounts for about two thirds of greenhouse gas emissions, a 
significant fraction of air pollutant emissions and about two thirds of 
primary energy use. Even with continuing incremental progress in energy 
technologies, most energy forecasts project that primary energy use and 
emissions of greenhouse gases and air pollutants from use of fuels will 
grow over the next century, because of increasing demand, especially in 
developing countries. To stabilize atmospheric CO2 at levels 
of 450-550 ppm (a level that climate analysts suggest would avoid undue 
interference with climate), it will be necessary to significantly 
reduce carbon emissions from the fuel sector, even if the electric 
sector completely switches to non-carbon emitting sources by 2100 
(Williams, 2003). Energy supply security is a serious concern, 
particularly for the transportation sector, which depends almost 
entirely on fuels derived from crude oil.
    A variety of alternative fuels have been proposed that could help 
address future environmental and energy supply challenges. These 
include reformulated gasoline or diesel, compressed natural gas, 
methanol, ethanol, synthetic liquids from natural gas or coal such as 
Fischer-Tropsch liquids or dimethyl ether (DME), and hydrogen. Of 
these, hydrogen offers the greatest potential environmental and energy 
supply benefits. Like electricity, hydrogen is a versatile secondary 
energy carrier that can be made from a variety of widely available 
primary energy sources including natural gas, coal, biomass 
(agricultural or forestry residues or energy crops), wastes, solar, 
wind or nuclear power. Hydrogen can be used with high conversion 
efficiency and essentially zero emissions. If hydrogen is made from 
renewable, nuclear or decarbonized fossil sources (e.g., energy 
production from fossil fuels with capture and secure storage of 
carbon), it would be possible to produce and use fuels on a global 
scale with near zero emissions of air pollutants (nitrogen oxides, 
carbon monoxide, sulfur oxides, volatile hydrocarbons or particulates) 
or greenhouse gases. A future energy system based on electricity and 
hydrogen has long been proposed as an ideal long-term solution to 
energy related environmental and supply security problems (see Box 1, 
Hoffmann, 2001).
    Balancing hydrogen's attractions are the technical, economic and 
infrastructure challenges posed by implementing hydrogen as a new fuel. 
Commercial hydrogen production, storage and transmission technologies 
exist in the chemical industries, but optimizing them for widespread 
hydrogen distribution to consumers involves engineering and cost 
challenges. Hydrogen end-use technologies such as fuel cells are making 
rapid progress, but are still very expensive compared to existing power 
sources, although costs are projected to drop in mass production. 
Developing lightweight, compact, low cost hydrogen storage for vehicles 
remains an issue. Unlike gasoline or natural gas, hydrogen is not 
widely distributed today to consumers, and building a hydrogen 
infrastructure is seen as a daunting challenge.
    In this testimony, I review the status of hydrogen technologies, 
and briefly describe near-term and long-term options for production and 
delivery of hydrogen for energy uses. The economics and environmental 
and energy supply aspects of different hydrogen pathways are discussed. 
Barriers to widespread use of hydrogen are described. Various scenarios 
are suggested for how a transition might take place from today's energy 
system to a hydrogen economy. Finally, I discuss the role of public 
policy in bringing about a hydrogen economy.

STATUS OF TECHNOLOGIES FOR HYDROGEN PRODUCTION AND DELIVERY

Hydrogen Production
            Thermochemical Hydrogen Production from Fossil Fuels and 
                    Biomass
    Hydrogen is widely used today in the chemical and oil refining 
industries. In the United States about one percent of primary energy 
use and five percent of natural gas use goes to hydrogen production. 
Most hydrogen today is made thermo-chemically by processing 
hydrocarbons (such as natural gas or coal) in high temperature chemical 
reactors to make a synthetic gas or ``syngas,'' comprised of hydrogen, 
carbon monoxide (CO), carbon dioxide (CO2), water vapor 
(H2O) and methane (CH4). The syngas is further 
processed to increase the hydrogen content and pure hydrogen is 
separated out of the mixture.
    Steam Reforming of Natural Gas: About 95 percent of industrial 
hydrogen in the United States is produced thermo-chemically from 
natural gas via ``steam methane reforming,'' where natural gas reacts 
with steam in the presence of a catalyst to make a syngas. Steam 
methane reforming is a mature, commercial technology for large-scale 
hydrogen production for the chemical and oil refining industries. In 
many areas of the world where low cost natural gas is available, 
including the United States, steam reforming is generally the lowest 
cost source of hydrogen over a wide range of plant sizes. A variety of 
systems are under development and demonstration for small scale 
production of hydrogen from natural gas, at a scale appropriate for 
vehicle refueling stations or fuel cells in buildings.
    Coal Gasification: Hydrogen can also be produced at large scale by 
gasification of solid fuels such as coal or petroleum coke. The 
chemical process technologies to produce hydrogen from coal are 
commercially available. Advanced systems for production of electricity 
and hydrogen from coal with CO2 capture are under 
development.
    CO2 Capture and Sequestration: When hydrogen is made 
from fossil fuels, carbon dioxide can be separated, compressed, 
transported by pipeline and ``sequestered'' in secure underground 
storage sites such as deep saline aquifers or depleted oil and gas 
fields. This would allow continued use of fossil-derived transportation 
fuels, with near-zero emissions of carbon to the atmosphere. The 
technologies for capturing, transporting and injecting carbon dioxide 
into geological formations are well known in the oil industry where 
carbon dioxide is piped and injected into oil reservoirs for enhanced 
oil recovery. Several demonstrations of CO2 sequestration 
are ongoing in the United States and Europe. However, there are still 
many unanswered scientific and cost questions about long-term storage 
of carbon dioxide. Carbon capture and sequestration are important 
enabling technologies for fossil hydrogen as a long-term, low carbon 
emitting option.
    Gasification of Biomass and Wastes: Gasification of biomass or 
wastes (such as municipal solid waste) could be used to produce 
hydrogen, in a process similar to coal gasification. In regions with 
plentiful, low cost biomass resources, biomass gasification could be an 
economically attractive method of hydrogen production. The technologies 
to produce hydrogen via biomass gasification are near-term.
            Electrolytic Hydrogen Production
    In water electrolysis, electricity is passed through a conducting 
aqueous electrolyte, breaking down water into its constituent elements 
hydrogen and oxygen. Any source of electricity can be used, including 
intermittent (time varying) sources such as off-peak power and solar or 
wind electricity. Various types of electrolyzers are in use. 
Commercially available systems today are based on alkaline technology. 
Proton exchange membrane (PEM) electrolyzers have been demonstrated, 
are in the process of being commercialized and hold the promise of low 
cost. Experimental designs for electrolyzers have been developed using 
solid oxide electrolytes and operating at temperatures of 700 to 
900+C. High temperature electrolysis systems offer higher 
efficiency of converting electricity to hydrogen, as some of the work 
to split water is done by heat, but materials requirements are more 
severe. Advances in electrolysis technologies are likely to reduce 
costs and improve conversion efficiencies. The production cost of 
electrolytic hydrogen is strongly dependent on the cost of electricity. 
Electrolytic systems are generally competitive with steam reforming of 
natural gas only where low cost (1-2 cent/kWh) power is available. 
Electrolysis is a modular technology that can be used over a wide range 
of scales from household to large central hydrogen plants serving a 
large city. Small-scale electrolysis systems for hydrogen production at 
refueling stations are being demonstrated, as part of hydrogen vehicle 
programs.
    Hydrogen from Off-peak Power: Off-peak power could be a locally 
important resource for electrolytic hydrogen production, particularly 
in areas where low cost excess hydropower or geothermal power is 
available. However, the total amount of hydrogen that could be made 
from off-peak power is considerably less than projected future needs 
for fuels. While locally important, off-peak power is unlikely to 
supply all the hydrogen that would be needed in a hydrogen economy 
(Williams, 2003). Depending on the source of the off-peak electricity, 
the full fuel cycle emissions of carbon from hydrogen production could 
be zero (for hydropower or nuclear power) to quite large (for coal-
fired power plants without CO2 sequestration). (``Full fuel 
cycle'' emissions include all emissions associated with extraction of 
primary resources such as coal or natural gas, conversion of primary 
resources to hydrogen, hydrogen transmission to users, and hydrogen 
use. For vehicles, ``full fuel cycle'' emissions are also referred to 
as ``well-to-wheels'' emissions.)
    Hydrogen from Wind or Solar Power: It has been proposed that solar 
or wind electricity could be used to produce hydrogen electrolytically 
in a ``zero emission'' fuel cycle. Solar and wind are potentially huge 
resources that could produce enough hydrogen to satisfy human needs for 
fuels, with zero emissions of greenhouse gases and air pollutants. 
Solar photovoltaic (PV) and wind powered electrolysis are technically 
feasible: the issue is cost. Electrolytic hydrogen from intermittent 
renewable sources is generally two to three times more costly to 
produce than hydrogen made thermo-chemically from natural gas or coal, 
even when the costs of CO2 sequestration are added to the 
fossil hydrogen production cost. Solar or wind hydrogen costs more 
primarily because of the high cost of electricity input for 
electrolysis, as compared to the lower cost of feedstocks like natural 
gas or coal for thermo-chemical processes.
            Thermo-chemical water splitting cycles
    It is thermodynamically possible to split water directly into 
hydrogen and oxygen using heat at 4000 C, although is impractical to 
work at these high temperatures with current materials. However, water 
splitting can also be accomplished through a complex series of coupled 
chemical reactions driven by heat at 400-900 C from nuclear reactors or 
solar concentrators. A number of thermo-chemical water splitting cycles 
have been investigated for use with nuclear or solar heat (Yalcin, 
1989). A recent assessment of nuclear hydrogen production (Brown, 2002) 
identified the sulfur-iodine process as one of the most promising 
cycles. Thermo-chemical water splitting cycles are still undergoing 
research, and are not as technically mature as fossil hydrogen 
production systems such as steam reforming, coal gasification or water 
electrolysis, and should be considered a longer-term possibility. A 
recent analysis by Williams (2003) indicated that nuclear thermo-
chemical hydrogen might cost about 80 percent more to produce than 
hydrogen from coal with CO2 sequestration, assuming all the 
cost and performance goals are met for thermo-chemical processes and 
nuclear plants.
            Other Experimental Methods of Hydrogen Production
    Fundamental research is being conducted on a variety of 
experimental methods of hydrogen production including direct conversion 
of sunlight to hydrogen in electrochemical cells and hydrogen 
production by biological systems such as algae or bacteria. These 
methods are far from commercialization.
            Economics of hydrogen production systems
    In Figure 1, we estimate the capital cost of commercial and near-
commercial hydrogen production systems versus size. Capital costs are 
given in terms of dollars per kilowatt ($/kW) of hydrogen output versus 
plant size. The plant size is given in kW and in terms of the number of 
hydrogen fuel cell cars that could be fueled. Small hydrogen production 
systems suitable for use at refueling stations are shown at the left, 
and large central hydrogen plants at the right. Steam methane reformers 
(SMR) and coal gasification plants are shown with and without CO2 
capture. SMRs are available at both small and large size. When small 
SMRs are produced in quantity, with a standardized design, the capital 
cost is projected to decrease. (Note that the capital cost per kW is 
projected to fall by about a factor of 2 for each ten-fold increase in 
production of small SMR units. Small SMRs are under development, so 
these ``mass-produced'' costs have not yet been achieved in commercial 
systems.) Coal gasification systems are large plants that could serve 
about one million fuel cell cars. Coal gasification systems have a 
higher capital cost per unit of hydrogen output than steam reformers or 
advanced electrolyzers. We have also shown a data point for nuclear 
thermo-chemical hydrogen, although costs for this less developed option 
should be regarded as more uncertain than those shown for the other 
large scale technologies. Hydrogen production systems exhibit scale 
economy, both in plant size, and, for small systems in the number of 
units produced.
Hydrogen delivery to consumers: hydrogen storage, transmission, 
        distribution and refueling
            Hydrogen Storage
    Unlike gasoline or alcohol fuels, which are easily handled liquids 
at ambient conditions, hydrogen is a light-weight gas, and has the 
lowest volumetric energy density of any fuel at normal temperature and 
pressure. Thus, hydrogen must be stored as a compressed gas (in high 
pressure gas cylinders), as a very low temperature or cryogenic liquid 
at ^253+C (in a special insulated vessel or dewar) or in a 
hydrogen compound where the hydrogen is easily removed by applying heat 
(such as a metal hydride). All these storage methods for hydrogen are 
well known in the chemical industry.
    Large-scale bulk storage of industrial hydrogen is typically done 
as a compressed gas or a cryogenic liquid. Very large quantities of 
hydrogen can be stored as a compressed gas in underground geological 
formations such as salt caverns or aquifers.
    Hydrogen onboard storage systems for vehicles are bulkier, heavier 
and costlier than those for liquid fuels (like gasoline or alcohols) or 
compressed natural gas, but are less bulky and heavy than electric 
batteries. Even with these constraints, it appears that hydrogen could 
be stored in high pressure (5000 psi or 340 atmospheres) gas cylinders 
at acceptable cost, weight and volume for vehicle applications (James 
et al., 1996; Thomas et al., 1998). This is true because hydrogen can 
be used so efficiently that relatively little energy is needed onboard 
to travel a long distance.
    Innovative storage methods such as hydrogen adsorption in carbon 
nano-structures and chemical hydrides are being researched (DOE 
Hydrogen Storage Workshop 2002). Development of a novel hydrogen 
storage medium that required neither high pressure nor low temperature 
would not only facilitate use of hydrogen on vehicles, but could reduce 
hydrogen infrastructure costs and complexity as well.
            Hydrogen Transmission and Distribution
    The technologies for routine handling of large quantities of 
hydrogen have been developed in the chemical industries. Hydrogen can 
be liquefied at low temperature (^253+C) and delivered by 
cryogenic tank truck or compressed to high pressure and delivered by 
truck or gas pipelines. While most hydrogen is produced and consumed 
where it is needed, a small fraction (perhaps five percent) termed 
``merchant hydrogen'' is distributed via truck or pipeline to distant 
users. The merchant hydrogen system could provide some of the 
technological building blocks to put a hydrogen refueling 
infrastructure in place. Developing a hydrogen infrastructure for 
vehicles poses special challenges in matching hydrogen supply to 
demand, discussed in the next section (chicken and egg problem).
    There are several hundred miles of high-pressure hydrogen pipelines 
in operation in the United States and in Europe. Long distance hydrogen 
pipeline transmission costs perhaps 1.5-3 times as much as natural gas 
transmission per unit of energy delivered.
    For local distribution of hydrogen to users such as refueling 
stations, high pressure, small diameter pipelines analogous to natural 
gas utility ``mains'' might be used. The cost of building local 
distribution pipelines through an urban area is likely to be quite 
high, on the order of $1 million/mile, depending on the area. A large 
and geographically dense demand would be required for cost-effective 
local hydrogen pipelines. This might not occur until 10-25 percent of 
the cars in a typical urban area converted to hydrogen.
    Like electricity, hydrogen can be made from a variety of widely 
available primary sources. This is quite different than the situation 
for natural gas or oil, which occur in limited geographical areas. 
Moreover, it is usually less expensive to bring a primary energy source 
natural gas or coal to a hydrogen plant located at the ``city gate,'' 
than it would be to make hydrogen at the gas field or coal mine and 
pipe it to the city. It is unlikely that transcontinental hydrogen 
pipelines would be built, unless there was a compelling reason to make 
hydrogen in a particular location far from demand. Rather hydrogen 
would be derived from regionally available resources.
            Hydrogen Refueling Stations
    The design of hydrogen refueling stations depends on how hydrogen 
is stored onboard the car, as well as demand patterns, and how many 
cars are served per day. A number of approaches are being tried for 
refueling hydrogen vehicles. There are currently about 60 hydrogen 
refueling stations worldwide for experimental vehicles.

NEAR-TERM AND LONG-TERM PATHWAYS FOR HYDROGEN PRODUCTION AND DELIVERY

    In Figures 2 and 3, we illustrate various options for supplying 
hydrogen transportation fuel in the near-term and long-term. (It is 
assumed that fuel is delivered to cars as a high pressure gas.)
    Near-term options include:

         LCentral steam reforming of natural gas with 
        distribution of hydrogen via compressed gas or liquid hydrogen 
        truck or pipeline.

         LRecovery of hydrogen from chemical processes with 
        distribution of hydrogen.

         LOnsite production of hydrogen via small scale steam 
        reforming of natural gas at the refueling station.

         LOnsite production of hydrogen via small scale water 
        electrolysis at the refueling station.

    Long-term central hydrogen supply options include:

         LCentralized production of hydrogen via electrolysis 
        with distribution of hydrogen.

         LSolar or wind powered electrolysis.

         LGasification of coal, petcoke, biomass or wastes.

         LThermo-chemical water splitting powered by high 
        temperature nuclear or solar heat.

    All the near-term options shown can be realized with commercially 
available technology, although small scale onsite production systems 
are undergoing rapid development for refueling station applications. Of 
the long-term options shown, all are based on commercial or near-
commercial technology, except thermo-chemical water splitting systems, 
which should be regarded as less technically mature than gasification-
based systems or electrolyzers.

Comparison of Hydrogen Production and Delivery Pathways

Economics
            Delivered Cost of Hydrogen
    In Figure 4, we compare the delivered cost of hydrogen 
transportation fuel from various near-term and long-term options. The 
delivered fuel cost includes the cost of producing hydrogen, 
distributing it to refueling stations and delivering it to vehicles at 
high pressure (5000 psi or 340 atmospheres). Costs are given in $/
kilogram of hydrogen. (One kilogram of hydrogen contains roughly the 
same amount of energy as one gallon of gasoline. So a delivered fuel 
cost of $2/kg hydrogen is roughly equivalent to a fuel cost of $2/
gallon gasoline.) Costs for the feedstocks for hydrogen production 
(natural gas, coal, etc.) are based on Energy Information 
Administration (EIA) projections for 2020. Although hydrogen costs more 
than gasoline, it can be used more efficiently in the car, so that the 
fuel cost per mile is comparable. For our assumptions (appropriate to 
U.S. conditions), fossil derived hydrogen offers the lowest cost. 
CO2 disposal adds relatively little to the cost of hydrogen 
production from coal. In general, the lowest cost option depends on the 
local costs of natural gas, coal, and electricity.
            Capital Cost of Hydrogen Infrastructure
    In Figure 5, we show the capital cost of hydrogen infrastructure 
for various near- and long-term options. Infrastructure includes 
hydrogen production, storage, delivery and refueling. For fossil 
hydrogen production, cases with CO2 capture and 
sequestration are included. Depending on the technology, the 
infrastructure capital cost is several hundred to several thousand 
dollars per car. Infrastructures based on CO2-free 
technologies cost more than earlier infrastructure that relies on steam 
reforming of natural gas. Of the long-term, low CO2 options, 
fossil hydrogen with CO2 sequestration appears to offer 
lower capital costs. This graph implies that putting a new hydrogen 
infrastructure in place for 100 million cars (about half the vehicles 
in the U.S.) might cost $50-$200 billion.
            Emissions of Air Pollutants and Greenhouse Gases
    The primary reasons for considering hydrogen as a future fuel are 
its potential benefits for the environment and energy supply security. 
Many alternative fuels and efficient, low emission end-use technologies 
could help address environmental and energy supply challenges. How does 
H2 compare to other options with respect to emissions of 
greenhouse gases and air pollutants and oil use? Several recent studies 
have estimated the ``well to wheels'' or full fuel cycle emissions of 
greenhouse gases and air pollutants for alternative fueled vehicles 
(Wang, 1999; Weiss et al., 2000; GM et al., 2001).
    In Figures 6 and 7, full fuel cycle emissions of air pollutants and 
greenhouse gases are shown for various alternative fueled vehicles. We 
compare current gasoline internal combustion engine vehicles (ICEVs) 
and a variety of lightweight, advanced vehicles: (i) ICEVs fueled with 
gasoline or hydrogen (H2); (ii) internal combustion engine/
hybrid electric vehicles (ICE/HEVs) fueled with gasoline, compressed 
natural gas (CNG), Diesel, Fischer-Tropsch (F-T) liquids or 
H2; and (iii) fuel cell vehicles (FCVs) fueled with 
gasoline, methanol or H2. We consider H2 derived 
from natural gas and coal, with and without CO2 
sequestration, and H2 derived from windpower via 
electrolysis.
    Emissions are normalized to an advanced, lightweight gasoline 
internal combustion engine vehicle with a fuel economy of 46 mpg, that 
satisfies stringent Tier II air pollution standards. Today's 
conventional gasoline cars are also shown for reference. We see that 
advanced internal combustion engine vehicles and ICE hybrid electric 
vehicles fueled with gasoline, CNG or Diesel fuel can result in 
reductions of both air pollutants and greenhouse gases, compared to 
today's gasoline ICEV technologies. With hydrogen produced from natural 
gas, well to wheels greenhouse gas emissions are somewhat reduced 
compared to gasoline or Diesel hybrids, and emissions of air pollutants 
are significantly lower. Hydrogen produced from renewable sources or 
fossil fuels with CO2 sequestration and used in fuel cells 
stands out as the options with by far the lowest emissions.
            Energy Supply Security
    It would be possible to make hydrogen from a variety of 
domestically available sources such as natural gas, coal or renewables. 
Widespread use of hydrogen would reduce costs associated with oil 
supply insecurity.
            Quantifying the Benefits of Hydrogen: Environmental and 
                    Energy Supply Security Externality Costs
    Hydrogen can reduce emissions of air pollutants and greenhouse 
gases compared to other transportation fuels, and decrease use of oil. 
What is the potential economic benefit?
    It is difficult to estimate the external costs of energy precisely, 
because of the many uncertain variables that go into such a 
calculation.

         LThe damage costs of global climate change are highly 
        uncertain. Costs of $50-$200/tonne Carbon are often used as a 
        possible range for the cost of removing carbon from the energy 
        system.

         LAir pollution damage costs have been estimated by 
        various authors (Rabl and Spadaro, 2000; Delucchi, 2000). These 
        are primarily associated with long-term health effects of 
        particulates (small particles that are emitted directly from 
        combustion or form in the atmosphere from combustion products). 
        There is a large uncertainty in air pollution damage costs due 
        to uncertainties in knowledge about 1) emissions from sources, 
        2) atmospheric transport and chemistry, 3) health impacts at a 
        particular level of exposure, and 4) the economic value of 
        damages (disease, premature death). As a result estimates for 
        air pollution damages per kilogram of pollutant emitted range 
        over 1-2 orders of magnitude.

         LThere is also considerable uncertainty in how to 
        value the costs of oil supply insecurity. We have used a value 
        of $0.35-$1.05/gallon gasoline based on a projected cost of 
        $20-$60 billion per year of expenditures to safeguard oil 
        supply (Ogden, Williams and Larson, 2003).

    In Figure 8, we have plotted the lifetime externality costs for 
different vehicle/fuel combinations over the lifetime of the car, based 
on an analysis in (Ogden, Williams and Larson, 2003). To derive the 
damage costs ($ per mile), we combined estimates of full fuel cycle 
emissions (kilograms per mile) of air pollutants and greenhouse gases 
(Wang, 1999) with estimates for the damage costs per kilogram of 
emission ($ per kilogram). To reflect the large uncertainties in, low, 
median and high externality cost estimates are shown for each vehicle/
fuel option. In each bar, three stacked externality costs are shown, 
representing costs for global climate change, air pollution and oil 
supply insecurity. We see that there is a tremendous range of 
uncertainty in these costs. However, hydrogen fuel cell vehicles have 
by far the lowest externality costs of any option. And they are the 
least sensitive to the actual value of these highly uncertain costs. At 
the mid to high end of the externality cost range, hydrogen fuel cell 
vehicles have a lifetime externality cost that is several thousand 
dollars less than advanced internal combustion engine hybrid vehicles 
fueled with gasoline or Diesel. This means that the hydrogen fuel cell 
vehicle could cost more in the showroom, and still break even in 
lifecycle costs, if externalities are taken into account.
    A lifecycle cost comparison of alternative fueled automobiles is 
shown in Figure 9 (Ogden, Williams and Larson, 2003). The lifecycle 
cost includes vehicle first costs (assuming fuel cell vehicle costs 
projected for large scale mass production), fuel costs, and median 
externality costs. This shows that hydrogen fuel cell vehicles are 
approximately competitive with other advanced internal combustion 
engine cars, when externalities are valued at the median level in 
Figure 8. In Figure 10, we replot the lifecycle cost with low, median 
and high externalities. If the high end of the externality cost range 
is used (right side of Figure 10), the hydrogen fuel cell vehicle is 
the least cost option. If, on the other hand, externalities are not 
valued highly (left side of Figure 10), there is little economic reason 
to switch to hydrogen.
    This analysis highlights the importance of externalities as a 
driver for adopting hydrogen as a transportation fuel. It also suggests 
that public policies reflecting the value of externalities will 
probably be needed to bring hydrogen fuel cell vehicles into widespread 
use.

BARRIERS TO ADOPTION OF HYDROGEN AS AN ENERGY CARRIER

    Probably the most significant barriers to widespread use of 
hydrogen are the current high cost of hydrogen end-use technologies, 
and the current lack of a hydrogen infrastructure. There is reason for 
optimism that the cost of hydrogen technologies such as fuel cells can 
be reduced by large-scale mass production (Thomas et al., 1998). 
Various strategies for starting a hydrogen infrastructure have been 
proposed. These include starting with buses or other centrally refueled 
fleet vehicles, with marine applications, or with hydrogen co-produced 
in by natural gas reformers in cogeneration systems in buildings. While 
it is fairly straightforward to envision a fueling system for centrally 
refueled fleets, moving beyond fleets into general automotive markets 
is more problematic, especially if the market penetration rate is slow. 
There is a problem of matching supply to demand, as the market grows 
(chicken and egg problem).
    In addition, although there are adequate methods for large-scale 
industrial hydrogen production, distribution and storage, technologies 
better adapted for a hydrogen energy economy could speed progress. For 
example, development of low cost, onsite hydrogen production systems 
for refueling stations would facilitate providing a fuel supply for 
vehicles. The development of a better onboard hydrogen storage system 
could increase the range of vehicles, and reduce infrastructure costs. 
Development of carbon sequestration is key for the long-term viability 
of the fossil hydrogen option.
    As mentioned above there is a need for policies reflecting the 
external costs of energy and encouraging the use of lower emitting, 
more energy efficient vehicles. There is uncertainty about future 
markets for hydrogen technologies, because it is uncertain how much its 
benefits will be valued. To quote from Ogden, Williams and Larson, 
2003: ``One should expect that externality valuations will change over 
time both as a result of improved scientific understanding and as a 
result of shifting societal values. Although externality valuations 
might decline over time, the long-term trend in the making of energy 
policy has been toward ever tighter controls on emissions that are 
thought to entail environmental damages. This trend may well continue 
both as a result of improved scientific evidence of damages [e.g., Pope 
et al. (1995) in the case of health damage caused by small-particle air 
pollutants, and O'Neill and Oppenheimer (2002) in the case of climate 
change damages], and the increasing importance of environmental issues 
in the public mind as incomes rise (Williams, 2000). Moreover, as 
already noted, energy supply insecurity concerns, which were paramount 
in energy policymaking in the 1970s, have once more become a prominent 
concern.''

POSSIBLE ROUTES TO A HYDROGEN ECONOMY

    In industrialized countries, hydrogen might get started by 
``piggybacking'' on the existing energy infrastructure. Initially, 
hydrogen could be made where it was needed from more widely available 
energy carriers, avoiding the need to build an extensive hydrogen 
pipeline distribution system. For example, in the United States, where 
low cost natural gas is widely distributed, hydrogen could be made 
initially from natural gas, in small reformers located near the 
hydrogen demand (e.g., at refueling stations). (Alternatively, hydrogen 
could be truck- or pipeline-delivered from a large plant serving both 
chemical and fuel needs, as with merchant hydrogen today.) As a larger, 
more concentrated demand builds, central ``city-scale'' H2 
production with local pipeline distribution would become more 
economically attractive. Eventually, hydrogen might be produced 
centrally and distributed in local gas pipelines to users, as natural 
gas is today. A variety of sources of hydrogen might be brought in at 
this time, including decarbonized fossil fuels with CO2 
sequestration or renewables. Urban areas with a high geographic density 
of energy demand would be early candidates for pipeline hydrogen 
systems. In developing countries, where relatively little energy 
infrastructure currently exists, centralized hydrogen production for 
vehicles might be phased in earlier. Regions with special concerns, 
such as islands that depend entirely on costly imported oil, might 
choose a hydrogen economy based on locally available resources. This 
path is being pursued in Iceland, which has announced its intention to 
switch to hydrogen fuel (produced via electrolysis using off-peak 
power) by 2030.

ENERGY POLICY AND THE HYDROGEN ECONOMY

Are Policies Necessary to Bring About a Hydrogen Economy?
    Our research suggests that external costs of energy could become a 
powerful economic driver for adopting hydrogen technologies (Ogden, 
Williams and Larson, 2003). Without these, there is little or no 
economic advantage in hydrogen over conventional technologies. This led 
us to conclude that a range of policies aimed at internalizing the 
environmental and security costs of energy will probably be needed to 
bring about a hydrogen economy. A world where hydrogen is widely used 
will be a world where externalities are more important than they are 
now. Political will and markets will evolve together, reflecting 
profound changes in how we view energy as a society. If we switch to 
hydrogen, a rapid transition may be more likely than a slow transition. 
(A rapid hydrogen infrastructure build up might allow a lower cost 
transition that a slow gradual buildup.)
    Another factor that could accelerate the adoption of hydrogen is 
the potential market pull of fundamentally new products and services 
enabled by the use of hydrogen or fuel cells. Innovative designs 
coupled with clean energy could draw customers. Technology 
breakthroughs could also change the way hydrogen is produced, 
distributed and used. We did not consider these factors in our 
analysis. However, we still see a strong role for government leadership 
in helping nurture hydrogen technologies and coordinate the profound 
changes in the energy system that hydrogen could bring.
Policy tools to encourage use of hydrogen
    Various policies could encourage development of hydrogen energy.

         LResearch and development on key concepts, where a 
        breakthrough could speed the adoption of hydrogen (e.g., 
        hydrogen storage, small scale hydrogen production, CO2 
        sequestration).

         LDemonstration of hydrogen production and end-use 
        technologies.

         LPolicies to encourage ``buy-down'' of hydrogen 
        technologies such as fuel cells. For example, use of hydrogen 
        in government fleets. Our analysis indicates that centrally 
        refueled fleets are potentially large enough to accomplish 
        significant cost reductions in hydrogen vehicle technologies, 
        while gaining experience with hydrogen supply and refueling 
        systems. This suggests coupling a Zero Emission Vehicle mandate 
        with clean fleet requirements.

         LPolicies to account for externalities: air pollution 
        standards, feebates for clean efficient vehicles, fuel economy 
        standards, gasoline tax, carbon tax.

    When should these policies be put in place? The first two items are 
happening now. Using fleet regulations to speed adoption of alternative 
fuel technologies has been tried before, without resounding success. 
Still, it is one of the only approaches that avoids the chicken and egg 
infrastructure problem, at least for a while, and deserves 
reexamination for hydrogen. The hardest and most important set of 
policies may be the last. Putting policies in place that reflect 
externalities will require a strong societal consensus, and a shift in 
how we view energy.
    Analysis by our group at Princeton University and other researchers 
suggests that, even under optimistic assumptions about progress in 
hydrogen and fuel-cell technologies, it would be several decades before 
hydrogen fuel-cell vehicle technologies could make a globally 
significant impact on reducing emissions. It might be necessary to 
postpone putting policies in place to deal with environmental and 
security issues, if hydrogen were the only technology that could 
address them. However, external costs of energy could be reduced 
significantly compared to today's cars with advanced internal 
combustion engine technologies available now or within a few years. We 
feel that it is very important in the near-term to encourage use of 
more efficient, less polluting internal combustion engine technologies 
using conventional fuels. These include more efficient gasoline and 
Diesel internal combustion engine hybrids.
    Still, hydrogen holds the greatest long-term promise for dealing 
simultaneously with air pollution, greenhouse gas emissions, and energy 
supply diversity. When hydrogen vehicles are ready, emissions could be 
reduced significantly compared to those from advanced internal 
combustion engine vehicles. This underscores the importance of 
research, development and demonstration of hydrogen technologies now, 
so they will be ready when we need them.
    It is highly uncertain today what economic values should be 
assigned to external costs of energy (climate change, health effects 
from air pollution, oil supply insecurity). However, the trend of the 
past few decades has been toward ever-increasing regulation of 
emissions, and integrated assessment models of global climate change 
suggest that deep reductions in carbon emissions from energy use will 
be required to stabilize atmospheric carbon dioxide at acceptable 
levels. Depending on how we as a society ultimately value the external 
costs of energy, hydrogen might well become the long-term fuel of 
choice.
    Should long-term concepts like hydrogen and fuel-cell vehicles have 
high priority, given that relatively modest improvements in more 
traditional internal combustion engine technologies could help address 
environmental and energy supply problems much sooner? In my view, 
hydrogen and fuel-cell technologies, although high-risk and long-term, 
have a potentially very high payoff. Therefore, they deserve 
significant government support now, as ``insurance,'' so that they will 
be ready in 15-20 years, if and when we need to deploy them widely.
    I would encourage a comprehensive strategy, based on developing and 
encouraging the use of clean, efficient internal combustion engine 
vehicles in the near-term, coupled with a long-term strategy of 
research, development and demonstration of hydrogen and fuel cells. 
Consistent policies to encourage use of cleaner transportation systems 
with lower carbon emissions and to move away from our almost exclusive 
dependence on crude oil-derived transportation fuels would encourage 
adoption of advanced internal combustion engine vehicles in the near-
term and, eventually, of hydrogen vehicles. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


References:

Brown, L.C., G.E. Besenbruch, and K.R. Schultz (General Atomics), A.C. 
        Marshall, S.K. Showalter, and P.S. Pickard (Sandia National 
        Laboratories), and J.F. Funk (University of Kentucky), 2002: 
        Nuclear production of hydrogen using thermochemical water-
        splitting cycles, paper prepared for presentation at the 
        American Nuclear Society Meeting Embedded Topical 
        ``International Congress on Advanced Nuclear Power Plants 
        (ICAPP),'' Hollywood, Florida, 9-13 June; to be published in 
        the Proceedings of ICAPP.
Delucchi, M.A. (2000): ``Environmental externalities of motor vehicle 
        use in the U.S.,'' Journal of Transportation Economics and 
        Policy 34 (part 2) pp. 135-168.
General Motors Corp., Argonne National Laboratory, BP, ExxonMobil, and 
        Shell, ``Well to Wheels Energy Use and Greenhouse Gas Emissions 
        of Advanced Fuel/Vehicle Systems: North American Analysis, 
        Executive Summary Report,'' April, 2001.
Hoffmann, P., Tomorrow's Energy: Hydrogen Fuel Cells and the Prospects 
        for a Cleaner Planet, MIT Press, Cambride, MA, 2001.
Farrell, E., D.W. Keith and J.J. Corbett, ``A Strategy for Introducing 
        Hydrogen into Transportation,'' preprint, to appear in Energy 
        Policy 2003.
James, B.D., G.N. Baum, F.D. Lomax, C.E. Thomas, I.F. Kuhn, 
        ``Comparison of Onboard Hydrogen Storage for Fuel Cell 
        Vehicles,'' Directed Technologies, Inc., prepared for Ford 
        Motor Company, under prime contract DE-AC02-94CE50389 to the 
        United States Department of Energy, May 1996.
Ogden, J.M., ``Prospects for Building a Hydrogen Energy 
        Infrastructure,'' chapter in Annual Review of Energy and the 
        Environment, Vol. 24, pp. 227-279, 1999.
Ogden, J.M., ``Modeling Infrastructure for a Fossil Hydrogen Energy 
        System with CO2 Sequestration, Proceedings of the 
        GHGT-6 Conference, October 2002, http://www.rite.or.jp/GHGT6/.
Ogden, J.M., ``Hydrogen: The Fuel of the Future?'' Physics Today, Vol. 
        55, No. 4, April 2002, pp. 69-74.
Ogden, J.M., R.H. Williams and E.D. Larson, ``A Societal Lifecycle Cost 
        Comparison of Alternative Fueled Vehicles,'' accepted for 
        publication in Energy Policy, September 2002, in press 2003.
Thomas, C.E., B.D. James, F.D. Lomax, and I.F. Kuhn, 1998b: Draft Final 
        Report, Integrated Analysis of Hydrogen Passenger Vehicle 
        Transportation Pathways, report to the National Renewable 
        Energy Laboratory, U.S. Department of Energy, Golden, CO, Under 
        Subcontract No. AXE-6-16685-01, March.
United States Department of Energy, ``Hydrogen Storage Workshop,'' 
        Argonne National Laboratory, August 14, 2002, http://
        www.cartech.doe.gov/publications/2002hydrogen.html
Wang, M.Q., M. Mintz, M. Singh, A. Vyas, and L. Johnson, 1999b: 
        Assessment of PNGV Fuels Infrastructure, Phase 2: Final Report: 
        Additional Capital Needs and Fuel Cycle Energy and Emissions 
        Impacts, Report No. ANL-ESD-37, Center for Transportation 
        Research, Argonne National Laboratory, prepared for the Office 
        of Transportation Technologies, U.S. Department of Energy, 
        Washington, DC, August.
Wang, M.Q. and H.-S. Huang, 1999: A Full Fuel-Cycle Analysis of Energy 
        and Emissions Impacts of Transportation Fuels Produced from 
        Natural Gas, Center for Transportation Research, Argonne 
        National Laboratory, prepared for the United States Department 
        of Energy Office of Transportation Technologies, Report No. 
        ANL/ESD-40. December.
Weiss, M., J. Heywood, E. Drake, A. Schafer, and F. AuYeung, 2000: On 
        the Road in 2020, MIT Energy Laboratory Report #MIT EL 00-003, 
        Cambridge, MA, October.
Williams, Robert H., ``Decarbonized Fossil Energy Carriers And Their 
        Energy Technological Competitors,'' Prepared for the IPCC 
        Workshop on Carbon Capture and Storage, 18-21 November 2002, 
        Regina, Saskatchewan, Canada.
Yalcin, S., 1989: A review of nuclear hydrogen production, 
        International Journal of Hydrogen Energy, 14 (8):551-561.
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
        
                      Biography for Joan M. Ogden
    Dr. Joan M. Ogden, Princeton Environmental Institute, Princeton 
University, Princeton, NJ 08544; Phone: (609) 258-5470; E-mail: 
[email protected]

SYNOPSIS: My graduate education centered on physics, mathematics and 
numerical simulation techniques, culminating in a Ph.D. in theoretical 
plasma physics in 1977. For several years I did research in nuclear 
fusion energy, first as a research associate at the Princeton Plasma 
Physics Laboratory and later as an independent consultant to the U.S. 
Department of Energy. During this time I also worked in other areas of 
applied physics, particularly the field of image processing where I 
hold several patents. A developing interest in broader energy questions 
led me to Princeton University's Center for Energy and Environmental 
Studies, Princeton Environmental Institute, where I have worked since 
1985. Most of my research has involved technical and economic 
assessments of new energy technologies, characterized by low emissions 
of pollutants and greenhouse gases and high conversion efficiency. 
Particular areas of interest are production of low polluting fuels, the 
use of hydrogen as an energy carrier and applications of fuel cell 
technology in transportation and stationary power production. Over the 
past several years I have carried out a series of assessments of fuel 
cell vehicles and hydrogen refueling infrastructure for the USDOE 
Hydrogen R&D Program and Fuel Cell Program. I have served on a number 
of high level panels for the US Department of Energy on Hydrogen, 
Carbon Sequestration and Fuel Cell Research, most recently as a 
contributor to the November 2001 Hydrogen Vision Meeting and leader of 
the ``Integration Team'' at the April 2002 Hydrogen Roadmap meeting. I 
have published over 100 technical articles on energy topics including 
one book, six book chapters and numerous peer reviewed articles and 
conference presentations.

EDUCATION:

B.S. with high honors, mathematics, University of Illinois, Champaign-
        Urbana, 1970.

Ph.D. in physics, University of Maryland, College Park, MD, 1977 
        (thesis: plasma physics theory, computer simulation).

Post-Doctoral Research Associate, Princeton Plasma Physics Laboratory, 
        Princeton University 1977-1979.

POSITIONS HELD:

Center for Energy and Environmental Studies, Princeton Environmental 
Institute, Princeton University

        LResearch Scientist (1993-present)

        LResearch Staff (1987-1993)

        LHewlett Fellowship (1986-1987)

        LNSF Visiting Professorship for Women (1985-1986)

RCA David Sarnoff Research Center, Princeton, NJ

        LConsultant (1982-1984)

        LMember of the Technical Staff (1984-1985)

Self-Employed Consultant in Applied Physics 1980-1985

        LClients included U.S. Department of Energy; Science 
        Applications, Inc.; RCA David Sarnoff Research Center; 
        Princeton University

Selected Publications

J.M. Ogden and R.H. Williams, Solar Hydrogen: Moving Beyond Fossil 
        Fuels, World Resources Institute, Washington DC, October 1989.
J.M. Ogden and J. Nitsch, ``Solar Hydrogen,'' Chapter 22 in T. 
        Johansson, H. Kelly, A.K.N. Reddy and R.H. Williams, Renewable 
        Energy: Fuels and Electricity from Renewable Sources, Island 
        Press, Washington, DC, 1993.
J.M. Ogden and T. Kreutz, M. Steinbugler, Fuels for fuel cell vehicles: 
        vehicle design and infrastructure issues,'' Society of 
        Automotive Engineers paper No. 982500, October 1998.
J.M. Ogden, ``Developing a Refueling Infrastructure for Hydrogen 
        Vehicles: A Southern California Case Study,'' International 
        Journal of Hydrogen Energy, Vol. 24, pp. 709-730, 1999.
J.M. Ogden, M. Steinbugler and T. Kreutz, ``A Comparison of Hydrogen, 
        Methanol and Gasoline as Fuels for Fuel Cell Vehicles,'' 
        Journal of Power Sources, Vol. 79, pp. 143-168, 1999.
J.M. Ogden, ``Prospects for Building a Hydrogen Energy 
        Infrastructure,'' chapter in Annual Review of Energy and the 
        Environment, Vol. 24, pp. 227-279, 1999.
J. M. Ogden, ``Modeling Infrastructure for a Fossil Hydrogen Energy 
        System with CO2 Sequestration,'' Proceedings of the 
        GHGT-6 Conference, October 2002, http://www.rite.or.jp/GHGT6/.
J.M. Ogden, R.H. Williams and E.D. Larson, ``A Societal Lifecycle Cost 
        Comparison of Alternative Fueled Vehicles,'' accepted for 
        publication in Energy Policy, September 2002, in press.
J.M. Ogden, ``Hydrogen: The Fuel of the Future?'' Physics Today, Vol. 
        55, No. 4, April 2002, p. 69-74.
J.M. Ogden, ``Alternative Fuels and Prospects--Overview,'' chapter to 
        appear in the Handbook of Fuel Cell Technology, John Wiley and 
        Sons, 2003.
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    Chairman Boehlert. Thank you very much. Dr. Burns.

 STATEMENT OF DR. LAWRENCE D. BURNS, VICE PRESIDENT, RESEARCH 
          DEVELOPMENT AND PLANNING FOR GENERAL MOTORS

    Dr. Burns. I appreciate the opportunity to be here today to 
testify on behalf of General Motors. And I am Larry Burns, Vice 
President of R&D and Planning for GM. I have responsibility for 
driving innovation and to GM's vehicles today, and directing 
GM's reinvention of the automobile around promising new 
technologies like fuel cells and bi-wire systems. GM's goal is 
to realize sustainable mobility vehicles that are more 
exciting, more compelling, and more affordable than the 
vehicles that people have available today. And these are 
vehicles that people really want to drive and buy.
    We believe fuel cells and hydrogen hold the key to 
realizing this goal. We expect to begin selling hydrogen fuel 
cell vehicles by 2010. And GM hopes to be the first manufacture 
to sell one million fuel cell vehicles profitably. In support 
of these goals, today, GM and Shell are announcing a new 
demonstration program in Washington DC area designed to be a 
real world trial of hydrogen fuel cells and hydrogen fueling 
technology.
    Before we see fuel cell vehicles on the roadways in large 
volumes, however, a number of technical challenges must be 
addressed. We see cost, durability, fuel infrastructure, and 
storage as the major barriers to commercialization of fuel cell 
vehicles. In addition, more emphasis must be placed on hydrogen 
production emphasis or technology research.
    With respect to the vehicle, hydrogen storage is the 
toughest hurdle. Liquid and compressed gas and solid state 
storage methods are all promising, but present technical 
challenges and cost challenges. GM has demonstrated both liquid 
and compressed hydrogen storage tanks in our prototype 
vehicles. And we are also doing research on various forms of 
solid state storage, but given the magnitude of the storage 
challenge, a significantly expanded federal R&D effort in this 
area is both necessary and appropriate.
    If we are successful in bringing fuel cell vehicles to 
market at the beginning of the next decade, the result will be 
a growing demand for conveniently available hydrogen. Looking 
out over a 20 year time frame, we believe we should begin today 
to look for better and more sustainable means of producing 
hydrogen as a vehicle fuel. Like hydrogen storage, we believe 
this is a challenge and also warrants a significantly expanded 
R&D effort.
    Cost is another major challenge, and we are making very 
important progress in this area. GM has achieved a cost 
improvement with each new generation of our fuel cell stack 
technology. In addition, we believe that revolutionary vehicle 
designs, like our autonomy concept and high wire prototype, 
which combine fuel cells and by-wire electronics and other 
advanced technologies, could make fuel cell vehicles more 
affordable and even more compelling. These designs enable 
dramatically fewer vehicle components, a long life chassis, and 
significantly fewer vehicle architecture, a result of which 
have a potential to reduce manufacturing costs.
    If we were producing our current fuel cell technology at a 
scale of over 1,000 stacks per year, we estimate that we 
could--would be able to produce these at a cost ten times 
higher than what is required to support wide-spread affordable 
application in automobiles. But also, this is within what is 
required for competitive distributed generation products. To 
put this magnitude of improvement in perspective, the computer 
industry has brought down the cost of computer memory over a 15 
year period by a factor of 3,000, from $17,000 per gigabyte to 
$6.00 per gigabyte. And the challenge we face with fuel cells 
requires the same type of molecular material breakthroughs.
    Similarly, we do not think the cost of producing hydrogen 
will be a show-stopper. Petroleum companies have said hydrogen 
can be generated from natural gas at the refinery at a cost 
that is comparable on a per mile cost basis to conventional 
fuels, taken into account the efficiency of fuel cells. Most of 
the cost of hydrogen comes from its expense of transporting and 
dispensing it.
    The fueling infrastructure is another challenge. However, 
one of the most exciting aspects of hydrogen is that there are 
many pathways for producing and delivering it. Hydrogen could 
be generated at a local filling station, as we know them today, 
using an appliance like device called the reformer. It also has 
the potential for refueling of home or places of business using 
an appliance called an electrolaphiser or natural gas reformer. 
This takes advantage of the fact that water and electricity and 
a natural gas are already available in our homes and in many of 
our businesses.
    GM sees distributed generation as a key stepping stone to 
hydrogen fuel cells vehicles in the early development of the 
hydrogen infrastructure. We also recently announced that we 
will conduct a demonstration of a 75 kilowatt direct hydrogen 
unit in both the U.S. and Japan. This system is intended for 
uninterruptible power supply systems, such as hospitals, high-
reliability data communications, and to handle peak power 
demands. We expect to market this unit in the 2005 timeframe. 
And as to reduce the cost to get to automobile scale 
applications, you open up many attractive business applications 
for fuel cells and stationary.
    GM has always believed that it will take a three-way 
partnership involving the auto industry, energy companies, and 
government to successfully commercialize hydrogen fuel cells 
for vehicles and stationary applications. We applaud President 
Bush's new hydrogen initiative and his vision for the hydrogen 
future, and the fact that he has elevated it as a national 
priority. We would welcome a measure welcome a major new 
national R&D initiative on hydrogen storage and production. We 
also believe the Department of Transportation should undeclared 
hydrogen as a hazardous material and treat it as a fuel. Next, 
the government should take the lead on development of a 
national template for the codes and standards that will be 
required for hydrogen and fuel cells. And finally, every 
federal agency will have a role in the transition to the 
hydrogen economy, and they should begin that process today by 
elevating the use and impact of hydrogen and fuel cell 
technologies on their operations.
    To this end, I would just caution that demonstration 
projects are costly to do, and they require significant 
resources. The same resources we are using to refine the fuel 
cell technology, particularly on the vehicle side. In the next 
couple of years, the goal should be to have limited number of 
small scale but integrated demonstration projects, and then 
later in the decade to expand those projects.
    Within GM, the magnitude of our fuel cell investment 
creates an intense business dilemma--the choice between using 
our resources to achieve a revolutionary vision or funding the 
aggressive pursuit of more incrementally focused initiatives. 
The decisions that we must make in resolving this internal 
debate will certainly be influenced by the development of a 
long-term stable set of government policies and initiatives 
upon which we can properly balance the investment of our finite 
financial and technical resources. Thank you very much.
    [The prepared statement of Dr. Burns follows:]
                Prepared Statement of Lawrence D. Burns
    I appreciate the opportunity to be here today to testify on behalf 
of General Motors. I am Larry Burns, Vice President of Research & 
Development and Planning for GM. I have responsibility for driving 
innovation into today's vehicles and directing GM's reinvention of the 
automobile around promising new technologies like fuel cells and by-
wire systems. GM's goal is to realize sustainable mobility with 
exciting, compelling, and affordable vehicles that people will want to 
drive and buy.
    We are on record saying that we expect to begin selling hydrogen 
fuel cell vehicles by 2010, and GM hopes to be the first manufacturer 
to sell one million fuel cell vehicles. In support of these goals, in 
the next few years, we will be fielding small demonstration fleets to 
test the viability of fuel cell technology. In fact, later today, GM 
and Shell will announce a new demonstration program in the Washington, 
D.C. area designed to be a real-world trial of hydrogen fuel cell 
vehicles and hydrogen fueling technology. Larger fleet demonstrations 
will follow as we ramp up to commercialization.
    Before we see fuel cell vehicles on the roadways in large volumes, 
however, a number of technical challenges must be addressed. The 
Department of Energy's recently released Fuel Cell Report to Congress 
identifies cost, durability, fuel infrastructure, and hydrogen storage 
as the major barriers to commercialization. In addition, the Report 
states that more emphasis must be placed on research into hydrogen 
production technologies.
    With respect to the vehicle, hydrogen storage is the toughest 
hurdle. Liquid, compressed gas, and solid-state storage methods are all 
promising, but all present technical challenges. GM has demonstrated 
both liquid and compressed hydrogen storage tanks in our prototype 
vehicles. We are also doing research on various forms of solid-state 
storage, such as metal and chemical hydrides. But, given the magnitude 
of the storage challenge, a significantly expanded federal R&D effort 
in this area is both necessary and appropriate.
    If we are successful in bringing fuel cell vehicles to the market 
at the beginning of the next decade, the result will be a growing 
demand for the production of hydrogen. Looking out over a 20-year 
timeframe, we believe we should begin today to look for better and more 
sustainable means of producing hydrogen as a vehicle fuel. Like 
hydrogen storage, we believe this challenge also warrants a 
significantly expanded federal R&D effort.
    As the DOE report correctly points out, cost is another major 
challenge, but we are making progress in this area, too. GM has 
achieved a cost improvement with each new generation of our fuel cell 
stack technology. In addition, we believe that revolutionary vehicle 
designs like our AUTOnomy concept and Hy-wire prototype--which combine 
fuel cells, by-wire electronics, and other advanced technologies in new 
and unique ways--could make fuel cell vehicles much more affordable. 
These designs enable dramatically fewer vehicle components, a longer-
life chassis, and significantly fewer vehicle architectures, all of 
which have the potential to reduce manufacturing costs.
    Since 1988, the computer industry has brought down the cost of 
computer memory from $17,000 per gigabyte to $6 in 2001--a factor of 
3,000 reduction. The cost challenge we face with the fuel cell requires 
the same type of molecular material breakthroughs, but is an order of 
magnitude less that what the computer industry had to accomplish. We 
are confident that we have a really clear definition of the technical 
milestones and cost targets that we need to meet on each subsystem to 
achieve total system affordability.
    Similarly, we do not think the cost of producing hydrogen will be a 
``show-stopper.'' Petroleum companies have said hydrogen can be 
generated from natural gas at the refinery at a cost that is comparable 
to conventional fuel costs. Most of the cost of hydrogen comes from the 
expense of transporting and dispensing it. The good news in this arena 
is that there is a lot of experience worldwide generating hydrogen and 
maintaining hydrogen pipeline. Our modeling has indicated that if we 
used today's technology, we are within a factor of 1.3 of where we need 
to be on the cost of hydrogen for transportation applications--when 
compared to U.S. gasoline prices and taking advantage of the inherent 
energy efficiency of fuel cell vehicles.
    The fueling infrastructure is another challenge. But one of the 
most exciting aspects of hydrogen is that there are many scenarios for 
producing and delivering it. Hydrogen could be generated at local 
filling stations as we know them today--with everything up to the 
storage tank remaining the same. But there is also the potential to 
refuel at home or at a place of business, using a simple appliance that 
electrolyzes water. Since the vast majority of homes are already 
plumbed with water and wired with electricity, it would be very easy to 
install this new appliance in the garage. A similar situation is 
possible with natural gas, which is piped into many homes and 
businesses--a reformer could generate hydrogen from the natural gas.
    GM sees distributed generation as a key stepping stone to hydrogen 
fuel cell vehicles and the early development of hydrogen 
infrastructure. Last year, we teamed with Hydrogenics, one of our fuel 
cell partners, to announce our first commercial product--a 25-kilowatt 
generator designed to keep wireless phone towers operating in the event 
of an interruption in the power grid. A prototype unit is now being 
field tested in California. We also announced a 75-kilowatt fuel cell 
that runs on hydrogen. We recently announced that we will conduct a 
demonstration of a 75-kW direct hydrogen unit in both the U.S. and 
Japan. This system is intended for uninterruptible power supply 
systems, such as hospitals, high-reliability data communications, and 
to handle peak power demands. We expect to market the unit by 2005. Our 
intent is to move down the cost curve to enable distributed generation 
as quickly as possible in order to generate revenues that we can apply 
to commercializing fuel cell vehicles.
    GM has always believed that it will take a three-way partnership 
involving the auto industry, energy companies, and government to 
successfully commercialize hydrogen fuel cells for vehicles and 
stationary applications. We applaud President Bush's new hydrogen 
initiative and his vision of the hydrogen future, and we would like to 
see this vision further elevated as a national priority. Specifically, 
we would welcome a major new national R&D initiative on hydrogen 
storage and production. In addition to R&D, there are other efforts the 
Federal Government should take immediately. First, the Department of 
Transportation should ``undeclare'' hydrogen as a hazardous material 
and treat it as a fuel. Second, the government should take the lead on 
development of a national template for the codes and standards that 
will be required for hydrogen and fuel cells. Third, every federal 
agency will have a role in the transition to the hydrogen economy, and 
they should begin that process today by evaluating the use and impact 
of hydrogen and fuel cell technologies on their operations.
    To this, let me add one caution regarding demonstration projects. 
We believe that we have much to learn from demonstrations that 
integrate hydrogen production, stationary fuel cells, vehicle 
refueling, and fuel cell vehicle production. However, each of these 
projects is in some way a distraction from our efforts to refine fuel 
cell technology--particularly on the vehicle side. In the next couple 
of years, the goal should be to have a limited number of small-scale--
but integrated--demo projects to learn about the practical challenges 
and logistical barriers to an integrated hydrogen economy. Later in 
this decade, we should expand to some larger-scale demonstrations that 
begin to enable the hydrogen infrastructure and prepare early customers 
for the commercialization of fuel cell vehicles.
    Within General Motors, the magnitude of our fuel cell investment 
creates an intense business dilemma--the choice between using our 
resources to achieve a revolutionary vision. . .or funding the 
aggressive pursuit of more incrementally focused initiatives. The 
decisions that we must make in resolving this internal debate will 
certainly be influenced by the development of a long-term, stable set 
of governmental policies and initiatives upon which we can properly 
balance the investment of our finite financial and technical resources.
    GM is marching down the cost curve on fuel cell technology and we 
are confident we will have hydrogen fuel cells that are cost 
competitive for distributed generation well before 2010. Based on this 
timetable, we also anticipate that we will be able to make business 
decisions with respect to the commercial viability of hydrogen fuel 
cell vehicles well before the 2015 timeframe.
    Thank you. I look forward to responding to your questions.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
        
                    Biography for Lawrence D. Burns

PROFILE

    Larry Burns was named Vice President of General Motors Research & 
Development and Planning in May, 1998. In this post, he oversees GM's 
advanced technology and innovation programs and also has responsibility 
for the company's product, capacity, and business plans. He is a member 
of the Automotive Strategy Board, GM's highest-level management team.
    In addition to driving innovation into today's vehicles, Larry is 
championing GM's ``reinvention'' of the automobile around promising new 
technologies like fuel cells and drive-by-wire systems. The goal is to 
realize sustainable mobility with vehicles that are affordable and 
aspirational. This is the key to providing the freedom benefits of 
``automobility'' to significantly more of the world's population than 
the 12 percent who own vehicles today--without compromising future 
generations.
    Larry began his GM career in 1969 as a member of the R&D staff, 
where his research focused on transportation, logistics, and production 
systems. He subsequently held executive positions in several GM 
divisions in the areas of product program management, quality, 
production control, industrial engineering, and product and business 
planning.
    Larry holds a Ph.D. in civil engineering from the University of 
California at Berkeley. He also has a Master's degree in engineering/
public policy from the University of Michigan and a Bachelor's degree 
in mechanical engineering from General Motors Institute (now Kettering 
University).
    Larry serves on the boards of the Deafness Research Foundation and 
the University of Michigan's Center for Hearing Disorders. His 
interests include running, skiing, backpacking, and spending time with 
his family. Larry and his wife CeCe have two daughters, Natalee, 15, 
and Hilary, 11.

    Chairman Boehlert. Thank you very much. Mr. Huberts.

 STATEMENT OF DONALD P.H. HUBERTS, CHIEF EXECUTIVE OFFICER FOR 
                         SHELL HYDROGEN

    Mr. Huberts. Thank you, Mr. Chairman. I am Don Huberts, the 
Chief Executive Officer of Shell Hydrogen. I appreciate the 
opportunity to testify before the Science Committee. Shell 
Hydrogen is the global business division of the Shell Group of 
Companies. Shell is a global company with operations in over 
135 companies. We have a 90 year history in the U.S., and our 
U.S. assets comprise almost a third of Shells global assets, 
and reflect all aspects of the energy business, exploration and 
production, all products, gas and power, chemicals, renewables, 
and hydrogen. And Shell is the leading retailer of 
transportation fuels in the U.S.
    Shell Hydrogen was established in 1999. We are committed to 
the commercial development hydrogen energy technologies, 
including hydrogen storage, reforming fossil fuels, and 
hydrogen purification. We are active in a number of 
inaugurative cooperative programs, partnerships, and joint 
ventures, and I have provided more details on these in my 
written testimony.
    The goal is to meet the future energy needs of our 
customers and build a sustainable, therefore comfortable, 
business. With this background, let me turn to the two 
principle points in my testimony.
    First, the future of our energy and hydrogen infrastructure 
is highly uncertain. A significant hydrogen economy could 
emerge in 2020 or not until 2050. It depends on complex cycle 
drivers, what the consumers want, and unpredictable events, as 
well as on technology breakthroughs.
    Shell's views about the future of energy are shaped by 
scenario work we have been using for years. The scenarios don't 
predict future events, but they are credible stories about how 
the future might develop. They look at forces that might push 
the future. There is a complex interplay between science and 
technology on the one hand, and social, political and market 
developments on the other hand. Our recent scenarios look at 
three key drivers that have the potential to bring fundamental 
change to the energy system. First of all, what constraints 
could occur on our global energy resources? Secondly, what 
changes could occur in peoples' personal preferences, their 
lifestyle choices, the priorities, the place on environmental 
concerns; and thirdly, what technology advances could occur 
that could transform the future. Will existing paradigms be 
broken, just as the Sony Walkman and mobile phones did?
    Shell's most recent scenario work tells two different but 
compelling stories about the future, based on a different range 
of assumptions about these three key drivers. But the two 
stores had important features in common. Natural gas will play 
a vital role in the next 20 years as a bridge to the future. As 
new vehicle technologies emerge, there will be pressure on the 
oil market.
    In the long-term, the potential exists for renewable energy 
sources to be the primary sources of energy if robust energy 
storage solutions are found. In some looking ahead to the 
future of hydrogen is highly uncertain because we just don't 
know what forces will emerge to shape it.
    That brings me to my principle point. Governments can play 
an important play. Governments can stimulate hydrogen 
technologies and provide incentives. However, governments must 
do so with a sustained commitment, and now bow in and out. At 
the same time, governments must allow the markets to work and 
give consumers the freedom to make commercial choices. 
Otherwise, money and time is wasted, playing to political 
choices that turn out not to be commercially the best options. 
Government policies can make or break projects of technologies; 
subsidies meant to encourage an industry can sometimes wreck 
it. Policies have to be intelligent and properly structured, 
not just well-meant.
    Previous experiences with alternative fuels, such as 
compressed natural gas, show that without prolonged government 
engagement and strong visible and vocal commitment to deliver a 
shift in the fuel use in society, these initiatives are 
destined to fail and remain mesh products.
    Policies related to the hydrogen and fuel industries are 
only now beginning to be formed. It is very important that they 
are carefully framed and appreciate the challenges. The Federal 
Government can provide fiscal support and R&D funding, such as 
the President's recent hydrogen and fuel cell--Hydrogen and 
FreedomCAR Proposals. Demonstration programs, like that in 
California, will be critical in moving forward.
    Significant work needs to be done in a number of areas, 
hydrogen production, storage, purification, and other 
infrastructure related issues. Government and industry working 
together can provide maximum support.
    But let me be clear, technology alone can not bridge the 
gap in cost of producing hydrogen. Hydrogen is made either from 
electricity, by spinning water, or it is extracted from natural 
gas or other fossil fuels. Therefore, the energy in the 
hydrogen will always be more expensive than that of the sources 
used to make it. Instead, hydrogen will become competitive due 
to its other benefits, cleaner air, lower greenhouse gas 
emissions, to greater efficiency or sequestration, and 
decreased reliance on foreign energy sources, and improved 
energy supplies security.
    Further, the transition to hydrogen will be a long and 
capital intensive process. Even with sustained and consistent 
government support, the huge investment for infrastructure 
changeover will be required. Industry can only support this if 
it can be done on a commercial basis.
    The initial investment has been estimated by Shell at round 
20 billion dollars for the U.S. alone to supply two percent of 
the cars with hydrogen by 2020, and to make hydrogen available 
at 25 percent of the existing gasoline retail stations. In the 
subsequent decades, further buildup of the hydrogen 
infrastructure will require hundreds of billions of U.S. 
dollars.
    The government can help mitigate some of the risks around 
such large investments. Ultimately, however, most of the 
capital will come from the private sector, so it will be 
consumers that push the effort. The Federal Government should 
work with industry and other governments to harmonize the 
international codes and standards. Public/private partnerships 
can work together to increase public awareness and education. I 
will be happy to answer any questions.
    [The prepared statement of Mr. Huberts follows:]
               Prepared Statement of Donald P.H. Huberts
    Thank you, Mr. Chairman. I am Don Huberts, the Chief Executive 
Officer of Shell Hydrogen.\1\ I appreciate the opportunity to testify 
before the Science Committee today to discuss the path to a hydrogen 
economy--the barriers we face and the opportunities presented in 
transitioning towards a hydrogen infrastructure.
---------------------------------------------------------------------------
    \1\ ``Shell Hydrogen'' refers to a global business consisting of 
separate companies and other organizational entities within the Royal 
Dutch/Shell group of companies. Each of the companies of the Royal 
Dutch/Shell group of companies is an independent entity and has its own 
separate identity.
---------------------------------------------------------------------------
    As the CEO of Shell Hydrogen, I am responsible for leading the 
development and execution of all the global business activities of the 
Royal Dutch/Shell Group relating to hydrogen fuel and fuel cells. This 
includes our activities in hydrogen refueling and fuel cell power 
generation, and our development of hydrogen generation, storage, and 
purification technologies. Shell Hydrogen has offices in Houston, 
Amsterdam, and Tokyo and through its local U.S. affiliate has many 
activities in the United States. For example, Shell is a founding 
member of the California Fuel Cell Partnership, of which I was Chairman 
elect during 2002. Shell is also a sustaining member of the National 
Hydrogen Association. I will expand on our activities below.
    Shell Hydrogen was established in 1999 as a global business 
division of the Royal Dutch/ Shell Group of Companies (Shell), one of 
the largest energy companies in the world, with operations in over 135 
countries. Shell is the leading retailer of transportation fuels in the 
U.S. and in many other countries throughout the world. Shell companies 
in the U.S. comprise 28 percent of the assets of Royal Dutch/Shell; as 
such, they represent a very important part of the Group's portfolio. 
Shell companies in the U.S. are involved in all aspects of the energy 
business--exploration & development, oil products, gas & power, 
chemicals, renewables, and hydrogen. Our heritage in this country spans 
more than 90 years, and while you have likely heard a lot during the 
past ten years about U.S. businesses ``going global,'' we have operated 
that way for a long, long time. In fact, we are one of the world's 
first truly multi-national companies.
    Shell's commitment to sustainable development is demonstrated by 
our actions. Sir Philip Watts, the Chairman of our Committee of 
Managing Directors, is the co-chairman of the World Business Council 
for Sustainable Development. Shell has incorporated the principles of 
sustainable development into its strategies, operations, processes, 
budgeting, and training and reward systems. We are developing 
alternative energy sources, such as renewables and hydrogen, which we 
aim to grow into viable businesses that will meet our customers' future 
energy needs.
    We report annually on our actions to meet our economic, 
environmental and social responsibilities in our publication The Shell 
Report: People, Planet and Profits, a public document that is available 
as a booklet or on-line.
    Out of this commitment, Shell Hydrogen was established to create 
business opportunities related to hydrogen energy, including: 
developing and investing in key technologies for hydrogen storage, 
reforming fossil fuels, and hydrogen purification; and forming 
cooperative ventures and partnerships to explore commercially viable 
approaches to building a hydrogen economy. Shell Hydrogen is committed 
to the rapid development-to-market application of hydrogen energy 
technology by bringing together manufacturers, suppliers, distributors, 
legislators, investors, and consumers. This has led to a number of 
innovative cooperative programs, partnerships, and joint ventures on an 
international scale through local affiliates.

    California: Shell is cooperating with more than 20 partners from 
the automotive, energy, fuel cell industries, and government to prepare 
the path for bringing commercially viable solutions to the densely 
populated state of California that seeks to improve environmental 
standards in the face of air-quality problems and increasing energy 
demands. In West Sacramento, the Partnership has opened a demonstration 
hydrogen fuel-cell project. A fleet of hydrogen-powered vehicles are 
serviced at a compressed-hydrogen fuelling station before being 
operated on local highways.

    Iceland: Shell is working as a partner in Icelandic New Energy Ltd. 
in a pioneering project that involves all phases of developing a 
hydrogen-based economy. It involves the manufacture of hydrogen and 
development of a basic hydrogen infrastructure and the study of vehicle 
performance under real conditions. In the first phase, three hydrogen-
powered buses, fuelled by compressed hydrogen made from water, will be 
introduced, possibly followed by a transition to an entirely hydrogen-
driven public transport fleet. The ultimate goal is that all passenger 
vehicles, trucks, and eventually shipping will be converted by 2030. In 
addition, the project envisions development of auxiliary markets for 
smaller fuel cells and bottled hydrogen, and longer-term, bulk exports 
of hydrogen.

    Japan: Shell is involved in a three-year project in Atsugi 
laboratory to develop a liquid hydrocarbon fuel reformer capable to 
producing and dispensing hydrogen on the retail forecourt of an 
existing service station. The R&D effort will use catalytic partial 
oxidation (CPO) to split hydrogen from gasoline, ensuring that sulphur, 
carbon and nitrogen are eliminated and leaving only pure hydrogen for 
fuel-cell use. Another target is increasing the reformer size from the 
current 50-kW unit to one capable of producing 1,000 kg of hydrogen 
daily (capable of fuelling 200 cars).
    Furthermore, together with Showa Shell Sekiyu K.K., the first 
hydrogen refueling station will be demonstrated in Tokyo. This is part 
of the Japan Hydrogen and Fuel Cell Demonstration Project, a program 
sponsored by the Japanese Ministry of Economy, Trade and Industry to 
build five hydrogen refueling stations in the Tokyo metropolitan area. 
The station will provide liquid and compressed hydrogen to a fleet of 
prototype fuel cell vehicles provided by several automotive companies, 
which will be used on the city's streets. Showa Shell will operate the 
station for two years from April 2003.

    The Netherlands: In Amsterdam, Shell is involved with the Amsterdam 
Transport Company (GVB) to test three hydrogen fuel-cell buses for two 
years as part of the Clean Urban Transport for Europe, or CUTE Project. 
Currently the Project has fuel-cell demonstration projects in nine 
European cities and is an initiative of the European Union. Delivery of 
the first buses is expected in the 3rd quarter 2003, with a hydrogen 
fuelling installation in place by June. Compressed hydrogen fuel will 
be produced on site at an installation being developed at the GVB Bus 
Depot North.

    Technology: In addition to these groundbreaking early fueling 
initiatives, Shell Hydrogen companies invest in technologies that are 
necessary to enable the hydrogen economy. Shell has been making 
significant investments in hydrogen production, as our companies are 
the fourth largest producers of hydrogen in the world, mostly for use 
in our refineries and chemical plants. The key challenge is to extend 
hydrogen from being used primarily for industrial purposes to becoming 
a transportation fuel.

    Because distribution costs are high, it is likely that small-scale 
generation by either natural gas reforming or water electrolysis will 
occur. Shell is investing in reforming and purification technologies 
through its affiliates HydrogenSource LLC in Connecticut and QuestAir 
Inc in Vancouver, Canada, to ensure cheap and clean hydrogen is 
available when it is needed. Through our experience in these ventures, 
and with the promise offered by these companies' technologies, we 
believe that small-scale hydrogen production costs will continue to 
come down over the next 5-10 years.
    Besides reducing the costs of cost of production, new and 
innovative ways must be developed to store hydrogen. To address this 
need, Shell and its partners are investing in Hera Hydrogen Storage 
Systems, which develops solid-state hydrogen storage solutions based on 
metal- or chemical-hydrides. The aim is to store enough hydrogen in a 
small space to power many different fuel cell applications. Currently, 
because hydrogen is such a light, diffuse gas, it is still difficult to 
store enough hydrogen on board a vehicle to give it adequate range 
between refueling. Shell intends to sell hydrogen as a fuel for fuel 
cell cars and other hydrogen-consuming fuel cell applications once the 
market develops, and our investments in Hera, HydrogenSource and 
QuestAir support that aim.
    The pace of change and the level of research into hydrogen and fuel 
cells have been accelerating for a number of years. Many of the 
technologies in existence today hold promise for initial commercial 
deployment in the coming 3 to 5 years. We consider it likely that PEM 
fuel cells, which operate at up to 200+F, will be the first 
to commercialize, initially in portable power units, then for 
stationary power, and finally for transportation first in fleets, and 
then from around 2010 in passenger vehicles.

The Path to a Hydrogen Economy

    Today I would like to share with you two topics of direct relevance 
to a hydrogen economy and hydrogen infrastructure:

        1. LShell's Scenarios on the future of energy, including 
        hydrogen, to 2050;

        2. LThe role of government in fostering the hydrogen economy.

    The most important points I want you take away from my testimony 
are:

        1. LThe future of our energy and hydrogen infrastructures is 
        highly uncertain. A significant hydrogen economy may emerge by 
        2020 or not until 2050, depending as much on complex societal 
        drivers and unpredictable disruptive events, as on technology 
        breakthroughs.

        2. LGovernments can play an important part in stimulating 
        development of the necessary hydrogen related technologies and 
        providing encouraging incentives during the early stages. The 
        sustained political will of the U.S. Government is particularly 
        important in this regard. However, governments must allow the 
        markets and consumers the freedom to make the fundamental 
        commercial choices. Otherwise, money and time is wasted 
        clinging to political choices that turn out not to be 
        commercially the best options.

Shell Scenarios

    Shell's views about the future of energy are shaped by scenarios 
that look out to 2050 in terms of energy needs, possibilities, and 
choices. We've been using scenarios for 30 years to help us think about 
the future. Scenarios are not predictions. Rather, they are ways of 
challenging assumptions, encouraging debate, and exploring 
possibilities. They are tools for focusing on critical uncertainties--
the unexpected discontinuities or unknown possibilities that could 
transform our business environment. Our scenarios don't pinpoint future 
events; rather, they consider the forces that might push the future 
along a different path.
    Scenarios are credible, relevant and challenging alternative 
stories about how things might develop. Credibility is essential. We 
harness our experience in energy businesses and technology 
development--as well as a wide range of outsider expertise--to develop 
them. What I will tell you today comes from our most recent work in 
this area: ``Energy Needs, Choices and Possibilities--Scenarios to 
2050.''
    Let me say before I begin that I fully understand that this House 
Science Committee is particularly interested in hydrogen fuels for 
transportation. Our scenario work includes transport, of course, but it 
is not confined to this sector, as important as it is. Because of the 
interrelationships and uncertainties associated with all energy 
sectors, Shell has taken a ``holistic'' approach to looking at the 
future.
    What questions do our long-term energy scenarios attempt to answer?
    First, there is an overarching question about the ability of a 
dynamic energy system to respond to the threat of climate change in 
this half-century.
    Other key questions explored in the scenarios include:

        LWhen will oil and gas resources fail to meet rising demand? 
        What will replace oil, particularly in transport?

        LWho will drive the expansion of renewables? How will energy 
        storage for renewables like solar and wind be solved?

        LHow might a hydrogen infrastructure develop?

        LHow will the choices of consumers and citizens affect energy 
        paths?

    We looked at important influences that are likely to shape the 
future of energy, including demography, urbanization, income and market 
liberalization. And, we looked at three critical drivers that have the 
potential to bring about fundamental changes in the energy system--
resource constraints, technology development and changing social and 
personal priorities.
    A word or two about global resource constraints: Some people see 
impending limitations on the ability of fossil fuel resources to 
continue meeting growth in energy demand. We think scarcity of oil 
supplies is unlikely before 2025, and could be delayed even longer. 
Natural gas resources are much more uncertain. Scarcity could occur as 
early as 2025, or well after 2050. The more immediate issue is whether 
we can develop the infrastructure to deliver remote gas economically.
    There is no shortage of coal, but resources are concentrated in a 
few countries and are becoming increasingly costly to exploit, among 
other reasons, due to tightening emission standards. Renewable 
resources, like solar and wind, will compete with food and leisure for 
land use and require new forms of energy storage. Technological 
advances are at the core of the transition to new forms of energy. 
These advances offer superior or new qualities--often transforming 
lifestyles as well as energy supplies.
    In the long-term, two potentially transforming energy technologies 
are:

        LSolar photovoltaics, which offer the possibility of abundant 
        direct and widely distributed energy, and

        LHydrogen fuel cells, which offer the possibility of high 
        performance and clean energy from a variety of fuels.

    Both are in the early stages of development and face large 
challenges. Energy storage is the fundamental problem. Both still have 
a long way to go on affordability, although they will benefit from 
manufacturing economies.
    People's choices also affect energy development in two ways--by 
their personal preferences as consumers and their priorities as 
citizens. Personal lifestyle choices and consumption patterns drive the 
energy system. These forces operate within frameworks shaped by social 
attitudes and concerns, such as energy security, air quality and the 
climate change.
    Now about the scenarios we've developed to the year 2050. There is 
no limit, of course, as to how many we could generate about the future. 
But our experience is that we can better engage people by limiting our 
thinking to two focused and thought-provoking scenarios. They are 
called Dynamics as Usual and the Spirit of the Coming Age. I'll talk 
briefly about both of them.

    Dynamics as Usual focuses on the choices that people make about 
clean, secure and increasingly sustainable energy that--with growing 
resource scarcities--drive the evolution toward renewable sources. 
However, this transition is anything but smooth and reflects intense 
competition among priorities and technologies. Dynamics as Usual 
explores the continuation of the dynamic which has shaped the evolution 
of energy toward lower-carbon fuels--with electricity as the carrier--
in response to demands for cleaner, more convenient energy.

    Spirit of the Coming Age focuses on the energy choices made by 
consumers in response to revolutionary new technologies--which arise 
from unexpected sources--and transform the system.

    The two scenarios reflect differences in energy resources, timing 
and nature of technology development and social and personal 
priorities. However, the scenarios also have important common features, 
including:

         Lthe vital role of natural gas as a bridging fuel 
        during at least the next two decades;

         Lpressure on the oil market as new vehicle 
        technologies diffuse;

         Lthe shift towards distributed heat and power supply 
        for economic and social reasons, and

         Lin the long-term, the potential for renewables to be 
        the eventual primary source of energy if robust energy storage 
        solutions are found.
Dynamics as Usual
    Let me focus on the four main elements of Dynamics as Usual:

        1. Lexisting technologies respond,

        2. Lthe `dash for gas,'

        3. Lrenewables boom and bust, and

        4. Lthe oil transition and renewables renaissance.

    Let's consider each of these points in turn.
    First, existing technologies respond. The demand for clean, secure 
and sustainable energy stimulates a drive for energy efficiency within 
existing technologies, particularly the internal combustion engine. 
Advanced internal combustion and hybrid engines deliver the same 
performance as standard vehicles--but use as little as half of the 
fuel. Fueling inconvenience limits the appeal of fuel cell vehicles.
    The spread of high-efficiency vehicles disrupts oil markets. Prices 
are depressed until firmed by growing developing country demand for 
transport and heating fuels after 2015. Oil consumption grows 
steadily--but weakly--for 25 more years.
    Second, the dash for gas. Natural gas use expands rapidly early in 
the century--reflecting its economic and environmental advantages in 
liberalized markets. Where gas is available it fuels most new power 
generation and accounts for three-quarters of incremental OECD capacity 
up to 2015. Older coal plants cannot meet tightening emissions 
standards and are increasingly replaced by gas.
    The rising costs and logistical complexity of expanding coal 
deliveries from northern mines prompts China to embark on major gas 
import projects. Pan-Asian and Latin American gas grids emerge. Large-
scale LNG trade is increasingly competitive. By 2020 gas is challenging 
oil as the dominant source of primary energy. However, expansion 
thereafter is constrained by concerns for security of supply.
    New nuclear plants have trouble competing in deregulated markets. 
Most existing nuclear capacity is maintained, but nuclear steadily 
loses market share in OECD countries.
    Third, the renewables boom and bust. Strong government support in 
OECD countries enables renewable energy to grow rapidly for two decades 
through established electricity grids. The cost of wind energy 
continues to fall as turbines exceed 3 MW.
    By 2020 a wide variety of renewable sources is supplying a fifth of 
electricity in many OECD markets. Then growth stalls.
    Limited electricity growth constrains expansion in OECD countries 
and with little progress on energy storage, concerns about power grid 
reliability block further growth of wind and solar. In developing 
countries, renewables do not fully compete with low-cost conventional 
resources.
    As renewables stagnate and gas security concerns grow, it is not 
clear what will fuel future energy supplies.
    It is a decade of great energy policy dilemmas.
    Fourth and lastly, the oil transition and renewables renaissance. 
Around 2040, as oil becomes scarce, advances in biotechnology together 
with vastly improved vehicle efficiency allow a relatively smooth 
transition to liquid biofuels or Fischer-Tropsch fuels. The existing 
transportation system can be modified at low cost.
    A new generation of renewable technologies emerge. The most 
important is organic and thin film embedded solar materials. New ways 
of storing and utilizing distributed solar energy are developed.
    By 2050 renewables reach a third of world primary energy and are 
supplying most incremental energy.
Spirit of the Coming Age
    Now let me turn to three key elements of the second scenario, 
Spirit of the Coming Age:

        1. Lbreaking paradigms,

        2. Lthe ubiquitous fuel cell,

        3. Lthe hydrogen economy.

    Let's talk about breaking paradigms.
    The Sony Walkman was repeatedly dismissed by focus groups. Portable 
computers and mobile phones are examples of innovations that broke 
existing paradigms. Such developments often come from niche market 
fringes--ignored by incumbent suppliers--where physical constraints 
force innovation and consumers are willing to pay a premium.
    In this scenario technological development is rapid and--
critically--societies adopt new technologies more or less immediately. 
With abundant gas supplies, innovations push fuel cells into a variety 
of new applications. The outlook is bright.
    By 2015, installations of both stationary and mobile fuel cells 
have won broad public acceptance. After all there are already hundreds 
of installations in place in the U.S. and in highly environmentally 
conscious Germany. This scenario says that by the end of the decade 
there is growing enthusiasm for the technology.
    Automobiles manufacturers know that hydrogen fuel cell vehicles 
match the public mood because they are cleaner, quieter and offer high 
performance. They can also support more electrical services--digital 
communications, pre-entry heating and cooling, and in-car 
entertainment--which consumers want but which require too much power 
for many traditional engines. The constraint is the fuel infrastructure 
and the potential health hazards of alternative fuels.
    Demand for stationary fuel cells--for businesses willing to pay a 
premium to ensure highly reliable power--helps drive fuel cell system 
costs down. This provides a platform for transport uses, stimulating 
further cost reductions--well below conventional power and heat 
technologies.
    In this scenario, by 2025 a quarter of the OECD vehicle fleet uses 
fuel cells. The global automobile industry rapidly consolidates around 
the new platform. Technical advances in transport and power services 
feed off each other, solving mutual problems. Fuel cells also benefit 
from broader developments in material technology.
    Cars no longer need to be idle for 95 percent of the time. Through 
docking stations, they can provide energy to homes and buildings.
    Now, let's talk about the emergence of a hydrogen economy. The 
advantages of the new technology push the transition to hydrogen well 
before oil becomes scarce. The higher the demand for fuel cells, the 
less oil fetches. Renewable energy makes steady but unspectacular 
progress until 2025. ``Green energy'' niches remain small in most 
regions.
    After 2025 the growing use of fuel cells for heat and power creates 
a rapidly expanding demand for hydrogen. It is widely produced from 
coal, oil and gas fields, with carbon dioxide extracted and sequestered 
at source. By 2050 a fifth of carbon dioxide emissions from the 
production and use of energy are being sequestered.
    Large-scale renewable and nuclear energy schemes to produce 
hydrogen by electrolysis start to become attractive after 2030. 
Renewable energy becomes a bulk supply business and starts to expand 
rapidly. Hydrogen is transported in gas grids until demand justifies 
dedicated hydrogen pipelines.
    A century-long process of hydrogen infrastructure development 
begins. The need for sequestration peaks after 2050 although only a 
small part of the total sequestration capacity has been used. It all 
sounds very positive. Still, it is worth noting that even in this most 
optimistic scenario for hydrogen it takes another 40 years before 
hydrocarbons fully lose their dominance of the energy industry.
    What I've just given you is an overview of our two long-term energy 
scenarios. They both underscore the complex interplay between 
scientific and technical advances and social, political and market 
developments. They also underscore the inherent uncertainty on the 
timing and nature of the hydrogen economy.

Role of Government

    Shell has extensive experience with government influence around the 
world, as no other industry is subject to so many policies and such 
political control. We know that policies can make or break projects, 
technologies and even whole industries. We have also learned that 
subsidies meant to encourage an industry can sometimes wreck it. We've 
learned that policies have to be intelligent and properly structured, 
not just well meant.
    Policies related to the hydrogen and fuel cell industries are only 
now beginning to be formed. It is very important that the right 
principles are ingrained in these policies and that they are carefully 
framed.
    This must be based on an appreciation for the challenges in 
producing hydrogen. Hydrogen is made either from electricity by 
splitting water, or extracted from natural gas or other fossil sources. 
Therefore, the energy in the hydrogen will always be more expensive 
than that of the sources used to make it. Hence, competitiveness must 
come from the additional benefits produced in cleaner air, lower 
CO2 emissions through greater efficiency or sequestration, 
and improved energy supply security. These externalities need to be 
reflected in price signals received by the market, otherwise technology 
alone cannot bridge the gap in cost. The incumbent petroleum based 
technology already has an infrastructure in place and is made from a 
relatively low cost feedstock. Hydrogen can only compete in the early 
years with the involvement and consistent support of government.
    Our participation in the California Fuel Cell Partnership has 
provided valuable insight into the potential social benefits resulting 
from the use of fuel cells, and the hurdles for implementation of a 
hydrogen infrastructure. Through working in partnership with car 
manufacturers, Federal and State government agencies, and other energy 
companies, we have researched pathways for a transition to a hydrogen 
economy in California. Such cooperation is unique and essential to 
ensure a hydrogen transition becomes feasible.
    The Federal Government has a key role to play in setting up the 
playing field for private enterprise to compete. Previous experiences 
with alternative fuels such as compressed natural gas (CNG) show that 
without prolonged government engagement and strong, visible and vocal 
commitment to deliver a shift in the fuel used in society, these 
initiatives are destined to fail and remain niche products. In addition 
to the sort of fiscal support and R&D funding proposed in the 
President's recent Hydrogen Fuel and FreedomCAR initiatives, the 
government should also work towards harmonized international codes and 
standards, increasing levels of public education, and mitigating the 
risk of in developing a new fuel infrastructure. Finally, as I pointed 
out earlier, it should ensure that the integral social, environmental, 
and economic costs and benefits to society of any fuel are properly 
considered by the market.
    The transition to hydrogen will be a long and capital intensive 
process, and will need a sustained political will to realize the 
significant benefits of cleaner air, lower greenhouse gas emissions, 
and a decreased reliance on foreign energy sources. Many of the 
existing technical and cost hurdles can be overcome with sustained and 
consistent government support, but even so the huge investment for the 
infrastructure changeover can only be supported by industry if it can 
be done on a commercial basis. The initial investment has been 
estimated by Shell at around USD 20bn for the U.S. alone, to supply two 
percent of the cars with hydrogen by 2020 and to make hydrogen 
available at 25 percent of the existing gasoline retail stations. In 
the subsequent decades, further build-up of the hydrogen infrastructure 
will require hundreds of billions of U.S. dollars. Support from the 
government in mitigating some of the risks around such large 
investments will clearly be indispensable. However, if the hydrogen 
sector is to truly take off, most of the capital will come from the 
private sector. Therefore, it will be consumers, and by extension, the 
capital markets that will ultimately determine how much money flows 
into this new industry.
    I hope that I have convinced you that Shell believes in hydrogen 
and is putting its money on the table. Through the companies of Shell 
Hydrogen, we are already a significant investor and we are willing to 
invest further as opportunities arise. Shell believes that governments 
should promote research and development--and provide significant 
funding--but, that they should do so in a way that allows for 
innovation and competition in the marketplace, and provides customer 
with a choice.
    I would be happy to answer any questions.
                   Biography for Donald P.H. Huberts
Chief Executive Officer

    Don Huberts has a Master's Degree in Chemical Engineering from 
Delft University of Technology, and a Master's of Science of Management 
(MBA) from the Sloan School of Management at the Massachusetts 
Institute of Technology in Boston, MA, USA. He joined Shell in 1980 as 
an assistant development engineer in Catalytic Cracking. Subsequently 
Don worked in Process Control in Houston, TX, USA and in Refinery 
Operations in The Netherlands. After obtaining his MBA at MIT in 1992, 
he worked as country focal point for Japan and the Philippines in the 
regional organization based in London, which was followed by an 
assignment as personnel resourcing adviser in The Hague. Thereafter, he 
was General Manager of a crude oil refining and product importation 
joint venture company in the Dominican Republic.
    In Hydrogen Don is responsible for developing Shell's global 
business in the emerging hydrogen and fuel cell industry. He was the 
2002 Chairman of the California Fuel Cell Partnership. Don is Chairman 
of the Board of HydrogenSource, a joint venture between UTC Fuel Cells 
and Shell Hydrogen. He is also member of the International Advisory 
Board of Conduit, a European based venture capital company which 
focuses purely upon fuel cells and related hydrogen technologies.
    Don is married and has three young daughters. He enjoys spending 
time with his family, soccer, movies, theater and visiting interesting 
places.

                               Discussion

            Industry's Opinion on Government Policy Options

    Chairman Boehlert. Thank you very much. Let me start with 
our two witnesses from industry, Dr. Burns and Mr. Huberts. To 
what extent do industry's plans and assumptions about making 
money from your hydrogen investments depend on specific 
government policy options, whether they are incentives or 
regulations? And can we get to a hydrogen economy just relying 
on narrowly defined market forces? Dr. Burns.
    Dr. Burns. I believe there is tremendous business growth 
opportunities for companies like General Motors and Shell 
associated with hydrogen. The reason we are so excited about 
this technology is we truly believe we can make better cars and 
trucks around the technologies that are emerging at this point 
in time. But if we have those cars and trucks available, and 
the hydrogen is not available, we are not going to be able to 
accomplish our own goals because the customers wouldn't have 
the hydrogen conveniently there. So we believe the governments 
can play a very important role in a couple of ways.
    First of all, to help keep hydrogen on an equal playing 
field with the cost of gasoline, recognizing that 
infrastructure for gasoline has been evolving over 100 years, 
where hydrogen will not just be starting out. So we need some 
mechanism to make sure that hydrogen has an opportunity to 
compete on a level playing field for a period of time to kick 
this off.
    Codes and standards also will be real important. And we 
need the R&D funds, we believe, to lead to some more important 
breakthroughs on materials to make these technologies more 
affordable in the near-term.
    Chairman Boehlert. Mr. Huberts?
    Mr. Huberts. Mr. Chairman, as I said, the externalities, as 
also Dr. Ogden pointed to, are key to realizing the benefits of 
hydrogen, and therefore, government policy will be required to 
assure that hydrogen receives the benefits of those 
externalities.
    Chairman Boehlert. Mr. Lloyd, would you have a comment on 
this question?
    Dr. Lloyd. With respect to--I think, again, speaking on 
behalf of the Partnership here, clearly we are hoping that 
working as partners here; we can develop a mechanism whereby we 
can get these vehicles on the road. I would say very carefully 
in my other hat, I will say that what we have found over the 
years that it is good to have basically a carrot on a stick. 
One of the things that we found just reading in the Financial 
Times yesterday, that the market share for the Japanese 
companies is increasing in the U.S. That is a time when, in 
fact, they are also developing. They have hybrids on the road. 
They are selling hybrids. They have fuel cells in limited 
numbers on the road in California. What that indicates to me is 
that they have got the right mix of being able to push the 
technology, respond to some of the stimuli, and yet they are 
gaining market share. I can't--I will completely agree with Dr. 
Burns. We--and we have learned this that, in fact, you have to 
build something the public will buy. I think maybe the Japanese 
have got a model that seems that they are getting both, 
advancing technology and----
    Chairman Boehlert. Would they mix with the hybrids and the 
fuel cell?
    Dr. Lloyd. Well, by the fuel cell, it is very early, but 
obviously they are getting those very small numbers on the 
road, the same as GM is doing there. But I think if you look at 
the hybrids, now in fact while it is difficult for the U.S. 
population to buy hybrids from the domestic manufactures, you 
have got Honda and Toyota who have already invested in hybrids. 
Obviously, there is significant cost in electric drive, and the 
public is obviously responding with sales. And if you look 
across the board, the fact that they are gaining market share 
tells you that, obviously, they are being able to push the 
technology, put vehicles out there which may be more costly, 
but the public does seem to be responding.
    Chairman Boehlert. Dr. Ogden.
    Dr. Ogden. I think that recognition of externalities is 
going to be an important condition for bringing about a 
hydrogen economy. I see this happening both in terms of 
policies to recognize those, and also in terms of changing 
consumer preferences really, for vehicles that would offer 
diverse energy supply, and lower emissions of air pollutants 
and greenhouse gases. So I see this as really taking place as a 
paradigm shift, and I think the government has an important 
role to play there in encouraging the progress toward that kind 
of future. And having a societal debate really about whether 
that is the sort of thing we want to do, you know? Opening it 
up and bring----

              DOE's Opinions on Government Policy Options

    Chairman Boehlert. Mr. Garman, you heard him. Everyone 
seems to be saying we need policy tools; we need to take 
externalities into account. What is DOE doing about this?
    Mr. Garman. Actually, well, you have got to get the 
technology in the ballpark before you get close to being able 
to play in terms of addressing the externalities. In a case in 
point, for instance, it might be wind energy. I mean the 
Department, through its R&D program, has brought down the cost 
of wind energy from 10 to 20 cents a kilowatt hour where no 
conceivable tax incentive or other policy mechanism would make 
it competitive. But technology work brought the cost of wind 
technology down to four to six cents a kilowatt hour, in the 
most, you know; class six wind areas, productive areas, which 
means you suddenly can begin to play with a production tax 
credit or some other government mechanism to incentivize use of 
the technology. So I think it is important that before we get 
too hung up on what kind of market mechanisms or tax 
incentives, or other mechanisms we might want to use, that we 
get the technology in the ballpark, because the revenue impacts 
of fuel cell incentives or other mechanisms like that would 
just be budget breakers. We have got to get the technology 
close. And when we get into the ballpark, then I think we can 
have a good productive dialogue about the additional mechanisms 
that might be needed.

             Sources of Funding for the Hydrogen Initiative

    Chairman Boehlert. I can't escape noting that one of the 
ways you intend to pay for the fuel cell initiative--hydrogen 
initiative is cutting wind energy R&D?.
    Mr. Garman. I hoped you would give me the opportunity to 
respond to that, Mr. Chairman.
    Chairman Boehlert. I will give you that opportunity right 
this moment.
    Mr. Garman. Because in truth, our wind request for 2004, we 
were--of course had to make our request before we had the 2003 
appropriates in hand. But the 2003 appropriations was 33 
million for wind; our request for 2004 is 41.6. Reasonably 
flat, our hydro is actually up, the geo-thermal reasonably 
flat, solar is from 87 to 79, but notable tag subset of that is 
actually up a little bit. We did take a hit in biomass, but 
actually when you look at even our biomass number, our request 
when you take away the Congressional earmarks that may or may 
not contribute to the R&D goals, we are actually asking for 
more than we asked for biomass on our core R&D goals. So we 
have a very strong--and in fact, in the overall energy supply 
account for our renewable energy, we actually--our 2004 request 
is actually up over the 2003 appropriation, 444 million to 426 
million. So we have a strong renewable energy R&D request. We--
a lot of the plus up that you see in the overall account is due 
to the additional dollars that we are asking for in hydrogen 
that is funded also from this account, on some of the very R&D 
goals that Dr. Burns was saying we needed to pay attention to.
    Chairman Boehlert. It proves the point that different 
people can look at the same figures and interpret them in a 
different manner. The new Chair of the Subcommittee on Energy, 
Ms. Biggert.

            Role of Partnerships in the Hydrogen Initiative

    Ms. Biggert. Thank you, Mr. Chairman. I have got a question 
for Mr. Garman. In your testimony you gave some details about 
the focus and structure of the President's Hydrogen Initiative, 
and thank you for that, but I think there is still some basic 
questions that haven't been answered. We don't know, for 
example, who will be the partners with this--for this--with the 
program, or even who will perform the research. In other words, 
what will be the role of the national labs? What about the 
oil--energy companies? Are there specific companies that you 
are looking in to partner with, and if so, which ones? And when 
are we going to see this plan?
    Mr. Garman. Excellent, thank you for that question. We have 
begun discussions with a variety of energy companies. We are 
looking particularly at those energy companies that have a 
sizeable investment in hydrogen work already. Fortunately, a 
lot of energy companies do that. They are the producers of a 
large amount of hydrogen, some nine million metric tons we 
produce each year, mainly for petroleum refining applications. 
We have been working with our FreedomCAR partners on a charter, 
and we have been discussing with a variety of energy companies 
possible participation. We hope that we can approach those 
companies in--just within a few short weeks and engage them 
very actively.
    In terms of the research and who will do it, we try to 
ensure that the research is undertaken on a competitive and 
peer-reviewed basis. Our--if FreedomCAR and the PNGV prior to 
that is a model, most of the research is actually performed--
the largest percentage is done in the national labs, and then 
following close behind that are tier one and tier two 
automobile suppliers. Ironically, the big three get very 
little, if any, of the dollars, and I think that if that model 
holds, you will see the R&D mainly being born by national labs 
and suppliers to the energy company, those who actually make 
hydrogen compressors, reformers, and other types of equipment.

        Role of the Office of Science in the Hydrogen Initiative

    Ms. Biggert. If you use the labs and the basic research, 
how about the Office of Science, are they involved? And right 
now we are seeing very flat funding of the Office of Science, 
will there be increased funding for this or will other--they 
will have to drop other basic research items?
    Mr. Garman. We--Science is already doing a superb job 
working with us. We have created an internal posture plan, 
which is under policy review now. We hope to share that with 
the Committee in the months ahead. Science is a strong partner 
with us in developing the plan on how DOE as an entity is going 
to pursue these things. They are already doing cutting edge 
research. Their Biological and Environment Research Division is 
working on microbial generation of hydrogen that looks quite 
promising. The Basic Energy Science Program has been helping us 
and working on materials for the storage of hydrogen, which you 
heard Dr. Burns say was a critical technology on board the 
vehicle. Science is very well integrated with our work. We 
think that they--we view them as a strong partner. I don't 
see--I think they will receive very lavish resources to do this 
work.
    Ms. Biggert. So there will be other resources that will be 
available other than what they received for Fiscal Year 2003 
and what is proposed for 2004?
    Mr. Garman. Yes, sir. The--yes, ma'am. The President has 
provided us with a funding profile. The 1.2 billion that 
includes 720 million dollars of new funding, and this would be 
shared between--my office would get the bulk of the funding, 
but Science would get some as well, as would Fossil and Nuclear 
Energy inside the Department.
    Ms. Biggert. Would that plan--is that part of the 
Initiative that you talked about--the plan for the Hydrogen 
Initiative? Is there another plan for what the government will 
be doing or is this all one plan that we will be receiving?
    Mr. Garman. Our posture plan is really--the simplest way to 
think about it is the DOE response to the President's 
Initiative, and how my Office of Energy Efficiency and 
Renewable Energy--the work, the hydrogen work that is being 
undertaken, the Fossil Office, the Nuclear Office, the Office 
of Science, will be integrated to make sure that we are hitting 
the R&D objectives.
    Ms. Biggert. Thank you very much. Thank you, Mr. Chairman.
    Chairman Boehlert. Thank you, Mr. Lampson.

           Safety Concerns and Precautions for Hydrogen Usage

    Mr. Lampson. Thank you, Mr. Chairman. We have been using 
hydrogen for a long time, as on the Space Shuttle and Space 
Station, and lots of other places, but generally today, it is 
handled by trained persons under controlled conditions, and it 
is clear that we have the knowledge and experience to handle 
these quantities safely under the conditions that were set out. 
But if hydrogen is to become widely available to people who 
don't understand how to handle it, it seems to me that a whole 
panoply of problems need to be solved. And let me ask some of 
those, and I am going to call Mr. Huberts and see if he will 
help me understand them. Hydrogen, I understand burns with an 
almost invisible flame. People could literally walk into it 
unknowingly. Hydrogen is highly ignitable. The ignition 
characteristics differ from natural gas, and how do they do so? 
What conditions, what precautions might we be able to take? How 
easily is it ignited by static electricity? What precautions 
might we be able to take? And also, unlike natural gas, 
hydrogen rises when it is released into the atmosphere. What 
special considerations need to be taken into consideration when 
handling in enclosed areas? Can you talk to me about those for 
a minute, please?
    Mr. Hubert. Sure, as we are going through the learning 
process right now, one of the examples is the station that will 
be opening here in the DC area. We will address those aspects 
under real-life conditions. So there will be changes, for 
example, in the way in which the station is designed in order 
to be safe, recognizing that hydrogen goes up instead of going 
down, contrary to different fuels, recognizing that it a gas, 
not a liquid. So those different properties of hydrogen need to 
be managed in a different way.
    We believe that can be done safely, and what is happening 
right now in demonstration projects that are taking place in 
these years is testing all those things out in practice, and 
getting the design rules established, getting the codes and 
standards established under which this new fuel can be handled 
safely by the general public.
    So your point is very valid. There is also a role there for 
the Federal Government in helping to harmonize these codes and 
standards as they are developed to make sure that the Fire 
Marshals, who are the local authorities, giving permits for 
refill stations, they know how to handle this fuel. And this is 
a whole process that is going to take several years, and the 
demonstration projects are really a key part of that process.
    Mr. Lampson. Do you envision ultimately that the general 
public would be able to pull up to a gas pump similar to what 
we do today and pump up with hydrogen?
    Mr. Huberts. Yes, definitely.
    Mr. Lampson. Assuming that hydrogen has to be transported, 
do we have the experience with hydrogen pipelines? Will the gas 
have to be compressed to be shipped? Will the stresses and 
metal fatigue be similar to natural gas or oil pipelines, and 
how will the dangers of hydrogen pipelines compare to natural 
pipelines? Are they more likely to be terrorist targets?
    Mr. Huberts. Hydrogen pipelines are available today, and 
there are hundreds of miles of hydrogen pipelines across the 
country. For instance, in the Texas area there is a little 
experience with those kind of pipelines. They are not exactly 
the same as natural gas pipelines. One has to take into account 
the different properties of hydrogen in designing these 
pipelines, but the experience to do that is available, and 
these pipelines have been operated safely for many, many years.
    As far as transporting hydrogen on the road, it is 
transported routinely, has been transported routinely for many 
years in tanker trucks in liquid form, in gaseous form. So, we 
will--hydrogen is different than natural gas in some aspects, 
the experience in transporting it is available, and we will 
make use to that experience and build on that

               Cost of Hydrogen vs. Natural Gas Pipelines

    Mr. Lampson. How about the cost?
    Mr. Huberts. Hydrogen pipelines are more expensive than 
natural gas pipelines, and that is one of the factors. As I 
explained, hydrogen is more expensive than other forms of 
energy because it has to be made, and it has different 
properties. So the benefits of hydrogen have to come from its 
greater efficiency, from social benefits, but at the end of the 
day it is going to be more expensive a hydrogen pipeline than 
it is to build a natural gas pipeline. It is--that is simply a 
fact.
    Mr. Lampson. Thank you very much. Mr. Chairman, I have got 
more questions, but I see that little yellow light out there, 
and if I start the next one you are going to jump on me. So I 
will give you back my time and ask for a second round.
    Chairman Boehlert. We will have a second round, Mr. Smith.

                 Direction of Hydrogen Research Efforts

    Mr. Smith. Thank you, Mr. Chairman. Certainly hydrogen is 
abundant. I just am a little concerned that we might start 
running top speed that might be the wrong direction. Is it your 
impression that we are going to do the additional research 
effort in the hydrogen fuel cells that might mean a sacrifice 
of some of our other efforts, whether it is the traditional--
whether it is some of the hybrid cars, whether it is additional 
research efforts in developing different, more efficient 
batteries, or better, more-efficient conventional engines? Or 
Toyota I understand is coming out with a vehicle that can get 
100 miles per gallon? Maybe Dr. Burns, a question to you as I 
add to the questions, my interest probably would be two-fold--
or our interest in general should be two-fold, and one is to 
reduce our dependency on imported petroleum energy, and the 
second is to have the kind of production of vehicles in the 
United States that is going to allow us to have the jobs in the 
economy, if you will. And Japan seems to have taken a lead. 
General Motors was going very strongly in the electric car, and 
I guess you still have an electric car research effort that has 
sort of faded out, whether it was the battery, the inability to 
develop batteries or etcetera. So the bottom line question, 
will the big three in the United States be at the forefront in 
the development of new and better, more-efficient vehicles, 
regardless of whether it is hydrogen cells or something else?
    Dr. Burns. That is a very important question, Congressman. 
General Motors has a near-term, midterm, and long-term view on 
propulsion technologies. In the near-term, improving the 
internal combustion engine, both gas and diesel, improving our 
transmissions are critically important. My role as head of R&D 
and Planning is--requires me to have the right balance 
portfolio of research projects within our company that allows 
us to improve the existing cars as we know them, as well as 
prepare ourselves for the longer term future. One technology we 
are especially excited about that will be utilized with our 
eight cylinder engines on our large sport utility engines and 
pick-up trucks is called displacement on demand. This is a 
technology that allows you to literally shut down four of the 
eight cylinders once the vehicle has been accelerated, to 
realize efficiency gains and emission advantages. And that can 
result in anywhere from a five to eight percent economy 
improvement. We coupling that technology with hybrid 
technologies for those same trucks. The hybrid system combined 
with displaced on demand is an opportunity to improve fuel 
economy on the order of 20 percent for these vehicles.

      Importance of Hybrids as an Intermediate Step to Fuel Cell 
                                Vehicles

    We see hybrids as an important intermediate type of a 
technology. Fuel cell vehicles likely will be hybrid vehicles 
as well. By that I mean they will have some type of a battery 
system on them, or capacitor system to store the energy 
associated with slowing the vehicle down and breaking the 
vehicle.
    Mr. Smith. The New York Times suggests that GM is coming--
and I guess your plan is to come by May or the summer with five 
minivans or a certain number, why are you doing that?
    Dr. Burns. Yeah, that is correct. The six vehicles that we 
are going to have available as part of the demonstration with 
Shell in Washington DC; they are pure full cell vehicles. We 
will have a modest amount of battery assist on them in order to 
give them better acceleration characteristics, but essentially 
they are pure fuel cell vehicles. But for larger vehicles, 
having the hybrid technology with fuel cells is critical.
    The key here is to get to electric drive. Electric drive 
has a lot of important advantages in terms of the driving 
characteristics of the vehicles. Fuel cells and hybrids have 
both of those.
    Mr. Smith. A quick question to you Mr. Garman, on the--John 
Graham and there seems to be inconsistency within the 
Administration for what the--how to progress on fuel cells.
    Mr. Garman. Actually, I am not familiar with that 
specific----
    Mr. Smith. The EIA was complaining that their projection of 
hybrid vehicle market growth directly contradicts reports by 
auto makers in the United States. It seemed to be an in-house 
criticism and I was just wondering about the coordination.
    Mr. Garman. The EIA is an independent statistical entity 
within the Department of Energy, and I can assure you there is 
no coordination between what they say and what we think. And we 
often have some--we often disagree with the EIA about the 
introduction of technologies, and it is a healthy disagreement.
    I did want to add the point, however that we view the 
introduction of the interim technologies very importantly as 
well. We have sought--we are seeking this year more funding for 
hybrid vehicle technology work, as well as materials work--
lightweight materials that we think will be importantly 
integrated in vehicles both in the midterm and the long-term as 
Dr. Burns indicated. And General Motors' vision of how the 
market is going to unfold and how consumers are going to become 
exposed to this new both hybrid and fuel cell technology and 
adapt to it is quite consistent with ours.
    Mr. Smith. Thank you, Mr. Chairman.
    Chairman Boehlert. Thank you, Mr. Smith.
    Mr. Ehlers [presiding]. Thank you, Mr. Smith. Next we will 
call on Mr. Miller.
    Mr. Miller. Thank you. I regret that I have been kind of in 
and out of this hearing and not been able to give it my full 
attention, so if I have--if I ask questions that you have 
already addressed, I apologize.

      Potential Benchmarks for Hydrogen Vehicles and Fossil Fuel 
                                Engines

    I think I have questions that probably would be best 
directed to Dr. Burns, I think, but if anyone else has an 
answer, please speak up. You spoke of the need--well, the 
intermediate technologies before we have a full-blown hydrogen 
economy. Is there a magic number of miles per gallon that we 
would need to achieve for American vehicles that would allow us 
energy self-sufficiency? I have heard 37.
    Dr. Burns. I am not aware of such a magic number that we 
should be targeting. The fuel cell is twice as efficient as the 
internal combustion engine, and that is very encouraging. But 
you also have to recognize that as Mr. Huberts mentioned, you 
need energy to create the hydrogen, the form that it is 
stored--that exists in the nature with water with hydrocarbons. 
And so when you balance that all out, we think we could see 
about a 50 percent fuel economy or energy efficiency advantage 
with the fuel cells going forward. But we really don't have a 
magic number of that type that we would target.
    Mr. Miller. With--you are talking about with hydrogen. I am 
talking if you stick, for at least the time being, with the 
fossil fuel--with fossil fuel engines as the energy source for 
vehicles, what kind of fuel efficiency would you need to 
achieve to--for the United States to have energy self 
sufficiency?
    Dr. Burns. Again, I don't--sir, I don't see a magic number 
on that. The key is, though, the growth of the economy, and the 
growth of the economy is going to determine the energy 
consumption going forward. And if you look at vehicle miles 
traveled in this country, it has nearly doubled since 1980, so 
again, I don't see that kind of number existing.
    Mr. Miller. Dr. Ogden, do you have any better idea or----
    Dr. Ogden. I would second that. It really depends on the 
vehicle miles traveled. You could decrease, perhaps, oil use in 
the near-term by implementing more efficient internal 
combustion engine technologies, and as demand grows, you will 
probably reach a point where you need to increase the 
efficiency more. And looking at other sorts of externalities, 
people have estimated 100 years from now, even if you 
completely decarbonize the electric sector, if you want to get 
on a path we you are going to stabilize the atmosphere say at 
an acceptable CO2 level, you are going to have to 
decarbonize the fuel sector very substantially, which will mean 
moving from hydrocarbon to something like hydrogen.
    Mr. Miller. Okay. I was thinking more immediate than over 
the course of the next 100 years.
    Mr. Garman. Mr. Congressman, I will take a crack at that, 
because we did some very rough scenario analysis on that very 
question and found that even if we were to impose an immediate 
and, let us say, unreachable, but an immediate 60 percent 
increase in the CAFE standard to 38.4 miles per gallon and 
discovered a 10 billion barrel oil field on the north slope of 
Alaska and began pumping that at a rate of up to two million 
barrels a day, we would still not be energy independent. We 
would for a short time. And we did this based on extrapolating 
EIA data. We would, for a short time, begin to bend that jaw 
between domestic production and demand but only for a short 
time. After a while, that demand would once again expand. So I 
think that is a powerful argument that eventually we must turn 
to a hydrogen approach for transportation.

    Possibility of the Failure of a Hydrogen Economy and Potential 
                            Alternate Plans

    Mr. Miller. A question then for you, Mr. Garman. We have 
continued to make remarkable technological advances, but they 
are not always the ones that we expected to make. And most of 
the folks who have called for a really serious effort in 
developing alternative fuels, a Manhattan Project for 
alternative fuels, has suggested we go off on several fronts at 
one time and see which one works. It does seem that this plan 
does put all the eggs in one basket, although the amount being 
put in this basket is not really that many eggs in view of how 
important alternative energy is to us. Is there a plan B? If 
this doesn't work out, what do we do? And when do we identify--
are we setting out points along the way that we identify that 
this is just not working, we better turn our attention 
somewhere else?
    Mr. Garman. Absolutely. As part of our FreedomCAR 
partnership, we have not only technology goals for 2010, but 
interim technology goals too, as well as off ramps on 
technologies once we determine that we are not succeeding in a 
particular technology, say onboard reformation of gasoline fuel 
aboard the vehicle. We have been putting money into this for 
some years, and if we are not achieving technological goals, we 
quit spending money on it. And we have off ramps. We subject 
our program to peer review by the National Academy of Sciences 
so that if we are on the wrong course, we know so that we can 
make adjustments in either the technology requirements or make 
the appropriate shifts.
    Mr. Ehlers. The gentleman's time has expired. We recognize 
Congressman Rohrabacher.
    Mr. Rohrabacher. Thank you very much. And I apologize as 
well for being in and out today. I have other Committee 
assignments, as we all do, and this is just unfortunate, but I 
do consider this hearing to be of importance, and that is why I 
came back.

                 Sources of Funding and Cost Estimates

    When I used to be a journalist, I used to ask one question. 
Everybody thought it was a great question and gave me a lot 
more credit than I deserved. And it was just one question I 
asked in so many different ways, and which is how much is it 
going to cost, and who is going to pay for it. And I think it 
comes down to a lot of what we are doing here. And I was 
wondering, first of all, is there or is there not an extra step 
that is required that requires energy which then costs money 
before hydrogen can be produced as a fuel? And am I incorrect 
in that? I mean my assumption is, okay, how much does that 
extra step cost? What is the percentage of that extra step to 
the end cost?
    Mr. Garman. We have done well-to-wheels efficiency 
analysis, which we think is very important. You raise the 
critical point that if you are considering a new system, you 
have to take into account if you are using, for instance, a 
hydrogen fuel cell vehicle with compressed natural gas reformed 
into hydrogen. You have to count what is the energy penalty you 
pay of converting the natural gas to hydrogen? What is the 
energy penalty you pay taking the hydrogen and compressing it 
to put it aboard the vehicle? And we have done those analyses. 
The inherent greater efficiency of fuel cell vehicles more than 
makes up for the penalty in the conversion in these well-to-
wheel analyses. I will provide for the Committee a complete 
well-to-wheel analysis. (See Appendix 1: Additional Material 
for the Record.)
    Mr. Rohrabacher. So in other words, a hydrogen fuel for a 
car, while it costs you to--it costs you more per gallon--I 
mean for a gallon, but you are getting many more miles per 
gallon?
    Mr. Garman. Right. And let me also--so that I don't mislead 
you, our 2010 technology goal for hydrogen produced from 
natural gas is $1.50 per gallon of gas equivalent, untaxed. So 
it is more than that today. We think that advances in R&D will 
bring that down to the $1.50 per gallon of gas equivalent 
untaxed.
    Mr. Rohrabacher. All right. Let me make sure I am getting 
you straight. So that includes the cost of the natural gas and 
everything?
    Mr. Garman. Yes. Yes, it does.
    Mr. Rohrabacher. Okay.
    Mr. Garman. And that is based on $4 per MCF natural gas in 
that particular figure.

                   Abundance and Cost of Natural Gas

    Mr. Rohrabacher. Okay. Now you are going to have to--other 
people may want to correct me if I am wrong, but I seem to 
remember that natural gas is not really as abundant as we 
thought it would be in the United States.
    Mr. Garman. Prices are up, and but EIA estimates--the same 
EIA that we sometimes agree with and sometimes don't, so 
estimates that natural gas is going to continue in the roughly 
$4 per MCF range.
    Mr. Rohrabacher. And that is--unless we all convert over to 
automobiles, which then of course means natural gas will go way 
up in price.
    Mr. Garman. And we have asked EIA to do that analysis for 
us, and they find that natural gas demand is not as much as you 
would expect in the early days.
    Mr. Rohrabacher. Well, of course not now, but if you have 
your way, the natural gas demand is going to be right through 
the roof.
    Mr. Garman. Right.
    Mr. Rohrabacher. That means natural gas will go up to 
about, maybe, $10 a gallon, I would imagine.
    Mr. Garman. Assuming we are successful, EIA has estimated, 
I think, between a three and five percent increase----
    Mr. Rohrabacher. Oh, come on now.
    Mr. Garman [continuing]. In--that is EIA.
    Mr. Rohrabacher. Let me tell you, I mean, looking at the 
way gas prices fluctuate right now with minor disruptions or 
minor increases in demand, I--frankly, I--what you are saying 
doesn't make any sense to me at all. I mean, yeah, it does if 
you say that natural gas prices are going to stay the same and 
we are going to get it for $1.50, that makes all of the sense. 
But once you convert it to cars, that is bound to go up. My 
guess, it would quadruple----
    Mr. Garman. Well, that is----
    Mr. Rohrabacher [continuing]. Because that is--because you 
are not talking about having to quadruple the use of natural 
gas, the margin is what counts in terms of price. What about--
--
    Mr. Garman. If I could, though----
    Mr. Rohrabacher. Sure.
    Mr. Garman [continuing]. That is--you are absolutely right, 
and that is why we do not want to depend on natural gas as our 
sole hydrogen source. The attraction of hydrogen is that----
    Mr. Rohrabacher. Right.
    Mr. Garman [continuing]. You can produce it from multiple 
sources.
    Mr. Rohrabacher. Right. And----
    Dr. Ogden. Could I just chime in with one----
    Mr. Rohrabacher. Sure. Jump right in there.
    Dr. Ogden [continuing]. Quick thing on that, too?
    Mr. Rohrabacher. But I hope that the other sources we are 
talking about are acceptable to environmentalists. Like some 
environmentalists don't want us to have nuclear energy, for 
example. And yeah, that is a way to produce hydrogen, but you 
are not going to get any more nuclear power plants. Or maybe 
they don't like burning oil or coal in order to produce 
hydrogen because of the air pollution that that causes, so 
there seems to be some problems there. Yes, ma'am.
    Dr. Ogden. I have done some calculations looking at the 
question what if we converted all of our cars to hydrogen cars, 
we derive the hydrogen from natural gas, how much more natural 
gas will you need? And typically the numbers are like an 
increase of 25 to 30 percent in what we would be using anyway, 
which is not a negligible number, but it is not--you know, you 
won't increase the use of natural gas by ten times if you go to 
hydrogen----
    Mr. Rohrabacher. I mean, all of the cars that we are going 
around--if you convert all of them, it is only going to 
increase natural gas usage by 25 percent?
    Dr. Ogden. That is correct. And the reason for that rather 
surprising result is that----
    Mr. Rohrabacher. All right.
    Dr. Ogden [continuing]. Hydrogen vehicles are much more 
efficient--the projected hydrogen than current gasoline fleets.
    Mr. Rohrabacher. Well, we are on the record now, and there 
is going to be somebody who is going to--my guess within a week 
who is going to come up and refute that.
    Dr. Ogden. Well, also to my----
    Mr. Rohrabacher. But that is my--but that is just common 
sense speaking to me, and I have no--I don't have a Ph.D., so I 
can't----
    Chairman Boehlert. Mr. Huberts, do you want to respond to 
that? Your time is up, but let us get Mr. Huberts' response.
    Mr. Huberts. Mr. Congressman, I think that the point here 
is that by using hydrogen, the choice for primary energy 
becomes flexible. And that choice will depend on many factors, 
including environmental concerns, etcetera. If people want to 
have cars, they are going to need energy in one form or the 
other. Hydrogen then liberates those cars from being bound to 
petroleum. And that is the whole point.
    Mr. Rohrabacher. I have to tell you, that won't be the 
whole point for somebody if he ends up spending $3,000 a year 
more for fueling his car and he finds out that his kids now 
have a lower standard of living because we have freed him from 
petroleum. And I will have to see more before I will jump. I do 
know that we use hydrogen for our rockets. It is very 
effective. And it is a good fuel source, but you haven't 
convinced me----
    Chairman Boehlert. The gentleman's time has expired.
    Mr. Rohrabacher. Thank you.
    Chairman Boehlert. Mr. Bell.
    Mr. Bell. Thank you, Mr. Chairman. Before leaving, Mr. 
Larson left a statement from one of his constituents, UTC 
Power, and it speaks to some of the issues being covered here 
today, and I would like to ask unanimous consent to have this 
entered into the record.
    Chairman Boehlert. Without exception, and at the same time, 
I will enter into the record the statement by Mr. Akin and also 
a question.

        Written Statement of UTC Power (Submitted by Mr. Larson)

                    Prepared Statement of UTC Power
    UTC Power, a unit of United Technologies Corporation (UTC), is 
pleased to submit the following comments regarding the House Science 
Committee's hearing entitled: ``The Path to a Hydrogen Economy.'' UTC, 
based in Hartford, Conn., provides a broad range of high technology 
products and support services to the building systems and aerospace 
industries. UTC Power is focused on the growing market for distributed 
energy generation to provide clean, efficient and reliable power. One 
of UTC Power's businesses is UTC Fuel Cells, a world leader in the 
production of fuel cells for applications ranging from space to 
commercial to transportation.
    We have attempted to be as specific as possible regarding our views 
on ``The Path to a Hydrogen Economy'' and have therefore used the 
``Energy Research, Development, Demonstration and Commercial 
Application Act of 2003'' (H.R. 238) as the basis for our comments. Our 
recommendations include the need for continued ``core'' fuel cell 
research and development efforts, including proton exchange membrane 
(PEM) technology that can be applied to power plants for both 
stationary and vehicle products. In addition, we believe that 
stationary and fleet vehicle demonstration programs, including transit 
buses, are strategically important as building blocks for the longer-
term successful deployment of fuel cell automobiles.
    UTC Power supports the overall thrust of H.R. 238 and its 
recognition of the need for a focused research, development 
demonstration and commercialization effort to bring advanced, clean, 
energy efficient and cost effective technologies to the market place 
that will result in energy security, fuel diversity, improved air 
quality and other environmental benefits as well as technology 
leadership. While H.R. 238's focus is on the research, development, 
demonstration and commercialization initiatives that fall within the 
scope of the Science Committee's jurisdiction, we also note the need to 
address financial incentives, direct government purchases, removal of 
regulatory barriers, education and training and development of 
harmonized codes and technical standards.
    The hydrogen provisions in Subtitle C of H.R. 238 are quite broad 
and call for a comprehensive program focused on production, storage, 
distribution and establishment of necessary technical standards. 
Success in all these areas is essential to ensure that the hydrogen 
economy becomes a reality. We are pleased with the growing awareness of 
the need to address hydrogen infrastructure requirements, but we should 
not lose sight of the continued need for basic fuel cell research and 
development efforts as well as strategic stationary and vehicle 
demonstration programs so that hydrogen can power the cars, trucks, 
buses, homes and buildings of tomorrow.

CORE FUEL CELL RESEARCH AND DEVELOPMENT PROGRAMS

    Fuel cells face a number of technical challenges including reducing 
the system's cost, size and weight while improving durability and 
performance characteristics. The industry also needs to address the 
efficiency and cost effectiveness of manufacturing processes and 
materials issues. While substantial progress has been made on many of 
these fronts, more work needs to be done. Continued investment in 
``core'' fuel cell power plant technology is needed to reach these 
goals. We believe the government has a pivotal role to play in 
supporting high-risk core fuel cell technology R&D efforts on a cost-
share basis with industry so the public at large can enjoy the 
efficiency, reliability and environmental benefits of fuel cell 
technology.
    Title II of the Hydrogen Future Act Amendment of H.R. 238 addresses 
fuel cell demonstration programs, but does not include provisions that 
target basic fuel cell technology research and development. The 
Department of Energy's Energy Efficiency and Renewable Energy 
organization should manage these ongoing technology programs as public-
private partnerships. Programs that address low cost, high-efficiency, 
fuel flexible, modular fuel cell power systems, improved manufacturing 
production and processes, high temperature membranes, cost effective 
fuel processing for natural gas, fuel cell stack and system reliability 
and durability and freeze/cold start capability all should be part of 
the ongoing core fuel cell component and systems research and 
development effort with a focus on PEM technology initiatives. These 
core PEM research and development efforts can be leveraged across 
stationary and transportation fuel cell applications for maximum return 
on investment to U.S. taxpayers.

FUEL CELL BUS DEMONSTRATION PROGRAM

    Fleet vehicles and transit buses in particular are ideal candidates 
for the initial deployment of fuel cell vehicles. Hydrogen storage is 
less of a problem because of space availability on the roof of buses 
and the bus installation is more forgiving compared to personal 
automobiles in terms of cost, size, weight and performance 
characteristics. And hydrogen fueling stations and technician training 
can more readily be made available given the relatively small number of 
inner city bus stations and service technicians.
    Since the automotive application is the most demanding in terms of 
cost, weight, size, durability, ease of maintenance, start up time and 
other performance criteria, it is understandable that it will take 
longer for fuel cells to successfully compete in this market. But as 
the industry gains experience in deploying fuel cells for stationary, 
inner city buses and fleet applications, these successes can pave the 
way for zero emission fuel cell cars and serve as benchmarks to measure 
progress towards the 2010 goals of the FreedomCAR initiative.
    H.R. 238's Sec. 402 of Subtitle H establishes a $200 million 
program for the acquisition of alternative fuel and fuel cell vehicles 
through DOE's Clean Cities program. We believe a zero emission fuel 
cell transit bus demonstration program is needed as a precursor to the 
fuel cell vehicle acquisition program. Specifically, we recommend that 
a new provision be added to H.R. 238 that establishes a national, zero 
emission, petroleum-free, hydrogen fuel cell bus demonstration program.
    This public-private partnership would focus on the design and 
production of fuel cell power plants, bus chassis, electric drive and 
other components, hydrogen infrastructure requirements, data 
collection, testing, evaluation, information dissemination and training 
of operators and maintenance personnel related to the demonstration 
effort. The program should deploy a minimum of 10 buses in 
geographically dispersed cities located in air quality non-attainment 
zones as part of a five- to six-year program.
    UTC Power believes that demonstration efforts for heavy-duty 
vehicles should begin with transit buses rather than school buses. Sec. 
302 of H.R. 238 calls for a $25 million fuel cell school bus program 
from FY 2004-2006. We believe this program should follow the zero 
emission fuel cell transit bus demonstration program. The fuel cell 
school bus program can therefore build on and take advantage of the 
lessons learned from the transit bus demonstration program.

FUEL CELL VEHICLE DEFINITION

    Section 401 of H.R. 238 defines a fuel cell vehicle as a ``vehicle 
propelled by one or more cells that convert chemical energy directly 
into electricity by combining oxygen with hydrogen fuel which is stored 
on board the vehicle in any form and may or may not require reformation 
prior to use.'' This definition appears to exclude hybrid fuel cell 
configurations. Our proposed definition would be a: ``vehicle propelled 
by an electric motor powered by a fuel cell system that converts 
chemical energy into electricity by combining oxygen (from air) with 
hydrogen fuel that is stored on the vehicle or is produced on-board by 
reformation of a hydrocarbon fuel. Such fuel cell system may or may not 
include the use of auxiliary batteries to enhance vehicle 
performance.''

DISTRIBUTED ENERGY-COMBINED HEAT AND POWER (CHP)

    UTC Power would also like to take this opportunity to comment on 
the need to expand Subtitle B to permit the demonstration of energy 
efficiency enhancing products and technologies that may be used in 
combined heat and power and waste heat recovery applications. These 
approaches use ``free energy,'' if not renewable energy, and draw upon 
core technology already in existence. This means these technologies can 
reach the market rather quickly and their benefits can be realized in 
the near-term. We recommend that Subtitle B, H.R. 238 be amended to 
broaden the scope of distributed generation demonstration initiatives 
beyond hybrid systems and specifically include distributed generation 
demonstration programs to validate products and technologies that may 
be used in combined heat and power, building heating and cooling power 
and waste heat recovery applications including waste-water treatment 
facilities, landfills, industrial process heat and central heating/
boiler systems.
    In conclusion, UTC believes that a sustained, robust commitment to 
the hydrogen economy is necessary to make this vision a reality. 
Progress has been made, but continued commitment and support of core 
fuel cell research and technology is essential, with additional 
emphasis on strategically focused fleet vehicle, including transit bus, 
demonstration programs.
    We appreciate the opportunity to comment on this important 
initiative. Should you have any questions regarding this matter, please 
contact Judith Bayer, UTC's Director, Environmental Government Affairs 
at 202-336-7436 or [email protected].

          Best Use of Scarce Resources (Submitted by Mr. Akin)

            Remarks and Question for David Garman--Mr. Akin
    Mr. Chairman, as we have seen, the road to greater use of hydrogen 
in our economy faces many challenges which demand considerable time and 
effort. I would like to commend the witnesses today for their 
commitment to the President's Hydrogen Initiative and their work thus 
far. In the past, we have tried to address our energy dependency 
through the research and development of vehicle technology without the 
necessary infrastructure, with little regard to the importance of 
consumer demand and with a disturbing lack of concern for practical 
implementation of protracted research. I commend the witnesses in their 
efforts to provide us with a plan that addresses both long- and short-
term concerns relating to a hydrogen economy.
    My question is: I have noticed in the FY 2004 budget request that 
DOE is requesting $17.3 million in renewables for hydrogen production. 
However, in the Department of Energy's Hydrogen Energy Roadmap, you 
note that such methods as solar heat and photoeletrochemical 
electrolysis are still in early development stages. Do you feel that an 
investment of $17M is the best use of scarce resources or do you feel 
that part of this money could be more appropriately used in other areas 
of hydrogen production such as natural gas?

    Chairman Boehlert. And all of the witnesses should know 
that there will be some follow-up written questions for you. We 
would appreciate a timely response. Mr. Bell.
    Mr. Bell. Thank you. With that, in the spirit of shameless 
Congressional district self promotion, I want to point out that 
the Houston Advanced Research Center, known as HARC, recently 
announced the successful connection of a five-kilowatt proton 
exchange membrane fuel cell system into the electric grid. The 
technology, which is patented as the Plug Power System, is the 
first in the HARC study to be located outdoors in real world 
conditions and the first residential unit to be connected to 
the electric power grid in Texas. And the purpose of this 
recent demonstration is to test the feasibility of putting 
energy into HARC's internal grid to learn whether homes in the 
future can safely generate their own power and receive emission 
reduction credits from on-site fuel cell installations. This is 
just one example of how HARC's partnership is taking the lead 
in shaping Houston as a promising site for fuel cell 
technologies.
    HARC's work demonstrates how Houston, the Nation's energy 
capital, and I want to note that Mr. Lampson tried to expand 
the Nation's energy capital to all of southeast Texas, but it 
is really Houston. He is trying to get a little bit of it in 
his district as well. He will have a chance to refute it, I am 
sure. But we really are trying to take the lead in exploring 
alternate energy sources.

          Timetable for Conversion to Alternate Energy Sources

    There has been a lot of talk and some here today about the 
timetable and how long this might take to make the conversation 
to alternate energy sources. Some have predicted that it could 
take decades. And I am curious, given the energy supply 
situation, the energy cost situation in the United States, can 
we afford for it take that long? And Mr. Garman, I will start 
with you on that.
    Mr. Garman. Some individual consumers are determining that 
they want hydrogen fuel cells now. And they may be in a 
particular situation that--where they have a reliability 
requirement, such as an Internet data hotel, if you will, or 
something that absolutely needs reliable power, high-quality 
power, and they are willing to make that investment at current 
prices. I believe Verizon--the Verizon communications company 
is installing fuel cells in many locations in its critical 
infrastructure, and they are willing to pay the additional 
price. So I think you are going to see these technologies 
coming into the marketplace both as a consequence in the R&D 
work that is bringing the cost of the technology down, but also 
because of the individual needs of particular consumers that 
have a specific requirement for niche applications are willing 
to pay a little extra now for that. So you will see both of 
those things happening.
    Mr. Bell. Mr. Huberts, do you care to----
    Mr. Huberts. I guess, first of all, we are aware of HARC 
initiative and Shell has decided last month to join that 
initiative. I think that the stationary power certainly is an 
application that can take place in a nearer term than 
transportation. And I think the sort of initiatives that are 
going on will expand, and we will see in the next three to five 
years more and more of those stationary fuel cells coming on 
the market, and they are going to be real commercial 
applications.

             Necessity of Competition to Speed Development

    Mr. Bell. Let me ask this, because my time is short, but 
Mr. Garman, you talked--spoke earlier about as more competition 
develops in this area that will speed development. And I want 
to commend Shell, because you all have also funded the Center 
for Research at Rice on sustainability and truly seem to be a 
company that gets it and knows that there needs to be this 
concentration on the future. But if there isn't greater 
participation or is there enough participation right now in 
this area to spur the kind of competition that you are talking 
about? Would either of you like to comment on that?
    Mr. Garman. I think the President's expression of a 
national commitment in this area is something with his resolve 
saying we, as a nation, are going to do this. I think that, 
first of all, sends a signal to the market. 720 million new 
dollars, 1.2 billion sends a signal to the market. But more 
important than that, really, I think the partnership that you 
see really on this table in front of you, these are some of the 
same folks that have worked with us over the past year or more 
on developing the technology road maps that we need. And they 
are the ones that are putting their own money up and investing 
their own money in these technologies and betting that they are 
going to be successful. I think that is an illustration of 
resolve, not only at the national level, but also the private 
sector putting its money where its mouth is.
    Mr. Bell. Would you like to comment on that?
    Mr. Huberts. I would say that--you mentioned you received 
fuel cells. We have been partnering with them. We are 
developing the processes required to make the hydrogen for 
their fuel cells. It requires investment, but we see tremendous 
commercial opportunity there, and we see that in a time frame 
with the stationary fuel cells that is much closer than with 
transportation. So it is an area where it makes sense to 
invest. It makes sense for business to participate.
    Chairman Boehlert. The gentleman's time has expired. Dr. 
Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. Since I appear to be 
the last person to ask questions, at least in the first round, 
let me just summarize what I believe I have heard and learned 
and see if any of you disagree with that, and then I will have 
a few questions after that.
    Number one, fuel cell technology is well underway. That is 
the least of our problems at this point. The main effort there 
is cost reduction and efficiency improvement. Secondly, 
hydrogen, if it is going to be a viable fuel, must be produced 
efficiently and used efficiently. Thirdly, the President made a 
point in his speech of mentioning carbon sequestration, so I 
assume the objective is to either produce the fuel from non-
carbon sources or sequester the carbon that is used in 
producing the hydrogen.
    Next, we must find the best way of producing hydrogen. And 
that--it seems to me, there is a considerable uncertainty about 
that. What is the best scientifically, economically, and 
environmentally? Next, we have to also find the best way of 
transporting hydrogen and distributing it. And that, I think, 
may be the biggest problem that we are going to face as a 
Nation with distributive responsibilities between the 
government and the industry. Next, because the timeline is 
longer than any of us would like, that we will have to, in 
terms of our goal of reducing dependence on foreign oil, we 
will have to have a transition technology of probably hybrids 
to bridge us to the hydrogen economy.

                   Development of Codes and Standards

    I am hoping that this is a reasonable summary of what you 
have said and what I understand. And I would appreciate any 
comments on that. Before I get to comments, let me just say Mr. 
Huberts mentioned codes and standards. I think Mr. Lampson also 
addressed that. A specific question for you, Mr. Garman, are 
you involved in developing those codes and standards and will 
you be working with NIST, the National Institute in Standards 
and Technology, on this since they have two centuries of 
experience in developing those?
    Mr. Garman. Yes, Congressman. We envision an interagency 
group that is under the leadership of the Office of Science and 
Technology Policy and the Executive Office of the White House 
convening interagency activities, which frankly are already 
underway involving not only NIST but at the Department of 
Transportation and other federal agencies involved in the codes 
and standards issue. In fact, Secretary Abraham is leaving 
tomorrow for a trip to Europe to discuss harmonization of long-
term codes and standards with his counterparts in EEU, 
stressing the importance of that particular activity. And we 
have, in our budget line, tripled our own work for safety code 
standards and utilization for hydrogen.

                Additional Cost of Carbon Sequestration

    Mr. Ehlers. Okay. The next specific question, if 
sequestration is going to be required, and I assume it is, that 
means any methods of producing hydrogen are going to have to 
assume the cost of sequestration. And it also means that we are 
not likely to use the technology that is being broached right 
now of using petroleum or natural gas fuels on cars and 
reforming it on board the car, because you can not sequester 
the carbon at that point, I believe. Is that correct?
    Mr. Garman. Over the long-term, you want a net zero carbon 
emissions profile. Now I would modify that by just pointing out 
that even if you are using natural gas in the near-term, 
because it--the carbon intensity, if you will, of natural gas 
is much lower than other hydrocarbons, you would get a 60 
percent reduction in carbon emissions from vehicles using 
hydrogen reformed from natural gas without sequestration than 
you would from vehicles using gasoline just because of both the 
lower carbon density in the natural gas and the higher 
efficiency of the natural gas vehicle.
    Mr. Ehlers. But my concern is that proposals within the 
automobile industry to use gasoline or perhaps natural gas, but 
initially gasoline in reforming it, will impede the development 
of the infrastructure you need for a full hydrogen economy. If 
you start producing cars that way, people will say, ``Oh, good, 
I can still use the gas station.'' And that removes the 
emphasis for developing the hydrogen transportation production 
and infrastructure. Is that----
    Mr. Garman. That is fair. I have heard that criticism. Yes, 
sir.
    Mr. Ehlers. Okay.
    Chairman Boehlert. Dr. Ehlers, you will have a second 
round, but your time is up in this round.
    Mr. Ehlers. Yeah. I just wonder if there are any quick 
reactions to my summary, since I have to leave, I have a vote 
going on.
    Dr. Ogden. Could I give one real quick reaction?
    Chairman Boehlert. Sure, Dr. Ogden.
    Dr. Ogden. One is the--I think it was really a good 
summary, but one thing I would sort of add is that there may be 
no one best way to produce hydrogen. It is sort of like 
producing electricity. There are lots of different ways you can 
produce it, and lots of carbon--net carbon neutral ways of 
producing it as well, not only fossil fuels or sequestration 
but renewable energy as well. And so there really is a large 
diverse portfolio of long-term options that could get you 
there.
    Mr. Ehlers. That is certainly true. But I think you do have 
to zero in on a method of distribution and using it and putting 
it into the vehicles.
    Dr. Ogden. Yeah, I certainly agree on that.
    Mr. Ehlers. Because if you have competing options there, it 
adds to the expense.
    Dr. Ogden. Agreed. Yes.
    Mr. Ehlers. But I agree that production can be any method 
whatsoever. Thank you.
    Chairman Boehlert. Thank you very much. Mr. Lampson.

                 Ability to be Hydrogen Reliant by 2040

    Mr. Lampson. Mr. Garman, in your testimony, you describe a 
four-part approach to moving toward a hydrogen economy with a 
full shift some time around 2040 or so. That is a wonderful 
goal. Is it pretty much correct, do you believe, that you can 
be--have us pretty much reliant on hydrogen, completely 
reliable on hydrogen by 2040?
    Mr. Garman. If we are successful in meeting our R&D goals 
in the short-term and industry does, on the vehicle question, 
make its commercialization decision around that 2015 time 
frame, then the answer is yes. Obviously, we have some daunting 
technology goals, as we have discussed this morning, and if we 
miss a few, the date can slip. And this is scenario analysis, 
similar to what Shell does trying to envision the future. It is 
impossible to predict the future, so we do the best that we can 
envisioning different ways the future might unfold.
    Mr. Lampson. Thanks. Let me ask all of the rest of the 
panelists now, if you will comment on this. Do you believe that 
the President's Hydrogen Initiative, as Mr. Garman has laid it 
out, will result in a complete transition to a hydrogen economy 
by 2040 or so, and if not, why not? What does the plan lack? 
And what are realistic goals?
    Dr. Burns. My--I will go ahead and go first. Yeah. I 
certainly think it is a very important first step, because it 
has put this issue on the national agenda and it provides an 
opportunity for everybody to pull together with a common will 
to make it happen. But it certainly is not going to be 
sufficient with the level of funding that we are talking about. 
General Motors, for example, has already spent nearly $1 
billion to develop our technology to the point that we have it 
today. And if we are successful in meeting the goals we have 
set for ourselves in the next five years, we will likely spend 
more than the President's program, as our company ourselves, in 
order to move it forward. I think it is a very important first 
step, because of the national agenda aspects of it, and it 
allows us to all talk about it. But there is an awful lot of 
work to be done, an awful lot of uncertainties that need to be 
addressed, and we don't know what we don't know at this point 
in time. So we are going to have to take some important first 
steps and learn as we go forward.
    Chairman Boehlert. A journey of a thousand miles. Continue.
    Dr. Lloyd. Oh, I totally agree with Dr. Burns. And I think 
the other question is I don't think we can afford not to look 
at that scenario and push as rapidly as is possible for the 
reason I mentioned, security of many sources. And again, I 
will--I think that with the type of partnership we are working 
with at the local level, state level, national level, I think 
it is critical, because the other part of it, there are 
international competitions going on. And I think it is very, 
very important.
    I would like to come back to one issue just to set the 
record straight when I talked about the competition, 
particularly with a Japanese company. I did want to highlight, 
I think, the very successful event that General Motors had out 
in Sacramento, which I think demonstrated the GM technology--
the very best a while ago and attribute to Dr. Burns and Dr. 
McCormick where they run all through their hybrids then right 
through the fuel cell, also to the high wire. And I think as we 
discovered during the partnership when Dr. Huberts was Chair, 
that in fact, what you see there, the public has a vision of 
what can be done with the hydrogen and the fuel cell, coupling 
that together. And I think General Motors is--has demonstrated 
that better than anyone. And I think that is the part we also 
need to focus on. Give the public something that becomes 
irresistible. We hadn't talked about today the opportunities to 
use the vehicle as a source for energy into the house. All 
sorts of possibilities open up, and I think Dr. Burns and Dr. 
McCormick are on the very forefront of looking at how we can 
couple this together. The bottom line is we can not afford not 
to do this.
    Mr. Lampson. Thank you. Dr. Ogden. Oh, do you want to--
okay. Okay. Thanks. Go ahead.
    Mr. Huberts. I think the President's Initiative is very 
important. I think what is also very important is that the 
policies are sustained and consistent. And as Mr. Garman 
pointed out, it is a long-haul effort. This is a marathon. We 
don't want to run out of steam after the first mile, so if you 
start too big too soon, sinking too much money into something 
that is still too expensive that is not sufficiently developed, 
you are going to run out of steam. So it needs to be a measured 
effort. Is it modest? Yes, it is modest. Could it be bigger? If 
you can afford it, make it bigger, but don't start too big, 
because this is something that needs a long-haul commitment.
    Mr. Lampson. And Dr. Ogden.
    Dr. Ogden. I think going back to your question about is the 
sort of time frame that was set forth of 2040 a reasonable 
thing, I think if the technology advances and if they are 
successful, then it certainly is a sort of a reasonable thing. 
Is it an absolute certainty that will happen? No, there are 
lots of unknowns we don't know about how fast technology will 
progress, how we will value the things that hydrogen fuel cells 
could give us in a society in terms of energy, security, and 
environment. And it could go faster or slower than that, but I 
think that what was presented there is a reasonable look at 
what would happen, assuming the technological success and a 
decision to commercialize.
    Chairman Boehlert. The gentleman's----
    Mr. Lampson. Thank you all very much.
    Chairman Boehlert. Thank you.
    Mr. Lampson. Thank you, Mr. Chairman.

                Effect of Policy on the Research Agenda

    Chairman Boehlert. Mr. Garman, you touched on this a little 
bit in your exchange with Dr. Ehlers, but you indicated in your 
earlier statement that it is a little bit early to worry about 
policy, but aren't there policy decisions that will effect the 
research agenda? For example, won't environmental rules effect 
the choice of hydrogen sources? And won't sequestration change 
the way that projects are designed?
    Mr. Garman. Absolutely. And I think--and perhaps I 
misspoke, because I was thinking about a narrow range of policy 
incentives for the purchase of these technologies rather than 
the broader context of policy measures that perhaps you are--I 
think, as I indicated in the testimony, the announcement last 
week in the administration of the future generation approach to 
integrated coal fired power plants that emit nothing, including 
carbon and sequestration are an important technology 
development that we have to consider very strongly. And 
absolutely, sequestration--the dollars in the President's 
Hydrogen Initiative, I want to make sure that everyone 
understands, do not include dollars for sequestration. That is 
an associated technology, but that is apart from the dollars we 
are asking for for hydrogen.

    Advice From the Panel as to What the Government Needs to Do to 
                       Further a Hydrogen Economy

    Chairman Boehlert. Give us--all of the--give us the best 
advice you can. What can we do, obviously approve the funding 
that is requested by the President, but short-term, what do we 
need to do? What would be your best advice for us? And let us 
go across the board. Mr. Huberts, do you have anything?
    Mr. Huberts. I would say, in the short-term, as a 
government, be also a user of this technology. Set an example 
of trying to use this in fleets, in buildings, in defense 
applications----
    Chairman Boehlert. So high profiled demonstration projects 
that have some real meaning?
    Mr. Huberts. Try--yes, try to get learning and education 
and also benefits, real benefits. And I think that is something 
that can be done in the short-term, and it would help the 
industry in buying down the costs.
    Chairman Boehlert. Mr. Garman, any special high profile 
demonstration projects thought about at this stage of the 
proceeding?
    Mr. Garman. We are--we have sought, I believe on the order 
of $13 million, Steve will correct me if I am wrong, for work 
in demonstration efforts in the early--for the '04 budget. An 
important word about demonstrations, though, I think it is 
important to stress that--and I think it is fair to say that 
the Department of Energy has something of a checkered history 
and record with respect to demonstrations. Sometimes the 
Department has done some demonstrations that weren't all that 
sensible. And sometimes, Congress has asked us to do 
demonstrations that weren't all that sensible. And I think it 
is very important that we come together and make sure that the 
limited amount of money that we do have for demonstrations is 
really spent to learn what we need to learn to provide the 
proper kind of feedback to the folks in the lab doing the R&D 
work rather than just, you know, showcasing the technology. 
They have to be--we have to get something out of these 
demonstrations. And that is something we all need to be mindful 
of.
    Chairman Boehlert. Dr. Burns, do you have any thoughts that 
you would like to share with us?
    Dr. Burns. Yes, I would like to reinforce the learning 
aspects, and also to tie the demonstrations to real customers, 
early adopters in particular. The military is showing a high 
degree of interest in technologies that allow them to reduce 
the logistics requirements for fighting battles. And hydrogen 
and fuel cells are unique in that they address two of the three 
largest requirements for logistics fuel and water, and they are 
interchangeable. And that flexibility is quite important. 
Having opportunities to do demonstrations on military bases 
where we have highly trained military professionals who will be 
working with us in the development of those codes and 
standards. And they also will become civilians at some point 
who can become our engineers and technicians and customers for 
these technologies would be very beneficial.
    I also just want to emphasize that stationary applications 
or distributed generation is where the first profitable markets 
likely will exist. So initiatives in the short-term that can 
encourage those opportunities would be much appreciated.
    Chairman Boehlert. Thank you very much. Dr. Ogden, do you 
have a----
    Dr. Ogden. I would say that this is a really great 
opportunity to take a really long-term view of energy policy 
and that that has now started with looking as hydrogen as a 
long-term option in the fuel sector. So just opening that 
dialogue of ways to do this, I think demonstration projects are 
very important for people to see how this really works, for 
there to be open learning about this, what works, what doesn't 
work, as we go down this road toward looking at something that 
could be a very valuable technology for our country in the 
long-term.
    Chairman Boehlert. Thank you very much. Dr. Lloyd, do you 
have any observations?
    Dr. Lloyd. Yes. I would say continuing--continuity of 
funding, I think, was identified before from the government. I 
think that is important. It is not a one-way street, though. I 
also think we need continuity of support of working with the 
industry so that these are actually sustained commitments, so 
it is a true partnership. I think the California Fuel Cell 
Partnership is a great example of how we are all working 
together. Clearly, we recognize that is limited. We would hope 
that DOE would look at other national partnerships, realizing 
these can't be duplicated everywhere, but maybe strategic 
locations throughout the country.
    So I think that, again, we have a model here, and I think 
that my advice would be to follow along the lines we have 
discussed earlier. And I think that providing adequate funding, 
providing adequate oversight, and also providing, again, the 
stimulus not only when we talk about some of--the buy down 
program, which I think is very important. And I think that was 
highlighted, the Federal Government has and can continue to 
play an important role there. But I think the other part of it, 
when we look at some of the cost sharing that DOE has, what I 
would suggest there is take a look at some of the areas where 
maybe some small, innovative companies with high-risk ideas, 
they may not have the resources to do some cost sharing. So as 
I indicated in my testimony, take a look at that, maybe 
reducing cost sharing as the Secretary has the discretion to do 
that. And maybe also look at some small business aspects, 
because we have been working on hydrogen storage and generating 
for many years. DOE has been working on that. We still have not 
come across the silver bullet. We need all the best ideas we 
can get.
    Chairman Boehlert. Thank you. Taking notes, Mr. Garman?
    Mr. Garman. I just--if I could just quickly correct the 
record. I said that there were $13 million in the '04 budget 
for demonstration work, that is only on the infrastructure 
side. We have $15 million on the vehicle side, so the total 
is----
    Chairman Boehlert. About 28.
    Mr. Garman.--28 million. Yes, sir.

     Details of the Decision-making Process at the California Fuel 
                            Cell Partnership

    Chairman Boehlert. That is good, because 13 million is 
petty cash around here. Thank you very much. Mr. Bell, have you 
got your question in? Do you have any questions? Let me--Dr. 
Lloyd and Mr. Huberts, as the current past chairman of the 
California Fuel Cell Partnership, would you comment on the 
process the partnership employs in making decisions on what 
projects deserve support? And specifically, what kinds of 
demonstration projects are most needed right now to promote the 
adoption of hydrogen technology? Dr. Lloyd, do you want to go 
first? Or Mr. Huberts? Do you want to flip a coin?
    Mr. Huberts. I will go first. The process we use in the 
California Fuel Cell Partnership is a decision making process 
based on consensus. So we have 20 partners around the table who 
together decide what kind of studies we do, what kind of 
project we support and how we support those. There is a 
consensus making process. We deliberately chose that process, 
because we have so many different interests around the table 
that if we did it any other way, we would lose, sooner or 
later, certain of the members.
    On what projects are important, certainly in the 
infrastructure area, we need to test out different options for 
producing hydrogen and also what we need to do in California is 
integrate those into the corner gas station. As you know, Shell 
is going to do that here in Washington. It is something that we 
believe needs to be done also in California, integrating it 
into the real life situation. How does the design work? How do 
you get through the process? How do you make it customer 
friendly? All of those aspects we need to test out in practice. 
And the partnership is very well suited for that, because it 
provides a framework for having a volume of vehicles there and 
also it provides the framework for learning. We have different 
energy companies working together there in a pretty competitive 
R&D situation. We can share information about safety issues for 
everything, etcetera. So that is where we will be focusing in 
the years ahead.
    Chairman Boehlert. Thank you. Dr. Lloyd, do you care to add 
anything?
    Dr. Lloyd. Yes, I would. Again, I think it has been a 
wonderful example of, as Don said, consensus building, which to 
me has benefited tremendously. I think we have got partnership 
stations. We have got partnership infrastructure. We have got 
partnership activities as we have exposed those to public. We 
have got our own--I have mentioned, we have got our own 
partnership stations in the north of California and growing in 
the south.
    But we also have partnerships growing up, so that, as Don 
mentioned today, you see one coming out in Washington. But we 
also have partners working in California, so--as we have seen 
with Toyota and with Honda getting vehicles and 
DiamlerChrysler, Ford, etcetera, working with some of the 
various partners and government partners. So in fact, I think 
that that is being greatly facilitated by the partnership 
having all of the appropriate partners together at the local 
level. And we have seen the great benefits of having DOE--DOT, 
who does a lot of work on the safety side, and EPA, in terms of 
certification of some of these fuel cell vehicles. So I think 
that--again we hope that this could be a model for a lot of 
things that could be going on.
    The other--I will just make one other point, if I may. One 
of our partners, for example, the South Coast Air Quality 
Management District has been very aggressive in natural gas 
vehicles. They are now also encouraging and may be requiring 
that the compressors used for natural gas be compatible with 
hydrogen. That is a cost savings that in the future when 
hydrogen is there, you can make that compatible. There are also 
discussions of using hydrogen engines to get--in fact, get the 
infrastructure out there. So all of those things are going on. 
And that was not part of the fuel cell partnership in that 
case, but through the partners.
    Chairman Boehlert. Thank you. And I think the President and 
the Administration deserve a great deal of credit for elevating 
significantly the profile of this issue. The State of the 
Union, you can't get a higher profile than that. And this is 
but the first of many hearings we are going to have on this 
subject, not just in this committee, but in the various 
Committees of the House and the Senate. And we are excited 
about the prospects for the future. And we are excited about 
the partnership that is obvious within the private sector. We 
are excited about what DOE and your people are doing. And you 
are going to be hearing a lot more from us about this.
    And with that, for the last word, I turn to the 
Distinguished Chair of the Subcommittee, Ms. Biggert.

       Re-allocation of Funds at DOE in Order to Account for the 
                          Hydrogen Initiative

    Ms. Biggert. Thank you very much, Mr. Chairman, for those 
kind words. I just have a quick follow-up question and maybe 
one more. And that is Mr. Garman again, and I--you said that 
the Hydrogen Initiative involves 721 million in new funding. 
And the remainder of the 1.2 billion is reallocated funding. So 
I am still not sure where this goes. So can you be more 
specific about where the new funding is going and what programs 
will be subject to reallocation, like, for instance, if your 
office is going to get the new funding while the Office of 
Science will have to reallocate its existing resources to 
contribute to the Hydrogen Initiative?
    Mr. Garman. No, the difference is between--in the new 
funding is between the base that we were already funding and 
the additional dollars that will be added on top of that base, 
so to put it in another way, nobody's ox will get gored to fund 
the initiative.
    Ms. Biggert. All right. So there won't have to be any cuts, 
like in looking at solar power or any of the new other 
initiatives? Those are still going to be important to this?
    Mr. Garman. The planning profile that we have been provided 
can accommodate a robust renewable energy program as well as 
this new initiative as well as the President's commitment on 
weatherization funding and some of the other work that we do in 
our office.
    Ms. Biggert. Okay. So it will focus on alternatives as well 
as the hydrogen?
    Mr. Garman. Yes, ma'am.

          Timetable for Stationary vs. Vehicle Fuel Cell Usage

    Ms. Biggert. Okay. Then just to follow-up, at a field 
hearing that we held last June, it was apparent that people--I 
don't think that very many people realize that fuel cells have 
applications other than automobiles. And that--and one 
statement was made there that we are likely to see a fuel cell 
installed in a home or a subdivision or--long before we are 
going to see that under the hood of a car. And that--so is this 
program going to focus on the use of hydrogen for stationary 
fuel cells as well as, you know, to power homes, office 
buildings, as well as the FreedomCAR? I mean, does the 
FreedomCAR include that within the program?
    Mr. Garman. Yes. And you have raised a very important 
distinction. We think that the first fuel cell applications you 
will see are in consumer electronics. And then you will see it 
then in stationary applications, and then you will see it in 
vehicles. It is--we are working on vehicles, because they are 
the hardest in terms of weight, cost, you know, to get a fuel 
cell down to, you know, 35 cents a kilowatt. That fuel cell--
that proton exchange membrane, polymer electrolyte membrane 
fuel cell will be economic long before that when it is in the 
hundreds of dollars per kilowatt in a stationary setting. So 
what we are really doing is we are going after the hardest 
thing we know to go after. And the ancillary benefits for 
stationary and these other applications will accrue as well. 
And the work that we are doing in hydrogen storage and 
production will benefit those stationary and earlier 
applications as well. Yes.
    Ms. Biggert. Thank you. Would anybody else like to comment 
on that?
    Mr. Huberts. I just--Mr. Garman, you said 35 cents per 
kilowatt. Did you mean $35?
    Mr. Garman. No, I am sorry. I meant $35 per kilowatt.
    Ms. Biggert. I was impressed.
    Dr. Burns. We see some very exciting business opportunities 
associated with distributive generation. David used the number 
of $35 for the stack. We think in terms of what we call the 
power module, which is also the storage of the hydrogen as 
well. In the area of $500 per kilowatt to $1,000 per kilowatt, 
there is a wide range of business opportunities in distributive 
generation. We call that premium power. These are customers who 
absolutely can't have their power go down, because it is very 
costly. Some financial companies would experience losses as 
much as $5 million an hour if they lost their power and 
couldn't do their transactions. So those business incentives 
are very significant to have the opportunity to apply the 
technology in a more stationary environment, which is less 
aggressive than in the automobile environment, allows us to 
learn from a durability standpoint, allows us to learn from 
handling of the hydrogen and the safety systems and other 
things, quite honestly allows us to generate some revenue and 
hopefully some profit that will help continue to feed the kinds 
of investments we will need to make to get to $50 per kilowatt 
for a widespread automotive application. We believe that is 
possible, and we think it is a great way to roll out the 
technology.
    Ms. Biggert. Thank you. I, too, thank you for excellent 
presentations and look forward to continuing the discussion on 
hydrogen. Thank you.
    Chairman Boehlert. Thank you very much. Mr. Garman, I can't 
close without revisiting the ox being gored. I mean, I think--
can we agree that it is subject to interpretation and further 
discussion, I mean, investment and industry efficiency program 
is down. We are great in this committee. We want all of these 
areas to go up, because they offer such great, great dividends 
for mankind, our investment in these programs. And so would you 
agree that it is subject to further discussion?
    Mr. Garman. Absolutely, Mr. Chairman. It----
    Chairman Boehlert. With that--the State Department could 
use you. You are a diplomat. I want to thank all of the 
witnesses for being such informative resources for this 
committee. And while we will end the panel and the deliberation 
today, we will not end the relationship that we have 
established with each of you, and you will be receiving 
additional questions in writing. And on occasion, you can 
expect to receive calls from some of our brilliant staff people 
back here, because we are partners in this venture. And it is 
exciting. And I think we--what we are about offers great 
promises for the future. I think we are all guilty of a major 
sin if we overstate the case, but we can be enthusiastic as we 
look forward, and if we maintain this great partnership, 
evidenced by the venture you announced today, GM and Shell, and 
the open relationship you have with our government. And you 
know--and when Dave Garman says, ``I am from the government. I 
am here to help,'' don't laugh. Say, ``We want to work with you 
to help.'' And together, I think we can move forward and 
accomplish something worthy of note. Thank you so much. This 
hearing is adjourned.
    [Whereupon, at 2:42 p.m., the Committee was adjourned.]
                              Appendix 1:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by David K. Garman, Assistant Secretary for Energy Efficiency 
        and Renewable Energy, U.S. Department of Energy

Questions submitted by the House Committee on Science

Q1. LToward the end of the hearing, you indicated that you agreed that 
policy choices can affect the research agenda for the Hydrogen 
Initiative.

Q1a. LWhich policy decisions need to be factored in now as you shape 
the research agenda?

A1a. In order to ensure that the Administration's hydrogen efforts are 
well coordinated and consistent, the Department considers a variety of 
relevant Administration policies in deciding its R&D agenda. Foremost 
among these is the President's National Energy Policy, which provides 
both guidance and context for our hydrogen R&D efforts. As policies 
change, the Department will revisit its research agenda to ensure that 
such changes are incorporated.

Q1b. LHow, for example, will you decide which sources of hydrogen to 
focus on?

A1b. Energy security is best achieved by generating hydrogen from 
diverse domestic resources, such as renewables, nuclear and fossil-
based resources. Only through this diversity can vulnerabilities from 
disruptions in supply be reduced.

Q1c. LHow will you decide how much emphasis to give to carbon 
sequestration?

A1c. Carbon sequestration is one technology in a robust portfolio of 
R&D activities. It is a key technology if fossil-based hydrogen 
production is eventually to be free of greenhouse gas emissions. As 
with other programs, funding allocations for carbon sequestration will 
be based on relative priority, program performance, expected potential 
for public benefits, alignment with the Administration's R&D investment 
criteria, and other factors.

Q1d. LCan such research decisions be made without making assumptions or 
decision about the future policy environment?

A1d. The Department's R&D efforts are designed to facilitate a fuel 
cell vehicle and hydrogen infrastructure commercialization decision by 
industry by the year 2015. It is quite clear that the policy 
environment, and market conditions, existing at that time will 
influence those decisions by industry. However, the future 2015 policy 
environment is highly uncertain and not something that can usefully 
guide the Department's research agenda--which is targeted at addressing 
known high risk technology barriers. As our research efforts continue 
to produce key results and as both the near- and longer-term policy 
framework develops, we will reassess whether changes in the research 
agenda are needed.

Q1e. LDoes the Department believe that auto manufacturers would begin 
offering fuel cell cars in 2020 absent government involvement--whether 
that be tax incentives, infrastructure investments or regulation?

A1e. Given current policy conditions and technology challenges, the 
Department believes that it is unlikely that auto manufacturers would 
begin to offer fuel cell vehicles in 2020 absent government 
involvement. However, it is premature to speculate what kind of 
specific policy instruments will be appropriate at that time.

Q2. LIn response to a budget question from Mrs. Biggert, you stated 
that, ``nobody's ox is going to be gored'' by funding increases for the 
Hydrogen initiative, and that future funding profiles will provide for 
``a robust renewable energy program.'' Yet the FY04 request proposes to 
cut the energy R&D programs within EERE that are not related to 
hydrogen by eight percent compared to the FY03 request. In fact, some 
programs, such as the biomass and industrial technologies programs are 
reduced by almost 30 percent. How do you reconcile this fact with your 
statements that other programs are not being sacrificed to pay for the 
hydrogen initiative? Does the Administration assume that the outyear 
funding for the hydrogen initiative will also come primarily from 
cutting other EERE programs? Will the Office of Science programs be cut 
to pay for the hydrogen initiative as well?

A2. EERE funding from FY 2003 to FY 2004 is relatively flat. EERE's FY 
2004 request for every non-hydrogen R&D program except Biomass and 
Industrial Technologies remains nearly level with its FY 2003 request 
level or Congressional appropriation. Funding for Biomass R&D was 
shifted in light of complementary funding in the 2002 Farm Bill, as 
well as a substantial number of non-mission supporting earmarks in the 
FY 2003 appropriations. Reductions in Industrial Technologies R&D 
result from recognition that the industrial sector is the most energy 
efficient sector of our economy, and industries, particularly energy-
intensive industries, are succeeding in their attempts to be more 
energy efficient.
    The Administration does not assume that outyear funding for the 
Hydrogen Fuel Initiative will come from cutting EERE, the Office of 
Science, or other programs. However, each year, the Administration may 
propose reallocations within its energy technology portfolio based on 
program performance, relative priority, expected potential for public 
benefits, alignment with the Administration's R&D investment criteria, 
and other factors.

Q3. LIn your discussion of the biomass program, you reference 
Congressional earmark levels as one reason why cuts are proposed for 
that program in the FY04 budget. However, roughly half of the cuts to 
the biomass program are proposed for the portion of the program funded 
through the Interior Appropriations account, which has never been 
significantly earmarked. What are the reasons for these proposed cuts?

A3. The Interior Appropriations reductions are all in one program--
gasification technologies for forest and paper industry applications. 
Work in this area has progressed to the point where the private sector 
can complete it.

Q4. LWhat role do you expect academic researchers to play in the 
hydrogen initiative? How much of the program will focus on basic 
research? How will the department pull together a basic research agenda 
that would contribute to the hydrogen initiative?

A4. Universities typically conduct a large portion of the Department's 
basic research. In the near-term, EERE anticipates a ramping up of 
efforts from universities for research on hydrogen storage. For 
example, a competitive solicitation will go out in three months. Basic 
research for which university capabilities are well suited include non-
precious metal catalysts and high temperature polymer membranes for 
fuel cell systems, hydrogen storage materials, and high temperature 
materials critical to nuclear production of hydrogen. For example, on 
March 14, 2003, we conducted a hydrogen storage ``Think Tank'' meeting 
that included 10 university scientists to brainstorm breakthrough ideas 
that might solve the hydrogen storage issue. New projects are being 
planned that will include university participation beginning in FY 
2004.
    The Department is finalizing a broad research framework and a 
multi-year plan to support the successful implementation of the 
initiative. In addition to the office of Energy Efficiency and 
Renewable Energy, these efforts will include contributions from DOE's 
Offices of Science, Fossil Energy and Nuclear Energy, as well as the 
Department of Transportation.

Q5. LHow much of the budget request for the hydrogen initiative will be 
devoted toward the production of hydrogen with renewable energy, such 
as wind and solar power?

A5. Out of a total of $38.5 million for hydrogen production research in 
the FY 2004 Budget Request for the Hydrogen Fuel Initiative, $17.3 
million is for research on the production of hydrogen with renewable 
energy.

Q6. LPlease provide for the record a copy of the Department's ``well-
to-wheels'' analysis comparing hydrogen with other fuels and a copy of 
the study by the EIA of the impact on natural gas supplies and prices 
of using natural gas as a major source of hydrogen production.

A6. Copies of the Department's ``well-to-wheels'' analysis and the EIA 
study are attached.

ATTACHMENT

Assumptions for the Increased Penetration of Hydrogen Fuel Cell 
                    Technologies

Introduction

    The assumptions provided below describe the inputs used to evaluate 
the impact of alternative scenarios regarding the increased penetration 
of hydrogen fueled proton-exchange membrane (PEM) fuel cells. These 
assumptions were used to emulate the scenarios provided by the Office 
of Energy Efficiency and Renewable Energy (EE). Four scenarios were 
constructed that differ from one another based on commercialization 
date (2011 or 2018) and whether there are production mandates for light 
duty vehicle manufacturers. Production mandates assume that light duty 
vehicle manufacturers are required to produce mainly fuel-cell 
vehicles, limiting their production of gasoline vehicles. This 
assumption was required to meet the penetration rates specified by EE. 
However, 100 percent penetration was not achievable by 2020 in the 2011 
commercialization date scenario (see attached table). The four 
scenarios are:

         LCommercialization in 2011 Without Production 
        Mandates,

         LCommercialization in 2018 Without Production 
        Mandates,

         LCommercialization in 2011 With Production Mandates, 
        and

         LCommercialization in 2018 With Production Mandates.

    These cases assume that by the commercialization date (2011 or 
2018), the increased research and development (R&D) provides a fuel 
cell stack at a cost that can be sold for $30 a kilowatt, reaching 
parity with the conventional gasoline vehicle. Where applicable, the 
cost reductions for PEM fuel cells and associated electronics are also 
captured in the other (non-transportation) demand sectors. The 
scenarios assume that other market conditioning (federal policies that 
encourage the development of a hydrogen infrastructure and auto 
manufacturer production of hydrogen fueled fuel cell vehicles) will be 
required for mass consumer acceptance of this technology (e.g., 
production mandates).
    The National Energy Modeling System (NEMS) was used to estimate the 
impacts of introducing such fuel cells as a potential technology in 
end-use energy markets, based on the Annual Energy Outlook 2003 
(AEO2003) Reference Case. The fuel cell system costs assumed for each 
sector are discussed below.

Detailed Assumptions

Transportation
    In the transportation sector, a PEM fuel cell system cost vehicle 
is assumed to be at cost parity with a gasoline-powered vehicle by the 
date of commercialization.
Buildings
    Performance characteristics and operating and maintenance (O&M) 
costs for fuel cells were assumed to improve over time as in the 
AEO2003 reference case. However, the installed cost per kilowatt (kW) 
for fuel cells available by the date of commercialization (2011 or 
2018) was modified to correspond to the cost breakthroughs assumed for 
the fuel cell vehicle. Starting with the characteristics for the 
current 200 kW PEM fuel cell found in the National Renewable Energy 
Laboratory's (NREL) draft technology characterizations for fuel cell 
systems, the fuel stack cost was reduced to $20/kW, the thermal 
management component cost was reduced by 2/3 to account for components 
already included in the ``fuel cell engine'' and for expected cost 
declines by commercialization date, and all other elements of the 
current installed cost were reduced by the same percentage as the cost 
decline between 2000 and the commercialization date in the AEO2003 
reference case fuel cell characterization. The resulting cost for fuel 
cells installed in the buildings sectors was $1130/kW, 67 percent lower 
than the current PEM fuel cell cost and 34 percent lower than the 
installed cost in the AEO2003 reference case. The installed cost/kW was 
assumed to remain at the commercialization date level through 2025, 
unless the level of penetration resulted in lower costs due to 
technology learning, in which case further reductions would occur.
Industrial
    For the industrial sector, the 10 megawatt (MW) gas turbine option 
in the combined heat and power (CHP) menu was replaced by a 10 MW fuel 
cell, with the cost and overall heat rate assumptions modified. The 
cost in 2000 was assumed to be $4600/kW, dropping to $500/kW by 2020.
Electricity Generators
    In the reference case, fuel cell capital costs are assumed to 
decline from $2,137 per kilowatt in 2002 to $1,329 per kilowatt in 2017 
and beyond. The heat rate is assumed to drop from 7,500 Btu per 
kilowatt-hour in 2002, to 6,750 Btu per kilowatt-hour over the next 10 
years. Variable O&M costs are assumed to be two cents per kilowatt-
hour, while fixed O&M costs are assumed to be $7.15 per kilowatt per 
year.
    In the cases prepared for this analysis, capital costs were assumed 
to gradually decline from the initial $2137/kW in 2002 to $1347/kW in 
2014, then steeply drop to $860/kW for the next five years, finally 
reaching $429/kW by 2020. The heat rate is assumed to be the same as 
reference case values through 2014, and then change to 7508 Btu/kWh 
through 2019, falling to 6826/kWh in 2020. Variable O&M costs are 
assumed to stay at the Reference case value of 20.44 mills per 
kilowatt-hour through 2014, and then fall to 5.19 mills per kilowatt-
hour for 2015 and beyond.
    Finally, fixed O&M costs are assumed to stay at the $7.15 per 
kilowatt-hour reference case value through 2014 and then rise to $14.18 
for 2015 and beyond.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


Question submitted by Representative W. Todd Akin

Q1. LI have noticed in the FY04 budget request that DOE is requesting 
$17.3 million for renewables for hydrogen production. However, in the 
DOE's Hydrogen Energy Roadmap, you note that such methods as solar hear 
and photoelectrochemical electrolysis are still in early development 
stages. Do you feel that an investment of $17 million is the best use 
of scarce resources or do you feel that part of this money could be 
more appropriately used in other areas of hydrogen production such as 
natural gas?

A1. DOE is dedicating $12.2 million for research on hydrogen production 
from natural gas, of which $6.5 million is for the Office of Fossil 
Energy's research on centralized production of natural gas, and $5.7 
million for research in the Office of Energy Efficiency and Renewable 
Energy on decentralized hydrogen production.
    Since one of the primary advantages of a hydrogen economy is the 
ability to produce hydrogen from a diverse array of domestic resources, 
this allocation represents a balance between near- and long-term 
research goals and among a portfolio of potential hydrogen production 
technologies.
    In addition, large-scale centralized production of hydrogen from 
natural gas is the method currently used by industry to produce nine 
million tons of hydrogen each year. Some improvements to this 
methodology are within the industry's capability and interest.

Question submitted by Representative Gil Gutknecht

Q1. LIn her testimony, Dr. Joan Ogden noted that wind turbines are a 
potential source for electrolytic hydrogen production. If we as a 
country are to move toward a hydrogen economy, we need to get serious 
about also increasing the amount of wind power we produce.

    LToday, small wind systems are too expensive for most individuals 
to purchase, and the Federal Production Tax Credit for wind energy 
benefits only large corporations. What changes would you suggest in the 
Federal Production Tax Credit, and/or what other ways can Congress 
promote the expansion of small-scale wind development? Moreover, what 
research is the Department planning to do on producing hydrogen from 
wind?

A1. Hydrogen can be produced from diverse domestic resources, including 
wind-generated electricity, using electrolyzers which split water 
molecules into hydrogen and oxygen. Our analysis has suggested that 
wind energy has the potential to produce a large volume of hydrogen 
from pathways that may include energy provided by large-scale wind 
farms as well as small-scale wind systems for distributed applications.
    The Department's small wind systems activities are focused on 
reducing energy costs by developing technology and breaking down market 
barriers. Currently, the cost of energy from small wind turbines used 
in distributed power applications is in the range of 10 to 15 cents per 
kWh for Class 5 winds (13.4 to 14.3 mph average). The research goal of 
the Department's distributed wind technology program is to increase the 
efficiency of these turbines so that they will generate power at the 
same cost in lighter, more common, Class 3 winds (11.5 to 12.5 mph 
average).
    The Department supports extension of the wind energy provision of 
the Federal Production Tax Credit (PTC), which applies to small 
business-use wind turbines, as proposed in the President's FY 2003 and 
FY 2004 budgets.
    The Department of Energy is developing low-cost, high efficiency 
electrolyzers to enable cost competitive hydrogen production from 
electricity sources, including wind. Electrolyzer costs need to be 
reduced by a factor of over two for large systems and over three for 
small systems while maintaining or improving system efficiency. The 
Department has begun an analytic modeling project to investigate the 
viability of large and small-scale wind energy and electrolysis 
options, in the context of exploring infrastructure scenarios for 
hydrogen production, storage, and delivery.
                   Answers to Post-Hearing Questions
Responses by Alan C. Lloyd, 2003 Chairman for the California Fuel Cell 
        Partnership

Focus of the President's FreedomCAR and Hydrogen Initiatives

Q1. LShould the President's FreedomCAR and Hydrogen Initiatives focus 
more on nearer-term applications, such as hybrid technologies, 
including diesel hybrids?

A1. As proposed by the President, the Department of Energy's vehicle 
research programs have an appropriate balance between research into 
technologies for the short-term and those for the longer-term. The U.S. 
should take advantage of the development and commercialization of 
extremely low emitting and high energy-efficiency technologies that, 
while they are not the ultimate goal, provide meaningful and 
substantial social benefits. FreedomCAR and the 21st Century Truck 
Initiative together make a $150 million investment in these advanced 
vehicle technologies, and their commercialization would provide 
significant near-term environmental and energy-efficiency rewards. At 
the same time, the President's proposal recognizes the need to take a 
longer-term view by fostering the continued development of fuel cell 
vehicle technologies (FCVs) and advanced fuels.
    FCVs are considered by many to be the ``holy grail'' of vehicle 
technologies. They have the potential to eliminate vehicle pollution 
and greenhouse gas emissions, increase the Nation's energy security, 
and offer unique benefits to consumers (i.e., quiet operation, more 
electronic capabilities, etc.) FCVs are a long-term strategy that will 
not be commercially available at a cost-competitive price to 
individuals for several years (approximately ten years). The U.S. 
cannot ignore the need to continue a critical trend to reduce harmful 
vehicle emissions and increase energy efficiency while FCV technology 
matures.
    Near-term technologies that advance the development of componentry 
for fuel cell vehicles include electric vehicles, hybrid electric 
vehicles, compressed natural gas and compressed natural gas hybrid 
electric vehicles, hydrogen internal combustion engine (ICE) and 
hydrogen ICE hybrid electric vehicles, and grid hybrid vehicles. These 
vehicle technologies also support the development and use of 
technologies and components that contribute to the commercialization of 
FCVs. The balance between the shorter-term and longer-term programs in 
the President's proposals seems to me to be the appropriate one.

Importance of the Involvement of Smaller Companies and International 
                    Manufacturers

Q2. LIn your experience, how important is it that the Administration 
involve smaller, technology-based companies, such as fuel cell 
manufacturers, in helping to shape the research agenda of these new 
initiatives? How about international manufacturers? What do such 
companies offer that the major domestic petroleum and auto companies 
are less able to?

A2. Our experience in California has been such that the smaller 
technology-based companies (manufacturers of fuel cells and hydrogen 
production technologies) have been the pioneers that are ready to make 
the vision of a hydrogen based economy successful. The U.S. will only 
benefit by including the input of smaller technology companies in 
shaping a research agenda and accelerating the path toward an energy 
solution that will eliminate harmful emissions and increase energy 
security.
    The drive and experience of smaller companies is not limited to 
U.S. companies. In addition, the entire fuel cell industry is 
internationalizing rapidly, and the auto industry is already 
internationalized. The U.S. stands to benefit from the cost reductions 
resulting from competition between technology companies no matter where 
they are located, either corporate headquarters or manufacturing 
facilities.
                   Answers to Post-Hearing Questions
Responses by Joan M. Ogden, Research Scientist, Princeton Environmental 
        Institute

Impacts of Using Natural Gas as a Source of Hydrogen

Q1. LCould you provide for the record your analysis of the impact on 
the natural gas market of using natural gas as a major source for 
producing hydrogen for transportation?

A1. As an extreme case, let's consider using hydrogen derived from 
natural gas to power all the light duty vehicles in the U.S., at 
projected 2020 levels of energy use. How does the required amount of 
natural gas compare to projections for total natural gas use?
    We use as input, information on U.S. energy consumption from the 
latest USDOE Energy Information Agency Annual Energy Outlook,

    http://www.eia.doe.gov/oiaf/aeo/index.html

    http://www.eia.doe.gov/oiaf/aeo/supplement/sup-tran.pdf

What is the projected Energy Use in U.S. Light Duty Vehicles?

    The energy use in all U.S. light duty vehicles (cars and light 
trucks) is estimated to be about 15.7 trillion BTU/year in 2002 growing 
to about 23.5 trillion BTU/year by 2020.
    These projections are based on the following assumptions for the 
U.S.:

         LLight-duty vehicle miles traveled are projected to 
        grow by 2.4 percent per year from 2000 through 2020. (This is 
        mostly a result of a growing number of vehicles.)

         LNew light-duty vehicle efficiency is projected to 
        reach 25.6 miles per gallon by 2020. However, the fleet average 
        in-use fuel economy (which determines actual fuel use) is 
        projected to be 19.7 miles per gallon in 2002, and 19.8 miles 
        per gallon in 2020.

How much energy would be needed if hydrogen was a major transportation 
                    fuel?

    Based on calculations by our group and others, it appears that an 
efficient hydrogen fuel cell vehicle might have a fuel economy 3-4 
times that of today's gasoline internal combustion engine vehicles. Our 
models indicate fuel economies of 82 miles per gallon equivalent for 4-
5 passenger mid-size H2 fuel cell vehicles, (and perhaps 80 
percent of this for hydrogen internal combustion engine hybrids). (With 
further use of lightweight materials, studies by MIT and by our group 
suggest the fuel economy for a H2 FCV could exceed 100 mpg.)
    The total fuel consumption goes down as the fuel economy goes up. 
If the fuel economy for a hydrogen car is three times that of a 
reference gasoline car, then the energy use goes down by a factor of 
three (assuming each car drives the same number of miles per year). The 
EIA projects that future light duty vehicles will use 23.5 trillion 
BTU/y in 2020. If H2 FCVs were used instead, the light duty 
vehicle hydrogen energy demand would be about one third of this or 7.8 
trillion BTU/y [=(23.5 trillion BTU/yr)/3].

How much natural gas would be needed to make enough hydrogen for all 
                    U.S. light duty vehicles?

    Natural gas can be converted to hydrogen at about 80 percent 
efficiency in large steam reformers. There is also electricity needed 
for compression of hydrogen for high-pressure storage on vehicles. 
Making the electricity requires additional energy, which might come 
from natural gas. Overall, for each 100 units of natural gas energy 
used (82 units at the hydrogen plant and 18 units to power 
electricity generation for compression) about 70 units of hydrogen 
energy would be available in the car's fuel tank. So, if 7.8 trillion 
BTU of H2 would be needed to power the entire light duty 
vehicle sector, this would require about 11 trillion BTU of natural gas 
as input in 2020.

How does this compare to projected natural gas use?

    Total demand for natural gas is projected to increase at an average 
annual rate of 1.8 percent between 2001 and 2020, from 22.7 trillion 
cubic feet to 34.9 trillion cubic feet, primarily because of rapid 
growth in demand for electricity generation. One trillion cubic feet of 
natural gas contains roughly 1 trillion BTU of energy.
    So the natural gas needed to make enough H2 for all 
light duty vehicles would increase natural gas use nationally in 2020 
by a little less than one third = (11 trillion BTU/35 trillion BTU).
    This is not a negligible amount of natural gas, but it does not 
represent a doubling or tripling of natural gas demand either.
    Of course, not all vehicles will run on hydrogen by 2020. I just 
used this figure to make a point.
    For a still optimistic but more reasonable, case, if 10 percent of 
all light duty vehicles used H2 from natural gas in 2020, 
this would require about 1.1 trillion BTU of natural gas per year 
representing only about a three percent increase in projected natural 
gas use. For reference, we already use about this much natural gas to 
make hydrogen industrially today for refineries and chemical uses.

What are the prospects for using natural gas to make H2?

    Even for the very extreme assumption that all the light duty 
vehicles in the U.S. ran on hydrogen, the use of natural gas was 
increased by only about 1/3. For a more reasonable (but still quite 
optimistic) level of 10 percent H2 light duty vehicles by 
2020, the natural gas use is increased only three percent. This 
highlights that point that natural gas could be a very important 
transitional source for H2 over the next several decades, 
without a huge impact on natural gas markets. As I mentioned in my 
earlier testimony, it is likely that hydrogen will be made from a 
variety of sources in the future, not just natural gas.

Evaluation of the Accuracy of Comparative Fuel Studies

Q2. LSeveral well-to-wheels analyses have appeared recently comparing 
hydrogen to other fuels with conflicting results For example, the 
Argonne Labs study cited by the Department differed with the 
conclusions of the recently updated MIT study regarding the advantages 
of hydrogen powered vehicles over diesel hybrids How should policy-
makers evaluate which of these highly technical studies is accurate, 
especially given the range of opinions in the literature?

A2. The differing results of various well-to-wheels studies are a 
result of the differing input assumptions. There is considerable 
uncertainty in some of the inputs (performance and cost of future 
vehicle components), and also considerable room for different 
approaches to vehicle design, that could give differing relative fuel 
economies of H2 vehicles versus diesel hybrids, for example. 
These factors explain why the results from two studies can seem 
contradictory, yet each is correct for the particular set of 
assumptions adopted by the researcher.
    Most well-to-wheels studies I have examined are broadly consistent 
(to within the uncertainty of the results) on several issues:

         LIt should be possible to improve fuel economy of 
        gasoline internal combustion engine vehicles by a factor of 
        1.5-2 compared to today's gasoline cars, with improvements like 
        lightweight materials, streamlining and hybrid drive trains.

         LThe well-to-wheel emissions of greenhouse gases can 
        be significantly reduced as compared to today's vehicles (by 
        perhaps 50 percent) by adopting advanced gasoline or diesel 
        internal combustion vehicles.

         LThe well-to-wheels primary energy use for advanced 
        H2 vehicles (H2 fuel cells or H2 
        ICE hybrids) is similar to that for a gasoline or diesel 
        hybrid. Unlike gasoline or diesel, the hydrogen can be made 
        from a variety of sources.

         LCompared to diesel or gasoline hybrids, H2 
        vehicles have similar well-to-wheels greenhouse gas emissions 
        when hydrogen is made from natural gas, but much lower 
        emissions when H2 is made from decarbonized fossil 
        sources (H2 from natural gas or coal with CO2 
        sequestration) or from renewables (wind, biomass, solar).

    Given the uncertainties in the inputs, seeming contradictions among 
these studies are often ``within the bounds of uncertainty.'' Rather 
than choosing one of these studies, as most accurate, it behooves 
policy-makers to understand that there are gains to be made, but the 
precise amount is not exactly known now. It is important that managers 
of the programs in the DOE understand the differences among these 
studies (I think they do), and to look for areas where R&D might have 
an impact in improving vehicle performance or reducing emissions or 
cost.
    There is also an issue of when a given vehicle technology could be 
ready to help deal with environmental and energy supply problems. It 
will be a while before hydrogen could be widely used, but cleaner, more 
efficient internal combustion engine technologies (like hybrids) could 
be widely used in the interim, while hydrogen is being developed.
                   Answers to Post-Hearing Questions
Responses by Lawrence D. Burns, Vice President, Research Development 
        and Planning, General Motors

Availability of Fuel Cell Vehicles to Consumers

Q1. LIn your testimony, you state that GM has made a commitment to 
having fuel cell vehicles for sale by 2010. Will these vehicles be 
offered for sale to a limited market, similar to the programs Toyota 
and Honda have in place today, or will they be available for the 
average consumer at competitive prices in the mass market?

A1. Hydrogen fuel cell vehicles must realize a significant share of the 
global auto market to yield beneficial energy and environmental 
impacts. As such, they must be as affordable as today's vehicles, 
sustainable from an environmental and energy perspective, compelling 
from a design and value standpoint, and profitable (to attract capital 
to grow capacity). GM is working hard and committing significant 
resources to realize these criteria as soon as possible.
    Our goal is to be the first auto company to profitably build and 
sell one million fuel cell vehicles. We believe this is possible by the 
middle of the next decade. As an interim stretch goal, we are targeting 
to have the capability of building an affordable (to the average 
customer) and compelling fuel cell vehicle by 2010. The primary 
motivation for us to meet the 2010 date is the significant business 
growth opportunity resulting from reinventing the automobile around 
fuel cells, electric drive, by-wire controls, and hydrogen.
    The two toughest technical challenges to meeting our 2010 stretch 
goal are the cost of the fuel cell propulsion module and how best to 
store hydrogen on-board the vehicle. Realizing our 2010 goal requires 
us to overcome these challenges. While we are determined to do just 
that, the inherent risks and uncertainties associated with developing 
new technologies means you should view our plans as goals, rather than 
commitments.
    Having affordable and compelling vehicles is an important necessary 
condition for generating high demand for fuel cell vehicles. However, 
conveniently available and competitively priced hydrogen is also an 
important condition. Vehicle affordability will also be directly 
affected by a number of government policies, including federal tax 
policy towards fuel cell vehicles and hydrogen, and the resolution of a 
number of issues related to codes and standards. Other government 
policies can have a more indirect effect on vehicle affordability, 
including the level of support for federal research into fuel cells and 
hydrogen storage, and early procurement by federal agencies of fuel 
cell vehicles as well as stationary fuel cells.
                              Appendix 2:

                              ----------                              


                   Additional Material for the Record




