[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
H.R. 5143, THE H-PRIZE ACT OF 2006
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HEARING
BEFORE THE
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
APRIL 27, 2006
__________
Serial No. 109-45
__________
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
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______
COMMITTEE ON SCIENCE
HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas BART GORDON, Tennessee
LAMAR S. SMITH, Texas JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California LYNN C. WOOLSEY, California
KEN CALVERT, California DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland MARK UDALL, Colorado
VERNON J. EHLERS, Michigan DAVID WU, Oregon
GIL GUTKNECHT, Minnesota MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland DANIEL LIPINSKI, Illinois
W. TODD AKIN, Missouri SHEILA JACKSON LEE, Texas
TIMOTHY V. JOHNSON, Illinois BRAD SHERMAN, California
J. RANDY FORBES, Virginia BRIAN BAIRD, Washington
JO BONNER, Alabama JIM MATHESON, Utah
TOM FEENEY, Florida JIM COSTA, California
RANDY NEUGEBAUER, Texas AL GREEN, Texas
BOB INGLIS, South Carolina CHARLIE MELANCON, Louisiana
DAVE G. REICHERT, Washington DENNIS MOORE, Kansas
MICHAEL E. SODREL, Indiana VACANCY
JOHN J.H. ``JOE'' SCHWARZ, Michigan
MICHAEL T. MCCAUL, Texas
MARIO DIAZ-BALART, Florida
C O N T E N T S
April 27, 2006
Page
Hearing Charter.................................................. 2
Opening Statements
Statement by Representative Sherwood L. Boehlert, Chairman,
Committee on Science, U.S. House of Representatives............ 10
Written Statement............................................ 11
Statement by Representative Judy Biggert, Chairman, Subcommittee
on Energy, Committee on Science, U.S. House of Representatives. 21
Written Statement............................................ 23
Statement by Representative Bob Inglis, Chairman, Subcommittee on
Research, Committee on Science, U.S. House of Representatives.. 11
Written Statement............................................ 13
Statement by Representative Daniel Lipinski, Member, Committee on
Science, U.S. House of Representatives......................... 20
Written Statement............................................ 21
Prepared Statement by Representative Jerry F. Costello, Member,
Committee on Science, U.S. House of Representatives............ 24
Prepared Statement by Representative Eddie Bernice Johnson,
Member, Committee on Science, U.S. House of Representatives.... 24
Witnesses:
Dr. Peter H. Diamandis, Chairman, the X Prize Foundation
Oral Statement............................................... 26
Written Statement............................................ 28
Biography.................................................... 30
Dr. David L. Bodde, Director, Innovation and Public Policy,
International Center for Automotive Research (ICAR), Clemson
University
Oral Statement............................................... 31
Written Statement............................................ 33
Biography.................................................... 35
Dr. David L. Greene, Corporate Fellow, Oak Ridge National
Laboratory, Center for Transportation Analysis, National
Transportation Research Center
Oral Statement............................................... 37
Written Statement............................................ 38
Biography.................................................... 40
Mr. Phillip Baxley, President, Shell Hydrogen, L.L.C.
Oral Statement............................................... 40
Written Statement............................................ 42
Biography.................................................... 47
Discussion....................................................... 47
Appendix: Additional Material for the Record
H.R. 5143, the H-Prize Act of 2006, as introduced................ 70
H.R. 5143, THE H-PRIZE ACT OF 2006
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THURSDAY, APRIL 27, 2006
House of Representatives,
Subcommittee on Environment, Technology, and
Standards,
Committee on Science,
Washington, DC.
The Committee met, pursuant to call, at 9:30 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
H.R. 5143, the H-Prize Act of 2006
thursday, april 27, 2006
9:30 a.m.-11:30 a.m.
2318 rayburn house office building
1. Purpose
On Thursday, April 27, 2006, the House Science Committee will hold
a hearing on H.R. 5143, the H-Prize Act of 2006. The bill is intended
to create a new incentive to achieve scientific and technical
breakthroughs required to make the transition to a hydrogen economy.
2. Witnesses
Mr. Phillip Baxley is the President of Shell Hydrogen, L.L.C., a
separate business unit established by Shell in 1999 to pursue new
business opportunities in hydrogen fuel and fuel cells.
Dr. David Bodde is the Director of Innovation and Public Policy at
Clemson University's International Center for Automotive Research
(ICAR). He was a member of the National Academy of Engineering
Committee on Alternatives and Strategies for Future Hydrogen Production
and Use, which issued the 2004 report The Hydrogen Economy:
Opportunities, Costs, Barriers, and R&D Needs.
Dr. Peter Diamandis is the Chairman of the X Prize Foundation, a non-
profit organization dedicated to fostering innovation through the use
of competitions. The foundation awarded its $10 million Ansari X Prize
to promote the formation of a commercial space flight industry. Prizes
for genomics, energy and education are under development.
Dr. David L. Greene is a corporate fellow of Oak Ridge National
Laboratory with the Center for Transportation Analysis, National
Transportation Research Center. He is an expert in transportation and
energy policy issues.
3. Overarching Questions
The hearing will address the following overarching questions:
1. Are any changes needed in H.R. 5143?
2. Does H.R. 5143 provide the right incentives to address the
most significant technical barriers to the widespread use of
hydrogen as a fuel source?
3. How can the Department of Energy (DOE) best use prize
competitions to complement more traditional research support
mechanisms, including contracts and grants, as a way to develop
the hydrogen economy?
4. Brief Overview
On April 6, 2006, Research Subcommittee Chairman Bob Inglis;
Science Committee Chairman Sherwood Boehlert; Environment, Technology
and Standards Subcommittee Chairman Vernon Ehlers; Congressman Roscoe
Bartlett; Congressman Michael McCaul; Congressman Daniel Lipinski; and
nine other co-sponsors introduced H.R. 5143, the H-Prize Act of 2006.
Inspired by the successful Ansari X Prize, which awarded $10
million to Burt Rutan for sub-orbital space flight, the H-Prize is
designed to accelerate the drive to a hydrogen economy by creating an
incentive for new, entrepreneurial players to join the race to break
down technical and other barriers to the advancement of hydrogen
technologies.
The Science Committee, at the Administration's request, created a
prize program for NASA in the NASA Reauthorization Act of 2005. The
language of H.R. 5143 is largely based upon that of the NASA Act (P.L.
109-155).
A summary of H.R. 5143 and a section-by-section analysis are
included in Part 7 of this charter.
Hydrogen gas is considered by many experts to be a promising fuel,
particularly in the transportation sector. When used as a fuel, its
only combustion byproduct is water vapor. The widespread adoption of
hydrogen as a transportation fuel has the potential to reduce or
eliminate air pollution generated by cars and trucks.\1\
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\1\ The Science Committee and its Subcommittees have held numerous
hearings on the use of hydrogen since the announcement of the
FreedomCAR Initiative by then-Secretary of Energy Spencer Abraham on
January 9, 2002. The FreedomCAR program was centered on fuel cell
vehicles, which use hydrogen as fuel.
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The Full Committee held the following hearings:
February 7, 2002--Full Committee Hearing on The Future of DOE's
Automotive Research Programs
April 2, 2003--Full Committee Markup of H.R. 238, Energy Research,
Development, Demonstration, and Commercial Application Act of 2003
March 5, 2003--Full Committee Hearing on The Path to a Hydrogen Economy
March 3, 2004--Full Committee Hearing on Reviewing the Hydrogen Fuel
and FreedomCAR Initiatives
The Energy Subcommittee held the following hearings:
June 26, 2002--Subcommittee on Energy Hearing on FreedomCar: Getting
New Technology into the Marketplace
June 24, 2002--Subcommittee on Energy Field Hearing on Fuel Cells and
the Hydrogen Future
There was one hearing held jointly with the Energy Subcommittee and the
Research Subcommittee:
July 20, 2005--Joint Hearing--Subcommittee on Energy and Subcommittee
on Research--Fueling the Future: On the Road to the Hydrogen Economy
In addition, these programs were also subject to scrutiny during
hearings on budget priorities and within the Administration's Climate
Change Technology Program. Transcripts of these hearings are available
on the Committee website or from the Congressional Research Service.
However, unlike harvested wood or mined coal, the hydrogen gas used
as a fuel is not a naturally occurring energy resource. Hydrogen must
be produced from hydrogen-bearing compounds, like water or natural gas,
and that requires energy--and, unlike gasoline, more energy is always
required to produce it than is recovered when hydrogen is burned in a
fuel cell. Hydrogen has the potential to reduce America's dependence on
foreign oil, but the degree to which hydrogen will displace foreign
energy supplies depends on what energy source is used to generate
hydrogen gas in the first place.
If hydrogen can be produced economically from energy sources that
do not release carbon dioxide into the atmosphere--from renewable
sources such as wind power or solar power, from nuclear power, or
possibly from coal with carbon sequestration, then the widespread use
of hydrogen as a fuel could make a major contribution to reducing the
emission of greenhouse gases.
While the promise of hydrogen is great, so are the technical
challenges. Experts suggest that major advances will be required across
a wide range of technologies for hydrogen to be affordable, safe,
cleanly produced, and readily distributed. The production, storage, and
use of hydrogen all present significant technical challenges. While DOE
research programs have produced promising advances, those programs are
still a long way from meeting their goals of developing economically
viable hydrogen technologies. Indeed, the American Physical Society in
a 2004 report stated that ``no material exists today that can be used
to construct a hydrogen fuel tank that can meet the consumer
benchmarks,'' that is for affordably storing enough fuel on-board a car
or truck to enable a long enough ride between refuelings.
5. Issues
What could be gained by establishing a prize program to promote
advances in using hydrogen as a fuel?
Traditionally, DOE has relied upon established researchers in
national labs, industry, and academia to carry out its mission of
developing energy technologies for use by the private sector. Most
commonly, DOE identifies a technical hurdle and then issues research
solicitations of varying specificity. These solicitations detail the
type of technologies the agency wants to fund and the performance goals
the agency anticipates the technology will meet when introduced to the
marketplace. For example, DOE might issue a solicitation for automotive
fuel cell technologies. Such a solicitation may include the requirement
that the fuel cells be a particular type of fuel cell, or may be
targeted at known technical problems. Projects are then selected
against the criteria set out in the original solicitation. DOE may use
grants, cooperative agreements or contracts to carry out projects, and
industrial participants are required to share costs.
Prizes would presumably involve less direct DOE involvement in day-
to-day research activities than would any of the traditional technology
development routes. Instead, DOE would offer a prize for the
development of a particular technology or for a particular achievement,
and then would wait to see what contestants produced. Proponents of
prizes argue that this would be less costly and less bureaucratic, and
might spur more creative thinking. In addition, they argue that
inventors and entrepreneurs (as opposed to national labs or major
energy companies) would be more inclined to compete for a prize than
compete for more traditional grants and contracts.
Proponents of prizes further argue that traditional peer review
processes tend to favor proposals that seem safe over those that may
produce surprising and potentially more innovative results. Many have
commented--in a wide variety of contexts--that the federal procurement
system can be intolerant of risk, and can place costly bureaucratic
demands on private-sector contractors.
Other advocates cite prizes as having additional benefits. Prizes
are seen as mobilizing much more private capital than matching grants,
since numerous contestants all spend their own money on technology
development while they vie for the same funds. (Traditional grant
processes usually have at most a one-to-one funding match.) Prizes
allow the Federal Government to shift much of the risk and the
financial burden of technology development from the government to the
contestants. For some, the most important aspect of prizes is their
ability to educate, inspire, and mobilize the public for scientific,
technological, and societal objectives.
How does a prize program need to be structured to be successful?
Prize contests can be less clear-cut than they first appear.
Problems can develop in the design of the contest, the selection of a
winner, and in the aftermath. A National Academy of Engineering (NAE)
panel examining the use of prizes by federal agencies\2\ suggested the
following design principles for prize programs:
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\2\ Concerning Federally Sponsored Inducement Prizes in Engineering
and Science, Steering Committee for the Workshop to Assess the
Potential for Promoting Technological Advance Through Government-
Sponsored Inducement Prizes in Engineering and Science, Washington, DC:
National Academy of Engineering (1999).
Treatment of intellectual property resulting from
prize contests should be properly aligned with the objectives
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and incentive structure of the prize contest.
Contest rules should be seen as transparent, simple,
fair, and unbiased.
Prizes should be commensurate with the effort
required and goals sought.
DOE would have to design its prize contests carefully. The goal for
which the prize was being awarded would have to be clearly enough
described that contestants (and DOE) had a firm sense of what DOE was
seeking and why. On the other hand, too detailed a description by DOE
would limit the kinds of ideas that a contest could yield. A very
detailed description would not end up being much different than
contract specifications.
The selection of a prize winner can also be difficult. Judges need
to be open to unexpected ideas. There are historical examples of
revolutionary ideas losing prize contests because the judges were not
open to unexpected ways of achieving the stated goals.\3\ Decisions
also need to be made about who is allowed to compete for a prize. For
example, H.R. 5143 does not allow federal employees to compete except
on their own time. It is silent on whether entities receiving federal
funding can compete. Should entities that are already receiving federal
backing be able to compete for a federally funded prize?
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\3\ The best-selling book Longitude by Dava Sobel describes just
such a case. John Harrison developed method for measuring exact
longitude based upon a clock that kept time accurately even during a
ship's pitching and rolling at sea. However, despite the proven test of
his invention at sea, the group administering the prize (the Board of
Longitude) refused to award him the prize money--which historians
attribute to the Board's domination by astronomers who favored a rival,
astronomy-based method of determining longitude.
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The award of a prize does not guarantee, by itself, that the social
benefits of the technology will be realized or that the technology will
be commercialized. In the wake of the award of any prize, DOE would not
be the entity to decide how to put a winning idea into actual use. A
prize winner might not have the financial wherewithal or even the
technical capacity to actually turn their winning idea into a viable
product. It may therefore be necessary for DOE to take additional
actions to promote technologies after the award of prizes.
Finally, it is unclear whether prizes would be a less costly way of
doing business once all the costs DOE would have to incur in running a
successful contest are taken into account.
How dependent upon prizes should DOE be for the development of critical
technologies?
Prizes are being proposed as a supplement to, not a substitute for
traditional R&D programs. Indeed, H.R. 5143 makes that point explicitly
in the last section of the bill. Traditional programs are especially
important if developing a specific technology on a specific timetable
is critical to a DOE objective, such as development of a coal-fired
power plant with zero carbon emissions. The timing of technology
development may be easier to control through traditional solicitations
and research awards.
What kinds of goals are appropriate for prize contests?
Prizes benefit from clear-cut goals. In general, the more complex
the goal of a contest, the more complex DOE's role would likely be.
(For example, evaluating a set of integrated technologies that
radically change hydrogen distribution and use is a more demanding
undertaking than evaluating the performance of a hydrogen storage
tank.) At some point, the complexity might eliminate the advantage of a
contest over traditional means of technology development. If
appropriately designed, prize contests can reveal important
information, particularly about the failures that emerge upon
integration of subsystems, that can inform the plans and priorities of
the Department's on-going hydrogen research program.
How large does a prize need to be to induce investment?
One of the key objectives of some prizes is to induce investment.
Often, the prestige of having won the prize is seen as having greater
value than the prize itself. Winning contestants, as in the Ansari X
Prize, have been known to spend more in an effort to win a prize than
they gained from the prize itself, and several contestants that did not
win also invested. Thus, the prize level must be high enough to garner
attention and prestige. But at the same time the prize amount must be
realistic enough to be appropriated. Also, if there is a limited pool
of potential contestants, even a large prize may not induce more
investments.
6. Background
Prizes
There are two types of technology prizes: recognition and
inducement prizes. Recognition prizes are post-facto prizes, intended
to reward a past accomplishment. The Nobel Prizes are the most famous
prizes of this type. Inducement prizes are awarded to an individual or
group who has the best entry in a defined contest or who first meet
some specified technical goal.
The NAE report specifically recommended that federal agencies
experiment with inducement prizes. Among other things, inducement
prizes may best serve ``to `stretch' the state of the art in
technology.'' As an example, the Defense Advanced Research Projects
Agency awarded $2 million in 2004 for its Grand Challenge Prize to
Stanford University researchers for their design and construction of an
autonomous ground vehicle that was able to navigate a 131.2 mile course
through the Mojave Desert.
Typically, inducement prize contests are either best-entry contests
or goal-oriented contests.
H.R. 5143 includes both types of prizes. In a best-entry contest, a
prize is given for the best entry submitted during a given time period,
even if the winning entry in a given year falls short of the ultimate
technical objective. DOE's Solar Decathlon competition, held on the
National Mall last summer, is a good example in the energy R&D arena.
Decathlon teams must design and build fully-functioning houses powered
exclusively by the sun.
By contrast, goal-oriented contests have a clear technical
objective. The prize is awarded only if a pre-determined goal is met
and verified. The $10 million Ansari X Prize was awarded in 2004 after
SpaceShipOne, a privately built three-person craft, made a required
second flight 62 miles (100 km) above the surface of the Earth within a
two-week period. The ability to meet a bright-line technical objective
does not necessarily guarantee economic viability.
Inducement Prizes can be divided further into four different types
of objectives:
New or Best Invention prizes reward the first new
technology or technique that meets some technical objective.
The Ansari X Prize falls in this category.
New Application prizes reward refining or integrating
existing technologies to meet a new objective. The previously
mentioned DARPA Grand Challenge Prize is this type of prize.
Performance Improvement prizes reward improving the
performance of an existing product used for an existing
application.
Technology Diffusion prizes reward the diffusion of
new innovation, for example requiring that a specified number
of units be sold in the commercial marketplace.
H.R. 5143 contains three prizes. The first is a set of $1 million
prizes for advancements in hydrogen storage, hydrogen production,
hydrogen use and hydrogen distribution. This is a best-entry contest
that rewards performance improvements. The second prize rewards
prototypes that meet objective contest criteria established in advance.
This is a $4 million goal-oriented contest for a new application,
namely the use of hydrogen in vehicles or other energy use
applications. The third prize is a $10 million goal-oriented contest
for the best invention that leads to transformational changes in the
distribution or production of hydrogen. Winners of the third prize
would become eligible for up to $90 million in matching funds for every
dollar of private funding raised by the winner for commercialization of
their winning technology.
Existing Energy Prizes
Section 1008 of the Energy Policy Act of 2005 authorizes DOE to
spend $15 million to carry out a more general prize program for ``grand
challenges of science and technology'' including to reduce U.S.
dependence on foreign oil. DOE is said to be studying this authority
for use in the hydrogen arena. In addition, the Federal Government
already operates a number of competitions and contests in the energy
R&D area. For example, DOE's Solar Decathlon, mentioned above, is a
best-entry ``design'' competition.\4\ Entrants must provide enough
solar power to perform all the functions Americans have come to expect
at home--washing clothes, running the dishwasher, powering computers,
and, of course, maintaining a comfortable temperature. Winners are
selected in subcategories--architecture, livability, comfort, power
performance, etc.--and an overall winner is determined as well.
Competitions of this type are often particularly useful for
demonstrating how a technology can be incorporated into a commercially
attractive product. In fact, the University of Colorado's winning
BioS[h]IP house was designed for and will be delivered to a client.
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\4\ The Solar Decathlon was the subject of a November 2, 2005
Energy Subcommittee hearing, Winning Teams and Innovative Technologies
from the 2005 Solar Decathlon.
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As with the Solar Decathlon, many existing energy R&D prize
competitions focus on student competitions. In DOE's Future Truck
competition, teams of students from 15 top North American universities
refined their re-engineered Ford Explorers to achieve lower emissions
and at least 25 percent higher fuel economy, without sacrificing
performance, utility, safety, and affordability. DOE and Natural
Resources Canada help sponsor the North American Solar Challenge, a
competition to design, build, and race solar-powered cars. Solar
Challenge teams, primarily from universities, compete in a 2,500 mile
race from Austin, Texas to Calgary, Alberta. A number of American Solar
Challenge teams go on to compete in the biennial World Solar
Challenge--a 3,000 kilometer (1,863 miles) race across Australia. And
the American Forest and Paper Association and DOE Office of Industrial
Technologies have sponsored student competitions to find novel uses for
the more than two billion tons of waste every year produced by the
forest products industry.
In at least one recent case, a government-sponsored energy
competition involved industry contestants. The California Energy
Commission and the Environmental Protection Agency's ENERGY STAR
program jointly sponsored Efficiency Challenge 2004, an international
design competition for energy efficient AC/DC power supplies. In two
award categories, power supplies were judged on different criteria. The
market-ready category weighed practical factors such as power supply
cost and packaging, along with energy efficiency. In the open category,
power supplies entered were evaluated without any cost or packaging
constraints. This latter category was intended to showcase the most
efficient power supply designs from both industry and academia.
Hydrogen
In his 2003 State of the Union speech, President Bush announced the
creation of a five-year, $1.2 billion Hydrogen Fuel Initiative, which
built on the FreedomCAR initiative announced in 2002. Together, the
initiatives aim to enable the transition to a hydrogen-based
transportation economy, by developing technologies for the production,
transportation and distribution of hydrogen, and the vehicles that will
use the hydrogen. Fuel cell cars running on hydrogen would emit only
water vapor from the tailpipe and, if domestic energy sources were used
to produce the hydrogen, would not be dependent on foreign fuels. The
Administration has requested $289.5 million for the Hydrogen Fuel
Initiative in Fiscal Year (FY) 2007, an increase of $41.8 million over
the FY 2006 funding level. Federal funding for the Hydrogen Initiative
totals $631.7 million for FY 2004-2006, about 52 percent of the
proposed initiative. Of that total, $121.5 million (19 percent) has
been earmarked by Congress for specific projects.
Major advances are needed across a wide range of technologies if
hydrogen is to be affordable, safe, cleanly produced, and readily
distributed. The production, storage and use of hydrogen all present
significant challenges.
Lowering the cost of hydrogen: At present, hydrogen
(when produced from its most affordable source, natural gas) is
three to four times more expensive to produce than gasoline.
Current DOE research efforts seek to lower that cost enough to
make fuel cell cars cost-competitive with conventional
gasoline-powered vehicles by 2015; and to advance the methods
for producing hydrogen from renewable resources, nuclear
energy, and coal.
Creating effective hydrogen storage: Current hydrogen
storage systems cannot deliver the vehicle driving distance
that automakers say consumers demand. New technology is needed.
Creating affordable hydrogen fuel cells: Fuel cell-
based propulsion is now up to 10 times more expensive than
internal combustion engines. A major goal of current DOE
research efforts is to reduce the cost of fuel cell propulsion
to affordable levels.
Analyses of the Hydrogen Fuel Initiative by the American Physical
Society (APS) \5\ and the National Academies of Science (NAS) \6\ note
that meeting the goals of the overall hydrogen initiative will require
fundamental breakthroughs--not just incremental improvements. For
example, storing hydrogen gas requires too large a volume for practical
on-board storage in vehicles. New materials would be required to store
hydrogen in more condensed form and release it when needed--a very
difficult technical problem. The APS study states, ``No material exists
today that can be used to construct a hydrogen fuel tank that can meet
the consumer benchmarks.'' The NAS estimated that fuel cells themselves
would need a ten- to twenty-fold improvement before fuel cell vehicles
become competitive with conventional technology. Current fuel cells
wear out quickly, and lifetimes are far short of those required to
compete with a gasoline engine. Large improvements have been made since
the NAS report was released, but additional improvements are still
needed. DOE estimates that roughly a five-fold decrease in fuel cell
cost will be required, while at the same time increasing performance
and durability.
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\5\ The Hydrogen Initiative, APS Panel on Public Affairs,
Washington, DC: The American Physical Society (March 2004).
\6\ The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D
Needs, Committee on Alternatives and Strategies for Future Hydrogen
Production and Use, Washington, DC: National Research Council and the
National Academy of Engineering (2004).
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Both reports recommended changes to the hydrogen initiatives,
particularly arguing for a greater emphasis on basic, exploratory
research because of the significant, perhaps insurmountable, technical
barriers that must be overcome. DOE has responded, in part, by
expanding the hydrogen program to include work in the Office of Science
focused on design of new catalysts, solar hydrogen production, and the
study of ion transport in fuel cell membranes.
Even if the technology advances to a point at which it is
competitive, the transition to a hydrogen economy will require an
enormous investment to create a new infrastructure. Changes in
regulation, training and public habits and attitudes will also be
necessary. Estimates of the cost of creating a fueling infrastructure
(replacing or altering gas stations) alone are in the billions of
dollars.
As currently envisioned, the transition won't happen quickly.
According to the NAS study, significant sales of hydrogen vehicles are
unlikely before 2025 even under the most optimistic technology
assumptions.
7. Section-by-Section Description of H.R. 5143
Section 1. Short Title.
The H-Prize Act of 2006.
Sec. 2. Definitions.
Sec. 3. Prize Authority.
Requires the Secretary of Energy to create a prize to advance the
research, development, demonstration and commercial application of
hydrogen energy technologies.
Requires the Secretary to advertise the prize competitions widely
to encourage broad participation, including a specific direction to
announce the prize competitions through publication of a Federal
Register notice. Requires the Secretary to enter into an agreement with
a private, non-profit entity to administer the prize competitions.
Authorizes the Secretary to use funding directly appropriated for such
purposes to DOE or other agencies and to accept funds provided by
private entities or individuals. Prohibits the announcement of any
prize competition until sufficient funds are available. Sunsets the
authority to award prizes in 2017.
Sec. 4. Prize Categories.
Defines prize categories for:
(1) Components or Systems. Establishes up to four $1 million
prizes awarded every other year to the best technology
advancements in components or systems related to hydrogen
production, hydrogen storage, hydrogen distribution, and
hydrogen utilization. Provides the Secretary the discretion to
reduce the amount or number of prizes based upon the
availability of funds.
(2) Prototypes. Establishes one $4 million prize for
prototypes of hydrogen-powered vehicles or hydrogen-based
products that best meet or exceed objective performance
criteria. Awards prototype prizes in years alternate with the
technology advancements prize. Prohibits the Secretary from
awarding the prize if no entrant meets the objectively defined
performance criteria.
(3) Transformational Changes. Establishes a $10 million prize
for transformational changes in technologies for the production
and distribution of hydrogen that meet or exceed far-reaching
objective criteria. Authorizes the Secretary to provide up to
$90 million more in matching funds for every dollar of private
funding raised by the winner for the continued development of
their winning technology. Authorizes prize winners to accept
these additional funds as cash or as a government contract
equivalent to the prize amount. Limits the total award to $100
million.
Requires the Secretary to establish contest criteria through
consultation with the Hydrogen Technical Advisory Committee, other
federal agencies including the National Science Foundation, and private
organizations including the National Academy of Sciences. Requires the
Secretary to appoint contest judges from the private sector and
agencies outside DOE. Excludes judges who may have a personal or
financial relationship with any contest participant.
Sec. 5. Eligibility.
Requires contestants to register through the process published in
the Federal Register. Requires contestants be incorporated and maintain
a primary place of business in the U.S. if a private entity, or must be
a U.S. citizen if an individual. Excludes from participation any
federal entities or federal or national lab employees while on duty.
Sec. 6. Intellectual Property.
Waives claims by the Federal Government to any intellectual
property rights derived from participation in the prize competitions.
Sec. 7. Liability.
Requires contestants to waive claims against the Federal Government
resulting from participation in prize competition activities. Requires
contestants to have liability insurance against damages resulting from
participation in any prize competition activity and to name the Federal
Government as an additional insured entity.
Sec. 8. Authorization of Appropriations.
Authorizes $55 million for each of fiscal years 2007 through 2016.
Limits the use of appropriated funds for administrative expenses to no
more than $1 million in any fiscal year.
Sec. 9. Nonsubstitution.
Expresses a sense of the Congress that the prize competitions shall
not act as a substitute for any R&D programs.
8. Witness Questions
Mr. Phillip Baxley , Dr. David Bodde, Dr. David L. Green
Are there any changes you would recommend making to
H.R. 5143?
Does H.R. 5143 provide the right incentives to
address the most significant technical barriers to the
widespread use of hydrogen as a fuel source?
How can the Department of Energy (DOE) best use prize
competitions to complement more traditional research support
mechanisms, including contracts and grants, as a way to develop
the hydrogen economy?
Dr. Peter Diamandis
Are there any changes you would recommend making to
H.R. 5143?
What are the advantages of using prize programs to
encourage technological progress in areas like the use of
hydrogen as a fuel source?
Chairman Boehlert. The Committee will come to order.
I want to welcome everyone here today for what has turned
out to be a very auspiciously timed hearing.
Suddenly, the whole Nation is focused on gas prices and in
a panic on our ``addiction to oil'' and the Congress is in a
panic trying to figure out how to respond. Our options in the
immediate future are limited, but our options in the mid- and
long-term are not. And unless we exercise those options, we are
going to lurch from oil crisis to oil crisis and each one is
going to get worse, and the toll on our economy will grow. The
future will be grim if we don't act now. If we fail to act now,
we will have to pay later.
There are many steps we need to begin to take. For
starters, we need to reduce demand by means such as imposing
tighter fuel economy standards. That is a mantra for me, and I
suppose people are getting a little bit used to me repeating
that over and over, but it is an issue whose time has come. But
over the longer run, we need to find ways to run our
transportation system on substances other than petroleum,
including biofuels and, perhaps, hydrogen.
The hydrogen economy holds out great promise, but it also
presents great hurdles. We are pretty far away from knowing how
to create, store, distribute, and use hydrogen cleanly and
efficiently. We need to devote all of the ingenuity we can
muster to attack this problem.
That is why I was so pleased when Chairman Inglis
introduced H.R. 5143, an innovative approach to encouraging
innovative research. The bill is carefully crafted to encourage
ongoing work that can lead to incremental improvements in
hydrogen technology, and to draw more scientists and engineers
into trying to remove the highest hurdles on the hydrogen
highway.
We know from history that prizes can help solve tough
technical problems. And this committee has a record of
promoting the use of prizes; we created the highly successful
Malcolm Baldrige Award and most recently we established a prize
program at NASA. Prizes can draw more money and more people
into the search for technical solutions, and they can provoke
more inventive thinking.
Now, no one is suggesting that this prize substitute for
the existing hydrogen R&D programs, which the President and
this committee have strongly supported. Those programs are
necessary to make sure the Nation has a cadre of experts
engaging in ongoing work in this area. But we can expand the
pool of financial and human resources further with prizes.
So I am eager to hear today from our experts on the
specifics of the bill. I expect that this bill will move
through the House swiftly, and we want to make sure we have got
this program written in exactly the right way. We also have to
examine the funding levels in the bill: we want them high
enough to make a difference, but not any higher than that,
given how tight the federal budget is. My guess is that the top
prize could be reduced to $10 million without reducing the
program's impact.
But while we work out the details, we shouldn't miss the
larger message. This committee is committed to moving forward
with new ways to promote new technologies, and I think the H-
Prize fits that bill.
I congratulate Mr. Inglis for proposing it, and as a matter
of fact, I have nominated him personally for the X Prize for
Legislative Initiative. And I want to congratulate him for
working so closely with the Committee in drafting this bill.
And I will yield the remainder of my time to Chairman
Inglis.
[The prepared statement of Chairman Boehlert follows:]
Prepared Statement of Chairman Sherwood L. Boehlert
I want to welcome everyone here today for what has turned out to be
a very auspiciously timed hearing.
Suddenly, the whole Nation is focused on gas prices and our
``addiction to oil'' and the Congress is in a panic trying to figure
out how to respond. Our options in the immediate future are limited,
but our options in the mid- and long-term are not. And unless we
exercise those options, we are going to lurch from oil crisis to oil
crisis and each one is going to get worse, and the toll on our economy
will grow. The future will be grim if we don't act now.
There are many steps we need to begin to take. For starters, we
need to reduce demand by means such as imposing tighter fuel economy
standards. But over the longer-run we need to find ways to run our
transportation system on substances other than petroleum, including
biofuels and perhaps hydrogen.
The hydrogen economy holds out great promise but it also presents
great hurdles. We are pretty far away from knowing how to create,
store, distribute and use hydrogen cleanly and efficiently. We need
devote all the ingenuity we can muster to attack this problem.
That's why I was so pleased when Chairman Inglis introduced H.R.
5143--an innovative approach to encouraging innovative research. The
bill is carefully crafted both to encourage ongoing work that can lead
to incremental improvements in hydrogen technology, and to draw more
scientists and engineers into trying to remove the highest hurdles on
the hydrogen highway.
We know from history that prizes can help solve tough technical
problems. And this committee has a record of promoting the use of
prizes; we created the highly successful Malcolm Baldrige Award and
most recently we established a prize program at NASA. Prizes can draw
more money and more people into the search for technological solutions
and they can provoke more inventive thinking.
Now, no one is suggesting that this prize substitute for the
existing hydrogen R&D programs, which the President and this committee
have strongly supported. Those programs are necessary to make sure the
Nation has a cadre of experts engaging in ongoing work in this area.
But we can expand the pool of financial and human resources further
with prizes.
So I'm eager to hear from our experts today on the specifics of the
bill. I expect that this bill will move through the House swiftly, and
we want to make sure we've got this program written in exactly the
right way. We also have to examine the funding levels in the bill: we
want them high enough to make a difference, but not any higher than
that, given how tight the federal budget is. My guess is that the top
prize could be reduced to $10 million without reducing the program's
impact.
But while we work out the details, we shouldn't miss the larger
message. This committee is committed to moving forward with new ways to
promote new technologies. I think the H-Prize fits that bill.
I congratulate Mr. Inglis for proposing it and for working so
closely with the Committee in drafting his bill. And I will yield the
remainder of my time to him. Mr. Inglis.
Mr. Inglis. And that is the prize that I get, and I thank
you very much, Mr. Chairman, for yielding to me. Thank you very
much for holding the hearing as well.
I thought I would show just a couple of slides, because I
know a picture is worth a thousand words.
[Slide.]
We know that we have got some surface waves about
interruptions in supply, and those are causing some of our
price increases. But underlying those surface waves is this sea
of rising demand. That is a gas line at a gas station in China.
We expect--Exxon Mobil says within the next--well, about 2030,
worldwide energy demand will increase by 60 percent. That will
necessitate a 40 percent increase, says Exxon Mobil in their
report, in OPEC oil production. Even if they have got it, do we
really want to be that much more dependent on them?
So the question is how to move to something else, how to
break this addiction to oil. Our goal has been to develop the
most non-governmental way for the government to help achieve
the result of breaking through to hydrogen. So the idea is to
take the ``can-do'' American spirit, put it with the prize and
the recognition of winning the prize, some financial
incentives, and hopefully bring the best and the brightest to
bear on these technological challenges.
As we have proposed it, there would be a million-dollar
prize every other year for breakthroughs in production,
storage, distribution, and utilization of hydrogen, every other
year a $4 million prototype prize, and then within 10 years, if
you can transform from well to wheels the--our use of hydrogen,
you would get $100 million. But since this is a non-
governmental approach, it wouldn't exactly be $100 million. It
would be $10 million in cash and then up to $90 million,
dollar-for-dollar match for your venture capital. So it is a
way of testing to see if the market agrees that you have got a
product to sell. If you don't, and you can't find $90 million
worth of venture capital, then you don't get the $90 million.
It is a way of getting all of the way to the government's
interest, which is a product on the market. We are not
interesting in developing technology and putting it on the
shelf. The government's interest is to get all of the way to
the market.
We have done it before, as the Chairman alluded to that we
have had prizes before and very successful prizes. The
Transcontinental Railroad involved some prizes, if you will,
given to the railroad companies, cash, stipends, $48,000 a
mile, plus 33 million acres of land given to those companies.
So we can do this, because we have. We have also done it before
with flight--transatlantic flight, the Orteig Prize was won by
Charles Lindbergh. It rewarded his going across the Atlantic
and back. And then, of course, as we will hear from Peter
Diamandis, we are going to hear about the wonderful work of the
Ansari X Prize. This is, of course, the--a picture of Burt
Ratan's SpaceShipOne, which was the first one to go into space
and back within a two-week period.
So, Mr. Chairman, I would thank you again, for holding the
hearing and for advancing the bill. I think we have got to
breakthrough to hydrogen. We can, because we must. And I thank
you for yielding.
[The prepared statement of Mr. Inglis follows:]
Chairman Boehlert. I thank you very much. And now you know
why, my colleagues, I have nominated Chairman Inglis for the X
Prize for Legislative Initiative.
Now, Mr. Lipinski.
Mr. Lipinski. Thank you, Mr. Chairman.
I--as--keeping with usual here, would like to certainly
associate myself with all of the comments of the Chairman of
the Committee and also with Mr. Inglis. I would like to thank
Mr. Inglis for his leadership on this very important issue and
I am pleased to be here for the hearing on Mr. Inglis' H-Prize
Act of 2006. I would like to welcome the witnesses and look
forward to hearing all of your testimony. And I apologize that
I am going to have to leave early, because I have other
commitments to be at after this.
Energy is on the mind of all Americans right now,
especially with them being very upset about the current gas
situation. Gas prices have risen to record highs, and oil
companies are reporting record profits.
Our natural gas prices concern many of my constituents in
Chicago this winter. And for some families, it makes hard
choices to keep their heat on during the coldest months. We can
be thankful it was a relatively mild winter in Chicago, but
that may be a bad sign related to global climate change.
We are also becoming increasingly aware of the threats
posed to our national security by our continued reliance on
foreign fossil fuels. Our main proposal in the Congress is to
help relieve the pressure of energy prices. These range from
short-term solutions, such as ending tax subsidies for oil
companies or easing various regulations, to long-term
approaches like research in hydrogen fuel, biofuels, and other
renewables.
No one idea or program is going to solve all of our energy
problems, but if we do not start to assemble the tools and
build an energy model for the future, we will be no better 20
years from now than we are today. We will likely be much worse
off.
An economy based on energy outside the fossil fuels is no
longer implausible, but to get there, we must invest in
research and development now to be able to sustain our economy.
Research grants are a basis of this process, but we, in
Congress, have a responsibility to find creative and new ways
to inspire researchers, business leaders, and our youth to
solve the problems their society faces.
One such example of innovative thinking is a bill
introduced by Ranking Member Gordon that replicates the
successful DARPA program model and puts it to work in the
Department of Energy. H.R. 4435, which I am proud to support,
would establish a new ARPA-E function at DOE to speed the
commercialization of innovative energy ideas and help reduce
our dependence on foreign fuel.
Today's legislation, H.R. 5143, seems to inspire
researchers, entrepreneurs, and other competitive spirits in an
effort to find specific solutions to the major challenges
facing development and commercialization of hydrogen fuel. The
H-Prize will help expand the possibilities of hydrogen
research, promoting people not normally involved in the federal
research and development to explore one of the greatest
challenges facing us today. This prize will help us take
advantage of America's greatest resource, our ingenuity and our
creativity, in order to tackle the problems before us.
We have some of the best and brightest minds in the world
in the United States as well as an economy that supports and
encourages entrepreneurship, and the H-Prize will focus our
inventiveness to address the greatest challenge that faces our
country.
Hydrogen holds enormous potential as the base of our future
economy, a potential we cannot and must not ignore.
Again, I thank Mr. Inglis for introducing this legislation,
and I look forward to hearing the testimony of our witnesses
today.
[The prepared statement of Mr. Lipinski follows:]
Prepared Statement of Representative Daniel Lipinski
Thank you, Mr. Chairman; I am pleased to be here today for this
hearing on H.R. 5143, the H-Prize Act of 2006. I would like to thank
Mr. Inglis for taking leadership on this important issue. I would also
like to welcome the witnesses and I look forward to hearing their
testimony. I apologize that other commitments will unfortunately
prohibit me from staying for the full hearing today because the topic
is an important one.
Energy is on the minds of many Americans right now and they are
very upset about the current situation. Gas prices have risen to record
highs and oil companies are reporting record profits. High natural gas
prices concerned many of my constituents in Chicago this winter and
forced some families to make hard choices to keep their heat on during
the coldest months. We can be thankful that it was a relatively mild
winter, but that may be a bad sign relate to global climate change. We
are also becoming increasingly aware of the threats posed to our
national security by our continued reliance on foreign fossil fuels.
There are many proposals in Congress to help relieve the pressure
of energy prices. These range from short-term solutions, such as ending
tax subsidies for oil companies or easing various regulations, to long-
term approaches like research in hydrogen fuel, biofuels, and other
renewables. No one idea or program is going to solve all of our energy
problems, but if we do not start to assemble the tools and build an
energy model for the future, we will be no better off 20 years from now
than we are today, and likely we will be much worse off.
An economy based on energy outside of fossil fuels is no longer
implausible. But to get there, we must invest in research and
development now to be able to sustain our economy. Research grants are
the basis of this process, but we in Congress have a responsibility to
find creative and new ways to inspire researchers, business leaders,
and our youth to solve the problems that society faces.
Once such example of innovative thinking is a bill introduced by
Ranking Member Gordon that replicates the successful DARPA program
model and puts it to work in the Department of Energy. H.R. 4435, which
I am proud to support, would establish a new ARPA-E function at DOE to
speed the commercialization of innovative energy ideas and help reduce
our dependence on foreign fuel.
Today's legislation at hand, H.R. 5143, seeks to inspire
researchers, entrepreneurs, and others competitive spirit in an effort
to find specific solutions to the major challenges facing development
and commercialization of hydrogen fuel. The H-Prize will help expand
the possibilities of hydrogen research, promoting people not normally
involved in federal research and development to explore one of the
greatest challenges facing us today.
This prize will help us take advantage of America's great
resource--our ingenuity and creativity--to tackle the problems before
us. We have some of the best and brightest minds in the world in the
United States, as well as an economy that supports and encourages
entrepreneurship, and the H-Prize will this focus inventiveness to
address the greatest challenge that faces our country.
Hydrogen holds enormous potential as the base of our future
economy--a potential we cannot and must not ignore.
Thank you, Mr. Chairman, and I yield back the remainder of my time.
Chairman Boehlert. Thank you very much, Mr. Lipinski.
Ms. Biggert.
Ms. Biggert. Thank you, Mr. Chairman. I want to thank you
for holding this hearing today and giving the Committee an
opportunity to discuss the creation of an H-Prize.
I also want to thank the bill's sponsor, Mr. Inglis, for
sharing a draft of his legislation with me and seeking my input
prior to its introduction.
As Chairman of the Energy Subcommittee, I participated in a
meeting of various hydrogen and fuel cell stakeholders that Mr.
Inglis convened in December of last year to discuss the idea.
At that meeting, I urged all involved to keep in mind the
recommendations included in a 1999 National Academy of
Engineering report on inducement prizes. The Academy
recommended that prizes should complement, not substitute for,
direct federal support of research and development. The Academy
also advised that rewards should be commensurate with the
effort required and the goal sought. To me, this advice is just
good common sense.
Unfortunately, I do not believe that this legislation meets
these criteria. I do not believe that authorizing a $100
million prize for the development of ``transformational
technologies'' meets either of these criteria. This is a
criticism that I shared with the bill's sponsor well in advance
of the bill's introduction.
According to the Organization for Economic Cooperation and
Development, the market for fuel cells and related products is
projected to reach $29 billion by 2011. With potential
applications in transportation, power generation, and portable
power, the market for fuel cells and related products, the OECD
estimates that this market could grow to over $1.7 trillion by
2021.
Isn't a billion- or trillion-dollar market prize enough?
Isn't this enough of an incentive to encourage scientists,
engineers, entrepreneurs, and energy companies, large and
small, to invest in the development of fuel cells and new and
innovative ways to produce and store hydrogen?
The 2005 Solar Decathlon, while structured differently than
the H-Prize, attracted 20 qualified teams. Each team received
$5,000 in federal funds to leverage between $200,000 and
$300,000 in outside investment for their prizes--for their
projects. The result was a diverse combination and outstanding
display of solar and other advanced energy technologies. The
total cost to the DOE: $1 million.
According to press accounts, two dozen teams from five
different countries competed for the $10 million Ansari X
Prize, and we will hear more about that later, but the best
part about that prize is that it didn't cost taxpayers a penny.
I think that it is safe to say that the market for hydrogen
and fuel cell technologies dwarfs the market for spaceships,
and yes, even solar technologies combined.
To put this in another context, the prize of all prizes,
the Nobel Prize, is only a $1.3 million prize.
Why haven't we ever offered a prize to find a cure for
cancer? Don't we already know more about hydrogen and fuel
cells than we know about cancer?
In addition, the Energy Policy Act of 2005, which just
became law in August of last year, authorized over $3.3 billion
for research into the production and distribution of hydrogen
and the development of fuel cells.
I also want to observe that while the last section of the
bill does explicitly prohibit any H-Prize program from
substituting for federal research and development programs, in
no way does this provision prevent the substitution of funding.
Substituting direct federal support for research and
development with a prize is exactly the opposite of what the
National Academy of Engineering recommended. Neither the
President nor Congress is going to be able to find the money
for such a prize without taking funds out of other vital energy
research and development programs.
Properly designed, an H-Prize could provide useful feedback
and constructive direction to the Hydrogen Fuel Initiative.
Designed with a specific goal in mind, prizes could spur the
development of technologies linking the critical pieces of the
hydrogen economy, those that make, move, store, and burn
hydrogen. But I am in no way convinced that we need to spend
$100 million on such a prize.
Before closing, I want to acknowledge Mr. Inglis' insight.
We too often focus exclusively on whether research programs are
meeting milestones and timelines, but forget to keep in mind
the goal of fostering innovation. We also tend to focus on the
dominant funding mechanisms--grants, contracts, and cooperative
agreements--without considering the full range of options. Mr.
Inglis is making us consider our decisions more fully, and
rightly so. So I look forward to continuing to work with the
bill's sponsors to address my concerns, and I yield back the
balance of my time.
[The prepared statement of Ms. Biggert follows:]
Prepared Statement of Representative Judy Biggert
Thank you, Mr. Chairman. I want to thank you for holding this
hearing today, and giving this committee an opportunity to discuss the
creation an H-Prize. I also want to thank the bill's sponsor, Mr.
Inglis, for sharing a draft of his legislation with me and seeking my
input prior to its introduction.
As Chairman of the Energy Subcommittee, I participated in a meeting
of various hydrogen and fuel cell stakeholders that Mr. Inglis convened
in December of last year to discuss the idea of an H-Prize.
At that meeting, I urged all involved to keep in mind the
recommendations included in a 1999 National Academy of Engineering
report on inducement prizes. The Academy recommended that prizes should
complement--not substitute for--direct federal support of research and
development. The Academy also advised that rewards should be
commensurate with the effort required and the goals sought. To me, this
advice is just good common sense.
Unfortunately, I do not believe this legislation meets these
criteria. In particular, I do not believe that authorizing a $100
million prize for the development of ``transformational technologies''
meets either of these criteria. This is a criticism that I shared with
the bill's sponsor well in advance of the bill's introduction.
According to the Organization for Economic Cooperation and
Development, the market for fuel cells and related products is
projected to reach $29 billion by 2011. With potential applications in
transportation, power generation and portable power, the market for
fuel cells and related products, the OECD estimates that this market
could grow to over $1.7 trillion by 2021.
Isn't a billion or trillion dollar market prize enough? Isn't this
enough of an incentive to encourage scientists, engineers,
entrepreneurs, and energy companies large and small to invest in the
development of fuel cells and new and innovative ways to produce and
store hydrogen?
The 2005 Solar Decathlon, while structured differently than the H-
Prize, attracted 20 qualified teams. Each team received $5,000 in
federal funds to leverage between $200,000 and $300,000 in outside
investment for their projects. The result was a diverse combination and
outstanding display of solar and other advanced energy technologies.
Total cost to the DOE: $1 million.
According to press accounts, two dozen teams from five different
countries competed for the $10 million Ansari X-Prize. But the best
part about the X-Prize is that it didn't cost taxpayers a penny.
I think it's safe to say that the market for hydrogen and fuel cell
technologies dwarfs the market for spaceships, and yes, even solar
technologies--combined.
To put this in another context, the prize of all prizes--the Nobel
Prize--is only a $1.3 million award.
Why haven't we ever offered a prize to find a cure for cancer?
Don't we already know more about hydrogen and fuel cells than we know
about cancer?
In addition, the Energy Policy Act of 2005, which just became law
in August of last year, authorized over $3.3 billion for research into
the production and distribution of hydrogen and the development of fuel
cells.
I also want to observe that while the last section of the bill does
explicitly prohibit any H-Prize program from substituting for federal
research and development programs, in no way does this provision
prevent the substitution of funding. Substituting direct federal
support for research and development with a prize is exactly the
opposite of what the National Academy of Engineering recommended.
Neither the President nor Congress is going to be able to find the
money for such a prize without taking funding out of other vital energy
research and development programs.
Properly designed, an H-Prize could provide useful feedback and
constructive direction to the Hydrogen Fuel Initiative. Designed with a
specific goal in mind, prizes could spur the development of
technologies linking the critical pieces of the hydrogen economy those
that make, move, store, and burn hydrogen. But I am in no way convinced
that we need to spend $100 million on such a prize.
Before closing, I want to acknowledge Mr. Inglis' insight. We too
often focus exclusively on whether research programs are meeting
milestones and timelines, but forget to keep in mind the goal of
fostering innovation. We also tend to focus on the dominant funding
mechanisms--grants, contracts, and cooperative agreements--without
considering the full range of options. Mr. Inglis is making us consider
our decisions more fully--and rightly so. I look forward to continuing
to work with the bill's sponsor to address my concerns, and I yield
back the balance of my time.
Chairman Boehlert. Thank you very much.
Dr. Baird.
Dr. Baird. I appreciate the Chairman. I appreciate the
gentlelady's comments and would associate myself with them.
I applaud the gentleman from--for coming up with great
ideas for how to stimulate exploration in hydrogen. I just
would question how we call it a non-governmental modality when
the government is going to be putting up the funding. It always
seems to me that the prize for innovation, under a free market
system, should be that you profit from your invention. And
while we have a host of ways to stimulate that at the federal
level, I think we need to acknowledge that they are government
ways and be honest with that.
So I will look forward, actually, and my main question will
be: what will be the cost-benefit ratio here? What are we
investing? What will the return on investment be? And frankly,
what would that return on investment be if we didn't have such
a prize? Would not the free market incentive, as we see the
escalating cost of gasoline, be sufficient without this
expenditure, and might it be expended in a different manner?
But I look forward to this debate, and I am glad we are
having it.
I thank the Chairman.
[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 H.R. 5143, the H-Prize Act of 2006. The bill
intends to create a prize to advance the research, development,
demonstration and commercial application of hydrogen energy
technologies.
Traditionally, the Department of Energy (DOE) has relied upon
established researchers in national labs, industry, and academia to
carry out its mission of developing energy technologies for use by the
private sector. Most often, DOE identifies a technical hurdle and then
issues research solicitations to detail the type of technologies the
agency seeks to fund. Moreover, DOE may use grants, cooperative
agreements or contracts to carry out projects.
While this method has worked well to advance scientific technology,
H.R. 5143 also intends to meet the same goal by offering a prize for
the development of a particular technology or for a specific
achievement. As we have seen in the past, several prize programs were
established to encourage the development of science and technology
through a competitive process.
I recognize that prize competitions benefit from clear-cut goals
and have inspired research to accelerate the advancement of hydrogen
technologies. However, I believe it is important that prizes act as a
supplement to, not a substitute for traditional research and
development programs. I encourage continued advancements in research,
development, demonstration, and commercial application projects and
will work with my colleagues to attract our country's best and
brightest minds to address U.S. energy challenges.
I look forward to hearing from today's panel of witnesses.
[The prepared statement of Ms. Johnson follows:]
Prepared Statement of Representative Eddie Bernice Johnson
Thank you, Mr. Chairman and Ranking Member.
I would like to commend the Chairman, Ranking Member and staff for
arranging today's hearing and always enjoy discussing how Congress can
work better to spur innovative technologies.
Clearly, our nation faces an energy crisis. Oil prices are
skyrocketing, and as the hot sun bakes my home state of Texas this
summer, energy prices will become as unbearable as the Dallas heat.
I am glad my colleagues have been forward-thinking to introduce
legislation to stimulate research and development of a hydrogen
economy.
The Science Committee has held hearings in the recent past on the
issue of the hydrogen economy. What I have heard witnesses say is that
technology is not developed enough for America to benefit from a
hydrogen economy for many years.
I fear the consequences of a ``head in the sand'' approach, with
energy prices as they are. We must invest in alternative fuels such as
hydrogen to address this crisis.
H.R. 5143 has been compared with the X Prize, but I want to point
out that the X Prize was funded with private resources.
I believe the Committee should consider what unintended
consequences could arise with a prize administered by a federal agency,
rather than by private industry.
Thank you, Mr. Chairman. I yield back the balance of my time.
Chairman Boehlert. Thank you very much.
And now to our very distinguished panel. And every time I
look at a panel of experts that come before this committee, I
am reminded that Washington is not the source of all wisdom. As
a matter of fact, I would like to add more wisdom here, but one
of the ways we get it is by having experts like you. So we
thank all of you for being facilitators and of counsel to the
Committee, if you will.
Our witnesses include Dr. Peter Diamandis. He is Chairman
of the X Prize Foundation, a non-profit organization dedicated
to fostering innovation through the use of competitions. The
Foundation awarded its $10 million Ansari X Prize to promote
the formation of a commercial space flight industry. Prizes for
genomics, energy, and education are under development. Thank
you, Dr. Diamandis, and we understand another commitment forces
you to have to leave at 11:15, so don't think as he departs he
is boycotting the rest of the meeting.
Dr. Diamandis. Thank you, Chairman.
Chairman Boehlert. Our second witness is Dr. David Bodde.
He is the Director of Innovation and Public Policy at Clemson
University's International Center for Automotive Research. He
was a member of the National Academy of Engineering Committee
on Alternatives and Strategies for Future Hydrogen Production
and Use, which issued the 2004 report ``The Hydrogen Economy:
Opportunities, Costs, Barriers, and R&D Needs.''
Our third witness is Dr. David Greene. He is a corporate
fellow at Oak Ridge National Laboratory with the Center for
Transportation Analysis, National Transportation Research
Center. He is an expert on transportation and energy policy
issues. Dr. Greene.
And finally, Mr. Phillip Baxley, the President of Shell
Hydrogen, L.L.C., a separate business unit established by Shell
in 1999 to pursue new business opportunities in hydrogen fuel
and fuel cells.
Gentlemen, thank you very much for participating in this
and being willing to serve as counsel and educators for this
committee.
Dr. Diamandis, you are first up.
STATEMENT OF DR. PETER H. DIAMANDIS, CHAIRMAN OF THE X PRIZE
FOUNDATION
Dr. Diamandis. Thank you.
Chairman Boehlert, members of the Committee, I thank you
for permitting me to come here and give testimony today on
prizes and the H-Prize.
My name is Peter Diamandis. I am the Founder, Chairman, and
CEO of the X Prize Foundation.
We started the Foundation in 1995. In fact, the first
public discussion ever on the X Prize was in this room in
testimony to Congressman Walker at that time. Our mission is to
bring about radical breakthroughs by using prizes. And in fact,
we believe that inducement prizes, versus recognition prizes,
like the Nobel Prize, have the chance to bring huge returns for
immediate change versus something achieved 30 years ago.
Incentive prizes have a tremendous history, as we have
heard some from Chairman Inglis' presentation early on, and it
was reading about Lindbergh's flight across the Atlantic that
actually inspired me. I read that this $25,000 prize offered in
1919 sparked $400,000 in expenditures. Literally 16 times the
prize amount was spent. And they didn't spend $1. And in fact,
the most unlikely winner, Lindbergh, called the ``flying fool''
the day before he took off, changed the course of history and
ignited a multi-hundred-billion-dollar industry of aviation.
When he landed in Paris, he was swamped by crowds. What
followed after that was tremendous. Within 18 months of his
landing, the number of passengers in the United States went
from 5,700 to 180,000, a 30-fold increase in passenger traffic
in the United States. The number of airplanes quadrupled. The
number of pilots tripled. It was not the technology. It was a
paradigm shift that occurred. The prize changed the way the
public thought about aviation. That is very important. Prizes
not only cause technology to be brought into existence, but
they change the way we think about these subjects.
My passion since the age of nine has been going into space,
and for 40 years, I have watched the cost of space flight go up
and reliability not change at all. And I became, you know,
disenchanted with waiting for NASA to open up space. And it was
that reading of the Lindbergh book that caused me to build this
Ansari X Prize.
I offered out a $10 million purse. We picked $10 million so
that it was not too large; we didn't want the Boeings and
Lockheeds competing, but large enough to incentivize those
entrepreneurs, those hungry, risk-taking entrepreneurs willing
to risk everything to change what they believed in--offering
for three people to go into space, come back down, and within
two weeks make that trip again. We had 26 teams from seven
countries compete for this coming from places I had no
expectation, from Romania, from Israel, from Russia, from Great
Britain, from Canada, from the United States competing to win
this $10 million prize and spending $100 million to win it.
The results were fantastic. With 50 times the prize--our
seed capital yielded 50 times the amount spent to try and win
that $10 million prize. And you go now to the Air and Space
Museum and see SpaceShipOne, the winning vehicle, hanging next
to the Spirit of St. Louis. And for me, that was the prize in
my heart, to see that happen. It was spectacular. October 4 of
2004, SpaceShipOne made two flights into space.
When that happened, for me, what occurred was we changed
the paradigm that space flight was not just for 100 very smart,
government-selected astronauts. Now kids believe that they can
fly into space. That was the most important thing: changing the
paradigm. I can't focus on that enough.
We also launched an industry. You know, Branson is now
committed to over $100 million to go after SpaceShipTwo. Of the
26 contenders, at least eight or nine of them are bringing
their vehicles into commercial practice. That would not have
happened. You know, the X Prize drove that breakthrough. The
technology had been around for decades to have this happen, but
the Prize, literally, caused the spark. It was the crucial seed
required to galvanize that to happen.
So successful prizes that are well designed, well timed,
and appeal to the audience can have huge returns on investment.
Why do prizes work? Let me offer out the following four
things that are very important as to why prizes work.
One, they attract alternate funding. Prizes have to be an
amazing story. They are about the human drama. They are about
the risk. And they attract different flavors of money, not your
traditional venture capital. They attract risk-taking money. I
call it ``ego money.'' The Larry Ellisons who backed an
America's Cup team and spent $70 million for a trophy. Twenty
billion dollars a year is spent paid in sponsorship dollars for
car races, boat races, bike races, or whatever it is. It
attracts that kind.
The media spotlight. Prizes have to create heroes. It is
never about the technology. The heroic element drives people to
think in the shower around the clock. You can't buy that level
of dedication.
It bypasses bureaucracy. A lot of the most brilliant people
will never, ever, ever apply for a grant, because they could
not stand the process of going through that. But a prize says
you win if you do this. You know. Bypass all of the bureaucracy
and go directly to the solution and you will win the money. And
that allows the most brilliant, and sometimes the most radical
thinkers, to enter and solve the problems that we have.
Most importantly, prizes elevate a problem so high that it
attracts people from outside the discipline. We all know how to
think the way we think. You know. Biologists approach things
from a biological problem. But if you put up a prize, you have
a physicist come in or a historical person come in. So it
attracts solutions outside disciplines and outside nations.
We, at the X Prize, have dedicated ourselves. We have grown
the organization. Larry Page, a co-founder of Google, has
joined our board. Craig Venter discovered--you know, cloned the
human genome, and we are building ourselves into a world-class
prize institute, focusing on developing prizes for different
areas. We are working on an automotive X Prize we hope to
launch this year for cars that significantly exceed 100 miles
per gallon. We are going to be launching a genomics X Prize. We
are looking in entrepreneurship and education and other arenas.
In closing, let me highlight our work with NASA.
In 2003, prior to the winning of the Ansari X Prize, some
of my friends at NASA headquarters approached us and asked,
``What can we do to help?'' I said, ``NASA should be doing
prizes.'' They hired us to do a study. We spent about six
months working and going through all of the agency elements and
came up with 100 prize ideas. To do a prize properly is not
picking a target. We have developed a prize innovation process
that figures out, first, what is the problem you are trying to
solve. Understand that first. Is it CO2 emissions?
Is it energy independence? Is it energy storage? What is the
problem? And then it--and then basically drive it forward.
So we have developed this process, and we are pleased to be
able to bring that technology and bring that capability to the
Committee.
Thank you for your time.
[The prepared statement of Dr. Diamandis follows:]
Prepared Statement of Peter H. Diamandis
Chairman Boehlert and members of the Committee, thank you for
permitting me to submit this testimony on the use of inducement prizes
for advances in hydrogen technology. My name is Peter H. Diamandis. I
am the Founder, Chairman, and CEO of the X PRIZE Foundation.
Founded in 1995, the X PRIZE Foundation fosters innovation in a
unique way. Rather than awarding money to honor past achievements or
directly funding research with uncertain outcomes, the X PRIZE
Foundation creates high profile competitions that attract and motivate
creative solutions to important problems. Our mission is to bring about
radical breakthroughs for the benefit of humanity utilizing prizes.
Incentive prizes have a history stretching over several hundred
years, with successful prizes having dramatic effects. One of the most
famous--and the one that personally inspired me to start X PRIZE--was
the Orteig Prize, won by Charles Lindbergh in 1927 for his dramatic
non-stop flight from New York to Paris in 1927. This $25,000 prize
caused nine teams to spend $400,000. Lindbergh's, the most unlikely of
the nine teams, won the purse and ignited an aviation renaissance.
The huge crowd that mobbed Lindbergh in Paris was just the first
indicator of the impact his achievement would have. Within eight months
of his flight, the number of airplanes in the U.S. quadrupled, the
number of pilots tripled and the number of individuals buying airline
tickets increased 30-fold from 5,700 to nearly 180,000.
Lindbergh's success in winning the Orteig Prize gave a jump-start
to commercial aviation. It was the efficiency of the Orteig Prize and
the tremendous leverage it offered that drove me to create the Ansari X
PRIZE to solve the problem of private space flight.
Since the age of nine, my passion has been space flight. I'm a
child of the Apollo vision that this country once had. However, as I
watched the aerospace industry develop over the past few decades, it
was evident to me that innovation in space flight had stalled. During
the past 40 years the cost of space flight has gone up, but the
reliability has not improved. To disrupt these trends, I created an
international competition with a $10M purse, for the first privately-
funded team to develop and fly a three-person, reusable spaceship to
100 kilometers altitude, twice within two weeks. The prize was
announced under the arch in St. Louis, 10 years ago next month (May
18th, 1996), along with 20 astronauts, the NASA Administrator, the FAA
Associate Administrator and the Lindbergh Family. During the following
decade I raised the $10 million purse, recruited 26 teams from seven
countries to compete and built a world-class team of individuals who
became expert in how to create, manage and award Inducement Prizes.
As you may know, the Ansari X PRIZE was won on Oct. 4, 2004, by
Mojave Aerospace Ventures, led by designer Burt Rutan and financier
Paul Allen. The competition caused teams to spend over $100 million to
win the $10 million purse, and attracted over five billion media
impressions that changed the public paradigm that space flight is only
for government employees. The winning spacecraft--SpaceShipOne--now
hangs next to the Spirit of St. Louis and the Wright Flyer in the
Smithsonian National Air & Space Museum.
The long-term effects won't be known for years, but it's already
clear that X PRIZE helped spawn a new industry with dramatic
technological, social and investment opportunities. Richard Branson
paid $121M for the winning technology, and thousands of consumers have
paid deposits for space tourism tickets. Several other commercial space
flight companies were spawned by the X PRIZE competition and are still
operating.
Inducement prizes are fundamentally different than conventional R&D
funding. Inducement prizes define a problem and pay for successful
solutions--they do not pay for the work itself, they do not define or
pre-judge technical approaches, and they do not pre-judge
qualifications.
Successful prizes are well-designed, well-timed, appeal to a broad
audience, and offer potential rewards--prestige, publicity, and future
business--far in excess of the purse itself. Inducement prizes have a
unique ability to efficiently drive research that leads to high-
leverage breakthroughs. The return-on-investment can be huge; the
Ansari X PRIZE leveraged seed capital 50-fold. Why is that? Why can
inducement prizes work so well? There actually is a science to this
process, something with the X PRIZE Foundation has spent 10 years
learning. Following are some the important reasons:
1. Prizes Attract Alternate Funding Sources: Prize teams are
able to attract risk-taking capital which is put up by
corporate sponsors or wealthy individuals who actually
encourage risk-taking because they seek the publicity and
desire to win. Prizes tap into the $20 billion pot of money
spent each year on event and sports-related sponsorship.
2. Media Spotlight: The intense media spotlight and
opportunity to become a global hero, drives teams to work
around the clock. Incentive prizes cause these teams to work
harder than any employment contract could ever achieve. If
leveraged correctly, the media can also play a key role in
educating the public about each team and their breakthroughs.
3. Bypassing Bureaucracy: Many brilliant individuals abhor
bureaucracy and would rather not go through the paper work and
peer-review process that would completely and totally frustrate
them. Prizes set up a clear process: Solve the problem, by
what-ever means, and you win the money and the fame.
4. Crossing Disciplinary & National Boundaries: Most
importantly, prizes encourage innovators from outside the
typical fields or nations to address your problem.
Breakthroughs typically come when a fresh mind, without pre-
conceived biases, looks at the challenge.
Creating and managing successful inducement prizes is much harder
than it looks. There have been many attempts in the past which have
failed. Prizes must not be about technology alone, they must be
structured to create and follow heroes, have dramatic and demonstrable
conclusions, and must be something the public and media are made to
care about. Success requires a carefully structured and balanced
approach that involves expertise in many areas, including science,
technology, rules & competition design, event management, arbitration,
financing, sponsorship, media relations, public relations, and
government relations.
Since the awarding of the $10 million Ansari X PRIZE we have
focused on building the X PRIZE Foundation into a world-class prize
institute using best practices and its 300 man-years of experience, to
create, administer and award prizes that will help change the world. We
are currently working on inducement prizes in several areas, including
automotive, genetics, education, entrepreneurship, and--of course--
space.
In closing I would like to highlight our work with NASA, since I
believe it provides a useful model for the type of prize creation and
management contemplated by the H-Prize Act. In 2003, prior to the
winning of the Ansari X PRIZE, the leadership of NASA asked the X PRIZE
to conduct a study on how prizes could be used to support their
mission. Under contract to the Agency, we came up with over 100 prize
ideas and helped them structure the Centennial Challenges Program,
which is now funded annually to approximately $10 million per year. The
X PRIZE Foundation now works closely with NASA assisting and advising,
and in a number of cases managing their larger prizes. In this
situation, NASA puts up the prize purse and the X PRIZE Foundation is
responsible for raising the sponsorship funds to manage the prize,
writing the rules, attracting the teams, and following through to a
successful conclusion.
It is important to note that NASA does not manage the prizes
themselves; they identify the prize area and secure the prize purse.
They depend on an independent partner like X PRIZE to write the rules
and implement the competition. In my view this separation of
responsibilities is fundamentally important. The prize organization
must often act quickly, with authority, and must be able to assure
potential competitors that they will be treated fairly and without
political bias. Thus, for example, once a particular prize has been
established and the management plan approved, one should avoid mixed
responsibilities for rule-creation, committee selection, judging, and
arbitration.
Inducement prizes are well-suited to stimulate innovations in the
fields of both energy and transportation, and for that reason towards
the long-term goal of a hydrogen economy. Technology advances are
plausible, large markets are possible, investors are poised, and there
would be great public interest in fundamental breakthroughs. The multi-
billion dollar question, of course, is what are the prize rules, who
will compete, and when will it be won. The H-Prize Act would hasten the
needed breakthroughs, and the X PRIZE Foundation is ready to help.
Thank you for your time and attention.
Biography for Peter H. Diamandis
Dr. Diamandis is the Chairman and CEO of the X PRIZE Foundation
(www.xprize.org), which awarded the $10,000,000 Ansari X PRIZE
(www.xprize.org) for private space flight. Diamandis is now focused on
building the X PRIZE Foundation into a world-class prize institute
whose mission is to bring about radical breakthroughs for the benefit
of humanity. The X PRIZE is now developing X PRIZEs in fields such as
Genomics, Automotive, Education, Medicine, Energy, and Social arenas.
Diamandis is also a leader in the commercial space arena, having
founded and run many of the leading companies in this sector. He is the
Chairman & Co-Founder of the Rocket Racing League (www.xracing.com).
Diamandis also serves as the CEO of Zero Gravity Corporation
(www.nogravity.com) a commercial space company developing private, FAA-
certified parabolic flight utilize Boeing 727-200 aircraft. Diamandis
is a co-founder of Space Adventures, Inc. (www.spaceadventures.com),
the company which brokered the first launches of private citizens to
the International Space Station.
In 1987, Diamandis co-Founded the International Space University
(ISU) (www.isunet.edu) where he served as the University's first
managing director. Today he serves as a Trustee of the $30M ISU that is
based in Strasbourg, France. Prior to ISU, Diamandis served as Chairman
of Students for the Exploration and Development of Space (SEDS) an
organization he founded at MIT in 1980. SEDS is the world's largest
student pro space organization.
Dr. Diamandis attended the Massachusetts Institute of Technology
(MIT) where he received his undergraduate degree in molecular genetics
and graduate degree in aerospace engineering. After MIT he attended
Harvard Medical School where he received his M.D. In 2005 he has was
also awarded an honorary Doctorate from the International Space
University.
He is the winner of the Konstantine Tsiolkovsky Award, twice the
winner of the Aviation & Space Technology Laurel, and the 2003 World
Technology Award for Space, the 2006 Orbit Prize and the 2006 Lindbergh
Award. In 8th grade, while living in New York, Dr. Diamandis won first
place in the Estes rocket design contest.
Diamandis' personal motto is: ``The best way to predict the future
is to create it yourself!''
Chairman Boehlert. Thank you very much.
I think--mark him down as a supporter of the concept.
Dr. Bodde.
STATEMENT OF DR. DAVID L. BODDE, DIRECTOR OF INNOVATION AND
PUBLIC POLICY AT CLEMSON UNIVERSITY'S INTERNATIONAL CENTER FOR
AUTOMOTIVE RESEARCH (ICAR)
Dr. Bodde. All right. Thank you very much, Mr. Chairman.
And thank you, also, for the opportunity to discuss this very
creative and innovative piece of legislation.
I think this does offer great hope for removing from this
country the curse of oil dependence and for moving us then into
an energy economy that is founded on domestic resources and on
our own technology advantages.
The H-Prize would accomplish this, in my judgment, through
two principle mechanisms.
First, it would stimulate and nurture the research base
from which these innovations are drawn. It will do this by
attracting new researchers and innovators and by calling public
attention to that.
Second, it would perform one of the most difficult feats in
our economy, and that is accelerating research, in this case
hydrogen-related research, across the gap between innovation
research, that is innovation funding--excuse me, between
research funding and new venture kinds of funding. These
communities move in parallel. They don't communicate well. And
that gap between research funding and innovation funding is a
very large one. This would help move across it.
Now to achieve that, we have to bear in mind, I think,
three fundamental principles.
First, continuity. To have this effect, the prize has got
to be continuous, it has got to be reliable, and it has got to
be predictable across the 10-year course of it.
Second, additionally. It has got, of course, to attract
risk capital, but it should not do this at the expense of the
basic funding for research for the hydrogen programs.
And finally, learning and adaptation over the course of the
10 years that this program would be in operation. We are going
to learn a lot of things about prizes and a lot of things about
this, and we need to have a conscious mechanism for adaptation.
Now, as requested, I would like to offer some suggestions
for the operation of the program, and I would like to do this
in the context of each of the three principle prize components
or prize categories, I should say.
The first prize category is for advancements in components
or systems. Now this is where you get the chief effect of the
expansion of the research base, the attracting of new
researchers into hydrogen-related activities. I would like to
offer three suggestions for your consideration in looking at
this part of the program.
One, to include in the criterion for eligibility,
scientific discoveries that lead directly to components and
systems. Now I know the point of the legislation is to provide
an incentive for innovation and not for science, for
applications and not for basic discovery. But in some cases,
the applications themselves will be relatively straightforward
and fall right out from the scientific discovery once that
discovery is announced, and so if we were to add directly
related scientific discoveries to the criterion for
eligibility, that would not only do justice in connecting
reward to benefit, but would also remove any possible incentive
for a discoverer to sequester a discovery until it could be
embodied in some kind of device or component. And it would also
increase the talent pool available for hydrogen-related
research.
The second suggestion, allowing enabling technologies to be
eligible. Now, by an ``enabling technology,'' I mean an advance
in a seemingly unrelated field that springs forward the
advances in the field that one is seeking. Take battery
technology, for example. Improved batteries would relieve
pressure on the--for performance of a fuel cell and would have
a dramatic effect in accelerating the hydrogen economy. And so
this is what I mean by an enabling technology. Likewise,
software for on-vehicle energy management, another kind of
enabling technology. Hydrogen safety, carbon sequestration,
there is a list of things that could significantly advance a
hydrogen economy, but--and in my judgment, should be a part of
the eligibility requirements.
The third suggestion that we apply the principle of
continuity most strongly here. In order to attract people to an
H-Prize competition, we need to build the pipeline of
researchers and investigators, and that, frankly, starts at the
high school level. It starts with interesting kids in science,
showing them career opportunities in science, nurturing that
through college through a graduate degree, and then into the
research community. This pipeline takes a long time to build,
and it takes continuity and assurance that that career will be
there at the end of the pipeline to have the effective
incentive.
Now the second prize category, that of prototypes,
addresses one of the most important difficulties in science and
innovation in this country today, and that is the gap between
research programs and innovation funding. What is called, or
what I call, maturation funds, perhaps seed capital for
innovation is another way to think about it, are needed here to
move across the gap between the two cultures. Some federal
programs already provide this. The SBIR, STTR, ATP programs are
certainly very capable in providing this, but here the reward
is given--or the award, I should say, is given before the
performance in anticipation of the performance. In contrast,
the H-Prize would complement these by being given after the
performance, and so it could be a very powerful supplement to
these kinds of programs in providing this bridging funding.
The first prize category is that for transformational
technologies for the distribution or production of hydrogen,
which is, in my view, the most challenging. And I think special
thought and care has to be put into the implementation criteria
for this.
Finally, learning and adaptation is one of the most
important parts of this program. Certainly the awarding
foundation should report its results periodically and follow up
the awards given to understand systematically what has come
from this program.
In conclusion, I think this is a very valuable program and
one that will help our energy security, the environment, and
our competitiveness.
[The prepared statement of Dr. Bodde follows:]
Prepared Statement of David L. Bodde
Thank you, Ladies and Gentlemen, for this opportunity to discuss
the H-Prize Act of 2006, now before this committee. I believe the H-
Prize offers an innovative policy that could accelerate our nation's
transition toward more secure and sustainable energy by:
Stimulating and nurturing the relevant science and
engineering research from which innovation must spring; and,
Accelerating hydrogen-related research to cross the
gap from science opportunity to investment opportunity.
To fully accomplish this, the H-Prize program should operate with
several principles in mind.
Continuity. The prizes must be offered reliably and
for a period long enough to build the technology pipeline,
rather than simply create a windfall for those already there.
Additionality. The funds needed to support the H-
Prize must supplement rather than compete with the core funding
appropriated in support of hydrogen-related research and
development.
Learning. We cannot now anticipate the changes,
social as well as scientific, that will occur over the 10-year
life of the H-Prize program, and so the administration of the
prize program must carefully document its experience, learn
from that experience, and adapt accordingly.
In what follows, I will set out my reasoning in support of these
summary points, and offer suggestions for the operation of the H-Prize
program.
Building the Foundation: Advancements
The first category of the H-Prize structure, ``advancements in
components or systems,'' can serve to expand the research base upon
which innovations will draw. These prizes would accomplish this by
drawing attention to the importance of the hydrogen revolution, and by
combining prestige with monetary value in attracting additional
researchers into the field. To achieve the greatest benefit, however, I
would suggest that consideration be given to:
Including scientific discoveries that lead directly
to components or systems in the eligibility for an
``advancements'' prize;
Allowing enabling technologies to be included in the
award criteria; and,
Ensuring continuity over the ten-year life of the
program to lower the career risk for technologists considering
hydrogen-related research.
Including Directly Related Scientific Discoveries
The intent of the H-Prize is to accelerate the hydrogen transition
by focusing on the application of technology, not the creation of new
knowledge-and properly so. Yet the boundaries between science and
innovation remain indistinct,\1\ and in some cases a science
breakthrough could directly release a wide array of components and
systems. For example, Wilhelm Roentgen's announcement of the discovery
of X-ray phenomena in 1895 was followed quickly by a host of
applications in medical and other fields, none of which would have
occurred in the absence of this seminal announcement. To allow this
possibility for hydrogen, I would suggest including directly supporting
science discoveries in the eligibility for this category of H-Prize.
---------------------------------------------------------------------------
\1\ Research in science yields an understanding of the natural
world and the laws that govern the behavior of materials, complex
systems, living organisms, and so forth. In contrast, innovation
concerns the man-made world and the creation of devices and methods
that improve our daily lives. More so than science, innovation brings
with it entrepreneurial and market considerations, thus making the
real-world connections between these two phenomena complex and varied.
---------------------------------------------------------------------------
Including directly connected science might offer two ancillary
benefits as well. First, it could broaden the pool of researchers who
would find the H-Prize relevant. And second it would remove any
possible incentive to sequester a discovery until an applications
device could be made.
Including Enabling Technologies
Technology revolutions often build upon combinations of advances in
seemingly unrelated fields--often termed ``enabling technologies.''
Consider home refrigeration, for example. When the mechanical
refrigerator swept into the market in the 1930s and 1940s, it destroyed
an industry (ice manufacturing and delivery), reshaped another (the
corner grocery became the supermarket), and improved the productivity
of homemaking enormously. Yet this innovation depended upon several
enabling technologies for its success--efficient, small scale
refrigeration cycles; widespread availability of electric energy; and
compact, powerful alternating-current motors.
In the case of hydrogen, enabling technologies can prove powerful
also. For example, a technology that greatly enhanced the safety of
hydrogen use would serve the transition well even if it were not
strictly related to any single component or system. Similarly, a
breakthrough in carbon sequestration might allow coal, shale, and other
abundant hydrocarbons to be used for hydrogen production without
environmental damage. Such a breakthrough, though not strictly hydrogen
production, would advance the transition markedly. Thus, I would
encourage a very broad interpretation of the term ``related to.''
Providing Continuity
The general principle of program continuity applies most strongly
in this first prize category. That is true because human beings must
invest many years of preparation as their entry ticket for any field of
technological research. For the prize program to draw additional
entrants to hydrogen-related research fields, it must be perceived as
stable over the time required for preparation and career launch--and
for that reason, this category of H-Prize might diminish in
attractiveness to new entrants as its ten-year ``sunset'' approaches.
None of this militates against learning and adaptation in the awards
process; rather, it suggests that greater predictability will make the
awards more attractive to those considering a career in the field. Less
predictability would have the opposite effect.
Crossing the Gap: Prototypes
The second category of H-Prize addresses one of the most important
problems in science and innovation--the availability of maturation
funds to move a technology across the gap between research funding and
investment funding. This gap arises because research funding tends to
asks questions of discovery, seeking knowledge of how the natural world
works. Answers to these questions do not always illuminate how the
constructed world--that of the devices and systems that serve humans--
can be improved through innovation. In too many cases, potential
investors cannot translate readily from scientific possibility to a
marketable innovation, and so they await a prototype or some other
evidence to help them judge the risks and returns from innovation. Thus
a technology, even with ongoing research support, can languish in the
chasm between research support and venture development funding. To be
sure, some companies and foundations do invest in technology maturation
research, but the resources are generally below the amount needed for
greatest benefit. Thus, the prize would most probably add to the total
resources available for innovation.\2\
---------------------------------------------------------------------------
\2\ The ``prototype'' prize category would also complement the
SBIR, STTR, and ATP programs, which serve much the same function but
with awards given in anticipation of success rather than after it
occurs.
---------------------------------------------------------------------------
The prototype category of the H-Prize could provide incentives for
private parties--perhaps foundations, research corporations, or first
stage investors--to commit technology maturation investments. In
effect, it lowers the risk for investors funding a technology
maturation project by offering the possibility that its cost can be
recovered. The most astute of these investors would find their
technology ``bets'' effectively hedged by the prize. The least astute
would not--and, of course, should not.
Transformational Technologies
The third category of prize--a $10 million cash prize and a match
for private investment funds up to $90 million--would reward major ``.
. .transformational changes in technologies for the distribution or
production of hydrogen. . .'' Thus it would provide incentives for the
infrastructure side of the hydrogen market, which is likely to prove a
highly capital-intensive undertaking. However, this prize category also
poses challenges that appear greater than in the previous categories.
First, the prize might prove redundant. Entrepreneurs and venture
capital investors seek opportunities with demonstrable potential for
exponential growth--exactly the kind of venture that appears to be
contemplated in the prize description. A new venture meeting these
objective criteria would probably have little difficulty attracting
venture capital, especially in view of the increasing risk aversion now
characterizing the venture investment industry.\3\
---------------------------------------------------------------------------
\3\ The most urgent need is for early stage funding. In 2005, for
example, only three percent of venture funds committed went for startup
and seed capital investments. Early stage investment occupied another
16 percent. The remaining 81 percent went for expansion and late-stage
investments. Data from National Association of State Venture Funds.
---------------------------------------------------------------------------
Second, one cannot know in advance the appropriate scale of
investment, and hence the size of the award might not mesh well with
the need. If the winning venture were small, the availability of a
large federal match might tempt its owners to accept too much capital.
Experienced venture investors recognize that too much funding can be as
inimical to long term success as too little. On the other hand, if the
winning venture were on the scale of, say, a shale oil plant (tens of
billions of dollars), the prize would add little beyond prestige to the
total incentive.
Learning and Adaptation
Learning and adaptation should be designed into the H-Prize process
from the beginning for three reasons. First, the awards program will
learn from its own experience, and can improve in response to that
learning. Second, the ten-year duration of the H-Prize program will
surely see significant advances in every field of science, especially
the hydrogen-related technologies. Award categories most relevant at
the beginning might well recede in importance 10 years into the future.
And third, an evolving public recognition of the scope and urgency of
the worldwide energy-environment-economy trilemma could lead to changes
in energy policy over the period. Because of such changes, the award
criteria (and possibly the administrative processes) that are most
appropriate at the beginning of the program might become less so by its
end.
For these reasons, I suggest that some formal process for learning
and adaptation be included in the H-Prize program. An annual or
biennial report of progress, to be submitted by the administering
institution, could establish the factual basis for learning. These
reports should surely include a follow-up analysis of each award to
ascertain its outcome as measured against progress toward a hydrogen
transition. To be sure, there is some tension between the earlier-
mentioned principle of consistency and the desirability of adaptation
with learning. The core idea should be to adapt the means but hold
constant the ends.
In Summary
Reducing our nation's dependence on oil will improve the
environment, relieve the economy of large income transfers to oil
producers, and strengthen our national security. I believe the H-Prize,
as set out in H.R. 5143, could do much to accelerate this greatly
needed transition from petroleum to a hydrogen economy. This is a
constructive and innovative proposal, and it deserves your fullest
consideration.
Biography for David L. Bodde
Senior Fellow and Professor, Arthur M. Spiro Center for
Entrepreneurial Leadership, Clemson University. Research and expertise
in:
Intellectual property management
Markets for new energy technology
Corporate entrepreneurship
Next-generation hybrid electric and hydrogen fuel
cell vehicles.
PREVIOUS PROFESSIONAL EXPERIENCE
University of Missouri-Kansas City, July 1996 to September 2004
Charles N. Kimball Chair in Technology and Innovation at the
University of Missouri, Kansas City. Joint appointment as Professor of
Engineering and Business Administration.
Midwest Research Institute (MRI), January 1991 to July 1996
Corporate Vice President and President of MRI's for-profit
subsidiary, MRI Ventures. Responsible for new enterprise development
through cooperative research, new ventures, licenses, and international
agreements. Managed technology development consortium of five private
companies to commercialize technology from the National Renewable
Energy Laboratory (NREL). Worked with Department of Energy and senior
NREL management on strategic initiatives for the laboratory.
National Academy of Sciences, April 1986 to January 1991
Executive Director, Commission on Engineering and Technical
Systems. Directed research and studies on public and private issues in
science and technology.
U.S. Government, March 1978 to March 1986
Assistant Director, Congressional Budget Office, United States
Congress. Directed economic analyses of legislation affecting energy,
industrial competitiveness, agribusiness, science, technology, and
education.
Deputy Assistant Secretary, Department of Energy. Policy research
regarding nuclear energy, coal, synthetic fuels, electric utilities,
technology transfer and national security. Emphasis on nuclear breeder
reactors and nuclear non-proliferation. U.S. delegate to International
Nuclear Fuel Cycle Evaluation, which sought an international agreement
on plutonium recycle and measures to slow the proliferation of nuclear
weapons.
TRW, Inc., January 1976 to March 1978
Manager, Engineering Analysis Office, Energy Systems Planning
Division. Built business using systems analysis and engineering
studies. Emphasis on application of aerospace technology to energy
problems, especially radioactive waste disposal and synthetic fuels.
U.S. Army, 1965 to 1970
Captain. Platoon leader, company commander, and battalion
operations officer. Airborne and Ranger qualified. Service as combat
engineer in Vietnam (1968-69). Bronze Star, Army Commendation Medals.
Remained in the Army Reserve as an R&D officer advising on the
management of defense laboratories and nuclear research programs.
EDUCATION
Harvard University
Doctor of Business Administration, March 1976. Doctoral thesis on
the influence of regulation on the technical configuration of the
commercial nuclear steam supply system. Thesis research cited in
subsequent books on nuclear energy. Harding Foundation Fellowship.
Massachusetts Institute of Technology
Master of Science degrees in Nuclear Engineering (1972) and
Management (1973). Atomic Energy Commission Fellowship. Experimental
thesis on irradiation-induced stress relaxation.
United States Military Academy
Bachelor of Science, 1965. Commissioned Second Lieutenant, U.S.
Army.
CORPORATE BOARD MEMBERSHIPS
Great Plains Energy
Board member of electric energy company, 1994-present. Chair,
Nuclear Committee; Chair, Governance Committee; Member, Audit
Committee.
The Commerce Funds
Founding director of family of mutual funds, currently with $2.2
billion assets under management. Growth and Bond Funds achieved
Morningstar 5-Star ranking. 1995-present.
PERSONAL BACKGROUND
Grew up in Kansas City, Missouri. Married (since 1967) with four
children. Enjoy competitive athletics, especially racquetball and
tennis. Frequent backpacker, amateur historian, bad poet, and worse
musician.
Author of The Intentional Entrepreneur (M.E. Sharpe 2004); co-
author of The Hydrogen Economy (National Academies Press 2004); and
editor of Managing Enterprise Risk: What the Electric Industry
Experience Implies for Contemporary Business (Elsevier 2006).
Additional publications in technology management, energy, and policy.
Chairman Boehlert. Thank you very much, Dr. Bodde.
Dr. Greene.
STATEMENT OF DR. DAVID L. GREENE, CORPORATE FELLOW, OAK RIDGE
NATIONAL LABORATORY, CENTER FOR TRANSPORTATION ANALYSIS,
NATIONAL TRANSPORTATION RESEARCH CENTER
Dr. Greene. Yes, thank you.
Good morning, Mr. Chairman and Members of the Committee and
all of those others present today.
We all are aware that our country faces serious energy
problems, and I would like to thank Congressman Inglis for
putting up this graph of Exxon Mobil's view of the world in the
future, because I think it shows us three really important
things that we need to keep our eye on. One is that demand for
transportation fuels and petroleum fuels is going to continue
to grow in the future. The second is that, even in Exxon
Mobil's view, production outside of OPEC will reach a peak and
they believe plateau, others believe decline. And the third is
that the source of supply for the rest of that energy is OPEC,
although it is highly unlikely that they will supply that
energy, because, as the Department of Energy has shown in their
own analysis and Professor Dermott Gately at NYU has shown,
it--they can make more money--more revenue by leaving a good
bit of that oil in the ground.
Our energy situation changed dramatically 35 years ago when
oil production in the United States peaked in 1970, and it has
never returned to that level. That and the formation of OPEC
fundamentally changed the world oil markets. The peaking or the
plateauing of oil production for the entire world outside of
OPEC is going to make an enormous difference as well.
Now I don't know of anything that could do more to solve
our nation's energy problems in the long run than the creation
of technologies to enable clean and efficient, economical
hydrogen-powered transportation. However, there are major
technological barriers, independent technological barriers that
stand in the way of doing this. And here, I would like to read
from the report that--from the National Academies that Dr.
Bodde participated in. They said: ``There are major hurdles on
the path to achieving the vision of the hydrogen economy. The
path will not be simple or straightforward. Specifically, for
the transportation sector, dramatic progress in the development
of fuel cells, storage devices, and distribution systems is
especially critical. Widespread success is not certain.''
The Department of Energy's own Hydrogen, Fuel Cells and
Infrastructure Technologies Multi-Year Plan echoes these same
three technological challenges. They say: ``Hydrogen storage
systems for vehicles are inadequate to meet customer driving
range expectations without intrusion into the vehicle cargo or
passenger space. Hydrogen is currently three to four times as
expensive as gasoline.'' And I think in saying that, they mean
also delivery of hydrogen and including the cost of that.
``Fuel cells are about five times more expensive.'' Some people
say ten times more expensive. I would say in each of these
areas, we are facing approximately order of magnitude
challenges to changing the technology. Very difficult. And
these technologies are not likely to be self-reinforcing. That
is, we need, essentially, independent scientific breakthroughs
in each of those three areas.
I think the H-Prize categories correspond well to these key
areas in which breakthroughs are needed.
Another area that the National Academy Committee cited was
the sequestration of hydrogen or production of hydrogen from
renewables. Sequestration is not a part of this even though it
would be a supporting technology, but I think that is
appropriate as well, because sequestration is needed--going to
be needed by many other fossil-fuel-using technologies, and I
personally do not think the challenges there are as great as
the ones for hydrogen that I have noted above.
I think this bill will increase the likelihood of
overcoming these technological barriers by mobilizing creative
minds that might not otherwise tackle them. And I think the--I
would endorse their--the arguments given by Dr. Diamandis and
Dr. Bodde on these points.
I would like to emphasize strongly, as strongly as I
possibly can, that creating the H-Prize cannot substitute for
adequately funding research, development, and demonstration. I
realize coming from a National Lab that is a little bit self-
serving, but nonetheless, I think it is true.
It is sometimes said that science is 95 percent
perspiration and five percent inspiration. We have heard a lot
about inspiration, but I want to emphasize that the
perspiration is just as important. And there is simply no
substitute for a sustained and concentrated effort. Thus, I see
the H-Prize as a useful supplement to a well designed and
adequately funded R&D program, and I think the writers of this
bill have recognized that appropriately.
I have some other recommendations on specifics of how
judges might be selected. I think that it would be appropriate
for the judges to be selected independently rather than by a
government agency. I think that clearly would show people that
there is no political influence in this and that the prize is
going to be awarded fairly.
Finally, I just wanted to congratulate the Committee and
its staff for listening to the expert panel that it convened
previously and reflecting those recommendations in their--the
legislation, and I want to wish them every success with this
important initiative.
Thank you.
[The prepared statement of Dr. Greene follows:]
Prepared Statement of David L. Greene
Good morning. My name is David Greene. I am a Corporate Fellow of
Oak Ridge National Laboratory where I have researched transportation
energy policy since 1977. The comments I offer the Committee today are
mine alone and do not necessarily reflect the views of Oak Ridge
National Laboratory, UT-Battelle or the U.S. Department of Energy. I am
also a National Associate of the National Academies. I point out these
two affiliations in the interests of disclosure since some of my
comments below pertain to these institutions.
We are all aware that our country faces serious energy problems.
Despite world oil prices at or near historic highs, U.S. net oil
imports averaged 60 percent for the year 2005 and for the first three
months of this year, as well (USDOE/EIA, 2006). According to estimates
by the Energy Information Administration, oil imports added $230
billion to our balance of trade deficit in 2005. By my own estimates,
U.S. oil dependence costs, comprised of transfer of wealth to oil
exporting countries and negative impacts on our Gross Domestic Product,
amounted to approximately one quarter of a trillion dollars last year
(Greene and Ahmad, 2005). By my best estimates, the economic costs of
our oil dependence over the past three decades exceed $3.5 trillion.
These estimates do not include political, strategic and military costs
which are difficult to estimate but clearly very large.
I know of nothing that could do more to solve our nation's energy
problems in the long run than the creation of technologies to enable
clean, efficient, economical hydrogen-powered transportation. However,
major technological barriers stand in the way of achieving this goal. I
endorse the following conclusions of the National Academies Committee
on Alternatives and Strategies for Future Hydrogen Production and Use
(NRC, 2004) with respect to the technological barriers to hydrogen
powered transportation.
``There are major hurdles on the path to achieving the vision
of the hydrogen economy; the path will not be simple or
straightforward.
Specifically for the transportation sector, dramatic progress
in the development of fuel cells, storage devices, and
distribution systems is especially critical. Widespread success
is not certain.'' (NRC, 2004, p. 116)
The Department of Energy's Hydrogen, Fuel Cells and Infrastructure
Technologies Multi-Year Research, Development and Demonstration Plan
identifies three key ``technology barriers'' that must be overcome if
the vision of hydrogen-powered vehicles is to be achieved.
``Hydrogen storage systems for vehicles are
inadequate to meet customer driving range expectations (>300
miles) without intrusion into vehicle cargo or passenger space.
Hydrogen is currently three to four times as
expensive as gasoline.
Fuel cells are about five times more expensive than
internal combustion engines and do not maintain performance
over the full useful life of the vehicle.'' (USDOE/EERE/HFCIT,
2005, p. ii)
The H-Prize categories correspond well to the key areas in which
breakthroughs are needed. As stated above, these are, (1) hydrogen
storage, (2) fuel cell power train cost and durability, and (3) the
cost of producing hydrogen, especially from renewable energy resources.
A fourth critical area noted by the National Academy Committee is the
sequestration of carbon if hydrogen is produced from fossil fuels.
While this is indeed key to achieving the full environmental benefits
of a hydrogen economy, I believe that the technological challenges in
this area are not as great and, in addition, that it is not a problem
peculiar to the use of hydrogen as an energy carrier. Other uses of
fossil fuels will also likely require carbon sequestration.
From a scientific and engineering point of view, the needed
technological breakthroughs appear to be independent. That is, a
breakthrough in one area, e.g., on-board hydrogen storage, will not
necessarily increase the likelihood of a breakthrough in fuel cells or
hydrogen production. The fact that multiple, independent breakthroughs
are needed magnifies the technological challenge. For this reason it is
wise to mobilize creative thinking throughout our society.
I believe that H.R. 5143 would increase the likelihood of
overcoming these technological barriers by mobilizing creative minds
that might not otherwise tackle them. A substantial, prestigious prize
provides motivation that an R&D contract cannot: a challenge with the
promise of public recognition for scientific achievement. The H-Prize
will also cast a wider net, potentially including individuals and
organizations that would otherwise not be part of the hydrogen R&D
effort.
Let me emphasize as strongly as possible that creating the H-Prize
cannot substitute for adequately funding research, development and
demonstration. It is sometimes said that science is 95 percent
perspiration and five percent inspiration. The fact is, there is simply
no substitute for sustained and concentrated effort. Thus, I see the H-
Prize as a useful supplement to a well-designed and adequately funded
R&D program.
H.R. 5143 clearly intends to isolate the H-Prize competition from
political considerations and conflicts of interest. This is not only
the right thing to do but is essential if the H-Prize is to provide the
intended incentives for innovation. With this in mind, I believe it
would be wise to specify in the legislation the independent third party
to be responsible for selecting award winners. Designating an
institution such as the National Academies that has a long and well
established history of independent, objective assessment would make
clear, in advance, that neither politics nor special interests would
influence the selection of winners.
The draft bill states that the Secretary of Energy, through an
agreement under section 3(c), shall assemble a panel of qualified
judges to select the winner. . .'' It is not clear to me from this
language whether the Secretary of Energy has authority to appoint the
judges or whether this authority would reside with the third party
administering the competition. In my opinion, in order to avoid even
the appearance of political influence in the selection of winners, the
authority should be given to the independent third party.
Finally, I congratulate the Committee and its staff for listening
to the expert panel it convened on the H-Prize, digesting their
recommendations and incorporating them in this draft legislation. I
wish you every success with this important initiative.
Thank you for your attention. I look forward to answering any
questions you may have to the best of my ability.
REFERENCES
Greene, D.L. and S. Ahmad. 2005. ``Costs of U.S. Oil Dependence: 2005
Update,'' ORNL/TM-2005/45, Oak Ridge National Laboratory, Oak
Ridge, Tennessee, January.
(NRC) National Research Council. 2004. The Hydrogen Economy, Committee
on Alternatives and Strategies for Future Hydrogen Production
and Use, National Academies Press, Washington, DC.
(USDOE/EERE) U.S. Department of Energy, Energy Efficiency and Renewable
Energy. 2005. ``Hydrogen, Fuel Cells & Infrastructure
Technologies Program: Multi-Year Research, Development and
Demonstration Plan,'' Revision 1, February, 2005, Washington,
DC.
(USDOE/EIA) U.S. Department of Energy, Energy Information
Administration. 2006. ``Weekly Petroleum Status Report, March
2006,'' Table H1, Washington, DC.
Biography for David L. Greene
A Corporate Fellow of Oak Ridge National Laboratory (ORNL), David
Greene has spent 25 years researching transportation energy and
environmental policy issues. Dr. Greene received a B.A. degree from
Columbia University in 1971, an M.A. from the University of Oregon in
1973, and a Ph.D. in Geography and Environmental Engineering from The
Johns Hopkins University in 1978. After joining ORNL in 1977, he
founded the Transportation Energy Group in 1980 and later established
the Transportation Research Section in 1987. Dr. Greene spent 1988-89
in Washington, DC, as a Senior Research Analyst in the Office of
Domestic and International Energy Policy, U.S. Department of Energy
(DOE). He has published more than one hundred seventy-five articles in
professional journals, contributions to books and technical reports,
and has authored or edited three books (Transportation and Energy,
Transportation and Global Climate Change, and The Full Costs and
Benefits of Transportation). Dr. Greene served as the first Editor-in-
Chief of the Journal of Transportation and Statistics, and currently
serves on the editorial boards of Transportation Research D, Energy
Policy, Transportation Quarterly, and the Journal of Transportation and
Statistics. Dr. Greene has been active in the Transportation Research
Board (TRB) and National Research Council (NRC) for over 25 years,
serving on several standing and ad hoc committees dealing with energy
and environmental issues and research needs. He is past Chairman and
member emeritus of TRB's Energy Committee, past chair of the Section on
Environmental and Energy Concerns and a recipient of the TRB's Pyke
Johnson Award. In recognition of his service to the National Academy of
Science and National Research Council, Dr. Greene has been designated a
lifetime National Associate of the National Academies.
Chairman Boehlert. Thank you very much, Dr. Greene. Don't
worry about being a little self-serving with your testimony. On
occasion, we are noted for that, too.
Mr. Baxley.
STATEMENT OF MR. PHILLIP BAXLEY, PRESIDENT OF SHELL HYDROGEN,
L.L.C.
Mr. Baxley. Thank you.
Good morning, Mr. Chairman, Members of the Committee. I
want to thank you for your invitation to testify here today.
Let me just, one more time, repeat, I am Phillip Baxley. I am
President of Shell Hydrogen with responsibility for Shell's
hydrogen business activities in North America.
Shell Hydrogen's global business was set up more than seven
years ago to pursue and develop business opportunities related
to hydrogen and fuel cells. In fact, I am pleased to note that
Shell Hydrogen was actually asked to testify before this same
distinguished Committee over six years ago on the emerging
issue and the emerging importance of hydrogen.
A hydrogen economy, Shell believes, provides benefits
through economic growth, job development, investment
opportunities, and a sustainable, secure energy supply.
Additionally, hydrogen can directly address air pollution and
provide many pathways to address the reduction and eventual
elimination of greenhouse gases.
The primary challenges, at this time, are to further
develop fuel cell vehicle technology and achieve mass
production levels. I believe the development of a Hydrogen
Prize can supplement and extend the great work that is already
being done in these areas.
The goal of providing hydrogen as a fuel on a significant
scale requires a coordinated undertaking within all levels of
government, the automotive industry, the energy companies, and
the supply network.
From a fuel supply perspective, there has been a hydrogen
economy, and is a hydrogen economy, and hydrogen infrastructure
in place for decades. Globally, 50 million tons of hydrogen are
produced and consumed every year, mainly in our own refineries
and chemical plants, and mostly used for producing clean
traditional fuels. Just to put this number in perspective, this
amount of hydrogen could power all the family vehicles in the
United States if they were fuel cell vehicles.
Additionally, most areas of significant population are
close to hydrogen production facilities now. The challenge,
then, is to bring hydrogen into the everyday lives of consumers
in convenient locations.
[Slide.]
This can be done, and it is already being demonstrated
conceptually, at Shell's Benning Road station right here in
Washington, DC, which you can see on your monitors here. And I
would also point out that this is an example from Shell, who
has been working on this over seven years, of an example of
actually going out and doing it and trying to make this happen.
And I would also invite those of you who haven't had the
opportunity to come out and visit the Shell hydrogen station on
Benning Road to do so, to drive a fuel cell car, and to fuel up
with hydrogen.
Our Benning Road station is a part of a longer-term goal of
establishing a number of large-scale, integrated pre-commercial
activities, which we call ``Lighthouse Projects.''
Last year, through the passage of the Energy Policy Act,
Congress demonstrated a commitment to producing commercial fuel
cell vehicles and developing a hydrogen infrastructure. I would
like to commend Representative Inglis for his leadership in
introducing H.R. 5143. The Federal Government can have an
important role in fostering technological innovation. The
creation of the Hydrogen Prize is an important step in that
direction.
In support of an H-Prize, I want to highlight three areas:
leadership opportunities and significance of visible
Congressional support, involvement and innovation across a
broader community, and commercialization and the growing global
market.
First, the H-Prize will raise the profile of hydrogen on
the national stage and demonstrate visible leadership from
Congress on an important issue for the economy, the
environment, and from a national security perspective. The
Energy Policy Act helped the hydrogen economy emerge in a
larger, more substantial way. A Hydrogen Prize demonstrates
further leadership to increase public awareness around
hydrogen, thereby working towards a successful evolution of
hydrogen commercialization.
Secondly, an H-Prize will stimulate involvement and
innovation across a much broader community than the Department
of Energy programs or funding alone can provide. The incentives
outlined in the H-Prize Act are competitive, but it is
imperative that the H-Prize is well managed so we do not weaken
the Department of Energy program when we are appropriating
these funds. It is important to expand on the progress being
made to the implementation of the energy bill and continue to
develop clear, consistent government policy for hydrogen so the
market can thrive.
One of the strongest points in support of the H-Prize is
the ability to stimulate involvement and innovation across a
much broader community than it is possible with DOE funding.
For example, student competitions at universities, at small
labs, at start-up companies, and my favorite is even the folks
in their garages will be able to participate, which has been a
hallmark of American ingenuity and competitiveness in so many
other pioneering areas. And perhaps not just in the United
States, but such a prize would likely attract interest and
talent from around the world.
Finally, an H-Prize can only accelerate commercialization
and support the growing global market. The race for global
dominance in the hydrogen economy has begun. Shell believes
that hydrogen will likely be widely used commercially within
the next generation in the United States, Western Europe,
China, and Japan. An H-Prize can play a role in assuring U.S.
leadership in the development and deployment of a hydrogen
economy by attracting world talents to the United States. The
market applications are the ultimate prize for many of the
participants, however, the criteria established to award prizes
needs to be considered well in order to properly stimulate
innovation in the marketplace. The scope of the prizes awarded
through the H-Prize also need to be well defined and well
thought out.
This issue is more important than ever, and we need to do
it right.
Thank you all for the opportunity to testify here today.
This concludes my testimony. I would be happy to answer any
questions you have.
[The prepared statement of Mr. Baxley follows:]
Prepared Statement of Phillip Baxley
Good morning Mr. Chairman and Members of the Committee, thank you
for the invitation to testify today. I am Phillip Baxley, President of
Shell Hydrogen LLC, with responsibility for Shell's hydrogen business
activities in North America.
Shell Hydrogen's global business was set up more than seven years
ago to pursue and develop business opportunities related to hydrogen
and fuel cells. Our goal is to bring hydrogen into commercial use for
transportation and other related needs. Through existing and planned
demonstration projects Shell Hydrogen is bringing hydrogen out of its
industrial settings to places where consumers can access it as a fuel
for their vehicles.
You are all aware of the energy challenges we face here in the U.S.
and around the world. In North America, Shell is a leader in the
development of unconventional hydrocarbon resources, like shale oil and
tar sands, as well as renewable energies and hydrogen technologies. We
remain committed not just to increasing the world's energy supply, but
to broadening its portfolio as well. A national energy portfolio that
includes significant use of hydrogen fuel and fuel cell applications
will make lasting contributions to our future energy needs. Last year,
through the passage of the Energy Policy Act, Congress demonstrated a
commitment to producing commercial fuel cell vehicles and developing a
hydrogen infrastructure. We are pleased to see further congressional
support through legislation complementing ongoing activities put in
motion by the energy bill.
The goal of providing hydrogen as a fuel on a significant scale
requires a coordinated undertaking within all levels of government, the
automotive industry, and energy companies. Most of the research and
development attention is focused on finding an inexpensive on-board
hydrogen storage solution, and I hope the development of a hydrogen
prize can supplement the work that is already being done. We must also
address the technical and operational challenges through public-private
partnerships and identify what is needed to accelerate the
commercialization of hydrogen fuel cell technology. In many respects,
hydrogen vehicles must be part of our primary focus because it is the
vehicles themselves that are furthest from commercial readiness.
From a fuel supply perspective, there has been a hydrogen economy
and hydrogen infrastructure in place for decades. Globally, 50 million
tons are produced and consumed every year, mainly in our own
refineries, for producing clean traditional fuels. To put this number
into perspective, this amount of hydrogen could power all the family
cars in the U.S. if they were fuel cell vehicles.
Additionally, most areas of significant population are close to
hydrogen production. [Images 1 and 2] Now the test is to bring hydrogen
into the everyday lives of consumers in convenient locations.
This can be done and is already being demonstrated, for example,
with our Benning Road station here in Washington, D.C. [Image 3] As you
may know, President Bush and a number of Members, staff and agency
officials have visited the facility--over 1,400 visitors since the
November 2004 opening.
The Benning Road station is part of our longer-term goal of
establishing a number of large-scale, integrated pre-commercial
activities, which we call ``Lighthouse Projects.'' We are focusing on a
limited number of projects--mainly transportation applications
involving hundreds of vehicles and several combined hydrogen and
gasoline refueling stations. Because significant numbers of vehicles
are required for `real world' operational experience in order to
validate network supply and refueling operations, we are focused on the
northeast and west coast corridors at this time. Before the end of the
year, we plan to have two more stations on-line in New York and Los
Angeles.
The Hydrogen Prize Act of 2006
I would like to commend Representative Inglis for his leadership in
introducing H.R. 5143. The Federal Government can have an important
role in fostering technological innovation--the creation of the
Hydrogen Prize is an important step in that direction.
My remarks will cover the following areas:
1. Leadership opportunities and the significance of visible
congressional support.
2. Involvement and innovation across a broader community.
3. Commercialization and the growing global market.
First, the H-Prize will raise the profile of hydrogen on the
national stage and demonstrate visible leadership from Congress on an
issue that is important for the economy, the environment and from a
national security perspective.
A hydrogen economy will not emerge by virtue of technology alone.
Any development will be a combination of technology, economics and
policy decisions.
The Energy Policy Act helped the hydrogen economy emerge in a
larger, more substantial way. A Hydrogen Prize demonstrates further
leadership to increase public awareness around hydrogen, thereby
working toward a successful evolution of hydrogen commercialization.
Shell sees hydrogen as an important part of our future energy mix.
To market hydrogen within the foreseeable future, we working along two
channels--first, to increase public awareness of hydrogen-based
projects and further explore retail hydrogen fueling stations, and
second, by actively supporting technological development essential for
rendering hydrogen accessible to a broader market. We work with
partners to promote and support the development of the infrastructure
and technical solutions that the world needs because we know we cannot
do it alone. On the basis of raising the awareness of hydrogen and
promoting it as a stable energy carrier, this legislation will provide
an opportunity to address these challenges, as well as allowing for new
technical jobs and building new supply chains.
There are several critical hurdles to overcome before hydrogen can
reach its full potential in the market. Shell will continue to work
together with our partners in the industry and different areas of
government to achieve sufficient levels of mass production to drive
down costs while meeting the energy needs of the country. It will be
helpful to open up to a broader group through the management of a prize
because prize incentives have a place in conquering our emerging
technology hurdles.
Secondly, an H-Prize will stimulate involvement and innovation
across a much broader community than the Department of Energy programs
and funding alone can provide.
The incentives outlined in the H-Prize Act are competitive, but it
is imperative that the H-Prize is well managed so we do not weaken the
existing Department of Energy program budget when appropriating these
funds. It is important to expand on the progress being made through the
implementation of the energy bill and continue to develop a clear,
consistent government policy for hydrogen that the market can thrive
in.
One of the strongest points in support of an H-Prize is the ability
to stimulate involvement and innovation across a much broader community
than is possible even with DOE funding. For example, student
competitions, universities, small labs, startup companies, even folks
in their garages can participate--which has been a hallmark of American
ingenuity and competitiveness in so many other pioneering areas. And
perhaps not just in the U.S., but such a prize would likely attract
interest and talent from around the world as well.
A hydrogen economy provides benefits through economic growth, job
development, investment opportunities, and a sustainable secure energy
supply. Additionally, hydrogen can directly address air pollution and
provides many pathways to address the reduction and eventual
elimination of greenhouse gases. The primary challenges at this time
are to further development fuel cell vehicle technology and achieve
mass production levels. Commercialization will not be achieved without
these two components working with our effective utilization of
refueling facilities and supply systems.
The current Department of Energy funding and fuel validation
program are extremely important technology development programs. To
move research to reality now requires further attention to the bridge
that needs to be built in the next ten years from small-scale
demonstrations toward commercial operation.
Finally, an H-Prize can only accelerate commercialization and
support the growing global market.
The race for global dominance in the hydrogen economy has begun.
Shell believes that hydrogen will be widely used commercially within
the next generation--in the United States, Western Europe, China and
Japan. An H-Prize can play a role in assuring U.S. leadership in the
development and deployment of the hydrogen economy by attracting world
talents to the U.S.
The benefits of hydrogen as a clean, competitive energy solution
can be delivered to millions of people around the world in the next
twenty years. Any innovation requires time because of technical issues,
public acceptance and practical experience.
It is often said that developing the hydrogen economy will be a
marathon, not a sprint. The course will not be completed quickly; we
need to prepare for a long commitment. This is an evolution; we cannot
switch to the new vehicles or construct a whole new infrastructure of
hydrogen filling stations and distribution networks all at once.
As with all energy transitions, this transition will take time and
occur in phases. Technological advances and market acceptance are
expected to define the phases. In addition, a corresponding education
effort in hydrogen safety will ensure public readiness as hydrogen
becomes increasingly available.
The use of hydrogen will accelerate over the next 10 to 20 years as
the technologies and infrastructure evolve. The market applications are
the ultimate prize for many of these participants. The criteria
established to award prizes needs to be well understood in order to be
valuable in the marketplace. The scope of the prizes awarded through
the H-Prize Act need to be well defined. This issue is more important
than ever and we need to do it right.
Conclusion
Increased use of hydrogen as a fuel provides benefits to energy
security, the environment and economic growth. Developing a Hydrogen
Prize is attractive from a public policy standpoint because hydrogen
can be produced from a wide range of primary energy sources--finding
the most efficient and marketable way to do this is definitely
something the government is in the position to promote and lead. The
future is in our hands and the obstacles can be overcome if we make the
right choices about hydrogen today.
Thank you for the opportunity to appear before the Committee today.
This concludes my testimony. I would be pleased to answer any questions
you may have.
Biography for Phillip Baxley
Phil Baxley is President of Shell Hydrogen LLC and General Manager
of Business Development for Hydrogen in North America. Shell Hydrogen,
a unit of Royal Dutch Shell's global Renewables and Hydrogen business,
was established in 1999 to pursue and develop business opportunities
related to hydrogen fuel and fuel cells. Mr. Baxley has been with Shell
Hydrogen for six years, with prior Shell assignments in Exploration and
Production, Business Development, Research & Development and
Engineering. Before joining Shell, he was an Environmental Consultant
with Intera Technologies of Austin, Texas. Mr. Baxley has degrees in
biomedical engineering (Rice University) and chemical engineering
(University of Florida) and serves on the Boards of Questair
Technologies and the National Hydrogen Association.
Discussion
Mr. Inglis. [Presiding.] Thank you, Mr. Baxley.
The Chairman put me in the Chair, so that means I get to
ask questions first, which is a wonderful opportunity.
And I would take us back to 1957. Sputnik has just been
launched, and you know, maybe it doesn't matter. Maybe we
should just let the Russians go to the moon, and perhaps the
market will come up with a solution. Perhaps someone will want
to go to the moon and compete with the Russians. And maybe it
doesn't matter. Maybe the government doesn't need to do
anything.
That is not exactly what happened in 1957 and following.
What happened was we in America responded and began an enormous
race, a race that has benefited us ever since with all of the
technology that we are enjoying even as we sit here.
So to those that missed the national security implications
of our current posture from reliance on a fuel source that we
don't control, I would encourage them to think beyond the
possibility that maybe the market can come up with a solution
to that. Perhaps there is a role for government in getting us,
as quickly as possible, beyond this danger point that we are
in.
So that is not a question. That is further commentary.
But Mr. Baxley, why is it important to accelerate the
commercialization? Maybe the market is just going to get there.
The market, as you said, is the prize. Why accelerate to
commercialization?
Mr. Baxley. Well, for us, for me, as a businessman, Shell
is in this as a business, and we view hydrogen, biofuels,
solar, wind, all as business opportunities for the future. We
see the need for those businesses. And so in any of those
businesses, we are looking for opportunities as to how do we
move that towards commercial reality sooner than later. How do
we take those investments and make them real? So for hydrogen
specifically, I think the challenge is, a lot of--in a lot of
cases, there is great technology work being done. There is a
great deal of work being done on how to make this happen within
companies, within the government, but I think there is also a
need to address many of the other aspects of hydrogen. That is,
raise the awareness on the part of the public, in terms of
consumers about hydrogen and the realities, and the H-Prize is
one way, among many, that we might do that.
So one of the attractive features of us as the Hydrogen
Prize, and by the way, the Hydrogen--a Hydrogen Prize is
something that we in Shell have been thinking about, actually,
for some time would be a good motivator. If done properly, a
Hydrogen Prize would be a good motivator to inspire to engage a
much broader community to work on not only the technical
challenges but also to drive to bring this to reality. Because
what we found is that when you get technology to the
marketplace, that is when the real innovation happens. So as
soon as possible, they are looking for ways to inspire people
to put the technology, to get it applied, and let the
innovation happen after that.
Mr. Inglis. Dr. Diamandis, is that inspiring the public,
what you are talking about, with a paradigm change?
Dr. Diamandis. It is, and the question, sir, is the prize
has to be simple and well defined. And for example, when we did
the Ansari X Prize, there were so many different ways we could
go. And there is an issue of what I call sufficiency. We didn't
shoot, for example, for the Prize to go to orbit. In fact,
originally, we were shooting for a Prize to go to 100 miles
altitude, and we backed it off from 100 miles to 100
kilometers, 62 miles. Most people don't know the difference
between the two, but we did. The energy requirements were
significantly more. And by taking 100 kilometers and three
people, which took us a year of work to figure out that one
crisp, clear goal. We were--it was achievable. It was
sufficient--it was an issue of sufficiency. It was sufficiently
large enough to capture the passion and get things going. And
now that that is in place, the industry has ignited. We are
talking to NASA about a $50 million orbital prize.
So my question is, you know, to pick the right problem to
solve to get people thinking about this stuff differently. In
space tourism, or personal spaceflight, 10 years ago, was a
laughable matter. People, you know, thought it was this far
away thing, not possible. The--you know, the Ansari X Prize
brought it into, ``Oh, yeah. It is now possible.'' And it
changed the way people thought about that.
So I would say in issue of energy independence and so
forth, you know, what is that right first prize that is
achievable in the near term and, once achieved, then ignites
people and people say, ``Oh, of course we can get independent
of oil. Of course we can reduce CO2 emissions.'' So
I--those are my thoughts on that.
Mr. Inglis. Thank you.
I think my time has expired.
Dr. Lipinski.
Mr. Lipinski. Yeah. Thank you.
Thinking about the X Prize makes me go back to--it probably
was the late '70s, not that anyone remembers the TV show
``Salvage 1'' where, essentially, that was it. Some people put
together in their backyard a--some sort of rocket ship. That is
about all I remember about it, but it certainly, as a kid,
really got me even more interested. I was interested in the
space program and everything, but that idea really did resonate
with me. I don't think it resonated with too many viewers,
because I don't think it was on too long, but--so I like that
idea.
But I want to go to Mr. Baxley who sort of brought this up
and suggested that we will have people with this H-Prize, you
know, working on--in their garages. And it will bring all kinds
of people into working on this hydrogen project because of the
H-Prize.
My big question is: is it going to really be--I want to
hear what everyone has to say about this. Okay. Mr. Baxley,
from Shell, certainly Shell is on a different--completely
different playing field than someone in their garage or any
other researchers probably. Who is really going to be inspired
to get involved in this? Is it actually going to wind up being
the big corporations who are already doing some of this
research who are really going to be the ones who are doing
this? Or is this--and so it is not going to really make a
difference. Or are there going to be other people who the prize
actually gets them interested in it, and do they actually have
a chance to make the type of breakthrough that someone with a
company with a large amount of money behind it has the ability
to do?
So I just wanted to go and I want to ask each of the
witnesses what their thoughts are on this. So we will start
with Mr. Diamandis.
Dr. Diamandis. Thank you, sir.
I think, again, if the prize is well structured and
dramatic enough, there are enough billionaires and multi-
millionaires out here that would love to go and win this. Paul
Allen gives credit to the X Prize for the $25 million
investment he put into SpaceShipOne's development. He read
about it on the internet and said, ``Wow, this is a really cool
thing.'' You know, ``Who can I get to go and win this?'' And he
teamed with Burt Ratan, who had presented it to him, and he
went and pursued this.
So again, it has to be something that is dramatic. It has
got to be something that evokes heroism. And it can't just be
about a technology. You know, GE's efficient refrigerator did
not make front pages, but humans risking their lives and doing
something amazing does.
Dr. Bodde. Sir, I recently had the privilege of talking to
a group of high school students in Greenville, South Carolina,
and this was after Congressman Inglis had just introduced the
idea of the H-Prize. And I think, starting not from the
billionaires but from the other end of the market, I want to be
able to look at a class of students and say, ``Look, this is
important stuff, and there are career opportunities for you in
this. And if you are good enough, and I want all of you to be
good enough, you can win this prize, and here is what it is.
And it is going to be available for you, and you can work your
way through this lengthy pipeline, from difficult science
classes to difficult college science classes to a doctorate to
a research institute, and you could win this thing.'' I want to
be able to say that. And if I can say that with credibility and
people all over the country can do that, I think we will have
considerable motivation.
Mr. Lipinski. Dr. Greene.
Dr. Greene. Well, I think I agree with both of these
points. Entrepreneurs, with some money to risk and the desire
to take a risk and see if they can achieve, that is one. People
at--professors at universities who might be inspired to try
this with an idea that doesn't require a lot of money but is
something no one else has thought of. Through--I think the
motivation for a large company like Shell and their research
laboratories is smaller but still there. They would like to win
the prize, I think, and get the recognition for that. Of
course, for us, National Laboratories, we are specifically
excluded, but I think that is okay.
Mr. Lipinski. Well, Mr. Baxley, does it make a--does this
really make a difference to Shell? And the other question would
be--I would--I don't know enough to know specifically, but I
would imagine, okay, you are with Shell Hydrogen. There must--
you must be at a point and have information, have the research
done that would put you ahead of others, at this point, being
able to reach the--this prize. I--so does it make a difference?
You had said it would make a difference. So for a second
question, do you think your company and other companies are
probably far ahead of anyone else in being able to reach this?
Mr. Baxley. Well, let me just make a couple of comments.
I think, first of all, Shell, very much, is focused on, you
know, how do we bring the fuels our customers are going to need
to the market for the 15,000 retail outlets we have in the
country. How are we going to make a business out of that? But
there are many, many more aspects to doing that. This is not
just about the technology. It is about the market acceptance.
It is about all of the codes and standards that have to be
developed. It is about awareness on the part of fire marshals,
awareness on the part of consumers. It is really an exposure of
all of this stuff that has to happen, and we are working on
that, not just on technology but we are working on outreach
programs through the National Hydrogen Association and others.
But the Hydrogen Prize, to us, is much more about raising--
simply raising the debate, raising the dialogue, raising the
awareness that hydrogen is not only challenging, but is also
attainable, and it is also something that is something that
this country should pursue as one option, as one big option,
and try to make that happen. No assurances it will happen. We
are committed to it. The Hydrogen Prize is really a testament
to the government and to the government's leadership in trying
to make that happen, not only in the way that it inspires
entrepreneurs to participate. I will give you a specific
example for Shell Hydrogen. We are not only doing hydrogen
stations, we are the only ones setting up joint venture
companies to work on technologies with other partners. We also
have set up two venture funds, one here in North America, and
one in Europe, and we are setting up one in Asia. Those venture
funds that we invest with other companies specifically for the
purpose, not only of understanding what other technologies are
out there, what other opportunities there are to invest in, but
to seed the things that need to happen that--we can't do all of
that ourselves. There are so many things that need to happen.
And such a large undertaking is moving--this is really an
unprecedented undertaking, if you think about it, to move from
where we are with petroleum-based fuels, to move to a hydrogen
fuel infrastructure with hydrogen-fueled vehicles. There are so
many aspects to that. A Hydrogen--the Hydrogen Prize touches on
many, many of those things, not only in technology, not only
public awareness, it also touches on an incredibly important
issue to us, as a business, and that is inspiring people like
you, Congressman, but scientists and engineers we are going to
need in the future to--aspiring them to get into this business.
So many, many positive aspects from a fairly modest investment.
Chairman Boehlert. Thank you very much.
Mr. Lipinski. Thank you.
Chairman Boehlert. The gentleman's time is expired.
We want inspiration and incentives, and this is a
combination of the two.
Dr. Diamandis and Dr. Greene, here is one for you.
You both mentioned the important need to clarify and
clearly divide responsibility for the Prize between DOE and
whatever entity is chosen to administer the Prize. First, we
may need to make even clearer that we do expect an outside
entity to administer the award. At what division do you
recommend? And what if DOE established a criteria for the Prize
and some criteria for selecting judges, such as avoiding
conflicts of interest, which is a natural, and then let the
administering organization pick the judges and the winner.
Would that work? And does that description leave out any task?
Dr. Diamandis.
Dr. Diamandis. Thank you, Mr. Chairman.
I think your point is a very, very important one.
The DOE, using them as the example, should really be
defined--it should be, really, in charge of providing the
capital, the Prize money, and helping to define what are the
problems they want to solve. After that, I believe that the
hand-off should take place to an organization that can manage
and run the Prize.
What do I mean by that?
The rule development is something that from--in our
organization, we bring--my vice chairman, for example, is the
Fellow Bob Weiss, who has produced 26 motion pictures. The
human drama element, the story line of the Prize is very
critical. The technology development is the package in the
middle and wrapped around it is the human story. And if that is
not taken properly--I--so I don't think the engineers in DOE
are going to worry about that part, how it is portrayed on
television or the front page in newspapers or talked about on
the--around the water cooler. And in fact, it is that packaging
that really allows the marketing and the expansion and
generates the paradigm shift. The technology comes along for
the ride.
So the rules development, I agree with the comments made
earlier, that the judging should be completely independent, so
it is a group--the outside managing organization selects
qualified judges----
Chairman Boehlert. So the administering organization picks
the judges----
Dr. Diamandis. Yes.
Chairman Boehlert.--and the winner?
Dr. Diamandis. Yes. Should select the judges. The judges
would then select the winner. The rules have to provide for
very clear-cut, measurable results that the judges can say they
either met or not. Period.
Chairman Boehlert. So the Prize selection criteria would be
developed by the administering agency?
Dr. Diamandis. Yes, sir.
Chairman Boehlert. Okay.
Dr. Greene.
Dr. Greene. I think that is about right. That satisfies my
concern that despite the fact that the Secretary of Energy is
obviously a person of great integrity, you don't want to put
him in the position of being political appointees selecting the
judges for the technical contests. Rather, that should, I
think, be done independently so that it is very clear to
everybody involved there is no politics in this. There is no
bias. There is no anything. This is going to be a fair and open
competition. I think that is absolutely essential. And I think
it is correct that the Department of Energy should say, ``These
are the things we want to get out of this Prize.'' They have
very carefully developed an R&D plan that, with consultation
with industry, with consultation with the universities and all
across the board, they know what the technical challenges are.
And I guess my only issue is that it must be that the
administering organization understand those technological
questions as well.
Chairman Boehlert. Another comment?
Thank you very much.
Mr. Udall.
Mr. Udall. Thank you, Mr. Chairman.
I want to welcome the panel. Thank you for your time today.
There are, as you all know, a number of myths associated
with hydrogen and the hydrogen economy. And as you point out in
almost all of the testimony today, we have a long road to
travel to build the infrastructure, to educate citizens. But in
particular, in that spirit, I want to focus on the question of
should the Prize be targeted explicitly at renewable hydrogen
production. Right now, most of the hydrogen, as I understand
it, that is produced, is produced by reforming conventional
fossil fuels. And if that is the road down which we are going
to travel, I think the benefits are less, obviously, than if we
move to a--truly a new energy regime, a new hydrogen energy
regime.
So I wanted to direct that question at the panel. And also,
if you could, talk about any technological hurdles that we
would expect to overcome.
Maybe I can start from right to left, my right to left, Mr.
Baxley, and then move across.
Mr. Baxley. Well, thank you, Congressman.
I would say that, certainly, Shell believes that the road
to a hydrogen economy has to go through sustainability, and it
ultimately has to be delivered--renewable hydrogen. And that is
a challenge we are working on. I think, and though we haven't
worked out the--I would fully support that an aspect of the
Prize has to be about, you know, how do we do that. How do we
get the sustainable green hydrogen?
Mr. Udall. Next, Dr. Greene.
Dr. Greene. I agree with that. I think all of the analyses
we have done indicate that the cheapest way to make fossil--to
make hydrogen is from fossil fuels, in the future from coal
rather than from natural gas, as it is made today.
I think we face a question as to how important it is to
keep the price down in--especially in the early stages of
introduction versus have renewable. But it is clear that if we
make hydrogen from coal and we don't sequester the carbon, we
will increase greenhouse gas emissions rather than decrease
greenhouse gas emissions, even with the efficiency improvements
that hydrogen fuel cell vehicles would offer.
Mr. Udall. Dr. Greene, is it--technological research
suggests that it is easier to sequester that carbon than it
would be in a conventional power plant today?
Dr. Greene. Yes.
Mr. Udall. Yes.
Dr. Bodde.
Dr. Bodde. Well, I certainly agree with those comments, but
I would just add one other thing, and that is that the
beginning of a hydrogen economy will probably produce hydrogen
very differently than we will in a mature, steady state
hydrogen economy, and we ought to allow for that prospect as
well in thinking about the H-Prizes, because we have to
remember what these H-Prizes do. This is seed capital. This is
the very earliest innovation capital into an area. And if done
right, it springs loose the rest of the whole thing. But if we
go right for the end state at the very beginning, we may never
get there. It may be too hard.
And so I certainly agree with the other comments, but I
would at least allow a possibility for production of hydrogen
from fossil fuels, properly sequestered as well.
Mr. Udall. I apologize if I mispronounced your name.
But what you are saying is you want to spread the
technology, get people excited, demonstrate it, and if that
involves the traditional approaches to producing hydrogen
today, you think that is a trade-off worth accepting, knowing
that over time we can move to the more visionary hydrogen
economy that we all are excited about?
Dr. Bodde. Yes, sir. I believe that is the case. I believe
there will be a transition period in which we will have to do
things that will be, perhaps, less than optimal from the
ultimate hydrogen economy perspective, but those will fade
eventually.
Mr. Udall. Doctor?
Dr. Diamandis. Sir, one of the best points about prizes is
if they are properly structured, and I can't stress that
enough, they don't prejudge the solution, and they allow for
radical ideas to come bubble up from outside the normal
industry. Again, one of the difficulties, of course, is that we
are humans and we have developed industries, and we have--we
tend to see things within the way we are used to. But if a
prize is properly structured and the rules are set, you really
have the ability for something to blindside you out of no
place: genetically engineered algae or microbes that generate
hydrogen or new physics, a new chemistry that comes from a
laboratory some place in the middle of, you know, a small town
in India. You know, those are the things that you hope for. And
everything--the entire success of the Prize 5 or 10 years out
all depends on what is done in the first six to 12 months of
writing those rules. But if the rules are written properly,
great. But the chances are very much against those. And there
are some great stories I can tell you about rules properly--not
properly written that would waste $100 million.
Chairman Boehlert. Well, we can tell you some of those
rules, too.
Mr. Udall. I would----
Chairman Boehlert. The gentleman's time has expired.
Mr. Rohrabacher.
Mr. Rohrabacher. Thank you very much, Mr. Chairman.
I would like to thank you, Mr. Chairman, for your
leadership on this and other issues dealing with energy and
trying to find answers to the challenges that we face in the
future.
And special thanks to Chairman Inglis and the leadership he
is providing specifically on this issue. And I look forward to
working with you and developing this concept and getting this
through the process.
Let me start, however, with one fundamental question about
hydrogen that is actually stemming from Mr. Udall's questions,
and that is: we do have to have a fundamental other energy
source in order to make the hydrogen before that becomes
anywhere near economically feasible, is that correct? Well,
we--as we just heard. Why is nuclear energy not one of the
things that is being on the plate here? I mean, I didn't hear
any discussion about nuclear energy. Isn't that the ideal, if
we are talking about greenhouse gases, which I may or may not
be concerned about in terms of global warming, but I may be
concerned about getting things going into the air for other
reasons? Isn't nuclear energy the ideal source of energy for
producing hydrogen?
This is to the panel. And of course Mr. Diamandis doesn't
want to comment on that, but what about the other three? And
then I will have one for you, Mr. Diamandis.
Dr. Bodde. Well, I--in my judgment, sir, I certainly think
that is on the table. I certainly think it should be one of the
competitors. But as my colleagues have said, one does not want
to prejudge the solution. One wants an open competition for
these kinds of early stage breakthroughs without any bias
toward one or another of the contestants.
Dr. Greene. There are, essentially, two pathways that are
being considered in the research program with respect to
nuclear energy. One is nuclear energy via electrolysis to
produce hydrogen. That has very serious cost problems. Nuclear
energy is a relatively expensive way to make electricity in the
first place, and electrolysis is currently the most expensive
way to make hydrogen, so you have a very difficult problem on
that path.
In the long run, there are thermochemical processes that
are being worked on, but most, including the National Academy
report, consider these to be among the most long-term future
technologies for producing hydrogen. That would be where you
would like to go, an efficient means of using nuclear energy to
thermochemically dissociate water and produce hydrogen. But
that is two, three--some number of decades off, according to
best judgment.
Mr. Rohrabacher. However, the use of nuclear energy to do
this would--I mean, we have that technology and that knowledge
now, correct?
Dr. Greene. Via electrolysis.
Mr. Rohrabacher. Right.
Dr. Greene. It is just very expensive.
Mr. Rohrabacher. How expensive are we talking about?
Dr. Greene. I will have to get back to you on that, but I
think it is several times more expensive than, say, producing
from coal or natural gas.
Mr. Baxley. Congressman, I appreciate you raising that
issue, because the point I want to make, just to reiterate, is
that we view hydrogen very much like we do electricity. It is
what I call ``liquid electricity.'' So hydrogen is a
universal--the universal power fluid. And the attractiveness of
hydrogen is that it allows for the potential to make fuel and
other uses from a wide diversity of domestic supply. Nuclear is
just one of them.
Mr. Rohrabacher. Right.
Mr. Baxley. I couldn't tell you whether it is nuclear,
coal, solar, wind. I can't even predict the price of oil a year
in advance, so I want to--don't want to prejudge that, but
certainly nothing, that we know of now, and certainly nuclear
and coal are two obvious ones that we have large domestic
reserves of. They are not off the table.
Mr. Rohrabacher. Okay.
Mr. Baxley. But in the near-term, I think, you know, we are
more pursuing how do we make sure it is safe, how do we make
sure it is available for the customers, how do we make it
affordable, and in the long-term, how do we make it
sustainable.
Mr. Rohrabacher. All right.
Well, let me put, for the record, Mr. Chairman, that the
high pressure helium reactor that I have mentioned in this
committee once before offers the production of energy and
electricity. This is a new reactor system developed by General
Atomics in San Diego, which currently has reactors working in
Japan and in one other location. The--this reactor, and I
remember that you had followed up on that question the last
time we had a hearing on this, offers an opportunity to provide
that energy without the byproduct of plutonium, which actually
this reactor actually eats plutonium, so thus we could produce
hydrogen and energy in the third world without leaving the
remnants over that could be used for nuclear weapons.
In terms of the actual Prize itself, Dr. Diamandis, you
have been very successful. I remember we had a meeting in, I
think, my backyard on this years ago. You have been very
successful in the goals that you have set out and the
methodology that you have achieved, but you were very specific
in what you wanted to have achieved. And it was the first
people who achieve the goal, rather than having a panel of
judges deciding which of many people have met the standards, do
you find this approach so far to be less definitive than what
your operation was?
Dr. Diamandis. Good to see you again, Congressman
Rohrabacher.
Mr. Rohrabacher. Good to see you.
Dr. Diamandis. The--as I mentioned, understanding the
problem set was very important for us. For example, for the
Ansari X Prize, it wasn't developing a new rocket engine. You
know. It was--the problems we were trying to solve were that
the public didn't believe that private people could fly into
space. That was the biggest problem. The capital was not ever
being invested in this arena. The regulatory laws didn't exist
to allow private industry to do these things. These were the
problems that we were--we decided what the problem statements
were, okay, and whether that comes from DOE or it comes from
yourselves, the--those problem statements, and then we went
through this iterative process of coming up with prize ideas,
taking those prize ideas, testing them with the public, with
sponsors, with potential contenders, and then iterating it
until we came up with a clear set of rules. And I do think,
because of our genetic inbreeding as humans, we compete. And
that is where--we do the best when we compete, whether it is on
the football field or whether it is wherever. It----
Mr. Rohrabacher. Is it important to do the first person who
achieves this or is it to have----
Dr. Diamandis. I think you get the----
Mr. Rohrabacher.--a judgment as to who best achieves it?
Dr. Diamandis. We have studied this in great detail, and
our feeling is that having the first person to achieve but
having a second- and third-place prize as well, but you have a
frontrunner out there and a second and third place allows those
who might not think they can win first prize still to come and
you double and triple the number of competitors that way.
Mr. Rohrabacher. Thank you very much.
Chairman Boehlert. The gentleman's time is expired.
And if I am interpreting correctly what the gentleman said
in his preamble to his question, he is arguing for a balanced
portfolio as he introduces the subject of nuclear into the
equation. And I think we can all agree that a balanced
portfolio is absolutely essential, and I thank the gentleman
for acknowledging some leadership. The test of leadership is
whether there is followership, so I would be more than willing
to meet with the gentleman in his backyard, as he did with Dr.
Diamandis, to talk about such things as CAFE standards, because
I know the gentleman is concerned about national security
issues, and that is a national security issue.
Mr. Miller.
Mr. Miller. Thank you, Mr. Chairman.
And Mr. Chairman, I am going to be--I am going to try to be
on my best behavior today.
I want to pursue questions very like the questions that
others have pursued and several of you have referred to. Dr.
Diamandis, you said that a prize should not prejudge the
solution, that you should account for the possibility that the
solution that emerges is not one that you expected. Dr. Bodde,
is it? Dr. Bodde, you said that the outcome should not be
biased by the prizes.
I am concerned that by pursuing a hydrogen economy we are
already biased towards a solution, because the real challenge
before us, I agree with what Mr. Inglis said that we need to
have a response to our energy needs that is similar to what
happened after Sputnik, but I am not sure that that quest is
for a hydrogen economy specifically but for some approach to
energy that is sustainable, that makes us energy-independent
and that does not produce greenhouse gases that I do worry are
going to affect the climate.
And not everyone is sold that the hydrogen economy is the
way to go, that the hydrogen economy will be the winner of the
various competing forms of energy. The problems are actually
pretty well described in the prize categories. The advancements
for hydrogen production. Well, several had pointed out that
hydrogen is not actually a source of fuel, that there are not
large reserves of hydrogen. Hydrogen has to be stripped from
another fuel source.
At other hearings before this committee, witnesses have
testified that hydrogen is not actually a source of fuel, it is
a method of--or not a source of energy, but is a method of
transporting energy, and we are going to have to find the
hydrogen from somewhere. And if it comes from finite sources of
energy, not renewable, sustainable sources of energy, perhaps
we are not making that great an advance in going to a hydrogen
economy.
Also, the present methods for stripping hydrogen out of
other fuel sources is pretty dirty. And yes, hydrogen may only
produce water, but the process of getting the hydrogen is
dirty.
Hydrogen storage. There have been plenty of suggestions, or
some suggestions, at least, that leaks hydrogen, that is widely
being used, that there is a--that there are thousands or
millions of hydrogen cells in the economy in the United States.
Small leaks will actually have a pretty significant
environmental impact there.
Hydrogen distribution. We have got a lot tied up in an
infrastructure for fuel that is a liquid on planet Earth, which
hydrogen is not. Hydrogen utilization may be the easiest
problem to solve.
By making this Prize about hydrogen, are we not already
biasing towards hydrogen as a solution to our energy needs
instead of the other solutions that may be out there?
Mr. Boehlert mentioned conservation, mentioned CAFE
standards. He--I have sponsored the legislation that he is one
of the principle authors of to require fuel efficiency
standards I think by 2013 but we can easily achieve with
existing technologies. Why are we not doing more about
conservation? Are we biasing our energy approach by focusing
this Prize and so much that we are doing that focuses on the
hydrogen economy?
Dr. Diamandis.
Dr. Diamandis. Thank you, sir.
I should say that for many of those same reasons, we
believe that a new generation of automobiles that significantly
exceed 100 miles per gallon equivalent is possible, and we are
looking to launch this year an automotive X Prize along those
lines, specifically for the--I think a lot of the issues
driving this legislation: reduction of CO2 emissions
and energy independence. So you know, we have attacked it
based--we are looking, in our foundation, to attack that
specific niche in the near term, because while we are talking
about, you know, generational solutions here in this committee,
we are trying to focus on what can be done in the next three
years. And we do believe a prize for the design, development,
marketing, and putting cars on the road, not just prototype
cars, is possible through a prize area.
What you are talking about is an E-Prize, an energy prize,
versus an H-Prize.
Mr. Miller. Right.
Dr. Diamandis. And it depends, again, where the DOE wants
to draw the circle. Does it want to draw it specifically on
hydrogen or around energy? And of course that problem statement
then defines the competition you are going to run.
Mr. Miller. Dr. Bodde.
Dr. Bodde. Yes, sir. I think there are--a lot of the
ability of the Prize to incentivize a variety of technologies,
a portfolio of technologies, will come from the way the
boundaries are drawn on--around what is eligible and what is
not. That is what I argued for, including enabling
technologies, battery technologies, for example, that are
perfectly fungible for all electric vehicles versus hydrogen
vehicles. Either way, we need good battery technology. Either
way, we need good energy management systems onboard vehicles.
So I think if the boundaries are drawn properly that an H-
Prize can incentivize many of the technologies we would want in
an E-Prize in general.
Mr. Miller. Do you think, Dr. Bodde, that it should be an
E-Prize instead of an H-Prize? Is what we are getting at not--
really an energy solution, not a hydrogen solution? Are we not
biasing this towards hydrogen among the various options that--
we are not sure which one is going to work, which--as you said
earlier, we shouldn't bias the outcome.
Dr. Bodde. Well, I think either one would work, quite
frankly.
Mr. Miller. An E-Prize as well as an H-Prize?
Dr. Bodde. Yes, but it is important to do something. It is
important not to let this whole thing pass and not take some
action, in my view.
Mr. Miller. Dr. Diamandis, should it be an E-Prize?
Dr. Diamandis. It depends on what this--what the Congress,
what the White House wants to achieve. At the top of the game,
it may well be both, and I shouldn't--you know, my favorite
saying is: ``If you are given a choice, take both.'' An E-
Prize, in the near-term, in terms of looking at biofuels and
renewables and so forth where hydrogen is one of the solution
sets for the long-term, may be the most efficient way to go.
I do know we have an immediate problem, and
entrepreneurship in this country can bring about immediate
solutions, if we properly incentivize them.
Mr. Miller. And if I--just one more second, Mr. Chairman.
Mr. Baxley said that he could not predict petroleum costs a
year in advance. The people in my district can't predict the
price at the pump in the morning what it will be at in the
afternoon, so yes, we do have an immediate problem.
Chairman Boehlert. You are darn right we do.
Thank you very much, Mr. Miller.
Mr. McCaul.
Mr. McCaul. Thank you, Mr. Chairman.
I want to thank Chairman Inglis for introducing the
legislation. I am proud to be an original co-sponsor on the
bill. I think hydrogen does provide a great promise. And just
thanks for your leadership on this.
Universities provide great research and development
throughout this country. They, in some instances, have a
relationship with the private sector. In my own district, the
University of Texas is researching hydrogen fuel cells on
monies provided by the National Science Foundation and the
Department of Energy.
I have got, really, two questions. The first one is: what
role do you see the universities playing in this, and would
they qualify?
And then the second question is probably more technical. I
have actually driven a hydrogen car, so I--we know the
technology is there. It is there today. The problem, as I was
told, is that it costs about $1 million to build one of these
cars. And I know one of the metals used currently is platinum,
which increases the cost. But I understand there is also more
research being done to develop another alloy that could be
used.
What do you see--in this Prize, it calls for, in 10 years,
wheel-to-wheels transformation. What do you see as some of the
challenges that we need to overcome to bring down that cost?
And I know, providing the infrastructure throughout the country
for hydrogen is an important issue as well and the storage
issue. But if you could sort of comment, the whole panel, on
the technology challenges and then also on the university
issue.
Anybody who wants to answer that.
Dr. Bodde. Well, let me begin, sir, if I may with the
university side.
The--it is first important to realize that technology is
all a people game. It is all about who you have on the court,
and that determines the style of play, for any particular
technology. And so it is helpful to think of universities as
basically ``people factories.'' They are things that draw
together not only the people that we move through the pipeline
in the university, but also people from overseas, guest
researchers, and so forth, into a community of interest focused
around a particular problem.
Now out of that are bound to come the solutions that come
when you have bright, creative people that are gathered
together.
Certainly, university researchers should be included within
the category of those eligible for the Prize whether they are
on research grants from the Federal Government or not, in my
opinion.
Dr. Greene. I think the greatest technological challenge is
storing this hydrogen on a vehicle. We have ideas of carbon
nanotubes. We have metal hydrides. We have high pressure
compression. We have liquefied hydrogen. All of these have
very, very serious problems and, in my opinion, are not really
close to providing the functionality that a consumer expects on
a vehicle. This is a very, very difficult problem. And it is
the kind of thing that we almost need a solution that nobody
has even thought about yet.
I mean, I--what I say about it is I haven't seen any good
ideas. So I think this is the most serious technological
challenge. The platinum and the fuel cells is certainly a
problem, the durability of membranes and those kinds of things.
Those, to me, look like the kinds of things that will be solved
with continued research and learning and that sort of process.
I am really worried about storage of hydrogen.
Mr. McCaul. The oil industry will tell you it is a 20-
year--this won't happen any sooner than 20 years. Do you agree
with that or disagree? I know it is very speculative.
Dr. Greene. I am surprised they will predict that but not
the price of oil. I can't say. I am----
Mr. McCaul. Is it 10 years that we are--this is obviously a
goal. It is an aspiration. Do you think this is achievable?
Dr. Greene. I think, you know, what is trying to be
accomplished here is to make some of those things happen that
we don't know how to make happen yet, to see what kind of
creative ideas people will come up with.
Mr. McCaul. Mr. Baxley.
Mr. Baxley. As a representative of an oil company, let me
just make a comment.
First of all, I do very much hope and anticipate that
universities would participate in this program. I think it is
tremendously important for them to do that. I think it is
tremendously important to overcome a whole host of technical
challenges. We have got a whole host of them, storage being,
obviously, the most prominent.
But in terms of the timing, you know, we didn't set up
Shell Hydrogen seven years ago just to have fun. We set up
Shell Hydrogen seven years ago to really figure out how we
could go forward and make this happen, how we could make it
into a business. Based on everything we have seen, we are still
here after seven years. We are growing. We are going to
continue to be here, from everything I have been told. We see
the potential for hydrogen to be introduced in the next five to
seven years in selected markets around the world. So this is
not a situation where everybody is going to wake up one morning
and go down to the Chevy dealer and there are going to be fuel
cell cars. This is going to be more a situation like the Prius
or the other hybrids where there are going to be limited
markets where it is going to be introduced. We are working hard
to figure out how do we introduce that, for example, on the
West Coast and the East Coast of the United States in, you
know, the period of the next 10 years.
So the other point I would make is that we keep saying, you
know, this is far out, and we use that as an excuse not to work
on it. It is important. It is important to work on all of the
other things, the nearer term: better fuels, better fuel
supply. Biofuels is a solution in the interim. There are other
solutions, but we have got to make sure that we keep the focus
on hydrogen, and that is why I think the Hydrogen Prize is so
important, because hydrogen is the one thing that has so many
big technical challenges. It is a big step for man. The other
ones we think we have a clear path to how to achieve in the
biofuels and some of the other areas, but hydrogen has so many
challenges, you really need to get all of the brainpower you
can focused on this----
Chairman Boehlert. Thank you.
Mr. Baxley.--as soon as possible.
Chairman Boehlert. Thank you very much, Mr. Baxley.
Mr. McCaul. Thank you, Mr. Chairman.
Chairman Boehlert. Thank you, Mr. McCaul.
Mr. Green.
Mr. Green. Thank you, Mr. Chairman. And I thank the Ranking
Member, as well. We appreciate greatly having the opportunity
to hear quite an outstanding panel.
I would like to address my first comment, if I may, to Dr.
Diamandis. Good morning, sir, and I commend you on how well you
have handled the X Prize. I was fascinated by it as I saw it
unfold.
Dr. Diamandis. Thank you.
Mr. Green. I am concerned, first, with the separation of
responsibilities that you make reference to. Could you kindly
explain how you envision this working, please?
Dr. Diamandis. Sure. I think that we have a current working
relationship with NASA that is appropriate to use as a model.
We assisted the agency in setting up what is called a
centennial challenge program. They had a law passed and signed
into law allowing them to do prizes of any size. Prizes above
$10 million require additional authorization from Congress, but
they can do larger prizes.
The way it works is NASA identifies an issue, a problem. We
are going to be announcing a prize with them next year, which
is--I mean next week, which is about a $2.5 million prize
involving lunar landing technology, but I can't say more than
that. And they basically say we are interested in--here are the
problems we have. We don't have technology developing in this
area. We then take that problem and we go out, we write the
rules, we go bring in the advisors, we set up, actually,
sometimes if a chunk of money is available, we will say this is
first and second and third-place prize amounts that we
recommend, and then we do it in an iterative process where they
come back and give us their input. It has been a very
cooperative process so far.
Once that is set, we go out and find a set of independent
judges. We go and register the teams. There is a whole legal
structure of master team agreements, liability issues. It is--
you know, 10 years of work has shown us where the problems have
been in these scenarios. But that independence, if--we are not
going to sell our soul, so if the rules that they want are
something that we believe doesn't make sense, we will say we
are not interested in managing the competition.
Mr. Green. In managing the competition and selecting the
winners, are we limited in terms of who can win?
Dr. Diamandis. Again, that is a very good question, because
one of the places you get your greatest, greatest success is
when you open up. You don't--in the world of aerospace, you
don't want to turn away those pesky bicycle mechanics from
Dayton, Ohio, you know, when you have got an aviation
competition. Because really, again, perfect example, out-of-
the-box thinking coming in to solve and beating the
government's funded Langley approach.
So one of the issues we deal with from NASA, for example,
is is it domestic only. You know. Again, Congress writing a
check to a Chinese team winning this is not, probably,
something you want in headlines, but making a global
competition is where you are going to have the greatest
benefits. Universities are going to be a key element of this,
without any question. And you are going to have alliances
between a Shell and a university and a wealthy backer. That is
going to happen. You want a free market economy bringing
together unlikely teams and allowing for crazy ideas to
surface. Remember, the day before something is a breakthrough,
it is a crazy idea, otherwise, it is not a breakthrough.
Mr. Green. Back to your comment about the possibility of a
winner being less than the most popular person on the planet,
how do we--how do you envision dealing with that one concern?
Dr. Diamandis. I am not--when you say the not--I mean, one
of the things, for example, is that in the Orteig Prize for
crossing the Atlantic, the most likely winner was Admiral Byrd
who had flown to the North Pole. And Lindbergh was an upstart.
In fact, people refused to sell him an airplane, because they
thought he would kill himself. And the day before he flew, the
New York Times wrote an editorial and said, ``Mr. Lindbergh,
please don't fly. You are going to kill yourself and set back
aviation a decade.'' And he went anyway and, in fact, changed
the course of history.
Mr. Green. Well, let me broaden the question. Can a
government win?
Dr. Diamandis. I don't think--in the Ansari X Prize, we
precluded--we, in fact, required that all teams demonstrate 90
percent or more private financing. We don't want a government
coming in here and winning it. We wanted teams worrying about
every penny they spent, and we wanted to drive breakthrough by
restricting capital. If you have private money, the free market
economy will drive you to solutions. I mean, the problem is
that we have had bloated government contracts in the aerospace
industry, and perhaps in the energy industry as well, I can't
speak to that effectively, that haven't driven really, you
know, people considering crazy ideas, because they are afraid
of taking the risks. You know. I get up and speak in this
committee about the fact that we are killing ourselves in this
country by being so risk-averse. Prizes allow risk taking.
Mr. Green. Thank you, Mr. Chairman.
Chairman Boehlert. Thank you very much, Mr. Green.
Ms. Biggert.
Ms. Biggert. Thank you, Mr. Chairman.
I just wanted to say that, you know, I think hydrogen is
certainly a very, very important concept. We--I keep talking
about let us think hydrogen nuclear and not oil and gas, and so
this is something that we have got to resolve and very, very
soon. But I do think that nuclear, too, is--and the cost of all
of these things, nuclear is so important in the long run, and
we are working on fast reactors, the recycling, and hydrogen. I
mean, we have moved forward. I can remember Secretary Abraham
coming to Argonne, which is in my district, and to look at the
fuel cells and saying how small--how fast can you make them
smaller so that they can go into a car so that we will have it.
And that happened pretty fast. I am amazed. And I have driven a
hydrogen car, and it was pretty scary, because it is a million-
dollar car right now, and I was driving around the streets of
Washington, DC, and I wanted to make sure I didn't bump into
anything. I think I was more worried about that than the fact
that there was liquid hydrogen under the back seat.
So I think that, you know, we are moving ahead, and I guess
just my problem--concerns have been just with the amount of
money and the--having to refocus from other things, perhaps.
And Mr. Baxley, you mentioned that Shell has been thinking
about doing such a--undertaking such a prize. I think that
would be a fabulous idea. If you have considered it, why hasn't
it gone forward, and would that--could that still be in the
future?
Mr. Baxley. I will, first of all, say that it was one of a
number of things we considered in terms of how to really engage
this--the public's imagination, from university sponsorships to
television advertisements to printed advertisements. So we
didn't develop it a whole lot further until, actually,
Representative Inglis suggested that the government sponsor it,
which we think is a great idea. Actually, we think it is an
issue of not just industry leadership. It is an issue of
government leadership, and we think it is important for--I
think it is really great if we can get both the federal level
of government and industry all on board by saying this is an
important issue to sponsor.
So it is something that, you know, we will look at moving
forward with. We are looking at how to structure a prize in
other areas as well. But certainly, on this topic, we are--we
think it is great if the government can lead the----
Ms. Biggert. Well, of course, one of the things that we
hear about that so many of the companies is the huge profits
that have been made by the oil and gas industry. And why not
use the profits to pay for such a prize? It would be good PR.
Mr. Baxley. Well, as I said, we are interested in pursuing
a prize, and we are interested in sponsoring various
initiatives to make sure that we move forward in hydrogen, just
as we are sponsoring many other issues on renewables. So I
appreciate that comment, and we are seriously considering, you
know, and will seriously consider being involved in this Prize
or any Hydrogen Prize going forward.
Ms. Biggert. It seems like some say that this could be
argued to be a handout to the industry, and particularly with
the $100 million prize. And Dr. Diamandis pointed out in his
opening remarks that he selected a $10 million prize in part
because he didn't want the big competitors like Boeing and
Lockheed Martin from being the only competitors. And then do
you--would you agree--would you all agree with that that this
could happen because--if it were to be a $100 million prize,
that the big groups would be--in that case, it was Boeing and
Lockheed because it was space, but would the big companies get
into this and--to use the money?
Dr. Greene. I don't think this is my area of expertise. I
defer to the----
Ms. Biggert. Okay.
Dr. Greene.--people who are in innovation policy and
setting----
Ms. Biggert. Well----
Dr. Greene.--up prizes.
Ms. Biggert.--Dr. Diamandis, then, do you think that that
could happen?
Dr. Diamandis. It is--this may be a little bit different in
the aerospace industry, which, again, I have much deeper
knowledge there. But again, my--on how much this Prize should
be, I think the most important thing that this legislation
would go--be--could do to go forward is actually allow an
organization, like the X Prize Foundation or someone else you
chose, to go through the proper process and not pick a number
out of the air. We actually go through a process. It takes us
time to figure out what is the right amount. And we go to the
innovative--we go to the entrepreneurs. We go to the people in
the garage. We go to large corporations and find out where--
what peaks their interest. And----
Ms. Biggert. You are talking about the X Prize now?
Dr. Diamandis. I am talking about how we do--we are about
to launch a genomics prize, an automotive prize. The process we
go through, which part of it includes setting the amount of
cash, not too large, not too small, and also setting the--
structuring the competition, how it is properly structured. Is
it one or multiple?
Ms. Biggert. So don't you think that the Federal Government
should do the same thing?
Dr. Diamandis. I do. I think there is a process to go
through before you launch a 10-year effort. As I said--what I
said earlier is investment--proper investment in the next few
months will determine the ultimate success or failure of the
Prize.
Chairman Boehlert. The gentlelady's time is expired.
But to continue on this vein, since we have to do the
appropriating, and since these are very difficult times, we are
not short of requests for the limited resources we have. Let me
put it another way. Would $10 million, as some have suggested,
be enough of an incentive to accomplish what you hope to
accomplish with the whole Prize activity?
Dr. Diamandis. Sir, let me offer out an idea along those
lines.
Ten million dollars is a great starting position. One of
the things that is of greatest value in a prize is when you are
able to bring a corporate sponsor to the table. So if the
government were to say, ``We want to do a study to create an H-
Prize or an E-Prize and we are going to put $10 million as a
starting amount to go this. And then we are going to allow
corporations to come in and title that.'' So, to use my
colleague here at Shell, you would want a Shell to come in and
say, ``Let us make it from $10 million to $50 million. We are
going to add $40 million to the equation.''
And why? Because a corporation coming in who spends $10
million will typically spend $30 million promoting the fact
that they invested $10 million. Very important, because the
promotion part of this is----
Chairman Boehlert. The bill does allow that. Mr. Inglis'
bill does allow that.
Dr. Diamandis. Yeah, and I think that is a very important
part that--and also it may be--one of the things we are
considering , for example, in our automotive and such is that
allowing the public to contribute to the amount of the prize.
They are the ones who want the breakthroughs in the automotive
industry, want the breakthroughs in energy. And these are
things we think about night and day in my organization for the
last 10 years. How do you--where do you get the greatest
effect? Having a corporate sponsor where it is titled, the X,
Y, Z, H-Prize, whatever, will give you the greatest benefit.
You know, we had the Ansari family. I wish we had a
corporation.
Chairman Boehlert. Thank you very much.
The gentleman's time has expired. The gentlelady's time has
expired. My time has expired.
It is time for Honda.
The Chair recognizes Mr. Honda.
Mr. Honda. Thank you very much.
And just a comment on disclosure. This Honda was made in
America.
And I do have a hybrid Toyota. And all of the questions I
was prepared to ask have been asked and responded to, but there
is one thing that does kind of nag at me, and I am sorry I
missed your initial testimony.
But at the risk of looking a little ignorant, let me go
ahead and ask the question.
It sounds like we are--we want to use taxpayer monies to
create an incentive program from which, if there are any
benefits to be accrued from the contest, it doesn't appear that
there is any return on the investment to the public in terms of
revenues back to the government in this kind of a program,
whereas if it were done as you had done it previously, which
attracted a lot of attention and a lot of sense of competition
and accomplishments, too, that even though the government
wanted to sort of insert themselves in the area of security and
safety, what benefits does the general public accrue in terms
of return on investments in terms of revenue and--you know,
because we are looking at the size of the Prize and the kinds
of prizes that are out there. And I believe in incentives. I am
a schoolteacher. I believe in incentives, intrinsic and
extrinsic. But where is the return on investment of this?
Dr. Greene. I think the major motivation of the government
being interested in hydrogen has to do with what economists
would call public goods: protect the environment, energy
security. And deal with the market failure of imperfect
competition as the OPEC cartel and the world oil market and the
problems that causes. These are the benefits, I think, as I see
it, that the government and the public expect from an eventual
successful hydrogen-powered transportation and energy system.
And that is the return that we are looking for, and it is
trillions and trillions of dollars.
But as far as return in the near term, I don't know the
answer to that.
Mr. Honda. I don't disagree with your response, it is just
that I think that is what we look at anyway when we try to put
appropriations or bills together for purposes of R&D at the--at
least at the nascent stage, and we are looking at also
considering doing some for developmental stages where we can
bridge the gap towards commercialization.
But--yes, sir. Mr. Baxley.
Mr. Baxley. I think, if I understood the question, and it
is actually a very, very relevant question. And I have to agree
with what Dr. Greene said, but I also would point out that it
is more than just the public good issues. It is more than just
the environment, the effects of climate change, which we are
still trying to figure out what that is, and the effects on our
national security, which are all huge dollar impacts. But I
would also point out another thing that I think all of you are
aware of, and that is job creation and new industry creation.
Hydrogen has the potential to create whole new industries and
whole new technology platforms, like other transformations,
that would create jobs. So that is a tremendous benefit to the
economy. And I viewed the Hydrogen Prize legislation as seed
money. This is the government putting in a limited amount of
seed money, and I don't think it has to be $100 million. I
think something in the order of $10 million would be sufficient
seed money, presuming that you also get sponsorship from
private sector and other organizations.
But the important thing is the leadership putting the seed
money in and getting it started and helping them to make that
happen. That is what I think is the important part.
Mr. Honda. Thank you, Mr. Baxley.
And to the Chair, if I may, I have a bill called H.R. 1491,
which addresses incentives in terms of looking at research and
having--the Federal Government having a role in bringing
research to commercialization and, at a certain point, engaging
the private investors at a certain point in time, because there
are many research that it is going to take more time than the
private industry are comfortable with. So I figure that we
should partner with them to bring that research to a point
where it becomes commercially viable.
So if you would look at H.R. 1491 and see how that fits
with your concepts, I would appreciate any feedback that you
might have, because I believe that in the times when we have
scarce resources in our country for whatever reason, people can
argue about why we have scarce resources, I do believe that we
should invest, as we did in the Internet, on behalf of the
Federal Government, to promote new ideas and create jobs, as
you have said.
Yes, sir.
Dr. Diamandis. Mr. Honda, I might ask you to think about a
prize as almost fixed-cost science or fixed-cost engineering.
You have a specific goal you want to achieve, you don't pay it
until it is done. If you think about it, you know, it would be
the most efficient way to implement NIH and NSF type funding
programs, but clearly you can't do that. But I am just saying
in terms of use of money for the best public good, it is the
most highly-leveraged, most efficient way the government could
ever use its funds.
Mr. Honda. Thank you. And it helps me feel better about the
word ``prize'' and leveraging, so that is a good way to think
about it.
Thank you.
Chairman Boehlert. Thank you very much, Mr. Honda.
And Mr. Wu advises that all of the pertinent questions have
been asked. He is just here because of his deep and abiding
interest in the Committee's activities, and we thank you for
being here.
And I thank all of my colleagues for being here.
Now, Dr. Bodde, I can't let this end. Chairman Inglis has
told me you have got a great story about how your mother
inspired you to be a scientist. Would you share that with the
Committee?
Dr. Bodde. Sir, this happened one summer in 1959, I guess
it was, driving across Kansas. And of course, those were the
days where there was no air-conditioning, and so all of the
windows were open. And mom says, ``Well,'' you know, ``look up
there. There is a Soviet satellite circling the Earth, and it
is the duty of every patriotic young American to go out and
study science and engineering so we can beat the Russians.''
Well, sure enough, I went out and studied science and
engineering, and sure enough, we beat the Russians.
So the chief lesson I draw from that is: mom is always
right.
Chairman Boehlert. You are darn right, and I hope we can
energize the mothers of America to give that same message to
the young students and our educational system, because we are
being challenged as never before. We are still number one, but
we have got a lot of work to do to maintain that number-one
position.
Is there anything else for the good of the order, because
our distinguished witnesses have other activities? But----
Mr. Inglis. Mr. Chairman, if I could indulge just a couple
minutes to----
Chairman Boehlert. A couple of minutes for the
distinguished Chair.
Mr. Inglis.--follow up on your comment and Chairman
Biggert's comment, they were very helpful, about the amount of
the Prize, because, you know, my goal in setting a prize,
initially, is up to $100 million. And of course the Secretary
has, under our bill, the discretion to do what Dr. Diamandis
described, and that is to set the amount up to $100 million. If
in consultation, I would hope with somebody as knowledgeable as
Dr. Diamandis, the Secretary of Energy decided, ``No, all you
need is $10 million,'' or maybe you need $10 million from
government and $50 million from private enterprise, then the
Secretary has that flexibility under the bill.
Chairman Boehlert. Yeah.
Mr. Inglis. It could also enable us to appropriate only
smaller amounts in the initial year and then larger amounts
when the Secretary of Energy reports back.
Chairman Boehlert. Thank you.
Mr. Inglis. So that is----
Chairman Boehlert. Point well taken.
Mr. Inglis.--certainly a doable objective, and working
with, as I said, somebody as expert as the X Prize Foundation
could get us there.
My goal in setting $100 million, as throwing it out there,
is to avoid a middling Department of Energy program, because a
middling Department of Energy program is nowhere near the
threat level that we are dealing with. We are at great risk,
and it is the kind of risk that Dr. Bodde just described from
his mother. Her perception of how at risk her country was and
inspiring her son to get involved in science is the kind of
reaction we need to be having, less we end up 20 years from now
in the same spot that we could have--we were after the 1973 oil
embargo, which is all a lot ado about nothing, and then we fell
back into our old ways.
So I think that we can find a way to do this using the
expertise of people like the X Foundation--X Prize to get us
there.
Chairman Boehlert. Thank you very much.
I don't mean this to be a point-counterpoint, but I do want
to recognize the distinguished gentlelady, Ms. Biggert.
Ms. Biggert. Thank you, Mr. Chairman.
I think when Mr. Inglis talked about making the--in
frontloading it, that is a very important concept to keep in
mind, because when we appropriate money, we put it in the
Treasury until somebody claims it. And those appropriated funds
really cost us money, because we--right now, the government has
borrowed $297 billion from the public in 2005, and interest on
the--on public debt is a major expenditure, so not putting the
money in prior to, you know, when we need it is important.
Chairman Boehlert. Thanks for the intervention.
Thank you all very much, my colleagues, and thank you,
distinguished witnesses. We really appreciate it.
Stay tuned.
Hearing adjourned.
[Whereupon, at 11:35 a.m., the Committee was adjourned.]
Appendix:
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Additional Material for the Record