Hydrogen Fuel Initiative: DOE Has Made Important Progress and Involved Stakeholders but Needs to Update What It Expects to Achieve by Its 2015 Target

Hydrogen Fuel Initiative: DOE Has Made Important Progress and
Involved Stakeholders but Needs to Update What It Expects to
Achieve by Its 2015 Target (11-JAN-08, GAO-08-305).

The United States consumes more than 20 million barrels of oil
each day, two-thirds of which is imported, leaving the nation
vulnerable to rising prices. Oil combustion produces emissions
linked to health problems and global warming. In January 2003,
the administration announced a 5-year, $1.2 billion Hydrogen Fuel
Initiative to perform research, development, and demonstration
(R&D) for developing hydrogen fuel cells for use as a substitute
for gasoline engines. Led by the Department of Energy (DOE), the
initiative's goal is to develop the technologies by 2015 that
will enable U.S. industry to make hydrogen-powered cars available
to consumers by 2020. GAO examined the extent to which DOE has
(1) made progress in meeting the initiative's targets, (2) worked
with industry to set and meet targets, and (3) worked with other
federal agencies to develop and demonstrate hydrogen
technologies. GAO reviewed DOE's hydrogen R&D plans, attended
DOE's annual review of each R&D project, and interviewed DOE
managers, industry executives, and independent experts.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-305
ACCNO: A79708
TITLE: Hydrogen Fuel Initiative: DOE Has Made Important Progress
and Involved Stakeholders but Needs to Update What It Expects to
Achieve by Its 2015 Target
DATE: 01/11/2008
SUBJECT: Alternative fuels
Energy conversion
Energy development
Energy efficiency
Energy industry
Energy planning
Energy research
Fossil fuels
Fuel research
Hydrogen as fuel
Hydrogen cars
Interagency relations
Policy evaluation
Program evaluation
Renewable energy sources
Research and development
Schedule slippages
Energy sources
Hydrogen Fuel Initiative

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GAO-08-305

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Report to Congressional Requesters:

United States Government Accountability Office:

GAO:

January 2008:

Hydrogen Fuel Initiative:

DOE Has Made Important Progress and Involved Stakeholders but Needs to
Update What It Expects to Achieve by Its 2015 Target:

Hydrogen Fuel Initiative:

GAO-08-305:

GAO Highlights:

Highlights of GAO-08-305, a report to congressional requesters.

Why GAO Did This Study:

GAO examined the extent to which DOE has (1) made progress in meeting
the initiative�s targets, (2) worked with industry to set and meet
targets, and (3) worked with other federal agencies to develop and
demonstrate hydrogen technologies. GAO reviewed DOE�s hydrogen R&D
plans, attended DOE�s annual review of each R&D project, and
interviewed DOE managers, industry executives, and independent experts.

What GAO Found:

DOE�s hydrogen program has made important progress in all R&D areas,
including both fundamental and applied science. Specifically, DOE has
reduced the cost of producing hydrogen from natural gas, an important
source of hydrogen through the next 20 years; developed a sophisticated
model to identify and optimize major elements of a projected hydrogen
delivery infrastructure; increased by 50 percent the storage capacity
of hydrogen, a key element for increasing the driving range of
vehicles; and reduced the cost and improved the durability of fuel
cells. However, some of the most difficult technical challenges lie
ahead, including finding a technology that can store enough hydrogen on
board a vehicle to achieve a 300-mile driving range, reducing the cost
of delivering hydrogen to consumers, and further reducing the cost and
improving the durability of fuel cells. The difficulty of overcoming
these technical challenges, as well as hydrogen R&D budget constraints,
has led DOE to push back some of its interim target dates. However, DOE
has not updated its 2006 Hydrogen Posture Plan�s overall assessment of
what the department reasonably expects to achieve by its technology
readiness date in 2015 and how this may differ from previous posture
plans. In addition, deploying the support infrastructure needed to
commercialize hydrogen fuel-cell vehicles across the nation will
require an investment of tens of billions of dollars over several
decades after 2015.

DOE has effectively involved industry in designing and reviewing its
hydrogen R&D program and has worked to align its priorities with those
of industry. Industry continues to review R&D progress through DOE�s
annual peer review of each project, technical teams co-chaired by DOE
and industry, and R&D workshops. Industry representatives are satisfied
with DOE�s efforts, stating that DOE generally has managed its hydrogen
R&D resources well. However, the industry representatives noted that
DOE�s emphasis on vehicle fuel cell technologies has left little
funding for stationary or portable technologies that potentially could
be commercialized before vehicles. In response, DOE recently increased
its funding for stationary and portable R&D.

DOE has worked effectively with hydrogen R&D managers and scientists in
other federal agencies, but it is too early to evaluate collaboration
among senior officials at the policy level. Agency managers are
generally satisfied with the efforts of several interagency working
groups to coordinate activities and facilitate scientific exchanges. At
the policy level, in August 2007, DOE convened the inaugural meeting of
an interagency task force, composed primarily of deputy assistant
secretaries and program directors. The task force is developing plans
to demonstrate and promote hydrogen technologies.

What GAO Recommends:

GAO recommends that DOE update its Hydrogen Posture Plan�s assessment
of what can reasonably be achieved by 2015 and how this may differ from
its prior posture plans. In commenting on a draft of the report, DOE
agreed with the recommendation, stating that it will update its posture
plan during 2008.

To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-305]. For more information, contact Mark
Gaffigan at (202) 512-3841 or [email protected].

[End of section]

Contents:

Letter:

Results in Brief:

Background:

The Hydrogen Fuel Initiative Has Made Important Progress but Will
Require Significant Scientific Advances and Continued R&D beyond 2015
and Investment in Developing the Physical Infrastructure:

DOE Has Partnered Well with Industry on Vehicle Technologies, but
Efforts to Develop Stationary and Portable Technologies Are Too New to
Evaluate:

DOE Has Effectively Coordinated with Other Federal Agencies at the
Working Level, but Efforts at the Policy Level Have Just Begun:

Conclusions:

Recommendation:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

Appendix II: Comments from the Department of Energy:

Appendix III: GAO Contact and Staff Acknowledgments:

Tables:

Table 1: Fuel Cell Types and Examples of Their Applications:

Table 2: Status of Key Hydrogen Fuel Initiative Technologies and Target
Dates:

Table 3: Funding for the Hydrogen Fuel Initiative, Fiscal Years 2004
through 2008:

Figures:

Figure 1: U.S. Refineries' Oil Prices, 1968 to 2007:

Figure 2: Schematic of a Typical Fuel Cell:

Abbreviations:

DOD: Department of Defense:

DOE: Department of Energy:

DOT: Department of Transportation:

HTAC: Hydrogen and Fuel Cell Technical Advisory Committee:

IWG: Interagency Working Group on Hydrogen and Fuel Cells:

IPHE: International Partnership for the Hydrogen Economy:

NASA: National Aeronautics and Space Administration:

NIST: National Institute of Standards and Technology:

R&D: research, development, and demonstration:

USCAR: U.S. Council for Automotive Research:

United States Government Accountability Office:

Washington, DC 20548:

January 11, 2008:

The Honorable Bart Gordon:
Chairman:
Committee on Science and Technology:
House of Representatives:

The Honorable Nick Lampson:
Chairman:
The Honorable Bob Inglis:
Ranking Member:
Subcommittee on Energy and Environment:
Committee on Science and Technology:
House of Representatives:

The Honorable Michael M. Honda:
House of Representatives:

The United States uses more than 20 million barrels of oil each day,
roughly two-thirds of which is imported. Disruptions in supply from
natural disasters such as hurricanes in the Gulf of Mexico and
political instability in some oil-producing regions have caused
prolonged price spikes, at times quadrupling the price of oil. In
recent years, reduced domestic production and increased world
consumption have contributed to recent records for the price of oil. In
2004, when oil cost refiners about $41 a barrel, the nation spent about
$6 billion a week for its oil when adjusted for inflation; by October
2007, oil cost refiners about $80 per barrel and the nation spent more
than $11 billion a week. Oil prices are likely to climb even higher as
global oil production peaks, which many studies estimate could occur
within the next 35 years. Moreover, the nation's transportation sector
is 97 percent dependent on oil-derived products that, when burned in
conventional internal combustion engines, produce harmful emissions
that raise health problems and global warming concerns.

To reduce the nation's dependence on foreign oil and to decrease
greenhouse gas emissions, President Bush in January 2003 announced the
initial phase of a 5-year, $1.2 billion Hydrogen Fuel Initiative to
conduct research, development, and demonstration (R&D) for developing
hydrogen-powered fuel cells as an alternative to the internal
combustion engine in vehicles. Hydrogen fuel cells emit only water and
heat as byproducts--an important factor for limiting carbon emissions.
The Hydrogen Fuel Initiative, primarily led by the Department of Energy
(DOE), set a target date of 2020 for making hydrogen vehicles
commercially available to consumers to achieve its goal of allowing a
child born in 2003 to be able to drive a hydrogen vehicle as his or her
first car.

Since the 1970s, the federal government has conducted R&D on hydrogen
and fuel cells, which operate similarly to a battery to produce
electricity. Hydrogen, like electricity, carries energy in a usable
form from one place to another. Moreover, hydrogen can be stored and
efficiently converted to energy when needed, making it ideal to power
fuel cells to generate energy. In addition to potential use in
vehicles, hydrogen fuel cells can be used in stationary applications,
such as replacing diesel generators used to provide emergency power in
hospitals, and portable applications, such as replacing batteries used
in electric wheelchairs and laptop computers. However, while hydrogen
is the most plentiful element in the universe, it is not found in its
gaseous state on earth because it is lighter than air and rises in the
atmosphere. Instead, hydrogen must be extracted from such common
compounds as fossil fuels, biomass, and water, a process that requires
energy.

To develop the Hydrogen Fuel Initiative, DOE met with stakeholders,
including industry executives and university scientists, in a series of
meetings and workshops. DOE determined that hydrogen fuel cell
technologies must be ready by 2015 to enable industry to begin
commercialization by 2020. DOE issued its first Hydrogen Posture Plan
in February 2004 and updated it in December 2006. The plan established
priorities for hydrogen R&D areas and set interim and final targets,
focused on developing hydrogen-powered fuel cells that match the
performance of gasoline-powered vehicles in terms of driving range,
durability, and cost. DOE began to implement the Hydrogen Fuel
Initiative in fiscal year 2004. DOE's Office of Energy Efficiency and
Renewable Energy, which conducts most of the initiative's R&D work,
oversees the Hydrogen Fuel Initiative through the hydrogen program
manager. The initiative's R&D is coordinated with other renewable
energy programs; DOE's Offices of Fossil Energy, Nuclear Energy, and
Science; and the Department of Transportation (DOT), which conducts R&D
in such areas as vehicle-related safety codes and standards and medium-
and heavy-duty vehicle demonstrations.

Title VIII of the Energy Policy Act of 2005 extended the Hydrogen Fuel
Initiative beyond the President's initial 5-year program by authorizing
R&D funding through 2020 and directing DOE to conduct R&D to develop,
among other things, the necessary supporting infrastructure, including
pipelines and fueling stations. The act also directed DOE to work with
industry and established the Hydrogen and Fuel Cell Technical Advisory
Committee (HTAC)--which includes representatives of industry, academia,
professional societies, government agencies, financial organizations,
and environmental groups--to review and make recommendations to the
Secretary of Energy on DOE's implementation of its hydrogen R&D
programs and activities; the safety, economical, and environmental
consequences of technologies; and DOE's long-term R&D plans. In
addition, the act directed the President to establish the Interagency
Task Force, chaired by the Secretary of Energy, to coordinate federal
agencies' hydrogen and fuel cell R&D efforts and promote hydrogen
technologies. The task force is to include representatives from, at a
minimum, DOT, the Department of Defense (DOD), the Department of
Commerce, the Department of State, the National Aeronautics and Space
Administration (NASA), the Environmental Protection Agency, and the
White House's Office of Science and Technology Policy. Subsequently, in
November 2006, HTAC recommended that the Interagency Task Force include
assistant secretary-level officials with policy-setting authority from
each participating agency.

DOE--with input from industry, university, and federal agency
stakeholders--identified the following four major technical challenges
that must be overcome before hydrogen technologies can be deployed on a
large scale:

* Production. Current production R&D efforts focus on economically
extracting hydrogen from other compounds using fossil, renewable, and
nuclear energy. For example, DOE established 2015 as the target date
for extracting hydrogen from natural gas at a cost equivalent of $2 to
$3 per gallon of gasoline.

* Storage. Storing hydrogen requires it to be either compressed under
very high pressure as a gas or super-cooled to obtain a liquid;
however, these technologies consume significant amounts of energy and
are currently too costly. Current hydrogen storage R&D efforts focus on
developing less energy-intensive and less expensive methods of storing
hydrogen. For example, DOE established 2015 as the target date for
developing a hydrogen fuel cell vehicle that can travel at least 300
miles using only the hydrogen stored onboard.

* Delivery. Current truck delivery technologies cannot compete with
gasoline technologies because of the cost of compressing or liquefying
hydrogen. Although delivery by pipeline is more economical, hydrogen
causes pipelines to become brittle, raising safety concerns. Current
R&D efforts focus on, among other things, reducing the cost of
delivering hydrogen by truck and pipeline, and developing new composite
materials for safer delivery by pipeline, targeting a point-to-point
delivery cost of less than $1 per gallon of gasoline equivalent.

* Fuel Cell Cost and Durability. The type of hydrogen fuel cell
considered the most promising for vehicles currently has cost and
durability limitations. Specifically, current fuel cell systems (1)
cost about $8,000 to produce at high volume, compared to $2,000 to
$3,000 to produce a conventional internal combustion engine and (2)
operate for less than half the life span of a conventional internal
combustion engine. Current hydrogen fuel cell R&D efforts focus on
reducing the cost and increasing the durability of fuel cells. For
example, DOE set a target date of 2015 to develop a fuel cell with a
life span of about 5,000 hours--or about 150,000 miles--making it
competitive with internal combustion engines.

Industry representatives have noted that they are spending far more for
hydrogen R&D than the federal government's Hydrogen Fuel Initiative.
Specifically, while actual R&D figures are proprietary, Chrysler LLC,
Ford Motor Company, and General Motors Corporation each has reported
spending at least as much as the federal government on R&D for hydrogen
fuel cell vehicles, and each plans to spend $6 to $10 billion from 2006
through 2015.

Furthermore, DOE is analyzing infrastructure requirements for deploying
hydrogen fuel cell technologies, including hydrogen production
facilities and pipelines to deliver hydrogen to major metropolitan
markets. To facilitate this effort, DOE is working with DOT, industry
groups, and international organizations to develop national and
international safety codes and standards, such as fire codes for
stationary fuel cells and standards for hydrogen fueling stations. DOE
is also validating hydrogen technologies in real-world environments by,
for example, collecting information on the performance of 77 hydrogen
fuel cell vehicles used as a demonstration in several cities for
commuting and other daily driving needs. To stimulate public awareness
and acceptance of hydrogen technologies, DOE is disseminating safety-
related information for emergency personnel as well as nontechnical
information for the general public on hydrogen production, storage, and
delivery; fuel cells; and near-term markets.

You asked that we assess DOE's Hydrogen Fuel Initiative as DOE enters
the last year of its initial 5-year, $1.2 billion program.
Specifically, you asked that we examine the extent to which DOE's
hydrogen R&D program has (1) made progress in meeting the initiative's
R&D targets, (2) worked with industry to set and meet R&D targets, and
(3) worked with other federal agencies to develop and demonstrate
hydrogen technologies.

To ensure that we obtained a thorough understanding of DOE's hydrogen
R&D program, we reviewed documents and interviewed DOE program managers
and national laboratory scientists, company and industry association
executives, independent experts, and state government officials. More
specifically, to assess DOE's progress in meeting its R&D targets, we
(1) reviewed DOE's Hydrogen Posture Plans and R&D project reports; (2)
attended DOE's annual review of its projects in May 2007; (3)
interviewed DOE hydrogen program managers and scientists at DOE's
National Renewable Energy Laboratory and Los Alamos National
Laboratory; (4) spoke with HTAC members and attended HTAC meetings; (5)
interviewed industry representatives and reviewed industry assessments
of DOE's progress in developing and demonstrating vehicle, stationary,
and portable technologies; and (6) reviewed reports of the National
Academies of Science and Engineering on the hydrogen program and spoke
with cognizant officials. To determine the extent to which DOE has
worked with industry to set and meet R&D targets, we reviewed pertinent
documents and assessed DOE's processes for soliciting industry input,
including attending a meeting of the fuel cell technical team at Los
Alamos National Laboratory. We also interviewed cognizant DOE managers
and scientists and executives of car manufacturers, energy companies,
utilities, hydrogen producers, fuel cell manufacturers, and suppliers
of hydrogen-related components. To determine the extent to which DOE
has worked with other federal agencies to develop and demonstrate
hydrogen technologies, we reviewed pertinent documents and spoke with
officials at DOE, DOT, DOD, the Department of Commerce, NASA, and the
U.S. Postal Service. We also attended the Interagency Task Force's
first meeting in August 2007. We conducted our work from March through
December 2007 in accordance with generally accepted government auditing
standards. Appendix I provides additional information about our scope
and methodology.

Results in Brief:

DOE's hydrogen R&D program has made important progress, but some of the
most difficult technical challenges--those that require significant
scientific advances--lie ahead, and many years of hydrogen R&D and
infrastructure development beyond the 2015 target date will be needed
before hydrogen can compete with current technologies. Specifically,
DOE has reduced the cost of producing hydrogen from natural gas--an
important source of hydrogen through the next 20 years; increased the
storage capacity of hydrogen by 50 percent--a key element for
increasing the driving range of vehicles; developed a sophisticated
model to identify and optimize major elements of a projected hydrogen
delivery infrastructure, and reduced the cost and improved the
durability of fuel cells. However, DOE and industry officials stated
that meeting some longer-term targets will require major scientific
advances. For example, current fuel cell technology relies on platinum
to separate electrons from protons to generate electricity. Because of
the high cost of platinum, DOE's targets for reducing fuel cell costs
include reducing the amount of platinum in fuel cells by more than 80
percent from its 2005 levels or finding a substitute. Some industry
representatives noted that DOE's target dates were very ambitious,
given the technical challenges and budget constraints. Relatedly,
nearly 25 percent of the Hydrogen Fuel Initiative's funding for fiscal
years 2004 through 2006 was spent on congressionally directed projects
that were largely outside the initiative's R&D scope. In response, DOE
has pushed back target dates for certain key technologies--the target
date for using wind energy to produce hydrogen was pushed back from
2015 to 2017--and reduced funding for stationary and portable
applications. Although DOE has pushed back interim target dates, it has
not updated its 2006 Hydrogen Posture Plan's overall assessment of what
the department reasonably expects to achieve by its technology
readiness date in 2015, including how this may differ from previous
posture plans. DOE also has not identified the R&D funding needed to
achieve its 2015 target. Moreover, deploying the production facilities,
fueling stations, and other support infrastructure needed to
commercialize hydrogen fuel cell vehicles across the nation will
require sustained industry and federal investment of tens of billions
of dollars over several decades after 2015, according to DOE officials
and industry representatives.

DOE has effectively solicited industry input and has worked to align
its R&D priorities with those of industry, and industry representatives
stated that DOE generally has managed its hydrogen R&D resources well.
Specifically, DOE involved industry and university experts at the
earliest planning stages and has continually focused on the highest R&D
priorities. DOE has hosted annual peer reviews of each R&D project and
has sponsored periodic workshops to solicit industry feedback on the
progress, priorities, and direction of the hydrogen R&D program. DOE
has also established 11 technical teams with DOE, industry, and
national laboratory representation to assess progress in specific areas
and bring technical and other issues to management attention. In
addition, both the National Academies of Science and Engineering and
HTAC provide input. One area of criticism that industry representatives
identified is that DOE has focused its limited resources on developing
vehicle technologies and given low priority to stationary and portable
technologies. These industry representatives note that stationary and
portable technologies may have more near-term market potential than
vehicle technologies and, therefore, may be integral to resolving
technical or infrastructure challenges and developing the public
acceptance necessary to deploy hydrogen nationally. DOE recently has
begun to emphasize near-term stationary and portable market
applications by soliciting industry, non-profit, and federal
organizations for ideas on early adoption of technologies and providing
R&D grants.

DOE's interagency coordination efforts among working level managers and
scientists have been productive and useful, but it is too early to
evaluate collaboration among senior officials at the policy level
because a body created to do so, the Interagency Task Force, just held
its first meeting in August 2007. At the working level, DOE has
established several interagency coordination bodies to facilitate
cooperation and share knowledge. For example, one working group has
created Web-based tools and joint workshops to coordinate R&D
activities and facilitate interagency technology partnerships by
bringing the Defense Logistics Agency together with DOE in an
initiative for deploying hydrogen-fuel-cell-powered forklifts. Working
level managers at federal agencies involved in hydrogen-related
activities generally were satisfied with the level of coordination.
However, the Interagency Task Force--composed of deputy assistant
secretaries, program directors, and other senior officials--has just
begun to plan actions to demonstrate and promote hydrogen technologies.
In its inaugural meeting in August 2007, the task force did not clearly
define its role or strategy, but member agencies plan to develop a path
forward and an action plan by May 2008. HTAC criticized DOE for taking
too long to initiate the effort and for not securing participation of
departmental assistant secretaries to ensure appropriate authority
inside each agency for making hydrogen-related budget and policy
decisions. In addition, some Interagency Task Force members observed
that lack of a common vision may hinder decision making.

To accurately reflect the progress made by the Hydrogen Fuel Initiative
and the challenges it faces, we recommend that the Secretary of Energy
update the Hydrogen Posture Plan's overall assessment of what DOE
reasonably expects to achieve by its technology readiness date in 2015,
including how this updated assessment may differ from prior posture
plans and a projection of anticipated R&D funding needs. DOE agreed
with our recommendation, stating that it plans to update the Hydrogen
Posture Plan during 2008.

Background:

For decades, oil has been relatively inexpensive and plentiful, helping
to spur the United States' economic growth. Despite price spikes
primarily caused by instability in the Middle East and other oil-
producing regions or by natural disasters, the price of oil has
historically returned to low levels. However, in recent years,
increasing world consumption of oil has put more upward pressure on the
price of oil, making the price less likely to return to low levels.
Figure 1 shows the volatility of the oil market because of political
instability and natural disasters, but also illustrates an upward trend
in price in recent years.

Figure 1: U.S. Refineries' Oil Prices, 1968 to 2007:

This figure is a line graph showing U.S. refineries' oil prices between
1968 and 2007. The X axis represents the calendar years, and the Y axis
represents the dollars per barrel.

[See PDF for image]

Source: GAO analysis of DOE data.

Note: Oil prices are in real terms, adjusted to fiscal year 2007
dollars to account for inflation. For 2007, oil prices for January
through September were averaged. Refiners' oil prices better reflect
the cost of oil than spot market prices because refiners typically
purchase oil through long-term contracts that generally are not
affected by short-term price changes.

[End of figure]

In 2005, the world consumed about 84 million barrels of oil per day,
and world oil production has been running at near capacity to meet the
growing demand. DOE's Energy Information Administration projects that
world oil consumption will continue to grow, reaching about 118 million
barrels per day in 2030. In February 2007, we reported that most
studies, amidst much uncertainty, estimate that oil production will
peak sometime between now and 2040, which could lead to rapid increases
in oil prices.[Footnote 1] We concluded that the United States--which
consumes about one-quarter of the world's oil and is about 97 percent
dependent on oil for transportation--would be particularly vulnerable
to the projected price increases.

Fuel cells convert the chemical energy in hydrogen--or a hydrogen-rich
fuel--and oxygen to create electricity with low environmental impact.
Although fuel cells can use a variety of fuels, hydrogen is preferred
because of the ease with which it can be converted to electricity and
its ability to combine with oxygen to emit only water and heat. Fuel
cells look and function very similar to batteries. However, for a
battery, all the energy available is stored within the battery and its
performance will decline as its fuel is depleted. A fuel cell, on the
other hand, continues to convert chemical energy to electricity as long
as fuel is fed into the fuel cell. Like a battery, a typical fuel cell
consists of an electrolyte--a conductive medium--and an anode and a
cathode sandwiched between plates to generate an electrochemical
reaction. (See fig. 2.) Like the respective negative and positive sides
of a battery, the current flows into the anode and out of the cathode.

Figure 2: Schematic of a Typical Fuel Cell:

This figure is a visual image of schematic of a typical fuel cell.

[See PDF for image]

Source: DOE.

[End of figure]

Fuel cells typically are classified according to their type of
electrolyte and fuel. Table 1 identifies the various types of fuel
cells and their uses.

Table 1: Fuel Cell Types and Examples of Their Applications:

Fuel cell type: Alkaline;
Examples of applications: Space exploration;
Operating temperature: 194-212[O] F;
Electric output (kilowatts): 10 - 100.

Fuel cell type: Phosphoric acid;
Examples of applications: Stationary and combined heat and power;
Operating temperature: 302-392[O] F;
Electric output (kilowatts): 50 - 1,000.

Fuel cell type: Proton exchange membrane;
Examples of applications: Vehicles, backup generators for emergency
service, mobile phones, and electronics;
Operating temperature: 122-212[O] F;
Electric output (kilowatts): Less than 250.

Fuel cell type: Molten carbonate;
Examples of applications: Electric utilities and other industrial
applications;
Operating temperature: 1,112-1,292[O] F;
Electric output (kilowatts): Less than 1,000.

Fuel cell type: Solid oxide;
Examples of applications: Electric utilities and other industrial
applications;
Operating temperature: 1,202-1,832[O] F;
Electric output (kilowatts): 5 - 3,000.

Source: DOE.

[End of table]

NASA began conducting R&D on hydrogen and fuel cells in the 1960s to
develop a simple alkaline fuel cell for the space program. However,
alkaline fuel cells do not work well for cars, in part because of their
propensity to be damaged by carbon dioxide. In response to the 1973 oil
embargo, the federal government began conducting R&D to improve
automobile efficiency and reduce the U.S. transportation sector's
dependence on oil by developing technologies for using alternative
fuels, including (1) ethanol from corn and other biomass, (2) synthetic
liquids from shale oil and liquefied coal, and (3) hydrogen directly
used in internal combustion engines. In 1977, DOE's Los Alamos National
Laboratory began R&D on fuel cells called polymer electrolyte membrane
or proton exchange membrane, which have a low operating temperature,
need only hydrogen and oxygen from the air, and are very efficient.
However, DOE and industry reduced R&D funding for alternative fuels
during the 1980s, when crude oil prices returned to historic levels.

DOE formed (1) an R&D partnership with the U.S. Council for Automotive
Research (USCAR)[Footnote 2] in 1993 and (2) the FreedomCAR Partnership
in 2002 to develop advanced technologies for cars, including hydrogen
fuel cells for vehicles. The hydrogen-related R&D elements of the
FreedomCAR became part of the Hydrogen Fuel Initiative. While DOE
conducts most of the initiative's R&D, which generally has focused on
developing fuel cells for vehicles, DOT also is a member of the
initiative, primarily focusing on regulatory issues related to the
safety of vehicles, pipelines, and transport of hydrogen. The Hydrogen
Fuel Initiative is also working with industry to demonstrate and deploy
other types of fuel cells for stationary and portable applications.

DOE further focused its hydrogen R&D in response to the National Energy
Policy issued in 2001, which highlighted hydrogen as one of several R&D
priorities. DOE hosted several meetings and workshops, including two
major workshops in 2001 and 2002 that were designed to develop an R&D
agenda and involved stakeholders from industry, universities,
environmental organizations, federal and state agencies, and national
laboratories.[Footnote 3] These meetings and workshops laid the
groundwork for identifying a common R&D vision and challenges, and each
DOE program has used meetings and workshops to develop separate
detailed R&D plans that set near-term and long-term targets to enable
commercialization decisions by 2015.

In February 2004, DOE integrated these plans into its first Hydrogen
Posture Plan, a single high-level agenda. The Hydrogen Posture Plan's
approach is to conduct R&D in multiple pathways within key technology
areas with the intent of providing several promising options for
industry to consider commercializing. For example, DOE is using a mix
of fossil, renewable, and nuclear energy to develop and demonstrate
technologies that can extract hydrogen from a variety of sources,
including natural gas, coal, biomass, water, algae, and microbes. DOE
officials state that they prioritize the most promising technologies
and terminate specific efforts that show little potential. Based on its
review of the posture plan, the National Academy of Engineering made 48
recommendations, most of which were incorporated by DOE, including
focusing on both applied and fundamental science R&D.[Footnote 4]

In addition to the R&D funded through the Hydrogen Fuel Initiative, DOE
conducts R&D on various other hydrogen-related technologies. For
example, the Office of Fossil Energy is working on a hydrogen-based
solid oxide fuel cell, with funding provided through the Solid State
Energy Conversion Alliance, for stationary applications of electricity
generation. Fossil Energy's R&D plan for extracting hydrogen from coal
complements a separately funded demonstration program called FutureGen.
The effort is designed to construct a prototype integrated gasification
combined-cycle coal power plant to be operational by 2015 that will
demonstrate production of hydrogen as well as reduced emissions. Fossil
Energy also funds R&D on the capture and sequestration of carbon
dioxide, considered an important area of R&D if coal is to be used as a
long-term source of hydrogen. The Office of Nuclear Energy's R&D plan
for producing hydrogen-using nuclear energy--called the Nuclear
Hydrogen Initiative--complements the separately funded Next Generation
Nuclear Plant program. The effort focuses on conducting R&D on a new
generation of nuclear power plants capable of producing large amounts
of hydrogen efficiently and economically. The first prototype is
scheduled to be operational between 2018 and 2021.

The Hydrogen Fuel Initiative Has Made Important Progress but Will
Require Significant Scientific Advances and Continued R&D beyond 2015
and Investment in Developing the Physical Infrastructure:

DOE's hydrogen R&D program has made important progress, but some target
dates have been pushed back, and further progress in certain areas will
require significant scientific advances and continued R&D beyond 2015.
Specifically, during its first 4 years, the Hydrogen Fuel Initiative
has achieved such targets as reducing the cost of extracting hydrogen
from natural gas, but other target dates have slipped as a result of
technical challenges and budget constraints. For example, DOE officials
and industry representatives stated that achieving targets for hydrogen
storage will require fundamental breakthroughs, while achieving targets
for other technologies will require significant scientific advances and
cost reductions. However, DOE has not updated its 2006 Hydrogen Posture
Plan's overall assessment of what the department reasonably expects to
achieve by its technology readiness date in 2015 and its anticipated
R&D funding needs to meet the 2015 target. Furthermore, full-scale
deployment of hydrogen technologies will require sustained industry and
federal investment, possibly for decades beyond 2015, to develop
supporting infrastructure.

The Hydrogen Fuel Initiative Has Made Important Progress, but Some
Target Dates Have Slipped, and Some Targets Require Significant
Scientific Advances:

According to DOE, key R&D targets to achieve technology readiness in
2015 focus primarily on (1) extracting hydrogen from diverse, domestic
resources at a cost equivalent to about $2 to $3 per gallon of
gasoline, (2) storing hydrogen on-board vehicles to enable a driving
range of at least 300 miles for most light duty vehicles, (3)
delivering hydrogen between two points for less than $1 per kilogram,
and (4) developing proton exchange membrane fuel cells that cost about
$30 per kilowatt and deliver at least 5,000 hours of service for
vehicles--which compares to about 150,000 miles in conventional
gasoline-powered vehicles--and at least 40,000 hours for stationary
applications. As shown in table 2, DOE has made progress on meeting
some of its near-term targets, in both applied and fundamental science,
important stepping stones for meeting DOE's 2015 targets.

Table 2: Status of Key Hydrogen Fuel Initiative Technologies and Target
Dates:

Technology: Fuel cell;
Target area: Cost[A];
Status: $107/kW;
Target (2010): $45/kW;
Target (2015): $30/kW.

Technology: Fuel cell;
Target area: Durability;
Status: 2,000 hours;
Target (2010): 5,000 hours (80�C);
Target (2015): 5,000 hours (80�C).

Technology: Storage;
Target area: System gravimetric capacity (net)[B];
Status: 2.3 wt%;
Target (2010): 6 wt%;
Target (2015): 9 wt%.

Technology: Storage;
Target area: System volumetric capacity (net)[C];
Status: 0.8 kWh/L;
Target (2010): 1.5 kWh/L;
Target (2015): 2.7 kWh/L.

Technology: Storage;
Target area: Cost[D];
Status: $15-$18/kW;
Target (2010): $4/kW;
Target (2015): $2/kW.

Technology: Production;
Target area: Cost, distributed natural gas[E];
Status: $3.00/gge;
Target (2010): $2.00-$3.00/gge;
Target (2015): $2.00-$3.00/gge.

Technology: Production;
Target area: Cost, distributed bio-derived renewable liquids;
Status: $4.40/gge;
Target (2010): $3.80/gge (2012 target);
Target (2015): <$3.00/gge (2017 target).

Technology: Production;
Target area: Cost, distributed water electrolysis;
Status: $4.80/gge;
Target (2010): $3.80/gge (2012 target);
Target (2015): <$3.00/gge (2017 target).

Technology: Production;
Target area: Cost, central wind-water electrolysis;
Status: validation (demonstrated in vehicles): $5.90/gge;
Target (2010): $3.10/gge (2012 target);
Target (2015): <$2.00/gge (2017 target).

Technology: Technology validation (demonstrated in vehicles);
Target area: Driving range;
Status: 200 miles;
Target (2010): 250 miles (2008 target);
Target (2015): 300 miles.

Technology: Technology validation (demonstrated in vehicles);
Target area: Efficiency;
Status: 53-58 percent;
Target (2010): (see 2015);
Target (2015): 60 percent.

Technology: Technology validation (demonstrated in vehicles);
Target area: Durability;
Status: 1,600 hours;
Target (2010): 2,000 hours (2009 target);
Target (2015): 5,000 hours.

Source: DOE.

[A] Cost projections are for 500,000 units per year.

[B] Measures usable hydrogen energy based on weight. Storage system
projections are based on complex metal hydride and include material,
tank, and balance of plant. Note that compressed tanks have capacities
of 3.5 to 4.7 weight percent and can enable partial market penetration.

[C] Measures usable hydrogen energy based on volume.

[D] Projection for 5,000 to 10,000 pounds-per-square-inch tanks;
assumes high volume manufacturing for 500,000 units.

[E] Modeled cost, delivered at the pump for dispensing at 5,000 pounds
per square inch; assumes large equipment volumes (e.g., 500 units).

[End of table]

Hydrogen Production:

For hydrogen to compete with gasoline, DOE must be able to produce
hydrogen at prices that approximate the cost of gasoline. Specifically,
in the near term, DOE must extract hydrogen from natural gas at a cost
of $2 to $3 per gallon of gasoline equivalent and, in the longer term,
develop biomass and biomass-derived liquids at similar costs or, for
large centralized production facilities, at costs less than $2 per
gallon of gasoline equivalent. DOE has established targets of less than
$2 per gallon of gasoline equivalent for extracting hydrogen from water
using wind energy and from coal using coal energy. The latter
technology must also demonstrate carbon capture and sequestration.
Other technologies being explored include producing hydrogen from
biological, photoelectrochemical, and nuclear processes, but are long-
term efforts.

Technologies for extracting hydrogen from diverse sources generally are
known and usually involve heat or chemical processes to separate
hydrogen from various compounds. DOE reported that it has met its
target of extracting hydrogen from natural gas through a process called
steam reformation, reducing cost to less than $3 per gallon of gasoline
equivalent, nearly one-half of the $5 per gallon of gasoline equivalent
that industry had achieved in 2003.[Footnote 5] As a result, DOE has
begun to phase out R&D in steam reformation of natural gas and plans to
focus its resources in higher priority areas, leaving industry to
continue to refine the steam reformation process and reduce its cost.
DOE, however, has pushed back its target dates for extracting hydrogen
from biomass and water using wind energy from 2015 to 2017.
Specifically, DOE is conducting research on reducing the cost of
extracting hydrogen from biomass-derived liquids such as ethanol, but
the cost of producing ethanol is still too high to make the
technologies competitive. DOE also is developing technologies to cost
efficiently extract hydrogen from biomass using a gasification process.
Gasification involves heating the biomass to a temperature high enough
to separate the hydrogen, but the gasification technologies do not yet
meet cost targets. DOE's Office of Fossil Energy leads the effort for
extracting hydrogen from coal--also using a gasification technology--
and has made progress in developing membranes that can separate
hydrogen in the 500 to 900 degrees Fahrenheit gasification process. The
R&D effort complements Fossil Energy's FutureGen program, which is
scheduled to have a 275-megawatt demonstration plant operational by
2015. DOE's Office of Nuclear Energy leads the effort to use nuclear
energy to produce hydrogen, primarily from water. These R&D efforts
involve development of a new generation of nuclear reactors that are
more efficient and operate at very high temperatures. The Office of
Nuclear Energy reports that an engineering-scale demonstration effort
for hydrogen production has been pushed back from 2017 to between 2018
and 2021.

Because steam reformation of natural gas reflects the most mature
technology, natural gas is expected to be the primary source of
hydrogen through the next 20 years. However, extracting hydrogen from
natural gas will simply substitute one fossil fuel for another with
similar vulnerabilities to supply disruptions and adverse environmental
effects. In the long term, DOE is developing technologies that rely on
renewable or nuclear energy from non-carbon-producing sources. DOE
officials noted that although the R&D efforts do not require
fundamental advances in science, they generally acknowledge that
developing the technologies will take years of applied scientific
effort before costs can be reduced enough to be competitive with
gasoline. One challenge, for example, is minimizing carbon or sulfur
impurities when extracting hydrogen from coal. Impurities can shorten
the life-span of the separation membranes used in the gasification
process and can also impact the life span and performance of fuel
cells. Although higher-temperature stationary fuel cells--such as solid
oxide fuel cells operating at temperatures exceeding 1,200 degrees
Fahrenheit--are more tolerant of impurities, lower temperature proton
exchange membrane vehicle fuel cells begin to fail when impurities are
present.

Hydrogen Storage:

For hydrogen fuel cell vehicles to compete with conventional gasoline
vehicles, DOE must develop technologies to store enough hydrogen on
board the vehicle to achieve a driving range of at least 300 miles
without compromising passenger or cargo space and while meeting all
consumer expectations for performance, safety, refueling ease, and
cost. In addition, DOE must develop technologies to store and dispense
enough hydrogen at fueling stations to meet consumer needs. None of the
current technologies have attained these requirements, and none is
likely to do so without fundamental scientific breakthroughs, according
to DOE officials and industry representatives. Although on a weight
basis, hydrogen has almost three times the energy content of gasoline,
it has almost four times less energy than gasoline on a volume basis.
This means DOE must store a much larger amount of hydrogen within
specified space constraints than gasoline to obtain equivalent amounts
of energy, raising the technical challenges and the cost.

Currently, hydrogen is most commonly stored as a gas, compressed under
high pressure, or is super-cooled to a liquid, but neither technology
is likely to meet DOE's 2015 performance and cost targets. For example,
hydrogen can currently be compressed to 10,000 pounds per square
inch,[Footnote 6] which is about the highest level of compression being
considered because of safety and cost concerns, yet this method stores
less than half the hydrogen necessary and is more than nine times the
cost needed to meet DOE's 2015 performance and cost targets. Similarly,
liquid hydrogen, which must be cryogenically maintained at negative 423
degrees Fahrenheit, typically requires about one-third of its energy
content to liquefy the hydrogen. Storing hydrogen in its denser liquid
form has a higher storage capacity than compressed hydrogen, but there
are challenges related to keeping the hydrogen insulated and losing
some hydrogen due to evaporation.

Scientists at Los Alamos National Laboratory succeeded in developing
materials that have the potential to meet DOE's 2010 technical targets
for chemically storing hydrogen, although it is not clear if the
materials will meet cost targets. The scientists used a liquid boron-
based compound to bind the hydrogen. Boron, from which the household
cleaner borax is derived, readily forms compounds with other chemicals
and can be recycled for reuse. The compound binds and releases hydrogen
and, in liquid form, can also be used to transport hydrogen through
pipelines or in trucks. The National Renewable Energy Laboratory has
also made significant progress in developing new nanostructure
materials. Scientists have designed these materials with pores at the
nanometer scale to resemble globes with many branches or foam
structures pocked with holes to significantly increase the surface area
on which to bind hydrogen. Recent efforts include manufacturing the
nanostructures with boron or calcium compounds, both of which bind and
release hydrogen. Likewise, scientists at Sandia National Laboratories
have also made progress, improving storage of hydrogen by 50 percent
between 2004 and 2006 by developing new materials that absorb hydrogen.

DOE is continuing R&D in compression and liquefaction of hydrogen, in
particular, because DOE contends that these technologies will be
important for early market penetration. However, for commercial scale
deployment of hydrogen technologies, DOE officials and industry
representatives agree that an alternative storage method must be found.
DOE's R&D focus is on developing new materials that can store hydrogen
without requiring high pressures or cryogenic temperatures. These areas
focus on developing new materials that can store hydrogen on the
surface of a material--called "adsorption;" absorb the hydrogen into a
material; or bind the hydrogen within a chemical compound. Adsorption
and absorption R&D typically involve nanotechnology to develop new
materials structured to increase surface area. Chemical storage of
hydrogen has additional challenges, including processing centers that
would be needed to bind and release hydrogen from the chemical carrier
before the hydrogen can be used by consumers, raising the overall
costs. In the last few years, a number of materials have been
developed, but not within the energy, temperature, or cost required for
commercial scale deployment.

Hydrogen Delivery:

Successful commercialization of hydrogen fuel cell technologies--
particularly hydrogen fuel cell vehicles--will depend upon a hydrogen
delivery infrastructure that provides the same level of safety,
convenience, and functionality as the existing gasoline delivery
infrastructure. The delivery infrastructure will initially need to
support hydrogen production at small facilities distributed throughout
the country and, eventually, larger centralized facilities. The
delivery infrastructure includes operations at the refueling site
itself, such as compression, storage, and dispensing, as well as the
actual delivery of hydrogen. DOE developed its 2015 targets with
significant input from industry. Specifically, DOE used a sophisticated
model for estimating hydrogen delivery costs for a city the size of
Indianapolis with 50 percent of the vehicles being hydrogen fuel cell
vehicles and with central production of hydrogen located 60 miles from
the city's edge. DOE determined that the cost of delivering hydrogen to
fueling stations must be less than $1 per gallon of gasoline
equivalent. This cost includes operations at the delivery site, such as
transferring the hydrogen to storage or dispensing equipment. To put
DOE's R&D requirements in perspective, the cost of delivering gasoline
from a Gulf Coast refinery to a fuel pump in Dallas, Texas, has been
estimated at about $0.18 per gallon.

Currently, hydrogen is delivered by truck as a liquid or gas or by a
modest pipeline infrastructure, but at delivery costs mostly ranging
from $4 to $9 per gallon of gasoline equivalent, significant advances
must be made to reduce costs to meet DOE's targets. Hydrogen is
difficult to deliver economically using conventional methods because
the hydrogen atom is small and diffuses rapidly, making it difficult to
design equipment to prevent leakage. Hydrogen can also corrode the
steel used in pipes and trucks, which make up the bulk of current
conventional delivery systems. Trucks can carry about 10 times more
liquid hydrogen than gaseous hydrogen, but since liquefying hydrogen
requires so much energy, hydrogen generally is delivered in gaseous
form by truck for distances less than 200 miles and in liquid form for
greater distances. In addition, about 630 miles of pipelines currently
deliver hydrogen, primarily located near oil refineries mostly along
the Gulf Coast where hydrogen predominantly is used. This
infrastructure is modest compared to the over 1.5 million miles of
pipelines that already deliver natural gas, oil, and other petroleum-
related products in the country. Although these pipelines meet the
specific hydrogen needs of industry, they must be operated at a
constant pressure and they cost on the order of $1 million per mile.
Moreover, hydrogen causes brittleness in pipelines, raising concerns
about using current materials to build a larger hydrogen pipeline
infrastructure, particularly where line pressures may vary.

DOE's priorities in R&D focus on reducing costs for delivering hydrogen
in liquid form by truck, in gas form by pipeline, and by binding the
hydrogen to a chemical carrier. Specifically, DOE is continuing its R&D
on cryogenic liquefaction of hydrogen to decrease costs and encourage
near-term deployment of hydrogen technologies. DOE is also conducting
R&D to develop new composite materials for pipes or to develop pipe
liners to prevent leaks and pipe failures due to embrittlement.
Brittleness in pipes carrying hydrogen is not well understood, and some
R&D efforts focus on understanding hydrogen's reaction with pipe
materials. Once hydrogen technology deployment reaches commercial
scale, pipelines provide the lowest cost delivery option. DOE is also
researching the potential for delivering hydrogen in chemical form by
binding hydrogen to various chemical compounds, alleviating the need
for cryogenic liquefaction of hydrogen and improving delivery through
pipelines. The chemical compounds include liquids and solids, as well
as powders that could flow through pipelines. DOE's R&D focuses on a
carrier that could substantially increase carrying capacity of hydrogen
for more economic delivery through conventional delivery systems, such
as pipelines and trucks. However, no chemical carrier has yet been
identified that has the optimal combination of high carrying capacity
and low energy requirements for binding and releasing hydrogen.
Additional R&D focuses on purifying hydrogen that has been transported,
since impurities may reduce the life span and operating efficiency of
fuel cells.

Fuel Cells:

To be competitive, vehicle fuel cells must have a similar life-span and
similar vehicle packaging requirements and be able to operate in the
same conditions as gasoline-powered engines. Specifically, vehicle fuel
cells must have a life span of about 5,000 hours--equivalent to about
150,000 miles of vehicle travel. Furthermore, fuel cells must be able
to operate in environments with temperatures ranging from minus 40
degrees to 104 degrees Fahrenheit and must be able to start up quickly
at low temperatures with minimal energy consumption. In addition, the
cost of commercial scale production of vehicle fuel cells must drop
from the current $107 per kilowatt to $30 per kilowatt--nearly a
quarter of the current cost--to meet DOE's 2015 target.[Footnote 7]
Stationary fuel cells must have a longer life span than those for
vehicles, up to 40,000 hours, equivalent to about 4.5 years of
continuous operation.

In the early 1990s, DOE estimated the cost of manufacturing fuel cells
at high volume to be about $3,000 per kilowatt. Since then, DOE's focus
has been on materials that can reduce costs at high volume. DOE
succeeded in reducing manufacturing costs at high volume to $175 per
kilowatt in 2004 and about $107 per kilowatt in 2006. The cost
reductions have been achieved primarily by reducing the amount of
platinum required as a catalyst and developing less expensive
membranes. DOE is just beginning to focus R&D efforts on improving
processes for commercial scale manufacture of fuel cell components. In
particular, DOE has announced its intention to fund R&D for commercial
scale manufacture of fuel cells for stationary applications.

DOE has achieved a life span of about 1,600 hours for vehicle fuel
cells, but has not yet demonstrated start-up from sub-freezing
temperatures. In addition, although DOE has reduced the cost of fuel
cells, significant gains in cost remain to be achieved, in part,
because fuel cells rely on platinum catalysts. Platinum, which is in
high demand primarily for use in catalytic converters for automobiles
and as jewelry, is the only catalyst that can sufficiently generate
enough power at low operating temperatures to operate a vehicle. To
reduce the cost of fuel cells, DOE's target focuses on decreasing the
amount of platinum used in 2005 by more than 80 percent in 2015. DOE
officials noted that Los Alamos National Laboratory has succeeded in
reducing platinum requirements and improving performance of fuel cells,
but they also noted that reliance on the current amount of platinum--
considering its rising costs--poses significant challenges to reducing
the costs enough to meet the 2015 targets. In addition, DOE has not yet
met the size and weight packaging requirements of the automobile
manufacturers for fuel cells. Complex equipment, such as heat
exchangers and humidifiers, must be added to the fuel cell to keep it
operating at its current 140 to 176 degrees Fahrenheit in a controlled
environment of 80 to 100 percent relative humidity. Furthermore,
impurities in the hydrogen fuel stream, such as sulfur compounds and
carbon monoxide, reduce the performance of the fuel cell. Removing or
managing the impurities raises overall costs. Regarding R&D for fuel
cells for stationary applications, DOE has demonstrated a life span of
about 20,000 hours, about one-half the life span required to meet DOE's
targets.

DOE's fuel cell R&D focuses on reducing costs and improving durability
by (1) developing alloys that contain less platinum, (2) developing
substitutes for platinum, and (3) developing fuel cells that operate at
slightly higher temperatures and lower relative humidity to reduce
complex equipment and increase tolerance to impurities. More
specifically, DOE is conducting R&D to develop new electrodes for fuel
cells that can be manufactured with less platinum, but can increase
durability. DOE is also pursuing R&D on developing less-expensive,
better performing substitutes for platinum, but DOE has not yet found a
substitute that matches the performance of platinum, particularly in
terms of achieving the power needed to operate a fuel cell vehicle. In
addition, DOE has recently focused R&D on developing fuel cells that
operate at 248 degrees Fahrenheit and lower relative humidity to reduce
or eliminate complex equipment and increase tolerance to impurities.
DOE has not yet developed new materials that meet these
characteristics. Fuel cells for stationary applications generally do
not have the same weight and size restrictions as for vehicle
applications, nor do they have the same rapid fluctuation in power
demand as vehicles, but they do have similar issues regarding cost and
durability.

DOE Has Not Updated Its Plan to Assess the Impact of Delays in Meeting
Some Key Target Dates on Technology Readiness or Projected the
Initiative's Costs through 2015:

DOE has made important progress in many areas of R&D, but some target
dates have been pushed back, primarily as a result of technical
challenges and budget constraints, according to DOE officials. Although
some industry representatives believe that having ambitious targets is
good, they noted that the target dates for certain technologies are
very ambitious, particularly given the requirements of incorporating
the technology into an integrated system that can be commercially
deployed in a real-world environment. For example, although DOE has
demonstrated considerable progress in developing new materials for
storing hydrogen, the current materials being investigated operate in
temperatures ranging from minus 300 degrees Fahrenheit to more than 700
degrees Fahrenheit. Of these, only a few fall within DOE's much more
narrow target range for operating temperatures and none meet DOE's cost
targets.

Table 3 shows that funding for the Hydrogen Fuel Initiative totaled
nearly $1.2 billion for fiscal years 2004 through 2008. Some HTAC and
industry representatives believe that $1.2 billion over 5 years is
insufficient to meet DOE's ambitious technical and cost targets.
Furthermore, congressionally directed projects--primarily for
activities outside the initiative's R&D scope--accounted for almost 25
percent of the Hydrogen Fuel Initiative's budget for fiscal years 2004
through 2006.

Table 3: Funding for the Hydrogen Fuel Initiative, Fiscal Years 2004
through 2008:

Office: Basic Science;
Fiscal year: 2004: $0;
Fiscal year: 2005: $29.2;
Fiscal year: 2006: $32.5;
Fiscal year: 2007: $36.4;
Fiscal year: 2008 request[A]: $59.5;
Fiscal year: Total: $157.6.

Office: Fossil Energy;
Fiscal year: 2004: 4.9;
Fiscal year: 2005: 16.5;
Fiscal year: 2006: 21.0;
Fiscal year: 2007: 23.6;
Fiscal year: 2008 request[A]: 12.5;
Fiscal year: Total: 78.5.

Office: Nuclear Energy;
Fiscal year: 2004: 6.2;
Fiscal year: 2005: 8.7;
Fiscal year: 2006: 24.1;
Fiscal year: 2007: 19.3;
Fiscal year: 2008 request[A]: 22.6;
Fiscal year: Total: 80.8.

Office: Energy Efficiency and Renewable Energy;
Fiscal year: 2004: 144.9;
Fiscal year: 2005: 166.8;
Fiscal year: 2006: 153.5;
Fiscal year: 2007: 193.6;
Fiscal year: 2008 request[A]: 213.0;
Fiscal year: Total: 871.7.

Total DOE;
Fiscal year: 2004: $156.0;
Fiscal year: 2005: $221.2;
Fiscal year: 2006: $231.0;
Fiscal year: 2007: $272.8;
Fiscal year: 2008 request[A]: $307.6;
Fiscal year: Total: $1,188.5.

Total DOT;
Fiscal year: 2004: $0.6;
Fiscal year: 2005: $0.5;
Fiscal year: 2006: $1.4;
Fiscal year: 2007: $1.4;
Fiscal year: 2008 request[A]: $1.4;
Fiscal year: Total: 5.36.

Total Hydrogen Fuel Initiative;
Fiscal year: 2004: $156.5;
Fiscal year: 2005: $221.7;
Fiscal year: 2006: $232.5;
Fiscal year: 2007: $274.2;
Fiscal year: 2008 request[A]: $309.0;
Fiscal year: Total: $1,193.9.

Percent of funds congressionally directed[B];
Fiscal year: 2004: 28;
Fiscal year: 2005: 21;
Fiscal year: 2006: 20;
Fiscal year: 2007: 0;
Fiscal year: 2008 request[A]: [A];
Fiscal year: Total: [Empty].

Source: DOE.

Note: We present funding data solely for background purposes. The
reliability of the database from which these data were drawn was
thoroughly assessed in our December 2006 report entitled Department of
Energy: Key Challenges Remain for Developing and Deploying Advanced
Energy Technologies to Meet Future Needs (GAO-07-106). For the current
report, we updated the prior assessment of data reliability and
discussed the accuracy of the hydrogen funding data with cognizant DOE
officials. We found these data to be sufficiently reliable for the
purposes of this report. The dollar amounts were not adjusted for
inflation.

[A] Reflects the President's budget proposal for fiscal year 2008.

[B] Includes funds designated for particular purposes through
legislative language or directives in congressional reports.

[End of table]

In response to both budget constraints and technical challenges, DOE
has pushed back target dates for certain key technologies--the target
date for using wind energy to produce hydrogen was pushed back from
2015 to 2017--and reduced funding for stationary and portable
applications that might, through early penetration in small markets,
resolve technical issues and stimulate public acceptance of hydrogen
vehicles. However, DOE's hydrogen program manager expressed confidence
that DOE remains on schedule for the higher priority targets.
Nevertheless, because some target dates have been pushed back 2 or more
years, what DOE currently projects for technology readiness in 2015
differs from its original set of expectations laid out in the 2004
Hydrogen Posture Plan. DOE has not updated its 2006 posture plan for
the Congress and industry to more clearly identify what technologies
will be ready for industry to consider when making commercialization
decisions in 2015, nor has it projected anticipated costs to achieve
technology readiness. For example, because some target dates have
slipped 2 or more years, the cost of meeting some of the technical
targets may exceed DOE's original planned estimates. However, DOE has
not updated estimates of the funding needed to achieve its technology
readiness target in 2015. DOE's Office of Energy Efficiency and
Renewable Energy projects that its hydrogen R&D budget will total $750
million for fiscal years 2009 through 2012.

DOE officials and industry representatives told us that R&D will need
to continue beyond 2015 because some interim target dates have been
pushed back. Furthermore, they said that even after the initial
technical targets are met, R&D will need to continue well beyond 2015
to further refine and sustain the developing hydrogen technologies. DOE
officials noted that they had always planned to conduct R&D beyond the
2015 target date. The officials pointed out that DOE is still
conducting R&D to improve conventional gasoline engines, even though
the engines have been in use for over 100 years, and that they always
have been planning to do the same for hydrogen technologies.

Developing the Physical Infrastructure to Support Commercial Deployment
of Hydrogen Technologies May Require Decades:

Industry would have to match the convenience of the conventional
infrastructure to compete with conventional technologies on a
commercial scale, particularly gasoline vehicles, requiring investments
of tens of billions of dollars that will most likely take decades to
accomplish. To meet the production of hydrogen if fuel cell vehicles
replaced an estimated 300 million gasoline vehicles, DOE reports that
over 70 million tons of hydrogen would need to be extracted from
various sources each year, requiring the construction of new production
facilities throughout the country. Currently, the United States has
approximately 132 operating refineries and 1,300 petroleum product
terminals that deliver petroleum products to more than 167,000 retail
service stations, truck stops, and marinas located throughout the
country. Typical gasoline stations dispense about 1,500 gallons of
gasoline each day, but store several times that amount on site, usually
in underground tanks. DOE officials acknowledged that investments in a
hydrogen infrastructure would be considerable, but noted that the
gasoline infrastructure also required investments of tens of billions
of dollars and took decades to develop.

Currently, U.S. industries produce over 9 million tons of hydrogen
annually, primarily to refine petroleum, manufacture fertilizer, and
process foods, most of which are produced near end-use along the Gulf
Coast and in California to avoid the high cost of delivery. Current
production reflects about one-eighth of the projected need and most of
it is localized in specific areas. Facilities capable of extracting
hydrogen economically will have to be constructed throughout the
country. Some of these facilities could be co-located with existing
gasoline fueling stations, but some stations have spatial limitations
that raise challenges of using them. Also, the current cost of
delivering hydrogen does not meet cost targets and cannot compete with
the gasoline infrastructure. Although pipelines represent more
attractive economics for delivering hydrogen than delivery by truck at
high market penetration, they reflect high initial capital investments,
estimated at about $1 million per mile. One industry official estimated
that building new pipelines along interstate highways capable of
serving about 75 percent of the U.S. population would cost
approximately $14 billion, assuming there would be no barriers
prohibiting the effort. The development and use of carriers may allow
use of the existing pipeline infrastructure and may also resolve some
embrittlement concerns, but such carriers also raise other technical
and cost challenges, such as storage and recycling of the chemical
carriers. For example, existing gasoline stations--already stretched
for space--could face additional challenges if equipment were needed on
site to separate the hydrogen from a chemical carrier, purify the
hydrogen, and store the chemical carrier so it can be returned to a
central facility for recycling. Although new fueling stations could be
constructed, industry has estimated the construction of new fueling
stations at about $1 to $2 million each.

In addition, other issues, such as safety codes and standards, may
impact investment decisions. For example, one industry representative
noted that safety concerns among local approving officials, among other
things, may prevent some conventional hydrogen storage systems from
being buried underground, as is common with gasoline tanks. The
National Hydrogen Association also reports that industry must put a lot
of energy and resources into educating local officials on codes and
standards involving hydrogen-related technologies. Even if hydrogen-
related technologies are approved, they often carry a cost premium. For
example, typical gasoline dispensing nozzles cost about $40 to $110,
but hydrogen dispensing nozzles currently cost about $4,000 each. Some
high costs could be expected to drop with high-volume manufacturing and
competition.

DOE officials and industry representatives also acknowledged the high
degree of risk for investors, noting that there are other near-term and
mid-term options for stationary and vehicle energy technologies. They
speculated that transitioning to hydrogen fuel cell technologies will
most likely start small, in localized markets relying on the current
infrastructure to minimize risk. For example, fuel cell vehicles might
start in cities such as Los Angeles or New York, but within limited
areas where there is a supporting infrastructure. They agreed that
broader expansion of hydrogen fuel cell technologies into the market
would likely cost investors tens of billions of dollars in
infrastructure costs and will take decades. Several energy companies
and electric utilities told us that they were unlikely to invest in the
hydrogen infrastructure in the near term because of the high cost and
high risk and, although they expressed interest in investing in the
long term, they did not have definitive plans about what investments
they might make. Nonetheless, DOE officials and industry
representatives stated that transitioning to hydrogen technologies will
require a sustained commitment by both industry and the federal
government. For example, industry representatives stated that federal
tax credits for fuel cell technologies have been authorized for only a
few years at a time--too short for industry to consider when making
long-term investment decisions.

To better understand real-world infrastructure challenges in
transitioning to hydrogen fuel cell technologies, DOE has several
ongoing demonstration projects and modeling analyses. The primary goal
of the technology validation effort is to demonstrate complete,
integrated systems in a real-world environment. Although individual
components may meet DOE's performance targets, the complete system may
not function as intended because of integration problems or
unanticipated real-world operating conditions. DOE's Controlled
Hydrogen Fleet and Infrastructure Demonstration and Validation Project,
which has paired auto companies with energy companies, in 2007 is
testing 77 hydrogen fuel cell vehicles and 14 hydrogen refueling
stations in real-world conditions around the country to evaluate
performance in different climates and usage patterns. The demonstration
project is expected to grow to 130 hydrogen fuel cell vehicles and at
least 18 hydrogen fueling stations in 2008. Individuals drive the
hydrogen fuel cell vehicles as they would a gasoline vehicle: to work
or to the store and fill up their vehicles at hydrogen fueling
stations.

Using information from this demonstration project and from
sophisticated modeling analyses, DOE officials and industry
representatives reported that the initial deployment of hydrogen
technologies in the market will most likely rely on technologies that
do not require a new infrastructure. Specifically, they noted that
natural gas--using steam reformation--will most likely remain the
dominant source of hydrogen in the near-to mid-term. They envisioned
that small amounts of hydrogen extracted mostly from natural gas at
multiple points distributed around the country would be sufficient to
meet initial demand. In addition, this distributed approach requires
less capital investment. DOE officials and industry representatives
noted that substantial changes to the infrastructure eventually will be
needed to not only support large-scale production and delivery of
hydrogen, but also to support multiple sources from which to extract
hydrogen to minimize reliance on natural gas. As the demand for
hydrogen grows, large centralized facilities for extracting hydrogen
will be needed to take advantage of economies of scale. The centralized
extraction of hydrogen will require deliveries over greater distances
and, correspondingly, greater investments in the delivery
infrastructure. Similarly, as the demand for hydrogen grows, there must
be more stations where consumers can conveniently purchase hydrogen for
vehicles or for stationary or portable applications.

DOE Has Partnered Well with Industry on Vehicle Technologies, but
Efforts to Develop Stationary and Portable Technologies Are Too New to
Evaluate:

DOE has effectively solicited industry input and has worked to align
R&D priorities, particularly for developing vehicle technologies.
However, DOE has just begun to prioritize resources to develop
stationary and portable technologies, which are much closer to being
ready for commercial application and could play a role in laying the
groundwork for vehicle technologies. Industry representatives
acknowledge DOE's efforts, but note that they are too new to evaluate.
Nevertheless, industry representatives stated that DOE generally has
managed and coordinated its hydrogen R&D resources well.

DOE Has Effectively Involved Industry and Other Stakeholders:

Industry executives told us that DOE's efforts to involve industry
early in the planning stages and its ongoing efforts to solicit
industry feedback on priorities have been effective in keeping the R&D
agenda focused and headed in the right direction. Although industry
representatives have sometimes disagreed about DOE's priorities, they
generally agreed that DOE has institutionalized processes to
effectively solicit feedback from industry. Just as importantly, DOE
officials noted that being a presidential initiative with congressional
backing has helped Hydrogen Fuel Initiative managers to garner support
from industry and within the federal government.

DOE's workshops in 2001 and 2002 involved industry and independent
experts at the earliest stages of planning an R&D agenda and laid the
groundwork for identifying market challenges and technical targets that
could lead to the development and deployment of hydrogen and fuel cell
technologies. The launch of Hydrogen Fuel Initiative in 2004
accelerated hydrogen R&D efforts, resulting in a more detailed R&D
agenda. DOE asked the National Research Council and the National
Academy of Engineering to review this agenda and implemented 46 of the
National Academies' 48 recommendations.[Footnote 8] For example, DOE
implemented a systems analysis and integration effort to (1) integrate
R&D on hydrogen production, delivery, and storage; and fuel cells; (2)
safety codes and standards; (3) monitor progress toward technology
targets; and (4) provide education on the benefits of and challenges to
transitioning to hydrogen technologies. In addition, the initiative has
facilitated ongoing communication with industry through annual merit
reviews, workshops, technical teams, HTAC, and other coordination
mechanisms.

DOE's annual merit review is a primary way to disseminate information
and get feedback on the merit of its hydrogen and fuel cell R&D
projects from industry, independent experts, and other DOE officials.
The most recent review, held in May 2007, showcased approximately 300
projects, with the principal investigators presenting status and
results. Industry representatives stated that annual reviews are useful
and have become a valuable tool to provide feedback to DOE on
prioritizing the R&D agenda.

DOE also has funded a number of workshops to solicit industry input on
a range of topics, including fuel cells, education, and codes and
standards. For example, DOE's Office of Science conducted a workshop in
May 2003 to identify the key areas where basic science R&D could
contribute toward transitioning to hydrogen technologies. The workshop
resulted in a report that has served the Office of Science as a guide
for continued R&D efforts. In addition, in June 2007, DOE's hydrogen
storage program held a 1-day meeting to identify techniques for
enhancing research on advanced hydrogen storage materials, with
participants from industry, academia, and DOE's national laboratories.
Industry representatives stated that workshops are an important
collaboration channel.

To solicit industry feedback on the progress, priorities, and direction
of the hydrogen R&D program, DOE established 11 technical teams
responsible for reviewing R&D progress in specific technologies. These
teams, co-chaired by industry and DOE, meet monthly and include
industry representatives with requisite expertise in hydrogen
technologies. The technical teams exchange information and jointly
review all projects at least once a year. For example, through one of
the technical teams on fuel cells, industry provided information on
optimal relative humidity when DOE began work on high temperature fuel
cells. The technical teams also provide an informal forum outside
regular meetings for frequent exchanges among scientists. The National
Academies noted the creation of technical teams as an important
achievement, and industry representatives stated that tech teams help
transfer automakers' requirements to the R&D portfolio.

HTAC, made up of industry executives and outside experts, also provides
advice to the Secretary of Energy on technical and programmatic issues
related to DOE's hydrogen R&D program. HTAC hosts periodic meetings,
which DOE officials attend, to review budget status, discuss R&D plans,
and propose changes. In its September 2007 report to the Secretary of
Energy, HTAC recommended, among other things, that DOE elevate the role
of hydrogen in the national energy portfolio. HTAC also expressed its
pleasure with the DOE hydrogen R&D program's use of best management
practices, including peer review in its solicitation processes,
assessment of technical progress, individual project selection and
monitoring, and overall program management.

DOE also obtains feedback from industry and academia through its
Centers of Excellence. To facilitate storage R&D, DOE coordinated the
creation of three Centers of Excellence to work on R&D in both applied
and fundamental science. Each center is led by a DOE national
laboratory and has about 15 industry and academic partners.

In addition, a DOE program dedicated to commercialization efforts
exchanges information with industry on DOE activities, including
hydrogen R&D, and explores potential for commercial development
opportunities. Another program focused on market transformation works
to build partnerships with industry and federal, state, and local
governments to foster the early adoption of hydrogen and fuel cell
technologies.

Furthermore, DOE is active at the state and local level and
participates in numerous organizations that bring together a range of
groups to foster the development and deployment of hydrogen technology.
For example, DOE is involved in the California Fuel Cell Partnership, a
group of auto, fuel, and fuel cell technology companies and government
agencies working to deploy fuel cell vehicles on state roads.

In response to industry feedback, DOE has shifted R&D priorities and
expanded industry participation. For example, during the past decade,
DOE funded R&D of on-board fuel processing, the concept of embedding
equipment in a vehicle to generate hydrogen from a fuel source such as
methanol. In 2004, DOE commissioned the National Renewable Energy
Laboratory to convene an independent review panel to provide a
technical go/no-go recommendation regarding on-board fuel processing
R&D. The panel recommended a no-go decision, and DOE concurred.
Automakers praised the decision, realizing that on-board fuel
processing R&D was too costly for a technology that did not appear to
be viable by the target date. In addition, partly as a result of
feedback from auto manufacturers, DOE expanded FreedomCAR in 2003 to
include energy companies. The idea stemmed from the need to coordinate
the development of vehicles with the fueling infrastructure, involving
such major energy companies as ConocoPhilips, British Petroleum (BP),
Shell, Chevron, and ExxonMobil. Through FreedomCAR, DOE, energy
companies, and car companies conduct joint R&D planning and technical
activities.

Overall, although industry representatives reflected a wide variety of
viewpoints on DOE's priorities, they generally agreed that DOE had done
a good job of soliciting input. A general consensus among senior
executives noted that DOE's processes to solicit industry input and
focus on key areas for R&D has been well-organized. The National
Hydrogen Association, an industry group, suggested that DOE's efforts
have turned out to be a good investment and praised technical goals and
progress. USCAR representatives stated that DOE is placing the right
emphasis on the key issues and that domestic auto makers maintain a
good relationship with DOE.

DOE Has Begun to Address Industry Concerns on Stationary and Portable
Technologies, but Its Efforts Are Too New to Evaluate:

Industry representatives note that because stationary and portable
technologies may have more near-term market potential than vehicle
technologies, they may be integral to resolving technical or
infrastructure challenges and developing the public acceptance
necessary to deploy hydrogen nationally. According to industry
representatives, stationary and portable research can benefit hydrogen
technology development and maturation, particularly for fuel cell
vehicles. For example, suppliers and manufacturers need near-term
opportunities to remain in business and to improve manufacturing
processes, which will eventually benefit fuel cell vehicles by creating
a supply base and fostering innovation. An industry representative
noted that parts suppliers otherwise may not survive until vehicle
technologies are ready in 10 to 20 years. In addition, HTAC stated that
increasing the level of R&D on portable and stationary power systems
would reduce the technical and market risks associated with longer-term
vehicle applications.

Industry has expressed concerns that DOE has focused on developing
vehicle technologies and has given less priority to stationary and
portable technologies. At its May 2007 meeting, HTAC suggested that DOE
has not focused enough on stationary and portable fuel cell R&D. Senior
executives of companies told us they had urged DOE to focus more on
demonstrating near-term stationary and portable technologies. The U.S.
Fuel Cell Council and the National Hydrogen Association also stated
that stationary fuel cell research had been overlooked and underfunded.
DOE noted that it had focused on vehicle R&D because of the significant
energy savings in the transportation sector.

Industry representatives stated that DOE has responded to industry's
input. Senior executives from industry told us that DOE's support for
stationary and portable R&D has grown substantially in the past year
and that DOE has done a good job of incorporating this R&D into its
program. In June 2007, to facilitate early adoption of hydrogen and
fuel cell technologies, DOE sought input from industry, non-profit
organizations, and local, state, and federal agencies to identify
hydrogen and fuel cell applications in stationary and portable power.
Such applications could include, for example, backup power
installations for telecommunications providers and public schools
designated as emergency shelters, warehouse lift-trucks currently
employing battery or internal combustion systems, and portable fuel
cells for battery operated devices. DOE has also begun to emphasize
near-term stationary and portable market applications by providing a
grant opportunity for hydrogen and fuel cell systems manufacturing R&D
focusing on technologies that are near commercialization.

Industry representatives acknowledged DOE's efforts but noted that
these efforts are too new to evaluate because DOE had not devoted as
many resources to them as it had to vehicle technologies. A
representative from the National Hydrogen Association, however, stated
that DOE's recent emphasis on high-volume manufacturing is a good sign
and could facilitate early market penetration of fuel cells.

DOE Has Effectively Coordinated with Other Federal Agencies at the
Working Level, but Efforts at the Policy Level Have Just Begun:

DOE's interagency coordination efforts among working level managers and
scientists have been productive and useful, but coordination with
senior officials at the policy level just began with the August 2007
establishment of the Interagency Task Force. At the working level, DOE
has established several interagency bodies to facilitate cooperation
and share knowledge--in particular, the Interagency Working Group on
Hydrogen and Fuel Cells (IWG) has contributed to implementing hydrogen
technology partnerships between DOE, DOT, and DOD and has created Web-
based tools and joint workshops to facilitate coordination of research
activities. At the policy level, however, the Interagency Task Force
has not yet clearly defined its overall role and strategy, but members
intend to formulate a plan by May 2008.

DOE Has Effectively Coordinated with Other Federal Agencies at the
Working Level:

Overall, working level officials--program managers, analysts, engineers
and others who implement hydrogen R&D--at the federal agencies
primarily involved in hydrogen-related activities generally told us
they were satisfied with the level of interagency coordination. The
primary coordination mechanism, the IWG, was created in 2003 and is
jointly chaired by DOE and the Office of Science and Technology Policy.
It provides a forum for coordinating interagency policy, programs, and
activities related to safe, economical, and environmentally sound
hydrogen and fuel cell technologies. The IWG meets monthly to help
prioritize and coordinate the roughly $500-million portfolio of federal
hydrogen and fuel cell R&D, part of which is funded by the Hydrogen
Fuel Initiative. In addition to DOE, the primary federal agencies
involved in hydrogen R&D include:

* DOT's hydrogen program, with approximately $1.4 million in annual
Hydrogen Fuel Initiative funding, is focused on conducting R&D and
deployment activities necessary to safely and reliably prepare the
transportation system for hydrogen technology use. Its activities
include pipeline technology research aimed at developing methods to
safely and efficiently transport hydrogen, codes and standards
formulation to ensure an appropriate regulatory regime, and capacity
planning to smooth operation of the transportation infrastructure. In
addition, DOT has a separately funded a $49 million bus demonstration
program to facilitate the development of commercially viable fuel cell
technologies in real- world environments.[Footnote 9]

* DOD receives no funding under the Hydrogen Fuel Initiative; however,
it has several entities involved in hydrogen-related activities. For
example, the Defense Logistics Agency has spent $11.7 million on a fuel-
cell powered fork lift program and a solid hydrogen storage
program,[Footnote 10] the Army supports a small amount of fuel cell
R&D, and the Navy has deployed fuel cells at several installations and
is conducting R&D in several areas, including for unmanned underwater
vehicles.

* NASA is the largest user of hydrogen in the United States, employing
it as fuel for rocket launches. NASA conducts limited hydrogen-related
R&D but is interested in coordinating with DOE on a proposed project to
demonstrate stationary fuel cells to generate electricity at NASA's
White Sands Test Facility.

* The U.S. Postal Service conducted a 3-year hydrogen fuel cell
demonstration program with mail delivery vehicles at test sites in
Virginia and California. Plans are underway to continue the effort
using the next generation of hydrogen vehicles in partnership with
General Motors and DOE. In addition, the Postal Service is considering
hydrogen technology as an option for its planned replacement of its
fleet of about 215,000 vehicles in 2018.

* The Department of Commerce's National Institute of Standards and
Technology (NIST) is working with federal agencies and standards
organizations on a variety of activities including certification of
hydrogen fuel dispensers, hydrogen quality standards, building safety
standards, and pipeline safety standards. In partnership with DOE, NIST
also is conducting manufacturing R&D and imaging research to
investigate how water moves through fuel cells to better understand
their operation.

As the main interagency coordination vehicle, the IWG has contributed
to implementing hydrogen technology partnerships among agencies and
created communication channels to coordinate R&D activities, such as ad-
hoc groups, joint workshops, and Web-based tools. In August 2007, DOE
and NIST signed an interagency agreement to coordinate development of
standards, test procedures, and test methods for hydrogen fuel purchase
and delivery. DOE has also partnered with the Postal Service to field
test fuel-cell-powered mail delivery trucks. In addition, recent IWG
efforts to highlight near-term opportunities for federal agencies to
procure commercially available hydrogen and fuel cell technologies have
been successful. For example, the Defense Logistics Agency has
announced plans to deploy over 70 fuel-cell-powered forklifts at three
defense parts depots in the United States, an initiative that spurred
additional cooperation with DOT. Moreover, the Army is demonstrating
mobile fuel-cell auxiliary power units, and the Navy has installed
solid-oxide stationary fuel cells that supply power for shore
facilities.

Other IWG activities have resulted in the creation of ad-hoc groups. As
a result of a 2005 memorandum of understanding on hydrogen R&D, DOE and
the Department of Agriculture established an Ad Hoc Committee on
Biomass Production of Hydrogen, which meets just prior to regular IWG
meetings and focuses on collaboration related to advancing hydrogen
production from biomass and hydrogen-related agricultural applications.
Also in 2005, as part of the IWG, DOT established an Ad Hoc Committee
on a Regulatory Framework for the Hydrogen Economy that includes DOE,
the Environmental Protection Agency, the U.S. Coast Guard, and the
Department of Labor. The committee has developed a framework for the
safe commercial application of hydrogen and fuel cell technologies.

The IWG also facilitated the creation of joint workshops. In April
2005, DOE, DOD, NASA, and the National Science Foundation facilitated a
session on small business innovation at the National Hydrogen
Association's annual meeting. That session featured success stories
from several small business owners. DOE, NASA, and DOD held a workshop
on modeling and simulating hydrogen combustion in February 2006. More
recently, in August 2007, NIST and DOE participated in a conference on
understanding potential impacts of delivering hydrogen through
pipelines.

The IWG also has created a publicly accessible Web site, which includes
links to federal hydrogen related activities, news, funding
opportunities, and regulatory authorities to encourage collaboration
among the public sector, private sector, academia, and international
scientific community. One tool available online is the regulatory
authorities inventory, a DOT-led effort to create a single point of
reference for stakeholders to view current U.S. statutes and
regulations that may be applicable to hydrogen.

DOE established the International Partnership for the Hydrogen Economy
(IPHE) in 2003 to provide a working-level coordinating mechanism for
more than a dozen partner countries to organize, coordinate, and
implement international research, development, demonstration, and
commercial utilization activities. IPHE also provides a forum for
advancing common policies, technical codes, and standards, and it
educates stakeholders on the benefits of, and challenges to,
transitioning to hydrogen technologies. Although participation is
voluntary, IPHE has contributed to international information exchange,
facilitated engagement from senior level officials, and influenced the
creation of hydrogen technology road maps in China and other countries.
In addition, DOE, DOD, and DOT are collaborating through the IPHE to
standardize data collection for all hydrogen fuel vehicles and hydrogen-
fueling demonstrations. While IPHE highlights its accomplishments, it
also acknowledges room for improvement by, for example, better defining
its role and developing performance metrics in the future.

DOT officials told us that while overall DOE has ably managed its
hydrogen program, some areas of interagency coordination have been more
effective than others. For example, DOT and the Defense Logistics
Agency conduct joint R&D planning and information sharing, a successful
relationship that grew out of the IWG. However, DOT's Pipeline R&D
Program was not included in early discussions at DOE, hampering
collaboration and communication on technology development. DOT
officials acknowledged that they now are involved in these discussions
but cited the importance of ensuring DOT representation at the onset of
coordination efforts.

Efforts with Other Federal Agencies at the Policy Level Have Just
Begun:

To ensure appropriate authority inside each agency for making hydrogen-
related budget and policy decisions, HTAC recommended in October 2006
that the IWG be elevated to require participation of an assistant
secretary or higher. In response, DOE created the Interagency Task
Force--a new entity composed of deputy assistant secretaries, program
directors, and other senior officials--which held its inaugural meeting
August 2007. Because the organization was created recently, its
membership is still in flux as the most appropriate participants are
being identified. The goals of the task force are to:

* increase understanding of available hydrogen and fuel cell
technologies and how they can contribute to the agencies' energy and
environmental goals,

* work together to identify concrete opportunities for the federal
government to provide leadership by being an early adopter,

* use government procurement and leadership to rapidly deploy
technology and facilitate its introduction into the marketplace, and:

* define new opportunities through interaction and exchange of ideas.

Although the task force outlined a set of broad goals, it did not
clearly define its responsibilities or strategy for achieving these
goals. Member agencies intend to develop a more detailed plan that will
guide efforts, identify actions that can be taken, and establish
targets by May 2008. The task force assigned IWG the responsibility for
creating the plan and agreed to review each agency's role,
responsibilities, and stake in hydrogen technology at the IWG's
December 2007 meeting.

In August 2007, HTAC criticized DOE for taking too long to respond to
HTAC's recommendation and for not securing participation of assistant
secretaries, participation that HTAC believes is necessary for making
hydrogen budget and policy decisions. Similarly, DOT officials told us
that the Interagency Task Force was supposed to be created specifically
at the senior level so participants could influence budget and policy
matters, but too many alternates were present at the first meeting,
reducing its potential effectiveness. DOT officials added that if
membership continues to shift or be inconsistent, then lack of
continuity will hinder progress and make it difficult to achieve goals.
DOE officials stated that the level of membership is adequate because
deputy assistant secretaries, program directors, and other senior
officials are high enough to make decisions, influence policy, and
impact the implementation of programs. Some task force members have
expressed concerns about lack of a common vision among agencies,
including a shared view of timelines, milestones, and approaches, in
part because of differing roles, responsibilities, and stakeholders and
because of the fact that no overarching authority guides all government
hydrogen R&D. For example, although DOE has clearly outlined a 2015
technology readiness goal suitable for its mission, DOT may need to
develop a regulatory framework earlier to address industry's intent to
begin deploying fuel cell vehicles as early as 2012.

Conclusions:

The Hydrogen Fuel Initiative has made important progress in developing
hydrogen technologies in all of its technical areas in both fundamental
and applied science. DOE and industry officials attribute this progress
to DOE's (1) planning process that involved industry and university
experts from the earliest stages; (2) use of annual merit reviews,
technical teams, centers of excellence, and other coordination
mechanisms to continually involve industry and university experts to
review the progress and direction of the program; (3) emphasis on both
fundamental and applied science, as recommended by independent experts;
and (4) continued focus on such high priority areas as hydrogen storage
and fuel cell cost and durability. Although DOE has made important R&D
progress, its 2015 technology readiness target is very ambitious,
requiring scientific breakthroughs in hydrogen storage, for example.
Budget constraints and technical challenges have led DOE to push back
its targets for providing certain technologies to automakers from 2015
to 2017 or later, which according to DOE, generally still lies within
the window for the automobile companies to provide hydrogen fuel cell
vehicles by 2020. However, DOE has not updated its 2006 Hydrogen
Posture Plan's overall assessment of what the department reasonably
expects to achieve by its technology readiness date in 2015 and how
this updated assessment may differ from prior posture plans. DOE also
has not identified R&D funding needed to achieve the 2015 target. This
information is important to the Congress and industry as they set
priorities and make funding decisions. Furthermore, developing a
nationwide commercial market for hydrogen fuel cell vehicles is
expected to cost tens of billions of dollars for production facilities,
fueling stations, pipelines, and other support infrastructure and take
decades to achieve, requiring a sustained investment by government and
industry in R&D and the infrastructure.

Recommendation:

To accurately reflect progress made by the Hydrogen Fuel Initiative and
the challenges it faces, we recommend that the Secretary of Energy
update the Hydrogen Posture Plan's overall assessment of what DOE
reasonably expects to achieve by its technology readiness date in 2015,
including how this updated assessment may differ from prior posture
plans and a projection of anticipated R&D funding needs.

Agency Comments and Our Evaluation:

We provided DOE with a draft of this report for its review and comment.
In written comments, DOE agreed with our recommendation, stating that
it plans to update the Hydrogen Posture Plan during 2008 to reflect the
progress made and any changes to the activities milestones,
deliverables, and timeline. (See app. II.) However, DOE found the title
of the draft report to be confusing, stating that R&D on hydrogen
technologies would inevitably continue beyond 2015. In response, we
revised the title to highlight the need for DOE to update what it
expects to achieve by its 2015 target. DOE also disagreed with our
statement that it has not determined what reasonably can be achieved by
2015 for use in a 2020 vehicle, citing extensive efforts to assess the
R&D program's progress. In response, we clarified that our concern is
that the Hydrogen Posture Plan, which provides the Congress and other
outside stakeholders with an assessment of progress, needs to be
updated to identify what DOE reasonably expects to achieve by its
technology readiness date in 2015. In addition, DOE provided comments
to improve the draft report's technical accuracy, which we have
incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents
of this report, we plan no further distribution of it until 30 days
from the date of this letter. At that time, we will send copies of this
report to the appropriate congressional committees, the Secretary of
Energy, the Director of the Office of Management and Budget, and other
interested parties. We will also make copies available to others upon
request. In addition, the report will be available at no charge on the
GAO Web site at [hyperlink, http://www.gao.gov].

If you or your staff have any questions about this report, please
contact me at (202) 512-3841 or [email protected]. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major contributions
to this report are listed in appendix III.

Signed by:

Mark E. Gaffigan:

Acting Director, Natural Resources and Environment:

[End of section]

Appendix I: Scope and Methodology:

To assess the extent to which the Department of Energy's (DOE) Hydrogen
Fuel Initiative has made progress in meeting its R&D targets, we
reviewed documents and interviewed DOE program managers, national
laboratory scientists, company and industry association executives,
independent experts, and state government officials. More specifically,
we reviewed DOE's 2004 and 2006 Hydrogen Posture Plans and R&D project
reports, attended DOE's annual review of its projects in May 2007, and
interviewed DOE hydrogen program managers and scientists at DOE's
National Renewable Energy Laboratory and Los Alamos National
Laboratory. We also reviewed the R&D plans, technology roadmaps,
assessments and reviews from each of DOE's programs, including Energy
Efficiency and Renewable Energy, Fossil Energy, Nuclear Energy, and
Science, and from several of the technical teams that DOE established
to review R&D progress in specific technologies. In addition, we spoke
with members and attended meetings of the Hydrogen and Fuel Cell
Technical Advisory Committee, interviewed industry representatives, and
reviewed industry assessments of DOE's progress in developing and
demonstrating vehicle, stationary, and portable technologies.
Furthermore, we reviewed reports of the National Academies of Sciences
and Engineering on the hydrogen R&D program and spoke with cognizant
officials.

To determine the extent to which DOE has worked with industry to set
and meet R&D targets, we reviewed pertinent documents, assessed DOE's
processes for soliciting industry input, and attended a meeting of the
fuel cell technical team at Los Alamos National Laboratory. We also
interviewed cognizant DOE managers and scientists and executives of car
manufacturers, energy companies, utilities, hydrogen producers, fuel
cell manufacturers, and suppliers of hydrogen-related components about
DOE's processes for soliciting industry input and we toured several
industry facilities.

To determine the extent to which DOE has worked with other federal
agencies to develop and demonstrate hydrogen technologies, we reviewed
pertinent documents and spoke with officials at DOE, the Department of
Transportation, the Department of Defense, the Department of Commerce,
the National Aeronautics and Space Administration, and the U.S. Postal
Service. We also attended the Interagency Task Force's first meeting in
August 2007.

We conducted this performance audit from March through December 2007 in
accordance with generally accepted government auditing standards. These
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.

[End of section]

Appendix II: Comments from the Department of Energy:

Department of Energy:
Washington, D.C. 20585:

January 3, 2008:

Mr. Mark E. Gaffigan:
Acting Director, Natural Resources and Environment:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:

Dear Mr. Gaffigan:

Thank you for the opportunity to comment on the draft Government
Accountability Office (GAO) report entitled "Hydrogen Fuel Initiative:
DOE Has Made Important Progress and Involved Industry and Other
Agencies, but R&D Will Continue Past Its 2015 Target Date (GAO- 08-
305)." The Department of Energy (DOE) has partnered with industry,
academia, Federal laboratories and other Federal agencies in taking a
leadership role in the research and development (R&D) of hydrogen and
fuel cell technologies that have the potential to reduce U.S. oil use
and greenhouse gas emissions. We commend the GAO for taking the time to
interview experts within the Department, our national laboratories and
industry in preparation for this report. We have reviewed the report in
detail and provide our general response below, as well as detailed
comments and clarifications as an enclosure to this letter.

The Department agrees with the GAO findings that the Hydrogen Program
has made significant progress in the research and development of
hydrogen and fuel cells over the past four years, and that the program
has worked effectively with industry and other Federal agencies.
However, we disagree with the underlying premise that forms the basis
for the report's title, which implies that DOE did not envision the
need for R&D of hydrogen and fuel cell technologies beyond 2015. The
Department never stated that R&D of hydrogen technologies would end in
2015. As indicated in the Hydrogen Posture Plan, the program
established a milestone of 2015 to complete the critical path
technology development that would enable industry to make
commercialization decisions for market introduction in the 2020
timeframe, and clearly stated that R&D would continue beyond this point
to support renewable and nuclear-based hydrogen production,
infrastructure development, and basic science. Just as we continue to
support research on the internal combustion engine today, over 100
years after its introduction, the Department will continue to improve
hydrogen and fuel cell technologies beyond 2015.

We also disagree with the report's statement that "DOE has not
determined what reasonably can be achieved by 2015 for use in a 2020
vehicle." As the GAO report points out, the program has [Footnote 11]
engaged experts from industry, academia, and national labs to identify
the major barriers and to plan a path forward. The program's detailed
multi-year R&D plans[Footnote 12] describe hundreds of tasks,
milestones, and deliverables in hydrogen production, delivery, storage,
and fuel cells based on system requirements, the current status of the
technology, and the pace of technology progress over the past 15 years.
The program's Technology Validation efforts have shown that significant
progress has been made in the critical path technology development
efforts. Vehicles in the learning demonstration include laboratory fuel
cell technology developed by the program three to five years ago. These
first generation vehicles include fuel cell systems demonstrating up to
58 percent efficiency, 1600 hour durability (48,000 miles), and up to I
90-mile range. We expect laboratory stacks demonstrating greater than
2,000 hours durability today to be in second generation vehicles by
2009, and membranes demonstrating 5,000 hours durability (our 2015
target) in the laboratory today to be in fuel cell vehicles in 2015. We
agree that significant challenges remain, particularly in hydrogen
storage; however, based on the progress to date, we have determined
what reasonably can be achieved by 2015.

We are pleased that the GAO has recognized the program's increased
efforts in stationary and portable fuel cell technology. These
applications offer significant benefits today and will help to reduce
cost, to promote consumer acceptance, and to develop infrastructure and
a domestic supply base � paving the way for fuel cell vehicles in the
future. We will continue the work of the newly launched Hydrogen and
fuel Cell Interagency Task Force to promote the use of hydrogen and
fuel cell technologies to meet energy needs within the Federal
Government. The Hydrogen Posture Plan will be updated during 2008 to
reflect the progress made in all areas of the program and any changes
to the activities, milestones, deliverables and timeline.

Thank you again for the effort you put into the preparation of the GAO
report on the Hydrogen Fuel Initiative, and for giving us the
opportunity to comment on the report.

Sincerely,

Signed by:

Steven G. Chalk:
Deputy Assistant Secretary for Renewable Energy:
Office of Technology Development:
Energy Efficiency and Renewable Energy:

Enclosure:

[End of section]

Appendix III GAO Contact and Staff Acknowledgments:

GAO Contact:

Mark Gaffigan, (202) 512-3841 or [email protected]:

Staff Acknowledgments:

In addition to the individual named above, Richard Cheston, Assistant
Director; Robert Sanchez; Thomas Kingham; Marc Castellano; and Alison
O'Neill made key contributions to this report. Also contributing to
this report were Kevin Bray, Virginia Chanley, Patrick Gould, Anne
Stevens, and Hai Tran.

[End of section]

Footnotes:

[1] GAO, Crude Oil: Uncertainty about Future Oil Supply Makes It
Important to Develop a Strategy for Addressing a Peak and Decline in
Oil Production, GAO-07-283 (Washington, D.C.: Feb. 28, 2007).

[2] In 1993, DOE and USCAR formed the Partnership for a New Generation
of Vehicles to (1) improve competitiveness in vehicle manufacturing,
(2) implement commercially viable innovations, and (3) develop vehicles
with up to three times the fuel efficiency of comparable 1994 family
sedans.

[3] DOE, A National Vision of America's Transition to a Hydrogen
Economy--to 2030 and Beyond, (Washington, D.C.: February 2002) and DOE,
National Hydrogen Energy Roadmap, (Washington, D.C.: November 2002).

[4] National Research Council of the National Academies, The Hydrogen
Economy: Opportunities, Costs, Barriers, and R&D Needs, (Washington,
D.C.: 2004).

[5] DOE assumes that a typical refueling station of 1,500 kilograms per
day of hydrogen servicing hydrogen fuel cell vehicles would service the
same number of vehicles as typical gasoline stations serve today.

[6] In comparison, tire pressure for passenger cars typically is 30 to
45 pounds per square inch.

[7] These are projected costs, based on high volume manufacturing of
500,000 units per year.

[8] See The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D
Needs.

[9] Buses have potential for early market penetration because they
generally refuel at central locations and have room to store an amount
of hydrogen that enables a practical driving range.

[10] The Defense Logistics Agency's fiscal year 2007 funding included
$11.7 million for a congressionally directed project to demonstrate
fuel-cell powered fork lift technology.

[11] Hydrogen Posture Plan, December 2006, [hyperlink,
http://www.hydrogen.energy.gov/pdfs/hydrogen_posture_plan_dec06.pdf]

[12] Hydrogen, Fuel Cells & Infrastructure Technologies Program Multi-
Year Research, Development, and Demonstration Plan, [hyperlink,
http://www1.eere.energy.gov/hydrogenandfuelcells/mypp/; Hydrogen from
Coal R&D Plan, [hyperlink,
http://www.fossil.energy.gov/programs/fuels/publications/programplans/20
07_Hydrogen_Program_Plan.pdf; Nuclear Hydrogen R&D Plan,
http://www.hydrogen.energy.gov/pdfs/nuclear_energry_h2_plan pdf; Basic
Research Needs for the Hydrogen Economy, [hyperlink,
http://www.sc.doe.gov/bes/hydrogen.pdf.

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