2
Major Crosscutting Issues

This chapter addresses the main crosscutting issues that the committee identified in its review of the FreedomCAR and Fuel Partnership. Given that much of the Partnership is relatively recent, the committee deems it important to address some issues early: program decision making, safety, learning demonstrations, and program structure. Some of these issues touch on the broader context on which the successful adoption into the marketplace of the technologies under development depends. The committee believes that proper attention to its recommendations will help move the program’s progress and increase its chances of success. It focuses on specific technical areas in Chapters 3 and 4.

PROGRAM DECISION MAKING

Program Management and Organization

As described in Chapter 1, most of the government programs on more efficient vehicle and engine technology, fuel cells, and hydrogen are in DOE, but some programs are in other agencies, such as the Department of Defense (DOD), the Department of Transportation (DOT), and the Environmental Protection Agency (EPA). The FreedomCAR and Fuel Partnership under review by the committee is a substantial piece of the larger whole. Coordination of all advanced vehicle and hydrogen programs is essential if they are to have an optimal impact. The vehicle systems programs form a fairly coherent whole, while the hydrogen production delivery and storage programs are diverse and explore many different pathways to the use of hydrogen as a transportation fuel.



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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report 2 Major Crosscutting Issues This chapter addresses the main crosscutting issues that the committee identified in its review of the FreedomCAR and Fuel Partnership. Given that much of the Partnership is relatively recent, the committee deems it important to address some issues early: program decision making, safety, learning demonstrations, and program structure. Some of these issues touch on the broader context on which the successful adoption into the marketplace of the technologies under development depends. The committee believes that proper attention to its recommendations will help move the program’s progress and increase its chances of success. It focuses on specific technical areas in Chapters 3 and 4. PROGRAM DECISION MAKING Program Management and Organization As described in Chapter 1, most of the government programs on more efficient vehicle and engine technology, fuel cells, and hydrogen are in DOE, but some programs are in other agencies, such as the Department of Defense (DOD), the Department of Transportation (DOT), and the Environmental Protection Agency (EPA). The FreedomCAR and Fuel Partnership under review by the committee is a substantial piece of the larger whole. Coordination of all advanced vehicle and hydrogen programs is essential if they are to have an optimal impact. The vehicle systems programs form a fairly coherent whole, while the hydrogen production delivery and storage programs are diverse and explore many different pathways to the use of hydrogen as a transportation fuel.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report To integrate the planning, budgeting, and management of the many DOE programs constituting the FreedomCAR and Fuel Partnership, DOE’s Office of Energy Efficiency and Renewable Energy (EERE) issued the Hydrogen Posture Plan in February 2004 (DOE, 2004a). The plan describes DOE’s intended role in hydrogen energy R&D and its pursuit of an accelerated path to the deployment of hydrogen fuel cells, and the associated infrastructure. Within DOE, a working group was established with representatives from the Offices of Energy Efficiency and Renewable Energy; Fossil Energy; Nuclear Energy, Science, and Technology; Science; Management, Budget, and Evaluation/chief financial officer; and Policy and International Affairs (in an oversight capacity). While the broader management of many of these DOE program activities lies beyond the statement of task for the committee, it is important to note that the planning, budgeting, execution, evaluation, and reporting of the government’s hydrogen-related programs be well coordinated and integrated. The committee finds that, while there has been commendable progress in managing the various transportation-related hydrogen activities across DOE, further improvements are needed. The committee identified two areas that need special attention: (1) carbon capture and sequestration and (2) basic energy research. The cost-effective, large-scale production of hydrogen may require that coal be the primary energy source. Carbon capture and sequestration would then be essential to reduce the emission of greenhouse gases. The potential of carbon sequestration to enable hydrogen production appears to play only a minor role in the current work on capture and sequestration (see Chapter 4). DOE’s various presentations to the committee indicated a strong focus on technology development and technology demonstration. It was also apparent that new technologies are likely to be required in hydrogen storage, fuel cell membranes, and electrodes. The committee encourages DOE to ensure that its Basic Energy Sciences Division in the Office of Science is appropriately involved in fundamental research critical to the FreedomCAR and Fuel Partnership. Congressionally Directed Funding The committee’s review of the FreedomCAR and Fuel Partnership found that in certain program areas, congressionally directed activities (earmarking) of funds had a serious negative impact on the program. Of concern to the committee is the allocation by Congress of significant funds to specific organizations for activities that will contribute little to achieving the Partnership’s objectives. Although DOE has some discretion over the allocation of funds not earmarked, over the past 2 years, earmarking has effectively removed about $80 million from the funding for planned programs. This has negatively impacted projects in safety, the production of hydrogen from fossil fuel and renewable energy sources, and hydrogen storage. One possible result is that not enough knowledge and technology will be available by 2015, when commercial feasibility will be assessed,

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report making a positive assessment less likely. In addition to increasing the chances that critical program milestones will be missed, earmarking has forced DOE managers to spend a lot of time trying to adapt programs so they contribute as much as possible to priority goals. It also signals to industry partners somewhat less than full government support for the program goals. This committee feels strongly that all of the funds appropriated for this FreedomCAR and Fuel Partnership should contribute directly to achieving the Partnership’s objectives. Congressional and administration leaders should be made aware that congressionally directed funding affects program timing and leads to shortfalls in meeting goals. DOE should ensure that these leaders understand how critical key parts of the FreedomCAR and Fuel Partnership are to achieving the program’s long-term, high-level goals. Determining Priorities, Milestones, and Go/No-Go Decisions Priorities, key milestones, and critical decisions within the FreedomCAR and Fuel Partnership must be determined in the appropriate systems context. For example, engine improvements must be evaluated in the context of the vehicle. It is the impact of vehicle improvements in context of the total vehicle fleet that really matters, and this impact depends on production volumes and the fraction of total fleet mileage accounted for by these improved vehicles. Several questions are raised by the need for a technology-development program focused on component technologies to conduct integrated evaluations in the appropriate system context. For example, each technical team has a detailed set of milestones and decision-making points in its strategic plan. These milestones allow assessing the progress of individual technology development projects, but it is not clear how individual team plans can be integrated into a broader assessment of progress and consequent decision making. Ultimately, the Partnership succeeds when car companies incorporate these new technologies into specific vehicle designs that are attractive to the public and subsequently become part of the vehicle fleet. The FreedomCAR and Fuel Partnership needs to identify and define appropriate priorities, milestones, and decision criteria in a context that goes beyond the individual technology areas. For example, if substantial demand for electricity for hydrogen generation is anticipated, multisector energy perspectives and inputs will be necessary to assess the prospects for carbon capture and sequestration as well as the electricity generating requirements and the impact of hydrogen generation on natural gas demand. The committee feels that the FreedomCAR and Fuel Partnership management teams have not yet resolved how best to address these broader program assessment issues. Nor do they appear to have developed plans to carry out analysis of these issues that would support the decision-making process. The management structure outlined in Chapter 1 appears to the committee to be

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report appropriate for the management tasks, but it is not clear how the structure allows for decisions about the Partnership’s progress toward commercialization of fuel cell, hydrogen infrastructure, and transition propulsion systems and vehicle technologies. DOE should consider identifying a working group to support overall program management. The working group should perform technology assessments in an appropriate systems framework; check targets and revise them if necessary; evaluate the broader impacts of the technologies being developed in the program on major problems such as overall fleet petroleum consumption and greenhouse gas emissions; and assess progress towards commercialization. While DOE has established a systems analysis capability to do much of this analysis, it is not clear whether or how it is planning to do so, nor does it appear to be adequately staffed to do so. As noted in the next section, “Systems Analysis and Simulation,” the systems analysis focus appears to be on developing the systems analysis tools rather than using them for more broadly based and integrated assessments. An important aspect of the Partnership’s decision making is that because the context for an assessment changes with time, so do the targets set for each component technology. One example of this is that the cost targets depend on the price of crude oil and natural gas. Also, because it is the total integrated cost of all the components that is critical to marketability, program management must have processes for reevaluating technology and cost targets as the program progresses. Because of the importance and challenge of making Partnership decisions in these broader contexts, the committee makes the following recommendation: Recommendation. An ongoing, integrated, well-to-wheels assessment should be made of the Partnership’s progress toward its overall objectives of reducing the nation’s dependence on oil and introducing hydrogen as a transportation fuel, if appropriate. This assessment should examine possible trade-offs between individual goals of the fuel program and the vehicle program, between short-term and long-term goals, and between energy sources, to guide future research priorities and, ultimately, national transportation energy policy. Systems Analysis and Simulation The previous discussion makes it evident that extensive systems analyses and simulation models are required to make informed decisions and manage the FreedomCAR and Fuel Partnership intelligently. Over the past several years, DOE has successfully developed many models to predict vehicle and component characteristics. Similarly, the production and distribution of fuels can be modeled to permit the comparison of production methods and of candidate fuels. One important model, the so-called “well-to-wheels” analysis, enables comparisons of alternative fuels and vehicle system architectures by predicting overall energy efficiency and emissions performance of the entire system, taking into

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report account the widely varying energy efficiency of alternative fuel production processes and the behavior of corresponding vehicle systems. The critical importance of developing systems analysis and simulation was a recurring theme throughout the Partnership for a New Generation of Vehicles (PNGV) program. The seventh and final report on the PNGV program (NRC, 2001) recognized considerable progress in this area, but it encouraged increased effort in system modeling. The report also criticized the lack of progress in cost modeling. The Hydrogen Economy (NRC/NAE, 2004) devoted one of its main recommendations to the urgent need for systems analysis, offering guidance in 10 areas. In response to these recommendations, DOE has been developing a systems analysis plan, a preliminary draft of which was presented to the committee. The key resources are in place, and individuals have been identified to take the lead on key analysis elements. Figure 2-1 depicts the main analysis domains—technical, cost, and market/benefits—and gives examples of applicable models. The overall organization structure, as discussed in Chapter 1, is depicted in Figure 2-2, with the systems analysis functions added. The overall systems analysis budget for FY05 is $17.592 million, over half of which is devoted to Vehicle Systems Analysis and Hydrogen Infrastructure Analysis, with the remaining budget devoted to analysis of individual technologies.1 Progress to date is shown in Table 2-1. Six areas register significant progress, and two register partial progress; plans are in place for the remaining two. In summary, the committee commends DOE on progress to date in addressing the systems analysis issue and especially on its response to the recommendations in The Hydrogen Economy. The plans and the personnel in place appear sound, and the overall approach is robust. If there are weaknesses, they probably lie in modeling (1) cost to the consumer and (2) consumer behavior in the face of a market transition to a radically different vehicle. Modeling cost is particularly difficult since it must rely on assumptions about future processes and products, and the necessary input data are highly proprietary. Recommendation. The FreedomCAR and Fuel Partnership should develop and refine its models for consumer behavior during a market transition to radically different vehicles and should also explore ways to enhance the effectiveness of its cost models. Finally, it appears that the systems analysis efforts are focused on developing and refining the systems analysis tools. While important, there is an additional responsibility to use the tools that are developed to provide overall program management or at least to perform technology assessments, goal checking, evalu- 1   S. Chalk, “Systems Analysis Introduction,” Presentation to the committee on January 24, 2005.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report FIGURE 2-1 Analysis domains for systems analysis efforts by the FreedomCAR and Fuel Partnership. SOURCE: S. Chalk, “Systems analysis introduction,” Presentation to the committee on January 24, 2005.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report FIGURE 2-2 Overview of the systems analysis activity. SOURCE: S. Chalk, “Systems analysis introduction,” Presentation to the committee on January 24, 2005.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report TABLE 2-1 Progress on Systems Analysis Activities Area Recommendation Status Comments Concept An independent, well-funded, professionally staffed and managed Systems Analysis function, separated by a firewall from technology development functions, is essential to success of the Program. It must be managed independently of the various DOE line R&D programs in order to minimize both the existence and the appearance of technology bias. Funding Should be on the order of $10M per year—without such a level, research priorities and results will be less understood. Approximately $12.0M for FY05 People Most important ingredient is the people who do the work. There are relatively few with the training, talent, and background to be able to properly identify, evaluate, trade off, and deal with the myriad of technical and economic parameters characteristic of complex energy technologies. A core of specially selected people is essential. Key personnel in place; additional analysts and modelers need to be identified Modeling Systems modeling for the hydrogen supply evolution should be started immediately, with the objective of helping guide research investments and priorities for the transpor tation, distribution, and storage of hydrogen. Many component, element, and transition models Approach Develop/employ a Systems Analysis approach to ○ understanding full costs, ○ defining options, ○ evaluating research results and ○ helping balance the program for short, medium, and long term. Coordination Systems Analysis is needed to coordinate the multiple parallel efforts within the program. Integration The program needs to be implemented within a balanced, overall DOE national energy R&D effort. Transition The complex evolution of the transport ation and delivery and storage systems would benefit from Systems Analysis to help guide the optimum research and technology investment strategies for any given stage of the evolution. Envelopes Detailed analysis within envelopes (from unit operations to a fully integrated system) and across the national energy system must be part of the function. Scope Implement the function for all U.S. energy options, not just hydrogen. PBA plans to put H2 module in NEMS = substantial progress = partial progress = plans in place NOTE: PBA, Office of Planning, Budget and Analysis; NEMS, National Energy Modeling System. SOURCE: S. Chalk, “Systems analysis introduction,” Presentation to the committee on January 24, 2005.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report ation of the broader impacts of competing technologies, and commercialization assessment. Responsibility for performing these tasks needs to be assigned and a work plan drawn up to address this expectation. Additional resources may well be required. It is in these areas that the committee recommends emphasis as the plan for systems analysis is solidified. Recommendation. The FreedomCAR and Fuel Partnership should assign responsibility for overall program management and for the complex analyses to support program management, such as technology assessments, goal checking, evaluating the broader impacts of the technologies on the major problems, commercialization assessment, and decision making, among others. SAFETY Safety is a topic that pervades virtually every aspect of the pursuit of a hydrogen economy, and it is one of the major hurdles to the use of hydrogen as a transportation fuel. Large quantities of hydrogen are manufactured and used today throughout the world without undue safety hazards. Safety becomes an issue, however, when it is in consumer hands and on board a vehicle. The Hydrogen Economy (NRC/NAE, 2004) emphasized safety from both technical and societal perspectives. Some of the issues are well known—for example, hydrogen’s propensity to find even the most infinitesimal leak path, its low ignition energy, its flammability over a wide range of concentrations, and its lack of a visible flame. Other issues, such as the potential consequences when a hydrogen powered vehicle crashes, and the adequacy of emerging codes and standards, are less well understood. In addition, an excellent safety record is essential to the public acceptance of hydrogen vehicles. Addressing public concerns about the widespread use of hydrogen as a transportation fuel could be critical in determining the feasibility of creating a fleet of hydrogen-fueled vehicles and their supporting infrastructure. Hydrogen Safety Program The purpose of the DOE Safety, Codes, and Standards program is to ensure that DOE’s R&D is conducted in a safe, exemplary manner and that deployed elements of the hydrogen-fueled transportation system have an acceptable level of risk. The elements of the program include producing and maintaining a DOE Safety Plan, a best engineering practices document for hydrogen systems, and extensive support for the development of national and international codes and standards that will allow the deployment of the hydrogen infrastructure and hydrogen-fueled vehicles. The Hydrogen Safety Review Panel (HSRP) is an important part of DOE plans to ensure that its hydrogen research is conducted in a safe manner. The

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report panel has updated a safety guidance document specifying requirements for DOE contractors (DOE, 2004b). It has made safety site visits to approximately 10 contractors. It is also involved with the review of safety plans that have recently been required on new DOE procurements. The panel reports to the manager of the Office of Hydrogen, Fuel Cells, and Infrastructure Technology (HFCIT). The manager of HFCIT also has overall DOE responsibility for the hydrogen technology program, which, as noted in Chapter 1, encompasses activities in other offices within DOE, including the FreedomCAR and Vehicle Technologies Office (FCVT); the Office of Fossil Energy (FE); the Office of Nuclear Energy, Science and Technology (NE); and the Office of Science (SC). These other offices do not have hydrogen safety offices and intend to rely on HFCIT for their safety support. The budget of the Safety, Codes, and Standards program was about $6 million in FY04 and FY05. It was appropriated $16 million in FY05, but this money had to be reallocated to balance other parts of the program that were severely impacted by congressionally directed activities (earmarks). The Safety, Codes, and Standards program was the most severely impacted by congressional ear-marks, making it, in effect, level-funded in FY05. The President’s FY06 budget request recommends $13.1 million for this program. The top-level allocation of FY05 funds is shown in Table 2-2. Four national laboratories (Sandia National Laboratories at Livermore, California, Pacific Northwest National Laboratory, Los Alamos National Laboratory, and the National Renewable Energy Laboratory) will perform the major portions of the work. There are just two federal employees working in the DOE headquarters Safety, Codes and Standards program. DOE and USCAR set up a codes and standards technical team about a year ago. The team has representatives from the automotive and energy companies, DOE, and National Highway Traffic Safety Administration (NHTSA). It has spent the first year preparing a roadmap, which is now in first draft form. Detailed descriptions of deliverables for the team do not exist yet. The near-term need is for interim codes and standards for the transition period. Priority The transition to hydrogen as a primary transportation fuel raises a multitude of safety questions that must be dealt with by many participants during each phase of the program. It will require a set of codes and standards, including those for on-site hydrogen production and dispensing at fueling stations. The committee observed that the DOE Safety, Codes, and Standards program addresses one of the highest priority areas of the entire FreedomCAR and Fuel Partnership but is also one of the least mature efforts at this early stage. The following discussion and recommendations elaborate on the importance of the Safety, Codes and Standards program.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report TABLE 2-2 FY05 Budget for Hydrogen-Related Safety Codes and Standards Activities Project FY05 Funding ($) Hydrogen release R&D 500,000 Materials R&D and handbook 412,000 Risk assessment and analysis 450,000 Hydrogen R&D subcontract support (modeling, SRI facilities, and International Energy Agency Safety Annex) 360,000 Safety Panel 350,000 Codes and Standards National Template (National Renewable Energy Laboratory execution of National Codes and Standards Template) 850,000 National template for contracts and subcontracts (support of codes and standards organization activities, i.e., NFPA, ICC, ASME, SAE, ANSI, CSA-America, NHA) 975,000 International codes and standards development 400,000 Office safety plan, lessons learned, best practices 329,400 Funding of DOT activities (NHTSA, RSPA) 790,000 HAMMER—safety training of officials and first responders 300,000 Taxes (7.8%) (SBIR, overarching analysis, international activities) 483,600 Total 6,200,000 NOTE: ANSI, American National Standards Institute; ASME, American Society of Mechanical Engineers; HAMMER, Hazardous Materials Management and Emergency Response facility at Pacific Northwest National Laboratory, Richland, Washington; ICC, International Codes Council; NFPA, National Fire Protection Association; NHA, National Hydrogen Association; NHTSA, National Highway Traffic Safety Administration; RSPA, Research and Special Projects Administration; SAE, Society of Automotive Engineers; SRI, Stanford Research Institute; SBIR, Small Business Innovation Research program. SOURCE: Information supplied by DOE in response to questions from the committee. Technical Teams The current technical team is focused just on codes and standards, not on overall safety issues. Codes and standards are necessary to allow the deployment of the hydrogen infrastructure, vehicles, and other equipment into the public domain. They are necessary but are not by themselves sufficient to ensure the safety of the overall activity. There does not appear to be any top-down process in place to allocate risk to the various parts of the end-to-end system. Safety is inherently a systems issue. To enhance the safety mission, the current codes and standards technical team should be made part of a safety team with a broader mission that would interact closely with the other technical teams involved in hydrogen use learning demonstrations (these will involve the public; see section “Learning Demonstrations”). This new safety technical team should identify

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report Incidents should be written up and made available to the public and to others in the field. Learning from past mistakes will take place, and the engineering and the codes and standards will gradually improve. For example, a recent hydrogen leak during fueling at Ballard Systems in Canada was written up in a noncontroversial way and published in the newsletter of a fuel cell conference (Kinzey, 2004). This is a positive example of how an incident should be reported. It is important to have factual information, scientific and engineering data, and lessons learned readily available. The Web sites of DOE, NHTSA, and USCAR could be improved (and interlinked) to make it easier to find hydrogen safety information. The Safety, Codes, and Standards plan identifies two safety documents—a safety plan and a best engineering practices document. The former is due this year and the latter in 2007. Both are important, and the latter should be expedited if possible. HSRP membership, meeting minutes, site visit reports, and other products should be made available on the DOE Web site. Recommendation. DOE, USCAR, and NHTSA should prepare and maintain a bibliography of hydrogen-safety-related reports and papers and make that information available on their Web sites in a user-friendly manner. NHTSA and DOE should develop investigation protocols and have investigation teams ready to visit serious incidents anywhere. Budget and Schedule The amount appropriated for the Safety, Codes and Standards program is much less than was requested. There are many milestones on the Codes and Standards Roadmap coming up in the next 2 to 3 years. The committee is concerned that many milesones will slip as a result of the severe cuts in this budget in FY05, jeopardizing the goal of having all of the codes and standards in place by 2010. Recommendation. DOE should examine the budget and schedule estimates for each of the codes and standards deliverables and also for the other safety activities of the Safety, Codes and Standards program. To the extent that the budget and schedule are incompatible, changes should be reflected in the next update of the roadmap. LEARNING DEMONSTRATION: NATIONAL HYDROGEN VEHICLE/INFRASTRUCTURE PROGRAM The FreedomCAR and Fuel Partnership includes a variety of R&D and demonstration activities for fuel cell vehicles and hydrogen fuel systems. Approximately 13 percent of the FY05 budget for the program was focused on demonstration activities, and what DOE calls learning demonstrations that will operate

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report during the next few years were announced. Any advanced technology, no matter how well tested by its developers, will show unanticipated characteristics when placed in the hands of the users. Some technologies—software, for example—require alpha and beta versions before a truly commercial product can be claimed. This kind of feedback will be especially important for the FreedomCAR and Fuel Partnership because of the long-term, high-risk research agenda and because public safety must be ensured in the face of highly energetic materials—for example, hydrogen and high-voltage batteries. To be sure, the private participants (e.g., the automotive and fuel companies) provide some feedback to DOE, but this would remain incomplete without feedback from the actual users. Thus the learning demonstration program should be considered an essential component of the FreedomCAR and Fuel Partnership. Rather than attempting to demonstrate that these technologies are commercially ready, the program will collect and analyze the experience of the early adopters of hydrogen vehicles and fuels infrastructure technologies in order to inform the research programs. Further, the use of private companies as partners will help disseminate the learning beyond DOE. Recognizing that the learning demonstration program is in its early stages, the committee recommends several points for DOE to consider as this program unfolds. Recommendation. The FreedomCAR and Fuel Partnership should continue to develop prompt and effective channels of communication among its members to disseminate the learning from the demonstrations. The results should also be disseminated to supporting organizations outside the Partnership in order to promote widespread innovation and competition. But once the learning demonstration for a project has been carried out, the project should be reassessed to see whether further operation is warranted. Recommendation. DOE management should keep the demonstration projects focused on their primary purpose—the accumulation, analysis, and dissemination of experience from the field. Safety should be stressed throughout the learning demonstration program, because an accident early on could attract publicity out of proportion to its true consequences. Recommendation. Among the high priorities for feedback, DOE should identify precursor incidents that point to incipient safety problems and should develop appropriate methods for training first responders to deal with hydrogen-related emergencies. Recommendation. The FreedomCAR and Fuel Partnership should develop effective channels of communication among its members to disseminate lessons learned and communicate to appropriate organizations outside the Partnership to

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report promote in them a culture of innovation and competition within the developing support structure. PROGRAM STRUCTURE Goals and Targets The partners of the FreedomCAR and Fuel Partnership have done a commendable job of establishing explicit goals for a wide variety of technologies for achieving “a clean and sustainable transportation energy future” (DOE, 2004c). The long-term future envisioned in the program is one of fuel-cell-powered vehicles that run on hydrogen produced from a variety of energy sources. The target year is 2015 for achieving a host of technology and cost goals that might enable private companies to make a decision about the commercialization of such vehicles. This is an ambitious target for reasons that were noted in The Hydrogen Economy (NRC/NAE, 2004) and that are detailed in the technology assessment portions of this report. The committee concurs with the observation on p. 116 of The Hydrogen Economy that “DOE should keep a balanced portfolio of R&D efforts and continue to explore supply-and-demand alternatives that do not depend on hydrogen.” The FreedomCAR and Fuel Partnership plan does not discuss any of these alternatives—for example, battery-electric vehicles or synthetic fuels made from fossil fuels or biomass—although DOE does support research in some of them (DOE, 2004c). The committee observes that with research breakthroughs in these alternative areas comparable to the breakthroughs required for the program as it is currently defined, the FreedomCAR vision still might be achieved without facing some of the infrastructure problems created by a shift to hydrogen. (See Chapter 3 for further discussion of electric vehicle battery technology.) Recommendation. The program should perform high-level systems analyses that identify the potential, the challenges, and the specific research breakthroughs for alternatives that could achieve the program vision without requiring a hydrogen infrastructure, and it should use these results to help define R&D efforts and allocate funds within DOE. Strategic Planning for the Partnership As noted in Chapter 1, five energy companies joined the program in September 2003, more than 1 1/2 years after its inception. This was an important step that enabled the program to tap the expertise and judgment of people in the energy field. The committee commends the energy companies for the progress that they have made in establishing technical teams and engaging the important fuel-related issues.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report The Executive Steering Group (see Figure 2-2), with high-level representation from the three automotive companies, the energy companies, and the government, is responsible for the overall direction of the program. One of its most important responsibilities is to ensure that the strategic direction of the program adjusts as technology advances, the marketplace changes, and new information becomes available. Developing an entirely new, radically different transportation system that meets the goals of this program and our nation is a formidable task. Finding the best way forward demands the best thinking and close cooperation of people with backgrounds and knowledge in many areas. The Executive Steering Group may want to consider chartering an ongoing strategic planning activity to carry out this important task. The committee has observed that there are many pathways by which to achieve the ultimate goals of this program. Some could involve energy sources other than petroleum or natural gas—perhaps coal or nuclear power. A comprehensive strategic plan should certainly consider all of these options and suggest research in those areas that might contribute to achieving the goals of the program. Roles of the Federal Government and Industry The FreedomCAR and Fuel Partnership, like its predecessor, the PNGV program, is based on the sponsorship of research projects which, if successful, will enable the production of new vehicles that enjoy widespread customer acceptance and help to achieve some important societal goals. The research projects are chosen jointly by representatives of government and industry with the intent of developing technologies able to achieve the desired results and capable of being widely deployed in mass-produced vehicles. This is the essence of the Partnership. The government establishes the societal goals to be addressed and funds and manages the program. Industry identifies the technologies needed, sets critical performance and cost parameters, and, in some instances, participates in the research. Figure 2-3 illustrates this relationship. It shows the FreedomCAR and Fuel Partnership as a framework for directed, focused communication of marketplace performance requirements, public sector needs, and research results. The framework embodies three premises: That high-risk, precompetitive research can expand the technical options available to the participating automotive and energy companies; That the effectiveness of this precompetitive research will be increased by a more thorough understanding of the realities of the marketplace; and That focused channels of communication among these companies as well as between them and the DOE research programs can accelerate the application of this new technology to meet public goals in a competitive marketplace.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report FIGURE 2-3 FreedomCAR and Fuel Partnership as a framework for communication. For this relationship to work, the program’s precompetitive research must be adopted by the industrial partners, developed and made a part of their product and process development programs and, ultimately, successfully introduced in commercially acceptable products. Achieving this result can be a major challenge. Many large companies have experienced difficulty in transitioning even their internal research results to commercial products. It is too early in the FreedomCAR and Fuel Partnership to expect to find significant examples of this part of the process, and the process itself is not clearly defined. But it is not too early for the partners to examine the organizational and other barriers to successful commercialization and find ways to overcome them. This should become an ongoing, shared activity as the partnership matures. Government and industry leaders in the Partnership appear to recognize that it is a high-priority management task to develop better ways to ensure that this transition of research results to commercial products occurs smoothly. While the target date for deciding on commercialization of a hydrogen-fueled transportation system is 2015, 10 years away, the commercial potential of each technology must be assessed on an ongoing basis. To stress the importance of this step, the committee makes the following recommendation: Recommendation. The FreedomCAR and Fuel Partnership and USCAR leadership should examine the effectiveness of the current process for transferring

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report technology from DOE projects to within-the-industry activities and develop and implement procedures that will make such transfer as effective as possible. FreedomCAR in the Policy Context Two broad public objectives drive federal support for the FreedomCAR and Fuel Partnership: To enhance the nation’s energy security by reducing and eventually eliminating the use of petroleum in light-duty vehicles. To improve the global environment by reducing and eventually eliminating greenhouse gas emissions and criteria pollutants from light-duty vehicles. If these public objectives are to be achieved in a society that allocates resources chiefly through the marketplace, then consumers must find the new generation of vehicles more attractive than current vehicles. Vehicles with advanced petroleum-saving technologies—improved internal combustion engine (ICE) vehicles, hybrid electric vehicles (HEVs), and hydrogen fuel cell vehicles (HFCVs)—must compete successfully with the market incumbent, the conventional ICE vehicle with a mechanical drive train. The FreedomCAR and Fuel Partnership has interpreted this competition strictly as a technological challenge on the supply side of the market—vehicles and fuels. Thus the program goals require the new technologies to achieve the road performance, carrying capacity, variety, cost, and safety of the conventional vehicle fleet. The HFCVs face an additional challenge—fueling stations must be everywhere when new HFCVs are introduced on a broad scale. This section contains some committee observations regarding two policy issues that could influence the pace and ultimate success of the FreedomCAR and Fuel Partnership: Demand-side policies that could add market pull to advance the fuel-efficient technologies offered by the program and The societal implications of alternative pathways to a hydrogen economy. Beyond Technology: Policies for Greater Demand Pull To understand how policies can influence the demand side of the market, consider the basic economics of the consumer purchase decision. As long as fuel remains readily available for about $2.00 per gallon, new car buyers have reason to be ambivalent about paying more for a vehicle with improved fuel economy.3 3   D.L. Greene, “Improving the nation’s energy security: Can cars and trucks be made more fuel efficient?,” Testimony to the U.S. House of Representatives’ Science Committee on February 9, 2005.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report This implies that some policy intervention beyond the availability of new technology might accelerate a transition to HEVs and, ultimately, fuel cell vehicles. The FreedomCAR and Fuel Partnership is currently configured to enhance the capacity of automakers to offer fuel efficiency improvements and other desirable attributes at a cost that attracts buyers, even at current fuel prices. However, these technical programs operate only on the supply side of the market. If the hydrogen economy is to emerge as a reality in the 2015-2020 time period envisioned by Presidential policy statements, then it would be appropriate to consider policies that could stimulate the demand for vehicles offering greater fuel economy and thereby reduce the risk of delaying the hydrogen economy. The technology goals for the FreedomCAR and Fuel Partnership assume that federal policy will not intervene decisively in the marketplace to tip the competitive balance in favor of fuel cell or hybrid vehicles. Thus, the technology goals are set to match the vehicle performance that U.S. consumers have become accustomed to, and the cost goals are meant to achieve vehicle cost parity. If, especially during the transition period, fuel cell vehicles cost more than vehicles using the competing technologies, policy interventions might be used to facilitate the transition, moderating its targets and speeding the introduction of the new technologies into the marketplace. Four broad classes of market intervention promise to complement the technology development of the FreedomCAR and Fuel Partnership. The first two, cap-and-trade programs and motor fuel taxes, influence the demand side of the market—that is, they motivate customers to prefer more fuel-efficient vehicles—by raising the price of transportation fuel. The third, Corporate Average Fuel Economy (CAFE) standards, operates chiefly on the supply side by requiring auto and light truck manufacturers to increase vehicle efficiencies or modify the composition of their fleets. And the fourth class, subsidies, can operate on either the supply side or the demand side of the market. To the extent that these or similar policies are implemented, the market penetration of improved ICE drive trains, HEVs, and HFCVs would accelerate. Each will be discussed in turn. Cap-and-Trade Programs Trading programs have long been used by the federal government to achieve environmental goals—reducing sulfur dioxide emissions from stationary plants and reducing the use of ozone-depleting chemicals, for example. As envisioned in recent literature, the government would set a cap on carbon emissions from all sources, including the production of motor fuels, and issue allowances to burn, produce, and import only the amounts of fuel that correspond to that cap (Pizer and Kopp, 2003). After the initial allocation, firms would be allowed to trade allowances, thus creating a market value for them. The net effect would be an increase in the cost of conventional motor fuels and a greater incentive for customers to prefer HEVs or HFCVs. (The incentive for vehicle owners to modify their driving behavior with the current fleet would provide an ancillary benefit.)

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report Motor Fuel Taxes In addition to the federal government, states and localities tax motor fuels. These taxes averaged $0.41 per gallon of gasoline in 2002 according to the Congressional Budget Office (CBO). Such taxes directly create an incentive to purchase more fuel-efficient vehicles and influence driving patterns for all vehicles. However, recent analyses suggest that the per-gallon tax would have to be very substantial to make consumers willing to pay a premium for a more efficient vehicle. For example, the CBO estimates that an additional $0.46 per gallon fuel tax would cause a reduction of only 10 percent in gasoline consumption over a 14-year period (CBO, 2004). In addition, the strength of the incentive depends on a consumer perception that the tax-induced increase in the price of gasoline is permanent and structural, not to be offset later by declining fuel costs. CAFE Standards Currently, each automaker’s annual production is divided into three “fleets”: imported passenger cars, domestically produced passenger cars, and light trucks (pickups, minivans, and SUVs). If the average fuel economy of each fleet does not meet or exceed the standard set for it, the automaker must pay a penalty. The current standards are set at 27.5 miles per gallon (mpg) for domestic and imported cars, and, until recently, 20.7 mpg for light trucks. In 2003 NHTSA issued a new rule for light trucks that increased the standard to 21.0 mpg for model year (MY) 2005, 21.6 mpg for MY 2006, and 22.2 mpg for MY 2007. Vehicles weighing over 8,500 pounds are exempt. However, fuel economy standards offer no incentive for further innovation once the standards have been achieved. And because they operate only on the supply side of the market, they have no influence on driver behavior, miles traveled, or other important aspects of fuel consumption (NRC, 2002). If new CAFE standards were proposed, the policy might consider the economic efficiency improvements that could come from a trading approach suggested by the NRC committee that wrote the aforementioned report. Under this approach, automakers facing high costs of improving the fuel economy of their fleets would be allowed to purchase fuel economy credits from automakers able to exceed the standards. This would reduce the disruptive effects of the regulation and improve its economic efficiency (NRC, 2002). Subsidies A simple buy-down of the costs of the transition could also tip purchase decisions toward a vehicle with improved fuel economy. Though direct payments might be possible, so might be tax incentives. Typically these take the form of tax credits for the purchase of specified vehicle types, such as the credit currently offered for purchase of an HEV. However, the effectiveness of a tax credit incentive varies with the tax status of the individual. An alternative incentive scheme at time of vehicle purchase is “feebates.” Purchasers of low fuel economy vehicles pay an additional fee; those who buy a fuel-efficient vehicle receive a rebate. This fee and rebate system can be revenue neutral. Feebate policies typically charge maximum fees of about $1,500 per

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report vehicle and give maximum rebates of about $500. Such a scheme could provide market incentives that support future CAFE requirements. The challenges posed by a transition to a hydrogen economy within the time implied by the President’s 2003 State of the Union address are substantial, and the likelihood of meeting them might be increased by market intervention. Such intervention would provide a demand-pull to complement the technology-push during the early phases of the transition. Such interventions, of course, lie beyond the scope of the FreedomCAR and Fuel Partnership. Nevertheless, because they could certainly influence the success of the Partnership, they should be included in general discussions of energy policy.4 Recommendation. DOE should analyze the implications of alternative market interventions for the technical goals of the FreedomCAR and Fuel Partnership. These implications then could be included in DOE’s policy deliberations. ENVIRONMENTAL IMPACTS OF ALTERNATIVE PATHWAYS In the long-range portion of the FreedomCAR and Fuel Partnership, DOE has focused on the production of hydrogen and fuel cells to achieve a variety of national goals. In this connection, some observations relating to the environment are appropriate. It is clear that the hydrogen needed to power the vehicles must be based on fossil-free feedstocks, or, if it is based on coal, oil, or methane (natural gas), a huge carbon sequestration program will be required. It is also clear that the one incentive to use hydrogen to carry energy to vehicles is the elimination of their carbon dioxide emissions. Liquid hydrocarbon fuels can be made readily from natural gas or coal and would avoid the difficult production, distribution, and storage problems of hydrogen. Using hydrogen to reduce greenhouse gases while shifting to a greater use of domestic sources of energy significantly constrains the energy sources that can be used. Specifically, the energy must come from wind machines, photovoltaic cells (PVs), fossil fuels (with sequestration), sustainably grown biomass, nuclear power plants, or hydroelectric dams.5 Although hydrogen itself poses little environmental threat when it is oxidized to water in a fuel cell, the same cannot be said for most of the primary energy sources that would be used in its production. A few impacts include the setting aside of large amounts of land to make electric power for electrolysis using PVs, wind turbines, and biomass; the disturbance of wildlife and birds of prey by the large-scale deployment of PV and wind machines; the creation of 4   For a recent discussion of energy policy, see the report by the National Commission on Energy Policy (NCEP, 2004). 5   Biomass can also serve as a limited gasification feedstock for hydrogen production.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report large amounts of low- and high-level radioactive wastes from nuclear power plants; the sequestration of large amounts of CO2 from fossil sources of hydrogen; and the consumption of large amounts of fresh water if electrolysis is employed to make the hydrogen. In June 2003, a paper appearing in Science reviewed the “expected” impacts on the stratosphere of the hydrogen gas emissions produced for a hydrogen economy (Tromp et al., 2003; Ananthaswamy, 2003). These impacts include a cooling of the stratosphere and a loss of some of the ozone that protects humans and other components of the biosphere from ultraviolet radiation. Hydrogen has also been associated with increased global warming through atmospheric reactions of trace amounts of hydrogen with ozone and methane, both themselves greenhouse gases (Derwent, 2003, 2004). This effect may require setting a cap on the overall well-to-wheels leakage into the atmosphere. Although the production of enough hydrogen to meet the entire transportation needs of the country could have significant deleterious environmental impacts, there appears to be no systematic DOE program to identify, study, and model them. The impacts need to be carefully evaluated to ensure that long-term national energy planning succeeds. Such a study would allow comparing potential hydrogen sources, making trade-offs among them, and developing mitigation measures. Recommendation. DOE, in collaboration with the Environmental Protection Agency, should systematically identify and examine possible long-term ecological and environmental effects of the large-scale use and production of hydrogen from various energy sources. REFERENCES Ananthaswamy, A. 2003. “Reality bites for the dream of a hydrogen economy.” New Scientist, November 15, 2003. CBO (U.S. Congressional Budget Office). 2004. Fuel Economy Standards Versus a Gasoline Tax, Economic and Budget Issue Brief. Available on the Web at <http://www.cbo.gov/showdoc.cfm?index=5159&sequence=0>. Derwent, R. 2004. “Global warming consequences of a future hydrogen economy.” Issues in Environmental Science and Technology. Vol. 20: Transport and the Environment. London, England: Royal Society of Chemistry. Derwent, D. 2003. “Climate implications of a hydrogen economy.” Berkshire, England: Climate Research, The Meteorology Office. Available on the Web at <http:www.cambrensis.org/hydropresentation.htm>. DOE (U.S. Department of Energy). 2004a. Hydrogen Posture Plan: An Integrated Research, Development and Demonstration Plan. Washington, D.C.: U.S. Department of Energy. Available on the Web at <http://www.eere.energy.gov/hydrogenandfuelcells/pdfs/hydrogen_posture_plan.pdf>. DOE. 2004b. Guidance for Safety Aspects of Proposed Hydrogen Projects. Washington, D.C.: Hydrogen, Fuel Cells and Infrastructure Technologies Program, Office of Energy Efficiency and Renewable Energy. Available on the Web at <http://www.eere.energy.gov/hydrogenandfuelcells/pdfs/safety_guidance.pdf>.

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Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report DOE. 2004c. Partnership Plan, FreedomCAR and Fuel Partnership. 2004. Washington, D.C.: Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy. Kinzey, B. 2004. “Hydrogen fueling incident in Burnaby, Canada.” Fuel Cell Summit Newsletter 5(3). Available on the Pacific Northwest National Laboratory (PNNL) Web site at <http://www.pnl.gov/fuelcells/>. NCEP (National Commission on Energy Policy). 2004. Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s Energy Challenges. Washington, D.C.: National Commission on Energy Policy. Available on the Web at <www.energycommission.org>. NHTSA (National Highway Traffic Safety Administration). 2004. NHTSA’s Four-Year Plan for Hydrogen, Fuel Cell and Alternative Fuel Vehicle Safety Research. Available on the Web at <http://dms.dot.gov/>. Search on docket number 18039 and download document 3. NRC (National Research Council). 2001. Review of the Research Program of the Partnership for a New Generation of Vehicles, Seventh Report. Washington, D.C.: National Academy Press. NRC. 2002. Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards. Washington, D.C.: National Academy Press. NRC/NAE (NRC/National Academy of Engineering). 2004. The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D Needs. Washington, D.C.: The National Academies Press. Parsons Brinckerhoff. 2004. Support Facilities for Hydrogen-Fueled Vehicles: Conceptual Design and Cost Analysis Study. Available on the Web at <www.cafcp.org>. Pizer, W.A., and R.J. Kopp. 2003. Summary and Analysis of McCain-Lieberman Climate Stewardship Act of 2003, S.139. Washington, D.C.: Resources for the Future. Tromp, T.K., R.L. Shia, M. Allen, J.M. Eiler, and Y.L. Yung. 2003. “Potential environmental impact of a hydrogen economy on the stratosphere.” Science 300 (June 13):1740-1742. White, J.B. 2005. “An auto-industry dilemma.” The Wall Street Journal Online, March 21.