7
A Budget Roadmap

As requested in the statement of task, this chapter estimates the required research, development, and demonstration (RD&D) funding, both by the federal government and by the private sector that would be required for a transition to hydrogen fuel cell vehicles (HCFVs). It also estimates the infrastructure and manufacturing costs to transition HFCVs into the market and considers whether a lack of skilled workers might inhibit development or deployment of the technologies required.

RESEARCH, DEVELOPMENT, AND DEMONSTRATION COSTS

Government RD&D Funding

The Bush administration and Congress committed $1.16 billion over 5 years starting in 2004 for RD&D of technologies for hydrogen fuel cell vehicles. This government effort, undertaken by the Department of Energy (DOE), had actual annual appropriations totaling $879 million through 2007, with $309 million requested for FY 2008. If appropriated, this would bring the federal program to the total committed amount. DOE program funding by focus area is shown in Table 7.1. State governments do not play a large role in funding hydrogen fuel cell vehicle technology, although several states are involved in infrastructure demonstrations.

Besides the obvious areas of focus, the DOE Nuclear Hydrogen Initiative is directed at using the high temperatures (about 900°C) of next-generation nuclear reactors in novel processes to free hydrogen from water. The DOE Science program is supporting basic research on novel membranes, catalysts at the nanoscale, novel materials for hydrogen storage, and new approaches for solar hydrogen production.

The statement of task direct the committee to make an estimate of future government RD&D funding for the transition from petroleum to hydrogen in a significant percentage of the vehicles sold by 2020. No hard data are available because DOE cannot publicize future spending plans beyond the current fiscal budget year. A rough estimate is made here out to 2020 when the number of fuel cell vehicles based on technologies developed in the Hydrogen Success case is projected to be nearly 2 million. Spending beyond 2020 would likely continue further improvements in the longer term—for example, in pursuit of hydrogen from renewable sources. Such spending is estimated in less detail through 2023 when fuel cell vehicles are projected to break-even competitively and become self-supporting. Funding estimates for DOE R&D directed at hydrogen light-duty vehicles are shown in Table 7.2 and total $4.1 billion through 2020 (constant 2005 dollars) plus an additional $0.9 billion for 2021-2023, bringing the overall total to $5.0 billion from 2008 to 2023. Other programs at DOE and in other agencies are not included in Table 7.2. These figures should be considered approximations only. It is quite likely that additional research and demonstration programs will be required.

Funding for distributed hydrogen production completes the work required to support initial hydrogen supplies during the transition, based on natural gas reforming and water electrolysis. Thus, the estimated budget includes demonstration projects (demos) of these technologies in service stations to foster technological and practical learning. The demos for each are 1,500 kg/d with capital and operating costs estimated based on DOE’s H2A model as noted in Chapter 6 (DOE, 2007). These costs are $8 million for water electrolysis and $5 million for natural gas reforming, and they are included in the distributed production demo line of Table 7.2.

Centralized hydrogen production is the major source of hydrogen supply for larger fuel cell vehicle populations. Thus, the RD&D program comprises the development of hydrogen from coal gasification and biomass gasification, including demos to foster learning. Biomass estimates do not include crop research, which would be done anyway to support biofuels generally. Centralized production includes the hydrogen delivery infrastructure RD&D.



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7 a Budget roadmap As requested in the statement of task, this chapter esti- the current fiscal budget year. A rough estimate is made here mates the required research, development, and demonstration out to 2020 when the number of fuel cell vehicles based on (RD&D) funding, both by the federal government and by technologies developed in the Hydrogen Success case is pro- the private sector that would be required for a transition to jected to be nearly 2 million. Spending beyond 2020 would hydrogen fuel cell vehicles (HCFVs). It also estimates the likely continue further improvements in the longer term—for infrastructure and manufacturing costs to transition HFCVs example, in pursuit of hydrogen from renewable sources. into the market and considers whether a lack of skilled Such spending is estimated in less detail through 2023 when workers might inhibit development or deployment of the fuel cell vehicles are projected to break-even competitively technologies required. and become self-supporting. Funding estimates for DOE R&D directed at hydrogen light-duty vehicles are shown in Table 7.2 and total $4.1 billion through 2020 (constant 2005 research, deVeloPmeNT, aNd demoNsTraTioN dollars) plus an additional $0.9 billion for 2021-2023, bring- cosTs ing the overall total to $5.0 billion from 2008 to 2023. Other programs at DOE and in other agencies are not included in Government rd&d Funding Table 7.2. These figures should be considered approxima- The Bush administration and Congress committed $1.16 tions only. It is quite likely that additional research and billion over 5 years starting in 2004 for RD&D of technolo- demonstration programs will be required. gies for hydrogen fuel cell vehicles. This government effort, Funding for distributed hydrogen production completes undertaken by the Department of Energy (DOE), had actual the work required to support initial hydrogen supplies dur- annual appropriations totaling $879 million through 2007, ing the transition, based on natural gas reforming and water with $309 million requested for FY 2008. If appropriated, electrolysis. Thus, the estimated budget includes demon- this would bring the federal program to the total committed stration projects (demos) of these technologies in service amount. DOE program funding by focus area is shown in stations to foster technological and practical learning. The Table 7.1. State governments do not play a large role in fund- demos for each are 1,500 kg/d with capital and operating ing hydrogen fuel cell vehicle technology, although several costs estimated based on DOE’s H2A model as noted in states are involved in infrastructure demonstrations. Chapter 6 (DOE, 2007). These costs are $8 million for water Besides the obvious areas of focus, the DOE Nuclear electrolysis and $5 million for natural gas reforming, and Hydrogen Initiative is directed at using the high temperatures they are included in the distributed production demo line of (about 900°C) of next-generation nuclear reactors in novel Table 7.2. processes to free hydrogen from water. The DOE Science Centralized hydrogen production is the major source of program is supporting basic research on novel membranes, hydrogen supply for larger fuel cell vehicle populations. catalysts at the nanoscale, novel materials for hydrogen stor- Thus, the RD&D program comprises the development of age, and new approaches for solar hydrogen production. hydrogen from coal gasification and biomass gasification, The statement of task direct the committee to make an including demos to foster learning. Biomass estimates do estimate of future government RD&D funding for the transi- not include crop research, which would be done anyway to tion from petroleum to hydrogen in a significant percentage support biofuels generally. Centralized production includes of the vehicles sold by 2020. No hard data are available the hydrogen delivery infrastructure RD&D. because DOE cannot publicize future spending plans beyond 

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 TRANSITIONS TO ALTERNATIVE TRANSPORTATION TECHNOLOGIES—A FOCUS ON HyDROGEN TABLE 7.1 Recent R&D Funding by the U.S. Department of Energy for Fuel Cells and Hydrogen Production (millions of constant 2005 dollars) Program Area 2004 2005 2006 2007 Total Hydrogen production and delivery 29.9 39.9 31.5 65.9 167.2 Fuel cells and hydrogen storage 52.7 68.2 58.7 89.6 269.2 Technology validation (learning demonstrations) 15.6 26.1 33.3 39.6 114.6 Safety, codes and education 8.2 5.8 5.1 15.8 34.9 System analysis 1.4 3.2 4.8 9.9 19.3 Nuclear Hydrogen Initiative 6.2 8.7 24.1 18.7 57.7 Science 0.0 29.2 32.5 50.0 111.7 Congressionally directed 42.0 40.2 42.5 0.0 124.7 Total 156.0 221.3 232.5 289.5 899.3 TABLE 7.2 Estimated Future Government Funding for RD&D (millions of constant 2005 dollars) Program Area 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Distributed H2 production 12 15 8 8 3 0 0 0 0 0 0 0 0 46 Distributed H2 production 0 8 3 2 0 0 0 0 0 0 0 0 0 13 demonstrations Centralized H2 production 28 35 45 50 55 55 50 45 35 30 30 20 15 493 Centralized H2 production 0 0 0 15 15 15 15 50 35 20 25 20 0 210 demonstrations Fuel cells and H2 storage 112 115 115 115 115 110 110 110 110 110 110 110 110 1,452 Fuel cell demonstrations 30 40 40 50 40 30 30 20 20 20 15 10 10 355 Safety, codes, and education 21 21 25 25 25 25 15 10 10 5 5 5 5 197 Systems analysis 12 10 10 10 10 10 10 10 10 10 10 10 5 127 Science 60 60 60 60 60 60 60 60 60 60 60 60 60 780 Exploratory H2 from renewables 34 35 35 30 30 30 30 30 30 30 30 30 30 404 Total, 2008-2020 309 339 341 365 353 335 320 335 310 285 285 265 235 4,077 Additional, 2021-2023 900 Total, 2008-2023 4,977 NOTE: Non-DOE programs are not included here, and some numbers are estimates that might change significantly with further information. The learning demo for hydrogen from coal gasification required to meet fuel cell vehicle specifications. A very rough is ancillary to a coal gasification plant under consideration estimate of this cost is $75 million. The biomass gasifica- by DOE and industry, with areas of responsibility and cost tion demo is sized at 39,000 kg H2/d, about one-quarter the sharing to be determined. The plant, with carbon dioxide size of a projected commercial plant. Capital and operating (CO2) sequestration, would have a major goal of clean power costs are estimated at $135 million (constant 2005 dollars) production and would proceed independently whether or not based on the H2A model. The biomass and coal gasification it optionally produces pure hydrogen for fuel cell vehicles. demo costs are in the centralized production demo line of Therefore, the cost to demonstrate hydrogen from coal Table 7.2. gasification in the budget roadmap of this report is only the Major R&D efforts continue on the fuel cell to meet cost cost to demonstrate the incremental hydrogen purification and durability targets. Hydrogen onboard storage work is

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 A BUDGET ROADMAP directed at breakthroughs that would be much better than This was a collaborative effort by the U.S. Fuel Cell Council, high-pressure hydrogen storage. Learning demos on fuel Hydrogen and Fuel Cells Canada, Fuel Cell Europe, and the cells also are included in the budget roadmap. Fuel Commercialization Conference of Japan. Unfortunately, DOE’s Science program continues basic research to help the survey reported only total private and government spend- meet hydrogen production and fuel cell vehicle goals and ing, with no breakdown. However, those figures were used provides the basis for longer-term improvements. Work to estimate the private sector funding alone. continues on improved fuel cell membrane materials for The survey reported total worldwide RD&D spending increased ion transport and membrane durability, catalyst of $800 million in 2005, and the United States is reported design at the nanoscale for more efficient hydrogen pro- at 40 percent of this amount, or $320 million. However, the duction, and novel metal hydrides for hydrogen storage. response rate to the survey was 37 percent. If nonrespondents Exploratory R&D on hydrogen from renewable energy spent at the same rate as respondents, a “ballpark” estimate sources includes the thermochemical splitting of water using of U.S. RD&D spending in 2005 for private sector and gov- high-temperature (900°C) energy from a new generation ernment would be $860 million. U.S. government spending of nuclear reactors. This exploratory work also includes a in 2005 was $220 million (see Table 7.1), thus leaving $640 photoelectrochemical process (in which photons absorb into million for the private sector, which represents roughly $700 an electrode and produce electrons for electrolysis) and a million spent in 2005. photobiochemical process (involving oxidative cleavage of This rough estimate of $700 million per year was pro- water mediated by photosynthetic microorganisms). These jected to continue from 2008 to 2023 for demonstrations, approaches seek to liberate hydrogen from water with pos- development of commercial-scale manufacturing, and sible benefits compared to conventional water electrolysis, addressing problems and opportunities that arise as the as well as longer-term benefits that would enhance the value hydrogen transition proceeds. In total then, future U.S. pri- of a transition to hydrogen-powered vehicles. vate sector spending on RD&D for the hydrogen transition From 2021 to 2023 (the breakeven year for transition to was estimated at roughly $9 billion through 2020 and $11 HFCVs in the Hydrogen Success scenario), RD&D would billion through the scenario breakeven year of 2023. follow on leads from the results of exploratory work on hydrogen from renewables and other areas of improvement conclusion that might surface as the transition proceeds. As for any CONCLUSION: The committee estimates that total gov- major commercial venture, RD&D would be ongoing and ernment-industry spending on RD&D needed to facilitate continue beyond the 2023 breakeven point. It is likely that the transition to HFCVs is roughly $16 billion over the government support would still be involved, but longer-term 16-year period from 2008 through 2023, of which about funding levels are not projected here. 30 percent (roughly $5 billion) would come from U.S. government sources. Government and private spend- Private sector rd&d costs ing beyond 2023 also will likely be required to support longer-term needs, but such estimates were beyond the The statement of task also requested an estimate of U.S. scope of this study. private RD&D funding for the transition to hydrogen fuel cell vehicles. This is very difficult to determine because such information is mostly proprietary. Private U.S. compa- iNFrasTrUcTUre aNd Vehicle cosTs nies prominent in hydrogen fuel cell RD&D are GM, Ford, Chevron/Texaco, United Technologies, GE and nine venture As requested in the statement of task, this section esti- capital companies listed on stock exchanges. These nine mates the total private and government funding that would be companies are Fuel Cell Energy, Quantum Fuel Systems, required to support a transition to hydrogen fuel cell vehicles, Plug Power, Medis Technology, Distributed Energy Sys- in addition to the RD&D funding estimated above. These tems, Hoku Scientific, Mechanical Technology, PolyFuel, budget estimates were prepared for activities that would and Protonex. These companies are noted in the Chapter 2 be required for the Case 1 (Hydrogen Success) scenario discussion of the role of entrepreneurial companies in the described in Chapter 6. hydrogen transition. Together they had a combined invested capital of $2.5 billion at the year end of 2006. At least 32 cost elements other U.S. entrepreneurial companies also are active, albeit at a more modest level. The major cost elements of a budget roadmap are summa- Some indications of the RD&D spending of private com- rized in Table 7.3. They include the capital requirements plus panies come from a 2005 worldwide hydrogen and fuel cell the annual operating and maintenance (O&M) costs for the industry survey published in 2006. PricewaterhouseCoopers two principal components of the system, namely (1) fuel cell was the survey administrator that compiled and released the vehicles and (2) hydrogen fuel supply for these vehicles. In results in a pamphlet available on the Internet (PWC, 2007). the budget roadmap that follows, the committee assumed that

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 TRANSITIONS TO ALTERNATIVE TRANSPORTATION TECHNOLOGIES—A FOCUS ON HyDROGEN TABLE 7.3 Major Cost Elements in a Budget Roadmap Cost Element Capital Costs O&M Costs Vehicle production costs Production facilities Raw materials Testing facilities Labor costs (skilled, manual, supervisory) Base vehicle costs Facility operating costs (utilities, insurance, etc.) Fuel cell power train costs Facility maintenance costs Retailing costs Hydrogen supply costs Fueling station land and building costs Feedstocks (natural gas, electricity, etc.) H2 supply technology (SMRs; coal Labor costs gasification) Delivery costs Delivery system hardware (local or remote) Other operating costs Supply-related facility maintenance costs NOTE: SMR = steam methane reformer. TABLE 7.4 Projected Cumulative Infrastructure Requirements in 2020, 2035, and 2050 for the Hydrogen Success (Case 1) Scenario 2020 2035 2050 Capital Cost Capital Cost Capital cost (billion Physical (billion Physical (billions Physical Infrastructure Items 2005 dollars) Units 2005 dollars) Units 2005 dollars) Units Hydrogen production plants: Natural gas on-site SMR $2.6 2,110 $34 22,000 $122 79,000 stations Central coal plants with CO2 0 0 $18.2 20 $80 79 capture and sequestration Central biomass plants 0 0 $13.5 93 $19 131 Central natural gas SMR 0 0 0 0 0 0 $2.6 $66 $221 Total production plant capital cost $2.6 2,110 $25 56,000 $74 180,000 Refueling stations Delivery system (dollars and 0 0 $48 39,000 $120 80,000 H2 pipelines; pipeline miles) 5,000 CO2 pipelines Total cumulative capital costs $2.6 $139 $415 some of these costs would be borne by government programs infrastructure to supply hydrogen to those vehicles also were during the transition period required for fuel cell vehicles to estimated, as well as the O&M costs of the infrastructure become competitive in the marketplace. each year. The analysis of transition costs for this case ends To estimate these costs, the results of the Case 1 sce- in 2023, which is the breakeven year, after which HFCVs nario described in Chapter 6 were utilized. That scenario compete economically with conventional vehicles Hydrogen represents the committee’s best estimate of the maximum Success scenario (see Chapter 6). practicable number of HFCVs that could be deployed in the Building the infrastructure needed to fuel HFCVs will United States by 2020 (and beyond). The committee first esti- be a substantial construction program in itself, aside from mated the annual expenditures required to deploy the number research and technology development. Table 7.4 shows the of vehicles specified per year in that scenario. The vehicle cumulative number of hydrogen production plants, refueling production costs of Table 7.3 are captured in the estimated stations, and distribution pipelines, as well as their cumula- retail price of HFCVs developed in Chapter 6, and used here tive capital costs at several points in time. The committee’s in the budget roadmap. The annual capital expenditures for projected cumulative investment for hydrogen infrastructure

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 A BUDGET ROADMAP Total annual expenditures TABLE 7.5 Quantities Related to Infrastructure Estimates for the Hydrogen Success (Case 1) Scenario Figure 7.1 shows the total annual expenditures involved for the purchase of fuel cell vehicles and the production Quantity 2020 2035 2050 of hydrogen. The deployment of HFCVs starts with 1,000 vehicles in 2012, increasing to commercial levels of 50,000 Hydrogen demand 1,410 38,000 120,000 (tonnes per day) per year in 2015, 750,000 per year in 2020, and 1.5 million Hydrogen fuel cell 1.8 million 61 million 219 million per year in 2023—the breakeven year, after which the HFCV vehicles served (0.7%) (18%) (60%) market is self-sustaining in the Hydrogen Success scenario. annually (% of During this period the unit price per vehicle falls from total light-duty slightly more than $200,000 in 2012 to just over $27,000 in fleet) Consumption 2023, as indicated in Chapter 6. The resulting total annual of feedstocks expenditures for the 5.5 million vehicles deployed by 2023 for hydrogen are shown in Figure 7.1, along with the average per-vehicle production price ($30,000), the additional capital expenditures for (exajoules per hydrogen supply infrastructure, and the annual O&M costs year): Natural gas 0.08 0.8 2.2 of hydrogen production (mainly for natural gas feedstock). Coal 0 1.4 3.8 The total annual expenditures for vehicles and hydrogen Biomass 0 1.6 2.2 supply in Figure 7.1 increase from about $300 million in CO2 sequestered 0 114 317 2012 to $46 billion in 2023, with the cumulative expenditure (million tonnes over the transition period reaching $184 billion in 2023. Most per year) of that amount (91 percent) is for the purchase of fuel cell vehicles. The remaining 9 percent ($16 billion) is for hydro- gen supply, divided about equally between the capital costs of hydrogen infrastructure and the O&M costs for hydrogen (Case 1) totals nearly $3 billion in 2020, and then climbs to production. The annual vehicle costs shown here reflect all $139 billion in 2035 and $415 billion in 2050. Although the of the capital and O&M cost elements shown in Table 7.3. estimated investment to build out the hydrogen infrastruc- Some of those elements, however (such as the capital invest- ture is clearly large, the committee’s analysis, as explained ment for fuel cell production facilities), are reflected only in the pages that follow, assumes that the vast majority of implicitly as part of the per-vehicle price estimates used here. the investment required will be made by industry because A more detailed budget roadmap showing the breakdown of it is economically attractive to do so, and only a modest estimated annual expenditures for all of the individual cost fraction will require government support. Table 7.5 reports elements in Table 7.3 (e.g., production facilities, equipment, several additional quantities related to these infrastructure and raw materials over the transition period) is well beyond projections, including numbers of vehicles served, amounts the scope of the present analysis. of hydrogen produced, energy feedstocks used, and CO2 Note that since the budget roadmap of Figure 7.1 shows sequestered from central-station hydrogen production. 45 40 35 H2 supply operating Billions $2005 per year H2 supply capital cost 30 Fuel cell vehicle cost 25 20 FIGURE 7.1 Total annual expenditures for vehicles and hydrogen supply for transition to 15 the breakeven year for the Hydrogen Success case, excluding RD&D costs. The cumulative 10 cost, shared by government and industry, to- tals $184 billion, of which 91 percent is the 5 cost of fuel cell vehicles and 9 percent is the 0 cost of hydrogen supply (about half for infra- structure costs and half for additional operat- 08 09 22 20 23 21 10 16 18 19 12 13 15 14 17 11 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 ing costs, mainly natural gas feedstock). Year Figure7-1.eps

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8 TRANSITIONS TO ALTERNATIVE TRANSPORTATION TECHNOLOGIES—A FOCUS ON HyDROGEN only the total private plus government expenditures needed Success case) would be the incremental cost of purchasing to implement the Case 1 scenario, it does not reflect the $17 fuel cell vehicles, plus about half the total cost of building billion net savings in consumer expenditures for fuel from and operating the infrastructure needed to supply hydrogen 2012 to 2023 (discussed in Chapter 6) as hydrogen-fueled during the transition period (the remaining half is assumed to vehicles become more competitive with gasoline vehicles. be provided by the private sector). In practice, it is desirable Nor does it reflect the roughly $5 billion loss of federal and that industry share the costs of both constructing and operat- state government tax revenues from gasoline sales displaced ing the hydrogen supply system. However, since the cumu- by hydrogen (which is assumed to be free of taxes in this lative costs for infrastructure construction and operation analysis). are approximately equal ($8 billion each over the transition period), the committee assumed for simplicity that all capital costs are borne by government and all operating costs by the Government Versus industry Funding private sector. These incremental costs are shown in Figure The question of how the total annual costs shown in Fig- 7.2. In this case, the cumulative government expenditure for ure 7.1 should be shared between the federal government and vehicles totals $40 billion over the transition period, as noted private industry has no simple or single answer. Conceivably, in Chapter 6, while hydrogen supply costs add another $8 the government could bear all of the $184 billion in vehicle billion, bringing the total to $48 billion. This amounts to 26 and hydrogen supply costs through 2023 to accelerate the percent of the $184 billion in total expenditures for vehicles deployment of fuel cell vehicles. This situation might apply if and hydrogen supply over the transition period in Case 1. the technical and market readiness of HFCVs was perceived To the extent that the Case 1 deployment schedule for by industry as still too risky to warrant private investments of HFCVs succeeds in meeting or exceeding the technical the magnitude required over this time frame. Thus, govern- and cost targets assumed in this analysis, the government’s ment would have to bear all of the costs and risks as the de share of total costs could be reduced further relative to the facto customer for all HFCVs. The committee believes that budget roadmap of Figure 7.2. Some consumers also may such a scenario is unrealistic since major auto companies be willing to pay a premium for this new type of vehicle. would not likely be willing to commit facilities and person- On the other hand, to the extent that early program goals nel, or risk their reputation and current development plans, are not fully achieved, or industry is reluctant to commit to on a venture they perceive as too risky, even if government the deployment schedule assumed in this analysis, greater offered to pay the bill. As discussed below, however, the government funding would be required to sustain the Case government might buy a substantial fraction of new HFCVs 1 scenario. For example, if government bore the full vehicle in the early years of the transition for use in its own fleet. cost, rather than the incremental cost, during the first 5 years In the committee’s judgment, a realistic estimate of the of production, it would add about $4 billion to the total cost government share of total costs to facilitate the maximum for approximately 150,000 HFCVs. For reference, this is practicable transition to HFCVs (based on the Hydrogen about half the number of new vehicles currently purchased 8 7 6 Billions $2005 per year H2 supply capital cost 5 Incremental vehicle cost 4 FIGURE 7.2 Annual government expen- ditures through the transition to 2023. Es- 3 timated expenditures are based only on the incremental costs of fuel cell vehicles over conventional vehicles, plus the capital cost 2 for hydrogen infrastructure, for the Hydrogen Success scenario (excluding RD&D costs). 1 The cumulative cost is $48 billion, of which 83 percent is the cost of vehicles and 16 per- 0 cent is the cost of hydrogen infrastructure. 08 09 22 20 23 21 10 16 18 19 12 13 15 14 17 11 Government RD&D costs over this period 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 total an additional $5 billion. Year Figure7-2.eps

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 A BUDGET ROADMAP 50 45 Government RD&D 40 Private RD&D Billions $2005 per year 35 H2 supply operating 30 H2 supply capital cost 25 Fuel cell vehicle cost 20 15 10 FIGURE 7.3 Total annual costs of transition 5 to the breakeven year for the Case 1 scenario, 0 including RD&D costs plus total vehicle and hydrogen supply costs. 08 09 22 20 23 21 10 16 12 18 19 13 15 14 17 11 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Year Figure7-3.eps by the federal government over a -year period.1 Allowing sive) then totals approximately $200 billion, shared between industry and government. The government portion of the for some expenditures of this nature, the committee estimates total transition cost, including RD&D, is estimated to be the government share of total vehicle plus hydrogen costs roughly $55 billion (an average of $10,000 per vehicle), to be approximately $50 billion (an average of $9,500 per vehicle) during the transition period. as summarized in the last line of Table 7.6 (which shows estimated transitions costs on a cumulative and average The committee’s analysis assumed (for simplicity) that per-vehicle basis). As discussed above, these estimates are all costs shown in Figures 7.1 and 7.2 are borne by U.S. based on the committee’s Hydrogen Success scenario defin- companies and government. To the extent that participation ing the maximum practicable number of HFCVs that could by Japanese and other foreign manufacturers accelerates be on U.S. roads by 2020. This overall cost range translates the introduction of HFCVs, and subsidizes the costs of a to an average of roughly $3 billion per year over 16 years transition to fuel cell vehicles, the total U.S. costs shown (2008-2023). To put these amounts in perspective, the U.S. here would be further reduced. For example, if early HFCV government subsidy for ethanol fuel in 2006 was approxi- markets outside the United States were half as large as the mately $2.5 billion and, if extended at the current rate, could assumed U.S. markets, the time for transition would be grow to $15 billion per year in 2020 as a result of the recent accelerated by 1-2 years, and the cumulative cost difference (December 2007) energy act.2 between HFCVs and gasoline vehicles would be reduced by Note, too, that while the budget roadmaps presented $5 billion to 10 billion (from the $40 billion estimated here) here apply only to the transition period through 2023, the assuming shared learning. Although the committee did not successful introduction of fuel cell vehicles would involve attempt to estimate the potential role of non-U.S. investments substantial additional expenditures—primarily by the pri- in HFCV technologies, it is aware that major efforts outside vate sector—for infrastructure, energy resources, and other the United States are currently under way and could have a requirements of a full-scale HFCV-based transportation significant influence on the development and cost of a transi- system. For example, as seen in Table 7.4, the committee tion to HFCVs in this country. estimated that over more than $400 billion would be required by 2050 to fully build out the hydrogen supply system to fuel oVerall BUdGeT roadmaP the HFCVs. However, the committee believes that follow- Figures 7.3 and 7.4 combine estimates of government and private sector RD&D costs with the estimated costs of 2The Volumetric Ethanol Excise Tax Credit (VEETC) of 51 cents per vehicle deployment in Figures 7.1 and 7.2, respectively. The gallon is provided to all ethanol blended with gasoline, which was about 5 overall cost for the transition period (2008 to 2023, inclu- billion gallons in 2006, according to DOE data. Although the VEETC is set to expire after 2010, Congress is debating various ways of extending it, as 1The overall federal fleet is about 650,000 vehicles, with acquisitions of it has since the credit was first created in 1978. The Energy Independence about 65,000 per year. While many of the newly acquired vehicles would and Security Act of 2007 established a renewable fuel standard that would not be appropriate for hydrogen or would not be in an area where hydrogen reach 30 billion gallons by 2020, most of which is likely to be ethanol. A is available, the federal fleet could by itself account for a significant fraction 51 cents per gallon credit applied to that amount would represent a subsidy of early HFCVs (GSA, 2007). in excess of $15 billion per year.

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00 TRANSITIONS TO ALTERNATIVE TRANSPORTATION TECHNOLOGIES—A FOCUS ON HyDROGEN 8 7 6 Billions $2005 per year Government R&D H2 supply capital cost 5 Incremental vehicle cost 4 3 2 1 FIGURE 7.4 Total annual costs of RD&D 0 plus incremental costs of HFCVs over con- 08 09 22 20 23 21 10 16 12 18 19 13 15 14 17 11 ventional vehicles up to the breakeven year 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 for the Case 1 scenario. Year Figure7-4.eps TABLE 7.6 Summary of Cumulative Budget Roadmap Costs for Transition to Hydrogen Fuel Cell Vehicles (maximum practicable number of vehicles by 2020) Total Cumulative Cost, Average Cost per HFCV on Road 2008-2023a Cost Elements 2008-2023 “Base vehicle” cost of conventional vehicles $128 billion $23,000 $7,000b Average incremental fuel cell vehicle cost relative to conventional gasoline vehicles $40 billion $30,000c Total purchase cost of fuel cell vehicles $168 billion Infrastructure capital cost for hydrogen supply $8 billion $1,500 Total operating cost for hydrogen supply $8 billion $1,500 Total cost of hydrogen supply $16 billion $3,000 Total cost for vehicles and hydrogen fuel supply $184 billion $33,000 Estimated government share of total vehicle and hydrogen fuel supply cost $50 billion $8,500 Government RD&D funding $5 billion $1,000 Private RD&D funding $11 billion $2,000 Total funding for government and private RD&D $16 billion $3,000 $200 billiond Total cost for vehicles, hydrogen, and all RD&D $36,000 Estimated government share of total cost for vehicles, hydrogen, and RD&D $55 billion $9,500 aRounded estimates based on 5.54 million HFCVs on the road in 2023. bThe final (learned-out) incremental cost per vehicle in 2023 is $3,600. cThe final (learned-out) cost per vehicle in 2023 is $27,000. dIncludes $128 billion “base vehicle” cost of conventional vehicles that would have been purchased instead of HFCVs. NOTE: All costs in constant 2005 U.S. dollars.

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0 A BUDGET ROADMAP ing a successful transition, there would be sufficient market To address the question of skills availability in the hydro- incentives for industry to invest the needed capital without gen and fuel cell industry, the committee constructed a simple government support. Additional details of some of the lon- flow diagram showing the elements of this emerging industry ger-term resource needs to support the Hydrogen Success segment (Figure 7.5). Key industrial players in each element scenario are found in Chapter 6. of the business model shown in Figure 7.5 were identified, Other factors besides technical progress and funding and more than 20 “not-for-attribution” interviews were con- requirements could also affect the viability of achieving the ducted with executives representing those companies (as well Hydrogen Success scenario. While a comprehensive assess- as with several academics and nongovernmental organization ment of potential barriers to a transition to fuel cell vehicles officials with expertise in the field). The companies ranged was beyond the scope of this study, one of those factors—the from early-stage entrepreneurial businesses to international availability of the requisite skilled workforce—was exam- giants with global reach. Uniformly, the feedback received in ined by the committee, as discussed below. these interviews was that there was little or no concern about attracting the skills needed to achieve the growth trajecto- ries envisioned from the initial commercial introduction of skills aVailaBiliTY hydrogen vehicles until 2025—even in the most aggressive The question looms large as to whether there will be of the committee’s scenarios. sufficient professional and skilled labor resources available It is possible that beyond 2025, when the committee’s to achieve the growth in fuel cell vehicles reflected in the projections envision the construction of large facilities for scenarios developed by the committee. Numerous recent central generation of hydrogen, as well as pipeline delivery reports have highlighted concerns about the availability of systems, labor force constraints may become more critical, critical skills and trained personnel resources, particularly in but the committee is reluctant to speculate on that possibility the energy arena. For example, a recent National Petroleum at this time. It was also recognized by the committee that new Council report declared that a demographic cliff is looming skills and knowledge will have to be acquired by public sec- in all areas of energy industry employment (NPC, 2007). tor agencies dealing with codes, standards, and safety mat- The U.S. Department of Labor recently released a report ters related to the hydrogen transition. Planning and effort on the “graying” of workers in the nuclear industry that will be required well in advance to ensure that the skills and indicated around one-third of the workforce in that segment knowledge needed to permit, install, and operate hydrogen of the energy business will be eligible to retire in the next 5 systems will be available when necessary. years (EBiz, 2007). The committee also is aware that DOE In summary, the committee found no evidence from the has been conducting an employment study related to the information gathered in its brief field research effort that hydrogen and fuel cell industry, but that study has not yet there is any need to be concerned about the availability of been released and was not available to the committee during critical skills to achieve a rapid ramp-up in the introduction the committee’s information-gathering efforts. of fuel cell vehicles and related fueling infrastructure, at least INPUTS COMPONENTS VEHICLES CUSTOMER INTERFACE Critical Materials Fuel Cells Dealerships • Platinum • Carbon fiber Tanks Vehicle • Other catalysts Production • Etc. Service / Fueling Membrane Production Stations H2 Production Natural Gas Appliances • SMR Electricity • Electrolyzers FIGURE 7.5 Diagram of the early structure of the hydrogen and fuel cell industries, identifying areas where skilled people will be needed. NOTE: SMR = steam methane reformers. Figure7-5.eps

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0 TRANSITIONS TO ALTERNATIVE TRANSPORTATION TECHNOLOGIES—A FOCUS ON HyDROGEN coNclUsioN in the period until 2025. Rather, the consensus among the sample of executives interviewed by the committee indicated CONCLUSION: The estimated government cost to sup- that attracting the skills needed to achieve any foreseeable port a transition to hydrogen fuel cell vehicles is roughly rate of growth in the hydrogen and fuel cell industry will $50 billion over a 16-year period from 2008 to 2023, not be a problem, particularly if the government sends a primarily for the production of fuel cell vehicles ($40 clear signal that its support for growing the industry will be billion of incremental cost) and, to a lesser extent, for substantial and enduring. the initial deployment of hydrogen supply infrastructure It is also interesting to speculate on why this conclusion (about $10 billion) and R&D (about $5 billion). No short- was found for hydrogen and fuel cell vehicles when other ages are foreseen in the critical workforce skills needed segments of the energy industry are expressing concern to accomplish the transition. However, further study is about skills availability. Three factors were suggested by the necessary to assess the longer-term costs, institutional interviews conducted: issues, workforce issues, and impacts of undertaking the major hydrogen infrastructure development required to 1. First, the scale of the hydrogen and fuel cell industry in support widespread use of HFCVs. the early years, even at the most rapid pace of growth envi- sioned by the committee, is still relatively small compared reFereNces to the world’s overall energy supply infrastructure. 2. Much of the leading work being done in the hydrogen DOE (U.S. Department of Energy). 2007. Hydrogen Fuel Cells and In- and fuel cell industry is coming from special task groups set frastructure Technologies Program. Available at www.eere.energy. up by divisions of major corporations (frequently referred gov/hydrogenandfuelcells/analysis/model.html. to as “skunk works”) or from entrepreneurial companies. EBiz. 2007. Nuclear Jobs. energyBizinsider, September 14, 2007. Available at http://www.energycentral.com/site/newsletters/ebi.cfm?id=383. These environments typically draw the best and the brightest GSA (General Services Administration). 2007. Available at http://www.gas. scientists, engineers, and skilled technicians for reasons such gov/graphics/ogp/FFR2007_508.pdf. Accessed April 2008. as challenge, excitement, and opportunity for substantial NPC (National Petroleum Council). 2007. Facing the Hard Truths About economic gain. Energy—A Comprehensive View to 00 of Global Oil and Natural 3. A refrain frequently heard in interviews and contacts Gas. Washington, D.C. PWC (PricewaterhouseCoopers). 2007. 2006 Worldwide Fuel Cell by committee members with professionals in the hydrogen Industry Survey. Available at http://www.pwc.com/servlet/ and fuel cell field is that working in this field offers various pwcPrintPreview?LNLoc=/extweb/pwcpublications.nsf/docid/ intangible benefits to employees—a feeling of doing some- 6F870010939851E0852570CA00179123. thing good, helping to address a critical global problem, creating a new industry, and so on. These intangible benefits appear to be attracting many of “the best and the brightest” to the field.