only the total private plus government expenditures needed to implement the Case 1 scenario, it does not reflect the $17 billion net savings in consumer expenditures for fuel from 2012 to 2023 (discussed in Chapter 6) as hydrogen-fueled vehicles become more competitive with gasoline vehicles. Nor does it reflect the roughly $5 billion loss of federal and state government tax revenues from gasoline sales displaced by hydrogen (which is assumed to be free of taxes in this analysis).

Government Versus Industry Funding

The question of how the total annual costs shown in Figure 7.1 should be shared between the federal government and private industry has no simple or single answer. Conceivably, the government could bear all of the $184 billion in vehicle and hydrogen supply costs through 2023 to accelerate the deployment of fuel cell vehicles. This situation might apply if the technical and market readiness of HFCVs was perceived by industry as still too risky to warrant private investments of the magnitude required over this time frame. Thus, government would have to bear all of the costs and risks as the de facto customer for all HFCVs. The committee believes that such a scenario is unrealistic since major auto companies would not likely be willing to commit facilities and personnel, or risk their reputation and current development plans, on a venture they perceive as too risky, even if government offered to pay the bill. As discussed below, however, the government might buy a substantial fraction of new HFCVs in the early years of the transition for use in its own fleet.

In the committee’s judgment, a realistic estimate of the government share of total costs to facilitate the maximum practicable transition to HFCVs (based on the Hydrogen Success case) would be the incremental cost of purchasing fuel cell vehicles, plus about half the total cost of building and operating the infrastructure needed to supply hydrogen during the transition period (the remaining half is assumed to be provided by the private sector). In practice, it is desirable that industry share the costs of both constructing and operating the hydrogen supply system. However, since the cumulative costs for infrastructure construction and operation 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 private sector. These incremental costs are shown in Figure 7.2. In this case, the cumulative government expenditure for vehicles totals $40 billion over the transition period, as noted in Chapter 6, while hydrogen supply costs add another $8 billion, bringing the total to $48 billion. This amounts to 26 percent of the $184 billion in total expenditures for vehicles and hydrogen supply over the transition period in Case 1.

To the extent that the Case 1 deployment schedule for HFCVs succeeds in meeting or exceeding the technical and cost targets assumed in this analysis, the government’s share of total costs could be reduced further relative to the budget roadmap of Figure 7.2. Some consumers also may be willing to pay a premium for this new type of vehicle. On the other hand, to the extent that early program goals are not fully achieved, or industry is reluctant to commit to the deployment schedule assumed in this analysis, greater government funding would be required to sustain the Case 1 scenario. For example, if government bore the full vehicle cost, rather than the incremental cost, during the first 5 years of production, it would add about $4 billion to the total cost for approximately 150,000 HFCVs. For reference, this is about half the number of new vehicles currently purchased

FIGURE 7.2 Annual government expenditures through the transition to 2023. Estimated expenditures are based only on the incremental costs of fuel cell vehicles over conventional vehicles, plus the capital cost for hydrogen infrastructure, for the Hydrogen Success scenario (excluding RD&D costs). The cumulative cost is $48 billion, of which 83 percent is the cost of vehicles and 16 percent is the cost of hydrogen infrastructure. Government RD&D costs over this period total an additional $5 billion.

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