A publication of the New Rules Project
of the Institute for Local Self-Reliance
A better
way to get
from here
to there
A commentary
on the hydrogen
economy and
a proposal for an
alternative strategy
David Morris
December 2003
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
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economic development strategies. Since 1974, ILSR has worked with citizen groups,
governments and private businesses in developing policies that extract the maximum
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3
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
Executive Summary
The idea of a hydrogen economy has burst
like a supernova over the energy policy
landscape, mesmerizing us with its possibilities
while blinding us to its weaknesses.
Such a fierce spotlight on hydrogen is pushing
more promising strategies into the
shadows.
The hydrogen economy is offered as an
all-purpose idea, a universal solution.
However, in the short and medium term a
crash program to build a hydrogen infrastructure
can have unwanted and even damaging
consequences. This is especially true
for the transportation sector, the transformation
of which is the primary focus of
hydrogen advocates and the highest priority
of federal efforts.
The focus on building a national hydrogen
distribution and fueling network to supply
fuel cell powered cars ignores shorter
term, less expensive and more rewarding
strategies encouraged by recent technological
developments. The most important of
these is the successful commercialization of
the hybrid electric vehicle (HEV).
The HEV establishes a new technological
platform upon which to fashion transportation-
related energy strategies. Its dual
reliance on electric and gasoline propulsion
systems allows and encourages us to develop
a dual energy strategy that expands the
electricity storage and propulsion capacity
component while rapidly expanding the
renewable fuels used both for the electricity
and engine side of the vehicle.
The current hydrogen economy strategy
focuses almost entirely on the engine
side of the hybrid with its inherent ramifications:
the creation of a nationwide production
and delivery system for hydrogen and
the commercialization of a fuel cell car that
can use pure hydrogen. A lower cost strategy
with a quicker payoff and impact would
focus on expanding electricity storage side
and substituting biofuels for gasoline.
HEV’s overcome the key performance liability
of all-electric cars: short driving
range. But the current generation of HEVs
lack the ability to operate solely on batteries.
Electricity is used to reduce or eliminate
energy losses due to idling and stopand-
go driving in urban areas.
Manufacturers should be strongly encouraged
to quickly develop the next generation
of HEVs that can travel significant distances
on battery power alone. Rapid advances
have occurred in recent years in electric
storage technologies.
One element of this strategy is to
encourage plug-in HEVs (PHEVs) that can
recharge the batteries from the grid as well
as the engine. While HEVs can reduce fuel
consumption by 30 percent, PHEVs can
reduce consumption by 85 percent or more.
A Better Way
to Get from Here
to There
A Commentary on the Hydrogen Economy
and a Proposal for an Alternative Strategy
David Morris, Vice President
Institute for Local Self-Reliance
December 2003
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
4
Extending the HEVs electricity-only
driving range should be accompanied by a
simultaneous strategy that expands the use
of renewable energy to fuel both the motor
and the engine. On the electricity side, this
means dramatically expanding the generation
of electricity using wind, sunlight and
other renewable fuels. On the engine side it
means dramatically expanding the use of
sugar-derived biofuels. More than 4 million
variable-fueled vehicles are already on the
road. They can operate on any combination
of ethanol and gasoline. The cost of modifying
vehicles to allow them this multiple fuel
capacity is small, about $150 per vehicle
compared to the tens of thousands of dollars
additional cost of a fuel cell vehicle. The cost
of developing a network of fueling stations
capable of delivering biofuels as a primary
fuel (50-100 percent) rather than the current,
6-10 percent additive is a tiny fraction of the
cost of establishing a network of hydrogen
fueling stations, about $50,000 for a biofuel
refueling station versus some $600,000 for a
hydrogen refueling station.
Currently in the United States ethanol is
made from sugars extracted from corn. In the
future the sugars will come from far more
abundant cellulose materials like corn stalks
and wheat straw and grasses and kelp. A
sugar economy would not only reduce the
nation’s dependence on imported oil but
would create the potential for designing a low
cost agricultural policy that benefits domestic
and foreign farmers alike.
For the foreseeable future, even the
hydrogen economy’s most ardent supporters
concede that theirs will be a high cost
strategy ($2.50 to $12 per gallon of gasoline
equivalent) based on nonrenewables and
likely to increase the emissions of greenhouse
gases. These advocates argue that in
the long term these various costs can be
reduced or eliminated. Technically that may
be so. But hydrogen’s high cost, poor energetics
and scant environmental benefits for
the near and medium term future must be
taken into account when evaluating it
against alternative fuels and strategies.
For example, hydrogen advocates
argue that hydrogen’s higher cost will be
offset by the higher efficiency of fuel cells.
The argument is valid when fuel cells are
compared to traditional internal combustion
engines (ICEs) but disappears when fuel
cells are compared to HEVs.
Some environmentalists have criticized
biofuels for their cost and modest net energy
yields. Yet hydrogen costs are higher
than biofuels even when the latter’s subsidies
are eliminated. And hydrogen production
and distribution has a negative net
energy yield. Finally, while electric batteries
have a high cost compared to gasoline they
are a lower cost storage medium than liquid
or compressed hydrogen.
A dual strategy (improvements in electricity
storage, electronics controllers and
software accompanied by an aggressive fuel
substitution policy) has many advantages
over a hydrogen focus. It is cheaper, less
disruptive and more resilient. It can have a
more dramatic short-term impact. It can
allow us to tackle multiple societal problems
(e.g. the plight of farmers and rural
economies) at the same time.
One can argue that this is not an eitheror
situation. We can promote hydrogen
while promoting more efficient vehicles and
renewable fuels. But we have scarce financial,
intellectual and entrepreneurial
resources. Dramatic improvements in the
efficiency of our transportation fleet via the
introduction of advanced and plug in
hybrids and the expansion of renewable
fuels to substitute for gasoline can occur
incrementally using the current production
and distribution systems. For a hydrogen
economy to have any impact the nation
must change virtually every aspect of its
energy system, from production to distribution
to the design of our gas stations and
our cars.
We may be on the verge of spending
hundreds of billions of dollars and diverting
enormous amounts of scarce intellectual
and entrepreneurial energy to create an
infrastructure based on nonrenewable fuels
in the hope that after it is in place we might
fuel it with renewable energy.
The chicken-and-egg problem of building
an infrastructure to allow the hydrogen
economy to emerge, even if the initial basis
of that economy is nonrenewable fuels has
already enticed environmental and renewable
energy advocates into a series of unfortunate
compromises. For example, to jumpstart
a hydrogen fueling system the
Minnesota legislature in 2003 declared natural
gas to be a renewable energy resource
so long as it is used to make hydrogen. In
2003 the California Air Resources Board
“Hydrogen’s high cost,
poor energetics and scant
environmental benefits for
the near and medium term
must be taken into account
when evaluating it against
alternative fuels and
strategies.”
5
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
(CARB) declared a fuel cell car superior to
a plug-in hybrid vehicle even though the
former would consume more fossil fuels
than the latter.
The electricity network is already in
place. Why not focus on expanding the portion
of this delivery system that relies on
renewable energy rather than spend the
next generation creating a new delivery
infrastructure that, once built, will require
renewable energy to once again make
inroads? In 2003 renewable resources generate
about 1.5 percent of the nation’s transportation
fuels and about 2.5 percent of the
nation’s electricity. Why not focus on ratcheting
upwards these low percentages rather
than face a situation in 2020 where renewable
resources generate 1-2 percent of the
nation’s hydrogen?
A crash program to switch to electricity/
biofuel powered vehicles should take
into account social and economic issues.
The transition should not only expand
renewable energy use but do so in a way
that maximizes the benefits to hard-pressed
rural economies here and abroad. This is
best accomplished by having the power
plants locally owned.
Farmers who own a wind turbine can
earn several times more than those that
simply lease their land for large-scale wind
developers. Farmers who own a share of
ethanol plants can earn several times more
per bushel of corn delivered than their
neighbors who only sell their corn to
ethanol plants.
There is another important reason to
treat scale and ownership issues seriously:
the concentration of market power. Archer
Daniels Midland (ADM) generates about 40
percent of the ethanol produced in the
country and dominates nationwide distribution.
Although its share has dropped in the
last 10 years with the rapid growth of smaller
and medium-sized ethanol facilities,
many of which are farmer owned, it
remains a worrisome situation. This is especially
so because of ADM’s past involvement
in price fixing and its aggressive exercise
of market power.
An aggressive biofuels program promises
important international benefits as well.
The key trade disputes currently involve
farmers in industrialized countries pitted
against farmers in poorer countries. Rather
than have carbohydrates compete with carbohydrates,
a biofuel program would allow
carabohydrates to compete with hydrocarbons.
The agricultural sector and farming
communities in poorer countries are far bigger
than in the United States and Europe.
And the use of plant matter to displace
imported fossil fuels is even more compelling
in poorer countries that lack the
hard currencies needed to pay for these
imports.
A decision to focus on an
electricity/biofuel path for the transportation
sector does not preclude the rapid
deployment of fuel cells. Indeed, the fuel
cell economy is developing rapidly without
a hydrogen distribution network. Fuel cells
have the attractive potential of decentralizing
and democracizing the electricity system,
reducing system costs and lowering
the likelihood of repetitions of widespread
blackouts like the one that occurred in the
northeastern United States in August 2003.
A fuel cell economy does not depend on a
hydrogen economy as currently envisioned.
The strategy currently envisioned to
effect a hydrogen economy may be diverting
significant intellectual, financial and
political resources from more attractive
strategies. Before we take that leap, we
should take a long hard look at the premises
and promises of the hydrogen economy
and at the other alternatives available that
could achieve the same goals more quickly
and cheaply.
Worldwide Sources of Commercial Hydrogen 2002 2
Origin Amount in billions Nm3 per yearPercent
Natural Gas 240 48
Oil 150 30
Coal 90 18
Electrolysis 20 4
“In 2003 renewable
resources generate about
1.5 percent of the nation’s
transportation fuels and
about 2.5 percent of the
nation’s electricity. Why not
focus on ratcheting
upwards these low percentages
rather than face a situation
in 2020 where renewable
resources generate 1-2
percent of the nation’s
hydrogen?
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
6
The Vision
In January 2003, President Bush announced
a $1.6 billion five-year effort to make hydrogen
the fuel of choice in the transportation
sector.1 The initiative was applauded on
both sides of the aisle. In the spring of 2003
the hydrogen title of the Energy Bill (Title
VII) was voted on first because of its uncontroversial
nature. As Marie Fund, spokeswoman
for the Senate Energy Committee
correctly noted before the hearings began,
“It’ll be kind of a love fest.”
Spurred by the sudden federal enthusiasm,
state legislatures have moved quickly
to embrace the hydrogen economy. In late
April 2003 California revised its Zero
Emission Vehicle program to focus on
hydrogen fuel cell vehicles rather than battery-
electric vehicles. In June 2003
Minnesota’s legislature declared, “It is a
goal of this state that Minnesota move to
hydrogen...” In July 2003 the Pacific
Northwest, led by the Bonneville Power
Authority, declared its intention to become
the “Saudi Arabia of hydrogen”.
The attractiveness of a hydrogen
economy is easily explained. Hydrogen is
the planet’s most abundant element. It
can be extracted from water, another
abundant material. Hydrogen gas is odorless,
tasteless and non-poisonous. Fuel
cells using hydrogen emit only water.
There are no harmful tailpipe or smokestack
emissions.
A future powered by hydrogen extracted
from water using electricity generated
by renewable fuels like wind or geothermal
power is a most appealing vision.
A fundamental reason that the hydrogen
economy initiatives have garnered such
widespread support is that everyone can
play the game. No energy source is excluded.
And in this game the fossil fuel and
nuclear industries have enormous advantages.
• Currently the industrial hydrogen
market is mature and growing. The hydrogen
comes primarily from natural gas (95
percent in the United States, 50 percent
worldwide) although it is also made from
coal and petroleum. Industrial use of
hydrogen is about 50 million metric tons
and growing at 4-10 percent per year.3
Some 95 percent of the hydrogen is generated
by industries for internal use as a
chemical for making fertilizer or in oil
refining. Five percent is merchant hydrogen
sold to external users.
• The nuclear industry sees itself as a
key player in a hydrogen future. “Hydrogen
Economy; Boom Time for Hydrogen
Production by Nuclear Energy,” reads a
headline in Power Economics.4 Nuclear
power “is the only way to produce hydrogen
on a large scale without contributing to
greenhouse gas emissions,” boasts the
trade journal Nucleonics Week. The federal
energy bill authorizes as much as $1 billion
to build a nuclear reactor and use it to
extract hydrogen from water.
• Coal supplies almost 20 percent of
the world’s hydrogen. At the 2000 World
Hydrogen Energy Congress in Beijing, Italy
and China announced plans to cooperate to
boost that percentage. President Bush has
launched a billion dollar initiative to develop
a coal gasification-to-hydrogen plant.
• Several automobile and oil companies
are betting that petroleum will be the
hydrogen source of the future. It was
General Motors, after all, that coined the
phrase “the hydrogen economy”. There is
more hydrogen in a gallon of gasoline than
in a gallon of liquid hydrogen.
• Wind energy and solar energy advocates
support hydrogen production as a
way to overcome the limitations resulting
from the intermittent nature of producing
electricity from these resources.
• There is another reason there is little
opposition to a hydrogen economy. After
President Bush announced a billion dollar
initiative in January 2003 it was apparent
that money for hydrogen-related projects
would soar even as money for other programs,
both fossil fuel and renewable, were
projected to decline. Potential recipients for
this new money are reticent to criticize the
initiative. States have begun to “prime the
pump” by investing significant sums up
front in the anticipation that it will make
them attractive for the increased federal
funding.
“There is more
hydrogen in a gallon of
gasoline than in a gallon of
liquid hydrogen.”
7
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
The Reality
A Hydrogen Economy Is Not A
Renewable Energy Economy
For the foreseeable future the vast majority
of hydrogen will be made from nonrenewable
resources. The Department of
Energy expects natural gas to be the primary
source for transportation-related
hydrogen for the next 10-20 years and
probably for many years beyond that.
After a review of the scientific and engineering
literature, MIT researchers
announced, “The uniform conclusion is
that decentralized gas reforming stations
can provide hydrogen at lower cost than
any of the other options 20 years from
now.”5 In the longer term, the Department
of Energy believes coal could become a
significant supplier of hydrogen after
2015. President Bush’s long-term vision,
as outlined in his State of the Union
address, is to use nuclear fusion to produce
hydrogen from water.
Hydrogen can be produced using
renewable energy but the cost is far higher
than producing hydrogen from non-renewable
fuels. “Electrolytic hydrogen from
intermittent renewable resources is generally
two to three times more costly to produce
than hydrogen made thermo-chemically
from natural gas or coal, even when
the costs of CO2 sequestration are added to
the fossil hydrogen production cost,” Joan
Ogden, research scientist at the University
of California-Davis told the House Science
Committee in March 2003.
All advocates of the hydrogen economy
discuss the “chicken and egg” problem. We
can’t have a hydrogen economy until there is
an adequate system for storing, transmitting
and fueling cars (and stationary fuel cells)
with hydrogen. Doing so will take decades
and the cost will run into the hundreds of billions
of dollars. While we build the infrastructure
hydrogen will come from non-renewable
resources like natural gas that has its own
distribution system. After the hydrogen infrastructure
is in place, renewable hydrogen
will be able to enter the market.
To get the hydrogen economy up and
running some states are allowing fossilfueled
hydrogen to be considered renewable
hydrogen feedstocks. In the spring of
2003, for example, the Minnesota legislature
declared that natural gas-derived
hydrogen would be considered renewable
energy until 2010 and therefore eligible for
incentive programs related to hydrogen and
fuel cell industry development.
A renewable hydrogen economy is an
interesting prospect. But the reality is that
the gestation process for the renewable egg
is going to be measured in decades. In the
meantime the energy for the chicken will
come from fossil (or nuclear) fuels.
Which is why some in the renewable
energy community question the wisdom of
shifting intellectual, financial, political and
entrepreneurial resources into a crash program
to produce hydrogen. The European
Wind Energy Association (EWEA) cautions
that a premature push toward a hydrogen
economy “could have a serious environmental
downside”. Christian Kjaer, EWEA’s policy
director notes, “It is a backwards argument
that hydrogen opens access to new and
renewable energy sources. It is the other way
around. Large-scale renewable energy production,
such as offshore wind power, is an
essential precondition for the deployment of
a sustainable hydrogen economy.”6
In the last 30 years renewable energy
has overcome significant odds. In the United
States it has now captured about 2 percent of
the total transportation fuels and electricity
markets. Wind power is the world’s fastest
growing energy resource. The growth curve
for photovoltaics is steep. This is the time to
make a major effort to move solar energy
from the margins of energy production to its
center rather than to shift our intellectual and
scientific and capital resources toward constructing
the infrastructure demanded for a
hydrogen economy and end up 25 years from
now where we are, in essence today: having
2 percent of the hydrogen market and hoping
to increase that fraction.
It is instructive to note that while windgenerated
hydrogen is far from competitive
with fossil fuel-generated hydrogen, windgenerated
electricity may already be competitive
with fossil fuel-generated electricity.
In several states electricity from high-speed
winds is the least expensive source of new
power. Even when wind-generated electricity
is more expensive, it is by 20-40 percent,
not 200 percent as is the case with windgenerated
hydrogen. One study concludes,
“Electrolysis is an uneconomical use of
wind and geothermal electricity”.7
“While windgenerated
hydrogen is far
from competitive with fossil
fuel-generated hydrogen,
wind-generated electricity
may already be competitive
with fossil fuel-generated
electricity.”
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
8
A Hydrogen Economy is a Diversion
of Scarce Resources
Currently federal energy budgets are stable
or shrinking but appropriations for hydrogen
research are expanding. Inevitably that
encourages existing programs to reorient
their programs toward hydrogen. Thus new
programs are in wind energy to hydrogen,
in nuclear power to hydrogen, in coal to
hydrogen. R&D on electric batteries and
other types of electricity storage systems is
shrinking while spending on hydrogen storage
is soaring. Spending to create a nationwide
system of hydrogen fueling stations
will soon surpass spending to create a
nationwide system of biofuel filling stations.
Growing numbers of states and even cities
have convened task forces to discuss how
to orient local resources into building a
hydrogen economy.
A Hydrogen Economy Is Energy
Inefficient
Hydrogen is not a fuel. It is an energy carrier,
like electricity. Like electricity, hydrogen
must be produced. It may be the world’s
most abundant element but hydrogen is
found only in combination with other elements.
Energy must be used to extract the
hydrogen. In most cases the energy used to
extract the hydrogen could otherwise be
used to meet the needs of the final consumer
directly.
For example, natural gas can be consumed
directly in a highly efficient power
plant (e.g. a combined cycle combustion
turbine or an on-site fuel cell with heat
recovery). This is a more efficient use of
natural gas than to use the gas to fuel the
process of extracting hydrogen from the
gas and then using more energy to compress
and transmit the hydrogen to a fuel
cell and then converting the hydrogen
into electricity. According to one calculation,
it takes 64 percent more natural gas
to make hydrogen and generate electricity
via a fuel cell with it than to generate electricity
directly via an efficient power plant
(heat rate of 7000 Btus per kWh).8 Others
calculate the loss in system efficiency at a
lower but still significant level.
The same disconcerting dynamic holds
true for renewable energy technologies. It
is more effective to generate electricity
using wind power and deliver it directly to
the customer than to use wind-generated
electricity to produce hydrogen, transport
the hydrogen long distances and then convert
the hydrogen back into electricity.
The staff of Aerovironment, Inc., an
engineering company headed by Paul
MacCready, the inventor of the first successful
human-powered airplane and the
company that helped design GM’s sporty
all-electric car the EV1, offers an instructive
illustration of the inefficiencies involved in
making hydrogen rather than electricity.
To satisfy the daily driving needs of a
battery-powered electric vehicle a home
would need a solar electric array of 450
square feet. Many homes have this amount
of rooftop space. However, if the solar cell
A Word About
Iceland
Iceland has received welldeserved
favorable attention
for boldly announcing
its intention to convert
entirely to hydrogen by
2040. Iceland has enormous
amounts of unharnessed
renewable energy,
mostly geothermal. With a
population of only
200,000 it has a tiny internal
market. The global
hydrogen market for
chemical uses is growing
rapidly. Iceland is seeking
to use its small internal
market to nurture technologies
and fuels that
could eventually become a
major export market. It is
a commendable strategy.
The United States is not in
a similar situation.
DOE Appropriation Requests for Renewable Energy and Hydrogen
0 50 100 150 200 250 million dollars
FY 2004 FY 2003
Renewable Energy Technologies
Hydrogen and Fuel Cells
Renewable Energy Technologies (requested)
Hydrogen and Fuel Cells
9
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
were instead used to electrolyze water and
feed the resulting hydrogen into a fuel cell
powered car, the amount of energy needed,
and therefore the size of the solar array
required, would increase 2.5 times to some
1100 square feet. That is beyond the space
available to most residences.
It requires about 60 kWh of electricity
to produce 1 kg of hydrogen from water
(with current electrolysis systems). An electric
vehicle needs only 38 kWh to travel the
same distance as a fuel cell vehicle using 1
kg of hydrogen.9
An in-depth study by two Swiss engineers
found that the energy needed to compact
gaseous hydrogen and transmit it long
distances dwarfed the energy contained in
the hydrogen. They conclude, “We have to
accept that (hydrogen’s)...physical properties
are incompatible with the requirements
of the energy market. Production, packaging,
storage, transfer and delivery of the
gas....are so energy consuming that alternatives
should be considered.”10
A Hydrogen Economy Increases
Pollution
The combination of higher energy losses
and the continuing reliance on fossil fuels
could result in increased greenhouse gas
emissions at least in the initial stages of
shifting to a hydrogen economy. One analysis
done for the Department of Energy in
2001 by Directed Technologies found that
relying on hydrogen electrolyzed from
water would double greenhouse gas emissions
compared with conventional gasoline
operation (using the average marginal US
grid generation mix).
Another study for the British
Department of Transportation concluded,
“Switching to an accelerated hydrogen fuel
pathway…will actually create more CO2 not
less. The reason is that the hydrogen used to
fuel the vehicle will have to come from
steam-reformed natural gas.”11
A Green Hydrogen Economy?
The thesis of this report is that a hydrogen
economy, for the foreseeable future, will be
based on non-renewable fuels and that we
can more rapidly progress toward a renewable
fueled transportatioin system at far
less cost by embracing the strategy elaborated
here.
Many argue that we should support a
hydrogen economy but only one fueled by
“green hydrogen”. Such a position raises
several issues.
Do these advocates oppose the elaboration
of a hydrogen infrastructure if it is not
in its initial stages predominantly powered
by renewable energy? Do they reject the
“hydrogen highway” proposed by newly
elected California Governor Arnold
Schwarzenegger unless only green hydrogen
were used? Do they oppose the development
and installation of distributed steam
reformers if these are reforming natural gas
rather than biogas or biofuels? Do they
reject the financing and installation of electrolyzers
unless they were powered by
renewable electricity?
“Even as world leaders
were announcing their
support for a hydrogen
economy a new technology
was entering the marketplace
that could and should
change the nature of the
conversation about
transportation futures.”
Comparison of Battery and Hydrogen Fuel Cell Electric Vehicles
75 miles daily
Source: Aerovironment Inc.
Battery Electric Vehicle
0.33kWh per mile = 25 kWh per day
Solar Array . . . . . .450 square feet: $33,600
Battery
Electric Vehicle . . .$40,000
Charger . . . . . . . . .$600-$2,000
Hydrogen Fuel Cell Electric Vehicle
50 miles per kg = 1.5 kg per day (hydrogen)
66 kWh per kg = 90 kWh per day
Solar Array . . . . . .1100 square feet: $81,600
Hydrogen Fuel Cell
Electric Vehicle . . .$40,000 (future?)
Hydrogen Generator
(water electrolysis) $8,000 (?)
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
10
There are some R&D areas that would
be tailored only to renewable energy (e.g.
biofueled fuel cells and reformers). But the
vast majority of R&D for a hydrogen economy
does not depend on the source of the
hydrogen. The electrolyzers that rely on
wind generated electricity will not be much
different than those that rely on natural gas
or coal fired electricity. The creation of the
delivery and storage and fueling and onvehicle
consumption technologies is the
same whether one relies on renewable or
nonrenewable fuels to make the hydrogen.
If 95-99 percent of the R&D and investment
is the same whether the hydrogen is
“brown” or “green” then those who advocate
green hydrogen need to clarify how and
where, in the next 10-20 years, their
roadmap differs from those who advocate
hydrogen from any resource. If not, it is likely
that green hydrogen advocates, like green
electricity advocates, will ask for a renewable
standard. But in the case of electricity the
infrastructure for delivery and end-use is
already in place and green electricity already
has a share, albeit tiny, of the market. Will
we see a demand for a 10 percent national
renewable hydrogen standard in 2030?
Hybrid Electric Vehicles:
A New Technological Platform
Most advocates of a hydrogen economy concede
that the price of hydrogen is high and
the process of making and distributing it
may be energy intensive. But they note that
when the hydrogen is used in a fuel cell the
fuel cell’s higher efficiency makes the overall
system less costly and more environmentally
benign than the present inefficient
internal combustion engine system.
That may be accurate. But one should
not compare a technology of the future with
a technology of yesteryear. For even as
world leaders were announcing their support
for a hydrogen economy a new technology
was entering the marketplace that
could and should change the nature of the
conversation about transportation futures.
The technology is the hybrid electric
vehicle. Hybrid vehicles boast both an
engine and an electrical propulsion system.
Hybrids enable electric vehicles to overcome
their key shortcoming: short driving
range. Although EVs have been more popular
than auto manufacturers acknowledge,
their 60-85 mile driving range has severely
inhibited their widespread use.
The hybrid electric vehicle (HEV) overcomes
the limitations of the 100 percent
battery-powered vehicle. The HEV has
excellent acceleration because of the torque
generated by electric motors. Tail pipe
emissions are extremely low. The first generation
Toyota Prius qualified as a Low
Emissions Vehicle (LEV) under California
regulations. Its second generation, introduced
in 2001, qualified as a Super Ultra
Low Emissions Vehicle (SULEV) and its
third generation is even more environmentally
friendly. This type of vehicle reduces
hydrocarbon emissions by 97 percent, carbon
monoxide emissions by 76 percent,
nitrogen oxide emissions by 97 percent and
particulate matter emissions by 90 percent
compared to the Tier 1 standard emissions
set by the Department of Energy.
The commercial success of hybrids
caught many in the automobile industry by
surprise. The story is instructive and may
be one reason why American policy makers
have not included hybrids in their future
planning. The Hybrid Electric Vehicle
(HEV) Program officially began in 1993.
The billion dollar five-year cost-shared program,
the Partnership for a New
Generation of Vehicles (PNGV), partnered
the U.S. Department of Energy (DOE) and
the three largest American auto manufacturers:
General Motors, Ford, and
DaimlerChrysler. The “Big Three” committed
to produce production-feasible HEV
propulsion systems by 1998, first generation
prototypes by 2000, and market-ready
HEVs by 2003. The automobile companies
promised to produce an 80-mile per gallon
prototype car by 1997.
The American car companies failed to
produce a commercial hybrid. The federal
government, relying on the research done
by the domestic car companies, designed a
future transportation strategy in which
hybrid electric vehicles did not play a significant
role.
Japanese carmakers, shut out of the
PNGV program, succeeded where
American carmakers had failed. Toyota
introduced the first hybrid electric vehicle,
the Prius, in Japan in December 1997 and in
the United States in July 2000. In December
“Hybrid vehicles already
are approaching the
efficiencies the government
is projecting for fuel cellpowered
vehicles 10 years
from now.”
11
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
1999 Honda introduced the Insight Hybrid
in Japan and in May 2002 in the United
States. In September 2003 Toyota introduced
its third generation Prius, a bigger
car with better performance and a higher
efficiency than its predecessor.
Hybrid sales doubled in 2002, reaching
35,000 in the United States. As of mid-2003
more than 100,000 were on the road worldwide.
Toyota claims to be making a profit
on its Prius. JD Powers projects that annual
sales and leases of HEVs in the United
States will soar to almost 500,000 by 2006
and 900,000 by 2010.12
The surprising success of Japanese
HEVs has resulted in some equally surprising
changes-of-heart by American car manufacturers
about the commercial feasibility
of HEV. As late as April 2002 General
Motors’ CEO and President G. Richard
Wagoner, Jr told Business Week, “How will
the economics of hybrids ever match that of
the internal combustion engine? We can’t
afford to subsidize them.” Nine months
later Wagoner admitted to CBS News, “I
think it’s fair to say nobody knows how big
this thing can be.”
In late 2002 Ford announced it would
be introducing a hybrid in the fall of 2003.
GM declared it would introduce a hybrid
pickup in 2004. Dodge will introduce a
hybrid Ram Contractor in 2005. However,
American car companies were unable to
meet their deadlines. In late 2003 Ford
announced it was postponing its introduction
of its HEV to 2004. GM announced it
was delaying introduction until 2007.
Daimler/Chrysler canceled its plans to
build a hybrid SUV. Meanwhile Toyota
announced that its 40 mile per gallon SUV
will be introduced on schedule in 2004.
Toyota introduced its third generation
HEV Prius in September 2003. The price is
the same as the previous generation Prius
but the vehicle is bigger and roomier and
with better fuel efficiency.13 By early
November demand had become so high
that Toyota was considering adding a night
shift to its Japanese factory for the first time
in its history. That would increase production
from 6,000 to 10,000 units a month.
Sales in Japan alone reached 17,500 in
September. In the U.S. the hybrid had
10,000 advance orders.
The emergence of the high-efficiency
hybrid changes the context for the discussion
of the hydrogen economy. For example,
all observers agree that the price of
hydrogen will be very high for the foreseeable
future. Currently merchant industrial
hydrogen costs more than $5 per kg (a kg
of hydrogen contains the energy of a gallon
of gasoline). The Department of Energy’s
goal is to produce hydrogen for a delivered
cost of $2.50 per kg by 2015 excluding federal
and state taxes. This is a far higher
cost than the projected price of gasoline,
excluding environmental costs.14
Hydrogen studies assume that the
higher price of the fuel will be offset by the
2-3 times higher fuel efficiencies of fuel cell
cars over internal combustion engine cars.15
But it is inappropriate to compare the cost
of a fuel cell powered hydrogen car that
won’t be commercialized for 5-10 years or
later with a century-old internal combustion
engine whose fuel efficiency has barely
improved in the last 50 years. A far more
appropriate comparison would be to currently
commercialized hybrid vehicles, or
even better, to hybrids that could be commercialized
in the next five years.
Hybrid vehicles already are approaching
the efficiencies the government is projecting
for fuel cell-powered vehicles 10
years from now (55-60 miles per gallon). An
assessment by MIT concluded, “there is no
current basis for preferring either FC (fuel
cell) or ICE (internal combustion engine)
hybrid power plants for mid-size automobiles
over the next 20 years. This conclusion
applied even with optimistic assumptions
about the pace of future fuel cell
development.”16
Hybrids can rely on fuel cell engines as
well as internal combustion engines but
they improve the efficiency of ICE’s more..
As the MIT researchers note, “hybrids
improve urban fuel economy of ICE vehicles,
whose engines have lower efficiencies
at lower power (and speeds) more than they
improve FC vehicles whose fuel cell stack
have higher efficiencies at lower power.”17
Some hydrogen advocates support using
hydrogen in internal combustion engines
rather than fuel cells. Not only can this be
done much more quickly but it can be done
much more cheaply. Such a strategy would
eliminate the additional cost of fuel cell vehicles
although it would still require a costly
delivery and storage infrastructure.
“Half of all cars on
the road travel a total of 20
miles or less each day.”
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
12
A Better Way
Step 1: Maximizing Efficiency:
Moving from HEV0 to HEV60
The current generation of hybrid electric
vehicles relies on the internal combustion
engine to fill the battery. The battery provides
electricity to motors for acceleration.
In effect, hybrids join together two power
plants. As one observer describes the
process, “A large electric motor gets the
vehicle rolling and even can power it up a
hill. A gasoline or diesel engine kicks in for
top acceleration and takes over when the
vehicle is at cruising speed. When the vehicle
stops, the engine shuts off, conserving
fuel. A computer turns over cabin heating
or cooling to the electric motor which is
supplied by powerful batteries recharged
by braking.”21
The HEV has a much more powerful
motor and a much smaller engine than its
counterparts. Reduced gasoline consumption
comes primarily from avoiding energy
use during idling and from using the motor
for stop-and-go urban driving. One intriguing
result is that HEVs are more efficient in
the city than on the highway. The second
generation Prius for example was rated at
45 miles per gallon on the highway and 52
miles per gallon in the city.
HEVs currently have no ability to be
charged from the electrical grid system and
little or no ability to operate solely on battery-
power. The industry designates this
generation of hybrids HEV0, the zero indicating
the number of miles the car can travel
on batteries alone. (The 2004 Prius actually
can travel a modest distance under light
load and low speed conditions.)
Hybrids can be configured to use electricity
for the majority of their propulsion
needs. These vehicles have larger battery
capacity. They are called plug-ins (PHEV)
because they can plug into an external electricity
system for charging. These PHEVs
are identified by numbers that indicate a
higher stand-alone electric driving range:
HEV20, HEV60.
As long as the battery has sufficient
charge, plug-in HEVs operate like a 100 percent
battery electric vehicle. When the battery
is low they operate like an engineassisted
HEV0. The displacement of gasoline
by external electricity depends on the
amount of battery capacity the vehicle has
and the owner’s daily driving habits.
Half of all cars on the road travel a total
of 20 miles or less each day. Such modest
mileage is especially true of urban vehicles.
Thus a vehicle with battery capacity sufficient
to travel 20 miles (HEV20) before
recharging can substantially reduce the
amount of gasoline consumed even in comparison
to today’s hybrid (HEV0). The electricity,
moreover, is used to displace the
gasoline used for those parts of a trip that
are the most polluting: stop-and-go driving,
continuous acceleration or deceleration,
cold engine starts, and idling.
HEVs have smaller engines than conventional
vehicles and larger motors. They
have similar acceleration because the
power of the engine and the motor can be
combined. The plug-in HEVs have more
electrical storage capacity. The greater the
battery capacity the higher the percentage
of time the vehicle will rely on the battery
rather than the engine. A hybrid with the
ability to travel 60 miles on its batteries
before recharging requires about 18 kWhs
of storage capacity.
If a car were driven 20 miles per day
and an HEV20’s batteries were fully
charged daily there would be a drastic
reduction in liquid fuel consumption. A
hybrid that can travel 60 miles on its battery
would allow for more daily driving or
fewer recharging cycles and could reduce
by 85 percent the amount of fuel the automobile
consumes.
A Word About
Fuel Cells
This report advocates a federal
program that accelerates the
use of high efficiency hybrid
vehicles fueled by biofuels. It is
not an argument against fuel
cells. The author has argued
elsewhere in favor of a vigorous
federal and state effort to
accelerate the use distributed
electricity technologies including
fuel cells.
The introduction of fuel
cells does not depend on the
introduction of a national distribution
network for hydrogen.
Fuel cells run on hydrogen, but
they can make the hydrogen
on-site. Currently they do so
by using hydrogen carriers like
natural gas, propane, methane
and methanol.
Since the world’s first fuel
cell vehicle was introduced in
1959 about 780 fuel cell systems
have been used in transport,
including bicycles, scooters,
cars, busses, submarines
and boats. About 200 of these
provide auxiliary power for US
and Russian spacecraft.18 In
the last year there have been
about 150 fuel celled vehicles
introduced, virtually all of them
pre-commercialization. The
conclusion of the most authoritative
survey of worldwide
operations is, “Exciting it may
be, but the advent of fuel cell
vehicles is still many years
away and the technical, commercial
and regulatory issues
that must be resolved are far
from trivial.”19 The cost of car
fuel cells, on the other hand,
must drop a hundredfold
before they are competitive.
Some argue there is “a need
for a Nobel Prize-winning
breakthrough” to make this
happen.20
Fuel cells for stationary
applications began to be intro-
Comparative Features of Conventional Vehicles and HEVs22
Vehicle Conventional HEV0 HEV20 HEV60
Engine Peak Power, kW 127 67 61 38
Motor RatedPower, kW — 44 51 75
Battery Rated Capacity, kWh — 2.9 5.9 17.9
Vehicle Weight, tons 1.85 1.78 1.83 1.96
13
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
Unlike the hydrogen-fueling infrastructure,
the electricity-fueling infrastructure is
already in place. Andy Franks, professor of
engineering at the University of California-
Davis, one of the country’s leading advocates
for PHEVs estimates that 95 percent
of homes and 70 percent of multi-family
dwellings have relatively easy access to a
120V outlet.
A study for the British Department of
Transportation that analyzed various pathways
to a hydrogen fuel future concludes,
“progressive electrification and hybridisation
offers significant CO2 benefits regardless
of the fuel or its source, at a risk level
more manageable than alternatives such as
more radical new vehicle technologies or
major infrastructure change.”23
Plug-in HEVs, says Bob Graham, area
manager of the Electric Power Research
Institute’s (EPRI) transportation program,
are “the logical next member of the family
of hybrid vehicles...With the possible exception
of the batteries, plug-in HEVs require
only evolutionary engineering advances
over HEV0 technology to meet technical
requirements.”24
Some argue that hybrid developments
alone will improve batteries and that since
fuel cells are expensive, automobile manufacturers
will still have an incentive to
increase the amount of work the batteries
(and motor) can do. But battery research at
automobile companies has virtually ceased.
R&D for HEV0 cars focuses on improving
the power output of the batteries rather
than their energy storage capacity. The
technological improvements needed for
both purposes do overlap but there are
major differences. One is intended to supplement
the engine. The other is intended
to replace the engine. Increases in power
often lead to reductions in energy density, a
prime objective for those who want to minimize
battery weight while expanding the
amount of driving done with batteries.
As Bob Graham, area manager of transportation
systems at EPRI observes,
“(P)roduced in volume, hybrid EVs such as
the Toyota Prius and the Honda Civic will
help drive down the cost of motors and controllers
that could be used in all types of
electric-drive cars.But the commercialization
of the plug-in hybrid EV, because of its
large market appeal, holds the key to the
one remaining barrier to zero emission
vehicles-the cost of the ’energy’ battery.”
Graham warns, “Currently, most incentives
do not increase with the all-electric
range of HEVs, even though there are larger
environmental and energy security benefits
associated with electric (battery only)
operation…The cost of advanced batteries
for non-plug hybrid EVs, plug-in hybrid EVs
and battery EVs is highly dependent on the
establishment of a growth market situation,
a predictable regulatory environment and
consistent production volumes that encourage
capital investment in production capacity
and line automation by battery and automotive
manufacturers.”
California’s recent revisions to its Zero
Emission Vehicle program is a good example
of regulatory decisions that may dramatically
affect the development of PHEVs.
The program requires that participants produce
a minimum number of “gold standard”
vehicles. Only fuel cells and 100 percent
battery-powered electric vehicles qualify for
that standard.25 After a long and contentious
debate, and after vigorous opposition by
leading environmental organizations, the
California Air Resources Board decided not
to require any hybrid vehicles with electriconly
driving ranges. These do qualify as a
“silver standard” technology but so do a
dozen other technologies, including hydrogen
powered internal combustion engines.
Thus it is unlikely that this regulation alone
will spur manufacturers to introduce plug in
HEVs.
Step 2: Expanding Battery Capacity
California recently abandoned its focus on
100 percent battery-powered electric vehicles
for promoting zero emission vehicles in
part out of frustration by what it believed
has been a lack of progress in battery
development. By January 2003 all major car
companies had eliminated their all-battery
electric vehicle sale and leasing programs:
Chrysler, Ford, GM, Honda, Nissan and
Toyota.) A report done for the California
Air Resources Board concluded that, “direct
efforts to develop EV batteries have generally
declined over the last 3 years.”26
However, recent evidence suggests that
the report’s conclusions were premature.27
It takes a long time between invention and
commercialization. Beta R&D, a company
that has developed the sodium nickel chloride
battery called ZEBRA took 17 years to
duced in field trials in the late
1970s. Today more than 2,500
are in operation. Fuel Cell
Today notes, “Progress in the
development and deployment
of small stationary fuel cells
(electrical output less than 10
kW) has continued at a high
level, with the cumulative number
of systems almost doubling
from 1,000 to 1,900 (in
the last year).”
The commercialization of
stationary power fuel cells is
increasing rapidly. Rapid technological
advances are occurring
in high-temperature fuel
cells that can use natural gas
and other fuels directly (e.g.
solid oxide cells) and in on-site
reformers of natural gas and
other fuels into hydrogen for
use in lower temperature fuel
cells.
The price of stationary
fuel cells needs to drop in half
for them to be price competitive,
assuming the waste heat
is captured. Nevertheless,
increasing numbers of businesses
are installing them now
because of their high reliability
and the high quality of the
electricity they produce.
Fuels cells are one of the
most promising technologies
that can allow for a dramatic
decentralization of our electricity
system. These technologies
along with the necessary regulatory
changes should be
strongly supported by policymakers.
Fuel cell cars and the
hydrogen infrastructure needed
to power those cars might
properly await the development
of on-site stationary fuel cells.
As Romesh Kymar, head of
fuel cell development in the
chemical engineering department
at Argonne National
Laboratory observes, “Maybe
fuel cell powered cars will
come at the tail end of those
stationary developments.”
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
14
develop a battery technology that in 2002
went into commercial production in a facility
owned by MES-DEA. Avestor, a Canadian
company, has just introduced a lithium
metal polymer battery it claims has been in
development for over 20 years.
Recently the Electric Power Research
Institute (EPRI) issued a report that found
“important and steady improvements in battery
technology, even over the past few
years. Researchers specifically found that
advanced batteries used in electric drive
vehicles are far exceeding previous projections
for cycle life and durability, a key consideration
in cost.”28 EPRI found, for example,
that advances in Nickel Metal Hydride
batteries (NiMH) meant that only one battery
pack rather than the two anticipated in
an earlier study would be needed for the
life of the vehicle. “It is highly probable that
NiMH batteries can be designed, using current
technologies, to meet the vehicle lifetime
requirements of full function battery
EVs, plug-in HEVs with 40 to 60 miles of
EV range....”
EPRI and others estimate that an
HEV60, in the near term, would cost about
$10,000 more than a conventional HEV.
Some believe the technological
advances in batteries are coming even more
quickly, spurred by increasing demands for
more power for portable electronic equipment
like laptop computers and cell phones.
Here consumers are willing to pay several
times the price per kilowatt-hour for energy
than are electric vehicle owners. That
makes the portable electronics market an
incubator for storage technologies that can
later be scaled up for use in electric vehicles.
Sony Corporation first commercialized
lithium batteries for laptop computers in
1991. Current lithium ion batteries have
energy capacities four times those of lead
acid batteries and almost twice that of nickel
metal hydride batteries. Recently scientists
reported that it was possible to construct
a lithium ion battery that could store
400 Wh per kg, ten times that stored in a
typical lead acid battery.29
The dynamics of battery advances is
such that the cost of those already commercialized
and thus mass produced for the
premium electronics market are now lower
than those that are still produced in small
batches for the electric vehicle market. In
2003 San Dimas-based AC Propulsion Inc.
replaced the electric batteries in its EV with
lithim-ion batteries. The substitution saved
500 pounds and increased by a factor of
three the amount of energy that could be
stored. Alan Cocconi, AC Propulsion
founder and chief engineer noticed the
rapid progress that had occurred in the use
of these small cells in laptops and power
tools. “Manufacturers produce these cells
by the tens of millions, so they compete
intensely based on performance and costs.
The result is commercial, off-the-shelf battery
technology with fantastic specs. We
decided to use it in electric cars”
Their new battery, called the tzero
LiIon is assembled from 6800 standard
cells. Tom Gage, President of AC
Propulsion notes, “The market for big cells
is small so they cost too much. The small
cells for the tzero cost less, in total, than
the nickel-metal hydride battery in the
Toyota RAV4EV and they hold twice the
energy. We got a quote from one battery
company for a Li Ion pack made from 100
much larger cells. Their price was 10 times
higher and neither the energy or the power
were as good as we get from the small
cells.”30
It is instructive that California, which
was very optimistic about battery development
when it launched its Zero Emission
Vehicle program in 1991 is now even more
optimistic about fuel cell developments. The
California Air Resources Board predicts
that the additional cost per fuel cell powered
vehicle, now about $1 million will drop
to $300,000 in the 2006-8 model years, to
$120,000 in 2009-2011 and to $10,000 in
2012-14.
Few other researchers are as optimistic
as California in the reduction in the cost of
fuel cell cars. Indeed, at the Future Car
Congress in June 2002 Toyota’s fuel cell
engineer Norihiko Nakamura announced,
“If a certain level of mass production can be
achieved the costs should be dropped drastically.
But a great amount of effort is needed
to bring the cost to even two to three
times that of a standard vehicle.”31
If California’s projection does come
true, 10 years from now we will be able to
buy a $30,000 conventional automobile for
$40,000 if powered by a fuel cell. That cost
“An urban-based HEV
that can travel 60 miles on
its batteries could reduce
fuel consumption by 85
percent.”
15
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
increase is about what the increased cost
right now would be for an HEV60.32 The
fuel cell car, however, will achieve fuel efficiencies
comparable only to those of the
2003 model HEV0 while the HEV60 will
achieve efficiencies 50 percent greater or
more.
This cost comparison doesn’t include the
infrastructure investments required. One
recent estimate by two energy experts reported
estimates a cost of $5,000 per vehicle to
create the infrastructure for hydrogen fueled
vehicles.33
The infrastructure for battery-driven
vehicles is already in place, except for
quicker rechargers or a wider availability of
electric outlets.
Step 3: Renewable Fuels for the
Engine
An effort to expand renewable energy for
the electricity part of the hybrid vehicle
would take a lesson from the effort to
expand renewable electricity overall. Some
15 states have Renewable Portfolio
Standards that require an increasing portion
of the state’s electricity supply to be
renewable fueled. The distributed nature of
some renewable energy technologies offers
diverse scenarios. In parts of California
solar cell canopies over parking lots
recharge electric vehicles parked during
the workday and plugged into outlets at the
meters. The Los Angeles Department of
Water and power estimated that a 1.87 kWh
array could provide roughly 17,000 miles
worth of power for an electric vehicle. A
recent study found that most cars have sufficient
surface area to generate 20 percent
of their transportation fuel needs from solar
cells embedded into the vehicle’s body.34
A focus on hybrids and plug in hybrids
offers the potential for a remarkable
improvement in energy efficiency with no
reduction in performance or vehicle room.
This is true for all types of vehicles, including
and especially SUVs.
An urban-based HEV that can travel 60
miles on its batteries could reduce fuel consumption
by 85 percent. This would reduce
the fuel consumption of a typical mid-sized
car from 600 gallons of gasoline per year to
100 gallons. If all vehicles were equipped
with this technology, annual national gasoline
consumption could decrease from
about 140 billion gallons to about 40 billion.
35
Such an improvement in efficiency in
and of itself would virtually eliminate our
reliance on imported oil. High efficiency
hybrids would also allow us to take a closer
look at using biofuels as a primary fuel
rather than an additive.
Currently the gas tanks of vehicles
using ethanol blends contain 5.7-10 percent
ethanol. With minor costs vehicles can be
modified to run on ethanol or gasoline or
any combination thereof. According to Eron
Shostek of the Alliance of Automobile
Manufacturers, the cost of these adjustments,
which include toughening some
hoses and installing a computer device to
900—
800—
700—
600—
500—
400—
300—
200—
100—
0—
Gasoline Consumption by Vehicle Size and Type
Annual Gasoline Consumption (gallons)
Compact Sedan Midsize Sedan Midsize SUV Fullsize SUV
Conventional
Vehicle
No-Plug Hybrid—
HEVO
Plug-In HEV,
20 mile EV range,
HEV20
Plug-In HEV,
60 miles EV range,
HEV60
Source: Electric
Power Research
Institute
“For ethanol or other
biofuels to become a
primary fuel will require a
shift to a reliance on a more
abundant feedstock.”
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
16
sense the amount of alcohol in the fuel so it
can mix with the correct amount of air for
combustion, is less than $160 per vehicle.
Thus for less than $1.5 billion all of the 9
million new cars sold each year in the
United States could be capable of using biofuels
to supply a majority or even all of their
engines’ needs.36
Because of government incentives
automakers plan to sell nearly 1.8 million
flexible-fueled vehicles in 2004, doubling
the 2 million cars already on the road.37
Currently more than 10 models of flexiblefueled
vehicles are available including the
best selling Taurus and Explorer.38
Ethanol and other biofuels currently
account for about 2 percent of our transportation
fuel supply. Production is increasing
rapidly. In the last three years annual
production capacity has expanded by one
billion gallons. By the end of 2007 it could
reach a capacity of 5 billion gallons per
year.
In several midwestern states, like
Minnesota, ethanol accounts for almost 10 percent
of the transportation fuel consumed by
cars each year. A 10 percent ethanol blend on a
national level would require about 15 billion
gallons a year. An aggressive national effort
could achieve this production level by about
2015 at a far lower cost and with a far greater
environmental and national security benefit
than a national effort to achieve significant
inroads of fuel cell vehicles powered by hydrogen.
Instructively, the federal hydrogen
roadmap doesn’t envision a 10 percent penetration
of hydrogen into the market until well
after 2030.
Ethanol has burst out of its identity as a
regional fuel because of the phase out by 18
states of their use of MTBE in gasoline.
MTBE is a petroleum and natural gas
derived oxygenate that has been used, in
proportions of about 13 percent, in a significant
portion of our gasoline since 1996. The
discovery that it is polluting groundwater
led states, beginning with California, to
phase out its use. The result? In California
ethanol consumption, virtually non-existent
in 2000 will exceed 600 million gallons in
2003. Similar jumps in consumption can be
expected as New York’s phase out becomes
operational in early 2004.
Ethanol is a much-misunderstood fuel.
Ethanol is alcohol. Liquor. Given its 100
percent alcohol content, it might more aptly
be called moonshine. Ethanol is fermented
from sugars just as wine and beer is. The
low-content alcohol that is produced is then
distilled to higher and higher concentrations,
making it useable as a power fuel.
Currently the sugars come from starch
crops because starch is easily and inexpensively
broken down into sugars and
because the harvesting and processing of
starch crops (e.g. corn, wheat) is a mature
industry with mature byproduct markets.
Today more than 98 percent of ethanol
made in the United States is derived from
corn. Starch crops could produce 7-15 billion
gallons of ethanol, although there
would be an impact on both corn prices
(higher) and animal feed prices (lower) as a
result. The higher volume is sufficient to
allow for the universal use of a 10 percent
ethanol blend, something that requires no
infrastructure or vehicle modifications. This
could be done at a fraction of a cost and
achieved ten to thirty years earlier than
achieving similar gasoline displacement
through the use of hydrogen and fuel cell
cars. Karen Miller, vice president of technical
operations for the National Hydrogen
Association estimates that to have 10 percent
of Americans driving fuel cell powered
cars will require 80 percent of the existing
“gas” stations to be retrofitted to offer
hydrogen.39 This would be enormously costly.
Almost as great a petroleum displacement
could occur without any modifications
in the vehicles or the filling stations by
achieving a 10 percent blend of ethanol
nationwide.
Making ethanol a primary fuel will
require the installation of new fueling tanks
in gas stations. To date there are almost 200
E85 (85% ethanol) refueling tanks in place,
far more than the 15 hydrogen-fueling
tanks currently operational in the United
States. The cost of installing a 12,000-gallon
E85 tank and three E85 gas pumps (dispensers)
is less than $50,000. This would
serve scores of cars a day. Some gas stations
are converting the nozzles for poor
selling grades (e.g. premium) to allow for
dispensing E85. The dispenser conversion
costs of doing this is about $1,000. The cost
of installing a hydrogen fueling station at
the University of California Davis was
roughly $600,000 and this doesn’t include
“We should compare
the cost of ethanol not to
current gasoline prices but
to current and future
hydrogen prices.”
17
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
the cost of a hydrogen reformer at each
fueling station. The fueling station can service
only 8 vehicles per day.40
For ethanol or other biofuels to become
a primary fuel will require a shift to a
reliance on a more abundant feedstock. The
key is to access the sugars in cellulose, the
most abundant biological material on the
planet, found in all plants from grasses to
trees to crops, and convert these sugars
into ethanol. This means converting the
corn stalks and wheat straw into ethanol
rather than the corn and wheat kernels.
Hundreds of millions, perhaps billions
of tons of biological materials are available
for conversion into fuels and chemicals.
Each year the United States produces about
300 million tons of cellulosic waste (urban
wastes and agricultural residues that can be
removed from the soil without environmental
harm). Another 1 billion tons of cellulosic
materials could be grown on available
lands without interfering with our food supply
or causing environmental damage.
Assuming current yields of 80 gallons per
ton, and half of the cellulosic material actually
being converted into ethanol, production
could exceed 50 billion gallons per
year.
Cellulose is not as easily broken down
into sugars as is starch but significant
progress has been made in the last ten
years. One commercial cellulose-to-ethanol
plant is operating in Canada at a small
scale. The cost of the ethanol is higher than
the cost of ethanol from starch because of
the high value of the byproducts of conventional
ethanol production (e.g. high protein
animal feed or high fructose corn syrup
and lower protein animal feed). In part this
is because the cost of gathering and baling
and transporting the agricultural residues is
currently very high. The cost will come
down as new technologies and techniques
are developed to serve a growing new agricultural
sector.
The cost of ethanol is high today compared
to the cost of gasoline. Handsome
subsidies equivalent to 54 cents per gallon
of ethanol make up the difference.41 If
ethanol production (or biodiesel
production42) were to increase substantially,
the cost to the taxpayer would increase dramatically.
However, in the context of a hydrogen
economy we should compare the cost of
ethanol not to current gasoline prices but to
current and future hydrogen prices.
The wholesale price of ethanol ranges
from $1.10-1.50 per gallon. On an energy
equivalent basis, this translates into a price
of about $1.65-2.15 per kg of hydrogen or
gallon of gasoline (excluding taxes). This is
substantially lower than the federal goal of
$2.50 per kg of hydrogen by 2015. Thus to
compete with hydrogen, ethanol would need
no incentives.
“Making hydrogen
from natural gas has a
negative net energy ratio.”
Comparing the Cost of an Ethanol Highway vs. a Hydrogen Highway
0 100 200 300 400 500 600 700 thousand dollars
Cost of an ethanol refueling station
Cost of a hydrogen refueling station
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
18
A Few Words about Ethanol
Biofuels and the Environment
The use of plants as a primary transportation
fuel is controversial. There are several
key issues. Will the dramatic substitution of
carbohydrates for hydrocarbons deprive the
world of needed food? Will the increased
use of plants lead to increase soil erosion or
ground water pollution? Does it take more
fossil fuel energy to grow a plant and convert
it into biofuels than the energy contained
in the biofuels and its byproducts?
Food versus Fuel
When corn is converted into ethanol it is
the starch, which is otherwise often converted
into sweeteners, that is lost. The
process actually concentrates the protein.
As we switch to cellulosic materials the
food versus fuel problem becomes more
one of the availability of land. Although estimates
vary, it appears that sufficient land
area exists to allow us to produce significant
quantities of fuels (and biochemicals)
without disrupting or diminishing the food
or feed supply. The Union for Concerned
Scientists, citing an in-depth analysis by the
Audubon Society concludes, “Overall,
around 200 million acres of cropland might
be suitable and available for energy or
“power” crops, without irrigation and without
competing with food crops.43 At current
yields of cellulosic crops like fast growing
trees, 200 million acres could provide 1 billion
tons a year of feedstock. Yields could
be increased significantly. Ten tons per acre
is a likely figure for the medium term
future. Tests of sugar cane bred to maximize
fiber rather than sugars resulted in
yields as high as 60 tons per acre in Puerto
Rico.
The amount of cellulosic wastes available,
through the harvesting of agricultural
residues like corn stalks and wheat straw
and forest industry wastes like sawdust and
bark and a part of the organic waste stream
of municipal solid waste could add another
300 million tons or more to the annual volume.
44 The resulting overall harvest
(assuming that only 40 percent of the agricultural
residue is removed) is about 1.3 billion
tons. At current yields this is sufficient
to provide over 100 billion gallons of
ethanol as well as significant quantities of
biochemicals and “waste” biomass that can
be used to provide the energy for the conversion
process.
Net Energy
A remarkable number of studies have been
done on the energetics of ethanol. The vast
majority of studies done since 1990 conclude
that there is a positive net energy generation
of more than 1.3:1 for corn derived ethanol.45
The table below extracts from a 1995 study
by the Institute for Local Self-Reliance.
Based on case study data from farms and
ethanol facilities, it estimated a positive net
energy ratio of 1.36:1. The study examined
three scenarios. The base line relied on
national average energy inputs by corn farmers
and ethanol plants. The second scenario
used the energy inputs of corn farmers in
the state the used the lowest energy inputs
and the most efficient existing ethanol plant.
$0 $2 $4 $6 $8 $10 $12
Ethanol
Hydrogen (DOE goal)
Hydrogen made from natural gas
Hydrogen made from renewable electricity
Comparing the Cost of Ethanol and Hydrogen
gallon of gasoline equivalent
“When corn is
converted into ethanol it is
the starch, which is otherwise
often converted into
sweeteners, that is lost.
The process actually
concentrates the protein.”
19
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
The third scenario used the energy inputs
from the most efficient corn farmer using
organic methods and the next generation
ethanol plant. The last scenario showed an
energy output to input ratio over 2.0.
The fundamental conclusion from these
energetics studies is that the net energy
ratio of ethanol is positive and growing more
positive as farm productivity improves and
ethanol fuel efficiency improves. For example,
one ethanol facility is in the process of
substituting corn stover and wood chips for
natural gas in providing all of its heat energy
and a portion of its electrical energy. Once
the substitution takes place the positive net
energy ratio of that facility should soar.
Cellulose to ethanol plants may have an
even more positive energetics ratio because
the feedstock uses less energy-intensive
inputs to grow and the parts of the plant not
converted into ethanol can be used to fuel
the plant.
Just as we need to compare hydrogen
and ethanol on cost we need to compare
ethanol and hydrogen on net energy generation.
Margaret Mann, one of the leading
researchers, has concluded that whereas
making hydrogen from biomass has a positive
net energy yield of 17 to 1 and wind
energy to hydrogen a positive net energy
yield of 12 to 1, making hydrogen from natural
gas has a negative net energy ratio.
Taking into account upstream operations
such as extraction and delivery of natural
gas, steam methane reforming, the most
popular hydrogen generation technology, is
only 67 percent efficient. That means for
every 1 unit of fossil fuel energy in, one
gets .67 units of energy out.46 If hydrogen
were made from electrolysis the electrolyzing
process itself uses 50-60 kWh to make 1
kg of hydrogen. Assuming 3414 Btus per
kWh the process itself uses more energy
than the kg of hydrogen contains. This is
compounded if the electrical process uses
steam, since the input per kWh out could
be over 8000 Btus.
Air Quality
There have been a number of evaluations of
ethanol’s impact on air quality. What we
know is that a 10 percent blend of ethanol
reduces carbon monoxide, a precursor for
ozone formation, significantly (by more
than 25 percent). We also know that ethanol
when used as an additive displaces highly
toxic and volatile components of gasoline
(e.g. benzene, toluene, xylene).
We also know that ethanol at a 10 percent
or lower blend also increases the total
volatile organic compound emissions from
the gasoline by about 15 percent. However,
since the VOCs emitted by pure gasoline
are more reactive than those produced with
ethanol blends and because of the significant
carbon monoxide reductions resulting
from the use of ethanol, any increase in
ozone formation is negligible.47
At higher concentrations of ethanol the
volatility of the gasoline-ethanol blend
drops. At concentrations above 25-40 percent
evaporative emissions drop below the
level they were before a drop of ethanol
was added to the gasoline. This eliminates
volatility as a problem. The reduction in carbon
monoxide emissions, a contributor to
ozone formation at ground level, increases
as the percentage of ethanol in the fuel
increases. There is some concern that an
increase in oxygen will increase nitrous
“Before we invest
hundreds of billions of
dollars to remake our
transportation system we
should be clear that the
means we embrace enable
the ends we pursue.”
Energy Used to Make Ethanol from Corn (BTUs per Gallon of Ethanol)
Corn Ethanol Corn Ethanol Corn Ethanol
(Industry Average) (Industry Best) (State-of-the-Art)
Feedstock Production 27,134 19,622 14,765
Processing 53,956 37,883 33,183
Total Energy Input 81,090 57,504 47,948
Energy Output (inc. co-products) 111,679 120,361 120,361
Net Energy Gain 30,589 62,857 72,413
Percent Gain 38% 109% 151%
Source: How Much Energy Does It Take to Make A Gallon of Ethanol?, ILSR, 1995
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
20
oxides (NOx), also a contributor to ozone
formation. But NOx is generated from high
combustion temperatures and ethanol
burns cooler than gasoline. That is one of
the reasons it makes such a good racing
fuel. And the new low emitting vehicles that
are entering the marketplace in ever-higher
numbers (including hybrids) appear not to
lead to a NOx increase from an increase in
fuel oxygen.48
Some studies have compared greenhouse
gas emissions of ethanol used as a
primary fuel in an internal combustion
engine versus hydrogen made from natural
gas used in a fuel cell powered car. One
analysis found that an E85 car using cornderived
ethanol produces, over the entire
fuel cycle (fuel used to grow the feedstock
and convert it to ethanol and convert the
ethanol into useful work in the engine) generates
about a third less carbon dioxide
equivalent greenhouse gases than a conventional
car getting 27.7 miles per gallon (275
vs. 400 grams per mile).49
The same study found that a hybrid EV
that gets 45 miles per gallon with no standalone
electric driving range using gasoline
formulated to California’s rigorous air quality
standards would emit the same amount
of greenhouse gases as the E85 car. A
hydrogen car relying on hydrogen produced
from natural gas at the gas station
generates about a third less greenhouse
gases than an E85 car (175 vs. 275 grams
per mile). Producing hydrogen from electrolysis
generates about the same as an E85
car (240 vs. 275 grams of CO2 per mile).50
The report concludes, “If all passenger
vehicles in California used E85 instead of
RFG3 (gasoline formulated to meet
California standards) in 33 mpg vehicles ...
(there would be a) 7 percent reduction in
annual California GHG emissions.”
This report assumes ethanol is made
from corn. If it were derived from the sugars
in cellulosic material and if the lignin in the
cellulosic material were used to generate the
energy needed by the manufacturing
process, a net reduction in greenhouse gases
could occur. That is, more carbon dioxide
would be absorbed by the plant while growing
than is generated by all the inputs into
growing the plant, converting it into transportation
fuel and consuming that fuel.51
One other environmental point should
be made about biofuels. A biorefinery, like a
petroleum refinery, will make many end
products. Production will be optimized to
maximize the enterprise’s profit. Petroleum
refineries make fuel, chemicals and other
end products. Biorefineries would do the
same. Indeed, ethanol may become a
byproduct of many facilities. A cellulose-toethanol
facility may convert only about 25
percent of the overall weight of the material
into ethanol. The rest can be used to fuel the
manufacturing process and as feedstock for
making higher value chemicals than ethanol.
The environmental benefits, both upstream
and downstream, from displacing petrochemicals
with biochemicals is significant.52
Assuming that 600 million tons of cellulosic
materials are converted into 50 billion
gallons of ethanol, some 400 million tons of
biological materials could become available
for conversion into chemicals. Although
one cannot substitute on a pound for pound
basis, the quantity of materials available is
about equal to the consumption of all organic
and inorganic chemicals in the United
States today.
Biofuels and Fuel Cells
As discussed above, a fuel cell economy is
possible without building a national distribution,
storage and fueling system for pure
hydrogen. Some fuel cells can extract the
hydrogen directly from hydrogen-carrying
liquids or gases. Others can extract the
hydrogen with built-in reformers. Alcohols
represent one of the hydrogen-carrying fuels
that could be used in fuel cells. Thus expanding
the use of alcohols in our engines could,
if hydrogen and fuel cells do prove to be a
cost-effective alternative, become a steppingstone
to using hydrogen derived from those
alcohols.
Most of the work in direct conversion of
alcohols in fuel cells has used methanol. A
fueling station in California dispenses
methanol into a fuel cell powered car that
doesn’t need onboard reforming. The phase
out of MTBE promises to make significant
quantities of methanol available. Methanol
can be made from biological materials but it is
currently cheaper to make it from natural gas.
Ethanol too reportedly is being used in
fuel cells. Several Chicago buses powered
by fuel cells are using hydrogen reformed
from ethanol. Significantly, the fuel cell can
use low-grade ethanol that contains 15-20
percent water (needed in the reforming
“Public policy
initiatives that resulted in a
large number of small and
medium-sized biorefineries
could change the face and
structure of American (and
perhaps world) agriculture.”
21
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
process) rather than fuel-grade ethanol that
contains no water. Low-grade ethanol can
be produced using less energy and at a
lower cost.
Just as small battery technologies are
developing rapidly because of the introduction
of more powerful mobile electronic
equipment so are small fuel cells. Micro
fuel cells using liquid fuels that can be purchased
in cartridge form (like refills for cigarette
lighters) are beginning to enter the
market. Toshiba announced in March 2003
a 12 watt direct methanol fuel cell for
portable computers that can run for 5 hours
on a single cartridge filled with 50 cc of
methanol. It expects to introduce it into the
market in 2004.
A start-up company, Medis
Technologies, has announced that it will
introduce a micro-fuel cell that converts
ethanol directly into electricity. Medis
believes that ethanol is a better fuel than
methanol because of restrictions regarding
methanol’s use in certain situations. The
Federal Aviation Authority, for example,
currently prohibit poisonous methanol from
being carried on airplanes.
Meanwhile, researchers at Saint Louis
University in Missouri are developing an
even more fascinating biological storage
and conversion device. Professor Shelley
Minteer recently announced a breakthrough
in enzymatic batteries that break
down ethanol fuel. These are potentially
much cheaper than existing fuel cells that
rely on expensive metals like platinum or
ruthenium catalysts. According to one
report, these biobatteries could have power
densities more than 30 times greater than
other batteries.53
Ownership Matters
“Perfection of means and confusion of ends
seems to characterize our age,” Albert
Einstein wisely observed half a century
ago. Before we invest hundreds of billions
of dollars to remake our transportation system
we should be clear that the means we
embrace enable the ends we pursue.
The three ends most people agree upon
are: enhanced national security; improved
environmental stewardship; healthier rural
economies.
The currently envisioned hydrogen
economy addresses the first end. The second,
arguably, is undermined unless the
hydrogen comes from renewable resources
or the fossil fuel generated electricity is
coupled with the long term storage of the
carbon emitted. The strategy does not
address economic development goals. A
dual fuel approach that maximizes the use
of renewable resources for the electricity
used by the hybrid electric vehicle’s motors
and maximizes the use of renewable
resources for the fuel used by its engine
addresses all three objectives.
America’s hard-pressed rural areas and
farmers have two abundant renewable
resources: wind and biomass. The former
can be harnessed to provide the electricity
for the HEV’s batteries. The latter can be
Fuel Cycle
Vehicle Cycle
Source:
The Impact of
Alternative Fuels
on Greenhouse
Gas Emissions,
TIAX
Greenhouse Gas Emissions from Ethanol Blends
0 10 20 30 40 50 60 70 80 90 100 grams per mile
Gasoline 0%
Ethanol
Pure Ethanol—Corn
Pure Ethanol—Biomass
“The social and
economic impact of an
increased demand for
biofuels is similar to that
for wind energy. It depends
on the structure of
ownership.”
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
22
harnessed to provide the fuels for the
HEV’s engine.
However, the shift to a renewable
fueled transportation system will not in and
of itself make a significant contribution to
the welfare of rural America. Currently a
wind developer may pay a farmer land-lease
payments of $3,000-4,000 a year per turbine.
This is welcome income for the landowner
because the turbine requires very little land
to be taken out of production and the land
owner has no responsibilities. However, if
the landowner owns the turbine his or her
revenue can double or triple during the 10
year financing period. After the turbine is
paid off the annual income could soar to
$100,000.
With regard to wind there are
economies of scale in the size of the turbine
but few if any economies of scale in
the size of the ownership structure. Thus a
1 MW wind turbine will be able to generate
electricity at a cost substantially cheaper
than a 50 kW turbine. But the farmer
who owns a single 1 MW turbine will be
able to generate electricity at a price comparable
to that offered by the wind developer
who owns 50 1 MW turbines. This
assumes the farmer is part of a management
structure that diffuses the risks and
spreads the management costs over more
machines. This has been the case in
Minnesota.
A typical large wind farm today generates
some 100-150 MW. The same amount
of power could be generated by 100 farmers.
Given the hundreds of thousands of
turbines that will be needed to power our
transportation system the number of
farmer-owners could run into the hundreds
of thousands and the amount of additional
income earned by rural residents into the
billions of dollars.
The social and economic impact of an
increased demand for biofuels is similar to
that for wind energy. It depends on the
structure of ownership. The corn farmer
benefits from an increase in ethanol
demand because the increase in the overall
demand for corn increases its price. But the
price increase is small, perhaps on the
order of 5-10 cents per bushel. If an ethanol
plant locates nearby the farmer may receive
a modestly higher net price for his or her
corn because of lower transportation costs.
This amounts, on average, to 5-10 cents per
bushel. But the farmer who owns a share in
an ethanol refinery can expect to receive
annual dividends ranging from 25-50 cents
per bushel or more.54 Of course, there will
be periods when the farmer receives no dividends.
One unpublished analysis of a large
Minnesota ethanol plant concluded that
farmer-owners earned 18 percent annually
on their investment.
With regard to ethanol, there are
economies of scale in the size of the facility.
A 100 million gallon per year facility might
have production costs 10-15 cents per gallon
lower than a 15 million gallon per year
facility. To aggressively increase the
amount of biofuels available one might
argue for a focus on larger plants. But there
is a technological and socio-economic
dynamic that comes from a proliferation of
smaller plants.
The Minnesota experience, often called
the Minnesota Model, is instructive. In the
early 1980s Minnesota’s state ethanol incentive
mirrored that of the federal incentive—
a partial exemption from the gasoline tax.
That incentive succeeded in making the
price of ethanol competitive with other
gasoline additives. The demand for ethanolblended
gasoline soared. But the demand
was met entirely by ethanol imported into
the state from out of state large manufacturing
facilities owned by one multinational
corporation. Minnesota farmers and
Minnesota’s farming communities were not
benefiting from the expanded consumption
of ethanol inside the state.
To remedy this problem, Minnesota
converted its state ethanol incentive from a
consumer-oriented excise tax exemption to
a producer-oriented direct payment. Instead
of reducing state gasoline taxes by a couple
of pennies for a 10 percent ethanol blend,
the state paid 20 cents a gallon for ethanol
produced within the state. To encourage
the construction of many plants in different
parts of the state the incentive, which ran
for 10 years, applied only to the first 15 million
gallons produced.
The result? Minnesota became home to
14 small and medium-sized ethanol plants.
The scale of the plants encouraged farmer
ownership. As of 2002, 12 of the 14 plants
were owned by more than 9,000 farmers.
Because of the large number of plants
23
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
built, several engineering firms competed
with each other to design and build the
least expensive and most efficient facility.
Yields of ethanol in dry mills quickly rose
from 2.5 to over 2.8 gallons per bushel. The
large number of plants, coupled with equal
numbers of plants being built in surrounding
states accelerated the engineering and
operational learning curves.
One result was to rapidly reduce the
cost of ethanol produced from small dry
mills. Indeed, a 1998 study by USDA that
examined the comparative economics of
small and medium sized corn dry mills and
large wet mills showed how this dynamic
had occurred between 1987 and 1998. In
1987 small and mid sized dry mills had
cash operating costs that were higher than
those of large wet mills. By 1998 dry mills
had dropped their operating costs far below
those of wet mills. The 1998 report concluded,
“Wet mill variable costs appear to have
remained very stable at about 46 cents per
gallon. Improved energy cost management
was offset by several factors, including
waste management and overhead…In contrast,
dry mills have experienced a l5-percent
reduction in operating costs, due to the
effects of reduced energy, labor and maintenance
expenditures and possibly economy
of scale.”56
Public policy initiatives that resulted in
a large number of small and medium-sized
biorefineries could change the face and
structure of American (and perhaps world)
agriculture. A 50-billion gallon national market
for ethanol would support about 1,500
30-million gallon per year biorefineries.
This translates into one manufacturing facility
in every other county in the country.
Each biorefinery would serve local and
regional markets. Each would produce biochemicals
as well as biofuels. Assuming an
average of 400 local investors per facility,
some 600,000 households would have an
equity interest in these ventures.
Clearly the location and ownership
structure of the biorefineries will be more
concentrated than in this ideal scenario, but
it indicates the potential for widespread economic
development. Today only about 120
petroleum refineries are operating in the
United States, a significant drop in the last
20 years. On the other hand, there are over
85 biorefineries operating as of October
2003 and the number could exceed 100 by
the end of 2004.
A biorefinery has a very attractive local
economic impact because it buys its materials
locally and sells its product locally. A
majority of a biorefinery’s expenditures are
local while a majority of a petroleum refinery’s
expenditures leave the region. For
example, about 45 cents of the cost of a gallon
of gasoline produced in a refinery consists
of the cost of the crude oil, often
imported over long distances. On the other
hand, about 45 cents of the cost of ethanol
consists of the cost of the raw material, the
vast majority of which is gathered from an
area within 50 miles of the manufacturing
facility.
Local ownership of wind turbines and
ethanol plants will not occur inevitably. In
both cases the conventional dynamic would
be to build ever-larger wind farms of 100-
500 MW and ever-larger and absentee
owned ethanol plants with capacities of 100
million gallons and over. Currently ethanol
production is dominated by a single firm.
That firm, Archer Daniels Midland (ADM),
has repeatedly engaged in price fixing.
Enforcement of anti-trust rules is essential
to enable the biofuels market to become
competitive and dynamic. And federal policies
should offer incentives for medium
sized and locally owned wind farms and
biorefineries and disincentives for largeabsentee
owned conversion facilities.
The Path to Be Taken
The interest at all levels in dramatically
restructuring the energy foundation of our
transportation sector is unprecedented and
welcome. The introduction of high efficiency
hybrid electric vehicles offers a new technological
platform upon which to fashion
public policy. Such a strategy should have a
dual approach. One is to increase the electric-
only driving range of the vehicle by
increasing its electrical storage capacity
while encouraging the rapid expansion of
renewable transportation-using electricity.
The second focuses on increasing the
renewable energy portion of the fuels used
in the engine. Here biofuels using existing
internal combustion engines may have a significant
advantage over hydrogen fuel cells.
A dual renewable fuel approach (electricity
and biofuels) should also be
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
24
designed to maximize the economic and
social benefits to those who cultivate and
harness the fuels. Economic development
can and should be as important a goal as
improving environmental stewardship and
enhancing national security.
New Rules For a Sustainable
Transportation System
• To maximize the use of grid electricity
for transportation public policy should
offer incentives based on the electric-driving
range of a car.
• To maximize the use of renewable
electricity policy makers should raise state
Renewable Portfolio Standards that mandate
specific numerical goals for renewable
energy and adopt a national meaningful
RPS that does not preempt or undermine
state efforts.
• To maximize the use of biofuels policy
makers at the state and federal level
should adopt Renewable Fuel Standards
(RFS) to complement their RPS standards.
These would begin with a 10 percent standard.
The standard should encompass all
renewable fuels not just biofuels. Thus
renewable electricity for electric cars,
renewable hydrogen for fuel cell cars as
well as biofuels for internal combustion
engine cars would qualify.
• To enable biofuels to move beyond a
10 percent blend, policy makers should
require that all new vehicles have a flexiblefuel
capacity. This requirement should be
tied to the rapid construction of a nationwide
infrastructure of E85 fueling facilities.
• To enable biofuels to move beyond a
10 percent blend, policy makers should
accelerate the commercialization of cellulose-
to-ethanol plants. This involves financing
at least three commercial-sized facilities
testing different technological approaches
by 2008. It also involves research and development
into low cost and environmentally
benign ways to collect and store cellulose.
• To maximize rural economic development
federal and state incentives need to be
changed to encourage smaller, locally
owned biorefineries and wind turbines.
Adopting these policies will allow the
country to reduce its reliance on imported
oil while strengthening its rural economies
and reducing its energy-related pollutants.
It will also create a technological dynamic
that can be adopted by other countries that
might be poor in oil and coal and gas but
rich in wind and sunlight and plant matter.
It can also provide a new market for plant
matter that overcomes the present competition
between farmers around the world for
slow-growing food and feed markets that
has fueled international trade conflicts.
Hydrogen is a worthy energy storage
technology and the hydrogen economy is
an attractive vision. But there are other
strategies that can achieve a high efficiency,
renewable energy fueled transportation system
more quickly and at a far lower cost.
“Economic development
can and should be as
important a goal as
improving environmental
stewardship and enhancing
national security.”
25
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
Notes
1. The United States effort is not unique. The European
Commission has a handsomely funded European
Integrated Hydrogen Project. Japan’s hydrogen program
is better funded and more advanced than that of
the United States.
2. National Hydrogen Association,
www.hydrogenUS.org
3. Much of the demand for hydrogen is to convert
heavy crude oils to gasoline and jet fuel. As we
exhaust the supplies of light crude oil and shift toward
Venezuelan crude or Canadian tar sands oil the
demand for hydrogen for this purpose is expected to
expand substantially.
4. Power Economics, April 30, 2002.
5. Malcolm A. Weiss, et. al., On the Road in 2020: A
life Cycle Analysis of New Automobile Technologies,
MIT. Cambridge, MA. 2002. MIT El 00-003.
6. SolarAccess.com. News. May 1, 2003.
7. Duane B. Myers, et. al., Hydrogen from Renewable
Energy Sources, Directed Technologies, Arlington, VA.
October 2003. Notes that the cost of producing electricity
from wind and geothermal is about the same as
generating electricity using natural gas, the cost of producing
hydrogen from wind and geothermal is about
85 percent more than producing hydrogen from natural
gas.
8. Alex Brooks, EV World. December 5, 2002.
9. Alex Brooks, EV World. April 23, 2003.
10. Ulf Bossel, Baldur Eliasson, Gordon Taylor, The
Future of the Hydrogen Economy: Bright or Bleak?,
April 15, 2003. Final report
11. Ricardo Consulting Engineers, Carbon to Hydrogen
Roadmaps for Passenger Cars. British Department of
Transportation. 2003.
12. California Journal. February 1, 2003. A more
recent report by JD Powers projects a slower growth
as a result of announcements by American car companies
that they were delaying their previously
announced introduction of hybrids.
13. The 2004 Prius has EPA estimated 60 mpg city/51
highway, 55 combined. It has 15% more cargo space
than its predecessor.
14. At a price of 3 cents per kWh, electrolysis produces
hydrogen at a cost of $2.35 per gallon of gasoline
equivalent, excluding transportation and storage.
Several studies have estimated a price per kg of hydrogen
of over $4 per kg. Directed Technologies estimates
that with electricity produced in a Class 6 wind
regime the cost of hydrogen delivered 500 miles to the
station would be a little over $4 per kg of hydrogen,
excluding sales taxes and dispensing markup. The
analysis concludes that hydrogen produced from landfill
gas would cost about $2.75 per kg. William Leighty
has developed a detailed analysis in Transmitting 4000
MW of New Windpower from North Dakota to Chicago:
New HVDC Electric Lines or Hydrogen Pipeline. 2002.
With an effective wind electric price of 2.8 cents per
kWh Leighty estimates a cost in Chicago of the equivalent
of $2.89 a gallon. Including the local distribution
and fuel station costs, the retail price in Chicago would
be $3.68-4.34 per gallon of gasoline equivalent. See
also Duane B. Myers, et. al., Hydrogen from Renewable
Energy Sources, Directed Technologies, Arlington, VA.
October 2003
15. For example Leon Walters and Dave Wade,
Hydrogen Production from Nuclear Energy, Department
of Energy and Argonne National Laboratory,
November 12, 2002 compares the cost of hydrogen
and gasoline this way. The authors assume the vehicle
using hydrogen would be getting over 85 miles per gallon
of gasoline equivalent. The gasoline driven car, on
the other hand, would be getting 20 miles per gallon.
16. Malcolm A. Weiss, John B. Heywood, Andreas
Schafer, Vinod K. Natarajan, Comparative Assessment of
Fuel Cell Cars. MIT. January 2003
17. Ibid.
18. Fuel Cell Today. Fuel Cell Systems: A survey of
worldwide activity. Mark Cropper, Stefan Geiger, David
Jollie, November 5, 2003
19. Ibid.
20. Electronic Engineering. May 26, 2003.
21. “A Pivotal Juncture for Hybrids”, Indianapolis Star,
November 4, 2003
22. Comparing the Benefits and Impacts of Hybrid
Electric Vehicle Options. 1000349. Electric Power
Research Institute. Palo Alto, CA. 2001. July 2001.
23. Carbon to Hydrogen Roadmaps for Passenger
Cars. Op. Cit.
24. Bob Graham, Plug-in Hybrid Electric Vehicles.
Significant Market Potential. December 5, 2002. See
also Bob Graham, Comparing the Benefits and Impacts
of Hybrid Electric Vehicle Options. EPRI. Menlo Park,
California. July 2001.
25. If all manufacturers opt for building fuel cell powered
cars, about 2500 will be on the road by 2011,
about the same number of all-battery electric vehicles
on the road by 2000 as a result of the Zero Emissions
Vehicle program in California initiated in the early
1990s.
26. Dr. Menahem Andersman, Brief Assessment of
Progress in EV Battery Technology since the BTAP June
2000 Report. California Air Resources Board.
February 2003.
27. There are many stories that indicate that the car
companies' involvement in introducing electric vehicles
was half-hearted and even hostile. After GM increased
the range of its EV1 to 100 miles there were two-year
waiting lists but GM built only 500 models. GM ended
the program in 2003 and required all those leasing EV1s
to return them. One GM employee who was involved in
the electric vehicle initiative by GM remembers, “We
launched the car in December of 1996 and by about
April I figured we’d been duped. They weren’t marketing
the vehicle.” New York Times, October 22, 2003. Jerry
Martin, spokesman for the California Air Resources
Board recalls, the car companies and oil industry
“fought California’s electric car mandate…every way
you can think of”. Washington Post October 22, 2003.
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
26
28. Lous Browning, Mark Duvall, et. al, Advanced
Batteries for Electric-Drive Vehicles, March 25, 2003.
Electric Power Research Institute. Palo Alto, CA.
29. Donald R. Sadoway and Anne M. Mayes, Portable
Power: Advanced Rechargeable Lithium Batteries. MRS
Bulletin August 2002. Lithium ion polymer batteries
have another advantage. They can be molded into virtually
any form to fit the shape of any device even as
small as a credit car. The Electrofuel corporation’s
PowerPad 160, introduced in early 2000 for use by
owners of portable computers, weighs less than 2.2
pounds and gives up to 16 hours of power. It is 3/8
inches thick.
30. Press Release. November 5, 2003. www.acpropulsion.
com. The Beijing People Daily reports on the
development of Chinese lithium ion batteries that will
have a 200-mile charge range and be rechargeable in
under 10 minutes.
31. Reported by Alec Brooks, Perspectives on Fuel Cell
and Battery Electric Vehicles, Presentation to CARB
ZEV Workshop, December 5, 2002.
32. “the cost of grid connected HEV60 in a mature
market was estimated to range between $7,000 and
$10,200 per vehicle” more than a conventional gasoline
vehicle. Reducing California’s Petroleum Dependence.
Joint Agency Draft Report. California Energy
Commission and California Air Resources Board. July
2003. Sacramento, CA.
33. Alex Farrell and David Keith, Rethinking
Hydrogen Cars. Science Magazine, July 18, 2003
34. Steven Letendre, Christy Herig, Richard Perez,
Real Solar Cars. October 2003. A Chevrolet Cavalier,
for example, has 3.22 square meters of surface area
available for solar cells. At present efficiencies these
could generate 407 watts. Assuming a PV capacity factor
of 15% and .206 kWh per mile, the 526 kWh generated
could drive the car about 2550 miles.
35. Vehicle miles driven will undoubtedly increase as
will car ownership. But the key variable is the increase
in vehicle miles driven outside urban areas, since an
HEV60 will account for virtually all local driving.
36. There is a significant loss of mileage in E85 cars
because of the lower energy content of ethanol versus
gasoline. However, there is some indication that if the
flexible fueled cars were optimized for E85 or if there
were cars dedicated to E85 that the mileage difference
would be small. See Mark Stuhldreher, Research in
High-Efficiency Alcohol-Fueled Engines at EPA, U. S.
Environmental Protection Agency National Vehicle and
Fuel Emissions Laboratory. Ann Arbor, MI. February
25, 2003
37. Currently automobile companies can count each
flexible fueled car as the equivalent of a car with high
high fuel efficiency to comply with the CAFÉ standards.
This is what has driven car manufacturers to
include multi-fuel capacity. The incentive is provided
regardless of whether these cars actually run on biofuels.
The environmental community notes that as a
result this incentive perversely allows an increase in
pollution because car companies can build a gas guzzling
SUV for every flexible fueled car even when the
latter doesn’t use a drop of ethanol. There have been
proposals to modify the incentive for flexible fueled
vehicles to require that ethanol be available in those
markets.
38. In Brazil, where almost all cars run on ethanol
blends and at one time most ran on 100 percent
ethanol one company, working with GM, has introduced
an inexpensive and reliable multi-fuel technology.
Following the launch of the 1.8 liter flex-fuel
engine, GM Brazil announced that it is ending production
of its l.8 liter gasoline Corsa and only selling the
flex fueled engine Corsa. GM do Brasil plans to sell
flex fuel versions of all its cars. Fiat and Ford are
preparing to launch flex fuel cars in Brazil. Volkswagen
already has.
39. Environment and Energy Daily. April 7, 2003
40. Wired Online. October 22, 2003. Another estimate
by a private company puts the cost of a fueling station
facility, without the electrolyzer, at $150,000. Hydrogen
Energy Projects, HyGen Industries LLC. Topanga, CA.
2003.
41. The incentives are equivalent of 54 cents per gallon
for the ethanol since the tax exemption is on the whole
gallon of gasoline (a 5.4 cent exemption from the federal
excise tax) whereas ethanol is only 10 percent of
the gallon.
42. This section focuses on ethanol because it is a relatively
mature industry and an abundant feedstock is
available for its expansion. Fuels made out of vegetable
oils are coming into the market. Sales were about 30
million gallons in 2003. The energy bill offers a handsome
incentive for the production of biodiesel.
Biodiesel usually consist of a 2-20% vegetable oil blend
although trucks are currently running on 100 percent
vegetable oil. Sufficient oil crops and recycleable fats
and oils are available to displace about 20 percent of
diesel fuel. Further supplies might come from converting
cellulosic materials or animal wastes to oils.
43. Powerful Solutions: Seven Ways to Switch America
to Renewable Energy, Union for Concerned Scientists,
2001 citing James Cook, Jan Beyea, and Kathleen
Keeler, “Potential Impacts of Biomass Production in
the United States on Biological Diversity,” Annual
Review of Energy and the Environment, 16:401–431,
1991
27
THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY
44. The amount of removal possible depends significantly
on the topography and soil quality of the farm.
For detailed analysis see Paul Gallagher, et. al.,
Biomass from Crop Residues: Cost and Supply
Estimates. Agricultural Economic Report Number 819.
United States Department of Agriculture. Washington,
D.C. March 2003. For breakdown of components of
the cellulosic waste stream and assumptions see David
Morris and Irshad Ahmed, The Carbohydrate Economy:
Making Chemicals and Industrial Materials from Plant
Matter. Institute for Local Self-Reliance. Minneapolis,
MN. August 2002.
45. Michael Wang, Hosein Shapouri, James Duffield,
The Energy Balance of Ethanol: An Update. National
Agricultural Statistics Service. USDA. August 2002.
Seungdo Kim and Bruce E. Dale, Allocation Procedure
in Ethanol Production System from Corn Grain,
Journal of Life Cycle Assessment. 2002. David Lorenz
and David Morris, How Much Energy Does It Take To
Make A Gallon Of Ethanol?. 1995 Institute for Local
Self-Reliance. For an analysis that concludes that the
net energy ratio is negative, see David Pimentel,
“Ethanol Fuels: Energy Balance, Economics and
Environmental Impacts are Negative.” Natural
Resources Research, Vol. 12, No. 2, June 2003. For a
detailed response see, Michael Graboski, Bruce
McClelland, “A Rebuttal to ‘Ethanol Fuels: Energy,
Economics and Environmental Impacts’, by D.
Pimentel”. Colorado School of Mines, Golden, CO.
May 2002
46. “Talking Hydrogen with Margaret Mann”. The
Carbohydrate Economy. Institute for Local Self-
Reliance. Minneapolis, MN. Winter 2003. Another
study put the net energy ratio of wind to hydrogen at
22 to 1 and the ratio for natural gas to hydrogen at .7
to 1. Carolyn C. Elam, Catherine E. Gregoire Padro,
Pamela L. Spath, International Energy Activities,
Proceedings of the 2002 U.S. DOE Hydrogen Program
Review. NREL/CP-610-32405.
47. For an extended discussion of ethanol and air quality
see David Morris and Jack Brondum, Ethanol and
Ozone. Institute for Local Self-Reliance. Minneapolis,
MN. Sept. 25, 2000
48. Michael D. Jackson, Stefan Unnasch, Jennifer Pont.
The Impact of Alternative Fuels on Greenhouse Gas
Emissions—A ‘Well-to-Wheel’ Analysis. Reference
M7100. TIAX, Cupertino, CA. 2002. See also, Well-to-
Wheel Energy Use and Greenhouse Gas Emissions of
Advanced Fuel/Vehicle Systems. North American
Analysis. General Motors, Argonne National
Laboratory, BP Amoco, ExxonMobil, Shell. April 2001.
Draft Final. Volume 1.
49. In Brazil 20 percent ethanol blends have been used
for decades. A 1977 paper by Furey and Jackson of
General Motors (No. 779008 delivered at the 12th
ICECEC meeting) showed that the volatility of ethanol
blends peaked near 5 percent levels. Ethanol itself has
a very low volatility, which is one of the reasons that
small quantities of higher volatility additives are used
in cars using a high ethanol percentage to enable cold
starts. Thus it is reasonable to expect reduced volatile
organic emissions at levels of ethanol above 25-30 percent.
A study by The Alliance, AIAM, Honda,
“Industry Low Sulfur Test Program” presented at the
California Air Resources Board workshop, 7/2001
shows that the NOx emissions were not affected by
higher levels of fuel oxygen for the most recent low
emitting vehicles and fuels that had low sulfur (30
ppm). The potential impact on air quality and human
health from increases in acetylaldehydes from using
large quantities of ethanol is also discussed. Modern
engines will be made ever-cleaner. Therefore all toxic
emissions will be very low. Also, the catalyst efficiency
impact of ethanol would be expected to help lower
acetylaldehyde emissions. Also of all the toxics
addressed in vehicle emissions regulations, acetylaldehyde
appears to be the least toxic, as indicated by
California’s regulations that estimate its potency at
0.016 relative to butadene, which is given a value of
1.0. See Staff Report on California RFG, California Air
Resources Board, April 22, 1994).
50. Michael D. Jackson, Stefan Unnasch, Jennifer Pont.
The Impact of Alternative Fuels on Greenhouse Gas
Emissions—A ‘Well-to-Wheel’ Analysis. Reference
M7100. TIAX, Cupertino, CA. 2002. See also, Well-to-
Wheel Energy Use and Greenhouse Gas Emissions of
Advanced Fuel/Vehicle Systems. North American
Analysis. General Motors, Argonne National
Laboratory, BP Amoco, ExxonMobil, Shell. April 2001.
Draft Final. Volume 1.
51. See Louis Browning, Climate Change. International
Vehicle Technology Symposium. ICF Consulting. Inc.
March 12, 2003.
52. Irshad Ahmed and David Morris, Replacing
Petrochemicals with Biochemicals: A Pollution
Prevention Strategy for the Great Lakes Region. Institute
for Local Self-Reliance. Minneapolis, MN. 1994
53. Associated Press. March 24, 2003.
54. Several ethanol facilities in Minneapolis report dividends
as high as $1 a bushel for the past several years.
This compares to a price of corn of about $2 per
bushel.
55. Hosein Shapouri, Paul Gallagher and Michael S.
Graboski, USDA’s 1998 Ethanol Cost-of-Production
Survey. USDA. Washington, D.C. 1998.
