Testimony of David K. Garman

Assistant Secretary
Energy Efficiency and Renewable Energy
Before the Committee on Energy and Natural Resources United States Senate
"Energy Use in the Transportation Sector"

March 6, 2003

Mr. Chairman, Members of the Committee, I appreciate the opportunity to testify before you today on energy use in the transportation sector.

I would like to begin by looking at the transportation sector in the context of the overall flow of energy in our economy. A diagram developed by Lawrence Livermore National Laboratory [Figure 1 (PDF 347 KB) Download Adobe Reader ] represents the current "energy flows" in the U.S. economy. It should not be regarded as a highly precise representation of these flows, but it is extremely useful in helping policymakers visualize complex energy data.

The primary energy inputs, including oil, coal, natural gas, nuclear and renewable energy are shown on the left. The relative sizes of the lines or "pipes" represent the relative contributions of the primary energy inputs, the impacts of energy conversion, and the end uses.

By using this diagram it is easier to visualize how the energy flows move toward electricity generation or through the different sectors of our economy. The diagram makes clear some inescapable features of energy use in the transportation sector:

The transportation sector is almost entirely dependent on oil. In fact, it is about 97 percent dependent on oil;
A majority of the oil we use is imported. We are currently importing about 55 percent of our oil from foreign sources-a percentage that is expected to increase to 68 percent by 2025;
A large amount of energy is rejected or wasted and transportation is the least efficient of the three sectors of our energy economy; and
Looking more specifically at oil, as we do in the next graph [Figure 2 (PDF 231 KB) Download Adobe Reader], we see an imbalance between petroleum demand for transportation and domestic production and that automobiles and light trucks are the dominant reason behind that demand.

In the early 1990s, the petroleum required just by our highway vehicles surpassed the amount produced domestically. The "gap" between production and transportation demand is growing-and is projected to keep growing. The current gap between total U.S. consumption and net production of oil is roughly 11 million barrels per day. And this is a gap that we are unlikely to close with regulation, new domestic production, or both. Although promoting efficiency in the use of oil and finding new domestic sources of oil are important short-term undertakings, over the long-term a petroleum-free option is eventually required.

We also face environmental challenges resulting from our current transportation system. We have made tremendous progress in reducing pollutant emissions from our cars and trucks as well as our stationary power sources and we will continue to make incremental gains through regulatory approaches such as the Tier II fuel standards. But for true efficiency gains, we must develop a wholly new approach to powering our vehicles.

We ultimately want a transportation system that is free of dependence on foreign energy supplies and emissions-free. We also want to preserve the freedom of consumers to purchase the kind of vehicles they want to drive. That is the concept behind the FreedomCAR partnership and Hydrogen Fuel Initiative, which are designed to develop the technologies necessary for hydrogen fuel cell vehicles and the infrastructure to support them.

Secretary Abraham unveiled the FreedomCAR partnership in January 2002 at the North American Auto Show in Detroit with the major U.S. automakers by his side. And President Bush unveiled the Administration's Hydrogen Fuel Initiative during his State of the Union address in January. As the President put it:

"With a new national commitment our scientists and engineers will overcome obstacles to taking these cars from laboratory to showroom, so that the first car driven by a child born today could be powered by hydrogen and pollution free."

A few days later, at an event attended by at least two members of this Committee, the President reiterated his commitment to his new Hydrogen Fuel Initiative. After viewing fuel cell vehicles from DaimlerChrysler, Honda, Nissan, Ford, Toyota and General Motors, the President said:

"The technology we have just seen is going to be seen on the roads of America. And it's important for our country to understand that by being bold and innovative, we can change the way we do business here in America; we can change our dependence upon foreign sources of energy; we can help with the quality of the air; and we can make a fundamental difference for the future of our children."

A transportation system based on hydrogen provides several advantages:

Hydrogen can be produced from diverse domestic sources, freeing us from a reliance on foreign imports for the energy we use at home;
Hydrogen can fuel ultra-clean internal combustion engines, which would reduce auto emissions by more than 99 percent; and,
When hydrogen is used to power fuel cell vehicles, the combination results in more than twice the efficiency of today's gasoline engines-and with none of the harmful air emissions. In fact, fuel cells' only byproducts are pure water and waste heat.

But, to ultimately succeed in the mass-market penetration of hydrogen fuel cell vehicles DOE, in partnership with the Department of Transportation (DOT) and the private sector, must conduct the necessary research and development to advance industry's investment in a hydrogen-based infrastructure that performs as well as the petroleum-based infrastructure we now have.

Our current gasoline/hydrocarbon infrastructure has been forged in a competitive market. It is ubiquitous and remarkably efficient. It can deliver refined petroleum products that began as crude oil half a world away to your neighborhood for less than the cost of milk, drinking water, or many other liquid products you can buy at the supermarket. We are currently bound to that infrastructure. We have no alternative. Our vision sees drivers able to go anywhere in America and refuel their hydrogen-powered vehicle. That is necessary before they will be comfortable purchasing one.

That is why the President, in his State of the Union address, proposed that the federal government significantly increase our spending on hydrogen infrastructure research and development, including hydrogen production, storage, and delivery technologies, as well as fuel cells. Over the next five years, we will spend an estimated $1.7 billion on the FreedomCAR partnership and Hydrogen Fuel Initiative, $1.2 billion of which is for the Hydrogen Fuel Initiative, which includes funds for fuel cells and hydrogen. Of the $1.2 billion figure, $720 million is "new money."

We will not build the infrastructure. The private sector will do that as the business case becomes clear. But as we develop the technologies needed by the vehicles, we will also develop the technologies required by the infrastructure. In cooperation with DOT, we will convene the parties needed for technology partnerships, we will collaborate on the needed codes and standards, and we will promote international cooperation in this effort.

There is growing worldwide interest in hydrogen and fuel cell technology, as reflected in the dramatic increase in public and private spending since the mid-1990s in the U.S. and elsewhere. We estimate current investments across the U.S. government agencies to be well over $200 million, about $120 million of which is for hydrogen and polymer electrolyte membrane (PEM) fuel cell research and development (R&D). In 2003, the Japanese government nearly doubled its annual fuel cell research, development and demonstration (RD&D) budget (compared to 2002) to approximately $268 million, and is this month launching a joint government/industry demonstration of hydrogen fuel cell vehicles, including the deployment of more than seven new hydrogen refueling stations. Governments and companies in Canada, Europe, and Asia are also investing heavily in hydrogen RD&D. For example, ten new hydrogen refueling stations will be built in Europe over the next few years to fuel hydrogen-powered buses. By comparison, the U.S. currently has approximately ten hydrogen refueling stations, and plans several more as appropriate to fund limited "learning" demonstrations to help identify R&D needs to make hydrogen and fuel cell technologies cost competitive and technologically viable.

The economic stakes are high - a recent report by PricewaterhouseCoopers projects global demand for all fuel cell products (in portable, stationary, and transportation power applications) to reach $46 billion per year by 2011 and to grow to more than $2.5 trillion per year in 2021. The United States should strive to be a leader in hydrogen and fuel cell technology development and commercialization in order to secure a competitive position for future energy technology innovations, new products, and service offerings. Furthermore, the more than 19 million barrels per day of petroleum projected to be imported to the U.S. by 2025 will cost our economy an estimated $188 billion per year (based on EIA projections) in real 2001 dollars.

Approach

In November 2001 my office began a formal hydrogen vision and "roadmapping" effort. Working with industry, stakeholders and academia, we developed a national approach for moving toward a hydrogen economy - a solution that holds the potential to provide virtually limitless clean, safe, secure, affordable, and reliable energy from domestic resources.

To realize this vision, the Nation must develop advanced technologies for hydrogen production, delivery, storage, conversion, and applications. The National Hydrogen Energy Technology Roadmap, which we released in November 2002, identifies the technological research, development, and demonstration steps required to make a successful transition to a hydrogen economy.

This past fall, the Department also developed an internal Hydrogen Posture Plan (Plan) to support the President's Hydrogen Fuel Initiative. The Plan identifies specific technology goals and milestones that would accelerate hydrogen and fuel cell development to enable an industry commercialization decision by 2015. My Office of Energy Efficiency and Renewable Energy led the development of the plan in collaboration with DOE's Office of Fossil Energy, Office of Nuclear Energy, Office of Science, and Office of Management, Budget, and Evaluation.

The Plan integrates the Department's planning and budgeting for program activities that will help turn the concept of a hydrogen-based economy into reality. More specifically, the Plan outlines the Department's role in hydrogen energy research and development in accordance with the National Hydrogen Energy Roadmap. The Plan is currently in draft and under policy review. The development of the Plan could not directly involve industry and other non-government stakeholders because of the inclusion of fiscal year 2004 through 2008 budget planning. Their input to other efforts such as the Hydrogen Roadmap, the Hydrogen Vision, the FreedomCAR Partnership Plan, and the Fuel Cell Report to Congress (which included four workshops with industry) has been considered in the development of the Plan.

To ensure that the Department continues to conduct its hydrogen research in a coordinated, focused, and efficient manner, the DOE Hydrogen Working Group that developed the Plan will continue to function. This Working Group will be chartered to meet regularly and perform the following functions:

Evaluate the progress of the Department's hydrogen and related activities with regard to milestones and performance goals;
Strengthen information exchange on technical developments;
Help ensure that the various activities (e.g., budgeting, execution, evaluation, and reporting) remain well coordinated;
Provide suggestions for management improvements and stronger technical performance; and,
Coordinate, through the Office of Science and Technology Policy, with other agencies (e.g., the Department of Defense, DOT, National Aeronautics and Space Administration, Department of Commerce) conducting similar research and development activities to ensure our efforts our complementary and not duplicative.

In anticipation of an energy bill this year, the Department is also preparing to form a Hydrogen Technology Advisory Committee (HTAC). This advisory group, composed of a diverse group of experts from industry, academia, and other stakeholders, would provide input to the Secretary.

My testimony today draws heavily from DOE's planning efforts including the Posture Plan, the FreedomCAR Partnership Plan, the Hydrogen Roadmap, and the Fuel Cell Report to Congress. These documents describe how DOE will integrate its ongoing and future hydrogen R&D activities into a focused Hydrogen Program. The program will integrate technology for hydrogen production (from fossil, nuclear, and renewable resources), infrastructure development (including delivery and storage), fuel cells, and other technologies supporting future hydrogen fueled vehicles. Successful implementation of the Administration's integrated plans and activities is critical to the FreedomCAR partnership and Hydrogen Fuel Initiative. Coordinating hydrogen activities within DOE and among the federal agencies will improve the effectiveness of our RD&D activities and strengthen its contribution to achieving the technical milestones on the road to a hydrogen economy.

Technology Challenges

Let me now review the challenges to be faced and how these challenges are to be met. Achieving our vision will require a combination of technological breakthroughs, market acceptance, and large investments in a national hydrogen energy infrastructure. Success will not happen overnight, or even over years, but rather over decades; it will require an evolutionary process that phases hydrogen in as the technologies and their markets are ready. Success will also require that the technologies to utilize hydrogen fuel and the availability of hydrogen occur simultaneously.

Some of the significant hurdles to be cleared include:

Lower by a factor of four the cost of producing and delivering hydrogen;
Develop more compact, light weight, lower cost, safe, and efficient hydrogen storage systems that will enable a greater than 300 mile vehicle range;
Lower by a factor of at least ten the cost of materials for advanced conversion technologies, especially fuel cells;
More effective and lower cost (by a factor of ten) carbon-capture and sequestration processes (a separate program critical to fossil-based production of hydrogen);
Designs and materials that maximize the safety of hydrogen use; and
The development of needed codes and standards as well as the education of consumers relative to the use of hydrogen.

The Department has drafted a work breakdown structure consistent with each of the critical areas identified in the Roadmap (production, delivery, storage, conversion, and end-use) and has identified milestones and decision points that are part of the effort. Examples of key program milestones that support FreedomCAR and achievement of a hydrogen economy include the following:

On-board hydrogen storage systems with a six percent capacity by weight by 2010 (more aggressive goals are being established for 2015);
Hydrogen production at an untaxed price equivalent to $1.50 per gallon of gasoline at the pump by 2010;
PEM automotive fuel cells that cost $45 per kilowatt by 2010 and $30 per kilowatt by 2015 and meet 100,000 miles of service life; and,
Zero emission coal plants that produce hydrogen and power, with carbon capture and sequestration, at $0.79 per kilogram at the plant gate.

In the near future, we plan on partnering with energy companies to establish more specific goals related to technology and components needed to produce and distribute hydrogen using various fossil, nuclear and renewable pathways. In this exercise, we will be looking at the full range of hydrogen technology areas covered in the Roadmap. Advances in other technologies will also be necessary for the ability of a hydrogen fueled vehicle to realize its full potential. These include:

Improved energy storage, (e.g., batteries that are more durable, cheaper, and better performing);
More efficient and cost effective electric motors;
Inexpensive and more effective power electronics; and
Better materials for lighter, but strong, structural members.

These technologies will enable hydrogen-fueled vehicles to be more efficient, and to help lower the vehicle cost to the consumer.

In the near- to mid-term, most hydrogen will likely be produced by technologies that do not require a new hydrogen delivery infrastructure (i.e., from distributed natural gas). As RD&D progresses along renewable, nuclear, and clean coal and natural gas production pathways (including techniques for carbon sequestration) a suite of technologies will become available in the mid- and long-term to produce hydrogen from a diverse array of domestic resources. The economic viability of these different production pathways will be strongly affected by regional factors, such as feedstock availability and cost, delivery approaches, and regulatory environment.

For hydrogen to become a viable fuel, advanced hydrogen storage technologies will be required, especially for automotive applications, where a driving range of at least 300 miles is needed. Current storage systems are too heavy, too large, and too costly. Technologies to convert hydrogen into useful energy - fuel cells and combustion technologies - must also be further improved to lower cost and improve performance.

Detailed analysis of life-cycle costs and benefits for alternative hydrogen production pathways, carbon sequestration, and other elements will continue. "Well-to-Wheels" analyses have led to the conclusion that the energy and environmental benefits depend greatly on how hydrogen is manufactured, delivered and stored, and on the economic feasibility of sequestration for fossil feed stocks. The results of these studies will help in making down-select decisions and to ensure that the relative merits of specific hydrogen pathways are evaluated properly and in comparison with other energy alternatives. Out-year planning will identify needs for RD&D on production and storage technologies, delivery infrastructure, and education and safety/codes and standards. Public education of consumers and local code officials must also be pursued concurrently with the RD&D.

Finally, industry must develop and construct the infrastructure to deliver hydrogen where it is needed. We will work with the DOT to help industry develop a safe, efficient, nation-wide hydrogen infrastructure. The hydrogen distribution infrastructure can evolve along with the conversion and production technologies, since much of the infrastructure that is developed for fossil-based hydrogen will also be applicable to renewable- and nuclear-based hydrogen. We will partner with industry to develop infrastructure in pilot projects, and industry will expand locally, regionally, and ultimately nationally.

Interim Strategies

As important as we believe hydrogen is for the long term, we are still working, in cooperation with other federal agencies, to maintain a robust, and in some areas growing, research and development program in non-hydrogen transportation technologies.

Under the FreedomCAR partnership we have proposed a funding increase in fiscal year 2004 for our hybrid (gasoline-electric and diesel-electric) technology, as well as increases in materials technology. We believe many of these technologies will deliver fuel savings both prior to and after the introduction of fuel cell vehicles, since lightweight materials and hybrid technologies are expected to be incorporated into fuel cell vehicle designs. Therefore, these investments are expected to pay off in the interim, as well as over the long term.

In addition, we had a number of interim strategies in mind as we established specific, measurable performance goals for our program. And our FY 2004 budget is aligned with these goals. For example:

We are working to develop technologies for heavy vehicles by 2006 that will enable reduction of parasitic energy losses, including losses from aerodynamic drag, from 39 percent of total engine output in 1998 to 24 percent;
The 2006 goal for Transportation Materials Technologies R&D activities is to reduce the production cost of carbon fiber from $12 per pound in 1998, to $3 per pound; and
The 2010 goal for Hybrid and Electric Propulsion R&D activities is to reduce the production cost of a high power 25kW battery for use in light vehicles from $3,000 in 1998 to $500, with an intermediate goal of $750 in 2006, enabling cost competitive market entry of hybrid vehicles.

Automakers are introducing technologies that have resulted in part from DOE's work in this area. At the recent North American International Auto Show in Detroit, the major U.S. automakers announced that they will have a variety of new hybrid gasoline-electric models entering the market in the 2004 to 2008 timeframe.

Of course, hybrid vehicles are more expensive compared to conventional vehicles, which is why the President proposed a tax credit for hybrid vehicles in his National Energy Plan, and subsequent to that in his 2004 budget submission. We urge that Congress adopt this important incentive for more efficient vehicles.

And we will continue support for our Clean Cities program, a unique, voluntary approach supporting more than eighty local coalitions that deploy alternative fuel vehicles (AFVs) and promote supporting infrastructure. The Clean Cities goals, against which we are making steady progress, are as follows:

One million AFVs operating exclusively on alternative fuels by 2010;
One billion gasoline gallon equivalents of alternative fuels per year used in AFVs by 2010 (approximately equivalent to saving 24 million barrels of oil annually); and
Seventy-five percent of Clean Cities coalitions self-sustaining by 2005.

We look to Clean Cities to maintain important momentum toward alternative fuels until hydrogen-powered cars become available.

The Administration strongly supports a renewable fuels standard (RFS) that will increase the use of clean, domestically produced renewable fuels, especially ethanol, which will improve the Nation's energy security, farm economy, and environment.

As important as the RFS and the Clean Cities program are, their goals illustrate the daunting challenges we face. Taken together, the RFS and Clean Cities are expected to offset about four billion gallons of petroleum use per year by 2010. That sounds impressive until it is compared to the demand for petroleum for transportation uses. In the year 2000, we used approximately 130 billion gallons of gasoline and over 33 billion gallons of diesel (highway use only). With that realization, the critical importance of the FreedomCAR partnership and Hydrogen Fuel Initiative as a long-term strategy becomes clear.

And, if we are to achieve real progress in the near term and our ultimate vision in the long term, we must continue to nurture productive partnerships with the private sector. It is the private sector that will make the major investments necessary for the transition to a radically different transportation future. Those investments will not be made in the absence of a clear-cut business case.

Mr. Chairman, I appreciate the opportunity to present this testimony today, and I would be pleased to answer any questions you may have now or in the future.