a better way to get from here to there

A publication of the New Rules Projectof the Institute for Local Self-Reliance

A betterway to get

from hereto thereA commentary on the hydrogen economy and a proposal for an alternative strategy

David MorrisDecember 2003

THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY

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3THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY

Executive SummaryThe idea of a hydrogen economy has burstlike a supernova over the energy policylandscape, mesmerizing us with its possibil-ities while blinding us to its weaknesses.Such a fierce spotlight on hydrogen is push-ing more promising strategies into theshadows.

The hydrogen economy is offered as anall-purpose idea, a universal solution.However, in the short and medium term acrash program to build a hydrogen infra-structure can have unwanted and even dam-aging consequences. This is especially truefor the transportation sector, the transfor-mation of which is the primary focus ofhydrogen advocates and the highest priori-ty of federal efforts.

The focus on building a national hydro-gen distribution and fueling network to sup-ply fuel cell powered cars ignores shorterterm, less expensive and more rewardingstrategies encouraged by recent technologi-cal developments. The most important ofthese is the successful commercialization ofthe hybrid electric vehicle (HEV).

The HEV establishes a new technologi-cal platform upon which to fashion trans-portation-related energy strategies. Its dualreliance on electric and gasoline propulsionsystems allows and encourages us to devel-op a dual energy strategy that expands the

electricity storage and propulsion capacitycomponent while rapidly expanding therenewable fuels used both for the electricityand engine side of the vehicle.

The current hydrogen economy strate-gy focuses almost entirely on the engineside of the hybrid with its inherent ramifica-tions: the creation of a nationwide produc-tion and delivery system for hydrogen andthe commercialization of a fuel cell car thatcan use pure hydrogen. A lower cost strate-gy with a quicker payoff and impact wouldfocus on expanding electricity storage sideand substituting biofuels for gasoline.HEV’s overcome the key performance lia-bility of all-electric cars: short drivingrange. But the current generation of HEVslack the ability to operate solely on batter-ies. Electricity is used to reduce or elimi-nate energy losses due to idling and stop-and-go driving in urban areas.Manufacturers should be strongly encour-aged to quickly develop the next generationof HEVs that can travel significant distanceson battery power alone. Rapid advanceshave occurred in recent years in electricstorage technologies.

One element of this strategy is toencourage plug-in HEVs (PHEVs) that canrecharge the batteries from the grid as wellas the engine. While HEVs can reduce fuelconsumption by 30 percent, PHEVs canreduce consumption by 85 percent or more.

A Better Way to Get from Here

to ThereA Commentary on the Hydrogen Economy and a Proposal for an Alternative Strategy

David Morris, Vice PresidentInstitute for Local Self-Reliance

December 2003

THE HYDROGEN ECONOMY AND A PROPOSAL FOR AN ALTERNATIVE STRATEGY4

Extending the HEVs electricity-onlydriving range should be accompanied by asimultaneous strategy that expands the useof renewable energy to fuel both the motorand the engine. On the electricity side, thismeans dramatically expanding the genera-tion of electricity using wind, sunlight andother renewable fuels. On the engine side itmeans dramatically expanding the use ofsugar-derived biofuels. More than 4 millionvariable-fueled vehicles are already on theroad. They can operate on any combinationof ethanol and gasoline. The cost of modify-ing vehicles to allow them this multiple fuelcapacity is small, about $150 per vehiclecompared to the tens of thousands of dollarsadditional cost of a fuel cell vehicle. The costof developing a network of fueling stationscapable of delivering biofuels as a primaryfuel (50-100 percent) rather than the current,6-10 percent additive is a tiny fraction of thecost of establishing a network of hydrogenfueling stations, about $50,000 for a biofuelrefueling station versus some $600,000 for ahydrogen refueling station.

Currently in the United States ethanol ismade from sugars extracted from corn. In thefuture the sugars will come from far moreabundant cellulose materials like corn stalksand wheat straw and grasses and kelp. Asugar economy would not only reduce thenation’s dependence on imported oil butwould create the potential for designing a lowcost agricultural policy that benefits domesticand foreign farmers alike.

For the foreseeable future, even thehydrogen economy’s most ardent support-ers concede that theirs will be a high coststrategy ($2.50 to $12 per gallon of gasolineequivalent) based on nonrenewables andlikely to increase the emissions of green-house gases. These advocates argue that inthe long term these various costs can bereduced or eliminated. Technically that maybe so. But hydrogen’s high cost, poor ener-getics and scant environmental benefits forthe near and medium term future must betaken into account when evaluating itagainst alternative fuels and strategies.

For example, hydrogen advocatesargue that hydrogen’s higher cost will beoffset by the higher efficiency of fuel cells.The argument is valid when fuel cells arecompared to traditional internal combustionengines (ICEs) but disappears when fuelcells are compared to HEVs.

Some environmentalists have criticizedbiofuels for their cost and modest net ener-gy yields. Yet hydrogen costs are higherthan biofuels even when the latter’s subsi-dies are eliminated. And hydrogen produc-tion and distribution has a negative netenergy yield. Finally, while electric batterieshave a high cost compared to gasoline theyare a lower cost storage medium than liquidor compressed hydrogen.

A dual strategy (improvements in elec-tricity storage, electronics controllers andsoftware accompanied by an aggressive fuelsubstitution policy) has many advantagesover a hydrogen focus. It is cheaper, lessdisruptive and more resilient. It can have amore dramatic short-term impact. It canallow us to tackle multiple societal prob-lems (e.g. the plight of farmers and ruraleconomies) at the same time.

One can argue that this is not an either-or situation. We can promote hydrogenwhile promoting more efficient vehicles andrenewable fuels. But we have scarce finan-cial, intellectual and entrepreneurialresources. Dramatic improvements in theefficiency of our transportation fleet via theintroduction of advanced and plug inhybrids and the expansion of renewablefuels to substitute for gasoline can occurincrementally using the current productionand distribution systems. For a hydrogeneconomy to have any impact the nationmust change virtually every aspect of itsenergy system, from production to distribu-tion to the design of our gas stations andour cars.

We may be on the verge of spendinghundreds of billions of dollars and divertingenormous amounts of scarce intellectualand entrepreneurial energy to create aninfrastructure based on nonrenewable fuelsin the hope that after it is in place we mightfuel it with renewable energy.

The chicken-and-egg problem of build-ing an infrastructure to allow the hydrogeneconomy to emerge, even if the initial basisof that economy is nonrenewable fuels hasalready enticed environmental and renew-able energy advocates into a series of unfor-tunate compromises. For example, to jump-start a hydrogen fueling system theMinnesota legislature in 2003 declared nat-ural gas to be a renewable energy resourceso long as it is used to make hydrogen. In2003 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.”


(CARB) declared a fuel cell car superior toa plug-in hybrid vehicle even though theformer would consume more fossil fuelsthan the latter.

The electricity network is already inplace. Why not focus on expanding the por-tion of this delivery system that relies onrenewable energy rather than spend thenext generation creating a new deliveryinfrastructure that, once built, will requirerenewable energy to once again makeinroads? In 2003 renewable resources gen-erate about 1.5 percent of the nation’s trans-portation fuels and about 2.5 percent of thenation’s electricity. Why not focus on ratch-eting upwards these low percentages ratherthan face a situation in 2020 where renew-able resources generate 1-2 percent of thenation’s hydrogen?

A crash program to switch to electrici-ty/biofuel powered vehicles should takeinto account social and economic issues.The transition should not only expandrenewable energy use but do so in a waythat maximizes the benefits to hard-pressedrural economies here and abroad. This isbest accomplished by having the powerplants locally owned.

Farmers who own a wind turbine canearn several times more than those thatsimply lease their land for large-scale winddevelopers. Farmers who own a share ofethanol plants can earn several times moreper bushel of corn delivered than theirneighbors who only sell their corn toethanol plants.

There is another important reason totreat scale and ownership issues seriously:the concentration of market power. ArcherDaniels Midland (ADM) generates about 40percent of the ethanol produced in thecountry and dominates nationwide distribu-tion. Although its share has dropped in thelast 10 years with the rapid growth of small-er and medium-sized ethanol facilities,many of which are farmer owned, it

remains a worrisome situation. This is espe-cially so because of ADM’s past involve-ment in price fixing and its aggressive exer-cise of market power.

An aggressive biofuels program promis-es important international benefits as well.The key trade disputes currently involvefarmers in industrialized countries pittedagainst farmers in poorer countries. Ratherthan have carbohydrates compete with car-bohydrates, a biofuel program would allowcarabohydrates to compete with hydrocar-bons. The agricultural sector and farmingcommunities in poorer countries are far big-ger than in the United States and Europe.And the use of plant matter to displaceimported fossil fuels is even more com-pelling in poorer countries that lack thehard currencies needed to pay for theseimports.

A decision to focus on anelectricity/biofuel path for the transporta-tion sector does not preclude the rapiddeployment of fuel cells. Indeed, the fuelcell economy is developing rapidly withouta hydrogen distribution network. Fuel cellshave the attractive potential of decentraliz-ing and democracizing the electricity sys-tem, reducing system costs and loweringthe likelihood of repetitions of widespreadblackouts like the one that occurred in thenortheastern United States in August 2003.A fuel cell economy does not depend on ahydrogen economy as currently envisioned.

The strategy currently envisioned toeffect a hydrogen economy may be divert-ing significant intellectual, financial andpolitical resources from more attractivestrategies. Before we take that leap, weshould take a long hard look at the premis-es and promises of the hydrogen economyand at the other alternatives available thatcould achieve the same goals more quicklyand cheaply.

Worldwide Sources of Commercial Hydrogen 2002 2

Origin Amount in billions Nm3 per yearPercentNatural Gas 240 48Oil 150 30Coal 90 18Electrolysis 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 percent-

ages rather than face a situ-

ation in 2020 where renew-

able resources generate 1-2

percent of the nation’s

hydrogen?


The VisionIn January 2003, President Bush announceda $1.6 billion five-year effort to make hydro-gen the fuel of choice in the transportationsector.1 The initiative was applauded onboth sides of the aisle. In the spring of 2003the hydrogen title of the Energy Bill (TitleVII) was voted on first because of its uncon-troversial nature. As Marie Fund, spokes-woman for the Senate Energy Committeecorrectly noted before the hearings began,“It’ll be kind of a love fest.”

Spurred by the sudden federal enthusi-asm, state legislatures have moved quicklyto embrace the hydrogen economy. In lateApril 2003 California revised its ZeroEmission Vehicle program to focus onhydrogen fuel cell vehicles rather than bat-tery-electric vehicles. In June 2003Minnesota’s legislature declared, “It is agoal of this state that Minnesota move tohydrogen...” In July 2003 the PacificNorthwest, led by the Bonneville PowerAuthority, declared its intention to becomethe “Saudi Arabia of hydrogen”.

The attractiveness of a hydrogeneconomy is easily explained. Hydrogen isthe planet’s most abundant element. Itcan be extracted from water, anotherabundant material. Hydrogen gas is odor-less, tasteless and non-poisonous. Fuelcells using hydrogen emit only water.There are no harmful tailpipe or smoke-stack emissions.

A future powered by hydrogen extract-ed from water using electricity generatedby renewable fuels like wind or geothermalpower is a most appealing vision.

A fundamental reason that the hydro-gen economy initiatives have garnered suchwidespread support is that everyone canplay the game. No energy source is exclud-ed. And in this game the fossil fuel andnuclear industries have enormous advan-tages.

• Currently the industrial hydrogenmarket is mature and growing. The hydro-gen comes primarily from natural gas (95percent in the United States, 50 percentworldwide) although it is also made fromcoal and petroleum. Industrial use ofhydrogen is about 50 million metric tonsand growing at 4-10 percent per year.3

Some 95 percent of the hydrogen is gener-ated by industries for internal use as a

chemical for making fertilizer or in oilrefining. Five percent is merchant hydro-gen sold to external users.

• The nuclear industry sees itself as akey player in a hydrogen future. “HydrogenEconomy; Boom Time for HydrogenProduction by Nuclear Energy,” reads aheadline in Power Economics.4 Nuclearpower “is the only way to produce hydro-gen on a large scale without contributing togreenhouse gas emissions,” boasts thetrade journal Nucleonics Week. The federalenergy bill authorizes as much as $1 billionto build a nuclear reactor and use it toextract hydrogen from water.

• Coal supplies almost 20 percent ofthe world’s hydrogen. At the 2000 WorldHydrogen Energy Congress in Beijing, Italyand China announced plans to cooperate toboost that percentage. President Bush haslaunched a billion dollar initiative to developa coal gasification-to-hydrogen plant.

• Several automobile and oil companiesare betting that petroleum will be thehydrogen source of the future. It wasGeneral Motors, after all, that coined thephrase “the hydrogen economy”. There ismore hydrogen in a gallon of gasoline thanin a gallon of liquid hydrogen.

• Wind energy and solar energy advo-cates support hydrogen production as away to overcome the limitations resultingfrom the intermittent nature of producingelectricity from these resources.

• There is another reason there is littleopposition to a hydrogen economy. AfterPresident Bush announced a billion dollarinitiative in January 2003 it was apparentthat money for hydrogen-related projectswould soar even as money for other pro-grams, both fossil fuel and renewable, wereprojected to decline. Potential recipients forthis new money are reticent to criticize theinitiative. States have begun to “prime thepump” by investing significant sums upfront in the anticipation that it will makethem attractive for the increased federalfunding.

“There is morehydrogen in a gallon of

gasoline than in a gallon of

liquid hydrogen.”


The Reality A Hydrogen Economy Is Not ARenewable Energy EconomyFor the foreseeable future the vast majori-ty of hydrogen will be made from non-renewable resources. The Department ofEnergy expects natural gas to be the pri-mary source for transportation-relatedhydrogen for the next 10-20 years andprobably for many years beyond that.After a review of the scientific and engi-neering literature, MIT researchersannounced, “The uniform conclusion isthat decentralized gas reforming stationscan provide hydrogen at lower cost thanany of the other options 20 years fromnow.”5 In the longer term, the Departmentof Energy believes coal could become asignificant supplier of hydrogen after2015. President Bush’s long-term vision,as outlined in his State of the Unionaddress, is to use nuclear fusion to pro-duce hydrogen from water.

Hydrogen can be produced usingrenewable energy but the cost is far higherthan producing hydrogen from non-renew-able fuels. “Electrolytic hydrogen fromintermittent renewable resources is gener-ally two to three times more costly to pro-duce than hydrogen made thermo-chemi-cally from natural gas or coal, even whenthe costs of CO2 sequestration are added tothe fossil hydrogen production cost,” JoanOgden, research scientist at the Universityof California-Davis told the House ScienceCommittee in March 2003.

All advocates of the hydrogen economydiscuss the “chicken and egg” problem. Wecan’t have a hydrogen economy until there isan adequate system for storing, transmittingand fueling cars (and stationary fuel cells)with hydrogen. Doing so will take decadesand the cost will run into the hundreds of bil-lions of dollars. While we build the infrastruc-ture hydrogen will come from non-renewableresources like natural gas that has its owndistribution system. After the hydrogen infra-structure is in place, renewable hydrogenwill be able to enter the market.

To get the hydrogen economy up andrunning some states are allowing fossil-fueled hydrogen to be considered renew-able hydrogen feedstocks. In the spring of2003, for example, the Minnesota legisla-

ture declared that natural gas-derivedhydrogen would be considered renewableenergy until 2010 and therefore eligible forincentive programs related to hydrogen andfuel cell industry development.

A renewable hydrogen economy is aninteresting prospect. But the reality is thatthe gestation process for the renewable eggis going to be measured in decades. In themeantime the energy for the chicken willcome from fossil (or nuclear) fuels.

Which is why some in the renewableenergy community question the wisdom ofshifting intellectual, financial, political andentrepreneurial resources into a crash pro-gram to produce hydrogen. The EuropeanWind Energy Association (EWEA) cautionsthat a premature push toward a hydrogeneconomy “could have a serious environmen-tal downside”. Christian Kjaer, EWEA’s policydirector notes, “It is a backwards argumentthat hydrogen opens access to new andrenewable energy sources. It is the other wayaround. Large-scale renewable energy pro-duction, such as offshore wind power, is anessential precondition for the deployment ofa sustainable hydrogen economy.”6

In the last 30 years renewable energyhas overcome significant odds. In the UnitedStates it has now captured about 2 percent ofthe total transportation fuels and electricitymarkets. Wind power is the world’s fastestgrowing energy resource. The growth curvefor photovoltaics is steep. This is the time tomake a major effort to move solar energyfrom the margins of energy production to itscenter rather than to shift our intellectual andscientific and capital resources toward con-structing the infrastructure demanded for ahydrogen economy and end up 25 years fromnow where we are, in essence today: having2 percent of the hydrogen market and hopingto increase that fraction.

It is instructive to note that while wind-generated hydrogen is far from competitivewith fossil fuel-generated hydrogen, wind-generated electricity may already be com-petitive with fossil fuel-generated electricity.In several states electricity from high-speedwinds is the least expensive source of newpower. Even when wind-generated electrici-ty is more expensive, it is by 20-40 percent,not 200 percent as is the case with wind-generated hydrogen. One study concludes,“Electrolysis is an uneconomical use ofwind and geothermal electricity”.7

“While wind-generated hydrogen is far

from competitive with fossil

fuel-generated hydrogen,

wind-generated electricity

may already be competitive

with fossil fuel-generated

electricity.”


A Hydrogen Economy is a Diversionof Scarce ResourcesCurrently federal energy budgets are stableor shrinking but appropriations for hydro-gen research are expanding. Inevitably thatencourages existing programs to reorienttheir programs toward hydrogen. Thus newprograms are in wind energy to hydrogen,in nuclear power to hydrogen, in coal tohydrogen. R&D on electric batteries andother types of electricity storage systems isshrinking while spending on hydrogen stor-age is soaring. Spending to create a nation-wide system of hydrogen fueling stationswill soon surpass spending to create anationwide system of biofuel filling stations.Growing numbers of states and even citieshave convened task forces to discuss howto orient local resources into building ahydrogen economy.

A Hydrogen Economy Is EnergyInefficientHydrogen is not a fuel. It is an energy carri-er, like electricity. Like electricity, hydrogenmust be produced. It may be the world’smost abundant element but hydrogen isfound only in combination with other ele-ments. Energy must be used to extract thehydrogen. In most cases the energy used toextract the hydrogen could otherwise beused to meet the needs of the final con-sumer directly.

For example, natural gas can be con-sumed directly in a highly efficient power

plant (e.g. a combined cycle combustionturbine or an on-site fuel cell with heatrecovery). This is a more efficient use ofnatural gas than to use the gas to fuel theprocess of extracting hydrogen from thegas and then using more energy to com-press and transmit the hydrogen to a fuelcell and then converting the hydrogeninto electricity. According to one calcula-tion, it takes 64 percent more natural gasto make hydrogen and generate electricityvia a fuel cell with it than to generate elec-tricity directly via an efficient power plant(heat rate of 7000 Btus per kWh).8 Otherscalculate the loss in system efficiency at alower but still significant level.

The same disconcerting dynamic holdstrue for renewable energy technologies. Itis more effective to generate electricityusing wind power and deliver it directly tothe customer than to use wind-generatedelectricity to produce hydrogen, transportthe hydrogen long distances and then con-vert the hydrogen back into electricity.

The staff of Aerovironment, Inc., anengineering company headed by PaulMacCready, the inventor of the first suc-cessful human-powered airplane and thecompany that helped design GM’s sportyall-electric car the EV1, offers an instructiveillustration of the inefficiencies involved inmaking hydrogen rather than electricity.

To satisfy the daily driving needs of abattery-powered electric vehicle a homewould need a solar electric array of 450square feet. Many homes have this amountof rooftop space. However, if the solar cell

A Word AboutIcelandIceland has received well-deserved favorable atten-tion for boldly announcingits intention to convertentirely to hydrogen by2040. Iceland has enor-mous amounts of unhar-nessed renewable energy,mostly geothermal. With apopulation of only200,000 it has a tiny inter-nal market. The globalhydrogen market forchemical uses is growingrapidly. Iceland is seekingto use its small internalmarket to nurture tech-nologies and fuels thatcould eventually become amajor export market. It isa commendable strategy.The United States is not ina similar situation.

DOE Appropriation Requests for Renewable Energy and Hydrogen

0 50 100 150 200 250 million dollars

FY 2

004

FY

2003

Renewable Energy Technologies

Hydrogen and Fuel Cells

Renewable Energy Technologies (requested)

Hydrogen and Fuel Cells


were instead used to electrolyze water andfeed the resulting hydrogen into a fuel cellpowered car, the amount of energy needed,and therefore the size of the solar arrayrequired, would increase 2.5 times to some1100 square feet. That is beyond the spaceavailable to most residences.

It requires about 60 kWh of electricityto produce 1 kg of hydrogen from water(with current electrolysis systems). An elec-tric vehicle needs only 38 kWh to travel thesame distance as a fuel cell vehicle using 1kg of hydrogen.9

An in-depth study by two Swiss engi-neers found that the energy needed to com-pact gaseous hydrogen and transmit it longdistances dwarfed the energy contained inthe hydrogen. They conclude, “We have toaccept that (hydrogen’s)...physical proper-ties are incompatible with the requirementsof the energy market. Production, packag-ing, storage, transfer and delivery of thegas....are so energy consuming that alterna-tives should be considered.”10

A Hydrogen Economy IncreasesPollutionThe combination of higher energy lossesand the continuing reliance on fossil fuelscould result in increased greenhouse gasemissions at least in the initial stages ofshifting to a hydrogen economy. One analy-sis done for the Department of Energy in2001 by Directed Technologies found thatrelying on hydrogen electrolyzed fromwater would double greenhouse gas emis-sions compared with conventional gasoline

operation (using the average marginal USgrid generation mix).

Another study for the BritishDepartment of Transportation concluded,“Switching to an accelerated hydrogen fuelpathway…will actually create more CO2 notless. The reason is that the hydrogen used tofuel the vehicle will have to come fromsteam-reformed natural gas.”11

A Green Hydrogen Economy?The thesis of this report is that a hydrogeneconomy, for the foreseeable future, will bebased on non-renewable fuels and that wecan more rapidly progress toward a renew-able fueled transportatioin system at farless cost by embracing the strategy elabo-rated here.

Many argue that we should support ahydrogen economy but only one fueled by“green hydrogen”. Such a position raisesseveral issues.

Do these advocates oppose the elabora-tion of a hydrogen infrastructure if it is notin its initial stages predominantly poweredby renewable energy? Do they reject the“hydrogen highway” proposed by newlyelected California Governor ArnoldSchwarzenegger unless only green hydro-gen were used? Do they oppose the develop-ment and installation of distributed steamreformers if these are reforming natural gasrather than biogas or biofuels? Do theyreject the financing and installation of elec-trolyzers unless they were powered byrenewable electricity?

“Even as world leaders

were announcing their

support for a hydrogen

economy a new technology

was entering the market-

place that could and should

change the nature of the

conversation about

transportation futures.”

Comparison of Battery and Hydrogen Fuel Cell Electric Vehicles75 miles daily

Source: Aerovironment Inc.

Battery Electric Vehicle0.33kWh per mile = 25 kWh per day

Solar Array . . . . . .450 square feet: $33,600Battery Electric Vehicle . . .$40,000Charger . . . . . . . . .$600-$2,000

Hydrogen Fuel Cell Electric Vehicle50 miles per kg = 1.5 kg per day (hydrogen)66 kWh per kg = 90 kWh per day

Solar Array . . . . . .1100 square feet: $81,600Hydrogen Fuel Cell Electric Vehicle . . .$40,000 (future?)Hydrogen Generator(water electrolysis) $8,000 (?)


There are some R&D areas that wouldbe tailored only to renewable energy (e.g.biofueled fuel cells and reformers). But thevast majority of R&D for a hydrogen econo-my does not depend on the source of thehydrogen. The electrolyzers that rely onwind generated electricity will not be muchdifferent than those that rely on natural gasor coal fired electricity. The creation of thedelivery and storage and fueling and on-vehicle consumption technologies is thesame whether one relies on renewable ornonrenewable fuels to make the hydrogen.

If 95-99 percent of the R&D and invest-ment is the same whether the hydrogen is“brown” or “green” then those who advocategreen hydrogen need to clarify how andwhere, in the next 10-20 years, theirroadmap differs from those who advocatehydrogen from any resource. If not, it is like-ly that green hydrogen advocates, like greenelectricity advocates, will ask for a renewablestandard. But in the case of electricity theinfrastructure for delivery and end-use isalready in place and green electricity alreadyhas a share, albeit tiny, of the market. Willwe see a demand for a 10 percent nationalrenewable hydrogen standard in 2030?

Hybrid Electric Vehicles: A New Technological PlatformMost advocates of a hydrogen economy con-cede that the price of hydrogen is high andthe process of making and distributing itmay be energy intensive. But they note thatwhen the hydrogen is used in a fuel cell thefuel cell’s higher efficiency makes the over-all system less costly and more environmen-tally benign than the present inefficientinternal combustion engine system.

That may be accurate. But one shouldnot compare a technology of the future witha technology of yesteryear. For even asworld leaders were announcing their sup-port for a hydrogen economy a new tech-nology was entering the marketplace thatcould and should change the nature of theconversation about transportation futures.

The technology is the hybrid electricvehicle. Hybrid vehicles boast both anengine and an electrical propulsion system.Hybrids enable electric vehicles to over-come their key shortcoming: short drivingrange. Although EVs have been more popu-

lar than auto manufacturers acknowledge,their 60-85 mile driving range has severelyinhibited their widespread use.

The hybrid electric vehicle (HEV) over-comes the limitations of the 100 percentbattery-powered vehicle. The HEV hasexcellent acceleration because of the torquegenerated by electric motors. Tail pipeemissions are extremely low. The first gen-eration Toyota Prius qualified as a LowEmissions Vehicle (LEV) under Californiaregulations. Its second generation, intro-duced in 2001, qualified as a Super UltraLow Emissions Vehicle (SULEV) and itsthird generation is even more environmen-tally friendly. This type of vehicle reduceshydrocarbon emissions by 97 percent, car-bon monoxide emissions by 76 percent,nitrogen oxide emissions by 97 percent andparticulate matter emissions by 90 percentcompared to the Tier 1 standard emissionsset by the Department of Energy.

The commercial success of hybridscaught many in the automobile industry bysurprise. The story is instructive and maybe one reason why American policy makershave not included hybrids in their futureplanning. The Hybrid Electric Vehicle(HEV) Program officially began in 1993.The billion dollar five-year cost-shared pro-gram, the Partnership for a NewGeneration of Vehicles (PNGV), partneredthe U.S. Department of Energy (DOE) andthe three largest American auto manufac-turers: General Motors, Ford, andDaimlerChrysler. The “Big Three” commit-ted to produce production-feasible HEVpropulsion systems by 1998, first generationprototypes by 2000, and market-readyHEVs by 2003. The automobile companiespromised to produce an 80-mile per gallonprototype car by 1997.

The American car companies failed toproduce a commercial hybrid. The federalgovernment, relying on the research doneby the domestic car companies, designed afuture transportation strategy in whichhybrid electric vehicles did not play a signif-icant role.

Japanese carmakers, shut out of thePNGV program, succeeded whereAmerican carmakers had failed. Toyotaintroduced the first hybrid electric vehicle,the Prius, in Japan in December 1997 and inthe United States in July 2000. In December

“Hybrid vehicles already

are approaching the

efficiencies the government

is projecting for fuel cell-

powered vehicles 10 years

from now.”


1999 Honda introduced the Insight Hybridin Japan and in May 2002 in the UnitedStates. In September 2003 Toyota intro-duced its third generation Prius, a biggercar with better performance and a higherefficiency than its predecessor.

Hybrid sales doubled in 2002, reaching35,000 in the United States. As of mid-2003more than 100,000 were on the road world-wide. Toyota claims to be making a profiton its Prius. JD Powers projects that annualsales and leases of HEVs in the UnitedStates will soar to almost 500,000 by 2006and 900,000 by 2010.12

The surprising success of JapaneseHEVs has resulted in some equally surpris-ing changes-of-heart by American car man-ufacturers about the commercial feasibilityof HEV. As late as April 2002 GeneralMotors’ CEO and President G. RichardWagoner, Jr told Business Week, “How willthe economics of hybrids ever match that ofthe internal combustion engine? We can’tafford to subsidize them.” Nine monthslater Wagoner admitted to CBS News, “Ithink it’s fair to say nobody knows how bigthis thing can be.”

In late 2002 Ford announced it wouldbe introducing a hybrid in the fall of 2003.GM declared it would introduce a hybridpickup in 2004. Dodge will introduce ahybrid Ram Contractor in 2005. However,American car companies were unable tomeet their deadlines. In late 2003 Fordannounced it was postponing its introduc-tion of its HEV to 2004. GM announced itwas delaying introduction until 2007.Daimler/Chrysler canceled its plans tobuild a hybrid SUV. Meanwhile Toyotaannounced that its 40 mile per gallon SUVwill be introduced on schedule in 2004.

Toyota introduced its third generationHEV Prius in September 2003. The price isthe same as the previous generation Priusbut the vehicle is bigger and roomier andwith better fuel efficiency.13 By earlyNovember demand had become so highthat Toyota was considering adding a nightshift to its Japanese factory for the first timein its history. That would increase produc-tion from 6,000 to 10,000 units a month.Sales in Japan alone reached 17,500 inSeptember. In the U.S. the hybrid had10,000 advance orders.

The emergence of the high-efficiencyhybrid changes the context for the discus-

sion of the hydrogen economy. For exam-ple, all observers agree that the price ofhydrogen will be very high for the foresee-able future. Currently merchant industrialhydrogen costs more than $5 per kg (a kgof hydrogen contains the energy of a gallonof gasoline). The Department of Energy’sgoal is to produce hydrogen for a deliveredcost of $2.50 per kg by 2015 excluding fed-eral and state taxes. This is a far highercost than the projected price of gasoline,excluding environmental costs.14

Hydrogen studies assume that thehigher price of the fuel will be offset by the2-3 times higher fuel efficiencies of fuel cellcars over internal combustion engine cars.15

But it is inappropriate to compare the costof a fuel cell powered hydrogen car thatwon’t be commercialized for 5-10 years orlater with a century-old internal combustionengine whose fuel efficiency has barelyimproved in the last 50 years. A far moreappropriate comparison would be to cur-rently commercialized hybrid vehicles, oreven better, to hybrids that could be com-mercialized in the next five years.

Hybrid vehicles already are approach-ing the efficiencies the government is pro-jecting for fuel cell-powered vehicles 10years from now (55-60 miles per gallon). Anassessment by MIT concluded, “there is nocurrent basis for preferring either FC (fuelcell) or ICE (internal combustion engine)hybrid power plants for mid-size automo-biles over the next 20 years. This conclu-sion applied even with optimistic assump-tions about the pace of future fuel celldevelopment.”16

Hybrids can rely on fuel cell engines aswell as internal combustion engines butthey improve the efficiency of ICE’s more..As the MIT researchers note, “hybridsimprove urban fuel economy of ICE vehi-cles, whose engines have lower efficienciesat lower power (and speeds) more than theyimprove FC vehicles whose fuel cell stackhave higher efficiencies at lower power.”17

Some hydrogen advocates support usinghydrogen in internal combustion enginesrather than fuel cells. Not only can this bedone much more quickly but it can be donemuch more cheaply. Such a strategy wouldeliminate the additional cost of fuel cell vehi-cles although it would still require a costlydelivery and storage infrastructure.

“Half of all cars on

the road travel a total of 20

miles or less each day.”


A Better Way

Step 1: Maximizing Efficiency:Moving from HEV0 to HEV60The current generation of hybrid electricvehicles relies on the internal combustionengine to fill the battery. The battery pro-vides electricity to motors for acceleration.In effect, hybrids join together two powerplants. As one observer describes theprocess, “A large electric motor gets thevehicle rolling and even can power it up ahill. A gasoline or diesel engine kicks in fortop acceleration and takes over when thevehicle is at cruising speed. When the vehi-cle stops, the engine shuts off, conservingfuel. A computer turns over cabin heatingor cooling to the electric motor which issupplied by powerful batteries rechargedby braking.”21

The HEV has a much more powerfulmotor and a much smaller engine than itscounterparts. Reduced gasoline consump-tion comes primarily from avoiding energyuse during idling and from using the motorfor stop-and-go urban driving. One intrigu-ing result is that HEVs are more efficient inthe city than on the highway. The secondgeneration Prius for example was rated at45 miles per gallon on the highway and 52miles per gallon in the city.

HEVs currently have no ability to becharged from the electrical grid system andlittle or no ability to operate solely on bat-tery-power. The industry designates thisgeneration of hybrids HEV0, the zero indi-cating the number of miles the car can trav-el on batteries alone. (The 2004 Prius actu-ally can travel a modest distance under lightload and low speed conditions.)

Hybrids can be configured to use elec-tricity for the majority of their propulsionneeds. These vehicles have larger batterycapacity. They are called plug-ins (PHEV)because they can plug into an external elec-

tricity system for charging. These PHEVsare identified by numbers that indicate ahigher stand-alone electric driving range:HEV20, HEV60.

As long as the battery has sufficientcharge, plug-in HEVs operate like a 100 per-cent battery electric vehicle. When the bat-tery is low they operate like an engine-assisted HEV0. The displacement of gaso-line by external electricity depends on theamount of battery capacity the vehicle hasand the owner’s daily driving habits.

Half of all cars on the road travel a totalof 20 miles or less each day. Such modestmileage is especially true of urban vehicles.Thus a vehicle with battery capacity suffi-cient to travel 20 miles (HEV20) beforerecharging can substantially reduce theamount of gasoline consumed even in com-parison to today’s hybrid (HEV0). The elec-tricity, moreover, is used to displace thegasoline used for those parts of a trip thatare the most polluting: stop-and-go driving,continuous acceleration or deceleration,cold engine starts, and idling.

HEVs have smaller engines than con-ventional vehicles and larger motors. Theyhave similar acceleration because thepower of the engine and the motor can becombined. The plug-in HEVs have moreelectrical storage capacity. The greater thebattery capacity the higher the percentageof time the vehicle will rely on the batteryrather than the engine. A hybrid with theability to travel 60 miles on its batteriesbefore recharging requires about 18 kWhsof storage capacity.

If a car were driven 20 miles per dayand an HEV20’s batteries were fullycharged daily there would be a drasticreduction in liquid fuel consumption. Ahybrid that can travel 60 miles on its bat-tery would allow for more daily driving orfewer recharging cycles and could reduceby 85 percent the amount of fuel the auto-mobile consumes.

A Word AboutFuel CellsThis report advocates a federalprogram that accelerates theuse of high efficiency hybridvehicles fueled by biofuels. It isnot an argument against fuelcells. The author has arguedelsewhere in favor of a vigor-ous federal and state effort toaccelerate the use distributedelectricity technologies includ-ing fuel cells.

The introduction of fuelcells does not depend on theintroduction of a national dis-tribution network for hydrogen.Fuel cells run on hydrogen, butthey can make the hydrogenon-site. Currently they do soby using hydrogen carriers likenatural gas, propane, methaneand methanol.

Since the world’s first fuelcell vehicle was introduced in1959 about 780 fuel cell sys-tems have been used in trans-port, including bicycles, scoot-ers, cars, busses, submarinesand boats. About 200 of theseprovide auxiliary power for USand Russian spacecraft.18 Inthe last year there have beenabout 150 fuel celled vehiclesintroduced, virtually all of thempre-commercialization. Theconclusion of the most author-itative survey of worldwideoperations is, “Exciting it maybe, but the advent of fuel cellvehicles is still many yearsaway and the technical, com-mercial and regulatory issuesthat must be resolved are farfrom trivial.”19 The cost of carfuel cells, on the other hand,must drop a hundredfoldbefore they are competitive.Some argue there is “a needfor a Nobel Prize-winningbreakthrough” to make thishappen.20

Fuel cells for stationaryapplications began to be intro-

Comparative Features of Conventional Vehicles and HEVs22

Vehicle Conventional HEV0 HEV20 HEV60Engine Peak Power, kW 127 67 61 38Motor RatedPower, kW — 44 51 75Battery Rated Capacity, kWh — 2.9 5.9 17.9Vehicle Weight, tons 1.85 1.78 1.83 1.96


Unlike the hydrogen-fueling infrastruc-ture, the electricity-fueling infrastructure isalready in place. Andy Franks, professor ofengineering at the University of California-Davis, one of the country’s leading advo-cates for PHEVs estimates that 95 percentof homes and 70 percent of multi-familydwellings have relatively easy access to a120V outlet.

A study for the British Department ofTransportation that analyzed various path-ways to a hydrogen fuel future concludes,“progressive electrification and hybridisa-tion offers significant CO2 benefits regard-less of the fuel or its source, at a risk levelmore manageable than alternatives such asmore radical new vehicle technologies ormajor infrastructure change.”23

Plug-in HEVs, says Bob Graham, areamanager of the Electric Power ResearchInstitute’s (EPRI) transportation program,are “the logical next member of the familyof hybrid vehicles...With the possible excep-tion of the batteries, plug-in HEVs requireonly evolutionary engineering advancesover HEV0 technology to meet technicalrequirements.”24

Some argue that hybrid developmentsalone will improve batteries and that sincefuel cells are expensive, automobile manu-facturers will still have an incentive toincrease the amount of work the batteries(and motor) can do. But battery research atautomobile companies has virtually ceased.R&D for HEV0 cars focuses on improvingthe power output of the batteries ratherthan their energy storage capacity. Thetechnological improvements needed forboth purposes do overlap but there aremajor differences. One is intended to sup-plement the engine. The other is intendedto replace the engine. Increases in poweroften lead to reductions in energy density, aprime objective for those who want to mini-mize battery weight while expanding theamount of driving done with batteries.

As Bob Graham, area manager of trans-portation systems at EPRI observes,“(P)roduced in volume, hybrid EVs such asthe Toyota Prius and the Honda Civic willhelp drive down the cost of motors and con-trollers that could be used in all types ofelectric-drive cars.But the commercializa-tion of the plug-in hybrid EV, because of itslarge market appeal, holds the key to theone remaining barrier to zero emission

vehicles-the cost of the ’energy’ battery.”Graham warns, “Currently, most incen-

tives do not increase with the all-electricrange of HEVs, even though there are larg-er environmental and energy security bene-fits associated with electric (battery only)operation…The cost of advanced batteriesfor non-plug hybrid EVs, plug-in hybrid EVsand battery EVs is highly dependent on theestablishment of a growth market situation,a predictable regulatory environment andconsistent production volumes that encour-age capital investment in production capaci-ty and line automation by battery and auto-motive manufacturers.”

California’s recent revisions to its ZeroEmission Vehicle program is a good exam-ple of regulatory decisions that may dra-matically affect the development of PHEVs.The program requires that participants pro-duce a minimum number of “gold standard”vehicles. Only fuel cells and 100 percentbattery-powered electric vehicles qualify forthat standard.25 After a long and contentiousdebate, and after vigorous opposition byleading environmental organizations, theCalifornia Air Resources Board decided notto require any hybrid vehicles with electric-only driving ranges. These do qualify as a“silver standard” technology but so do adozen other technologies, including hydro-gen powered internal combustion engines.Thus it is unlikely that this regulation alonewill spur manufacturers to introduce plug inHEVs.

Step 2: Expanding Battery CapacityCalifornia recently abandoned its focus on100 percent battery-powered electric vehi-cles for promoting zero emission vehicles inpart out of frustration by what it believedhas been a lack of progress in batterydevelopment. By January 2003 all major carcompanies had eliminated their all-batteryelectric vehicle sale and leasing programs:Chrysler, Ford, GM, Honda, Nissan andToyota.) A report done for the CaliforniaAir Resources Board concluded that, “directefforts to develop EV batteries have gener-ally declined over the last 3 years.”26

However, recent evidence suggests thatthe report’s conclusions were premature.27

It takes a long time between invention andcommercialization. Beta R&D, a companythat has developed the sodium nickel chlo-ride battery called ZEBRA took 17 years to

duced in field trials in the late1970s. Today more than 2,500are in operation. Fuel CellToday notes, “Progress in thedevelopment and deploymentof small stationary fuel cells(electrical output less than 10kW) has continued at a highlevel, with the cumulative num-ber of systems almost dou-bling from 1,000 to 1,900 (inthe last year).”

The commercialization ofstationary power fuel cells isincreasing rapidly. Rapid tech-nological advances are occur-ring in high-temperature fuelcells that can use natural gasand other fuels directly (e.g.solid oxide cells) and in on-sitereformers of natural gas andother fuels into hydrogen foruse in lower temperature fuelcells.

The price of stationaryfuel cells needs to drop in halffor them to be price competi-tive, assuming the waste heatis captured. Nevertheless,increasing numbers of busi-nesses are installing them nowbecause of their high reliabilityand the high quality of theelectricity they produce.

Fuels cells are one of themost promising technologiesthat can allow for a dramaticdecentralization of our electric-ity system. These technologiesalong with the necessary regu-latory changes should bestrongly supported by policy-makers. Fuel cell cars and thehydrogen infrastructure neededto power those cars mightproperly await the developmentof on-site stationary fuel cells.As Romesh Kymar, head offuel cell development in thechemical engineering depart-ment at Argonne NationalLaboratory observes, “Maybefuel cell powered cars willcome at the tail end of thosestationary developments.”


develop a battery technology that in 2002went into commercial production in a facili-ty owned by MES-DEA. Avestor, a Canadiancompany, has just introduced a lithiummetal polymer battery it claims has been indevelopment for over 20 years.

Recently the Electric Power ResearchInstitute (EPRI) issued a report that found“important and steady improvements in bat-tery technology, even over the past fewyears. Researchers specifically found thatadvanced batteries used in electric drivevehicles are far exceeding previous projec-tions for cycle life and durability, a key con-sideration in cost.”28 EPRI found, for exam-ple, that advances in Nickel Metal Hydridebatteries (NiMH) meant that only one bat-tery pack rather than the two anticipated inan earlier study would be needed for thelife of the vehicle. “It is highly probable thatNiMH batteries can be designed, using cur-rent technologies, to meet the vehicle life-time requirements of full function batteryEVs, plug-in HEVs with 40 to 60 miles ofEV range....”

EPRI and others estimate that anHEV60, in the near term, would cost about$10,000 more than a conventional HEV.

Some believe the technologicaladvances in batteries are coming even morequickly, spurred by increasing demands formore power for portable electronic equip-ment like laptop computers and cell phones.Here consumers are willing to pay severaltimes the price per kilowatt-hour for energythan are electric vehicle owners. Thatmakes the portable electronics market anincubator for storage technologies that canlater be scaled up for use in electric vehi-cles.

Sony Corporation first commercializedlithium batteries for laptop computers in1991. Current lithium ion batteries haveenergy capacities four times those of leadacid batteries and almost twice that of nick-el metal hydride batteries. Recently scien-tists reported that it was possible to con-struct a lithium ion battery that could store400 Wh per kg, ten times that stored in atypical lead acid battery.29

The dynamics of battery advances issuch that the cost of those already commer-cialized and thus mass produced for thepremium electronics market are now lowerthan those that are still produced in small

batches for the electric vehicle market. In2003 San Dimas-based AC Propulsion Inc.replaced the electric batteries in its EV withlithim-ion batteries. The substitution saved500 pounds and increased by a factor ofthree the amount of energy that could bestored. Alan Cocconi, AC Propulsionfounder and chief engineer noticed therapid progress that had occurred in the useof these small cells in laptops and powertools. “Manufacturers produce these cellsby the tens of millions, so they competeintensely based on performance and costs.The result is commercial, off-the-shelf bat-tery technology with fantastic specs. Wedecided to use it in electric cars”

Their new battery, called the tzeroLiIon is assembled from 6800 standardcells. Tom Gage, President of ACPropulsion notes, “The market for big cellsis small so they cost too much. The smallcells for the tzero cost less, in total, thanthe nickel-metal hydride battery in theToyota RAV4EV and they hold twice theenergy. We got a quote from one batterycompany for a Li Ion pack made from 100much larger cells. Their price was 10 timeshigher and neither the energy or the powerwere as good as we get from the smallcells.”30

It is instructive that California, whichwas very optimistic about battery develop-ment when it launched its Zero EmissionVehicle program in 1991 is now even moreoptimistic about fuel cell developments. TheCalifornia Air Resources Board predictsthat the additional cost per fuel cell pow-ered vehicle, now about $1 million will dropto $300,000 in the 2006-8 model years, to$120,000 in 2009-2011 and to $10,000 in2012-14.

Few other researchers are as optimisticas California in the reduction in the cost offuel cell cars. Indeed, at the Future CarCongress in June 2002 Toyota’s fuel cellengineer Norihiko Nakamura announced,“If a certain level of mass production can beachieved the costs should be dropped dras-tically. But a great amount of effort is need-ed to bring the cost to even two to threetimes that of a standard vehicle.”31

If California’s projection does cometrue, 10 years from now we will be able tobuy 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.”


increase is about what the increased costright now would be for an HEV60.32 Thefuel cell car, however, will achieve fuel effi-ciencies comparable only to those of the2003 model HEV0 while the HEV60 willachieve efficiencies 50 percent greater ormore.

This cost comparison doesn’t include theinfrastructure investments required. Onerecent estimate by two energy experts report-ed estimates a cost of $5,000 per vehicle tocreate the infrastructure for hydrogen fueledvehicles.33

The infrastructure for battery-drivenvehicles is already in place, except forquicker rechargers or a wider availability ofelectric outlets.

Step 3: Renewable Fuels for theEngine An effort to expand renewable energy forthe electricity part of the hybrid vehiclewould take a lesson from the effort toexpand renewable electricity overall. Some15 states have Renewable PortfolioStandards that require an increasing por-tion of the state’s electricity supply to berenewable fueled. The distributed nature ofsome renewable energy technologies offersdiverse scenarios. In parts of Californiasolar cell canopies over parking lotsrecharge electric vehicles parked duringthe workday and plugged into outlets at themeters. The Los Angeles Department ofWater and power estimated that a 1.87 kWharray could provide roughly 17,000 miles

worth of power for an electric vehicle. Arecent study found that most cars have suf-ficient surface area to generate 20 percentof their transportation fuel needs from solarcells embedded into the vehicle’s body.34

A focus on hybrids and plug in hybridsoffers the potential for a remarkableimprovement in energy efficiency with noreduction in performance or vehicle room.This is true for all types of vehicles, includ-ing and especially SUVs.

An urban-based HEV that can travel 60miles on its batteries could reduce fuel con-sumption by 85 percent. This would reducethe fuel consumption of a typical mid-sizedcar from 600 gallons of gasoline per year to100 gallons. If all vehicles were equippedwith this technology, annual national gaso-line consumption could decrease fromabout 140 billion gallons to about 40 bil-lion.35

Such an improvement in efficiency inand of itself would virtually eliminate ourreliance on imported oil. High efficiencyhybrids would also allow us to take a closerlook at using biofuels as a primary fuelrather than an additive.

Currently the gas tanks of vehiclesusing ethanol blends contain 5.7-10 percentethanol. With minor costs vehicles can bemodified to run on ethanol or gasoline orany combination thereof. According to EronShostek of the Alliance of AutomobileManufacturers, the cost of these adjust-ments, which include toughening somehoses and installing a computer device to

900—

800—

700—

600—

500—

400—

300—

200—

100—

0—

Gasoline Consumption by Vehicle Size and Type

Annu

al G

asol

ine

Cons

umpt

ion

(gal

lons

)

Compact Sedan Midsize Sedan Midsize SUV Fullsize SUV

� ConventionalVehicle

� No-Plug Hybrid—HEVO

� Plug-In HEV, 20 mile EV range,HEV20

� Plug-In HEV, 60 miles EV range,HEV60

Source: ElectricPower ResearchInstitute

“For ethanol or other

biofuels to become a

primary fuel will require a

shift to a reliance on a more

abundant feedstock.”


sense the amount of alcohol in the fuel so itcan mix with the correct amount of air forcombustion, is less than $160 per vehicle.Thus for less than $1.5 billion all of the 9million new cars sold each year in theUnited States could be capable of using bio-fuels to supply a majority or even all of theirengines’ needs.36

Because of government incentivesautomakers plan to sell nearly 1.8 millionflexible-fueled vehicles in 2004, doublingthe 2 million cars already on the road.37

Currently more than 10 models of flexible-fueled vehicles are available including thebest selling Taurus and Explorer.38

Ethanol and other biofuels currentlyaccount for about 2 percent of our trans-portation fuel supply. Production is increas-ing rapidly. In the last three years annualproduction capacity has expanded by onebillion gallons. By the end of 2007 it couldreach a capacity of 5 billion gallons peryear.

In several midwestern states, likeMinnesota, ethanol accounts for almost 10 per-cent of the transportation fuel consumed bycars each year. A 10 percent ethanol blend on anational level would require about 15 billiongallons a year. An aggressive national effortcould achieve this production level by about2015 at a far lower cost and with a far greaterenvironmental and national security benefitthan a national effort to achieve significantinroads of fuel cell vehicles powered by hydro-gen. Instructively, the federal hydrogenroadmap doesn’t envision a 10 percent penetra-tion of hydrogen into the market until wellafter 2030.

Ethanol has burst out of its identity as aregional fuel because of the phase out by 18states of their use of MTBE in gasoline.MTBE is a petroleum and natural gasderived oxygenate that has been used, inproportions of about 13 percent, in a signifi-cant portion of our gasoline since 1996. Thediscovery that it is polluting groundwaterled states, beginning with California, tophase out its use. The result? In Californiaethanol consumption, virtually non-existentin 2000 will exceed 600 million gallons in2003. Similar jumps in consumption can beexpected as New York’s phase out becomesoperational in early 2004.

Ethanol is a much-misunderstood fuel.Ethanol is alcohol. Liquor. Given its 100

percent alcohol content, it might more aptlybe called moonshine. Ethanol is fermentedfrom sugars just as wine and beer is. Thelow-content alcohol that is produced is thendistilled to higher and higher concentra-tions, making it useable as a power fuel.

Currently the sugars come from starchcrops because starch is easily and inexpen-sively broken down into sugars andbecause the harvesting and processing ofstarch crops (e.g. corn, wheat) is a matureindustry with mature byproduct markets.

Today more than 98 percent of ethanolmade in the United States is derived fromcorn. Starch crops could produce 7-15 bil-lion gallons of ethanol, although therewould be an impact on both corn prices(higher) and animal feed prices (lower) as aresult. The higher volume is sufficient toallow for the universal use of a 10 percentethanol blend, something that requires noinfrastructure or vehicle modifications. Thiscould be done at a fraction of a cost andachieved ten to thirty years earlier thanachieving similar gasoline displacementthrough the use of hydrogen and fuel cellcars. Karen Miller, vice president of techni-cal operations for the National HydrogenAssociation estimates that to have 10 per-cent of Americans driving fuel cell poweredcars will require 80 percent of the existing“gas” stations to be retrofitted to offerhydrogen.39 This would be enormously cost-ly. Almost as great a petroleum displace-ment could occur without any modificationsin the vehicles or the filling stations byachieving a 10 percent blend of ethanolnationwide.

Making ethanol a primary fuel willrequire the installation of new fueling tanksin gas stations. To date there are almost 200E85 (85% ethanol) refueling tanks in place,far more than the 15 hydrogen-fuelingtanks currently operational in the UnitedStates. The cost of installing a 12,000-gallonE85 tank and three E85 gas pumps (dis-pensers) is less than $50,000. This wouldserve scores of cars a day. Some gas sta-tions are converting the nozzles for poorselling grades (e.g. premium) to allow fordispensing E85. The dispenser conversioncosts of doing this is about $1,000. The costof installing a hydrogen fueling station atthe University of California Davis wasroughly $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.”


the cost of a hydrogen reformer at eachfueling station. The fueling station can serv-ice only 8 vehicles per day.40

For ethanol or other biofuels to becomea primary fuel will require a shift to areliance on a more abundant feedstock. Thekey is to access the sugars in cellulose, themost abundant biological material on theplanet, found in all plants from grasses totrees to crops, and convert these sugarsinto ethanol. This means converting thecorn stalks and wheat straw into ethanolrather than the corn and wheat kernels.

Hundreds of millions, perhaps billionsof tons of biological materials are availablefor conversion into fuels and chemicals.Each year the United States produces about300 million tons of cellulosic waste (urbanwastes and agricultural residues that can beremoved from the soil without environmen-tal harm). Another 1 billion tons of cellu-losic materials could be grown on availablelands without interfering with our food sup-ply or causing environmental damage.Assuming current yields of 80 gallons perton, and half of the cellulosic material actu-ally being converted into ethanol, produc-tion could exceed 50 billion gallons peryear.

Cellulose is not as easily broken downinto sugars as is starch but significantprogress has been made in the last tenyears. One commercial cellulose-to-ethanolplant is operating in Canada at a smallscale. The cost of the ethanol is higher thanthe cost of ethanol from starch because ofthe high value of the byproducts of conven-tional ethanol production (e.g. high proteinanimal feed or high fructose corn syrupand lower protein animal feed). In part thisis because the cost of gathering and balingand transporting the agricultural residues iscurrently very high. The cost will comedown as new technologies and techniques

are developed to serve a growing new agri-cultural sector.

The cost of ethanol is high today com-pared to the cost of gasoline. Handsomesubsidies equivalent to 54 cents per gallonof ethanol make up the difference.41 Ifethanol production (or biodieselproduction42) were to increase substantially,the cost to the taxpayer would increase dra-matically.

However, in the context of a hydrogeneconomy we should compare the cost ofethanol not to current gasoline prices but tocurrent and future hydrogen prices.

The wholesale price of ethanol rangesfrom $1.10-1.50 per gallon. On an energyequivalent basis, this translates into a priceof about $1.65-2.15 per kg of hydrogen orgallon of gasoline (excluding taxes). This issubstantially lower than the federal goal of$2.50 per kg of hydrogen by 2015. Thus tocompete with hydrogen, ethanol would needno 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


A Few Words about EthanolBiofuels and the EnvironmentThe use of plants as a primary transporta-tion fuel is controversial. There are severalkey issues. Will the dramatic substitution ofcarbohydrates for hydrocarbons deprive theworld of needed food? Will the increaseduse of plants lead to increase soil erosion orground water pollution? Does it take morefossil fuel energy to grow a plant and con-vert it into biofuels than the energy con-tained in the biofuels and its byproducts?

Food versus FuelWhen corn is converted into ethanol it isthe starch, which is otherwise often con-verted into sweeteners, that is lost. Theprocess actually concentrates the protein.As we switch to cellulosic materials thefood versus fuel problem becomes moreone of the availability of land. Although esti-mates vary, it appears that sufficient landarea exists to allow us to produce signifi-cant quantities of fuels (and biochemicals)without disrupting or diminishing the foodor feed supply. The Union for ConcernedScientists, citing an in-depth analysis by theAudubon Society concludes, “Overall,around 200 million acres of cropland mightbe suitable and available for energy or“power” crops, without irrigation and with-out competing with food crops.43 At currentyields of cellulosic crops like fast growingtrees, 200 million acres could provide 1 bil-lion tons a year of feedstock. Yields couldbe increased significantly. Ten tons per acreis a likely figure for the medium term

future. Tests of sugar cane bred to maxi-mize fiber rather than sugars resulted inyields as high as 60 tons per acre in PuertoRico.

The amount of cellulosic wastes avail-able, through the harvesting of agriculturalresidues like corn stalks and wheat strawand forest industry wastes like sawdust andbark and a part of the organic waste streamof municipal solid waste could add another300 million tons or more to the annual vol-ume.44 The resulting overall harvest(assuming that only 40 percent of the agri-cultural residue is removed) is about 1.3 bil-lion tons. At current yields this is sufficientto provide over 100 billion gallons ofethanol as well as significant quantities ofbiochemicals and “waste” biomass that canbe used to provide the energy for the con-version process.

Net EnergyA remarkable number of studies have beendone on the energetics of ethanol. The vastmajority of studies done since 1990 concludethat there is a positive net energy generationof more than 1.3:1 for corn derived ethanol.45

The table below extracts from a 1995 studyby the Institute for Local Self-Reliance.Based on case study data from farms andethanol facilities, it estimated a positive netenergy ratio of 1.36:1. The study examinedthree scenarios. The base line relied onnational average energy inputs by corn farm-ers and ethanol plants. The second scenarioused the energy inputs of corn farmers inthe state the used the lowest energy inputsand 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 Hydrogengallon of gasoline equivalent

“When corn is

converted into ethanol it is

the starch, which is other-

wise often converted into

sweeteners, that is lost.

The process actually

concentrates the protein.”


The third scenario used the energy inputsfrom the most efficient corn farmer usingorganic methods and the next generationethanol plant. The last scenario showed anenergy output to input ratio over 2.0.

The fundamental conclusion from theseenergetics studies is that the net energyratio of ethanol is positive and growing morepositive as farm productivity improves andethanol fuel efficiency improves. For exam-ple, one ethanol facility is in the process ofsubstituting corn stover and wood chips fornatural gas in providing all of its heat energyand a portion of its electrical energy. Oncethe substitution takes place the positive netenergy ratio of that facility should soar.

Cellulose to ethanol plants may have aneven more positive energetics ratio becausethe feedstock uses less energy-intensiveinputs to grow and the parts of the plant notconverted into ethanol can be used to fuelthe plant.

Just as we need to compare hydrogenand ethanol on cost we need to compareethanol and hydrogen on net energy gener-ation. Margaret Mann, one of the leadingresearchers, has concluded that whereasmaking hydrogen from biomass has a posi-tive net energy yield of 17 to 1 and windenergy to hydrogen a positive net energyyield of 12 to 1, making hydrogen from nat-ural gas has a negative net energy ratio.Taking into account upstream operationssuch as extraction and delivery of naturalgas, steam methane reforming, the mostpopular hydrogen generation technology, isonly 67 percent efficient. That means forevery 1 unit of fossil fuel energy in, onegets .67 units of energy out.46 If hydrogenwere made from electrolysis the electrolyz-

ing process itself uses 50-60 kWh to make 1kg of hydrogen. Assuming 3414 Btus perkWh the process itself uses more energythan the kg of hydrogen contains. This iscompounded if the electrical process usessteam, since the input per kWh out couldbe over 8000 Btus.

Air QualityThere have been a number of evaluations ofethanol’s impact on air quality. What weknow is that a 10 percent blend of ethanolreduces carbon monoxide, a precursor forozone formation, significantly (by morethan 25 percent). We also know that ethanolwhen used as an additive displaces highlytoxic and volatile components of gasoline(e.g. benzene, toluene, xylene).

We also know that ethanol at a 10 per-cent or lower blend also increases the totalvolatile organic compound emissions fromthe gasoline by about 15 percent. However,since the VOCs emitted by pure gasolineare more reactive than those produced withethanol blends and because of the signifi-cant carbon monoxide reductions resultingfrom the use of ethanol, any increase inozone formation is negligible.47

At higher concentrations of ethanol thevolatility of the gasoline-ethanol blenddrops. At concentrations above 25-40 per-cent evaporative emissions drop below thelevel they were before a drop of ethanolwas added to the gasoline. This eliminatesvolatility as a problem. The reduction in car-bon monoxide emissions, a contributor toozone formation at ground level, increasesas the percentage of ethanol in the fuelincreases. There is some concern that anincrease 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 14,765Processing 53,956 37,883 33,183Total Energy Input 81,090 57,504 47,948Energy Output (inc. co-products) 111,679 120,361 120,361Net Energy Gain 30,589 62,857 72,413Percent Gain 38% 109% 151%

Source: How Much Energy Does It Take to Make A Gallon of Ethanol?, ILSR, 1995


oxides (NOx), also a contributor to ozoneformation. But NOx is generated from highcombustion temperatures and ethanolburns cooler than gasoline. That is one ofthe reasons it makes such a good racingfuel. And the new low emitting vehicles thatare entering the marketplace in ever-highernumbers (including hybrids) appear not tolead to a NOx increase from an increase infuel oxygen.48

Some studies have compared green-house gas emissions of ethanol used as aprimary fuel in an internal combustionengine versus hydrogen made from naturalgas used in a fuel cell powered car. Oneanalysis found that an E85 car using corn-derived ethanol produces, over the entirefuel cycle (fuel used to grow the feedstockand convert it to ethanol and convert theethanol into useful work in the engine) gen-erates about a third less carbon dioxideequivalent greenhouse gases than a conven-tional car getting 27.7 miles per gallon (275vs. 400 grams per mile).49

The same study found that a hybrid EVthat gets 45 miles per gallon with no stand-alone electric driving range using gasolineformulated to California’s rigorous air quali-ty standards would emit the same amountof greenhouse gases as the E85 car. Ahydrogen car relying on hydrogen pro-duced from natural gas at the gas stationgenerates about a third less greenhousegases than an E85 car (175 vs. 275 gramsper mile). Producing hydrogen from elec-trolysis generates about the same as an E85car (240 vs. 275 grams of CO2 per mile).50

The report concludes, “If all passengervehicles in California used E85 instead ofRFG3 (gasoline formulated to meetCalifornia standards) in 33 mpg vehicles ...(there would be a) 7 percent reduction inannual California GHG emissions.”

This report assumes ethanol is madefrom corn. If it were derived from the sugarsin cellulosic material and if the lignin in thecellulosic material were used to generate theenergy needed by the manufacturingprocess, a net reduction in greenhouse gasescould occur. That is, more carbon dioxidewould be absorbed by the plant while grow-ing than is generated by all the inputs intogrowing the plant, converting it into trans-portation fuel and consuming that fuel.51

One other environmental point shouldbe made about biofuels. A biorefinery, like a

petroleum refinery, will make many endproducts. Production will be optimized tomaximize the enterprise’s profit. Petroleumrefineries make fuel, chemicals and otherend products. Biorefineries would do thesame. Indeed, ethanol may become abyproduct of many facilities. A cellulose-to-ethanol facility may convert only about 25percent of the overall weight of the materialinto ethanol. The rest can be used to fuel themanufacturing process and as feedstock formaking higher value chemicals than ethanol.The environmental benefits, both upstreamand downstream, from displacing petro-chemicals with biochemicals is significant.52

Assuming that 600 million tons of cellu-losic materials are converted into 50 billiongallons of ethanol, some 400 million tons ofbiological materials could become availablefor conversion into chemicals. Althoughone cannot substitute on a pound for poundbasis, the quantity of materials available isabout equal to the consumption of all organ-ic and inorganic chemicals in the UnitedStates today.

Biofuels and Fuel CellsAs discussed above, a fuel cell economy ispossible without building a national distribu-tion, storage and fueling system for purehydrogen. Some fuel cells can extract thehydrogen directly from hydrogen-carryingliquids or gases. Others can extract thehydrogen with built-in reformers. Alcoholsrepresent one of the hydrogen-carrying fuelsthat could be used in fuel cells. Thus expand-ing the use of alcohols in our engines could,if hydrogen and fuel cells do prove to be acost-effective alternative, become a stepping-stone to using hydrogen derived from thosealcohols.

Most of the work in direct conversion ofalcohols in fuel cells has used methanol. Afueling station in California dispensesmethanol into a fuel cell powered car thatdoesn’t need onboard reforming. The phaseout of MTBE promises to make significantquantities of methanol available. Methanolcan be made from biological materials but it iscurrently cheaper to make it from natural gas.

Ethanol too reportedly is being used infuel cells. Several Chicago buses poweredby fuel cells are using hydrogen reformedfrom ethanol. Significantly, the fuel cell canuse low-grade ethanol that contains 15-20percent water (needed in the reforming

“Public policyinitiatives that resulted in a

large number of small and

medium-sized biorefineries

could change the face and

structure of American (and

perhaps world) agriculture.”


process) rather than fuel-grade ethanol thatcontains no water. Low-grade ethanol canbe produced using less energy and at alower cost.

Just as small battery technologies aredeveloping rapidly because of the introduc-tion of more powerful mobile electronicequipment so are small fuel cells. Microfuel cells using liquid fuels that can be pur-chased in cartridge form (like refills for cig-arette lighters) are beginning to enter themarket. Toshiba announced in March 2003a 12 watt direct methanol fuel cell forportable computers that can run for 5 hourson a single cartridge filled with 50 cc ofmethanol. It expects to introduce it into themarket in 2004.

A start-up company, MedisTechnologies, has announced that it willintroduce a micro-fuel cell that convertsethanol directly into electricity. Medisbelieves that ethanol is a better fuel thanmethanol because of restrictions regardingmethanol’s use in certain situations. TheFederal Aviation Authority, for example,currently prohibit poisonous methanol frombeing carried on airplanes.

Meanwhile, researchers at Saint LouisUniversity in Missouri are developing aneven more fascinating biological storageand conversion device. Professor ShelleyMinteer recently announced a break-through in enzymatic batteries that breakdown ethanol fuel. These are potentiallymuch cheaper than existing fuel cells thatrely on expensive metals like platinum or

ruthenium catalysts. According to onereport, these biobatteries could have powerdensities more than 30 times greater thanother batteries.53

Ownership Matters“Perfection of means and confusion of endsseems to characterize our age,” AlbertEinstein wisely observed half a centuryago. Before we invest hundreds of billionsof dollars to remake our transportation sys-tem we should be clear that the means weembrace enable the ends we pursue.

The three ends most people agree uponare: enhanced national security; improvedenvironmental stewardship; healthier ruraleconomies.

The currently envisioned hydrogeneconomy addresses the first end. The sec-ond, arguably, is undermined unless thehydrogen comes from renewable resourcesor the fossil fuel generated electricity iscoupled with the long term storage of thecarbon emitted. The strategy does notaddress economic development goals. Adual fuel approach that maximizes the useof renewable resources for the electricityused by the hybrid electric vehicle’s motorsand maximizes the use of renewableresources for the fuel used by its engineaddresses all three objectives.

America’s hard-pressed rural areas andfarmers have two abundant renewableresources: wind and biomass. The formercan be harnessed to provide the electricityfor the HEV’s batteries. The latter can be

� Fuel Cycle� Vehicle Cycle

Source: The Impact ofAlternative Fuelson GreenhouseGas 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.”


harnessed to provide the fuels for theHEV’s engine.

However, the shift to a renewablefueled transportation system will not in andof itself make a significant contribution tothe welfare of rural America. Currently awind developer may pay a farmer land-leasepayments of $3,000-4,000 a year per turbine.This is welcome income for the landownerbecause the turbine requires very little landto be taken out of production and the landowner has no responsibilities. However, ifthe landowner owns the turbine his or herrevenue can double or triple during the 10year financing period. After the turbine ispaid off the annual income could soar to$100,000.

With regard to wind there areeconomies of scale in the size of the tur-bine but few if any economies of scale inthe size of the ownership structure. Thus a1 MW wind turbine will be able to gener-ate electricity at a cost substantially cheap-er than a 50 kW turbine. But the farmerwho owns a single 1 MW turbine will beable to generate electricity at a price com-parable to that offered by the wind devel-oper who owns 50 1 MW turbines. Thisassumes the farmer is part of a manage-ment structure that diffuses the risks andspreads the management costs over moremachines. This has been the case inMinnesota.

A typical large wind farm today gener-ates some 100-150 MW. The same amountof power could be generated by 100 farm-ers. Given the hundreds of thousands ofturbines that will be needed to power ourtransportation system the number offarmer-owners could run into the hundredsof thousands and the amount of additionalincome earned by rural residents into thebillions of dollars.

The social and economic impact of anincreased demand for biofuels is similar tothat for wind energy. It depends on thestructure of ownership. The corn farmerbenefits from an increase in ethanoldemand because the increase in the overalldemand for corn increases its price. But theprice increase is small, perhaps on theorder of 5-10 cents per bushel. If an ethanolplant locates nearby the farmer may receivea modestly higher net price for his or hercorn because of lower transportation costs.

This amounts, on average, to 5-10 cents perbushel. But the farmer who owns a share inan ethanol refinery can expect to receiveannual dividends ranging from 25-50 centsper bushel or more.54 Of course, there willbe periods when the farmer receives no div-idends. One unpublished analysis of a largeMinnesota ethanol plant concluded thatfarmer-owners earned 18 percent annuallyon their investment.

With regard to ethanol, there areeconomies of scale in the size of the facility.A 100 million gallon per year facility mighthave production costs 10-15 cents per gal-lon lower than a 15 million gallon per yearfacility. To aggressively increase theamount of biofuels available one mightargue for a focus on larger plants. But thereis a technological and socio-economicdynamic that comes from a proliferation ofsmaller plants.

The Minnesota experience, often calledthe Minnesota Model, is instructive. In theearly 1980s Minnesota’s state ethanol incen-tive mirrored that of the federal incentive—a partial exemption from the gasoline tax.That incentive succeeded in making theprice of ethanol competitive with othergasoline additives. The demand for ethanol-blended gasoline soared. But the demandwas met entirely by ethanol imported intothe state from out of state large manufactur-ing facilities owned by one multinationalcorporation. Minnesota farmers andMinnesota’s farming communities were notbenefiting from the expanded consumptionof ethanol inside the state.

To remedy this problem, Minnesotaconverted its state ethanol incentive from aconsumer-oriented excise tax exemption toa producer-oriented direct payment. Insteadof reducing state gasoline taxes by a coupleof pennies for a 10 percent ethanol blend,the state paid 20 cents a gallon for ethanolproduced within the state. To encouragethe construction of many plants in differentparts of the state the incentive, which ranfor 10 years, applied only to the first 15 mil-lion gallons produced.

The result? Minnesota became home to14 small and medium-sized ethanol plants.The scale of the plants encouraged farmerownership. As of 2002, 12 of the 14 plantswere owned by more than 9,000 farmers.

Because of the large number of plants


built, several engineering firms competedwith each other to design and build theleast expensive and most efficient facility.Yields of ethanol in dry mills quickly rosefrom 2.5 to over 2.8 gallons per bushel. Thelarge number of plants, coupled with equalnumbers of plants being built in surround-ing states accelerated the engineering andoperational learning curves.

One result was to rapidly reduce thecost of ethanol produced from small drymills. Indeed, a 1998 study by USDA thatexamined the comparative economics ofsmall and medium sized corn dry mills andlarge wet mills showed how this dynamichad occurred between 1987 and 1998. In1987 small and mid sized dry mills hadcash operating costs that were higher thanthose of large wet mills. By 1998 dry millshad dropped their operating costs far belowthose of wet mills. The 1998 report conclud-ed, “Wet mill variable costs appear to haveremained very stable at about 46 cents pergallon. Improved energy cost managementwas offset by several factors, includingwaste management and overhead…In con-trast, dry mills have experienced a l5-per-cent reduction in operating costs, due to theeffects of reduced energy, labor and mainte-nance expenditures and possibly economyof scale.”56

Public policy initiatives that resulted ina large number of small and medium-sizedbiorefineries could change the face andstructure of American (and perhaps world)agriculture. A 50-billion gallon national mar-ket for ethanol would support about 1,50030-million gallon per year biorefineries.This translates into one manufacturing facil-ity in every other county in the country.Each biorefinery would serve local andregional markets. Each would produce bio-chemicals as well as biofuels. Assuming anaverage of 400 local investors per facility,some 600,000 households would have anequity interest in these ventures.

Clearly the location and ownershipstructure of the biorefineries will be moreconcentrated than in this ideal scenario, butit indicates the potential for widespread eco-nomic development. Today only about 120petroleum refineries are operating in theUnited States, a significant drop in the last20 years. On the other hand, there are over85 biorefineries operating as of October

2003 and the number could exceed 100 bythe end of 2004.

A biorefinery has a very attractive localeconomic impact because it buys its materi-als locally and sells its product locally. Amajority of a biorefinery’s expenditures arelocal while a majority of a petroleum refin-ery’s expenditures leave the region. Forexample, about 45 cents of the cost of a gal-lon of gasoline produced in a refinery con-sists of the cost of the crude oil, oftenimported over long distances. On the otherhand, about 45 cents of the cost of ethanolconsists of the cost of the raw material, thevast majority of which is gathered from anarea within 50 miles of the manufacturingfacility.

Local ownership of wind turbines andethanol plants will not occur inevitably. Inboth cases the conventional dynamic wouldbe to build ever-larger wind farms of 100-500 MW and ever-larger and absenteeowned ethanol plants with capacities of 100million gallons and over. Currently ethanolproduction is dominated by a single firm.That firm, Archer Daniels Midland (ADM),has repeatedly engaged in price fixing.Enforcement of anti-trust rules is essentialto enable the biofuels market to becomecompetitive and dynamic. And federal poli-cies should offer incentives for mediumsized and locally owned wind farms andbiorefineries and disincentives for large-absentee owned conversion facilities.

The Path to Be TakenThe interest at all levels in dramaticallyrestructuring the energy foundation of ourtransportation sector is unprecedented andwelcome. The introduction of high efficien-cy hybrid electric vehicles offers a new tech-nological platform upon which to fashionpublic policy. Such a strategy should have adual approach. One is to increase the elec-tric-only driving range of the vehicle byincreasing its electrical storage capacitywhile encouraging the rapid expansion ofrenewable transportation-using electricity.The second focuses on increasing therenewable energy portion of the fuels usedin the engine. Here biofuels using existinginternal combustion engines may have a sig-nificant advantage over hydrogen fuel cells.

A dual renewable fuel approach (elec-tricity and biofuels) should also be


designed to maximize the economic andsocial benefits to those who cultivate andharness the fuels. Economic developmentcan and should be as important a goal asimproving environmental stewardship andenhancing national security.

New Rules For a SustainableTransportation System

• To maximize the use of grid electrici-ty for transportation public policy shouldoffer incentives based on the electric-driv-ing range of a car.

• To maximize the use of renewableelectricity policy makers should raise stateRenewable Portfolio Standards that man-date specific numerical goals for renewableenergy and adopt a national meaningfulRPS that does not preempt or underminestate efforts.

• To maximize the use of biofuels poli-cy makers at the state and federal levelshould adopt Renewable Fuel Standards(RFS) to complement their RPS standards.These would begin with a 10 percent stan-dard. The standard should encompass allrenewable fuels not just biofuels. Thusrenewable electricity for electric cars,renewable hydrogen for fuel cell cars aswell as biofuels for internal combustionengine cars would qualify.

• To enable biofuels to move beyond a10 percent blend, policy makers shouldrequire that all new vehicles have a flexible-fuel capacity. This requirement should betied to the rapid construction of a nation-wide infrastructure of E85 fueling facilities.

• To enable biofuels to move beyond a10 percent blend, policy makers shouldaccelerate the commercialization of cellu-lose-to-ethanol plants. This involves financ-ing at least three commercial-sized facilitiestesting different technological approachesby 2008. It also involves research and devel-opment into low cost and environmentallybenign ways to collect and store cellulose.

• To maximize rural economic develop-ment federal and state incentives need to bechanged to encourage smaller, locallyowned biorefineries and wind turbines.

Adopting these policies will allow thecountry to reduce its reliance on importedoil while strengthening its rural economiesand reducing its energy-related pollutants.It will also create a technological dynamic

that can be adopted by other countries thatmight be poor in oil and coal and gas butrich in wind and sunlight and plant matter.It can also provide a new market for plantmatter that overcomes the present competi-tion between farmers around the world forslow-growing food and feed markets thathas fueled international trade conflicts.

Hydrogen is a worthy energy storagetechnology and the hydrogen economy isan attractive vision. But there are otherstrategies that can achieve a high efficiency,renewable energy fueled transportation sys-tem 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.”


Notes1. The United States effort is not unique. The EuropeanCommission has a handsomely funded EuropeanIntegrated Hydrogen Project. Japan’s hydrogen pro-gram is better funded and more advanced than that ofthe United States.

2. National Hydrogen Association,www.hydrogenUS.org

3. Much of the demand for hydrogen is to convertheavy crude oils to gasoline and jet fuel. As weexhaust the supplies of light crude oil and shift towardVenezuelan crude or Canadian tar sands oil thedemand for hydrogen for this purpose is expected toexpand substantially.

4. Power Economics, April 30, 2002.

5. Malcolm A. Weiss, et. al., On the Road in 2020: Alife 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 RenewableEnergy Sources, Directed Technologies, Arlington, VA.October 2003. Notes that the cost of producing elec-tricity from wind and geothermal is about the same asgenerating electricity using natural gas, the cost of pro-ducing hydrogen from wind and geothermal is about85 percent more than producing hydrogen from natu-ral gas.

8. Alex Brooks, EV World. December 5, 2002.

9. Alex Brooks, EV World. April 23, 2003.

10. Ulf Bossel, Baldur Eliasson, Gordon Taylor, TheFuture of the Hydrogen Economy: Bright or Bleak?,April 15, 2003. Final report

11. Ricardo Consulting Engineers, Carbon to HydrogenRoadmaps for Passenger Cars. British Department ofTransportation. 2003.

12. California Journal. February 1, 2003. A morerecent report by JD Powers projects a slower growthas a result of announcements by American car compa-nies that they were delaying their previouslyannounced introduction of hybrids.

13. The 2004 Prius has EPA estimated 60 mpg city/51highway, 55 combined. It has 15% more cargo spacethan its predecessor.

14. At a price of 3 cents per kWh, electrolysis produceshydrogen at a cost of $2.35 per gallon of gasolineequivalent, excluding transportation and storage.Several studies have estimated a price per kg of hydro-gen of over $4 per kg. Directed Technologies esti-mates that with electricity produced in a Class 6 windregime the cost of hydrogen delivered 500 miles to thestation would be a little over $4 per kg of hydrogen,excluding sales taxes and dispensing markup. Theanalysis concludes that hydrogen produced from land-fill gas would cost about $2.75 per kg. William Leightyhas developed a detailed analysis in Transmitting 4000MW 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 perkWh Leighty estimates a cost in Chicago of the equiva-

lent of $2.89 a gallon. Including the local distributionand fuel station costs, the retail price in Chicago wouldbe $3.68-4.34 per gallon of gasoline equivalent. Seealso Duane B. Myers, et. al., Hydrogen from RenewableEnergy Sources, Directed Technologies, Arlington, VA.October 2003

15. For example Leon Walters and Dave Wade,Hydrogen Production from Nuclear Energy, Departmentof Energy and Argonne National Laboratory,November 12, 2002 compares the cost of hydrogenand gasoline this way. The authors assume the vehicleusing hydrogen would be getting over 85 miles per gal-lon of gasoline equivalent. The gasoline driven car, onthe other hand, would be getting 20 miles per gallon.

16. Malcolm A. Weiss, John B. Heywood, AndreasSchafer, Vinod K. Natarajan, Comparative Assessment ofFuel Cell Cars. MIT. January 2003

17. Ibid.

18. Fuel Cell Today. Fuel Cell Systems: A survey ofworldwide activity. Mark Cropper, Stefan Geiger, DavidJollie, 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 HybridElectric Vehicle Options. 1000349. Electric PowerResearch Institute. Palo Alto, CA. 2001. July 2001.

23. Carbon to Hydrogen Roadmaps for PassengerCars. Op. Cit.

24. Bob Graham, Plug-in Hybrid Electric Vehicles.Significant Market Potential. December 5, 2002. Seealso Bob Graham, Comparing the Benefits and Impactsof Hybrid Electric Vehicle Options. EPRI. Menlo Park,California. July 2001.

25. If all manufacturers opt for building fuel cell pow-ered cars, about 2500 will be on the road by 2011,about the same number of all-battery electric vehicleson the road by 2000 as a result of the Zero EmissionsVehicle program in California initiated in the early1990s.

26. Dr. Menahem Andersman, Brief Assessment ofProgress in EV Battery Technology since the BTAP June2000 Report. California Air Resources Board.February 2003.

27. There are many stories that indicate that the carcompanies' involvement in introducing electric vehicleswas half-hearted and even hostile. After GM increasedthe range of its EV1 to 100 miles there were two-yearwaiting lists but GM built only 500 models. GM endedthe program in 2003 and required all those leasing EV1sto return them. One GM employee who was involved inthe electric vehicle initiative by GM remembers, “Welaunched the car in December of 1996 and by aboutApril I figured we’d been duped. They weren’t marketingthe vehicle.” New York Times, October 22, 2003. JerryMartin, spokesman for the California Air ResourcesBoard recalls, the car companies and oil industry“fought California’s electric car mandate…every wayyou can think of”. Washington Post October 22, 2003.


28. Lous Browning, Mark Duvall, et. al, AdvancedBatteries for Electric-Drive Vehicles, March 25, 2003.Electric Power Research Institute. Palo Alto, CA.

29. Donald R. Sadoway and Anne M. Mayes, PortablePower: Advanced Rechargeable Lithium Batteries. MRSBulletin August 2002. Lithium ion polymer batterieshave another advantage. They can be molded into vir-tually any form to fit the shape of any device even assmall as a credit car. The Electrofuel corporation’sPowerPad 160, introduced in early 2000 for use byowners of portable computers, weighs less than 2.2pounds and gives up to 16 hours of power. It is 3/8inches thick.

30. Press Release. November 5, 2003. www.acpropul-sion.com. The Beijing People Daily reports on thedevelopment of Chinese lithium ion batteries that willhave a 200-mile charge range and be rechargeable inunder 10 minutes.

31. Reported by Alec Brooks, Perspectives on Fuel Celland Battery Electric Vehicles, Presentation to CARBZEV Workshop, December 5, 2002.

32. “the cost of grid connected HEV60 in a maturemarket was estimated to range between $7,000 and$10,200 per vehicle” more than a conventional gasolinevehicle. Reducing California’s Petroleum Dependence.Joint Agency Draft Report. California EnergyCommission and California Air Resources Board. July2003. Sacramento, CA.

33. Alex Farrell and David Keith, RethinkingHydrogen 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 areaavailable for solar cells. At present efficiencies thesecould generate 407 watts. Assuming a PV capacity fac-tor of 15% and .206 kWh per mile, the 526 kWh gener-ated could drive the car about 2550 miles.

35. Vehicle miles driven will undoubtedly increase aswill car ownership. But the key variable is the increasein vehicle miles driven outside urban areas, since anHEV60 will account for virtually all local driving.

36. There is a significant loss of mileage in E85 carsbecause of the lower energy content of ethanol versusgasoline. However, there is some indication that if theflexible fueled cars were optimized for E85 or if therewere cars dedicated to E85 that the mileage differencewould be small. See Mark Stuhldreher, Research inHigh-Efficiency Alcohol-Fueled Engines at EPA, U. S.Environmental Protection Agency National Vehicle andFuel Emissions Laboratory. Ann Arbor, MI. February25, 2003

37. Currently automobile companies can count eachflexible fueled car as the equivalent of a car with highhigh fuel efficiency to comply with the CAFÉ stan-dards. This is what has driven car manufacturers toinclude multi-fuel capacity. The incentive is providedregardless of whether these cars actually run on biofu-els. The environmental community notes that as aresult this incentive perversely allows an increase inpollution because car companies can build a gas guz-zling SUV for every flexible fueled car even when thelatter doesn’t use a drop of ethanol. There have beenproposals to modify the incentive for flexible fueledvehicles to require that ethanol be available in thosemarkets.

38. In Brazil, where almost all cars run on ethanolblends and at one time most ran on 100 percentethanol one company, working with GM, has intro-duced an inexpensive and reliable multi-fuel technolo-gy. Following the launch of the 1.8 liter flex-fuelengine, GM Brazil announced that it is ending produc-tion of its l.8 liter gasoline Corsa and only selling theflex fueled engine Corsa. GM do Brasil plans to sellflex fuel versions of all its cars. Fiat and Ford arepreparing to launch flex fuel cars in Brazil. Volkswagenalready has.

39. Environment and Energy Daily. April 7, 2003

40. Wired Online. October 22, 2003. Another estimateby a private company puts the cost of a fueling stationfacility, without the electrolyzer, at $150,000. HydrogenEnergy Projects, HyGen Industries LLC. Topanga, CA.2003.

41. The incentives are equivalent of 54 cents per gallonfor the ethanol since the tax exemption is on the wholegallon of gasoline (a 5.4 cent exemption from the fed-eral excise tax) whereas ethanol is only 10 percent ofthe gallon.

42. This section focuses on ethanol because it is a rela-tively mature industry and an abundant feedstock isavailable for its expansion. Fuels made out of vegetableoils are coming into the market. Sales were about 30million gallons in 2003. The energy bill offers a hand-some incentive for the production of biodiesel.Biodiesel usually consist of a 2-20% vegetable oil blendalthough trucks are currently running on 100 percentvegetable oil. Sufficient oil crops and recycleable fatsand oils are available to displace about 20 percent ofdiesel fuel. Further supplies might come from convert-ing cellulosic materials or animal wastes to oils.

43. Powerful Solutions: Seven Ways to Switch Americato Renewable Energy, Union for Concerned Scientists,2001 citing James Cook, Jan Beyea, and KathleenKeeler, “Potential Impacts of Biomass Production inthe United States on Biological Diversity,” AnnualReview of Energy and the Environment, 16:401–431,1991


44. The amount of removal possible depends signifi-cantly on the topography and soil quality of the farm.For detailed analysis see Paul Gallagher, et. al.,Biomass from Crop Residues: Cost and SupplyEstimates. Agricultural Economic Report Number 819.United States Department of Agriculture. Washington,D.C. March 2003. For breakdown of components ofthe cellulosic waste stream and assumptions see DavidMorris and Irshad Ahmed, The Carbohydrate Economy:Making Chemicals and Industrial Materials from PlantMatter. Institute for Local Self-Reliance. Minneapolis,MN. August 2002.

45. Michael Wang, Hosein Shapouri, James Duffield,The Energy Balance of Ethanol: An Update. NationalAgricultural Statistics Service. USDA. August 2002.Seungdo Kim and Bruce E. Dale, Allocation Procedurein Ethanol Production System from Corn Grain,Journal of Life Cycle Assessment. 2002. David Lorenzand David Morris, How Much Energy Does It Take ToMake A Gallon Of Ethanol?. 1995 Institute for LocalSelf-Reliance. For an analysis that concludes that thenet energy ratio is negative, see David Pimentel,“Ethanol Fuels: Energy Balance, Economics andEnvironmental Impacts are Negative.” NaturalResources Research, Vol. 12, No. 2, June 2003. For adetailed response see, Michael Graboski, BruceMcClelland, “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”. TheCarbohydrate Economy. Institute for Local Self-Reliance. Minneapolis, MN. Winter 2003. Anotherstudy put the net energy ratio of wind to hydrogen at22 to 1 and the ratio for natural gas to hydrogen at .7to 1. Carolyn C. Elam, Catherine E. Gregoire Padro,Pamela L. Spath, International Energy Activities,Proceedings of the 2002 U.S. DOE Hydrogen ProgramReview. NREL/CP-610-32405.

47. For an extended discussion of ethanol and air qual-ity see David Morris and Jack Brondum, Ethanol andOzone. 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 GasEmissions—A ‘Well-to-Wheel’ Analysis. ReferenceM7100. TIAX, Cupertino, CA. 2002. See also, Well-to-Wheel Energy Use and Greenhouse Gas Emissions ofAdvanced Fuel/Vehicle Systems. North AmericanAnalysis. General Motors, Argonne NationalLaboratory, BP Amoco, ExxonMobil, Shell. April 2001.Draft Final. Volume 1.

49. In Brazil 20 percent ethanol blends have been usedfor decades. A 1977 paper by Furey and Jackson ofGeneral Motors (No. 779008 delivered at the 12thICECEC meeting) showed that the volatility of ethanolblends peaked near 5 percent levels. Ethanol itself hasa very low volatility, which is one of the reasons thatsmall quantities of higher volatility additives are usedin cars using a high ethanol percentage to enable coldstarts. Thus it is reasonable to expect reduced volatileorganic emissions at levels of ethanol above 25-30 per-cent. A study by The Alliance, AIAM, Honda,“Industry Low Sulfur Test Program” presented at theCalifornia Air Resources Board workshop, 7/2001shows that the NOx emissions were not affected byhigher levels of fuel oxygen for the most recent lowemitting vehicles and fuels that had low sulfur (30ppm). The potential impact on air quality and humanhealth from increases in acetylaldehydes from usinglarge quantities of ethanol is also discussed. Modernengines will be made ever-cleaner. Therefore all toxicemissions will be very low. Also, the catalyst efficiencyimpact of ethanol would be expected to help loweracetylaldehyde emissions. Also of all the toxicsaddressed in vehicle emissions regulations, acetylalde-hyde appears to be the least toxic, as indicated byCalifornia’s regulations that estimate its potency at0.016 relative to butadene, which is given a value of1.0. See Staff Report on California RFG, California AirResources Board, April 22, 1994).

50. Michael D. Jackson, Stefan Unnasch, Jennifer Pont.The Impact of Alternative Fuels on Greenhouse GasEmissions—A ‘Well-to-Wheel’ Analysis. ReferenceM7100. TIAX, Cupertino, CA. 2002. See also, Well-to-Wheel Energy Use and Greenhouse Gas Emissions ofAdvanced Fuel/Vehicle Systems. North AmericanAnalysis. General Motors, Argonne NationalLaboratory, BP Amoco, ExxonMobil, Shell. April 2001.Draft Final. Volume 1.

51. See Louis Browning, Climate Change. InternationalVehicle Technology Symposium. ICF Consulting. Inc.March 12, 2003.

52. Irshad Ahmed and David Morris, ReplacingPetrochemicals with Biochemicals: A PollutionPrevention Strategy for the Great Lakes Region. Institutefor Local Self-Reliance. Minneapolis, MN. 1994

53. Associated Press. March 24, 2003.

54. Several ethanol facilities in Minneapolis report divi-dends as high as $1 a bushel for the past several years.This compares to a price of corn of about $2 perbushel.

55. Hosein Shapouri, Paul Gallagher and Michael S.Graboski, USDA’s 1998 Ethanol Cost-of-ProductionSurvey. USDA. Washington, D.C. 1998.

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