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GM's Cole, U.S. Fuel Cell Council's Rose pick apart fuel cell programs, budget numbers and more

Auto industry experts take a look at federal investment in hydrogen and fuel cell research. Keith Cole, director of legislative and regulatory affairs for General Motors and Robert Rose, executive director of the U.S. Fuel Cell Council, join E&E Daily senior reporter Brian Stempeck to assess research efforts by the Department of Energy and how fuel cell programs will fare in a tight budgetary situation on Capitol Hill this year.

Transcript

Brian Stempeck: I'm Brian Stempeck and this is OnPoint. Today we'll be discussing fuel cell and hydrogen car policy with Keith Cole, director of legislative and regulatory affairs at General Motors, and Bob Rose, director of the U.S. Fuel Cell Council. Last week President Bush in his State of the Union address gave a lot of priority to hydrogen cars. Bob, what does that mean for the budget coming out today? What are we going to see from the president?

Bob Rose: Well, I hope it means we'll have more money for hydrogen and fuel cells at the end of the budget process. I don't think that's assured. We have a Congress which has so far not embraced, as a matter of national priority, the notion of a hydrogen future. We'd like to see the Congress do that this year, and we hope that that will be reflected in a good strong budget with as much of an increase as anybody can expect in a relatively lean budget year.

Brian Stempeck: Right, the White House right now is saying they want to try to half the deficit and last year fuel cell funding and hydrogen research was, give or take, about $260 million. Do you expect it to be the same as last year or an increase or what do you think we'll be seeing as the budget comes out?

Bob Rose: In terms of what the president is going to propose I don't have an authoritative answer, but if I had to guess I would say it would be pretty close to the same, maybe even a little bit more. I think it will be done though in the context of a very lean Department of Energy budget. You can't spend the president's proposal and we'll have a lot of work ahead of us.

Brian Stempeck: Keith, what are you hearing in terms of what might be coming out of the budget in terms of some of the hydrogen research dollars?

Keith Cole: I don't have any inside knowledge on that, but I agree with Bob. I think we're going to see a number close to last year's budget, maybe even a little increase, which is a powerful statement in favor of hydrogen considering the other cuts that I would agree with Bob are going to be coming in DOE budget.

Brian Stempeck: Does that mean, I mean basically is the White House then going to prioritize hydrogen research to the point where we see maybe some of the vehicle technology programs at DOE, are those going to suffer, you know, as a result of the hydrogen money? Is that a possibility?

Keith Cole: You know, hydrogen is a key part of Freedom Car. There are other vehicle-related activities that get funded under Freedom Car, so I think you'll see some other technologies hitching a ride on hydrogen actually. But, you know, the game of trying to say what got cut to pay for something else is --

Brian Stempeck: Right.

Keith Cole: It's in the eye of the beholder.

Brian Stempeck: Bob, one thing we ran into last year was that a lot of appropriators in the House actually earmarked a lot of the hydrogen funding to programs that weren't actually related to hydrogen projects.

Bob Rose: Um-hmm.

Brian Stempeck: Can you describe kind of how that problem happened and if we're going to see that again happening this year.

Bob Rose: Well I don't want to neglect the Senate when it comes to earmarking hydrogen dollars, because the Senate also was very enthusiastic in steering portions of the hydrogen program budget to favored programs in individual states. The process is a very straightforward one. The Congress is given, by the Constitution, the right and authority to spend the people's money and a lot of members of Congress assume that part of that is really individual program level decisions about spending on a certain kind of research or research in a certain place, rather than supporting the overall federal program. The result is that two years ago essentially all of the president's increase for hydrogen was earmarked mostly to universities --

Brian Stempeck: Um-hmm.

Bob Rose: Sometimes to research institutions whose work may have coincidentally had something to do with hydrogen or may not. This last year there was a larger budget so there were more earmarks and the result was for the second year in a row forced the program guys at DOE to scramble to try to redirect their programs and kind of rebuild their budgets.

Brian Stempeck: Right. What kind of pushback is there from DOE though? Is the ABC working with Congress and all to try to get them to safeguard this funding?

Bob Rose: Yes, in fact, I think admirably so. The Department of Energy spoke up about earmarks and it's a matter of political risk, obviously, because the appropriators have the budget strings. But the Department of Energy did speak rather forcefully on the subject, and we think that perhaps OMB also has some things in mind. Interestingly, the business community has spoken up this year I think more forcefully than in many years past. Our view at the Fuel Cell Council is that we're not against earmarks, but we believe the core program ought to be funded first and if you're going to earmark dollars they should be additive.

Brian Stempeck: Keith, what's GM's take on the earmarkings on this money going on? Obviously, your company works pretty closely with DOE on some of these projects. Does this money being earmarked, does hurt GM's chances of getting a project off the ground? Is that affected at all?

Keith Cole: You know, we're participating in the DOE demo program, the test and validation program for fuel cell vehicles, and that didn't get affected that much by the earmarks. I think the way that we're affected is that the DOE has a very well thought out research program and has identified a lot of the key areas where basic R&D needs to take place. And as Bob alluded to, what's happening is that plan doesn't get fully funded. So there is good research that's needed to be done that been vetted by outside, people outside the agency, outside the department, as well as within DOE and those priority research projects are not getting funded. And so, the impact's going to be, five, 10, 15 years down the road we're not going to have the fruits of those research that we would have in the absence of the earmark.

Brian Stempeck: Can you give us an example, how does it breakdown in terms of, you have a lot of the auto companies, like yours, investing huge sums of money in hydrogen and fuel cell research and then you have DOE undertaking its own program. How do the two different fields break down in terms of what research is going on and where?

Keith Cole: Well that's a little hard to say. General Motors has invested over $1 billion to date in fuel cell research. We have a broad-based research program including, that we fund internally, on stack, fuel cell stack design --

Brian Stempeck: Um-hmm.

Keith Cole: The electric components of the cars, hydrogen storage, but there are number of issues, particularly kind of basic science in really advanced hydrogen storage technologies, these complex hydrides, new catalysts. Catalystic get away from precious metal that are, you know, people can envision, but haven't really been developed yet, that's the kind of work that we don't really have the capability of taking on.

Brian Stempeck: Right.

Keith Cole: So that's an area where DOE is focusing on, where they should, the kind of basic science research in these long-term projects.

Brian Stempeck: Is DOE going in the right direction Bob? I mean, I know there's been some criticism that they're neglecting ways to say, produce hydrogen from renewable sources, things like that. Overall, how would you judge their research agenda right now?

Bob Rose: I think their research agenda is actually quite balanced. If you look at the specific question you asked, I think a substantial amount, I think the majority in fact of the hydrogen generation research money is being invested in renewably based sources of hydrogen.

Brian Stempeck: Um-hmm.

Bob Rose: So I think what happens is if you look past the rhetoric or the perceived needs or the perceived competition between renewables, say, and hydrogen and into the specifics of the program, it's a lot more balanced story.

Brian Stempeck: Um-hmm. What do you both see as the role for Congress in the coming year, in terms of their work on the energy bill again, all indications for an out of the House bill is going to be very similar to last year, Senate's coming up with some new titles and I know Senator Dorgan is one of the people who's working on a hydrogen title and potentially some new research money. What is the role for Congress in terms of addressing this issue in the coming year?

Bob Rose: Well I would say the first thing that I would hope the Congress will do is embrace this notion of a transition to hydrogen as a matter of national purpose and a long-term, not just a long-term goal, but a long-term project. The worst thing that can happen is for today's enthusiasm to wane and become next year's disappointment. I mean, we really need to understand this is a matter not for just you and me, but for our children to complete and that's the kind of thing governments have a hard time doing sometimes, but it's extremely important. I mean this is, we're talking about a shift that is as fundamental as any shift government has ever attempted.

Brian Stempeck: Keith, what are your thoughts on that in terms of how the energy bill could help further hydrogen investment?

Keith Cole: Well, it's not just the energy bill, but let's answer the question you asked Bob, what can Congress really focus on? I think first and foremost something to remember, that I would like all congressional offices to remember, is this is a marathon and not a sprint. We're not going to solve this in the next quarter or the next year, it's going to be the end of this decade, the beginning of the next that we're really going to start to see, I think, some pay-off. So in the immediate term, what should Congress be doing? One is fully funding DOE's research program, in particularly the test and validation programs that they have undergoing, because we need to get cycles of learning to learn about this new technology, learn how it interacts, the hydrogen production side, the dispensing side and the vehicle side as well is the stationary fuel cell. So those demos are very valuable in learning, getting the industry to work together on that. If anything increased funding in these key areas of long-term fundamental R&D on storage, would be an area, and there's a need for Congress to continue to paint the picture of this vision happening. I mean, we, one of the best roles that Congress can play is to maintain the enthusiasm that we got out of the president's State of the Union address, what, two years ago now and to continue to attract interest and really, the real goal is to leverage private resources --

Brian Stempeck: Um-hmm.

Keith Cole: And private investment into the fuel cell area over the rest of the decade.

Brian Stempeck: A lot of people are skeptical though of the long-term nature of this. They say that by setting goals 20 years out, saying you're going to have hydrogen cars on the road by 2010, 2015, you're really just kind of dodging a bullet now and it's an excuse not to produce hydrogen cars. People say GM's lagging behind other companies when it comes to technology like that, how do you respond to those critics?

Keith Cole: Well, I don't think we're lagging in our advanced technology one bit. Let's look at hybrids, I mean, we started our hybrid program at the heavy end of the market because that's where the most fuels can be saved.

Brian Stempeck: Um-hmm.

Keith Cole: And because you're starting with vehicles that have lower fuel economy to begin with, adding a hybrid is a way to, you have the best chance of that technology paying for itself. So where did we start? Transit buses. They get three miles a gallon to four miles a gallon with a hybrid system they can get five miles a gallon, not only that but you reduce pollutants by 90 percent and you can make a diesel hybrid bus run cleaner than a natural gas bus. That's an exciting technology package that we're leading in and what we're doing is very simply, starting with that formula at the heavy end of the market we're downsizing that hybrid technology to put it into our large cars and trucks in the coming years.

Brian Stempeck: But don't you think, I mean, isn't GM kind of falling behind at this point? You have Toyota already with several models out. Honda has mainstream cars, like the Accord, out there. Ford has the SUV Escape. Why haven't we seen kind of this flagship hybrid vehicle from GM? I know you have the pickup trucks that have a small gain in fuel economy, but why haven't we seen kind of that flagship hybrid from GM? Is it because of the hydrogen investment?

Keith Cole: No, the auto industry is an industry where you have to, I think compete in a variety of technologies, hybrids, fuel cells, diesel, advanced transmissions and things like displacement on demand, continuing improvements in the internal combustion engines. So, no, you have to play in all those arenas. You can't cede any of them. You know, today, the hybrid, we have a 17 million vehicle market in the United States and we're less than 1 percent of that with hybrids and there was an article just last week that came out that said probably the, that was projecting the maximum level for hybrids at about 3 percent of the market.

Brian Stempeck: Um-hmm.

Keith Cole: So we're going to have, we have a play in hybrids right now. We're going to have more in the coming years. We don't know the scope of that market. We think that the heavy end of the market is the area where consumers will see a value for hybrids and so that's where we're focusing. It's a little different strategy than some of our competitors, but we think that's where the consumer value is for doing things in large volumes.

Brian Stempeck: Right.

Keith Cole: And remember, advanced technology doesn't make any difference if you don't sell it in large volumes. That's the only way to change the energy equation in the transportation arena, is if you're selling vehicles in large volumes.

Bob Rose: Can I --

Brian Stempeck: Sure.

Bob Rose: Add to that a couple of things really quickly? Firstly, hydrogen, particularly as the president has characterized it, hydrogen and hydrogen vehicles, is not an energy policy. It's part of an energy policy and we need, as a nation, to have this discussion about our energy future in the broadest sense. I think everything ought to be on the table. Secondly, as to hybrids, I think we need hybrids, but if every American, when he bought his next car, went out and bought a hybrid, we would still at the end of 15 years be importing as much oil then as we do today because we are going to be using our cars more and there are going to be more on the road. So hybrids are going to help, but it's really only hydrogen that's going to get us to that point where we're actually reducing, fundamentally, our need for imported oil.

Brian Stempeck: Um-hmm.

Bob Rose: So, the third thing is that hydrogen and fuel cells are not just about cars. They're about, they're a part of an energy strategy that touches every kind of energy we consume.

Brian Stempeck: Is there a way to that Congress can accelerate the progress of this? You know, some people have talked about, during the energy debate I think last year or the year before, setting a target of having X number of cars powered by hydrogen on the road by a certain date and I know a lot of people are opposed to that. But shouldn't there be some way to count measurable progress towards what we're doing rather than just continually, you know, tossing huge amounts of funding into this?

Bob Rose: Well, I'm on record saying I think we do need targets. The Japanese have set them. The challenge with targets is that they quickly become perceived as expectations and not targets. Targets help us focus on a goal and to that extent I think they're extremely valuable and I think the Japanese have recognized that and I think you see the result in their program where I think they're moving quickly ahead --

Brian Stempeck: Um-hmm.

Bob Rose: On several fronts. But I have a feeling that Keith and I disagree on this point, so maybe I'll let him respond.

Keith Cole: Well, we have targets today and they're the right kind of targets. They're technology targets. What you're talking about is targets to say X vehicles on the road in a year and you're looking out into the future five, 10, 15 years. I mean, that's a crystal ball exercise. It's good for attracting some attention, but in terms of how do you make something real? I don't think that type of target helps to make this vision real. What does make it real are the kind of targets that we have today, which are embedded in the Freedom Car program, which are technical targets. Let's get the cost of the fuel cell stack down. So they have targets on the cost of fuel cell stack production. Let's get the cost of hydrogen storage down and reduce the size and weight of a hydrogen storage system. Those are the technical targets that DOE has set. They're the ones that we're working towards and I think you mentioned, a question or two ago, that you're concerned that there hasn't been progress made. Actually, we're making a lot of progress towards those technical targets and we're ahead of where the targets are pointed today. So I think we have the right technical targets. We're making a lot of progress, as demonstrated by the fact that we're ahead of the game in a number of those areas and I think you'll continue to see that kind of progress being made. One other thing about vehicle targets and I do disagree with Bob about this, but this technology is rapidly evolving and one of the things you don't want to do is have the manufacturing sector, the automobile companies and their suppliers tool up too early and end up tooling up on the wrong technology. So one of the dangers with a target is that you get, especially if it becomes more than a target and is an expectation or a mandate, you get people investing money on a technology which is maybe not quite right for the market and then that's sunk capital that's lost and you could set back progress by years or decades if you end up tooling up too early --

Brian Stempeck: Pushing towards the wrong goal.

Keith Cole: On the wrong technology.

Brian Stempeck: All right. We'll let that be the last word. We're out of time. I want to thank you both for joining us. We were joined by Bob Rose, director of the U.S. Fuel Cell Counsel and Keith Cole, director of legislative and regulatory affairs for General Motors. Thanks for watching. I'm Brian Stempeck and this is OnPoint. Join us again tomorrow for another edition.

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