Obama Hydrogen Fuel Failure Conceded by Chu Paring Budget: Cars

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A 2008 Honda FCX Clarity is filled with compressed hydrogen at an Air Products and Chemicals Inc. hydrogen fueling station in Allentown, Pennsylvania. Close

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Photographer: Mike Mergen/Bloomberg

A 2008 Honda FCX Clarity is filled with compressed hydrogen at an Air Products and Chemicals Inc. hydrogen fueling station in Allentown, Pennsylvania.

Energy Secretary Steven Chu, whose mandate includes getting more fuel-efficient cars on U.S. roads, is disregarding advisers in his own department and seeking to cut almost half the federal funding for hydrogen-powered autos.

A Nobel Prize-winning physicist who also researched advanced biofuels, Chu says hydrogen fuel-cell technology developed by carmakers such as General Motors Co. (GM), Daimler AG (DAI) and Toyota Motor Corp. (7203) isn’t yet practical. Auto companies and members of a government panel say he’s wrong and that they will be ready to market such cars by 2015.

“Secretary Chu has firmly set his mind against hydrogen as a passenger-car fuel,” Mary Nichols, chairwoman of California’s Air Resources Board, said in an interview with Bloomberg Government. Her agency’s regulations affect more drivers than any other state’s. “Frankly, his explanations don’t make sense to me. They are not based on the facts as we know them.”

The Obama administration’s fading support for hydrogen is a challenge for carmakers who say advanced gasoline engines, batteries, biofuels and fuel cells are all needed to curb U.S. oil consumption and carbon emissions. Chu’s proposed budget, which cuts funds for hydrogen stations, creates roadblocks for retail sales of fuel-cell cars, the companies say.

Vehicles powered by hydrogen made from natural gas produce at least 50 percent fewer carbon emissions than the cleanest gasoline autos, according to Energy Department estimates. A Honda Clarity at one of the 58 U.S. hydrogen fueling stations. Photo: Mike Mergen/Bloomberg Close

Vehicles powered by hydrogen made from natural gas produce at least 50 percent fewer... Read More

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Vehicles powered by hydrogen made from natural gas produce at least 50 percent fewer carbon emissions than the cleanest gasoline autos, according to Energy Department estimates. A Honda Clarity at one of the 58 U.S. hydrogen fueling stations. Photo: Mike Mergen/Bloomberg

Chu is “hostile to hydrogen,” Robert Walker, a former member of the Energy Department’s Hydrogen and Fuel Cell Technical Advisory Committee, said in an interview. Walker, executive chairman of Wexler & Walker Public Policy Associates, a Washington lobbying firm, and a former Republican House member from Pennsylvania, resigned from the panel in April over the budget proposal.

‘More Likely’ Options

Chu, 63, has advocated battery cars and biofuels as options more likely to meet U.S. energy and environmental goals in the near term. Discounting hydrogen means the U.S. risks falling behind Japan, Germany and South Korea in the technology because those nations are moving ahead with plans for extensive fuel- station networks to serve buyers of the cars.

“The secretary believes that we should fund fuel-cell research and development as part of a diverse energy portfolio, including both stationary and mobile applications -- and we are,” said Stephanie Mueller, an Energy Department spokeswoman.

Chu, who said in 2009 that the Obama administration was “going to be moving away from hydrogen-fuel cells for vehicles,” declined a request for an interview.

“We’re going to be moving away from hydrogen-fuel cells for vehicles,” Chu said at the time. “We asked ourselves, is it likely in the next 10 or 15, or even 20 years that we will convert to a hydrogen car economy? The answer, we felt, was no.” Photo: Chip Somodevilla/Getty Images Close

“We’re going to be moving away from hydrogen-fuel cells for vehicles,” Chu said at the... Read More

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“We’re going to be moving away from hydrogen-fuel cells for vehicles,” Chu said at the time. “We asked ourselves, is it likely in the next 10 or 15, or even 20 years that we will convert to a hydrogen car economy? The answer, we felt, was no.” Photo: Chip Somodevilla/Getty Images

$4 a Gallon

Consumer interest in alternative-fuel vehicles has grown this year as gasoline neared $4 a gallon. U.S. drivers bought about 275,000 gasoline-electric hybrids last year, led by Toyota’s Prius, and GM and Nissan Motor Co. are boosting sales of rechargeable Volt and Leaf vehicles.

“Fuel-cell technology is viable and ready for the mass market,” Chris Hostetter, Toyota’s U.S. group vice president for advanced planning, said in a May 10 interview at the opening of a hydrogen filling station in Torrance, California. “Building an extensive hydrogen refueling infrastructure is the critical next step in bringing these products to market.”

Automotive fuel cells are layers of platinum-coated plastic film sandwiched between metal plates that create electricity from the chemical reaction of hydrogen and oxygen. Vehicles use the same type of electric motors and controls as battery-only models, and neither emits tailpipe pollutants.

$10 Billion Bet

Toyota plans to sell a fuel-cell car in the U.S. and other markets by 2015 or sooner, Hostetter said. Japan’s largest automaker has said the model may sell for about $50,000, without elaborating.

Honda Motor Co. and Daimler offer a limited number of fuel- cell vehicles for lease in the U.S. Honda reported 17 leases last year, none yet this year. Daimler reports four leases through May this year. Automakers estimated the cost of fuel- cell vehicles was about $1 million each as recently as five years ago.

Globally, automakers have poured an estimated $10 billion into fuel-cell vehicle research, saying hydrogen provides range and rapid fueling that is comparable to gasoline and superior to plug-in electrics.

The Energy Department cut hydrogen funding to make way for biofuels, battery vehicles and increased fuel-efficiency standards, Steven Chalk, deputy assistant secretary for renewable energy, said in an interview.

‘Folks Are Frustrated’

“If folks are frustrated with that position, I understand that,” Chalk said. In a time of budget constraints, “we’re trying to focus on the things that are going to make the impact in the time frame that matters, which is in the next five years.”

The $100 million the department is requesting for hydrogen, down from $177 million provided in the 2010 fiscal year, “is still quite an investment, and we think we can be competitive,” he said.

President George W. Bush announced a $720 million research and development effort for hydrogen-powered cars in his 2003 State of the Union address. Congress in 2005 created the advisory committee that Walker ran, which tracks progress by fuel-cell manufacturers, automakers and energy companies pushing to commercialize hydrogen technology.

During his two years on the job, Chu hasn’t met with the committee, according to Walker and Chalk.

Chu told the Senate Appropriations energy and water development subcommittee on May 18 that hydrogen tanks for fuel- cell vehicles are inadequate and that the technology contributes to carbon emissions, linked to climate change, because natural gas is the main source of industrial hydrogen.

Carbon Emissions

Toyota, Honda, GM, Daimler and Hyundai Motor Co. (005380) all say the hydrogen tanks on fuel-cell vehicles they’re testing in California and elsewhere provide the same range of 250 miles (402 kilometers) to 400 miles as gasoline autos.

Vehicles powered by hydrogen made from natural gas produce at least 50 percent fewer carbon emissions than the cleanest gasoline autos, according to Energy Department estimates.

Natural gas “will have to be significantly more abundant and less costly,” to make hydrogen affordable, Chu said at the Senate hearing.

Natural gas prices have fallen 66 percent since July 3, 2008, when it reached $13.577 per million British thermal units. The price for July delivery declined to $4.646 per million BTUs yesterday on the New York Mercantile Exchange.

“Why is it that the secretary can’t look at the data, look at the facts, and arrive at the same conclusion that his own advisory committee has reached?” Robert Shaw, who is chairman of the 18-member advisory panel, said in an interview. Shaw is president of Arete Corp., a venture capital-fund manager based in Center Harbor, New Hampshire.

Taxpayer Funds

“It’s just not a good use of taxpayer funds,” Joseph Romm, a senior fellow at the Center for American Progress, said in an interview. Romm’s duties as an Energy Department official during the Clinton administration included supervising the hydrogen program.

Without an adequate refueling infrastructure, few consumers are going to buy hydrogen vehicles, he said. Without knowing whether the autos will be a success, there’s little incentive to build stations.

The U.S. has 58 hydrogen fueling stations, according to the Energy Department.

Germany, Japan

In 2009, Germany announced plans for 1,000 hydrogen stations. In January, Japan said it will have 100 hydrogen stations in place by 2015, and South Korea may have 50 by the end of next year and more than 100 by the end of the decade.

Electric vehicles can plug directly into wall outlets. They have the highest “bang for the buck,” Romm said.

Making hydrogen from natural gas costs $3 to $4 per kilogram, or the equivalent of a gallon of gasoline, Shaw said in a March letter to Chu, and fuel-cell vehicles are twice as efficient as gasoline autos.

Air Products & Chemicals Inc. (APD), the second-biggest U.S. industrial-gas producer, estimates it can sell hydrogen from natural gas for about $5 per kilogram, Ed Kiczek, the company’s senior business development manager, said in an interview.

The company, based in Allentown, Pennsylvania, plans to install hydrogen fuel pumps at 10 or more Southern California gasoline stations in the next two years, he said.

California expects automakers to sell at least 53,000 hydrogen vehicles in the state to comply with emissions rules in 2015 through 2017, Nichols, head of the state air board, said, citing her agency’s surveys of automakers. Those saying hydrogen vehicles won’t be ready haven’t been keeping pace with advances made by automakers, she said.

“The conventional view is always a few years out of date, unfortunately,” Nichols said. “There’s also just a wrong premise that these different fuels have to compete with other, and one has to be a winner. We need all of them.”

To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editors responsible for this story: Larry Liebert at lliebert@bloomberg.net; Kae Inoue at kinoue@bloomberg.net

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