Eric on Energy

The Obama administration’s decision to cut spending on fuel cell vehicles came as a bit of a surprise, especially given the money the Department of Energy is putting into alternative vehicles in general.

The Wall Street Journal’s Keith Johnson asks if the decision amounts to the government picking a winner. I’d say they’re picking off a loser.

No alternative technology is likely to knock the gasoline-powered internal combustion engine off its throne by 2020, according to a Boston Consulting Group study. But batteries and biofuels are a better bet for making an impact in the next decade than fuel cells.

Electric vehicles benefit from the success of hybrids and the anticipated success of the coming wave of plug-in hybrids, particularly with oil prices expected to be in the midst of a significant rebound when plug-ins hit the market. Carmakers have stepped up their investment in battery R&D.

Although biofuels are a harder case to make than batteries, they benefit from a low cost of deployment. Assuming we can develop an affordable domestic supply of cellulosic biofuels, converting petroleum-based vehicles and fueling infrastructure is a minor cost.

In contrast, today’s fuel cells are expensive and have short life spans.

The clearest evidence against the picking-a-winner thesis is the carmakers. If they’d had a lot invested in fuel-cell vehicles you’d have heard a big outcry. How many images of sexy new prototype fuel cell vehicles have you seen in the years since the Bush administration touted the coming hydrogen economy? And how does that compare to images of electric vehicles, or even E85 vehicles?

At an MIT conference in March, Ford’s John Viera said the company is devoting more of its R&D to electric vehicles than hydrogen vehicles. You could make the case that instead of picking a winner, the government is following the market. More likely everybody is seeing the same thing, and all that’s changed is that the DOE’s Steven Chu is the first to abandon the talking points about agnosticism and say, and publicly act on, what everybody is thinking.

Viera made another point at the conference: alternative vehicle technologies are expensive and it’s going to take innovative business models to make them affordable. His comments were in the context of praising Better Place, the electric vehicle infrastructure company whose CEO is skilled at charming heads of state. If there are people working on innovative business models for fuel-cell vehicles, they’d better hurry up and make a case.

It’s also important to note that even though the DOE has thrown fuel-cell vehicles under the electric bus, they’re still investing in long-term hydrogen-related research. The work at two of the 46 Energy Frontier Research Centers is applicable to generating hydrogen, the work at two others will advanced fuel cells, and the work at another will help efforts to improve hydrogen storage. None of this long-term research is likely to make an impact in the next decade, but in 20 or 30 years some of it could lead to breakthroughs that will have us talking about hydrogen again.