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27–094PS 2006

H.R. 5143, THE H–PRIZE ACT OF 2006

HEARING

BEFORE THE

COMMITTEE ON SCIENCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 27, 2006

Serial No. 109–45

Printed for the use of the Committee on Science

(

Available via the World Wide Web: http://www.house.gov/science

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COMMITTEE ON SCIENCE

HON. SHERWOOD L. BOEHLERT, New York, Chairman

RALPH M. HALL, Texas

LAMAR S. SMITH, Texas

CURT WELDON, Pennsylvania

DANA ROHRABACHER, California

KEN CALVERT, California

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan

GIL GUTKNECHT, Minnesota

FRANK D. LUCAS, Oklahoma

JUDY BIGGERT, Illinois

WAYNE T. GILCHREST, Maryland

W. TODD AKIN, Missouri

TIMOTHY V. JOHNSON, Illinois

J. RANDY FORBES, Virginia

JO BONNER, Alabama

TOM FEENEY, Florida

RANDY NEUGEBAUER, Texas

BOB INGLIS, South Carolina

DAVE G. REICHERT, Washington

MICHAEL E. SODREL, Indiana

JOHN J.H. ‘‘JOE’’ SCHWARZ, Michigan

MICHAEL T. MCCAUL, Texas

MARIO DIAZ-BALART, Florida

BART GORDON, Tennessee

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

DARLENE HOOLEY, Oregon

MARK UDALL, Colorado

DAVID WU, Oregon

MICHAEL M. HONDA, California

BRAD MILLER, North Carolina

LINCOLN DAVIS, Tennessee

DANIEL LIPINSKI, Illinois

SHEILA JACKSON LEE, Texas

BRAD SHERMAN, California

BRIAN BAIRD, Washington

JIM MATHESON, Utah

JIM COSTA, California

AL GREEN, Texas

CHARLIE MELANCON, Louisiana

DENNIS MOORE, Kansas

VACANCY

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C O N T E N T S

April 27, 2006

Page

Hearing Charter ...................................................................................................... 2

Opening Statements

Statement by Representative Sherwood L. Boehlert, Chairman, Committee

on Science, U.S. House of Representatives ........................................................ 10

Written Statement ............................................................................................ 11

Statement by Representative Judy Biggert, Chairman, Subcommittee on Energy, Committee on Science, U.S. House of Representatives ........................... 21

Written Statement ............................................................................................ 23

Statement by Representative Bob Inglis, Chairman, Subcommittee on Research, Committee on Science, U.S. House of Representatives ........................ 11

Written Statement ............................................................................................ 13

Statement by Representative Daniel Lipinski, Member, Committee on

Science, U.S. House of Representatives ............................................................. 20

Written Statement ............................................................................................ 21

Prepared Statement by Representative Jerry F. Costello, Member, Committee

on Science, U.S. House of Representatives ........................................................ 24

Prepared Statement by Representative Eddie Bernice Johnson, Member, Committee on Science, U.S. House of Representatives ............................................ 24

Witnesses:

Dr. Peter H. Diamandis, Chairman, the X Prize Foundation

Oral Statement ................................................................................................. 26

Written Statement ............................................................................................ 28

Biography .......................................................................................................... 30

Dr. David L. Bodde, Director, Innovation and Public Policy, International

Center for Automotive Research (ICAR), Clemson University

Oral Statement ................................................................................................. 31

Written Statement ............................................................................................ 33

Biography .......................................................................................................... 35

Dr. David L. Greene, Corporate Fellow, Oak Ridge National Laboratory,

Center for Transportation Analysis, National Transportation Research Center

Oral Statement ................................................................................................. 37

Written Statement ............................................................................................ 38

Biography .......................................................................................................... 40

Mr. Phillip Baxley, President, Shell Hydrogen, L.L.C.

Oral Statement ................................................................................................. 40

Written Statement ............................................................................................ 42

Biography .......................................................................................................... 47

Discussion ................................................................................................................. 47

Appendix: Additional Material for the Record

H.R. 5143, the H–Prize Act of 2006, as introduced ............................................... 70

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H.R. 5143, THE H–PRIZE ACT OF 2006

THURSDAY, APRIL 27, 2006

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ENVIRONMENT, TECHNOLOGY, AND

STANDARDS,

COMMITTEE ON SCIENCE,

Washington, DC.

The Committee met, pursuant to call, at 9:30 a.m., in Room 2318

of the Rayburn House Office Building, Hon. Sherwood L. Boehlert

[Chairman of the Committee] presiding.

2

HEARING CHARTER

COMMITTEE ON SCIENCE

U.S. HOUSE OF REPRESENTATIVES

H.R. 5143, the H–Prize Act of 2006

THURSDAY, APRIL 27, 2006

9:30 A.M.–11:30 A.M.

2318 RAYBURN HOUSE OFFICE BUILDING

1. Purpose

On Thursday, April 27, 2006, the House Science Committee will hold a hearing

on H.R. 5143, the H–Prize Act of 2006. The bill is intended to create a new incentive

to achieve scientific and technical breakthroughs required to make the transition to

a hydrogen economy.

2. Witnesses

Mr. Phillip Baxley is the President of Shell Hydrogen, L.L.C., a separate business

unit established by Shell in 1999 to pursue new business opportunities in hydrogen

fuel and fuel cells.

Dr. David Bodde is the Director of Innovation and Public Policy at Clemson University’s International Center for Automotive Research (ICAR). He was a member

of the National Academy of Engineering Committee on Alternatives and Strategies

for Future Hydrogen Production and Use, which issued the 2004 report The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D Needs.

Dr. Peter Diamandis is the Chairman of the X Prize Foundation, a non-profit organization dedicated to fostering innovation through the use of competitions. The

foundation awarded its $10 million Ansari X Prize to promote the formation of a

commercial space flight industry. Prizes for genomics, energy and education are

under development.

Dr. David L. Greene is a corporate fellow of Oak Ridge National Laboratory with

the Center for Transportation Analysis, National Transportation Research Center.

He is an expert in transportation and energy policy issues.

3. Overarching Questions

The hearing will address the following overarching questions:

1. Are any changes needed in H.R. 5143?

2. Does H.R. 5143 provide the right incentives to address the most significant

technical barriers to the widespread use of hydrogen as a fuel source?

3. How can the Department of Energy (DOE) best use prize competitions to

complement more traditional research support mechanisms, including contracts and grants, as a way to develop the hydrogen economy?

4. Brief Overview

On April 6, 2006, Research Subcommittee Chairman Bob Inglis; Science Committee Chairman Sherwood Boehlert; Environment, Technology and Standards Subcommittee Chairman Vernon Ehlers; Congressman Roscoe Bartlett; Congressman

Michael McCaul; Congressman Daniel Lipinski; and nine other co-sponsors introduced H.R. 5143, the H–Prize Act of 2006.

Inspired by the successful Ansari X Prize, which awarded $10 million to Burt

Rutan for sub-orbital space flight, the H–Prize is designed to accelerate the drive

to a hydrogen economy by creating an incentive for new, entrepreneurial players to

join the race to break down technical and other barriers to the advancement of hydrogen technologies.

The Science Committee, at the Administration’s request, created a prize program

for NASA in the NASA Reauthorization Act of 2005. The language of H.R. 5143 is

largely based upon that of the NASA Act (P.L. 109–155).

A summary of H.R. 5143 and a section-by-section analysis are included in Part

7 of this charter.

3

1The Science Committee and its Subcommittees have held numerous hearings on the use of

hydrogen since the announcement of the FreedomCAR Initiative by then-Secretary of Energy

Spencer Abraham on January 9, 2002. The FreedomCAR program was centered on fuel cell vehicles, which use hydrogen as fuel.

The Full Committee held the following hearings:

February 7, 2002—Full Committee Hearing on The Future of DOE’s Automotive Research Programs

April 2, 2003—Full Committee Markup of H.R. 238, Energy Research, Development, Demonstration, and Commercial Application Act of 2003

March 5, 2003—Full Committee Hearing on The Path to a Hydrogen Economy

March 3, 2004—Full Committee Hearing on Reviewing the Hydrogen Fuel and FreedomCAR Initiatives

The Energy Subcommittee held the following hearings:

June 26, 2002—Subcommittee on Energy Hearing on FreedomCar: Getting New Technology into

the Marketplace

June 24, 2002—Subcommittee on Energy Field Hearing on Fuel Cells and the Hydrogen Future

There was one hearing held jointly with the Energy Subcommittee and the Research Subcommittee:

July 20, 2005—Joint Hearing—Subcommittee on Energy and Subcommittee on Research—Fueling the Future: On the Road to the Hydrogen Economy

In addition, these programs were also subject to scrutiny during hearings on budget priorities

and within the Administration’s Climate Change Technology Program. Transcripts of these

hearings are available on the Committee website or from the Congressional Research Service.

Hydrogen gas is considered by many experts to be a promising fuel, particularly

in the transportation sector. When used as a fuel, its only combustion byproduct is

water vapor. The widespread adoption of hydrogen as a transportation fuel has the

potential to reduce or eliminate air pollution generated by cars and trucks.1

However, unlike harvested wood or mined coal, the hydrogen gas used as a fuel

is not a naturally occurring energy resource. Hydrogen must be produced from hydrogen-bearing compounds, like water or natural gas, and that requires energy—

and, unlike gasoline, more energy is always required to produce it than is recovered

when hydrogen is burned in a fuel cell. Hydrogen has the potential to reduce America’s dependence on foreign oil, but the degree to which hydrogen will displace foreign energy supplies depends on what energy source is used to generate hydrogen

gas in the first place.

If hydrogen can be produced economically from energy sources that do not release

carbon dioxide into the atmosphere—from renewable sources such as wind power or

solar power, from nuclear power, or possibly from coal with carbon sequestration,

then the widespread use of hydrogen as a fuel could make a major contribution to

reducing the emission of greenhouse gases.

While the promise of hydrogen is great, so are the technical challenges. Experts

suggest that major advances will be required across a wide range of technologies

for hydrogen to be affordable, safe, cleanly produced, and readily distributed. The

production, storage, and use of hydrogen all present significant technical challenges.

While DOE research programs have produced promising advances, those programs

are still a long way from meeting their goals of developing economically viable hydrogen technologies. Indeed, the American Physical Society in a 2004 report stated

that ‘‘no material exists today that can be used to construct a hydrogen fuel tank

that can meet the consumer benchmarks,’’ that is for affordably storing enough fuel

on-board a car or truck to enable a long enough ride between refuelings.

5. Issues

What could be gained by establishing a prize program to promote advances in using

hydrogen as a fuel?

Traditionally, DOE has relied upon established researchers in national labs, industry, and academia to carry out its mission of developing energy technologies for

use by the private sector. Most commonly, DOE identifies a technical hurdle and

then issues research solicitations of varying specificity. These solicitations detail the

type of technologies the agency wants to fund and the performance goals the agency

anticipates the technology will meet when introduced to the marketplace. For example, DOE might issue a solicitation for automotive fuel cell technologies. Such a solicitation may include the requirement that the fuel cells be a particular type of fuel

cell, or may be targeted at known technical problems. Projects are then selected

against the criteria set out in the original solicitation. DOE may use grants, cooperative agreements or contracts to carry out projects, and industrial participants are

required to share costs.

4

2 Concerning Federally Sponsored Inducement Prizes in Engineering and Science, Steering

Committee for the Workshop to Assess the Potential for Promoting Technological Advance

Through Government-Sponsored Inducement Prizes in Engineering and Science, Washington,

DC: National Academy of Engineering (1999). 3The best-selling book Longitude by Dava Sobel describes just such a case. John Harrison developed method for measuring exact longitude based upon a clock that kept time accurately even

during a ship’s pitching and rolling at sea. However, despite the proven test of his invention

at sea, the group administering the prize (the Board of Longitude) refused to award him the

prize money—which historians attribute to the Board’s domination by astronomers who favored

a rival, astronomy-based method of determining longitude.

Prizes would presumably involve less direct DOE involvement in day-to-day research activities than would any of the traditional technology development routes.

Instead, DOE would offer a prize for the development of a particular technology or

for a particular achievement, and then would wait to see what contestants produced.

Proponents of prizes argue that this would be less costly and less bureaucratic, and

might spur more creative thinking. In addition, they argue that inventors and entrepreneurs (as opposed to national labs or major energy companies) would be more

inclined to compete for a prize than compete for more traditional grants and contracts.

Proponents of prizes further argue that traditional peer review processes tend to

favor proposals that seem safe over those that may produce surprising and potentially more innovative results. Many have commented—in a wide variety of contexts—that the federal procurement system can be intolerant of risk, and can place

costly bureaucratic demands on private-sector contractors.

Other advocates cite prizes as having additional benefits. Prizes are seen as mobilizing much more private capital than matching grants, since numerous contestants

all spend their own money on technology development while they vie for the same

funds. (Traditional grant processes usually have at most a one-to-one funding

match.) Prizes allow the Federal Government to shift much of the risk and the financial burden of technology development from the government to the contestants.

For some, the most important aspect of prizes is their ability to educate, inspire,

and mobilize the public for scientific, technological, and societal objectives.

How does a prize program need to be structured to be successful?

Prize contests can be less clear-cut than they first appear. Problems can develop

in the design of the contest, the selection of a winner, and in the aftermath. A National Academy of Engineering (NAE) panel examining the use of prizes by federal

agencies2 suggested the following design principles for prize programs:

• Treatment of intellectual property resulting from prize contests should be

properly aligned with the objectives and incentive structure of the prize contest.

• Contest rules should be seen as transparent, simple, fair, and unbiased.

• Prizes should be commensurate with the effort required and goals sought.

DOE would have to design its prize contests carefully. The goal for which the

prize was being awarded would have to be clearly enough described that contestants

(and DOE) had a firm sense of what DOE was seeking and why. On the other hand,

too detailed a description by DOE would limit the kinds of ideas that a contest could

yield. A very detailed description would not end up being much different than contract specifications.

The selection of a prize winner can also be difficult. Judges need to be open to

unexpected ideas. There are historical examples of revolutionary ideas losing prize

contests because the judges were not open to unexpected ways of achieving the stated goals.3 Decisions also need to be made about who is allowed to compete for a

prize. For example, H.R. 5143 does not allow federal employees to compete except

on their own time. It is silent on whether entities receiving federal funding can compete. Should entities that are already receiving federal backing be able to compete

for a federally funded prize?

The award of a prize does not guarantee, by itself, that the social benefits of the

technology will be realized or that the technology will be commercialized. In the

wake of the award of any prize, DOE would not be the entity to decide how to put

a winning idea into actual use. A prize winner might not have the financial wherewithal or even the technical capacity to actually turn their winning idea into a viable product. It may therefore be necessary for DOE to take additional actions to promote technologies after the award of prizes.

5

Finally, it is unclear whether prizes would be a less costly way of doing business

once all the costs DOE would have to incur in running a successful contest are

taken into account.

How dependent upon prizes should DOE be for the development of critical technologies?

Prizes are being proposed as a supplement to, not a substitute for traditional

R&D programs. Indeed, H.R. 5143 makes that point explicitly in the last section of

the bill. Traditional programs are especially important if developing a specific technology on a specific timetable is critical to a DOE objective, such as development

of a coal-fired power plant with zero carbon emissions. The timing of technology development may be easier to control through traditional solicitations and research

awards.

What kinds of goals are appropriate for prize contests?

Prizes benefit from clear-cut goals. In general, the more complex the goal of a contest, the more complex DOE’s role would likely be. (For example, evaluating a set

of integrated technologies that radically change hydrogen distribution and use is a

more demanding undertaking than evaluating the performance of a hydrogen storage tank.) At some point, the complexity might eliminate the advantage of a contest

over traditional means of technology development. If appropriately designed, prize

contests can reveal important information, particularly about the failures that

emerge upon integration of subsystems, that can inform the plans and priorities of

the Department’s on-going hydrogen research program.

How large does a prize need to be to induce investment?

One of the key objectives of some prizes is to induce investment. Often, the prestige of having won the prize is seen as having greater value than the prize itself.

Winning contestants, as in the Ansari X Prize, have been known to spend more in

an effort to win a prize than they gained from the prize itself, and several contestants that did not win also invested. Thus, the prize level must be high enough to

garner attention and prestige. But at the same time the prize amount must be realistic enough to be appropriated. Also, if there is a limited pool of potential contestants, even a large prize may not induce more investments.

6. Background

Prizes

There are two types of technology prizes: recognition and inducement prizes. Recognition prizes are post-facto prizes, intended to reward a past accomplishment. The

Nobel Prizes are the most famous prizes of this type. Inducement prizes are awarded to an individual or group who has the best entry in a defined contest or who

first meet some specified technical goal.

The NAE report specifically recommended that federal agencies experiment with

inducement prizes. Among other things, inducement prizes may best serve ‘‘to

‘stretch’ the state of the art in technology.’’ As an example, the Defense Advanced

Research Projects Agency awarded $2 million in 2004 for its Grand Challenge Prize

to Stanford University researchers for their design and construction of an autonomous ground vehicle that was able to navigate a 131.2 mile course through the Mojave Desert.

Typically, inducement prize contests are either best-entry contests or goal-oriented contests.

H.R. 5143 includes both types of prizes. In a best-entry contest, a prize is given

for the best entry submitted during a given time period, even if the winning entry

in a given year falls short of the ultimate technical objective. DOE’s Solar Decathlon

competition, held on the National Mall last summer, is a good example in the energy R&D arena. Decathlon teams must design and build fully-functioning houses

powered exclusively by the sun.

By contrast, goal-oriented contests have a clear technical objective. The prize is

awarded only if a pre-determined goal is met and verified. The $10 million Ansari

X Prize was awarded in 2004 after SpaceShipOne, a privately built three-person

craft, made a required second flight 62 miles (100 km) above the surface of the

Earth within a two-week period. The ability to meet a bright-line technical objective

does not necessarily guarantee economic viability.

Inducement Prizes can be divided further into four different types of objectives:

• New or Best Invention prizes reward the first new technology or technique

that meets some technical objective. The Ansari X Prize falls in this category.

6

4The Solar Decathlon was the subject of a November 2, 2005 Energy Subcommittee hearing,

Winning Teams and Innovative Technologies from the 2005 Solar Decathlon.

• New Application prizes reward refining or integrating existing technologies to

meet a new objective. The previously mentioned DARPA Grand Challenge

Prize is this type of prize.

• Performance Improvement prizes reward improving the performance of an existing product used for an existing application.

• Technology Diffusion prizes reward the diffusion of new innovation, for example requiring that a specified number of units be sold in the commercial marketplace.

H.R. 5143 contains three prizes. The first is a set of $1 million prizes for advancements in hydrogen storage, hydrogen production, hydrogen use and hydrogen distribution. This is a best-entry contest that rewards performance improvements. The

second prize rewards prototypes that meet objective contest criteria established in

advance. This is a $4 million goal-oriented contest for a new application, namely the

use of hydrogen in vehicles or other energy use applications. The third prize is a

$10 million goal-oriented contest for the best invention that leads to transformational changes in the distribution or production of hydrogen. Winners of the

third prize would become eligible for up to $90 million in matching funds for every

dollar of private funding raised by the winner for commercialization of their winning

technology.

Existing Energy Prizes

Section 1008 of the Energy Policy Act of 2005 authorizes DOE to spend $15 million to carry out a more general prize program for ‘‘grand challenges of science and

technology’’ including to reduce U.S. dependence on foreign oil. DOE is said to be

studying this authority for use in the hydrogen arena. In addition, the Federal Government already operates a number of competitions and contests in the energy R&D

area. For example, DOE’s Solar Decathlon, mentioned above, is a best-entry ‘‘design’’ competition.4 Entrants must provide enough solar power to perform all the

functions Americans have come to expect at home—washing clothes, running the

dishwasher, powering computers, and, of course, maintaining a comfortable temperature. Winners are selected in subcategories—architecture, livability, comfort,

power performance, etc.—and an overall winner is determined as well. Competitions

of this type are often particularly useful for demonstrating how a technology can

be incorporated into a commercially attractive product. In fact, the University of

Colorado’s winning BioS[h]IP house was designed for and will be delivered to a client.

As with the Solar Decathlon, many existing energy R&D prize competitions focus

on student competitions. In DOE’s Future Truck competition, teams of students

from 15 top North American universities refined their re-engineered Ford Explorers

to achieve lower emissions and at least 25 percent higher fuel economy, without sacrificing performance, utility, safety, and affordability. DOE and Natural Resources

Canada help sponsor the North American Solar Challenge, a competition to design,

build, and race solar-powered cars. Solar Challenge teams, primarily from universities, compete in a 2,500 mile race from Austin, Texas to Calgary, Alberta. A number of American Solar Challenge teams go on to compete in the biennial World Solar

Challenge—a 3,000 kilometer (1,863 miles) race across Australia. And the American

Forest and Paper Association and DOE Office of Industrial Technologies have sponsored student competitions to find novel uses for the more than two billion tons of

waste every year produced by the forest products industry.

In at least one recent case, a government-sponsored energy competition involved

industry contestants. The California Energy Commission and the Environmental

Protection Agency’s ENERGY STAR program jointly sponsored Efficiency Challenge

2004, an international design competition for energy efficient AC/DC power supplies.

In two award categories, power supplies were judged on different criteria. The market-ready category weighed practical factors such as power supply cost and packaging, along with energy efficiency. In the open category, power supplies entered

were evaluated without any cost or packaging constraints. This latter category was

intended to showcase the most efficient power supply designs from both industry

and academia.

Hydrogen

In his 2003 State of the Union speech, President Bush announced the creation of

a five-year, $1.2 billion Hydrogen Fuel Initiative, which built on the FreedomCAR

initiative announced in 2002. Together, the initiatives aim to enable the transition

7

5The Hydrogen Initiative, APS Panel on Public Affairs, Washington, DC: The American Physical Society (March 2004). 6The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D Needs, Committee on Alternatives and Strategies for Future Hydrogen Production and Use, Washington, DC: National

Research Council and the National Academy of Engineering (2004).

to a hydrogen-based transportation economy, by developing technologies for the production, transportation and distribution of hydrogen, and the vehicles that will use

the hydrogen. Fuel cell cars running on hydrogen would emit only water vapor from

the tailpipe and, if domestic energy sources were used to produce the hydrogen,

would not be dependent on foreign fuels. The Administration has requested $289.5

million for the Hydrogen Fuel Initiative in Fiscal Year (FY) 2007, an increase of

$41.8 million over the FY 2006 funding level. Federal funding for the Hydrogen Initiative totals $631.7 million for FY 2004–2006, about 52 percent of the proposed initiative. Of that total, $121.5 million (19 percent) has been earmarked by Congress

for specific projects.

Major advances are needed across a wide range of technologies if hydrogen is to

be affordable, safe, cleanly produced, and readily distributed. The production, storage and use of hydrogen all present significant challenges.

• Lowering the cost of hydrogen: At present, hydrogen (when produced from

its most affordable source, natural gas) is three to four times more expensive

to produce than gasoline. Current DOE research efforts seek to lower that

cost enough to make fuel cell cars cost-competitive with conventional gasolinepowered vehicles by 2015; and to advance the methods for producing hydrogen from renewable resources, nuclear energy, and coal.

• Creating effective hydrogen storage: Current hydrogen storage systems

cannot deliver the vehicle driving distance that automakers say consumers

demand. New technology is needed.

• Creating affordable hydrogen fuel cells: Fuel cell-based propulsion is now

up to 10 times more expensive than internal combustion engines. A major

goal of current DOE research efforts is to reduce the cost of fuel cell propulsion to affordable levels.

Analyses of the Hydrogen Fuel Initiative by the American Physical Society (APS) 5

and the National Academies of Science (NAS) 6 note that meeting the goals of the

overall hydrogen initiative will require fundamental breakthroughs—not just incremental improvements. For example, storing hydrogen gas requires too large a volume for practical on-board storage in vehicles. New materials would be required to

store hydrogen in more condensed form and release it when needed—a very difficult

technical problem. The APS study states, ‘‘No material exists today that can be used

to construct a hydrogen fuel tank that can meet the consumer benchmarks.’’ The

NAS estimated that fuel cells themselves would need a ten- to twenty-fold improvement before fuel cell vehicles become competitive with conventional technology. Current fuel cells wear out quickly, and lifetimes are far short of those required to compete with a gasoline engine. Large improvements have been made since the NAS

report was released, but additional improvements are still needed. DOE estimates

that roughly a five-fold decrease in fuel cell cost will be required, while at the same

time increasing performance and durability.

Both reports recommended changes to the hydrogen initiatives, particularly arguing for a greater emphasis on basic, exploratory research because of the significant,

perhaps insurmountable, technical barriers that must be overcome. DOE has responded, in part, by expanding the hydrogen program to include work in the Office

of Science focused on design of new catalysts, solar hydrogen production, and the

study of ion transport in fuel cell membranes.

Even if the technology advances to a point at which it is competitive, the transition to a hydrogen economy will require an enormous investment to create a new

infrastructure. Changes in regulation, training and public habits and attitudes will

also be necessary. Estimates of the cost of creating a fueling infrastructure (replacing or altering gas stations) alone are in the billions of dollars.

As currently envisioned, the transition won’t happen quickly. According to the

NAS study, significant sales of hydrogen vehicles are unlikely before 2025 even

under the most optimistic technology assumptions.

7. Section-by-Section Description of H.R. 5143

Section 1. Short Title.

The H–Prize Act of 2006.

8

Sec. 2. Definitions.

Sec. 3. Prize Authority.

Requires the Secretary of Energy to create a prize to advance the research, development, demonstration and commercial application of hydrogen energy technologies.

Requires the Secretary to advertise the prize competitions widely to encourage

broad participation, including a specific direction to announce the prize competitions

through publication of a Federal Register notice. Requires the Secretary to enter into

an agreement with a private, non-profit entity to administer the prize competitions.

Authorizes the Secretary to use funding directly appropriated for such purposes to

DOE or other agencies and to accept funds provided by private entities or individuals. Prohibits the announcement of any prize competition until sufficient funds are

available. Sunsets the authority to award prizes in 2017.

Sec. 4. Prize Categories.

Defines prize categories for:

(1) Components or Systems. Establishes up to four $1 million prizes awarded

every other year to the best technology advancements in components or systems related to hydrogen production, hydrogen storage, hydrogen distribution, and hydrogen utilization. Provides the Secretary the discretion to reduce the amount or number of prizes based upon the availability of funds.

(2) Prototypes. Establishes one $4 million prize for prototypes of hydrogenpowered vehicles or hydrogen-based products that best meet or exceed objective performance criteria. Awards prototype prizes in years alternate with

the technology advancements prize. Prohibits the Secretary from awarding

the prize if no entrant meets the objectively defined performance criteria.

(3) Transformational Changes. Establishes a $10 million prize for transformational changes in technologies for the production and distribution of

hydrogen that meet or exceed far-reaching objective criteria. Authorizes the

Secretary to provide up to $90 million more in matching funds for every dollar of private funding raised by the winner for the continued development

of their winning technology. Authorizes prize winners to accept these additional funds as cash or as a government contract equivalent to the prize

amount. Limits the total award to $100 million.

Requires the Secretary to establish contest criteria through consultation with the

Hydrogen Technical Advisory Committee, other federal agencies including the National Science Foundation, and private organizations including the National Academy of Sciences. Requires the Secretary to appoint contest judges from the private

sector and agencies outside DOE. Excludes judges who may have a personal or financial relationship with any contest participant.

Sec. 5. Eligibility.

Requires contestants to register through the process published in the Federal Register. Requires contestants be incorporated and maintain a primary place of business

in the U.S. if a private entity, or must be a U.S. citizen if an individual. Excludes

from participation any federal entities or federal or national lab employees while on

duty.

Sec. 6. Intellectual Property.

Waives claims by the Federal Government to any intellectual property rights derived from participation in the prize competitions.

Sec. 7. Liability.

Requires contestants to waive claims against the Federal Government resulting

from participation in prize competition activities. Requires contestants to have liability insurance against damages resulting from participation in any prize competition activity and to name the Federal Government as an additional insured entity.

Sec. 8. Authorization of Appropriations.

Authorizes $55 million for each of fiscal years 2007 through 2016. Limits the use

of appropriated funds for administrative expenses to no more than $1 million in any

fiscal year.

Sec. 9. Nonsubstitution.

Expresses a sense of the Congress that the prize competitions shall not act as a

substitute for any R&D programs.

9

8. Witness Questions

Mr. Phillip Baxley , Dr. David Bodde, Dr. David L. Green

• Are there any changes you would recommend making to H.R. 5143?

• Does H.R. 5143 provide the right incentives to address the most significant

technical barriers to the widespread use of hydrogen as a fuel source?

• How can the Department of Energy (DOE) best use prize competitions to complement more traditional research support mechanisms, including contracts

and grants, as a way to develop the hydrogen economy?

Dr. Peter Diamandis

• Are there any changes you would recommend making to H.R. 5143?

• What are the advantages of using prize programs to encourage technological

progress in areas like the use of hydrogen as a fuel source?

10

Chairman BOEHLERT. The Committee will come to order.

I want to welcome everyone here today for what has turned out

to be a very auspiciously timed hearing.

Suddenly, the whole Nation is focused on gas prices and in a

panic on our ‘‘addiction to oil’’ and the Congress is in a panic trying

to figure out how to respond. Our options in the immediate future

are limited, but our options in the mid- and long-term are not. And

unless we exercise those options, we are going to lurch from oil crisis to oil crisis and each one is going to get worse, and the toll on

our economy will grow. The future will be grim if we don’t act now.

If we fail to act now, we will have to pay later.

There are many steps we need to begin to take. For starters, we

need to reduce demand by means such as imposing tighter fuel

economy standards. That is a mantra for me, and I suppose people

are getting a little bit used to me repeating that over and over, but

it is an issue whose time has come. But over the longer run, we

need to find ways to run our transportation system on substances

other than petroleum, including biofuels and, perhaps, hydrogen.

The hydrogen economy holds out great promise, but it also presents great hurdles. We are pretty far away from knowing how to

create, store, distribute, and use hydrogen cleanly and efficiently.

We need to devote all of the ingenuity we can muster to attack this

problem.

That is why I was so pleased when Chairman Inglis introduced

H.R. 5143, an innovative approach to encouraging innovative research. The bill is carefully crafted to encourage ongoing work that

can lead to incremental improvements in hydrogen technology, and

to draw more scientists and engineers into trying to remove the

highest hurdles on the hydrogen highway.

We know from history that prizes can help solve tough technical

problems. And this committee has a record of promoting the use of

prizes; we created the highly successful Malcolm Baldrige Award

and most recently we established a prize program at NASA. Prizes

can draw more money and more people into the search for technical

solutions, and they can provoke more inventive thinking.

Now, no one is suggesting that this prize substitute for the existing hydrogen R&D programs, which the President and this committee have strongly supported. Those programs are necessary to

make sure the Nation has a cadre of experts engaging in ongoing

work in this area. But we can expand the pool of financial and

human resources further with prizes.

So I am eager to hear today from our experts on the specifics of

the bill. I expect that this bill will move through the House swiftly,

and we want to make sure we have got this program written in exactly the right way. We also have to examine the funding levels in

the bill: we want them high enough to make a difference, but not

any higher than that, given how tight the federal budget is. My

guess is that the top prize could be reduced to $10 million without

reducing the program’s impact.

But while we work out the details, we shouldn’t miss the larger

message. This committee is committed to moving forward with new

ways to promote new technologies, and I think the H–Prize fits

that bill.

11

I congratulate Mr. Inglis for proposing it, and as a matter of fact,

I have nominated him personally for the X Prize for Legislative Initiative. And I want to congratulate him for working so closely with

the Committee in drafting this bill.

And I will yield the remainder of my time to Chairman Inglis.

[The prepared statement of Chairman Boehlert follows:]

PREPARED STATEMENT OF CHAIRMAN SHERWOOD L. BOEHLERT

I want to welcome everyone here today for what has turned out to be a very auspiciously timed hearing.

Suddenly, the whole Nation is focused on gas prices and our ‘‘addiction to oil’’ and

the Congress is in a panic trying to figure out how to respond. Our options in the

immediate future are limited, but our options in the mid- and long-term are not.

And unless we exercise those options, we are going to lurch from oil crisis to oil crisis and each one is going to get worse, and the toll on our economy will grow. The

future will be grim if we don’t act now.

There are many steps we need to begin to take. For starters, we need to reduce

demand by means such as imposing tighter fuel economy standards. But over the

longer-run we need to find ways to run our transportation system on substances

other than petroleum, including biofuels and perhaps hydrogen.

The hydrogen economy holds out great promise but it also presents great hurdles.

We are pretty far away from knowing how to create, store, distribute and use hydrogen cleanly and efficiently. We need devote all the ingenuity we can muster to attack this problem.

That’s why I was so pleased when Chairman Inglis introduced H.R. 5143—an innovative approach to encouraging innovative research. The bill is carefully crafted

both to encourage ongoing work that can lead to incremental improvements in hydrogen technology, and to draw more scientists and engineers into trying to remove

the highest hurdles on the hydrogen highway.

We know from history that prizes can help solve tough technical problems. And

this committee has a record of promoting the use of prizes; we created the highly

successful Malcolm Baldrige Award and most recently we established a prize program at NASA. Prizes can draw more money and more people into the search for

technological solutions and they can provoke more inventive thinking.

Now, no one is suggesting that this prize substitute for the existing hydrogen

R&D programs, which the President and this committee have strongly supported.

Those programs are necessary to make sure the Nation has a cadre of experts engaging in ongoing work in this area. But we can expand the pool of financial and

human resources further with prizes.

So I’m eager to hear from our experts today on the specifics of the bill. I expect

that this bill will move through the House swiftly, and we want to make sure we’ve

got this program written in exactly the right way. We also have to examine the

funding levels in the bill: we want them high enough to make a difference, but not

any higher than that, given how tight the federal budget is. My guess is that the

top prize could be reduced to $10 million without reducing the program’s impact.

But while we work out the details, we shouldn’t miss the larger message. This

committee is committed to moving forward with new ways to promote new technologies. I think the H–Prize fits that bill.

I congratulate Mr. Inglis for proposing it and for working so closely with the Committee in drafting his bill. And I will yield the remainder of my time to him. Mr.

Inglis.

Mr. INGLIS. And that is the prize that I get, and I thank you very

much, Mr. Chairman, for yielding to me. Thank you very much for

holding the hearing as well.

I thought I would show just a couple of slides, because I know

a picture is worth a thousand words.

[Slide.]

We know that we have got some surface waves about interruptions in supply, and those are causing some of our price increases.

But underlying those surface waves is this sea of rising demand.

That is a gas line at a gas station in China. We expect—Exxon

Mobil says within the next—well, about 2030, worldwide energy deVerDate 11-MAY-2000 17:49 Dec 07, 2006 Jkt 027094 PO 00000 Frm 00015 Fmt 6633 Sfmt 6601 C:\WORKD\FULL06\042706\27094 SCIENCE1 PsN: SCIENCE1
12

mand will increase by 60 percent. That will necessitate a 40 percent increase, says Exxon Mobil in their report, in OPEC oil production. Even if they have got it, do we really want to be that

much more dependent on them?

So the question is how to move to something else, how to break

this addiction to oil. Our goal has been to develop the most nongovernmental way for the government to help achieve the result of

breaking through to hydrogen. So the idea is to take the ‘‘can-do’’

American spirit, put it with the prize and the recognition of winning the prize, some financial incentives, and hopefully bring the

best and the brightest to bear on these technological challenges.

As we have proposed it, there would be a million-dollar prize

every other year for breakthroughs in production, storage, distribution, and utilization of hydrogen, every other year a $4 million prototype prize, and then within 10 years, if you can transform from

well to wheels the—our use of hydrogen, you would get $100 million. But since this is a non-governmental approach, it wouldn’t exactly be $100 million. It would be $10 million in cash and then up

to $90 million, dollar-for-dollar match for your venture capital. So

it is a way of testing to see if the market agrees that you have got

a product to sell. If you don’t, and you can’t find $90 million worth

of venture capital, then you don’t get the $90 million. It is a way

of getting all of the way to the government’s interest, which is a

product on the market. We are not interesting in developing technology and putting it on the shelf. The government’s interest is to

get all of the way to the market.

We have done it before, as the Chairman alluded to that we have

had prizes before and very successful prizes. The Transcontinental

Railroad involved some prizes, if you will, given to the railroad

companies, cash, stipends, $48,000 a mile, plus 33 million acres of

land given to those companies. So we can do this, because we have.

We have also done it before with flight—transatlantic flight, the

Orteig Prize was won by Charles Lindbergh. It rewarded his going

across the Atlantic and back. And then, of course, as we will hear

from Peter Diamandis, we are going to hear about the wonderful

work of the Ansari X Prize. This is, of course, the—a picture of

Burt Ratan’s SpaceShipOne, which was the first one to go into

space and back within a two-week period.

So, Mr. Chairman, I would thank you again, for holding the

hearing and for advancing the bill. I think we have got to breakthrough to hydrogen. We can, because we must. And I thank you

for yielding.

[The prepared statement of Mr. Inglis follows:]

13

14

15

16

17

18

19

20

Chairman BOEHLERT. I thank you very much. And now you know

why, my colleagues, I have nominated Chairman Inglis for the X

Prize for Legislative Initiative.

Now, Mr. Lipinski.

Mr. LIPINSKI. Thank you, Mr. Chairman.

I—as—keeping with usual here, would like to certainly associate

myself with all of the comments of the Chairman of the Committee

and also with Mr. Inglis. I would like to thank Mr. Inglis for his

leadership on this very important issue and I am pleased to be

here for the hearing on Mr. Inglis’ H–Prize Act of 2006. I would like

to welcome the witnesses and look forward to hearing all of your

testimony. And I apologize that I am going to have to leave early,

because I have other commitments to be at after this.

Energy is on the mind of all Americans right now, especially with

them being very upset about the current gas situation. Gas prices

have risen to record highs, and oil companies are reporting record

profits.

Our natural gas prices concern many of my constituents in Chicago this winter. And for some families, it makes hard choices to

keep their heat on during the coldest months. We can be thankful

it was a relatively mild winter in Chicago, but that may be a bad

sign related to global climate change.

We are also becoming increasingly aware of the threats posed to

our national security by our continued reliance on foreign fossil

fuels. Our main proposal in the Congress is to help relieve the

pressure of energy prices. These range from short-term solutions,

such as ending tax subsidies for oil companies or easing various

regulations, to long-term approaches like research in hydrogen fuel,

biofuels, and other renewables.

No one idea or program is going to solve all of our energy problems, but if we do not start to assemble the tools and build an energy model for the future, we will be no better 20 years from now

than we are today. We will likely be much worse off.

An economy based on energy outside the fossil fuels is no longer

implausible, but to get there, we must invest in research and development now to be able to sustain our economy. Research grants are

a basis of this process, but we, in Congress, have a responsibility

to find creative and new ways to inspire researchers, business leaders, and our youth to solve the problems their society faces.

One such example of innovative thinking is a bill introduced by

Ranking Member Gordon that replicates the successful DARPA

program model and puts it to work in the Department of Energy.

H.R. 4435, which I am proud to support, would establish a new

ARPA–E function at DOE to speed the commercialization of innovative energy ideas and help reduce our dependence on foreign

fuel.

Today’s legislation, H.R. 5143, seems to inspire researchers, entrepreneurs, and other competitive spirits in an effort to find specific solutions to the major challenges facing development and commercialization of hydrogen fuel. The H–Prize will help expand the

possibilities of hydrogen research, promoting people not normally

involved in the federal research and development to explore one of

the greatest challenges facing us today. This prize will help us take

21

advantage of America’s greatest resource, our ingenuity and our

creativity, in order to tackle the problems before us.

We have some of the best and brightest minds in the world in

the United States as well as an economy that supports and encourages entrepreneurship, and the H–Prize will focus our inventiveness to address the greatest challenge that faces our country.

Hydrogen holds enormous potential as the base of our future

economy, a potential we cannot and must not ignore.

Again, I thank Mr. Inglis for introducing this legislation, and I

look forward to hearing the testimony of our witnesses today.

[The prepared statement of Mr. Lipinski follows:]

PREPARED STATEMENT OF REPRESENTATIVE DANIEL LIPINSKI

Thank you, Mr. Chairman; I am pleased to be here today for this hearing on H.R.

5143, the H–Prize Act of 2006. I would like to thank Mr. Inglis for taking leadership

on this important issue. I would also like to welcome the witnesses and I look forward to hearing their testimony. I apologize that other commitments will unfortunately prohibit me from staying for the full hearing today because the topic is an

important one.

Energy is on the minds of many Americans right now and they are very upset

about the current situation. Gas prices have risen to record highs and oil companies

are reporting record profits. High natural gas prices concerned many of my constituents in Chicago this winter and forced some families to make hard choices to keep

their heat on during the coldest months. We can be thankful that it was a relatively

mild winter, but that may be a bad sign relate to global climate change. We are

also becoming increasingly aware of the threats posed to our national security by

our continued reliance on foreign fossil fuels.

There are many proposals in Congress to help relieve the pressure of energy

prices. These range from short-term solutions, such as ending tax subsidies for oil

companies or easing various regulations, to long-term approaches like research in

hydrogen fuel, biofuels, and other renewables. No one idea or program is going to

solve all of our energy problems, but if we do not start to assemble the tools and

build an energy model for the future, we will be no better off 20 years from now

than we are today, and likely we will be much worse off.

An economy based on energy outside of fossil fuels is no longer implausible. But

to get there, we must invest in research and development now to be able to sustain

our economy. Research grants are the basis of this process, but we in Congress have

a responsibility to find creative and new ways to inspire researchers, business leaders, and our youth to solve the problems that society faces.

Once such example of innovative thinking is a bill introduced by Ranking Member

Gordon that replicates the successful DARPA program model and puts it to work

in the Department of Energy. H.R. 4435, which I am proud to support, would establish a new ARPA–E function at DOE to speed the commercialization of innovative

energy ideas and help reduce our dependence on foreign fuel.

Today’s legislation at hand, H.R. 5143, seeks to inspire researchers, entrepreneurs, and others competitive spirit in an effort to find specific solutions to the

major challenges facing development and commercialization of hydrogen fuel. The

H–Prize will help expand the possibilities of hydrogen research, promoting people

not normally involved in federal research and development to explore one of the

greatest challenges facing us today.

This prize will help us take advantage of America’s great resource—our ingenuity

and creativity—to tackle the problems before us. We have some of the best and

brightest minds in the world in the United States, as well as an economy that supports and encourages entrepreneurship, and the H–Prize will this focus inventiveness to address the greatest challenge that faces our country.

Hydrogen holds enormous potential as the base of our future economy—a potential we cannot and must not ignore.

Thank you, Mr. Chairman, and I yield back the remainder of my time.

Chairman BOEHLERT. Thank you very much, Mr. Lipinski.

Ms. Biggert.

Ms. BIGGERT. Thank you, Mr. Chairman. I want to thank you for

holding this hearing today and giving the Committee an opportunity to discuss the creation of an H–Prize.

22

I also want to thank the bill’s sponsor, Mr. Inglis, for sharing a

draft of his legislation with me and seeking my input prior to its

introduction.

As Chairman of the Energy Subcommittee, I participated in a

meeting of various hydrogen and fuel cell stakeholders that Mr.

Inglis convened in December of last year to discuss the idea.

At that meeting, I urged all involved to keep in mind the recommendations included in a 1999 National Academy of Engineering report on inducement prizes. The Academy recommended that

prizes should complement, not substitute for, direct federal support

of research and development. The Academy also advised that rewards should be commensurate with the effort required and the

goal sought. To me, this advice is just good common sense.

Unfortunately, I do not believe that this legislation meets these criteria. I do not believe that authorizing a $100 million prize for

the development of ‘‘transformational technologies’’ meets either of

these criteria. This is a criticism that I shared with the bill’s sponsor well in advance of the bill’s introduction.

According to the Organization for Economic Cooperation and Development, the market for fuel cells and related products is projected to reach $29 billion by 2011. With potential applications in

transportation, power generation, and portable power, the market

for fuel cells and related products, the OECD estimates that this

market could grow to over $1.7 trillion by 2021.

Isn’t a billion- or trillion-dollar market prize enough? Isn’t this

enough of an incentive to encourage scientists, engineers, entrepreneurs, and energy companies, large and small, to invest in the

development of fuel cells and new and innovative ways to produce

and store hydrogen?

The 2005 Solar Decathlon, while structured differently than the H–Prize, attracted 20 qualified teams. Each team received $5,000

in federal funds to leverage between $200,000 and $300,000 in outside investment for their prizes—for their projects. The result was

a diverse combination and outstanding display of solar and other

advanced energy technologies. The total cost to the DOE: $1 million.

According to press accounts, two dozen teams from five different

countries competed for the $10 million Ansari X Prize, and we will

hear more about that later, but the best part about that prize is

that it didn’t cost taxpayers a penny.

I think that it is safe to say that the market for hydrogen and

fuel cell technologies dwarfs the market for spaceships, and yes,

even solar technologies combined.

To put this in another context, the prize of all prizes, the Nobel

Prize, is only a $1.3 million prize.

Why haven’t we ever offered a prize to find a cure for cancer?

Don’t we already know more about hydrogen and fuel cells than we

know about cancer?

In addition, the Energy Policy Act of 2005, which just became

law in August of last year, authorized over $3.3 billion for research

into the production and distribution of hydrogen and the development of fuel cells.

I also want to observe that while the last section of the bill does

explicitly prohibit any H–Prize program from substituting for fedVerDate 11-MAY-2000 17:49 Dec 07, 2006 Jkt 027094 PO 00000 Frm 00026 Fmt 6633 Sfmt 6601 C:\WORKD\FULL06\042706\27094 SCIENCE1 PsN: SCIENCE1
23

eral research and development programs, in no way does this provision prevent the substitution of funding. Substituting direct federal support for research and development with a prize is exactly

the opposite of what the National Academy of Engineering recommended. Neither the President nor Congress is going to be able

to find the money for such a prize without taking funds out of other

vital energy research and development programs.

Properly designed, an H–Prize could provide useful feedback and

constructive direction to the Hydrogen Fuel Initiative. Designed

with a specific goal in mind, prizes could spur the development of

technologies linking the critical pieces of the hydrogen economy,

those that make, move, store, and burn hydrogen. But I am in no

way convinced that we need to spend $100 million on such a prize.

Before closing, I want to acknowledge Mr. Inglis’ insight. We too

often focus exclusively on whether research programs are meeting

milestones and timelines, but forget to keep in mind the goal of fostering innovation. We also tend to focus on the dominant funding

mechanisms—grants, contracts, and cooperative agreements—without considering the full range of options. Mr. Inglis is making us

consider our decisions more fully, and rightly so. So I look forward

to continuing to work with the bill’s sponsors to address my concerns, and I yield back the balance of my time.

[The prepared statement of Ms. Biggert follows:]

PREPARED STATEMENT OF REPRESENTATIVE JUDY BIGGERT

Thank you, Mr. Chairman. I want to thank you for holding this hearing today,

and giving this committee an opportunity to discuss the creation an H–Prize. I also

want to thank the bill’s sponsor, Mr. Inglis, for sharing a draft of his legislation

with me and seeking my input prior to its introduction.

As Chairman of the Energy Subcommittee, I participated in a meeting of various

hydrogen and fuel cell stakeholders that Mr. Inglis convened in December of last

year to discuss the idea of an H–Prize.

At that meeting, I urged all involved to keep in mind the recommendations included in a 1999 National Academy of Engineering report on inducement prizes. The

Academy recommended that prizes should complement—not substitute for—direct

federal support of research and development. The Academy also advised that rewards should be commensurate with the effort required and the goals sought. To

me, this advice is just good common sense.

Unfortunately, I do not believe this legislation meets these criteria. In particular,

I do not believe that authorizing a $100 million prize for the development of ‘‘transformational technologies’’ meets either of these criteria. This is a criticism that I

shared with the bill’s sponsor well in advance of the bill’s introduction.

According to the Organization for Economic Cooperation and Development, the

market for fuel cells and related products is projected to reach $29 billion by 2011.

With potential applications in transportation, power generation and portable power,

the market for fuel cells and related products, the OECD estimates that this market

could grow to over $1.7 trillion by 2021.

Isn’t a billion or trillion dollar market prize enough? Isn’t this enough of an incentive to encourage scientists, engineers, entrepreneurs, and energy companies large

and small to invest in the development of fuel cells and new and innovative ways

to produce and store hydrogen?

The 2005 Solar Decathlon, while structured differently than the H–Prize, attracted 20 qualified teams. Each team received $5,000 in federal funds to leverage

between $200,000 and $300,000 in outside investment for their projects. The result

was a diverse combination and outstanding display of solar and other advanced energy technologies. Total cost to the DOE: $1 million.

According to press accounts, two dozen teams from five different countries competed for the $10 million Ansari X–Prize. But the best part about the X–Prize is

that it didn’t cost taxpayers a penny.

I think it’s safe to say that the market for hydrogen and fuel cell technologies

dwarfs the market for spaceships, and yes, even solar technologies—combined.

24

To put this in another context, the prize of all prizes—the Nobel Prize—is only

a $1.3 million award.

Why haven’t we ever offered a prize to find a cure for cancer? Don’t we already

know more about hydrogen and fuel cells than we know about cancer?

In addition, the Energy Policy Act of 2005, which just became law in August of

last year, authorized over $3.3 billion for research into the production and distribution of hydrogen and the development of fuel cells.

I also want to observe that while the last section of the bill does explicitly prohibit

any H–Prize program from substituting for federal research and development programs, in no way does this provision prevent the substitution of funding. Substituting direct federal support for research and development with a prize is exactly

the opposite of what the National Academy of Engineering recommended. Neither

the President nor Congress is going to be able to find the money for such a prize

without taking funding out of other vital energy research and development programs.

Properly designed, an H–Prize could provide useful feedback and constructive direction to the Hydrogen Fuel Initiative. Designed with a specific goal in mind, prizes

could spur the development of technologies linking the critical pieces of the hydrogen economy those that make, move, store, and burn hydrogen. But I am in no way

convinced that we need to spend $100 million on such a prize.

Before closing, I want to acknowledge Mr. Inglis’ insight. We too often focus exclusively on whether research programs are meeting milestones and timelines, but forget to keep in mind the goal of fostering innovation. We also tend to focus on the

dominant funding mechanisms—grants, contracts, and cooperative agreements—

without considering the full range of options. Mr. Inglis is making us consider our

decisions more fully—and rightly so. I look forward to continuing to work with the

bill’s sponsor to address my concerns, and I yield back the balance of my time.

Chairman BOEHLERT. Thank you very much.

Dr. Baird.

Dr. BAIRD. I appreciate the Chairman. I appreciate the

gentlelady’s comments and would associate myself with them.

I applaud the gentleman from—for coming up with great ideas

for how to stimulate exploration in hydrogen. I just would question

how we call it a non-governmental modality when the government

is going to be putting up the funding. It always seems to me that

the prize for innovation, under a free market system, should be

that you profit from your invention. And while we have a host of

ways to stimulate that at the federal level, I think we need to acknowledge that they are government ways and be honest with that.

So I will look forward, actually, and my main question will be:

what will be the cost-benefit ratio here? What are we investing?

What will the return on investment be? And frankly, what would

that return on investment be if we didn’t have such a prize? Would

not the free market incentive, as we see the escalating cost of gasoline, be sufficient without this expenditure, and might it be expended in a different manner?

But I look forward to this debate, and I am glad we are having

it.

I thank the Chairman.

[The prepared statement of Mr. Costello follows:]

PREPARED STATEMENT OF REPRESENTATIVE JERRY F. COSTELLO

Good morning. I want to thank the witnesses for appearing before our committee

to discuss H.R. 5143, the H–Prize Act of 2006. The bill intends to create a prize to

advance the research, development, demonstration and commercial application of

hydrogen energy technologies.

Traditionally, the Department of Energy (DOE) has relied upon established researchers in national labs, industry, and academia to carry out its mission of developing energy technologies for use by the private sector. Most often, DOE identifies

a technical hurdle and then issues research solicitations to detail the type of techVerDate 11-MAY-2000 17:49 Dec 07, 2006 Jkt 027094 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 C:\WORKD\FULL06\042706\27094 SCIENCE1 PsN: SCIENCE1
25

nologies the agency seeks to fund. Moreover, DOE may use grants, cooperative

agreements or contracts to carry out projects.

While this method has worked well to advance scientific technology, H.R. 5143

also intends to meet the same goal by offering a prize for the development of a particular technology or for a specific achievement. As we have seen in the past, several

prize programs were established to encourage the development of science and technology through a competitive process.

I recognize that prize competitions benefit from clear-cut goals and have inspired

research to accelerate the advancement of hydrogen technologies. However, I believe

it is important that prizes act as a supplement to, not a substitute for traditional

research and development programs. I encourage continued advancements in research, development, demonstration, and commercial application projects and will

work with my colleagues to attract our country’s best and brightest minds to address U.S. energy challenges.

I look forward to hearing from today’s panel of witnesses.

[The prepared statement of Ms. Johnson follows:]

PREPARED STATEMENT OF REPRESENTATIVE EDDIE BERNICE JOHNSON

Thank you, Mr. Chairman and Ranking Member.

I would like to commend the Chairman, Ranking Member and staff for arranging

today’s hearing and always enjoy discussing how Congress can work better to spur

innovative technologies.

Clearly, our nation faces an energy crisis. Oil prices are skyrocketing, and as the

hot sun bakes my home state of Texas this summer, energy prices will become as

unbearable as the Dallas heat.

I am glad my colleagues have been forward-thinking to introduce legislation to

stimulate research and development of a hydrogen economy.

The Science Committee has held hearings in the recent past on the issue of the

hydrogen economy. What I have heard witnesses say is that technology is not developed enough for America to benefit from a hydrogen economy for many years.

I fear the consequences of a ‘‘head in the sand’’ approach, with energy prices as

they are. We must invest in alternative fuels such as hydrogen to address this crisis.

H.R. 5143 has been compared with the X Prize, but I want to point out that the

X Prize was funded with private resources.

I believe the Committee should consider what unintended consequences could

arise with a prize administered by a federal agency, rather than by private industry.

Thank you, Mr. Chairman. I yield back the balance of my time.

Chairman BOEHLERT. Thank you very much.

And now to our very distinguished panel. And every time I look

at a panel of experts that come before this committee, I am reminded that Washington is not the source of all wisdom. As a matter of fact, I would like to add more wisdom here, but one of the

ways we get it is by having experts like you. So we thank all of

you for being facilitators and of counsel to the Committee, if you

will.

Our witnesses include Dr. Peter Diamandis. He is Chairman of

the X Prize Foundation, a non-profit organization dedicated to fostering innovation through the use of competitions. The Foundation

awarded its $10 million Ansari X Prize to promote the formation

of a commercial space flight industry. Prizes for genomics, energy,

and education are under development. Thank you, Dr. Diamandis,

and we understand another commitment forces you to have to leave

at 11:15, so don’t think as he departs he is boycotting the rest of

the meeting.

Dr. DIAMANDIS. Thank you, Chairman.

Chairman BOEHLERT. Our second witness is Dr. David Bodde. He

is the Director of Innovation and Public Policy at Clemson University’s International Center for Automotive Research. He was a

member of the National Academy of Engineering Committee on Alternatives and Strategies for Future Hydrogen Production and Use,

26

which issued the 2004 report ‘‘The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D Needs.’’

Our third witness is Dr. David Greene. He is a corporate fellow

at Oak Ridge National Laboratory with the Center for Transportation Analysis, National Transportation Research Center. He is an

expert on transportation and energy policy issues. Dr. Greene.

And finally, Mr. Phillip Baxley, the President of Shell Hydrogen,

L.L.C., a separate business unit established by Shell in 1999 to

pursue new business opportunities in hydrogen fuel and fuel cells.

Gentlemen, thank you very much for participating in this and

being willing to serve as counsel and educators for this committee.

Dr. Diamandis, you are first up.

STATEMENT OF DR. PETER H. DIAMANDIS, CHAIRMAN OF THE

X PRIZE FOUNDATION

Dr. DIAMANDIS. Thank you.

Chairman Boehlert, members of the Committee, I thank you for

permitting me to come here and give testimony today on prizes and

the H–Prize.

My name is Peter Diamandis. I am the Founder, Chairman, and

CEO of the X Prize Foundation.

We started the Foundation in 1995. In fact, the first public discussion ever on the X Prize was in this room in testimony to Congressman Walker at that time. Our mission is to bring about radical breakthroughs by using prizes. And in fact, we believe that inducement prizes, versus recognition prizes, like the Nobel Prize,

have the chance to bring huge returns for immediate change versus

something achieved 30 years ago.

Incentive prizes have a tremendous history, as we have heard

some from Chairman Inglis’ presentation early on, and it was reading about Lindbergh’s flight across the Atlantic that actually inspired me. I read that this $25,000 prize offered in 1919 sparked

$400,000 in expenditures. Literally 16 times the prize amount was

spent. And they didn’t spend $1. And in fact, the most unlikely

winner, Lindbergh, called the ‘‘flying fool’’ the day before he took

off, changed the course of history and ignited a multi-hundred-billion-dollar industry of aviation.

When he landed in Paris, he was swamped by crowds. What followed after that was tremendous. Within 18 months of his landing,

the number of passengers in the United States went from 5,700 to

180,000, a 30-fold increase in passenger traffic in the United

States. The number of airplanes quadrupled. The number of pilots

tripled. It was not the technology. It was a paradigm shift that occurred. The prize changed the way the public thought about aviation. That is very important. Prizes not only cause technology to be

brought into existence, but they change the way we think about

these subjects.

My passion since the age of nine has been going into space, and

for 40 years, I have watched the cost of space flight go up and reliability not change at all. And I became, you know, disenchanted

with waiting for NASA to open up space. And it was that reading

of the Lindbergh book that caused me to build this Ansari X Prize.

I offered out a $10 million purse. We picked $10 million so that

it was not too large; we didn’t want the Boeings and Lockheeds

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competing, but large enough to incentivize those entrepreneurs,

those hungry, risk-taking entrepreneurs willing to risk everything

to change what they believed in—offering for three people to go

into space, come back down, and within two weeks make that trip

again. We had 26 teams from seven countries compete for this coming from places I had no expectation, from Romania, from Israel,

from Russia, from Great Britain, from Canada, from the United

States competing to win this $10 million prize and spending $100

million to win it.

The results were fantastic. With 50 times the prize—our seed capital yielded 50 times the amount spent to try and win that $10

million prize. And you go now to the Air and Space Museum and

see SpaceShipOne, the winning vehicle, hanging next to the Spirit

of St. Louis. And for me, that was the prize in my heart, to see that

happen. It was spectacular. October 4 of 2004, SpaceShipOne made

two flights into space.

When that happened, for me, what occurred was we changed the

paradigm that space flight was not just for 100 very smart, government-selected astronauts. Now kids believe that they can fly into

space. That was the most important thing: changing the paradigm.

I can’t focus on that enough.

We also launched an industry. You know, Branson is now com- mitted to over $100 million to go after SpaceShipTwo. Of the 26

contenders, at least eight or nine of them are bringing their vehicles into commercial practice. That would not have happened. You

know, the X Prize drove that breakthrough. The technology had

been around for decades to have this happen, but the Prize, literally, caused the spark. It was the crucial seed required to galvanize that to happen.

So successful prizes that are well designed, well timed, and appeal to the audience can have huge returns on investment.

Why do prizes work? Let me offer out the following four things

that are very important as to why prizes work.

One, they attract alternate funding. Prizes have to be an amazing story. They are about the human drama. They are about the

risk. And they attract different flavors of money, not your traditional venture capital. They attract risk-taking money. I call it ‘‘ego

money.’’ The Larry Ellisons who backed an America’s Cup team

and spent $70 million for a trophy. Twenty billion dollars a year

is spent paid in sponsorship dollars for car races, boat races, bike

races, or whatever it is. It attracts that kind.

The media spotlight. Prizes have to create heroes. It is never

about the technology. The heroic element drives people to think in

the shower around the clock. You can’t buy that level of dedication.

It bypasses bureaucracy. A lot of the most brilliant people will

never, ever, ever apply for a grant, because they could not stand

the process of going through that. But a prize says you win if you

do this. You know. Bypass all of the bureaucracy and go directly

to the solution and you will win the money. And that allows the

most brilliant, and sometimes the most radical thinkers, to enter

and solve the problems that we have.

Most importantly, prizes elevate a problem so high that it attracts people from outside the discipline. We all know how to think

the way we think. You know. Biologists approach things from a bioVerDate 11-MAY-2000 17:49 Dec 07, 2006 Jkt 027094 PO 00000 Frm 00031 Fmt 6633 Sfmt 6601 C:\WORKD\FULL06\042706\27094 SCIENCE1 PsN: SCIENCE1
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logical problem. But if you put up a prize, you have a physicist

come in or a historical person come in. So it attracts solutions outside disciplines and outside nations.

We, at the X Prize, have dedicated ourselves. We have grown the

organization. Larry Page, a co-founder of Google, has joined our

board. Craig Venter discovered—you know, cloned the human genome, and we are building ourselves into a world-class prize institute, focusing on developing prizes for different areas. We are

working on an automotive X Prize we hope to launch this year for

cars that significantly exceed 100 miles per gallon. We are going

to be launching a genomics X Prize. We are looking in entrepreneurship and education and other arenas.

In closing, let me highlight our work with NASA.

In 2003, prior to the winning of the Ansari X Prize, some of my

friends at NASA headquarters approached us and asked, ‘‘What

can we do to help?’’ I said, ‘‘NASA should be doing prizes.’’ They

hired us to do a study. We spent about six months working and

going through all of the agency elements and came up with 100

prize ideas. To do a prize properly is not picking a target. We have

developed a prize innovation process that figures out, first, what is

the problem you are trying to solve. Understand that first. Is it

CO2 emissions? Is it energy independence? Is it energy storage?

What is the problem? And then it—and then basically drive it forward.

So we have developed this process, and we are pleased to be able

to bring that technology and bring that capability to the Committee.

Thank you for your time.

[The prepared statement of Dr. Diamandis follows:]

PREPARED STATEMENT OF PETER H. DIAMANDIS

Chairman Boehlert and members of the Committee, thank you for permitting me

to submit this testimony on the use of inducement prizes for advances in hydrogen

technology. My name is Peter H. Diamandis. I am the Founder, Chairman, and CEO

of the X PRIZE Foundation.

Founded in 1995, the X PRIZE Foundation fosters innovation in a unique way.

Rather than awarding money to honor past achievements or directly funding research with uncertain outcomes, the X PRIZE Foundation creates high profile competitions that attract and motivate creative solutions to important problems. Our

mission is to bring about radical breakthroughs for the benefit of humanity utilizing

prizes.

Incentive prizes have a history stretching over several hundred years, with successful prizes having dramatic effects. One of the most famous—and the one that

personally inspired me to start X PRIZE—was the Orteig Prize, won by Charles

Lindbergh in 1927 for his dramatic non-stop flight from New York to Paris in 1927.

This $25,000 prize caused nine teams to spend $400,000. Lindbergh’s, the most unlikely of the nine teams, won the purse and ignited an aviation renaissance.

The huge crowd that mobbed Lindbergh in Paris was just the first indicator of

the impact his achievement would have. Within eight months of his flight, the number of airplanes in the U.S. quadrupled, the number of pilots tripled and the number of individuals buying airline tickets increased 30-fold from 5,700 to nearly

180,000.

Lindbergh’s success in winning the Orteig Prize gave a jump-start to commercial

aviation. It was the efficiency of the Orteig Prize and the tremendous leverage it

offered that drove me to create the Ansari X PRIZE to solve the problem of private

space flight.

Since the age of nine, my passion has been space flight. I’m a child of the Apollo

vision that this country once had. However, as I watched the aerospace industry develop over the past few decades, it was evident to me that innovation in space flight

had stalled. During the past 40 years the cost of space flight has gone up, but the

29

reliability has not improved. To disrupt these trends, I created an international

competition with a $10M purse, for the first privately-funded team to develop and

fly a three-person, reusable spaceship to 100 kilometers altitude, twice within two

weeks. The prize was announced under the arch in St. Louis, 10 years ago next

month (May 18th, 1996), along with 20 astronauts, the NASA Administrator, the

FAA Associate Administrator and the Lindbergh Family. During the following decade I raised the $10 million purse, recruited 26 teams from seven countries to compete and built a world-class team of individuals who became expert in how to create,

manage and award Inducement Prizes.

As you may know, the Ansari X PRIZE was won on Oct. 4, 2004, by Mojave Aerospace Ventures, led by designer Burt Rutan and financier Paul Allen. The competition caused teams to spend over $100 million to win the $10 million purse, and attracted over five billion media impressions that changed the public paradigm that

space flight is only for government employees. The winning spacecraft—

SpaceShipOne—now hangs next to the Spirit of St. Louis and the Wright Flyer in

the Smithsonian National Air & Space Museum.

The long-term effects won’t be known for years, but it’s already clear that X

PRIZE helped spawn a new industry with dramatic technological, social and investment opportunities. Richard Branson paid $121M for the winning technology, and

thousands of consumers have paid deposits for space tourism tickets. Several other

commercial space flight companies were spawned by the X PRIZE competition and

are still operating.

Inducement prizes are fundamentally different than conventional R&D funding.

Inducement prizes define a problem and pay for successful solutions—they do not

pay for the work itself, they do not define or pre-judge technical approaches, and

they do not pre-judge qualifications.

Successful prizes are well-designed, well-timed, appeal to a broad audience, and

offer potential rewards—prestige, publicity, and future business—far in excess of the

purse itself. Inducement prizes have a unique ability to efficiently drive research

that leads to high-leverage breakthroughs. The return-on-investment can be huge;

the Ansari X PRIZE leveraged seed capital 50-fold. Why is that? Why can inducement prizes work so well? There actually is a science to this process, something with

the X PRIZE Foundation has spent 10 years learning. Following are some the important reasons:

1. Prizes Attract Alternate Funding Sources: Prize teams are able to attract risk-taking capital which is put up by corporate sponsors or wealthy individuals who actually encourage risk-taking because they seek the publicity

and desire to win. Prizes tap into the $20 billion pot of money spent each

year on event and sports-related sponsorship.

2. Media Spotlight: The intense media spotlight and opportunity to become a

global hero, drives teams to work around the clock. Incentive prizes cause

these teams to work harder than any employment contract could ever

achieve. If leveraged correctly, the media can also play a key role in educating the public about each team and their breakthroughs.

3. Bypassing Bureaucracy: Many brilliant individuals abhor bureaucracy

and would rather not go through the paper work and peer-review process

that would completely and totally frustrate them. Prizes set up a clear process: Solve the problem, by what-ever means, and you win the money and the

fame.

4. Crossing Disciplinary & National Boundaries: Most importantly, prizes

encourage innovators from outside the typical fields or nations to address

your problem. Breakthroughs typically come when a fresh mind, without preconceived biases, looks at the challenge.

Creating and managing successful inducement prizes is much harder than it

looks. There have been many attempts in the past which have failed. Prizes must

not be about technology alone, they must be structured to create and follow heroes,

have dramatic and demonstrable conclusions, and must be something the public and

media are made to care about. Success requires a carefully structured and balanced

approach that involves expertise in many areas, including science, technology, rules

& competition design, event management, arbitration, financing, sponsorship, media

relations, public relations, and government relations.

Since the awarding of the $10 million Ansari X PRIZE we have focused on building the X PRIZE Foundation into a world-class prize institute using best practices

and its 300 man-years of experience, to create, administer and award prizes that

will help change the world. We are currently working on inducement prizes in sevVerDate 11-MAY-2000 17:49 Dec 07, 2006 Jkt 027094 PO 00000 Frm 00033 Fmt 6633 Sfmt 6621 C:\WORKD\FULL06\042706\27094 SCIENCE1 PsN: SCIENCE1
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eral areas, including automotive, genetics, education, entrepreneurship, and—of

course—space.

In closing I would like to highlight our work with NASA, since I believe it provides a useful model for the type of prize creation and management contemplated

by the H–Prize Act. In 2003, prior to the winning of the Ansari X PRIZE, the leadership of NASA asked the X PRIZE to conduct a study on how prizes could be used

to support their mission. Under contract to the Agency, we came up with over 100

prize ideas and helped them structure the Centennial Challenges Program, which

is now funded annually to approximately $10 million per year. The X PRIZE Foundation now works closely with NASA assisting and advising, and in a number of

cases managing their larger prizes. In this situation, NASA puts up the prize purse

and the X PRIZE Foundation is responsible for raising the sponsorship funds to

manage the prize, writing the rules, attracting the teams, and following through to

a successful conclusion.

It is important to note that NASA does not manage the prizes themselves; they

identify the prize area and secure the prize purse. They depend on an independent

partner like X PRIZE to write the rules and implement the competition. In my view

this separation of responsibilities is fundamentally important. The prize organization must often act quickly, with authority, and must be able to assure potential

competitors that they will be treated fairly and without political bias. Thus, for example, once a particular prize has been established and the management plan approved, one should avoid mixed responsibilities for rule-creation, committee selection, judging, and arbitration.

Inducement prizes are well-suited to stimulate innovations in the fields of both

energy and transportation, and for that reason towards the long-term goal of a hydrogen economy. Technology advances are plausible, large markets are possible, investors are poised, and there would be great public interest in fundamental breakthroughs. The multi-billion dollar question, of course, is what are the prize rules,

who will compete, and when will it be won. The H–Prize Act would hasten the needed breakthroughs, and the X PRIZE Foundation is ready to help.

Thank you for your time and attention.

BIOGRAPHY FOR PETER H. DIAMANDIS

Dr. Diamandis is the Chairman and CEO of the X PRIZE Foundation

(www.xprize.org), which awarded the $10,000,000 Ansari X PRIZE (www.xprize.org)

for private space flight. Diamandis is now focused on building the X PRIZE Foundation into a world-class prize institute whose mission is to bring about radical breakthroughs for the benefit of humanity. The X PRIZE is now developing X PRIZEs in

fields such as Genomics, Automotive, Education, Medicine, Energy, and Social arenas.

Diamandis is also a leader in the commercial space arena, having founded and

run many of the leading companies in this sector. He is the Chairman & Co-Founder of the Rocket Racing League (www.xracing.com). Diamandis also serves as the

CEO of Zero Gravity Corporation (www.nogravity.com) a commercial space company

developing private, FAA-certified parabolic flight utilize Boeing 727–200 aircraft.

Diamandis is a co-founder of Space Adventures, Inc. (www.spaceadventures.com),

the company which brokered the first launches of private citizens to the International Space Station.

In 1987, Diamandis co-Founded the International Space University (ISU)

(www.isunet.edu) where he served as the University’s first managing director. Today

he serves as a Trustee of the $30M ISU that is based in Strasbourg, France. Prior

to ISU, Diamandis served as Chairman of Students for the Exploration and Development of Space (SEDS) an organization he founded at MIT in 1980. SEDS is the

world’s largest student pro space organization.

Dr. Diamandis attended the Massachusetts Institute of Technology (MIT) where

he received his undergraduate degree in molecular genetics and graduate degree in

aerospace engineering. After MIT he attended Harvard Medical School where he received his M.D. In 2005 he has was also awarded an honorary Doctorate from the

International Space University.

He is the winner of the Konstantine Tsiolkovsky Award, twice the winner of the

Aviation & Space Technology Laurel, and the 2003 World Technology Award for

Space, the 2006 Orbit Prize and the 2006 Lindbergh Award. In 8th grade, while living in New York, Dr. Diamandis won first place in the Estes rocket design contest.

Diamandis’ personal motto is: ‘‘The best way to predict the future is to create it

yourself!’’

Chairman BOEHLERT. Thank you very much.

31

I think—mark him down as a supporter of the concept.

Dr. Bodde.

STATEMENT OF DR. DAVID L. BODDE, DIRECTOR OF INNOVATION AND PUBLIC POLICY AT CLEMSON UNIVERSITY’S

INTERNATIONAL CENTER FOR AUTOMOTIVE RESEARCH

(ICAR)

Dr. BODDE. All right. Thank you very much, Mr. Chairman. And

thank you, also, for the opportunity to discuss this very creative

and innovative piece of legislation.

I think this does offer great hope for removing from this country

the curse of oil dependence and for moving us then into an energy

economy that is founded on domestic resources and on our own

technology advantages.

The H–Prize would accomplish this, in my judgment, through

two principle mechanisms.

First, it would stimulate and nurture the research base from

which these innovations are drawn. It will do this by attracting

new researchers and innovators and by calling public attention to

that.

Second, it would perform one of the most difficult feats in our

economy, and that is accelerating research, in this case hydrogenrelated research, across the gap between innovation research, that

is innovation funding—excuse me, between research funding and

new venture kinds of funding. These communities move in parallel.

They don’t communicate well. And that gap between research funding and innovation funding is a very large one. This would help

move across it.

Now to achieve that, we have to bear in mind, I think, three fundamental principles.

First, continuity. To have this effect, the prize has got to be continuous, it has got to be reliable, and it has got to be predictable

across the 10-year course of it.

Second, additionally. It has got, of course, to attract risk capital,

but it should not do this at the expense of the basic funding for research for the hydrogen programs.

And finally, learning and adaptation over the course of the 10

years that this program would be in operation. We are going to

learn a lot of things about prizes and a lot of things about this, and

we need to have a conscious mechanism for adaptation.

Now, as requested, I would like to offer some suggestions for the

operation of the program, and I would like to do this in the context

of each of the three principle prize components or prize categories,

I should say.

The first prize category is for advancements in components or

systems. Now this is where you get the chief effect of the expansion

of the research base, the attracting of new researchers into hydrogen-related activities. I would like to offer three suggestions for

your consideration in looking at this part of the program.

One, to include in the criterion for eligibility, scientific discoveries that lead directly to components and systems. Now I know

the point of the legislation is to provide an incentive for innovation

and not for science, for applications and not for basic discovery. But

in some cases, the applications themselves will be relatively

32

straightforward and fall right out from the scientific discovery once

that discovery is announced, and so if we were to add directly related scientific discoveries to the criterion for eligibility, that would

not only do justice in connecting reward to benefit, but would also

remove any possible incentive for a discoverer to sequester a discovery until it could be embodied in some kind of device or component. And it would also increase the talent pool available for hydrogen-related research.

The second suggestion, allowing enabling technologies to be eligible. Now, by an ‘‘enabling technology,’’ I mean an advance in a

seemingly unrelated field that springs forward the advances in the

field that one is seeking. Take battery technology, for example. Improved batteries would relieve pressure on the—for performance of

a fuel cell and would have a dramatic effect in accelerating the hydrogen economy. And so this is what I mean by an enabling technology. Likewise, software for on-vehicle energy management, another kind of enabling technology. Hydrogen safety, carbon sequestration, there is a list of things that could significantly advance a

hydrogen economy, but—and in my judgment, should be a part of

the eligibility requirements.

The third suggestion that we apply the principle of continuity

most strongly here. In order to attract people to an H–Prize competition, we need to build the pipeline of researchers and investigators, and that, frankly, starts at the high school level. It starts with

interesting kids in science, showing them career opportunities in

science, nurturing that through college through a graduate degree,

and then into the research community. This pipeline takes a long

time to build, and it takes continuity and assurance that that career will be there at the end of the pipeline to have the effective

incentive.

Now the second prize category, that of prototypes, addresses one

of the most important difficulties in science and innovation in this

country today, and that is the gap between research programs and

innovation funding. What is called, or what I call, maturation

funds, perhaps seed capital for innovation is another way to think

about it, are needed here to move across the gap between the two

cultures. Some federal programs already provide this. The SBIR,

STTR, ATP programs are certainly very capable in providing this,

but here the reward is given—or the award, I should say, is given

before the performance in anticipation of the performance. In contrast, the H–Prize would complement these by being given after the

performance, and so it could be a very powerful supplement to

these kinds of programs in providing this bridging funding.

The first prize category is that for transformational technologies

for the distribution or production of hydrogen, which is, in my view,

the most challenging. And I think special thought and care has to

be put into the implementation criteria for this.

Finally, learning and adaptation is one of the most important

parts of this program. Certainly the awarding foundation should

report its results periodically and follow up the awards given to understand systematically what has come from this program.

In conclusion, I think this is a very valuable program and one

that will help our energy security, the environment, and our competitiveness.

33

1 Research in science yields an understanding of the natural world and the laws that govern

the behavior of materials, complex systems, living organisms, and so forth. In contrast, innovation concerns the man-made world and the creation of devices and methods that improve our

daily lives. More so than science, innovation brings with it entrepreneurial and market considerations, thus making the real-world connections between these two phenomena complex and varied.

[The prepared statement of Dr. Bodde follows:]

PREPARED STATEMENT OF DAVID L. BODDE

Thank you, Ladies and Gentlemen, for this opportunity to discuss the H–Prize Act

of 2006, now before this committee. I believe the H–Prize offers an innovative policy

that could accelerate our nation’s transition toward more secure and sustainable energy by:

• Stimulating and nurturing the relevant science and engineering research

from which innovation must spring; and,

• Accelerating hydrogen-related research to cross the gap from science opportunity to investment opportunity.

To fully accomplish this, the H–Prize program should operate with several principles in mind.

• Continuity. The prizes must be offered reliably and for a period long enough

to build the technology pipeline, rather than simply create a windfall for

those already there.

• Additionality. The funds needed to support the H–Prize must supplement

rather than compete with the core funding appropriated in support of hydrogen-related research and development.

• Learning. We cannot now anticipate the changes, social as well as scientific,

that will occur over the 10-year life of the H–Prize program, and so the administration of the prize program must carefully document its experience,

learn from that experience, and adapt accordingly.

In what follows, I will set out my reasoning in support of these summary points,

and offer suggestions for the operation of the H–Prize program.

Building the Foundation: Advancements

The first category of the H–Prize structure, ‘‘advancements in components or systems,’’ can serve to expand the research base upon which innovations will draw.

These prizes would accomplish this by drawing attention to the importance of the

hydrogen revolution, and by combining prestige with monetary value in attracting

additional researchers into the field. To achieve the greatest benefit, however, I

would suggest that consideration be given to:

• Including scientific discoveries that lead directly to components or systems in

the eligibility for an ‘‘advancements’’ prize;

• Allowing enabling technologies to be included in the award criteria; and,

• Ensuring continuity over the ten-year life of the program to lower the career

risk for technologists considering hydrogen-related research.

Including Directly Related Scientific Discoveries

The intent of the H–Prize is to accelerate the hydrogen transition by focusing on

the application of technology, not the creation of new knowledge-and properly so.

Yet the boundaries between science and innovation remain indistinct,1 and in some

cases a science breakthrough could directly release a wide array of components and

systems. For example, Wilhelm Roentgen’s announcement of the discovery of X-ray

phenomena in 1895 was followed quickly by a host of applications in medical and

other fields, none of which would have occurred in the absence of this seminal announcement. To allow this possibility for hydrogen, I would suggest including directly supporting science discoveries in the eligibility for this category of H–Prize.

Including directly connected science might offer two ancillary benefits as well.

First, it could broaden the pool of researchers who would find the H–Prize relevant.

And second it would remove any possible incentive to sequester a discovery until

an applications device could be made.

Including Enabling Technologies

Technology revolutions often build upon combinations of advances in seemingly

unrelated fields—often termed ‘‘enabling technologies.’’ Consider home refrigeration,

34

2The ‘‘prototype’’ prize category would also complement the SBIR, STTR, and ATP programs,

which serve much the same function but with awards given in anticipation of success rather

than after it occurs. 3The most urgent need is for early stage funding. In 2005, for example, only three percent

of venture funds committed went for startup and seed capital investments. Early stage investfor example. When the mechanical refrigerator swept into the market in the 1930s

and 1940s, it destroyed an industry (ice manufacturing and delivery), reshaped another (the corner grocery became the supermarket), and improved the productivity

of homemaking enormously. Yet this innovation depended upon several enabling

technologies for its success—efficient, small scale refrigeration cycles; widespread

availability of electric energy; and compact, powerful alternating-current motors.

In the case of hydrogen, enabling technologies can prove powerful also. For example, a technology that greatly enhanced the safety of hydrogen use would serve the

transition well even if it were not strictly related to any single component or system.

Similarly, a breakthrough in carbon sequestration might allow coal, shale, and other

abundant hydrocarbons to be used for hydrogen production without environmental

damage. Such a breakthrough, though not strictly hydrogen production, would advance the transition markedly. Thus, I would encourage a very broad interpretation

of the term ‘‘related to.’’

Providing Continuity

The general principle of program continuity applies most strongly in this first

prize category. That is true because human beings must invest many years of preparation as their entry ticket for any field of technological research. For the prize program to draw additional entrants to hydrogen-related research fields, it must be

perceived as stable over the time required for preparation and career launch—and

for that reason, this category of H–Prize might diminish in attractiveness to new

entrants as its ten-year ‘‘sunset’’ approaches. None of this militates against learning

and adaptation in the awards process; rather, it suggests that greater predictability

will make the awards more attractive to those considering a career in the field. Less

predictability would have the opposite effect.

Crossing the Gap: Prototypes

The second category of H–Prize addresses one of the most important problems in

science and innovation—the availability of maturation funds to move a technology

across the gap between research funding and investment funding. This gap arises

because research funding tends to asks questions of discovery, seeking knowledge

of how the natural world works. Answers to these questions do not always illuminate how the constructed world—that of the devices and systems that serve humans—can be improved through innovation. In too many cases, potential investors

cannot translate readily from scientific possibility to a marketable innovation, and

so they await a prototype or some other evidence to help them judge the risks and

returns from innovation. Thus a technology, even with ongoing research support,

can languish in the chasm between research support and venture development funding. To be sure, some companies and foundations do invest in technology maturation

research, but the resources are generally below the amount needed for greatest benefit. Thus, the prize would most probably add to the total resources available for

innovation.2

The prototype category of the H–Prize could provide incentives for private parties—perhaps foundations, research corporations, or first stage investors—to commit

technology maturation investments. In effect, it lowers the risk for investors funding

a technology maturation project by offering the possibility that its cost can be recovered. The most astute of these investors would find their technology ‘‘bets’’ effectively hedged by the prize. The least astute would not—and, of course, should not.

Transformational Technologies

The third category of prize—a $10 million cash prize and a match for private in- vestment funds up to $90 million—would reward major ‘‘. . .transformational

changes in technologies for the distribution or production of hydrogen. . .’’ Thus it

would provide incentives for the infrastructure side of the hydrogen market, which

is likely to prove a highly capital-intensive undertaking. However, this prize category also poses challenges that appear greater than in the previous categories.

First, the prize might prove redundant. Entrepreneurs and venture capital investors seek opportunities with demonstrable potential for exponential growth—exactly

the kind of venture that appears to be contemplated in the prize description. A new

venture meeting these objective criteria would probably have little difficulty attracting venture capital, especially in view of the increasing risk aversion now characterizing the venture investment industry.3

35

ment occupied another 16 percent. The remaining 81 percent went for expansion and late-stage

investments. Data from National Association of State Venture Funds.

Second, one cannot know in advance the appropriate scale of investment, and

hence the size of the award might not mesh well with the need. If the winning venture were small, the availability of a large federal match might tempt its owners

to accept too much capital. Experienced venture investors recognize that too much

funding can be as inimical to long term success as too little. On the other hand,

if the winning venture were on the scale of, say, a shale oil plant (tens of billions

of dollars), the prize would add little beyond prestige to the total incentive.

Learning and Adaptation

Learning and adaptation should be designed into the H–Prize process from the

beginning for three reasons. First, the awards program will learn from its own experience, and can improve in response to that learning. Second, the ten-year duration

of the H–Prize program will surely see significant advances in every field of science,

especially the hydrogen-related technologies. Award categories most relevant at the

beginning might well recede in importance 10 years into the future. And third, an

evolving public recognition of the scope and urgency of the worldwide energy-environment-economy trilemma could lead to changes in energy policy over the period.

Because of such changes, the award criteria (and possibly the administrative processes) that are most appropriate at the beginning of the program might become less

so by its end.

For these reasons, I suggest that some formal process for learning and adaptation

be included in the H–Prize program. An annual or biennial report of progress, to

be submitted by the administering institution, could establish the factual basis for

learning. These reports should surely include a follow-up analysis of each award to

ascertain its outcome as measured against progress toward a hydrogen transition.

To be sure, there is some tension between the earlier-mentioned principle of consistency and the desirability of adaptation with learning. The core idea should be to

adapt the means but hold constant the ends.

In Summary

Reducing our nation’s dependence on oil will improve the environment, relieve the

economy of large income transfers to oil producers, and strengthen our national security. I believe the H–Prize, as set out in H.R. 5143, could do much to accelerate

this greatly needed transition from petroleum to a hydrogen economy. This is a constructive and innovative proposal, and it deserves your fullest consideration.

BIOGRAPHY FOR DAVID L. BODDE

Senior Fellow and Professor, Arthur M. Spiro Center for Entrepreneurial Leadership, Clemson University. Research and expertise in:

• Intellectual property management

• Markets for new energy technology

• Corporate entrepreneurship

• Next-generation hybrid electric and hydrogen fuel cell vehicles.

PREVIOUS PROFESSIONAL EXPERIENCE

University of Missouri–Kansas City, July 1996 to September 2004

Charles N. Kimball Chair in Technology and Innovation at the University of Missouri, Kansas City. Joint appointment as Professor of Engineering and Business Administration.

Midwest Research Institute (MRI), January 1991 to July 1996

Corporate Vice President and President of MRI’s for-profit subsidiary, MRI Ventures. Responsible for new enterprise development through cooperative research,

new ventures, licenses, and international agreements. Managed technology development consortium of five private companies to commercialize technology from the National Renewable Energy Laboratory (NREL). Worked with Department of Energy

and senior NREL management on strategic initiatives for the laboratory.

National Academy of Sciences, April 1986 to January 1991

Executive Director, Commission on Engineering and Technical Systems. Directed

research and studies on public and private issues in science and technology.

36

U.S. Government, March 1978 to March 1986

Assistant Director, Congressional Budget Office, United States Congress. Directed

economic analyses of legislation affecting energy, industrial competitiveness, agribusiness, science, technology, and education.

Deputy Assistant Secretary, Department of Energy. Policy research regarding nuclear energy, coal, synthetic fuels, electric utilities, technology transfer and national

security. Emphasis on nuclear breeder reactors and nuclear non-proliferation. U.S.

delegate to International Nuclear Fuel Cycle Evaluation, which sought an international agreement on plutonium recycle and measures to slow the proliferation of

nuclear weapons.

TRW, Inc., January 1976 to March 1978

Manager, Engineering Analysis Office, Energy Systems Planning Division. Built

business using systems analysis and engineering studies. Emphasis on application

of aerospace technology to energy problems, especially radioactive waste disposal

and synthetic fuels.

U.S. Army, 1965 to 1970

Captain. Platoon leader, company commander, and battalion operations officer.

Airborne and Ranger qualified. Service as combat engineer in Vietnam (1968–69).

Bronze Star, Army Commendation Medals. Remained in the Army Reserve as an

R&D officer advising on the management of defense laboratories and nuclear research programs.

EDUCATION

Harvard University

Doctor of Business Administration, March 1976. Doctoral thesis on the influence

of regulation on the technical configuration of the commercial nuclear steam supply

system. Thesis research cited in subsequent books on nuclear energy. Harding Foundation Fellowship.

Massachusetts Institute of Technology

Master of Science degrees in Nuclear Engineering (1972) and Management (1973).

Atomic Energy Commission Fellowship. Experimental thesis on irradiation-induced

stress relaxation.

United States Military Academy

Bachelor of Science, 1965. Commissioned Second Lieutenant, U.S. Army.

CORPORATE BOARD MEMBERSHIPS

Great Plains Energy

Board member of electric energy company, 1994–present. Chair, Nuclear Committee; Chair, Governance Committee; Member, Audit Committee.

The Commerce Funds

Founding director of family of mutual funds, currently with $2.2 billion assets

under management. Growth and Bond Funds achieved Morningstar 5-Star ranking.

1995–present.

PERSONAL BACKGROUND

Grew up in Kansas City, Missouri. Married (since 1967) with four children. Enjoy

competitive athletics, especially racquetball and tennis. Frequent backpacker, amateur historian, bad poet, and worse musician.

Author of The Intentional Entrepreneur (M.E. Sharpe 2004); co-author of The Hydrogen Economy (National Academies Press 2004); and editor of Managing Enterprise Risk: What the Electric Industry Experience Implies for Contemporary Business

(Elsevier 2006). Additional publications in technology management, energy, and policy.

Chairman BOEHLERT. Thank you very much, Dr. Bodde.

Dr. Greene.

37

STATEMENT OF DR. DAVID L. GREENE, CORPORATE FELLOW,

OAK RIDGE NATIONAL LABORATORY, CENTER FOR TRANSPORTATION ANALYSIS, NATIONAL TRANSPORTATION RESEARCH CENTER

Dr. GREENE. Yes, thank you.

Good morning, Mr. Chairman and Members of the Committee

and all of those others present today.

We all are aware that our country faces serious energy problems,

and I would like to thank Congressman Inglis for putting up this

graph of Exxon Mobil’s view of the world in the future, because I

think it shows us three really important things that we need to

keep our eye on. One is that demand for transportation fuels and

petroleum fuels is going to continue to grow in the future. The second is that, even in Exxon Mobil’s view, production outside of

OPEC will reach a peak and they believe plateau, others believe

decline. And the third is that the source of supply for the rest of

that energy is OPEC, although it is highly unlikely that they will

supply that energy, because, as the Department of Energy has

shown in their own analysis and Professor Dermott Gately at NYU

has shown, it—they can make more money—more revenue by leaving a good bit of that oil in the ground.

Our energy situation changed dramatically 35 years ago when oil

production in the United States peaked in 1970, and it has never

returned to that level. That and the formation of OPEC fundamentally changed the world oil markets. The peaking or the plateauing

of oil production for the entire world outside of OPEC is going to

make an enormous difference as well.

Now I don’t know of anything that could do more to solve our nation’s energy problems in the long run than the creation of technologies to enable clean and efficient, economical hydrogen-powered

transportation. However, there are major technological barriers,

independent technological barriers that stand in the way of doing

this. And here, I would like to read from the report that—from the

National Academies that Dr. Bodde participated in. They said:

‘‘There are major hurdles on the path to achieving the vision of the

hydrogen economy. The path will not be simple or straightforward.

Specifically, for the transportation sector, dramatic progress in the

development of fuel cells, storage devices, and distribution systems

is especially critical. Widespread success is not certain.’’

The Department of Energy’s own Hydrogen, Fuel Cells and Infrastructure Technologies Multi-Year Plan echoes these same three

technological challenges. They say: ‘‘Hydrogen storage systems for

vehicles are inadequate to meet customer driving range expectations without intrusion into the vehicle cargo or passenger space.

Hydrogen is currently three to four times as expensive as gasoline.’’

And I think in saying that, they mean also delivery of hydrogen

and including the cost of that. ‘‘Fuel cells are about five times more

expensive.’’ Some people say ten times more expensive. I would say

in each of these areas, we are facing approximately order of magnitude challenges to changing the technology. Very difficult. And

these technologies are not likely to be self-reinforcing. That is, we

need, essentially, independent scientific breakthroughs in each of

those three areas.

38

I think the H–Prize categories correspond well to these key areas

in which breakthroughs are needed.

Another area that the National Academy Committee cited was

the sequestration of hydrogen or production of hydrogen from renewables. Sequestration is not a part of this even though it would

be a supporting technology, but I think that is appropriate as well,

because sequestration is needed—going to be needed by many other

fossil-fuel-using technologies, and I personally do not think the

challenges there are as great as the ones for hydrogen that I have

noted above.

I think this bill will increase the likelihood of overcoming these

technological barriers by mobilizing creative minds that might not

otherwise tackle them. And I think the—I would endorse their—the

arguments given by Dr. Diamandis and Dr. Bodde on these points.

I would like to emphasize strongly, as strongly as I possibly can,

that creating the H–Prize cannot substitute for adequately funding

research, development, and demonstration. I realize coming from a

National Lab that is a little bit self-serving, but nonetheless, I

think it is true.

It is sometimes said that science is 95 percent perspiration and

five percent inspiration. We have heard a lot about inspiration, but

I want to emphasize that the perspiration is just as important. And

there is simply no substitute for a sustained and concentrated effort. Thus, I see the H–Prize as a useful supplement to a well designed and adequately funded R&D program, and I think the writers of this bill have recognized that appropriately.

I have some other recommendations on specifics of how judges

might be selected. I think that it would be appropriate for the

judges to be selected independently rather than by a government

agency. I think that clearly would show people that there is no political influence in this and that the prize is going to be awarded

fairly.

Finally, I just wanted to congratulate the Committee and its staff

for listening to the expert panel that it convened previously and reflecting those recommendations in their—the legislation, and I

want to wish them every success with this important initiative.

Thank you.

[The prepared statement of Dr. Greene follows:]

PREPARED STATEMENT OF DAVID L. GREENE

Good morning. My name is David Greene. I am a Corporate Fellow of Oak Ridge

National Laboratory where I have researched transportation energy policy since

1977. The comments I offer the Committee today are mine alone and do not necessarily reflect the views of Oak Ridge National Laboratory, UT–Battelle or the U.S.

Department of Energy. I am also a National Associate of the National Academies.

I point out these two affiliations in the interests of disclosure since some of my comments below pertain to these institutions.

We are all aware that our country faces serious energy problems. Despite world

oil prices at or near historic highs, U.S. net oil imports averaged 60 percent for the

year 2005 and for the first three months of this year, as well (USDOE/EIA, 2006).

According to estimates by the Energy Information Administration, oil imports added

$230 billion to our balance of trade deficit in 2005. By my own estimates, U.S. oil

dependence costs, comprised of transfer of wealth to oil exporting countries and negative impacts on our Gross Domestic Product, amounted to approximately one quarter of a trillion dollars last year (Greene and Ahmad, 2005). By my best estimates,

the economic costs of our oil dependence over the past three decades exceed $3.5

trillion. These estimates do not include political, strategic and military costs which

are difficult to estimate but clearly very large.

39

I know of nothing that could do more to solve our nation’s energy problems in the

long run than the creation of technologies to enable clean, efficient, economical hydrogen-powered transportation. However, major technological barriers stand in the

way of achieving this goal. I endorse the following conclusions of the National Academies Committee on Alternatives and Strategies for Future Hydrogen Production

and Use (NRC, 2004) with respect to the technological barriers to hydrogen powered

transportation.

‘‘There are major hurdles on the path to achieving the vision of the hydrogen

economy; the path will not be simple or straightforward.

Specifically for the transportation sector, dramatic progress in the development

of fuel cells, storage devices, and distribution systems is especially critical.

Widespread success is not certain.’’ (NRC, 2004, p. 116)

The Department of Energy’s Hydrogen, Fuel Cells and Infrastructure Technologies Multi-Year Research, Development and Demonstration Plan identifies three

key ‘‘technology barriers’’ that must be overcome if the vision of hydrogen-powered

vehicles is to be achieved.

• ‘‘Hydrogen storage systems for vehicles are inadequate to meet customer driving range expectations (>300 miles) without intrusion into vehicle cargo or

passenger space.

• Hydrogen is currently three to four times as expensive as gasoline.

• Fuel cells are about five times more expensive than internal combustion engines and do not maintain performance over the full useful life of the vehicle.’’

(USDOE/EERE/HFCIT, 2005, p. ii)

The H–Prize categories correspond well to the key areas in which breakthroughs

are needed. As stated above, these are, (1) hydrogen storage, (2) fuel cell power train

cost and durability, and (3) the cost of producing hydrogen, especially from renewable energy resources. A fourth critical area noted by the National Academy Committee is the sequestration of carbon if hydrogen is produced from fossil fuels. While

this is indeed key to achieving the full environmental benefits of a hydrogen economy, I believe that the technological challenges in this area are not as great and,

in addition, that it is not a problem peculiar to the use of hydrogen as an energy

carrier. Other uses of fossil fuels will also likely require carbon sequestration.

From a scientific and engineering point of view, the needed technological breakthroughs appear to be independent. That is, a breakthrough in one area, e.g., onboard hydrogen storage, will not necessarily increase the likelihood of a breakthrough in fuel cells or hydrogen production. The fact that multiple, independent

breakthroughs are needed magnifies the technological challenge. For this reason it

is wise to mobilize creative thinking throughout our society.

I believe that H.R. 5143 would increase the likelihood of overcoming these technological barriers by mobilizing creative minds that might not otherwise tackle them.

A substantial, prestigious prize provides motivation that an R&D contract cannot:

a challenge with the promise of public recognition for scientific achievement. The

H–Prize will also cast a wider net, potentially including individuals and organizations that would otherwise not be part of the hydrogen R&D effort.

Let me emphasize as strongly as possible that creating the H–Prize cannot substitute for adequately funding research, development and demonstration. It is sometimes said that science is 95 percent perspiration and five percent inspiration. The

fact is, there is simply no substitute for sustained and concentrated effort. Thus, I

see the H–Prize as a useful supplement to a well-designed and adequately funded

R&D program.

H.R. 5143 clearly intends to isolate the H–Prize competition from political considerations and conflicts of interest. This is not only the right thing to do but is essential if the H–Prize is to provide the intended incentives for innovation. With this

in mind, I believe it would be wise to specify in the legislation the independent third

party to be responsible for selecting award winners. Designating an institution such

as the National Academies that has a long and well established history of independent, objective assessment would make clear, in advance, that neither politics

nor special interests would influence the selection of winners.

The draft bill states that the Secretary of Energy, through an agreement under

section 3(c), shall assemble a panel of qualified judges to select the winner. . .’’ It

is not clear to me from this language whether the Secretary of Energy has authority

to appoint the judges or whether this authority would reside with the third party

administering the competition. In my opinion, in order to avoid even the appearance

of political influence in the selection of winners, the authority should be given to

the independent third party.

40

Finally, I congratulate the Committee and its staff for listening to the expert

panel it convened on the H–Prize, digesting their recommendations and incorporating them in this draft legislation. I wish you every success with this important

initiative.

Thank you for your attention. I look forward to answering any questions you may

have to the best of my ability.

REFERENCES

Greene, D.L. and S. Ahmad. 2005. ‘‘Costs of U.S. Oil Dependence: 2005 Update,’’

ORNL/TM–2005/45, Oak Ridge National Laboratory, Oak Ridge, Tennessee,

January.

(NRC) National Research Council. 2004. The Hydrogen Economy, Committee on Alternatives and Strategies for Future Hydrogen Production and Use, National

Academies Press, Washington, DC.

(USDOE/EERE) U.S. Department of Energy, Energy Efficiency and Renewable Energy. 2005. ‘‘Hydrogen, Fuel Cells & Infrastructure Technologies Program:

Multi-Year Research, Development and Demonstration Plan,’’ Revision 1, February, 2005, Washington, DC.

(USDOE/EIA) U.S. Department of Energy, Energy Information Administration.

2006. ‘‘Weekly Petroleum Status Report, March 2006,’’ Table H1, Washington,

DC.

BIOGRAPHY FOR DAVID L. GREENE

A Corporate Fellow of Oak Ridge National Laboratory (ORNL), David Greene has

spent 25 years researching transportation energy and environmental policy issues.

Dr. Greene received a B.A. degree from Columbia University in 1971, an M.A. from

the University of Oregon in 1973, and a Ph.D. in Geography and Environmental Engineering from The Johns Hopkins University in 1978. After joining ORNL in 1977,

he founded the Transportation Energy Group in 1980 and later established the

Transportation Research Section in 1987. Dr. Greene spent 1988–89 in Washington,

DC, as a Senior Research Analyst in the Office of Domestic and International Energy Policy, U.S. Department of Energy (DOE). He has published more than one

hundred seventy-five articles in professional journals, contributions to books and

technical reports, and has authored or edited three books (Transportation and Energy, Transportation and Global Climate Change, and The Full Costs and Benefits

of Transportation). Dr. Greene served as the first Editor-in-Chief of the Journal of

Transportation and Statistics, and currently serves on the editorial boards of Transportation Research D, Energy Policy, Transportation Quarterly, and the Journal of

Transportation and Statistics. Dr. Greene has been active in the Transportation Research Board (TRB) and National Research Council (NRC) for over 25 years, serving

on several standing and ad hoc committees dealing with energy and environmental

issues and research needs. He is past Chairman and member emeritus of TRB’s Energy Committee, past chair of the Section on Environmental and Energy Concerns

and a recipient of the TRB’s Pyke Johnson Award. In recognition of his service to

the National Academy of Science and National Research Council, Dr. Greene has

been designated a lifetime National Associate of the National Academies.

Chairman BOEHLERT. Thank you very much, Dr. Greene. Don’t

worry about being a little self-serving with your testimony. On occasion, we are noted for that, too.

Mr. Baxley.

STATEMENT OF MR. PHILLIP BAXLEY, PRESIDENT OF SHELL

HYDROGEN, L.L.C.

Mr. BAXLEY. Thank you.

Good morning, Mr. Chairman, Members of the Committee. I

want to thank you for your invitation to testify here today. Let me

just, one more time, repeat, I am Phillip Baxley. I am President of

Shell Hydrogen with responsibility for Shell’s hydrogen business

activities in North America.

Shell Hydrogen’s global business was set up more than seven

years ago to pursue and develop business opportunities related to

hydrogen and fuel cells. In fact, I am pleased to note that Shell HyVerDate 11-MAY-2000 17:49 Dec 07, 2006 Jkt 027094 PO 00000 Frm 00044 Fmt 6633 Sfmt 6601 C:\WORKD\FULL06\042706\27094 SCIENCE1 PsN: SCIENCE1
41

drogen was actually asked to testify before this same distinguished

Committee over six years ago on the emerging issue and the

emerging importance of hydrogen.

A hydrogen economy, Shell believes, provides benefits through

economic growth, job development, investment opportunities, and a

sustainable, secure energy supply. Additionally, hydrogen can directly address air pollution and provide many pathways to address

the reduction and eventual elimination of greenhouse gases.

The primary challenges, at this time, are to further develop fuel

cell vehicle technology and achieve mass production levels. I believe

the development of a Hydrogen Prize can supplement and extend

the great work that is already being done in these areas.

The goal of providing hydrogen as a fuel on a significant scale

requires a coordinated undertaking within all levels of government,

the automotive industry, the energy companies, and the supply network.

From a fuel supply perspective, there has been a hydrogen economy, and is a hydrogen economy, and hydrogen infrastructure in

place for decades. Globally, 50 million tons of hydrogen are produced and consumed every year, mainly in our own refineries and

chemical plants, and mostly used for producing clean traditional

fuels. Just to put this number in perspective, this amount of hydrogen could power all the family vehicles in the United States if they

were fuel cell vehicles.

Additionally, most areas of significant population are close to hydrogen production facilities now. The challenge, then, is to bring

hydrogen into the everyday lives of consumers in convenient locations.

[Slide.]

This can be done, and it is already being demonstrated conceptually, at Shell’s Benning Road station right here in Washington,

DC, which you can see on your monitors here. And I would also

point out that this is an example from Shell, who has been working

on this over seven years, of an example of actually going out and

doing it and trying to make this happen. And I would also invite

those of you who haven’t had the opportunity to come out and visit

the Shell hydrogen station on Benning Road to do so, to drive a

fuel cell car, and to fuel up with hydrogen.

Our Benning Road station is a part of a longer-term goal of establishing a number of large-scale, integrated pre-commercial activities, which we call ‘‘Lighthouse Projects.’’

Last year, through the passage of the Energy Policy Act, Congress demonstrated a commitment to producing commercial fuel

cell vehicles and developing a hydrogen infrastructure. I would like

to commend Representative Inglis for his leadership in introducing

H.R. 5143. The Federal Government can have an important role in

fostering technological innovation. The creation of the Hydrogen

Prize is an important step in that direction.

In support of an H–Prize, I want to highlight three areas: leadership opportunities and significance of visible Congressional support, involvement and innovation across a broader community, and

commercialization and the growing global market.

First, the H–Prize will raise the profile of hydrogen on the national stage and demonstrate visible leadership from Congress on

42

an important issue for the economy, the environment, and from a

national security perspective. The Energy Policy Act helped the hydrogen economy emerge in a larger, more substantial way. A Hydrogen Prize demonstrates further leadership to increase public

awareness around hydrogen, thereby working towards a successful

evolution of hydrogen commercialization.

Secondly, an H–Prize will stimulate involvement and innovation

across a much broader community than the Department of Energy

programs or funding alone can provide. The incentives outlined in

the H–Prize Act are competitive, but it is imperative that the H–

Prize is well managed so we do not weaken the Department of Energy program when we are appropriating these funds. It is important to expand on the progress being made to the implementation

of the energy bill and continue to develop clear, consistent government policy for hydrogen so the market can thrive.

One of the strongest points in support of the H–Prize is the ability to stimulate involvement and innovation across a much broader

community than it is possible with DOE funding. For example, student competitions at universities, at small labs, at start-up companies, and my favorite is even the folks in their garages will be able

to participate, which has been a hallmark of American ingenuity

and competitiveness in so many other pioneering areas. And perhaps not just in the United States, but such a prize would likely

attract interest and talent from around the world.

Finally, an H–Prize can only accelerate commercialization and

support the growing global market. The race for global dominance

in the hydrogen economy has begun. Shell believes that hydrogen

will likely be widely used commercially within the next generation

in the United States, Western Europe, China, and Japan. An H–

Prize can play a role in assuring U.S. leadership in the development and deployment of a hydrogen economy by attracting world

talents to the United States. The market applications are the ultimate prize for many of the participants, however, the criteria established to award prizes needs to be considered well in order to

properly stimulate innovation in the marketplace. The scope of the

prizes awarded through the H–Prize also need to be well defined

and well thought out.

This issue is more important than ever, and we need to do it

right.

Thank you all for the opportunity to testify here today. This concludes my testimony. I would be happy to answer any questions

you have.

[The prepared statement of Mr. Baxley follows:]

PREPARED STATEMENT OF PHILLIP BAXLEY

Good morning Mr. Chairman and Members of the Committee, thank you for the

invitation to testify today. I am Phillip Baxley, President of Shell Hydrogen LLC,

with responsibility for Shell’s hydrogen business activities in North America.

Shell Hydrogen’s global business was set up more than seven years ago to pursue

and develop business opportunities related to hydrogen and fuel cells. Our goal is

to bring hydrogen into commercial use for transportation and other related needs.

Through existing and planned demonstration projects Shell Hydrogen is bringing

hydrogen out of its industrial settings to places where consumers can access it as

a fuel for their vehicles.

You are all aware of the energy challenges we face here in the U.S. and around

the world. In North America, Shell is a leader in the development of unconventional

43

hydrocarbon resources, like shale oil and tar sands, as well as renewable energies

and hydrogen technologies. We remain committed not just to increasing the world’s

energy supply, but to broadening its portfolio as well. A national energy portfolio

that includes significant use of hydrogen fuel and fuel cell applications will make

lasting contributions to our future energy needs. Last year, through the passage of

the Energy Policy Act, Congress demonstrated a commitment to producing commercial fuel cell vehicles and developing a hydrogen infrastructure. We are pleased to

see further congressional support through legislation complementing ongoing activities put in motion by the energy bill.

The goal of providing hydrogen as a fuel on a significant scale requires a coordinated undertaking within all levels of government, the automotive industry, and energy companies. Most of the research and development attention is focused on finding an inexpensive on-board hydrogen storage solution, and I hope the development

of a hydrogen prize can supplement the work that is already being done. We must

also address the technical and operational challenges through public-private partnerships and identify what is needed to accelerate the commercialization of hydrogen fuel cell technology. In many respects, hydrogen vehicles must be part of our

primary focus because it is the vehicles themselves that are furthest from commercial readiness.

From a fuel supply perspective, there has been a hydrogen economy and hydrogen

infrastructure in place for decades. Globally, 50 million tons are produced and consumed every year, mainly in our own refineries, for producing clean traditional

fuels. To put this number into perspective, this amount of hydrogen could power all

the family cars in the U.S. if they were fuel cell vehicles.

Additionally, most areas of significant population are close to hydrogen production. [Images 1 and 2] Now the test is to bring hydrogen into the everyday lives

of consumers in convenient locations.

This can be done and is already being demonstrated, for example, with our

Benning Road station here in Washington, D.C. [Image 3] As you may know, President Bush and a number of Members, staff and agency officials have visited the facility—over 1,400 visitors since the November 2004 opening.

The Benning Road station is part of our longer-term goal of establishing a number

of large-scale, integrated pre-commercial activities, which we call ‘‘Lighthouse

Projects.’’ We are focusing on a limited number of projects—mainly transportation

applications involving hundreds of vehicles and several combined hydrogen and gasoline refueling stations. Because significant numbers of vehicles are required for

‘real world’ operational experience in order to validate network supply and refueling

operations, we are focused on the northeast and west coast corridors at this time.

Before the end of the year, we plan to have two more stations on-line in New York

and Los Angeles.

The Hydrogen Prize Act of 2006

I would like to commend Representative Inglis for his leadership in introducing

H.R. 5143. The Federal Government can have an important role in fostering technological innovation—the creation of the Hydrogen Prize is an important step in that

direction.

My remarks will cover the following areas:

1. Leadership opportunities and the significance of visible congressional support.

2. Involvement and innovation across a broader community.

3. Commercialization and the growing global market.

First, the H–Prize will raise the profile of hydrogen on the national stage and demonstrate visible leadership from Congress on an issue that is important for the economy, the environment and from a national security perspective.

A hydrogen economy will not emerge by virtue of technology alone. Any development will be a combination of technology, economics and policy decisions.

The Energy Policy Act helped the hydrogen economy emerge in a larger, more

substantial way. A Hydrogen Prize demonstrates further leadership to increase public awareness around hydrogen, thereby working toward a successful evolution of

hydrogen commercialization.

Shell sees hydrogen as an important part of our future energy mix. To market

hydrogen within the foreseeable future, we working along two channels—first, to increase public awareness of hydrogen-based projects and further explore retail hydrogen fueling stations, and second, by actively supporting technological development

essential for rendering hydrogen accessible to a broader market. We work with partners to promote and support the development of the infrastructure and technical soVerDate 11-MAY-2000 17:49 Dec 07, 2006 Jkt 027094 PO 00000 Frm 00047 Fmt 6633 Sfmt 6621 C:\WORKD\FULL06\042706\27094 SCIENCE1 PsN: SCIENCE1
44

lutions that the world needs because we know we cannot do it alone. On the basis

of raising the awareness of hydrogen and promoting it as a stable energy carrier,

this legislation will provide an opportunity to address these challenges, as well as

allowing for new technical jobs and building new supply chains.

There are several critical hurdles to overcome before hydrogen can reach its full

potential in the market. Shell will continue to work together with our partners in

the industry and different areas of government to achieve sufficient levels of mass

production to drive down costs while meeting the energy needs of the country. It

will be helpful to open up to a broader group through the management of a prize

because prize incentives have a place in conquering our emerging technology hurdles.

Secondly, an H–Prize will stimulate involvement and innovation across a much

broader community than the Department of Energy programs and funding alone can

provide.

The incentives outlined in the H–Prize Act are competitive, but it is imperative

that the H–Prize is well managed so we do not weaken the existing Department of

Energy program budget when appropriating these funds. It is important to expand

on the progress being made through the implementation of the energy bill and continue to develop a clear, consistent government policy for hydrogen that the market

can thrive in.

One of the strongest points in support of an H–Prize is the ability to stimulate

involvement and innovation across a much broader community than is possible even

with DOE funding. For example, student competitions, universities, small labs,

startup companies, even folks in their garages can participate—which has been a

hallmark of American ingenuity and competitiveness in so many other pioneering

areas. And perhaps not just in the U.S., but such a prize would likely attract interest and talent from around the world as well.

A hydrogen economy provides benefits through economic growth, job development,

investment opportunities, and a sustainable secure energy supply. Additionally, hydrogen can directly address air pollution and provides many pathways to address

the reduction and eventual elimination of greenhouse gases. The primary challenges

at this time are to further development fuel cell vehicle technology and achieve

mass production levels. Commercialization will not be achieved without these two

components working with our effective utilization of refueling facilities and supply

systems.

The current Department of Energy funding and fuel validation program are extremely important technology development programs. To move research to reality

now requires further attention to the bridge that needs to be built in the next ten

years from small-scale demonstrations toward commercial operation.

Finally, an H–Prize can only accelerate commercialization and support the growing global market.

The race for global dominance in the hydrogen economy has begun. Shell believes

that hydrogen will be widely used commercially within the next generation—in the

United States, Western Europe, China and Japan. An H–Prize can play a role in

assuring U.S. leadership in the development and deployment of the hydrogen economy by attracting world talents to the U.S.

The benefits of hydrogen as a clean, competitive energy solution can be delivered

to millions of people around the world in the next twenty years. Any innovation requires time because of technical issues, public acceptance and practical experience.

It is often said that developing the hydrogen economy will be a marathon, not a

sprint. The course will not be completed quickly; we need to prepare for a long commitment. This is an evolution; we cannot switch to the new vehicles or construct

a whole new infrastructure of hydrogen filling stations and distribution networks all

at once.

As with all energy transitions, this transition will take time and occur in phases.

Technological advances and market acceptance are expected to define the phases.

In addition, a corresponding education effort in hydrogen safety will ensure public

readiness as hydrogen becomes increasingly available.

The use of hydrogen will accelerate over the next 10 to 20 years as the technologies and infrastructure evolve. The market applications are the ultimate prize

for many of these participants. The criteria established to award prizes needs to be

well understood in order to be valuable in the marketplace. The scope of the prizes

awarded through the H–Prize Act need to be well defined. This issue is more important than ever and we need to do it right.

45

Conclusion

Increased use of hydrogen as a fuel provides benefits to energy security, the environment and economic growth. Developing a Hydrogen Prize is attractive from a

public policy standpoint because hydrogen can be produced from a wide range of primary energy sources—finding the most efficient and marketable way to do this is

definitely something the government is in the position to promote and lead. The future is in our hands and the obstacles can be overcome if we make the right choices

about hydrogen today.

Thank you for the opportunity to appear before the Committee today. This concludes my testimony. I would be pleased to answer any questions you may have.

46

47

BIOGRAPHY FOR PHILLIP BAXLEY

Phil Baxley is President of Shell Hydrogen LLC and General Manager of Business

Development for Hydrogen in North America. Shell Hydrogen, a unit of Royal Dutch

Shell’s global Renewables and Hydrogen business, was established in 1999 to pursue and develop business opportunities related to hydrogen fuel and fuel cells. Mr.

Baxley has been with Shell Hydrogen for six years, with prior Shell assignments

in Exploration and Production, Business Development, Research & Development

and Engineering. Before joining Shell, he was an Environmental Consultant with

Intera Technologies of Austin, Texas. Mr. Baxley has degrees in biomedical engineering (Rice University) and chemical engineering (University of Florida) and

serves on the Boards of Questair Technologies and the National Hydrogen Association.

DISCUSSION

Mr. INGLIS. [Presiding.] Thank you, Mr. Baxley.

The Chairman put me in the Chair, so that means I get to ask

questions first, which is a wonderful opportunity.

And I would take us back to 1957. Sputnik has just been

launched, and you know, maybe it doesn’t matter. Maybe we

should just let the Russians go to the moon, and perhaps the market will come up with a solution. Perhaps someone will want to go

to the moon and compete with the Russians. And maybe it doesn’t

matter. Maybe the government doesn’t need to do anything.

That is not exactly what happened in 1957 and following. What

happened was we in America responded and began an enormous

race, a race that has benefited us ever since with all of the technology that we are enjoying even as we sit here.

So to those that missed the national security implications of our

current posture from reliance on a fuel source that we don’t control,

I would encourage them to think beyond the possibility that maybe

the market can come up with a solution to that. Perhaps there is

a role for government in getting us, as quickly as possible, beyond

this danger point that we are in.

So that is not a question. That is further commentary.

But Mr. Baxley, why is it important to accelerate the commercialization? Maybe the market is just going to get there. The market, as you said, is the prize. Why accelerate to commercialization?

Mr. BAXLEY. Well, for us, for me, as a businessman, Shell is in

this as a business, and we view hydrogen, biofuels, solar, wind, all

as business opportunities for the future. We see the need for those

businesses. And so in any of those businesses, we are looking for

opportunities as to how do we move that towards commercial reality sooner than later. How do we take those investments and

make them real? So for hydrogen specifically, I think the challenge

is, a lot of—in a lot of cases, there is great technology work being

done. There is a great deal of work being done on how to make this

happen within companies, within the government, but I think there

is also a need to address many of the other aspects of hydrogen.

That is, raise the awareness on the part of the public, in terms of

consumers about hydrogen and the realities, and the H–Prize is

one way, among many, that we might do that.

So one of the attractive features of us as the Hydrogen Prize, and

by the way, the Hydrogen—a Hydrogen Prize is something that we

in Shell have been thinking about, actually, for some time would

be a good motivator. If done properly, a Hydrogen Prize would be

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a good motivator to inspire to engage a much broader community

to work on not only the technical challenges but also to drive to

bring this to reality. Because what we found is that when you get

technology to the marketplace, that is when the real innovation

happens. So as soon as possible, they are looking for ways to inspire people to put the technology, to get it applied, and let the innovation happen after that.

Mr. INGLIS. Dr. Diamandis, is that inspiring the public, what you

are talking about, with a paradigm change?

Dr. DIAMANDIS. It is, and the question, sir, is the prize has to be

simple and well defined. And for example, when we did the Ansari

X Prize, there were so many different ways we could go. And there

is an issue of what I call sufficiency. We didn’t shoot, for example,

for the Prize to go to orbit. In fact, originally, we were shooting for

a Prize to go to 100 miles altitude, and we backed it off from 100

miles to 100 kilometers, 62 miles. Most people don’t know the difference between the two, but we did. The energy requirements

were significantly more. And by taking 100 kilometers and three

people, which took us a year of work to figure out that one crisp,

clear goal. We were—it was achievable. It was sufficient—it was an

issue of sufficiency. It was sufficiently large enough to capture the

passion and get things going. And now that that is in place, the

industry has ignited. We are talking to NASA about a $50 million

orbital prize.

So my question is, you know, to pick the right problem to solve

to get people thinking about this stuff differently. In space tourism,

or personal spaceflight, 10 years ago, was a laughable matter. People, you know, thought it was this far away thing, not possible.

The—you know, the Ansari X Prize brought it into, ‘‘Oh, yeah. It

is now possible.’’ And it changed the way people thought about

that.

So I would say in issue of energy independence and so forth, you

know, what is that right first prize that is achievable in the near

term and, once achieved, then ignites people and people say, ‘‘Oh,

of course we can get independent of oil. Of course we can reduce

CO2 emissions.’’ So I—those are my thoughts on that.

Mr. INGLIS. Thank you.

I think my time has expired.

Dr. Lipinski.

Mr. LIPINSKI. Yeah. Thank you.

Thinking about the X Prize makes me go back to—it probably

was the late ’70s, not that anyone remembers the TV show ‘‘Salvage 1’’ where, essentially, that was it. Some people put together

in their backyard a—some sort of rocket ship. That is about all I

remember about it, but it certainly, as a kid, really got me even

more interested. I was interested in the space program and everything, but that idea really did resonate with me. I don’t think it

resonated with too many viewers, because I don’t think it was on

too long, but—so I like that idea.

But I want to go to Mr. Baxley who sort of brought this up and

suggested that we will have people with this H–Prize, you know,

working on—in their garages. And it will bring all kinds of people

into working on this hydrogen project because of the H–Prize.

49

My big question is: is it going to really be—I want to hear what

everyone has to say about this. Okay. Mr. Baxley, from Shell, certainly Shell is on a different—completely different playing field

than someone in their garage or any other researchers probably.

Who is really going to be inspired to get involved in this? Is it actually going to wind up being the big corporations who are already

doing some of this research who are really going to be the ones who

are doing this? Or is this—and so it is not going to really make a

difference. Or are there going to be other people who the prize actually gets them interested in it, and do they actually have a

chance to make the type of breakthrough that someone with a company with a large amount of money behind it has the ability to do?

So I just wanted to go and I want to ask each of the witnesses

what their thoughts are on this. So we will start with Mr.

Diamandis.

Dr. DIAMANDIS. Thank you, sir.

I think, again, if the prize is well structured and dramatic

enough, there are enough billionaires and multi-millionaires out

here that would love to go and win this. Paul Allen gives credit to

the X Prize for the $25 million investment he put into

SpaceShipOne’s development. He read about it on the internet and

said, ‘‘Wow, this is a really cool thing.’’ You know, ‘‘Who can I get

to go and win this?’’ And he teamed with Burt Ratan, who had presented it to him, and he went and pursued this.

So again, it has to be something that is dramatic. It has got to

be something that evokes heroism. And it can’t just be about a

technology. You know, GE’s efficient refrigerator did not make

front pages, but humans risking their lives and doing something

amazing does.

Dr. BODDE. Sir, I recently had the privilege of talking to a group

of high school students in Greenville, South Carolina, and this was

after Congressman Inglis had just introduced the idea of the H–

Prize. And I think, starting not from the billionaires but from the

other end of the market, I want to be able to look at a class of students and say, ‘‘Look, this is important stuff, and there are career

opportunities for you in this. And if you are good enough, and I

want all of you to be good enough, you can win this prize, and here

is what it is. And it is going to be available for you, and you can

work your way through this lengthy pipeline, from difficult science

classes to difficult college science classes to a doctorate to a research institute, and you could win this thing.’’ I want to be able

to say that. And if I can say that with credibility and people all

over the country can do that, I think we will have considerable motivation.

Mr. LIPINSKI. Dr. Greene.

Dr. GREENE. Well, I think I agree with both of these points. Entrepreneurs, with some money to risk and the desire to take a risk

and see if they can achieve, that is one. People at—professors at

universities who might be inspired to try this with an idea that

doesn’t require a lot of money but is something no one else has

thought of. Through—I think the motivation for a large company

like Shell and their research laboratories is smaller but still there.

They would like to win the prize, I think, and get the recognition

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for that. Of course, for us, National Laboratories, we are specifically excluded, but I think that is okay.

Mr. LIPINSKI. Well, Mr. Baxley, does it make a—does this really

make a difference to Shell? And the other question would be—I

would—I don’t know enough to know specifically, but I would imagine, okay, you are with Shell Hydrogen. There must—you must be

at a point and have information, have the research done that would

put you ahead of others, at this point, being able to reach the—this

prize. I—so does it make a difference? You had said it would make

a difference. So for a second question, do you think your company

and other companies are probably far ahead of anyone else in being

able to reach this?

Mr. BAXLEY. Well, let me just make a couple of comments.

I think, first of all, Shell, very much, is focused on, you know,

how do we bring the fuels our customers are going to need to the

market for the 15,000 retail outlets we have in the country. How

are we going to make a business out of that? But there are many,

many more aspects to doing that. This is not just about the technology. It is about the market acceptance. It is about all of the

codes and standards that have to be developed. It is about awareness on the part of fire marshals, awareness on the part of consumers. It is really an exposure of all of this stuff that has to happen, and we are working on that, not just on technology but we are

working on outreach programs through the National Hydrogen Association and others. But the Hydrogen Prize, to us, is much more

about raising—simply raising the debate, raising the dialogue, raising the awareness that hydrogen is not only challenging, but is also

attainable, and it is also something that is something that this

country should pursue as one option, as one big option, and try to

make that happen. No assurances it will happen. We are committed to it. The Hydrogen Prize is really a testament to the government and to the government’s leadership in trying to make that

happen, not only in the way that it inspires entrepreneurs to participate. I will give you a specific example for Shell Hydrogen. We

are not only doing hydrogen stations, we are the only ones setting

up joint venture companies to work on technologies with other

partners. We also have set up two venture funds, one here in North

America, and one in Europe, and we are setting up one in Asia.

Those venture funds that we invest with other companies specifically for the purpose, not only of understanding what other technologies are out there, what other opportunities there are to invest

in, but to seed the things that need to happen that—we can’t do

all of that ourselves. There are so many things that need to happen. And such a large undertaking is moving—this is really an unprecedented undertaking, if you think about it, to move from where

we are with petroleum-based fuels, to move to a hydrogen fuel infrastructure with hydrogen-fueled vehicles. There are so many aspects to that. A Hydrogen—the Hydrogen Prize touches on many,

many of those things, not only in technology, not only public awareness, it also touches on an incredibly important issue to us, as a

business, and that is inspiring people like you, Congressman, but

scientists and engineers we are going to need in the future to—aspiring them to get into this business. So many, many positive aspects from a fairly modest investment.

51

Chairman BOEHLERT. Thank you very much.

Mr. LIPINSKI. Thank you.

Chairman BOEHLERT. The gentleman’s time is expired.

We want inspiration and incentives, and this is a combination of

the two.

Dr. Diamandis and Dr. Greene, here is one for you.

You both mentioned the important need to clarify and clearly divide responsibility for the Prize between DOE and whatever entity

is chosen to administer the Prize. First, we may need to make even

clearer that we do expect an outside entity to administer the

award. At what division do you recommend? And what if DOE established a criteria for the Prize and some criteria for selecting

judges, such as avoiding conflicts of interest, which is a natural,

and then let the administering organization pick the judges and

the winner. Would that work? And does that description leave out

any task?

Dr. Diamandis.

Dr. DIAMANDIS. Thank you, Mr. Chairman.

I think your point is a very, very important one.

The DOE, using them as the example, should really be defined—

it should be, really, in charge of providing the capital, the Prize

money, and helping to define what are the problems they want to

solve. After that, I believe that the hand-off should take place to

an organization that can manage and run the Prize.

What do I mean by that?

The rule development is something that from—in our organization, we bring—my vice chairman, for example, is the Fellow Bob

Weiss, who has produced 26 motion pictures. The human drama

element, the story line of the Prize is very critical. The technology

development is the package in the middle and wrapped around it

is the human story. And if that is not taken properly—I—so I don’t

think the engineers in DOE are going to worry about that part,

how it is portrayed on television or the front page in newspapers

or talked about on the—around the water cooler. And in fact, it is

that packaging that really allows the marketing and the expansion

and generates the paradigm shift. The technology comes along for

the ride.

So the rules development, I agree with the comments made earlier, that the judging should be completely independent, so it is a

group—the outside managing organization selects qualified

judges——

Chairman BOEHLERT. So the administering organization picks

the judges——

Dr. DIAMANDIS. Yes.

Chairman BOEHLERT.—and the winner?

Dr. DIAMANDIS. Yes. Should select the judges. The judges would

then select the winner. The rules have to provide for very clear-cut,

measurable results that the judges can say they either met or not.

Period.

Chairman BOEHLERT. So the Prize selection criteria would be developed by the administering agency?

Dr. DIAMANDIS. Yes, sir.

Chairman BOEHLERT. Okay.

Dr. Greene.

52

Dr. GREENE. I think that is about right. That satisfies my concern that despite the fact that the Secretary of Energy is obviously

a person of great integrity, you don’t want to put him in the position of being political appointees selecting the judges for the technical contests. Rather, that should, I think, be done independently

so that it is very clear to everybody involved there is no politics in

this. There is no bias. There is no anything. This is going to be a

fair and open competition. I think that is absolutely essential. And

I think it is correct that the Department of Energy should say,

‘‘These are the things we want to get out of this Prize.’’ They have

very carefully developed an R&D plan that, with consultation with

industry, with consultation with the universities and all across the

board, they know what the technical challenges are.

And I guess my only issue is that it must be that the administering organization understand those technological questions as

well.

Chairman BOEHLERT. Another comment?

Thank you very much.

Mr. Udall.

Mr. UDALL. Thank you, Mr. Chairman.

I want to welcome the panel. Thank you for your time today.

There are, as you all know, a number of myths associated with

hydrogen and the hydrogen economy. And as you point out in almost all of the testimony today, we have a long road to travel to

build the infrastructure, to educate citizens. But in particular, in

that spirit, I want to focus on the question of should the Prize be

targeted explicitly at renewable hydrogen production. Right now,

most of the hydrogen, as I understand it, that is produced, is produced by reforming conventional fossil fuels. And if that is the road

down which we are going to travel, I think the benefits are less,

obviously, than if we move to a—truly a new energy regime, a new

hydrogen energy regime.

So I wanted to direct that question at the panel. And also, if you

could, talk about any technological hurdles that we would expect

to overcome.

Maybe I can start from right to left, my right to left, Mr. Baxley,

and then move across.

Mr. BAXLEY. Well, thank you, Congressman.

I would say that, certainly, Shell believes that the road to a hydrogen economy has to go through sustainability, and it ultimately

has to be delivered—renewable hydrogen. And that is a challenge

we are working on. I think, and though we haven’t worked out

the—I would fully support that an aspect of the Prize has to be

about, you know, how do we do that. How do we get the sustainable green hydrogen?

Mr. UDALL. Next, Dr. Greene.

Dr. GREENE. I agree with that. I think all of the analyses we

have done indicate that the cheapest way to make fossil—to make

hydrogen is from fossil fuels, in the future from coal rather than

from natural gas, as it is made today.

I think we face a question as to how important it is to keep the

price down in—especially in the early stages of introduction versus

have renewable. But it is clear that if we make hydrogen from coal

and we don’t sequester the carbon, we will increase greenhouse gas

53

emissions rather than decrease greenhouse gas emissions, even

with the efficiency improvements that hydrogen fuel cell vehicles

would offer.

Mr. UDALL. Dr. Greene, is it—technological research suggests

that it is easier to sequester that carbon than it would be in a conventional power plant today?

Dr. GREENE. Yes.

Mr. UDALL. Yes.

Dr. Bodde.

Dr. BODDE. Well, I certainly agree with those comments, but I

would just add one other thing, and that is that the beginning of

a hydrogen economy will probably produce hydrogen very differently than we will in a mature, steady state hydrogen economy,

and we ought to allow for that prospect as well in thinking about

the H–Prizes, because we have to remember what these H–Prizes

do. This is seed capital. This is the very earliest innovation capital

into an area. And if done right, it springs loose the rest of the

whole thing. But if we go right for the end state at the very beginning, we may never get there. It may be too hard.

And so I certainly agree with the other comments, but I would

at least allow a possibility for production of hydrogen from fossil

fuels, properly sequestered as well.

Mr. UDALL. I apologize if I mispronounced your name.

But what you are saying is you want to spread the technology,

get people excited, demonstrate it, and if that involves the traditional approaches to producing hydrogen today, you think that is

a trade-off worth accepting, knowing that over time we can move

to the more visionary hydrogen economy that we all are excited

about?

Dr. BODDE. Yes, sir. I believe that is the case. I believe there will

be a transition period in which we will have to do things that will

be, perhaps, less than optimal from the ultimate hydrogen economy

perspective, but those will fade eventually.

Mr. UDALL. Doctor?

Dr. DIAMANDIS. Sir, one of the best points about prizes is if they

are properly structured, and I can’t stress that enough, they don’t

prejudge the solution, and they allow for radical ideas to come bubble up from outside the normal industry. Again, one of the difficulties, of course, is that we are humans and we have developed industries, and we have—we tend to see things within the way we

are used to. But if a prize is properly structured and the rules are

set, you really have the ability for something to blindside you out

of no place: genetically engineered algae or microbes that generate

hydrogen or new physics, a new chemistry that comes from a laboratory some place in the middle of, you know, a small town in

India. You know, those are the things that you hope for. And everything—the entire success of the Prize 5 or 10 years out all depends

on what is done in the first six to 12 months of writing those rules.

But if the rules are written properly, great. But the chances are

very much against those. And there are some great stories I can

tell you about rules properly—not properly written that would

waste $100 million.

Chairman BOEHLERT. Well, we can tell you some of those rules,

too.

54

Mr. UDALL. I would——

Chairman BOEHLERT. The gentleman’s time has expired.

Mr. Rohrabacher.

Mr. ROHRABACHER. Thank you very much, Mr. Chairman.

I would like to thank you, Mr. Chairman, for your leadership on

this and other issues dealing with energy and trying to find answers to the challenges that we face in the future.

And special thanks to Chairman Inglis and the leadership he is

providing specifically on this issue. And I look forward to working

with you and developing this concept and getting this through the

process.

Let me start, however, with one fundamental question about hydrogen that is actually stemming from Mr. Udall’s questions, and

that is: we do have to have a fundamental other energy source in

order to make the hydrogen before that becomes anywhere near

economically feasible, is that correct? Well, we—as we just heard.

Why is nuclear energy not one of the things that is being on the

plate here? I mean, I didn’t hear any discussion about nuclear energy. Isn’t that the ideal, if we are talking about greenhouse gases,

which I may or may not be concerned about in terms of global

warming, but I may be concerned about getting things going into

the air for other reasons? Isn’t nuclear energy the ideal source of

energy for producing hydrogen?

This is to the panel. And of course Mr. Diamandis doesn’t want

to comment on that, but what about the other three? And then I

will have one for you, Mr. Diamandis.

Dr. BODDE. Well, I—in my judgment, sir, I certainly think that

is on the table. I certainly think it should be one of the competitors.

But as my colleagues have said, one does not want to prejudge the

solution. One wants an open competition for these kinds of early

stage breakthroughs without any bias toward one or another of the

contestants.

Dr. GREENE. There are, essentially, two pathways that are being

considered in the research program with respect to nuclear energy.

One is nuclear energy via electrolysis to produce hydrogen. That

has very serious cost problems. Nuclear energy is a relatively expensive way to make electricity in the first place, and electrolysis

is currently the most expensive way to make hydrogen, so you have

a very difficult problem on that path.

In the long run, there are thermochemical processes that are

being worked on, but most, including the National Academy report,

consider these to be among the most long-term future technologies

for producing hydrogen. That would be where you would like to go,

an efficient means of using nuclear energy to thermochemically dissociate water and produce hydrogen. But that is two, three—some

number of decades off, according to best judgment.

Mr. ROHRABACHER. However, the use of nuclear energy to do this

would—I mean, we have that technology and that knowledge now,

correct?

Dr. GREENE. Via electrolysis.

Mr. ROHRABACHER. Right.

Dr. GREENE. It is just very expensive.

Mr. ROHRABACHER. How expensive are we talking about?

55

Dr. GREENE. I will have to get back to you on that, but I think

it is several times more expensive than, say, producing from coal

or natural gas.

Mr. BAXLEY. Congressman, I appreciate you raising that issue,

because the point I want to make, just to reiterate, is that we view

hydrogen very much like we do electricity. It is what I call ‘‘liquid

electricity.’’ So hydrogen is a universal—the universal power fluid.

And the attractiveness of hydrogen is that it allows for the potential to make fuel and other uses from a wide diversity of domestic

supply. Nuclear is just one of them.

Mr. ROHRABACHER. Right.

Mr. BAXLEY. I couldn’t tell you whether it is nuclear, coal, solar,

wind. I can’t even predict the price of oil a year in advance, so I

want to—don’t want to prejudge that, but certainly nothing, that

we know of now, and certainly nuclear and coal are two obvious

ones that we have large domestic reserves of. They are not off the

table.

Mr. ROHRABACHER. Okay.

Mr. BAXLEY. But in the near-term, I think, you know, we are

more pursuing how do we make sure it is safe, how do we make

sure it is available for the customers, how do we make it affordable, and in the long-term, how do we make it sustainable.

Mr. ROHRABACHER. All right.

Well, let me put, for the record, Mr. Chairman, that the high

pressure helium reactor that I have mentioned in this committee

once before offers the production of energy and electricity. This is

a new reactor system developed by General Atomics in San Diego,

which currently has reactors working in Japan and in one other location. The—this reactor, and I remember that you had followed up

on that question the last time we had a hearing on this, offers an

opportunity to provide that energy without the byproduct of plutonium, which actually this reactor actually eats plutonium, so thus

we could produce hydrogen and energy in the third world without

leaving the remnants over that could be used for nuclear weapons.

In terms of the actual Prize itself, Dr. Diamandis, you have been

very successful. I remember we had a meeting in, I think, my backyard on this years ago. You have been very successful in the goals

that you have set out and the methodology that you have achieved,

but you were very specific in what you wanted to have achieved.

And it was the first people who achieve the goal, rather than having a panel of judges deciding which of many people have met the

standards, do you find this approach so far to be less definitive

than what your operation was?

Dr. DIAMANDIS. Good to see you again, Congressman Rohrabacher.

Mr. ROHRABACHER. Good to see you.

Dr. DIAMANDIS. The—as I mentioned, understanding the problem

set was very important for us. For example, for the Ansari X Prize,

it wasn’t developing a new rocket engine. You know. It was—the

problems we were trying to solve were that the public didn’t believe

that private people could fly into space. That was the biggest problem. The capital was not ever being invested in this arena. The regulatory laws didn’t exist to allow private industry to do these

things. These were the problems that we were—we decided what

56

the problem statements were, okay, and whether that comes from

DOE or it comes from yourselves, the—those problem statements,

and then we went through this iterative process of coming up with

prize ideas, taking those prize ideas, testing them with the public,

with sponsors, with potential contenders, and then iterating it until

we came up with a clear set of rules. And I do think, because of

our genetic inbreeding as humans, we compete. And that is

where—we do the best when we compete, whether it is on the football field or whether it is wherever. It——

Mr. ROHRABACHER. Is it important to do the first person who

achieves this or is it to have——

Dr. DIAMANDIS. I think you get the——

Mr. ROHRABACHER.—a judgment as to who best achieves it?

Dr. DIAMANDIS. We have studied this in great detail, and our

feeling is that having the first person to achieve but having a

second- and third-place prize as well, but you have a frontrunner

out there and a second and third place allows those who might not

think they can win first prize still to come and you double and triple the number of competitors that way.

Mr. ROHRABACHER. Thank you very much.

Chairman BOEHLERT. The gentleman’s time is expired.

And if I am interpreting correctly what the gentleman said in his

preamble to his question, he is arguing for a balanced portfolio as

he introduces the subject of nuclear into the equation. And I think

we can all agree that a balanced portfolio is absolutely essential,

and I thank the gentleman for acknowledging some leadership. The

test of leadership is whether there is followership, so I would be

more than willing to meet with the gentleman in his backyard, as

he did with Dr. Diamandis, to talk about such things as CAFE

standards, because I know the gentleman is concerned about national security issues, and that is a national security issue.

Mr. Miller.

Mr. MILLER. Thank you, Mr. Chairman.

And Mr. Chairman, I am going to be—I am going to try to be

on my best behavior today.

I want to pursue questions very like the questions that others

have pursued and several of you have referred to. Dr. Diamandis,

you said that a prize should not prejudge the solution, that you

should account for the possibility that the solution that emerges is

not one that you expected. Dr. Bodde, is it? Dr. Bodde, you said

that the outcome should not be biased by the prizes.

I am concerned that by pursuing a hydrogen economy we are already biased towards a solution, because the real challenge before

us, I agree with what Mr. Inglis said that we need to have a response to our energy needs that is similar to what happened after

Sputnik, but I am not sure that that quest is for a hydrogen economy specifically but for some approach to energy that is sustainable, that makes us energy-independent and that does not produce

greenhouse gases that I do worry are going to affect the climate.

And not everyone is sold that the hydrogen economy is the way

to go, that the hydrogen economy will be the winner of the various

competing forms of energy. The problems are actually pretty well

described in the prize categories. The advancements for hydrogen

production. Well, several had pointed out that hydrogen is not acVerDate 11-MAY-2000 17:49 Dec 07, 2006 Jkt 027094 PO 00000 Frm 00060 Fmt 6633 Sfmt 6601 C:\WORKD\FULL06\042706\27094 SCIENCE1 PsN: SCIENCE1
57

tually a source of fuel, that there are not large reserves of hydrogen. Hydrogen has to be stripped from another fuel source.

At other hearings before this committee, witnesses have testified

that hydrogen is not actually a source of fuel, it is a method of—

or not a source of energy, but is a method of transporting energy,

and we are going to have to find the hydrogen from somewhere.

And if it comes from finite sources of energy, not renewable, sustainable sources of energy, perhaps we are not making that great

an advance in going to a hydrogen economy.

Also, the present methods for stripping hydrogen out of other

fuel sources is pretty dirty. And yes, hydrogen may only produce

water, but the process of getting the hydrogen is dirty.

Hydrogen storage. There have been plenty of suggestions, or

some suggestions, at least, that leaks hydrogen, that is widely

being used, that there is a—that there are thousands or millions

of hydrogen cells in the economy in the United States. Small leaks

will actually have a pretty significant environmental impact there.

Hydrogen distribution. We have got a lot tied up in an infrastructure for fuel that is a liquid on planet Earth, which hydrogen is

not. Hydrogen utilization may be the easiest problem to solve.

By making this Prize about hydrogen, are we not already biasing

towards hydrogen as a solution to our energy needs instead of the

other solutions that may be out there?

Mr. Boehlert mentioned conservation, mentioned CAFE standards. He—I have sponsored the legislation that he is one of the

principle authors of to require fuel efficiency standards I think by

2013 but we can easily achieve with existing technologies. Why are

we not doing more about conservation? Are we biasing our energy

approach by focusing this Prize and so much that we are doing that

focuses on the hydrogen economy?

Dr. Diamandis.

Dr. DIAMANDIS. Thank you, sir.

I should say that for many of those same reasons, we believe that

a new generation of automobiles that significantly exceed 100 miles

per gallon equivalent is possible, and we are looking to launch this

year an automotive X Prize along those lines, specifically for the—

I think a lot of the issues driving this legislation: reduction of CO2

emissions and energy independence. So you know, we have attacked it based—we are looking, in our foundation, to attack that

specific niche in the near term, because while we are talking about,

you know, generational solutions here in this committee, we are

trying to focus on what can be done in the next three years. And

we do believe a prize for the design, development, marketing, and

putting cars on the road, not just prototype cars, is possible

through a prize area.

What you are talking about is an E–Prize, an energy prize,

versus an H–Prize.

Mr. MILLER. Right.

Dr. DIAMANDIS. And it depends, again, where the DOE wants to

draw the circle. Does it want to draw it specifically on hydrogen or

around energy? And of course that problem statement then defines

the competition you are going to run.

Mr. MILLER. Dr. Bodde.

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Dr. BODDE. Yes, sir. I think there are—a lot of the ability of the

Prize to incentivize a variety of technologies, a portfolio of technologies, will come from the way the boundaries are drawn on—

around what is eligible and what is not. That is what I argued for,

including enabling technologies, battery technologies, for example,

that are perfectly fungible for all electric vehicles versus hydrogen

vehicles. Either way, we need good battery technology. Either way,

we need good energy management systems onboard vehicles.

So I think if the boundaries are drawn properly that an H–Prize

can incentivize many of the technologies we would want in an E–

Prize in general.

Mr. MILLER. Do you think, Dr. Bodde, that it should be an E–

Prize instead of an H–Prize? Is what we are getting at not—really

an energy solution, not a hydrogen solution? Are we not biasing

this towards hydrogen among the various options that—we are not

sure which one is going to work, which—as you said earlier, we

shouldn’t bias the outcome.

Dr. BODDE. Well, I think either one would work, quite frankly.

Mr. MILLER. An E–Prize as well as an H–Prize?

Dr. BODDE. Yes, but it is important to do something. It is important not to let this whole thing pass and not take some action, in

my view.

Mr. MILLER. Dr. Diamandis, should it be an E–Prize?

Dr. DIAMANDIS. It depends on what this—what the Congress,

what the White House wants to achieve. At the top of the game,

it may well be both, and I shouldn’t—you know, my favorite saying

is: ‘‘If you are given a choice, take both.’’ An E–Prize, in the nearterm, in terms of looking at biofuels and renewables and so forth

where hydrogen is one of the solution sets for the long-term, may

be the most efficient way to go.

I do know we have an immediate problem, and entrepreneurship

in this country can bring about immediate solutions, if we properly

incentivize them.

Mr. MILLER. And if I—just one more second, Mr. Chairman.

Mr. Baxley said that he could not predict petroleum costs a year

in advance. The people in my district can’t predict the price at the

pump in the morning what it will be at in the afternoon, so yes,

we do have an immediate problem.

Chairman BOEHLERT. You are darn right we do.

Thank you very much, Mr. Miller.

Mr. McCaul.

Mr. MCCAUL. Thank you, Mr. Chairman.

I want to thank Chairman Inglis for introducing the legislation.

I am proud to be an original co-sponsor on the bill. I think hydrogen does provide a great promise. And just thanks for your leadership on this.

Universities provide great research and development throughout

this country. They, in some instances, have a relationship with the

private sector. In my own district, the University of Texas is researching hydrogen fuel cells on monies provided by the National

Science Foundation and the Department of Energy.

I have got, really, two questions. The first one is: what role do

you see the universities playing in this, and would they qualify?

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And then the second question is probably more technical. I have

actually driven a hydrogen car, so I—we know the technology is

there. It is there today. The problem, as I was told, is that it costs

about $1 million to build one of these cars. And I know one of the

metals used currently is platinum, which increases the cost. But I

understand there is also more research being done to develop another alloy that could be used.

What do you see—in this Prize, it calls for, in 10 years, wheelto-wheels transformation. What do you see as some of the challenges that we need to overcome to bring down that cost? And I

know, providing the infrastructure throughout the country for hydrogen is an important issue as well and the storage issue. But if

you could sort of comment, the whole panel, on the technology challenges and then also on the university issue.

Anybody who wants to answer that.

Dr. BODDE. Well, let me begin, sir, if I may with the university

side.

The—it is first important to realize that technology is all a people game. It is all about who you have on the court, and that determines the style of play, for any particular technology. And so it is

helpful to think of universities as basically ‘‘people factories.’’ They

are things that draw together not only the people that we move

through the pipeline in the university, but also people from overseas, guest researchers, and so forth, into a community of interest

focused around a particular problem.

Now out of that are bound to come the solutions that come when

you have bright, creative people that are gathered together.

Certainly, university researchers should be included within the

category of those eligible for the Prize whether they are on research grants from the Federal Government or not, in my opinion.

Dr. GREENE. I think the greatest technological challenge is storing this hydrogen on a vehicle. We have ideas of carbon nanotubes.

We have metal hydrides. We have high pressure compression. We

have liquefied hydrogen. All of these have very, very serious problems and, in my opinion, are not really close to providing the

functionality that a consumer expects on a vehicle. This is a very,

very difficult problem. And it is the kind of thing that we almost

need a solution that nobody has even thought about yet.

I mean, I—what I say about it is I haven’t seen any good ideas.

So I think this is the most serious technological challenge. The

platinum and the fuel cells is certainly a problem, the durability

of membranes and those kinds of things. Those, to me, look like the

kinds of things that will be solved with continued research and

learning and that sort of process. I am really worried about storage

of hydrogen.

Mr. MCCAUL. The oil industry will tell you it is a 20-year—this

won’t happen any sooner than 20 years. Do you agree with that or

disagree? I know it is very speculative.

Dr. GREENE. I am surprised they will predict that but not the

price of oil. I can’t say. I am——

Mr. MCCAUL. Is it 10 years that we are—this is obviously a goal.

It is an aspiration. Do you think this is achievable?

Dr. GREENE. I think, you know, what is trying to be accomplished here is to make some of those things happen that we don’t

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know how to make happen yet, to see what kind of creative ideas

people will come up with.

Mr. MCCAUL. Mr. Baxley.

Mr. BAXLEY. As a representative of an oil company, let me just

make a comment.

First of all, I do very much hope and anticipate that universities

would participate in this program. I think it is tremendously important for them to do that. I think it is tremendously important

to overcome a whole host of technical challenges. We have got a

whole host of them, storage being, obviously, the most prominent.

But in terms of the timing, you know, we didn’t set up Shell Hydrogen seven years ago just to have fun. We set up Shell Hydrogen

seven years ago to really figure out how we could go forward and

make this happen, how we could make it into a business. Based on

everything we have seen, we are still here after seven years. We

are growing. We are going to continue to be here, from everything

I have been told. We see the potential for hydrogen to be introduced in the next five to seven years in selected markets around

the world. So this is not a situation where everybody is going to

wake up one morning and go down to the Chevy dealer and there

are going to be fuel cell cars. This is going to be more a situation

like the Prius or the other hybrids where there are going to be limited markets where it is going to be introduced. We are working

hard to figure out how do we introduce that, for example, on the

West Coast and the East Coast of the United States in, you know,

the period of the next 10 years.

So the other point I would make is that we keep saying, you

know, this is far out, and we use that as an excuse not to work

on it. It is important. It is important to work on all of the other

things, the nearer term: better fuels, better fuel supply. Biofuels is

a solution in the interim. There are other solutions, but we have

got to make sure that we keep the focus on hydrogen, and that is

why I think the Hydrogen Prize is so important, because hydrogen

is the one thing that has so many big technical challenges. It is a

big step for man. The other ones we think we have a clear path

to how to achieve in the biofuels and some of the other areas, but

hydrogen has so many challenges, you really need to get all of the

brainpower you can focused on this——

Chairman BOEHLERT. Thank you.

Mr. BAXLEY.—as soon as possible.

Chairman BOEHLERT. Thank you very much, Mr. Baxley.

Mr. MCCAUL. Thank you, Mr. Chairman.

Chairman BOEHLERT. Thank you, Mr. McCaul.

Mr. Green.

Mr. GREEN. Thank you, Mr. Chairman. And I thank the Ranking

Member, as well. We appreciate greatly having the opportunity to

hear quite an outstanding panel.

I would like to address my first comment, if I may, to Dr.

Diamandis. Good morning, sir, and I commend you on how well you

have handled the X Prize. I was fascinated by it as I saw it unfold.

Dr. DIAMANDIS. Thank you.

Mr. GREEN. I am concerned, first, with the separation of responsibilities that you make reference to. Could you kindly explain how

you envision this working, please?

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Dr. DIAMANDIS. Sure. I think that we have a current working relationship with NASA that is appropriate to use as a model. We assisted the agency in setting up what is called a centennial challenge program. They had a law passed and signed into law allowing them to do prizes of any size. Prizes above $10 million require

additional authorization from Congress, but they can do larger

prizes.

The way it works is NASA identifies an issue, a problem. We are

going to be announcing a prize with them next year, which is—I

mean next week, which is about a $2.5 million prize involving

lunar landing technology, but I can’t say more than that. And they

basically say we are interested in—here are the problems we have.

We don’t have technology developing in this area. We then take

that problem and we go out, we write the rules, we go bring in the

advisors, we set up, actually, sometimes if a chunk of money is

available, we will say this is first and second and third-place prize

amounts that we recommend, and then we do it in an iterative

process where they come back and give us their input. It has been

a very cooperative process so far.

Once that is set, we go out and find a set of independent judges.

We go and register the teams. There is a whole legal structure of

master team agreements, liability issues. It is—you know, 10 years

of work has shown us where the problems have been in these scenarios. But that independence, if—we are not going to sell our soul,

so if the rules that they want are something that we believe doesn’t

make sense, we will say we are not interested in managing the

competition.

Mr. GREEN. In managing the competition and selecting the winners, are we limited in terms of who can win?

Dr. DIAMANDIS. Again, that is a very good question, because one

of the places you get your greatest, greatest success is when you

open up. You don’t—in the world of aerospace, you don’t want to

turn away those pesky bicycle mechanics from Dayton, Ohio, you

know, when you have got an aviation competition. Because really,

again, perfect example, out-of-the-box thinking coming in to solve

and beating the government’s funded Langley approach.

So one of the issues we deal with from NASA, for example, is is

it domestic only. You know. Again, Congress writing a check to a

Chinese team winning this is not, probably, something you want in

headlines, but making a global competition is where you are going

to have the greatest benefits. Universities are going to be a key element of this, without any question. And you are going to have alliances between a Shell and a university and a wealthy backer. That

is going to happen. You want a free market economy bringing together unlikely teams and allowing for crazy ideas to surface. Remember, the day before something is a breakthrough, it is a crazy

idea, otherwise, it is not a breakthrough.

Mr. GREEN. Back to your comment about the possibility of a winner being less than the most popular person on the planet, how do

we—how do you envision dealing with that one concern?

Dr. DIAMANDIS. I am not—when you say the not—I mean, one of

the things, for example, is that in the Orteig Prize for crossing the

Atlantic, the most likely winner was Admiral Byrd who had flown

to the North Pole. And Lindbergh was an upstart. In fact, people

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refused to sell him an airplane, because they thought he would kill

himself. And the day before he flew, the New York Times wrote an

editorial and said, ‘‘Mr. Lindbergh, please don’t fly. You are going

to kill yourself and set back aviation a decade.’’ And he went anyway and, in fact, changed the course of history.

Mr. GREEN. Well, let me broaden the question. Can a government win?

Dr. DIAMANDIS. I don’t think—in the Ansari X Prize, we precluded—we, in fact, required that all teams demonstrate 90 percent

or more private financing. We don’t want a government coming in

here and winning it. We wanted teams worrying about every penny

they spent, and we wanted to drive breakthrough by restricting

capital. If you have private money, the free market economy will

drive you to solutions. I mean, the problem is that we have had

bloated government contracts in the aerospace industry, and perhaps in the energy industry as well, I can’t speak to that effectively, that haven’t driven really, you know, people considering

crazy ideas, because they are afraid of taking the risks. You know.

I get up and speak in this committee about the fact that we are

killing ourselves in this country by being so risk-averse. Prizes

allow risk taking.

Mr. GREEN. Thank you, Mr. Chairman.

Chairman BOEHLERT. Thank you very much, Mr. Green.

Ms. Biggert.

Ms. BIGGERT. Thank you, Mr. Chairman.

I just wanted to say that, you know, I think hydrogen is certainly

a very, very important concept. We—I keep talking about let us

think hydrogen nuclear and not oil and gas, and so this is something that we have got to resolve and very, very soon. But I do

think that nuclear, too, is—and the cost of all of these things, nuclear is so important in the long run, and we are working on fast

reactors, the recycling, and hydrogen. I mean, we have moved forward. I can remember Secretary Abraham coming to Argonne,

which is in my district, and to look at the fuel cells and saying how

small—how fast can you make them smaller so that they can go

into a car so that we will have it. And that happened pretty fast.

I am amazed. And I have driven a hydrogen car, and it was pretty

scary, because it is a million-dollar car right now, and I was driving around the streets of Washington, DC, and I wanted to make

sure I didn’t bump into anything. I think I was more worried about

that than the fact that there was liquid hydrogen under the back

seat.

So I think that, you know, we are moving ahead, and I guess just

my problem—concerns have been just with the amount of money

and the—having to refocus from other things, perhaps.

And Mr. Baxley, you mentioned that Shell has been thinking

about doing such a—undertaking such a prize. I think that would

be a fabulous idea. If you have considered it, why hasn’t it gone

forward, and would that—could that still be in the future?

Mr. BAXLEY. I will, first of all, say that it was one of a number

of things we considered in terms of how to really engage this—the

public’s imagination, from university sponsorships to television advertisements to printed advertisements. So we didn’t develop it a

whole lot further until, actually, Representative Inglis suggested

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that the government sponsor it, which we think is a great idea. Actually, we think it is an issue of not just industry leadership. It is

an issue of government leadership, and we think it is important

for—I think it is really great if we can get both the federal level

of government and industry all on board by saying this is an important issue to sponsor.

So it is something that, you know, we will look at moving forward with. We are looking at how to structure a prize in other

areas as well. But certainly, on this topic, we are—we think it is

great if the government can lead the——

Ms. BIGGERT. Well, of course, one of the things that we hear

about that so many of the companies is the huge profits that have

been made by the oil and gas industry. And why not use the profits

to pay for such a prize? It would be good PR.

Mr. BAXLEY. Well, as I said, we are interested in pursuing a

prize, and we are interested in sponsoring various initiatives to

make sure that we move forward in hydrogen, just as we are sponsoring many other issues on renewables. So I appreciate that comment, and we are seriously considering, you know, and will seriously consider being involved in this Prize or any Hydrogen Prize

going forward.

Ms. BIGGERT. It seems like some say that this could be argued to be a handout to the industry, and particularly with the $100

million prize. And Dr. Diamandis pointed out in his opening remarks that he selected a $10 million prize in part because he didn’t

want the big competitors like Boeing and Lockheed Martin from

being the only competitors. And then do you—would you agree—

would you all agree with that that this could happen because—if

it were to be a $100 million prize, that the big groups would be—

in that case, it was Boeing and Lockheed because it was space, but

would the big companies get into this and—to use the money?

Dr. GREENE. I don’t think this is my area of expertise. I defer to

the——

Ms. BIGGERT. Okay.

Dr. GREENE.—people who are in innovation policy and

setting——

Ms. BIGGERT. Well——

Dr. GREENE.—up prizes.

Ms. BIGGERT.—Dr. Diamandis, then, do you think that that could

happen?

Dr. DIAMANDIS. It is—this may be a little bit different in the

aerospace industry, which, again, I have much deeper knowledge

there. But again, my—on how much this Prize should be, I think

the most important thing that this legislation would go—be—could

do to go forward is actually allow an organization, like the X Prize

Foundation or someone else you chose, to go through the proper

process and not pick a number out of the air. We actually go

through a process. It takes us time to figure out what is the right

amount. And we go to the innovative—we go to the entrepreneurs.

We go to the people in the garage. We go to large corporations and

find out where—what peaks their interest. And——

Ms. BIGGERT. You are talking about the X Prize now?

Dr. DIAMANDIS. I am talking about how we do—we are about to

launch a genomics prize, an automotive prize. The process we go

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through, which part of it includes setting the amount of cash, not

too large, not too small, and also setting the—structuring the competition, how it is properly structured. Is it one or multiple?

Ms. BIGGERT. So don’t you think that the Federal Government

should do the same thing?

Dr. DIAMANDIS. I do. I think there is a process to go through before you launch a 10-year effort. As I said—what I said earlier is

investment—proper investment in the next few months will determine the ultimate success or failure of the Prize.

Chairman BOEHLERT. The gentlelady’s time is expired.

But to continue on this vein, since we have to do the appropriating, and since these are very difficult times, we are not short

of requests for the limited resources we have. Let me put it another

way. Would $10 million, as some have suggested, be enough of an

incentive to accomplish what you hope to accomplish with the

whole Prize activity?

Dr. DIAMANDIS. Sir, let me offer out an idea along those lines.

Ten million dollars is a great starting position. One of the things

that is of greatest value in a prize is when you are able to bring

a corporate sponsor to the table. So if the government were to say,

‘‘We want to do a study to create an H–Prize or an E–Prize and

we are going to put $10 million as a starting amount to go this.

And then we are going to allow corporations to come in and title

that.’’ So, to use my colleague here at Shell, you would want a

Shell to come in and say, ‘‘Let us make it from $10 million to $50

million. We are going to add $40 million to the equation.’’

And why? Because a corporation coming in who spends $10 million will typically spend $30 million promoting the fact that they

invested $10 million. Very important, because the promotion part

of this is——

Chairman BOEHLERT. The bill does allow that. Mr. Inglis’ bill

does allow that.

Dr. DIAMANDIS. Yeah, and I think that is a very important part

that—and also it may be—one of the things we are considering ,

for example, in our automotive and such is that allowing the public

to contribute to the amount of the prize. They are the ones who

want the breakthroughs in the automotive industry, want the

breakthroughs in energy. And these are things we think about

night and day in my organization for the last 10 years. How do

you—where do you get the greatest effect? Having a corporate

sponsor where it is titled, the X, Y, Z, H–Prize, whatever, will give

you the greatest benefit. You know, we had the Ansari family. I

wish we had a corporation.

Chairman BOEHLERT. Thank you very much.

The gentleman’s time has expired. The gentlelady’s time has expired. My time has expired.

It is time for Honda.

The Chair recognizes Mr. Honda.

Mr. HONDA. Thank you very much.

And just a comment on disclosure. This Honda was made in

America.

And I do have a hybrid Toyota. And all of the questions I was

prepared to ask have been asked and responded to, but there is one

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thing that does kind of nag at me, and I am sorry I missed your

initial testimony.

But at the risk of looking a little ignorant, let me go ahead and

ask the question.

It sounds like we are—we want to use taxpayer monies to create

an incentive program from which, if there are any benefits to be

accrued from the contest, it doesn’t appear that there is any return

on the investment to the public in terms of revenues back to the

government in this kind of a program, whereas if it were done as

you had done it previously, which attracted a lot of attention and

a lot of sense of competition and accomplishments, too, that even

though the government wanted to sort of insert themselves in the

area of security and safety, what benefits does the general public

accrue in terms of return on investments in terms of revenue and—

you know, because we are looking at the size of the Prize and the

kinds of prizes that are out there. And I believe in incentives. I am

a schoolteacher. I believe in incentives, intrinsic and extrinsic. But

where is the return on investment of this?

Dr. GREENE. I think the major motivation of the government

being interested in hydrogen has to do with what economists would

call public goods: protect the environment, energy security. And

deal with the market failure of imperfect competition as the OPEC

cartel and the world oil market and the problems that causes.

These are the benefits, I think, as I see it, that the government and

the public expect from an eventual successful hydrogen-powered

transportation and energy system. And that is the return that we

are looking for, and it is trillions and trillions of dollars.

But as far as return in the near term, I don’t know the answer

to that.

Mr. HONDA. I don’t disagree with your response, it is just that

I think that is what we look at anyway when we try to put appropriations or bills together for purposes of R&D at the—at least at

the nascent stage, and we are looking at also considering doing

some for developmental stages where we can bridge the gap towards commercialization.

But—yes, sir. Mr. Baxley.

Mr. BAXLEY. I think, if I understood the question, and it is actually a very, very relevant question. And I have to agree with what

Dr. Greene said, but I also would point out that it is more than

just the public good issues. It is more than just the environment,

the effects of climate change, which we are still trying to figure out

what that is, and the effects on our national security, which are all

huge dollar impacts. But I would also point out another thing that

I think all of you are aware of, and that is job creation and new

industry creation. Hydrogen has the potential to create whole new

industries and whole new technology platforms, like other transformations, that would create jobs. So that is a tremendous benefit

to the economy. And I viewed the Hydrogen Prize legislation as

seed money. This is the government putting in a limited amount

of seed money, and I don’t think it has to be $100 million. I think

something in the order of $10 million would be sufficient seed

money, presuming that you also get sponsorship from private sector and other organizations.

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But the important thing is the leadership putting the seed money

in and getting it started and helping them to make that happen.

That is what I think is the important part.

Mr. HONDA. Thank you, Mr. Baxley.

And to the Chair, if I may, I have a bill called H.R. 1491, which

addresses incentives in terms of looking at research and having—

the Federal Government having a role in bringing research to commercialization and, at a certain point, engaging the private investors at a certain point in time, because there are many research

that it is going to take more time than the private industry are

comfortable with. So I figure that we should partner with them to

bring that research to a point where it becomes commercially viable.

So if you would look at H.R. 1491 and see how that fits with your

concepts, I would appreciate any feedback that you might have, because I believe that in the times when we have scarce resources in

our country for whatever reason, people can argue about why we

have scarce resources, I do believe that we should invest, as we did

in the Internet, on behalf of the Federal Government, to promote

new ideas and create jobs, as you have said.

Yes, sir.

Dr. DIAMANDIS. Mr. Honda, I might ask you to think about a

prize as almost fixed-cost science or fixed-cost engineering. You

have a specific goal you want to achieve, you don’t pay it until it

is done. If you think about it, you know, it would be the most efficient way to implement NIH and NSF type funding programs, but

clearly you can’t do that. But I am just saying in terms of use of

money for the best public good, it is the most highly-leveraged,

most efficient way the government could ever use its funds.

Mr. HONDA. Thank you. And it helps me feel better about the

word ‘‘prize’’ and leveraging, so that is a good way to think about

it.

Thank you.

Chairman BOEHLERT. Thank you very much, Mr. Honda.

And Mr. Wu advises that all of the pertinent questions have been

asked. He is just here because of his deep and abiding interest in

the Committee’s activities, and we thank you for being here.

And I thank all of my colleagues for being here.

Now, Dr. Bodde, I can’t let this end. Chairman Inglis has told me

you have got a great story about how your mother inspired you to

be a scientist. Would you share that with the Committee?

Dr. BODDE. Sir, this happened one summer in 1959, I guess it

was, driving across Kansas. And of course, those were the days

where there was no air-conditioning, and so all of the windows

were open. And mom says, ‘‘Well,’’ you know, ‘‘look up there. There

is a Soviet satellite circling the Earth, and it is the duty of every

patriotic young American to go out and study science and engineering so we can beat the Russians.’’ Well, sure enough, I went out

and studied science and engineering, and sure enough, we beat the

Russians.

So the chief lesson I draw from that is: mom is always right.

Chairman BOEHLERT. You are darn right, and I hope we can energize the mothers of America to give that same message to the

young students and our educational system, because we are being

67

challenged as never before. We are still number one, but we have

got a lot of work to do to maintain that number-one position.

Is there anything else for the good of the order, because our distinguished witnesses have other activities? But——

Mr. INGLIS. Mr. Chairman, if I could indulge just a couple minutes to——

Chairman BOEHLERT. A couple of minutes for the distinguished

Chair.

Mr. INGLIS.—follow up on your comment and Chairman Biggert’s

comment, they were very helpful, about the amount of the Prize,

because, you know, my goal in setting a prize, initially, is up to

$100 million. And of course the Secretary has, under our bill, the

discretion to do what Dr. Diamandis described, and that is to set

the amount up to $100 million. If in consultation, I would hope

with somebody as knowledgeable as Dr. Diamandis, the Secretary

of Energy decided, ‘‘No, all you need is $10 million,’’ or maybe you

need $10 million from government and $50 million from private enterprise, then the Secretary has that flexibility under the bill.

Chairman BOEHLERT. Yeah.

Mr. INGLIS. It could also enable us to appropriate only smaller

amounts in the initial year and then larger amounts when the Secretary of Energy reports back.

Chairman BOEHLERT. Thank you.

Mr. INGLIS. So that is——

Chairman BOEHLERT. Point well taken.

Mr. INGLIS.—certainly a doable objective, and working with, as

I said, somebody as expert as the X Prize Foundation could get us

there.

My goal in setting $100 million, as throwing it out there, is to

avoid a middling Department of Energy program, because a middling Department of Energy program is nowhere near the threat

level that we are dealing with. We are at great risk, and it is the

kind of risk that Dr. Bodde just described from his mother. Her

perception of how at risk her country was and inspiring her son to

get involved in science is the kind of reaction we need to be having,

less we end up 20 years from now in the same spot that we could

have—we were after the 1973 oil embargo, which is all a lot ado

about nothing, and then we fell back into our old ways.

So I think that we can find a way to do this using the expertise

of people like the X Foundation—X Prize to get us there.

Chairman BOEHLERT. Thank you very much.

I don’t mean this to be a point-counterpoint, but I do want to recognize the distinguished gentlelady, Ms. Biggert.

Ms. BIGGERT. Thank you, Mr. Chairman.

I think when Mr. Inglis talked about making the—in

frontloading it, that is a very important concept to keep in mind,

because when we appropriate money, we put it in the Treasury

until somebody claims it. And those appropriated funds really cost

us money, because we—right now, the government has borrowed

$297 billion from the public in 2005, and interest on the—on public

debt is a major expenditure, so not putting the money in prior to,

you know, when we need it is important.

Chairman BOEHLERT. Thanks for the intervention.

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Thank you all very much, my colleagues, and thank you, distinguished witnesses. We really appreciate it.

Stay tuned.

Hearing adjourned.

[Whereupon, at 11:35 a.m., the Committee was adjourned.]

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Appendix:

ADDITIONAL MATERIAL FOR THE RECORD

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