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Chairman Barton, Ranking Member Boucher, and Members of the Subcommittee:
ChevronTexaco is pleased to have the opportunity to testify before the Energy
and Commerce Subcommittee on Energy and Air Quality on DOE's hydrogen programs
and the future of advanced energy technologies.
As ChevronTexaco's President of Technology Ventures, I oversee many facets of
our company's new energy technology development and commercialization, including
hydrogen generation and hydrogen infrastructure, and can share our experience as
well as our views regarding the critical steps required in the development of
this technology.
By way of background, ChevronTexaco is an integrated, global energy company that
produces oil, natural gas, transportation fuels and other energy products. We
operate in 180 countries and employ more than 53, 000 people worldwide.
ChevronTexaco is the second-largest U.S.-based energy company and the fifth
largest in the world, based on market capitalization. We consider ourselves to
be an environmentally responsible company. In addition to supplying global
energy, we are also involved in a whole host of advanced clean energy and fuel
technologies. We believe that ChevronTexaco's Worldwide Power and Gasification
business unit is a world leader in gasification technology which is a reliable,
efficient, and clean technology that converts hydrocarbons, such as coal, for
the production of power, fuels, chemicals and industrial gases, such as
hydrogen. Commercial examples of the use of our technology include Tampa
Electric Power Company's Polk facility that produces electricity and Eastman
Chemical Company's Kingsport, Tennessee facility that produces chemicals.
With regards to fuel cell technology, we believe that fuel -cell technology will
continue to evolve. Stationary fuel cells to generate high quality power are
commercially available in selected operations today and there are transportation
demonstrations underway.
ChevronTexaco has installed two stationary fuel cells at our facilities in San
Ramon, California and Houston, Texas. These fuel cells convert hydrogen from
natural gas into electricity, clean water and usable heat, and provide secure
digital-grade power to select information technology systems and laboratories.
We undertook these projects to gain experience with designing and installing
stationary fuel-cell systems, and to help us translate this experience into
other types of fuel cell projects. We are working on hydrogen infrastructure
development issues, including production, storage, and distribution.
CHEVRONTEXACO'S RESEARCH AND DEVELOPMENT INITIATIVES
We continue to support development of hydrogen generation and hydrogen
storage systems. We are active in research and development to create safe
methods for storing and delivering hydrogen. New opportunities to develop the
technology may be presented through demonstrations, including the DOE's recently
announced "Controlled Hydrogen Fleet and Infrastructure Demonstration and
Validation Project." To meet the challenges involved with this new
technology, we are involved in partnerships, participate in government and
private workshops, and privately fund basic and applied research for hydrogen
fuels, storage, and refueling sites. These efforts were underway prior to
President Bush's announcement of the Hydrogen Initiative in this year's State of
the Union address and subsequently, DOE's solicitation on infrastructure. The
Administration's actions provide an impetus for the private sector to focus more
attention on the development of this technology. We view new DOE programs as an
excellent opportunity to work in partnership with the auto companies, States,
the U.S. government and other critical parties, especially with regard to fuel
production and distribution infrastructure. Developing a hydrogen infrastructure
requires the cooperative efforts of the government, auto manufacturers, major
energy companies, and others.
An example of the type of activity that we are involved in includes:
California Fuel Cell Partnership: We continue to work with auto companies,
other energy partners and government agencies, to provide hydrogen to operate a
project facility that safely delivers high-pressure hydrogen to demonstration
vehicles.
In addition, as part of this effort ChevronTexaco engages and supports important
R&D initiatives including:
Hydrogen Production: Hydrogen is a fuel - not a natural resource. It must be
manufactured from other sources, so how the supply system is developed is
critical. The two primary sources of hydrogen are water and hydrocarbons. For
the past 50 years, we have been engaged in the conversion of hydrocarbons to
hydrogen through refinery and gasification processes. As you may be aware, oil
refineries are the largest current producers and users of hydrogen. We are
leveraging long-standing core competencies in fuels, catalysis, proprietary
gasification and process engineering technology to explore the development of a
fuel-processing business. This includes understanding the total environmental
consequences and costs of making hydrogen from many different sources. Though
many fuel cell systems include reformers that convert natural gas or other fuels
to hydrogen at the site, cost effective hydrogen production and distribution
technologies will enable a wider range of fuel-cell systems to operate. We are
also looking at electrolysis to produce hydrogen from water, however as we focus
on the transition to a hydrogen based market it is clear that making hydrogen
from readily available hydrocarbon fuels is currently far more cost competitive
with today's fuels. We have developed relationships with leading fuel-cell
developers, utilities and technology companies in an effort to introduce
competitive fuel-cell systems into the market. We have hydrogen generators in
long term testing that will convert a hydrocarbon feedstock, such as natural gas
or liquid hydrocarbons, into hydrogen.
Delivery of Hydrogen: One other challenge is how hydrogen would be
distributed in a decentralized manner. We are working to design a delivery
infrastructure that is economic and safe. We are developing infrastructure
systems to incorporate and integrate a range of new technologies including
hydrogen extraction from natural gas, safe-site storage technologies, and
advanced hydrogen detection and control systems to ensure safe handling and use.
This is an array of technical challenges that will require involvement of many
industry technology providers as well as public and government agencies.
Hydrogen Storage: Hydrogen storage is a critical part of the infrastructure
development. Distribution of fuels for commercial use must provide for hydrogen
storage. We are currently engaged in the R&D and commercialization of new
hydrogen storage technology through partnerships and internal efforts. Our
objective is to provide safe reliable products capable of meeting a wide range
of applications including small portable, automotive, and bulk storage
applications.
COMMERCIAL AND INFRASTRUCTURE CHALLENGES
We have operated in the refining and marketing business segment for over 100
years. The financial investment has been very large. The current level of
discretionary capital spending on the refining business segment by integrated
oil companies has been close to zero and investments are being minimized.
Integrated energy companies have generally been reducing their exposure to this
business because of our inability to achieve an adequate return on capital. This
has created an environment where refining assets have been sold for about 20% to
40% of replacement cost. It is estimated that six to nine refineries may be up
for sale in the U.S. within the next 12 months either because of weak business
conditions or Federal Trade Commission mandates. It is unlikely that U.S.
refiners and marketers would create a substantial new infrastructure investment
without believing that they could obtain a satisfactory economic return to
compensate for this risk.
The introduction of fuel-cell cars must be coordinated with the introduction of
the infrastructure. We know that the infrastructure must be in place before
customers buy these cars. We also know that this will require significant
investment and that to be successful the auto companies and energy companies
must work together to co-develop solutions with support of government in
private/public partnerships.
Hydrogen must be available when and where it will be needed. We understand that
customers must be confident that hydrogen will be available before they will buy
cars powered by hydrogen. It is a significant task to develop technology to:
1. produce the hydrogen at a reasonable cost;
2. make it available over a broad geographic area;
3. store it at the sales point;
4. fuel the cars; and
5. in addition, the technology must be employed in a safe manner to achieve
total consumer confidence.
There are 9 million tons per year of hydrogen produced and used in the United
States. This is equivalent to only 1% of the crude oil produced in America.
Worldwide production is 40 million tons per year. Most of this hydrogen is used
in refineries, chemical plants, metals processing and the electronics industry.
Hydrogen right now is a specialty chemical, and it must be transformed into a
broader energy fuel if it is to be used for transportation.
Storing hydrogen in the car, at the refueling station and throughout the
delivery infrastructure is a sizable challenge that is unmet thus far. The
problems are different at each location, and they each deserve the attention of
industry, national labs and the DOE. Much attention is given to storing hydrogen
on board the car, and rightly so, but similar attention is needed in the other
places that hydrogen needs to be stored. We are working to develop this
technology, but there is still more work to be done before a standard is
embraced.
Eventually the hydrogen market may be big enough that we can make hydrogen in
large centralized plants, similar to refineries today. But then the hydrogen
still needs to be distributed across the country. Once large centralized plants
are built, it will be possible to capture a significant portion of the carbon
dioxide made as a by product. Capturing, inertly storing or sequestering large
volumes of CO2 are two distinct challenges yet to be overcome.
New codes and standards need to be developed that permit the development of
the infrastructure. Existing building codes and hydrogen system design standards
were not developed with consumer applications in mind. Today's codes provide
large distance "setbacks" from other facilities that limit the
locations where hydrogen can be manufactured, stored and dispensed. This was
appropriate for the technology and hydrogen applications of the 20th century,
but they make retrofits of existing sites with limited area for expansion
impractical for future hydrogen facilities.
Codes and standards will need to be updated to reflect the developments in safer
hydrogen technologies arising from the new storage and control system
technologies. In some cases, building codes will need to be strengthened to
ensure safe maintenance facilities. Through research and demonstration of
hydrogen generation and storage technology we will be able to gain the necessary
safety knowledge which will lead to data driven codes and standards that do not
currently exist.
The cost of hydrogen to consumers needs to be competitive in the market with
other energy fuels. We need to be convinced that hydrogen can compete with other
fuels in the market. This may be achievable once the demand for hydrogen is
substantial, but as of yet this has not been demonstrated. The ability to
economically supply hydrogen to the market while the demand is low is difficult.
Coordination between the auto companies and energy companies for decisions on
optimal geographic demonstration fleets of fuel-cell cars and buses will be
important to get the infrastructure started and to prove the value and
functionality of the fuel-cell vehicle and infrastructure. Specialty
applications and niche markets that use much of the same technology but in
different products are going to be important and will be a signpost along the
path. One opportunity in this area would be for use of the technology by the
military. In addition, applications, such as airport ground equipment vehicles
and fleets of industrial vehicles with centralized and stationary refueling,
need to be successful before consumers become a significant user of this
technology.
PUBLIC POLICY RECOMMENDATIONS
We believe that there are several areas that are critical to the development of
this technology. We recommend the following:
1. Support the Technology Development and Validation For Hydrogen
Infrastructure: We see DOE's sponsored "Controlled Hydrogen Fleet and
Infrastructure Demonstration and Validation Project" as a positive step
that will create opportunities to move the technology forward. It is essential
that DOE integrate the infrastructure issues simultaneously with fuel cell
vehicle development. Major energy companies that already support this nation's
fuel infrastructure have a key role to play in the development of hydrogen based
energy. ChevronTexaco is committed to helping the U.S. move towards safe and
cost competitive solutions. This should be a high priority in terms of DOE and
other government R&D support.
2. Public Education: When new technologies are on the horizon, there is a lot
of fanfare and media attention surrounding the development of the technology.
Unfortunately, this leads to unrealistic public expectations. As the hydrogen
market evolves over the next few decades, technology breakthroughs will change
the way hydrogen is made and supplied to the consumer. It is important that the
public understand the market drivers, environmental benefits, costs and
challenges associated with each stage of the transition.
3. Leverage Private Industry Stakeholders: We believe that this will help
make the technology commercial, and also focus government priorities on areas
where there is the most need. ChevronTexaco has already invested in R&D
efforts in the areas of hydrogen generation and storage, however the private
sector alone can not provide the resources and capital necessary in a technology
that may not see any sort of return for decades. The only way to accelerate
efforts towards commercialization of this market is for private industry and
government to
4. Monitor Market Signals: Often we see that factors can change the need for
a particular technology - either increasing or decreasing demand. Some of these
factors may include competing technologies, availability of resources and public
opinion. To embark on a long-term major government initiative without doing
mid-course reviews would be a mistake. Periodic reviews will be necessary to
assess progress and steer or change policy as needed and implement appropriate
mid-course corrections.
I should note that this year's energy bill, H.R. 6, passed by this Committee
and the House does include several provisions to address infrastructure issues
with this energy technology as well as other advanced energy technologies.
.
Thank you for the opportunity to testify and I would be happy to answer any
questions.
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