Tuesday, January 25, 2005

Larry Burns' logic

People often ask about GMs blitz about the fuel cell vehicles, and I wonder about it too. Many think that it is just a hoax aimed at delaying any action on fuel economy front in the near future. Some say that GM is hopelessly optimistic. Many others are simply trying to understand what the hoopla is all about. Larry Burns tries to explain *some* of the logic here:

1. Volatility in oil supplies worries GM
2. Hybrids don't "solve" the energy, environmental or congestion problems
3. When it comes to Fuel Cell Vehicles (FCVs)

3.1) Propulsion system in is much simpler since there are many fewer parts
3.2) Geometry of parts involved in FCVs is a lot simpler than ICE vehicle parts
3.3) The cost per kilowatt are now only ten times as much when they used to be 100 times as much six years ago
3.4) Production and handling of hydrogen are established industries
3.5) Cost per hydrogen station should be in the range of only $1 million
3.6) "The solution lies in the software"

Let's take these one at a time.

If GM is genuinely concerned that future of oil supplies is uncertain and while there may be a lot of oil, but it will come at the cost of a LOT of price and uncertainty, then I must applaud them for taking such a view.

While hybrids won't "solve the problem", it is too simplistic to think that they don't have a significant role to play in the solution of energy and environmental problems. In addition, we know that even smaller steps today will have significant long term impacts and will make the job of addressing longer term problems easier.

While the propulsion system is much simpler and the geometry of parts involved is simpler, it should also be kept in mind that the conventional ICE technology has kept on getting better by 1-2% EVERY YEAR. This simply means that there is a lot of catching up to do if FCVs have to compete head on with traditional vehicles in terms of reliability and performance.

Newer research and improvment in technology is rapidly bringing down the cost of FCV systems. There is no doubt about that. However, it is the last couple of zeros that are going to be the most difficult to remove. Remember that this has to be done while meeting very high performance standards which current FCV technology does not meet in many cases.

While hydrogen production and distribution is a well established business, the entire rationale for hydrogen-based vehicles is based on the premise that the hydrogen will come from very low carbon sources. Current hydrogen production does no carbon mitigation in the form of sequestration. Thus unprecedented developments in carbon capture and storage as well as renewable energy systems will have to made, otherwise the environmental argument in favoe of FCVs disappears.

In the interview, Burns only talks about 12,000 hydrogen stations. Currently, there are more than 180,000 gasoline stations in the US. Several estimates agree that for hydrogen or any other alternative (such as compressed natural gas) to really take off, at least 30,000 to 40,000 stations will be required. In addition, the cost of infrastructure extends beyond the hydrogen stations. TIAX (which bought A D Little's business in this area) has done quite a bit work on hydrogen and fuel cells for the DOE. In a recent presentation, they outlined the significant amount of risks involved in hydrogen infrastructure including long pay back periods.

The last point about FCVs offering a completely new type of product is where I think Larry Burns and GM see to be most right. What I like here is that they have an attitude that aims to completely change our notions about what it means to own and operate an automobile. In some respects, GM believes that the customers will buy a product which is new and exciting and offers value. In some respects, it is "building a better mouse trap and they will come" attitude. In either case, I think that GM may be on to something here. It is not a common sight to see a company of the size of GM which is so entrenched in its traditional products, markets and procedures trying to reinvent itself. Even fewer of those who have tried have succeeded. Never the less, it is this buzz and excitement about FCVs that I find most attractive, but I also feel that this alone is not sufficient to overcome several technical and market obstacles in the way of FCVs.

Overall, Larry Burns' logic may be slightly twisted, but he is not out of his mind. I would be very happy if GM and other car makers succeed at this effort, but at this point I am not ready to put my money on them doing so.

UPDATE:
Hydrogen Forecast has video interviews with Larry Burns, Tim Vail and Anne Asensio about the Sequel. Pay close attention to Anne Asensio's clip as she talks about aspects of vehicle design that might really get many young people excited. (Note: Flash Player and IE needed)

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