Tuesday, May 23, 2006

Rewarding H2 Results

I missed the introduction in the House of Representatives of HR 5413 a month or so ago, or I'd have posted on this subject much earlier. Titled the "H Prize Act of 2006", Rep. Inglis's bill follows the methodology of the space technology X-Prize, which I've highlighted previously as a worthy model for incremental energy R&D. The bill would award monetary prizes for reaching specified hydrogen milestones, up to $100 million for a truly game-changing technology solution. This proposal, simple as it seems, might even satisfy both hydrogen enthusiasts and hydrogen skeptics.

The X-Prize approach seems ideally suited for hydrogen. As with the commercialization of space travel, making hydrogen practical requires either a series of key breakthroughs in divergent research areas, or a truly novel combination of existing technologies. The other similarity of note is in industry structure, with both dominated by government agencies and large corporations, but with interesting work going on in small start-ups. As for space, the dollars involved here are unlikely to galvanize the biggest players to redouble their efforts, but they would be very material to new entrants struggling to stay alive while innovating.

As I commented the other day, there's been a recent wave of skepticism about hydrogen, and it is justified to some degree by the overly ambitious projections of a few years ago. The beauty of the H Prize from this perspective is that it is a very cost-effective way to fund basic research: you only pay for results, not for work that goes nowhere. Granted, we might shell out a few tens of millions for milestones that never add up to a workable energy system, but if we can't afford to spend a few millions on something potentially so important, then we ought to fold our tent and offshore the operation of the entire country to China and India.

Enthusiasts could point out that much work remains before the milestones in question can be reached, let alone integrated into a practical system. Still, it would be hard to justify spending much more on H2 than we do, given its deferred payoff. A modest H Prize looks like a clever and frugal way to stimulate the creative margin of what could be the next big wave in energy. It certainly pales in comparison to the billions we've spent on things such as grain ethanol that look appealing in the short term, but don't offer a fraction of hydrogen's long-term potential.

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