Migration to Alternative Fuels and Powertrains

Fuel cell vehicles, like battery electric vehicles, produce zero tailpipe emissions. Unlike BEVs, however, which must be recharged via an external power source, FCVs use an on-board fuel cell to create electrical power through an electro-chemical reaction based on hydrogen fuel and air. Vehicles using fuel cells as the primary source of motive power can also be hybridized with a high-voltage battery, to improve vehicle performance and better optimize the cost and robustness of the fuel cell system. In fact, all of our efforts to improve high-voltage electronics and battery technology on HEVs, BEVs and PHEVs will be applicable to FCVs, if and when these vehicles become more commercially viable.

We believe that hydrogen-powered fuel cell vehicles may be an important long-term solution for reducing GHGs, if hydrogen fuel emerges as a viable low-carbon energy carrier. Therefore, Ford has committed to significant hydrogen fuel cell research and development.

Ford has a decade-long history of fuel cell vehicle development and technology demonstration. The Company developed the first research prototype FCV in 1999. In 2004, we introduced the first production-intended FCV using the Ford Focus as a base vehicle. The Focus FCV uses a Ballard fuel cell technology, called HyWay1. It is one of the industry's first hybridized fuel cell vehicles, meaning it has a battery system as well as a fuel cell system.

From 2004 to 2009, Ford participated in a technology demonstration program, partially funded by the U.S. Department of Energy (DOE), as well as other demonstration programs in Canada and Europe. A total of 30 Ford Focus FCVs have been in operation in these programs. These vehicles have been tested to demonstrate durability and reliability; for example, they were subjected to driving tests at sub-zero temperatures and high altitudes to prove vehicle performance under a range of customer-encountered driving environments. By 2009, these vehicles had accumulated over a million driving miles without significant technical problems, thereby demonstrating the reliability of fuel cell powertrain systems in real-world driving conditions. The data collected from this fleet is critical for the further development of fuel cell technology. Based on the knowledge gained from the Focus FCV test fleet, we have completed the development and laboratory validation of our new fuel cell technology, called HyWay2/3. This new technology improves the robustness and "freeze start" capability of the fuel cell propulsion system.

Even with the advances we have made in hydrogen technology over the past 10 years, however, we still have many challenges to overcome before hydrogen FCVs can compete in the market with current vehicle technology. The cost and durability of the fuel cell system are the most significant challenges. These challenges remain too significant to allow for the commercialization of FCVs at this point, even with the incremental improvements in current state-of-the-art fuel cell technology. For example, extensive DOE analysis has not yet revealed an automotive fuel cell stack that meets the DOE's cost targets for real-world commercialization, or that maintains proper performance throughout the targeted lifetime while staying within the targeted cost. There are also still significant challenges related to the cost and availability of hydrogen production, hydrogen distribution and on-board hydrogen storage. To overcome these challenges, and to make fuel cell vehicle technology commercially viable, we believe that further scientific breakthroughs are required.

Given these significant challenges to commercialization, we believe that further investment in demonstrating hydrogen FCVs and integrating current FCV technology into existing vehicles are not high-value investments for Ford. Therefore, Ford is now reprioritizing its resources to concentrate on fundamental fuel cell research that will help increase the commercialization potential of FCV technology. For example, Ford is focusing on materials development, basic scientific research into reducing the costs and increasing the durability of the fuel cell stack and system, and the development of improved analytical models. We are working on these critical issues with our alliance partners: Daimler AG and Automotive Fuel Cell Corporation, a Vancouver-based company owned by Ballard, Daimler and Ford.

Our materials research is focused on the membrane electrode assembly (MEA) and bipolar plates, which make up key elements of the fuel cell stack. Currently, these components are made from expensive materials. We are working to find alternatives to replace these materials, such as developing new catalyst membranes and corrosion-resistant bipolar plates. Simultaneously, we are working to increase the density of fuel cell materials, which will improve the utilization of the expensive materials used in the MEA and bipolar plate. Fuel cell catalyst research is also crucial to our ability to optimize fuel cell stack operating conditions and reduce system complexity.

We are also developing advanced computational modeling that will help us understand the mechanisms underlying ideal fuel cell functioning and anticipate failure modes under the real-world usage profiles. These modeling tools will assist with our materials research.

Hydrogen storage on-board the vehicle is another critical challenge to the commercial viability of hydrogen FCVs. We recognize that compressed hydrogen storage, which is currently used in the demonstration vehicles, may not be sufficient to achieve commercialization goals. We are therefore pursuing research on materials-based on-board hydrogen storage technology, including complex hydride and novel hydrogen sorbent technologies, which show technical potential.

Producing and distributing hydrogen fuel is another important hurdle on the road to implementing hydrogen-powered FCVs. The GHG reduction benefits of hydrogen fuel depend on what procedures and feed stocks are used to produce hydrogen. Currently, the most state-of-the-art procedure for producing hydrogen is a distributed natural gas steam reforming process. However, when FCVs are run on hydrogen reformed from natural gas using the current processes, they do not provide significant environmental benefits on a well-to-wheels basis that take into account GHG emissions from the natural gas reformation process. It would be necessary to employ carbon sequestration technologies in hydrogen production from fossil fuels or increase the use of renewable energy sources to make hydrogen for hydrogen-fueled FCVs to provide significant environmental benefits.

Even if the challenges of producing hydrogen can be overcome, there is still no widespread hydrogen fueling system. Therefore, new infrastructure must be designed and executed throughout the country to make hydrogen FCVs feasible.

Working alone, Ford will not be able to overcome all of the challenges hydrogen vehicles face. That is why Ford is collaborating with a wide range of partners on the development of hydrogen vehicles, fuels and fueling systems. In addition to our work with Ballard and Daimler described above, we are working with:

• The Freedom CAR and Fuel Partnership: a partnership between Ford, General Motors, Chrysler, five energy providers and the DOE to develop vehicles and fuels that will provide freedom from imported oil and carbon-based fuel emissions, and
• The Clean Energy Partnership Berlin: a consortium of 13 corporate partners and the German government that is working to demonstrate the suitability of hydrogen as a fuel for everyday use.