Concerned about slow sales of electric cars and plug-in hybrids, automakers are increasingly betting the future of green cars on hydrogen fuel cell technology.
Even Toyota Motor Corp., maker of the popular Prius gas-electric hybrid, will use hydrogen instead of batteries to power its next generation of green vehicles.
"Today, Toyota actually favors fuel cells over other zero-emission vehicles, like pure battery electric vehicles," said Craig Scott, the company's national manager of advanced technologies. "We would like to be still selling cars when there's no more gas. And no one is coming to our door asking us to build a new electric car."
But even hydrogen's most ardent proponents agree the technology faces enormous hurdles. Like electric cars, hydrogen fuel cell vehicles are expensive. So is the infrastructure to refuel them.
Car companies have been slow to put hydrogen fuel cell vehicles on the market in part because of the lack of fueling stations. Operators of fueling stations, in turn, won't build more retail outlets unless they see more fuel cell car sales.
Dan Poppe is among the few early investors in hydrogen stations. Wearing a hard hat and coveralls at his Burbank hydrogen station, Poppe chews on the edges of his mustache and worries about his future.
"In 2004, we were told we'd have 10,000 cars on the road [in California] by 2009 — but it was more like 200 cars," said Poppe, whose company, H2 Frontier, builds and operates stations in California. "Today, we still only have about 250. That's not going to do it."
Hydrogen fuel cell car makers and station operators like Poppe are subsidized by the state of California, which has set a goal of having 1.5 million zero-emission cars on the road by 2025. By the same year, the state wants 15% of all new cars sold to be zero-emission vehicles.
The category includes plug-in hybrids — which can travel a few miles on battery power alone before a gas engine kicks in — but it doesn't include traditional hybrids, which sell at lower cost and in much higher volumes.
Automakers are still working on electric car technology, and sales of battery electric and plug-in hybrid vehicles are up 30% this year over 2013. Still, total sales for zero-emission vehicles represent less than 1% of all cars nationally.
They are more popular in California than anywhere else. The state's drivers own 40% of the nation's zero-emission vehicles, almost all of them plug-in hybrids and battery electric vehicles. With automakers still struggling to produce a mass-market electric car, fuel cells increasingly look like the ascendant platform.
Hydrogen fuel cells are designed to power electric motors much the way batteries do. But instead of storing their energy in a battery pack that takes hours to recharge, the fuel-cell vehicles store hydrogen gas in an onboard tank that can be refilled in minutes, just like a gasoline tank.
The state subsidizes hydrogen-powered cars the same way it does battery-powered cars, with the same $5,000 rebate it offered buyers of electric cars in the early days. (Electric car buyers now are eligible for a $2,500 state rebate.) New fuel cell car buyers also qualify, at least until the end of 2014, for a $4,000 federal rebate — down from as much as $12,000 for cars that hit the road in earlier years.
The state will also award automakers environmental credits for building them, which they can use to comply with California clean air mandates or sell to other automakers who need the credits to comply. Automakers get more credits for fuel cell cars than most battery electrics or plug-in hybrids.
Hydrogen refueling station operators like Poppe also get money from the state and other agencies, among them the California Energy Commission, California Air Resources Board and South Coast Air Quality Management District.
Poppe received $3 million from the state to build a station in Chino. He got $500,000 from the energy commission and the air quality district to operate his station in Burbank.
The district says it has spent $11.4 million so far on the construction, operation and maintenance of nine Southern California stations, with "considerably more funds" having been spent by the energy commission and the air resources board, agency spokesman Sam Atwood said.
To qualify for a $1-million grant, Poppe had to invest $250,000 to $300,000 of his own money. To receive grants to cover operational expenses, he has had to hit specific performance goals — a certain number of pumps open, operating at certain capacities, by certain dates — or face being disqualified.
Despite the risks to entrepreneurs, Poppe believes the future is hydrogen, because fuel cell vehicles address the two main shortcomings of today's battery-powered cars: short driving range and long recharging times.
Car companies agree.
Toyota will launch a fuel cell sedan in Japan early next year and in the U.S. by the summer. Hyundai Motor Co. started leasing a hydrogen fuel cell version of its Tucson sport utility vehicle this year. Honda Motor Co., which has spent years testing and leasing its FCX Clarity fuel cell vehicle, is preparing to launch a new fuel cell car sometime next year.
Ford Motor Co., which has put 1.3 million test miles on a fleet of 300 fuel cell vehicles over the last several years, recently cut a deal with Daimler, Renault and Nissan to develop a joint fuel cell technology that all four companies would share.
General Motors Co., which holds more patents for hydrogen fuel cell technology than any other carmaker, has similarly tested its HydroGen4 car. GM has partnered with Honda, its rival for the number of new fuel cell patents each year, to co-develop new automotive fuel cell applications.
The cars, when they arrive, won't come cheap. Toyota hasn't set a price for its car here, but when it's launched in Japan it will have a $68,000 sticker price — though buyers will qualify for a $20,000 government rebate.
Fuel cell cars have about the same range as many gas-powered vehicles — as much as 300 miles between fueling stops.
Most electric cars have a range of about 80 miles, though more expensive battery-powered cars — namely, the Tesla Model S — offer more than 200 miles of driving range. The Tesla Model S starts at $72,000 and can cost upward of $100,000 with the largest battery and luxury options.
In addition, fuel cell advocates point out that there are multiple sources of hydrogen, including hydro-electric or wind generators, nuclear power plants and natural gas.
Elon Musk, chairman of the battery-electric vehicle manufacturer Tesla Motors Inc., derides hydrogen-powered cars and calls the science behind them overcomplicated.
"I usually call them 'fool cells,'" Musk told shareholders in June, having earlier dismissed the technology as "a load of rubbish."
Musk did not elaborate on specific weaknesses of hydrogen power or why he believes batteries will remain the dominant power source for zero-emission cars. A Tesla spokesperson declined requests for interviews with Musk or other executives.
Some observers caution that the appearance of competing technologies can be misleading. They say the need for clean transportation won't necessarily be found in a single system.
"If you have a fuel cell car, you have a longer range between visits to the gas station; but if you plug in at home, you never have to go to the gas station at all," said Don Anair of the Union of Concerned Scientists. "It's not an either-or proposition. It's a both-and proposition."
California is at the leading edge of subsidizing the fuel cell movement. The state Legislature passed AB 8 late last year, dedicating $20 million a year through 2023 to finance the construction of as many as 100 hydrogen fueling stations.
There are only 11 such stations in California now, though that number could increase to 40 stations within a year.
Automakers and station owners have little incentive to invest without government subsidies to develop cars and stations.
"Without government support, this is not a viable business," Poppe said.
Until the nascent technology goes mainstream, hydrogen station operators like Poppe — who's such a believer in the technology that he and his wife both drive Mercedes-Benz B-Class fuel cell cars — must wait for their businesses to become profitable. His Burbank station serves 10 or
20 cars a day; he needs at least 30 to recoup his investment.
Experts put the price of building a single hydrogen fueling station, excluding the cost of the real estate, at about $2 million. A single nozzle at his Burbank station costs $12,000, Poppe said.
That's expensive, but so are gasoline stations — along with the drilling and refining operations that feed them.
"We could put in a nationwide network of [hydrogen] stations for less than the cost of building the Alaska pipeline," said Charlie Freese, head of the fuel cell vehicle program for GM. "There are a lot of other hidden costs too, like the cost of keeping the [Strait] of Hormuz open."