DALLAS -- President George W. Bush, eager to ease the country's dependence on oil from the Middle East, pledged in 2003 that the first car driven by a child born that day would be powered by hydrogen, not gasoline. He committed $1.2 billion for development, and so began the race to the hydrogen age.
More than a decade later, the race has barely begun.
Hydrogen fuel cell cars are available to the American public in only California, where the country's only existing hydrogen stations -- fewer than 10 -- are located. In the automobile industry, the sentiment is that a wide-scale rollout is 10 or 20 years off, if it happens at all.
But through all of the ups and downs, hydrogen and fuel cell technology at large have not been counted out as the energy source of the future. Car manufacturers continue to spend billions on research. The technology has found new applications on forklifts, cellphone towers and in data centers owned by Apple and eBay.
Used by NASA from its earliest space missions, fuel cells generate energy through a chemical reaction, as opposed to the combustion process used by most every car and jet engine. That dramatically reduces carbon emissions, an attractive feature as governments implement tougher laws to combat global warming.
Andy Marsh, the former Dallas entrepreneur who launched Valere Power over a decade ago, is betting heavily on the technology. His new company, New York-based Plug Power, manufactures hydrogen fuel cell systems, complete with on-site fueling stations. The systems power forklifts and other machinery at warehouses and manufacturing plants across the country.
"When I'm an old man, there won't be internal combustion engines," said Marsh, the chief executive officer of Plug Power. "The biggest issue with hydrogen cars is what comes first, the infrastructure or the car? In a warehouse you don't have that problem. It's all self-contained."
With a client list that includes Wal-Mart, Procter & Gamble and Ace Hardware, Plug Power reported $64.2 million in revenue last year, more than twice what it did the year before.
In the fuel cell industry, that makes it a major player. But within the energy sector, fuel cells remain a fringe technology, generating about $1 billion a year in global sales, said Cosmin Laslau, a senior analyst with Lux Research. Exxon Mobil takes in more than that in a day.
As companies try to rein in energy costs and cut carbon emissions, fuel cells are gaining ground as an alternative to the grid. Data centers, through which all Internet traffic must run, have enormous electricity demands -- amounting to $9 billion a year in 2013, according to the National Resources Defense Council.
The price of electricity typically skyrockets at times of heavy demand. California-based Bloom Energy has made a business setting up fuel cell systems to power data centers, using the grid only as backup and effectively guaranteeing steady electricity costs.
Fuel cells are on cellphone towers in remote areas across the United States, providing backup power in the event of a power line failure. They are even finding application as power plants in cities, where their small size allows installation in spaces where traditional plants are not feasible.
"Some of these small players can make a $50 million business targeting specialty applications," Laslau said. "There just aren't these $10 [billion] or $100 billion opportunities for developers. We still think it's an industry that's going to be low billions five years out."
But 10 or 15 years out? Hydrogen fuel cells' future in the car industry is a topic of debate. In the low-emissions market, electric cars got ahead and are starting to cut into traditional car sales. But the limitations of battery technology have restricted those cars' range, and the batteries typically require hours to recharge. Hydrogen fuel cell vehicles can go 300 miles on a single tank and be refueled as quickly as a gasoline-powered vehicle.
Their main challenge is infrastructure. California has committed $200 million to build 100 stations, and there are plans for 12 more in the Northeast. But creating a nationwide network to compete with gasoline is likely to cost tens of billions of dollars.
"Even if the vehicles are ready, we need a serious cost reduction on the refueling station," said Devin Lindsay, an analyst with IHS Automotive. "It can work. There are just going to be some roadblocks ahead."
Still, that isn't stopping Japanese car giant Toyota. The auto manufacturer, which has been developing hydrogen cell cars for two decades, is preparing to release its first mass-produced model in the U.S. in October for $57,500.
Because of a lack of refueling stations, car sales will be limited to California and are projected to number 3,000 cars by 2017.
"I cannot help but think that to some people, our collaboration, our adventurous road trip, must seem quixotic; idealism without regard for practicality. I, of course, would not agree with that," Toyota managing officer Satoshi Ogiso said at a conference in California last year.
Business on 06/27/2015