1 Giant Obstacle Keeping Hydrogen Fuel Out of Your Gas Tank

The promise of using hydrogen as a next-generation, ultra-clean, high-energy-density fuel source has existed for decades. It sounds like a great idea, especially when you pin your hopes to projections that span decades into the future. If only the industry could hammer out some technological inefficiencies, the world could be powered by a cheap fuel that produces water vapor when combusted and offers similar driving ranges to current gasoline-powered vehicles. Automakers such as Toyota (NYSE: TM  ) and General Motors (NYSE: GM  ) have already poured large amounts of money into developing fuel cell technology. Surely they can't be wrong, right?

While successfully developing any disruptive new technology requires a hefty budget and interdisciplinary collaboration, consumers and investors shouldn't hold their breath while awaiting the arrival of the Hydrogen Economy. The day will surely come when hydrogen fueling stations dot the nation's highways in abundance, but if that day is decades away, it probably isn't a viable investing opportunity. It certainly isn't as great of an opportunity as other alternative fuel technologies being developed by Clean Energy Fuels (NASDAQ: CLNE  ) and Tesla Motors (NASDAQ: TSLA  )

All of the optimism surrounding research into fuel cell development overlooks one giant obstacle preceding their utilization: production of hydrogen fuel.

Not your grandfather's production
Don't be mistaken: The world knows how to produce hydrogen directly and as a byproduct of several industrial chemical processes. The problem is producing enough to sustain a respectable automobile fleet that can travel freely throughout the country. Consider how daily domestic hydrogen production has fared over the past several decades.

Of course, introducing hydrogen vehicles would create an incentive to increase production -- and one technology is ready to capitalize on the opportunity. Steam reforming shows promise for producing large amounts of hydrogen from natural gas, which the National Renewable Energy Laboratory estimates could be produced, transported, and dispensed for nearly $4 per gasoline equivalent gallon. There is also the potential for natural gas to be transported directly to fueling stations and converted to hydrogen fuel onsite. The production process would still generate greenhouse gases -- albeit far fewer over the fuel's lifetime compared with petroleum fuels -- and require generous amounts of energy. There's also little incentive to introduce an additional step to manufacture hydrogen when natural gas serves as a viable alternative fuel itself.

In fact, in 2011 natural gas fuel provided by companies such as Clean Energy Fuels was 1,416 times more abundant than hydrogen fuel, while electric fuel (in gasoline equivalency) was 44 times more abundant. Heck, even propane and 85% ethanol fuels were 715 times and 788 times more abundant, respectively. When's the last time you read about the great Propane Economy?

The Department of Energy has invested heavily in developing fuel cells and the technologies needed to produce commercial quantities of hydrogen fuel. While advances have been made for a variety of innovations ranging from microbial production of hydrogen to pipeline technologies, there are still cost-prohibitive obstacles relating to transportation, storage, and, most importantly, production.

Don't take my word for it, though. In 2011, General Motors CEO Daniel Akerson commented on the long-term realities of hydrogen fuel cell vehicles:  

We're looking at hydrogen fuel cells, which have no carbon emissions, zero. They're very expensive now, but we've, just in the last two years, reduced the price of that technology by $100,000.

The car is still too expensive and probably won't be practical until the 2020-plus period. And then there's the issue of infrastructure.

Tesla Motors' Elon Musk has been a vocal critic of hydrogen fuel, too, although that is to be expected from the head of a company developing a competing alternative-fuel vehicle. Nonetheless, most cost projections for a viable hydrogen fuel market rely on a Catch-22 scenario. For instance, the Department of Energy estimates fuel cell technologies to be competitive by 2017 if 500,000 vehicles are produced each year to support them. A robust national infrastructure is required to justify those production levels, but investments in infrastructure require a large customer base. That presents a slight problem.

Fueling tomorrow, today?
I'm certainly a technological optimist and believe that hydrogen fuels could indeed fuel tomorrow, but investors must temper their expectations when defining "tomorrow." Will it arrive at the end of the decade, by the middle of the next decade, or sometime further into the future? The fact that automobile companies are exploring fuel cell technologies shouldn't convey that the opportunity is inevitable in the near term. Vehicle manufacturers are simply (and wisely) not gambling the future of their fleets away on any one technology. I suggest investors follow suit until more progress is made on key technological fronts for hydrogen fuel, especially production.

Hydrogen fuel doesn't scare OPEC, but this company does
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Read/Post Comments (25) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 24, 2013, at 5:48 PM, andiconda wrote:

    Its foolish to think that if we needed hydrogen for fuel we all wouldn't be driving cells. It disgusts me that money gets in the way of human advancement.

  • Report this Comment On November 24, 2013, at 6:21 PM, rodgerolsen wrote:

    With minimal conversion, most cars will run on unmodified natural gas. In Eastern Europe about 40% of vehicles are duel fuel - at a cost of about $800 each for conversion. It makes no sense, therefor to use natural gas to produce expensive hydrogen, create an expensive supply line and then use it in cars that cost several times as much as natural gas vehicles. Only a PC world gone mad could accept that as a viable option.

  • Report this Comment On November 24, 2013, at 8:31 PM, Seer2012 wrote:

    Scientist are discovering new ways of producing hydrogen fuels, inexpensively. Some of the breakthroughs will change the world while others will prove to be a waste of time and money. I read this article and believe it at least has potential.

    http://www.vtnews.vt.edu/articles/2013/04/040413-cals-hydrog...

  • Report this Comment On November 24, 2013, at 8:57 PM, sagehopper wrote:

    Only one word. Hindenburg.

  • Report this Comment On November 24, 2013, at 9:07 PM, vet212 wrote:

    To sagehopper it wasn't the hydrogen in Hindenburg's ballonets that was the problem it was the waterproofing dope on her skin fabric that was electrostatically ignited that started the fire. As to hydrogen as a motor fuel no matter what we burn from high-tech rocket fuels to coal and wood what we are burning is in reality the hydrogen contained in that fuel

  • Report this Comment On November 24, 2013, at 10:57 PM, Barmil wrote:

    Want to learn real research on hydrogen power for cars, Study BMW they have research going on since 2001. What they have found out and managed to produce is truly remarkable compared to the very recent research done by GM, Toyota etc.

    Example: BMW built a test car that hit 185 mph this year with their 12 cylinder block.

  • Report this Comment On November 24, 2013, at 11:14 PM, JFkaminski wrote:

    Thats all because the concept of FUEL cells is the WRONG Process by which to use. There is nothing worse than watching everyone try to force a square peg into a round hole by throwing more and more money at it, all thinking they will make it do what the last couldnt.

    There is a better way to produce H..Completly different. A totaly new concept I devised. One day if I get 100 million, Ill make it happen. Till then. It stays with me.

  • Report this Comment On November 24, 2013, at 11:41 PM, Dadw5boys wrote:

    So all the hydrogen fuel stations that Shell has can not be copied ? GM has a tank that can take shots from a 50 cal and not blow up.

  • Report this Comment On November 25, 2013, at 12:05 AM, Haloperidal wrote:

    The largest and cheapest source of hydrogen is water. Why are we not developing or using technology to crack this molecule to fuel vehicles?

  • Report this Comment On November 25, 2013, at 12:16 AM, unclamaui wrote:

    I guess the writer Maxx, did not read this weekends news

    that Hyundai and Toyota rolling out models in 2014

  • Report this Comment On November 25, 2013, at 3:15 AM, FMagyar wrote:

    For crimminy's sake just google a few scientific papers on the thermodynamic efficiencies of H2 production, Granted that assumes a basic level of mathematical and scientific literacy! The physics and chemistry are very well understood. Unfortunately even a cursory look at the problem makes it very clear that the first and second laws of thermodynamics make this a very difficult proposition to take seriously. You also need to understand the concepts of anergy and exergy!

    The hydrogen economy is a at the very least a myth propagated by special interest groups with an agenda or to put it in different words the whole idea is finely refined yak dung! Don't buy it!

  • Report this Comment On November 25, 2013, at 3:51 AM, michael23518 wrote:

    Anyone can produce hydrogen at home. All you need is water,a dc current from a battery and a way to store it. This is being built into a big issue because the car companies don't want to give up the profits from selling it under their own label.

  • Report this Comment On November 25, 2013, at 8:48 AM, mobadthangood wrote:

    OIL company greed!

  • Report this Comment On November 25, 2013, at 9:25 AM, Mojo1977 wrote:

    Barmil: "Want to learn real research on hydrogen power for cars, Study BMW"

    In 02 I actually did a report in college on the future of fuel cell technology based on BMW's research. They already had buses and cars running on the stuff. And the hydrogen source, I'm not sure why they need natural gas or some other expensive process. BMW was making hydrogen from solar panels and water, for free...

    Oh yeah, free...

  • Report this Comment On November 25, 2013, at 10:59 AM, atkinskd wrote:

    The biggest problem with ALL the energy we use is that it takes more to harvest it than it produces. Fuel Cells are no exception, especially when you factor in all manner of materials needed, power levels required, and let's not forget what a H2 car fire would look like on a busy highway. The ONLY option that comes close is Thorium Nuclear (and selfishly I want my Mr Fusion). The cradle-to-grave analysis on 'Green Energy' shows that in delicately balanced circumstances the payoff is in decades at best. We're too easily enamored with glitz and not interested enough in facts.

  • Report this Comment On November 25, 2013, at 11:37 AM, TMFBlacknGold wrote:

    @atkinskd,

    Thorium reactors are the future, if we invest in it sufficiently:

    http://www.fool.com/investing/general/2013/03/11/the-future-...

    --Maxxwell

  • Report this Comment On November 25, 2013, at 1:44 PM, RParsons wrote:

    Excellent Article and well written. It really brings to light the challenges that face the implementation of Hydrogen as a prominent vehicle fuel, aside from the publicity and clear yet somewhat theoretical benefits. It should like all alternative fuels, be pursued, and I applaud the manufacturers who continue to pioneer these vehicles.

    However, as you note, there are other equally viable and beneficial alternative fuels which are available, practical and in use today. In fact, Propane is far and away the most prolific in use world wide today, and continues to grow in use at an impressive pace. You numbers make this clear. However, you may be surprised to find out that in the US, Propane gallons are likely consumed in greater quantities than CNG gallon equivalents, in vehicle application. Unfortunately, there is not as efficient reporting of use as CNG and E85, as there are such a large number of competitors in the market.

  • Report this Comment On November 25, 2013, at 7:31 PM, cmalek wrote:

    With today's technology the production of Hydrogen consumes more energy than the resulting Hydrogen can produce when burned. Until that equation can be reversed, Hydrogen will not become a popular fuel.

  • Report this Comment On November 26, 2013, at 10:27 AM, fatngassy wrote:

    The FATNGASSY Hydrogen Economy Plan: It's a supply and demand conundrum - there is never going to be a massive, reliable supply of compressed hydrogen gas until there is a demand for it; and there is never going to be a demand for it until there is a massive, reliable supply chain. The government needs to step in. Using a special tax on hydrocarbons, they should buy all available excess electricity at half price and pay enerfgy companies to electrolize, compress and store that hydrogen. The government would create a massive supply of the gas (which can also be used with internal combustion vehicles, to heat homes or otherwise in lieue of natural gas). The government would own the gas until such a time that the hydrogen economyh fully develops and then can sell those assets accordingly.

  • Report this Comment On November 26, 2013, at 12:55 PM, CluckChicken wrote:

    Barmil - I wouldn't call GM a recent entry into the Fuel Cell research. For some reason GM rarely gets as much press about their research then others do but you can still find it. For example:

    1966 GM introduces the hydrogen fuel cell car ever produced http://www.hydrogencarsnow.com/gm-electrovan.htm

    2002 GM introduces the AUTOnomy concept vehicle. http://www.hydrogencarsnow.com/gm-hy-wire-concept.htm (Top Gear actually took this one out for a spin)

    They have also been doing testing with vehicles at various US military bases for the better part of the last decade. http://www.shadetreemechanic.com/gm_fuel_cell_truck_to_army....

  • Report this Comment On November 26, 2013, at 1:55 PM, kyleleeh wrote:

    The laws of Physics are not "technological inefficacies" that the industry needs to overcome. Any way you cut it producing hydrogen consumes more energy then the hydrogen itself produces. If you want replace the 85 million barrels of oil a day the world produces with hydrogen you would need to burn 100 million barrels of oil a day to produce that much hydrogen.

    Hydrogen is just a middle man, standing between a source of energy and your car engine. Cutting out the middle man out is always more efficient. Whatever energy source you're using to make hydrogen you would better off just using that energy directly to power your car.

  • Report this Comment On November 26, 2013, at 4:53 PM, sheldonross wrote:

    "Anyone can produce hydrogen at home. All you need is water,a dc current from a battery and a way to store it. This is being built into a big issue because the car companies don't want to give up the profits from selling it under their own label."

    In what world would that be more efficient than just using the electricity to power, oh I don't know ... an electric vehicle?

  • Report this Comment On November 26, 2013, at 6:26 PM, SkepikI wrote:

    Maxx- every time I see these articles, notably missing in action is the issue of safety. Anyone who has spent a significant time around Hydrogen, including the refinery guys will tell you it is marginally crazy to have a bunch of nimrods in vehicles driving madly about, storing large quantities of the stuff. Hydrogen is one of a very few substances that can DETONATE (technical term) over a wide range of concentrations in air.

    There are numerous examples of serious damage and injury at Nuclear Power Plants, Refineries, Submarines etc where trained people who KNEW WHAT THEY WERE DOING ended up in the middle of a hydrogen detonation.

  • Report this Comment On November 27, 2013, at 8:59 AM, 2late2soon wrote:

    Fuel cells should be considered not as the main source of energy in a car but, alternatively, being used to charge the battery of an electric vehicle. The electric car would use the fuel cell (high energy density Wh/Kg and low power density W/Kg) as a range extender. This would enable the use of lower capacity lithium ion batteries.

  • Report this Comment On November 29, 2013, at 3:16 PM, cmalek wrote:

    @fatngassy:

    "The government would create a massive supply of the gas"

    The government already creates massive supply of two gases - they are "hot air" and "methane", both generated in copious quantities by our esteemed Congress.

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