At first glance, hydrogen shows great promise as a vehicle fuel source given its energy density and environmentally friendly emissions. Critics of hydrogen fuel reference the questionable logistics involved in the generation of the fuel itself, though when investigated more closely the efficiency of the fuel generation process suggests that hydrogen may indeed be a suitable vehicle fuel. Like all emerging technologies there are details that need to be worked out, but car companies including Honda Motor Co. (NYSE:HMC), Toyota Motor Corp (NYSE:TM) and others, alongside fuel cell manufacturers, are addressing these concerns as they look to bring hydrogen to the masses.

First look shows a clean and efficient fuel
Hydrogen's biggest appeal to the environmentally conscious is its lack of greenhouse gas emissions. Perfect combustion of hydrogen gas yields just water as a product (though technically water is a greenhouse gas). The absence of carbon dioxide emissions seems like an ideal solution to help address growing concerns regarding global climate change.

Hydrogen's relatively high energy density relative to electric batteries is the second consideration that makes hydrogen a feasible vehicle fuel (or more appropriately a feasible energy carrier) on initial examination. Gasoline's biggest advantage over alternative fuels like ethanol and natural gas, outside of having an already-established infrastructure, is its comparatively high energy density. According to a BMW (NASDAQOTH:BAMXF) sponsored symposium, for use as a fuel in its compressed form, hydrogen has a potential efficiency in internal combustion engines that exceeds that of gasoline by over 25%. In fuel cells used for powering electric vehicles where hydrogen functions as an energy carrier, efficiency improvements over gasoline-powered vehicles are likewise realized. Honda describes the efficiency of their limited-release hydrogen fuel cell vehicle by stating:

Honda's FCX Clarity FCEV is much more efficient than conventional gasoline-powered vehicles in converting chemical energy into power...In gasoline-powered vehicles, fuel (gasoline) is used to heat and expand air, which then drives the engine's pistons and crankshaft. Fuel cell vehicles, on the other hand, are much more efficient, because the conversion of fuel (hydrogen) to electricity, used to power the electric drive motor, is a more direct electrochemical process. Water is a by-product...And since the FCX Clarity FCEV has significantly fewer components in the drive system, no pistons and no camshafts, the energy loss from these systems is eliminated.

Second look criticizes current fuel sources
The advantages of hydrogen sound almost too good to be true. Accordingly there are drawbacks, with the one seemingly biggest practical drawback regarding the production of the fuel itself. The dominant and least expensive process used for producing hydrogen is currently the steam reformation of natural gas which is used to produce 95% of the hydrogen in the United States. Essentially, it is necessary in the process to use natural gas as a starting reactant and then to chemically convert it to hydrogen. The conversion process produces carbon dioxide along with the hydrogen, making the emission-free claims of hydrogen-powered vehicles suspect. Indeed, once the hydrogen is being used as fuel for either internal-combustion or electric motors the process yields just water, but to create the hydrogen fuel in the first place is a different story.

Third look shows efficiency
Steam reformation of natural gas involves reacting natural gas with water at high temperatures to produce carbon monoxide and hydrogen. Typically the process is followed with a second step, called a gas-shift reaction, which reacts water with the carbon monoxide to yield carbon dioxide and more hydrogen. The process is used commonly in the fertilizer industry for the eventual synthesis of ammonia, and has been refined through extensive R&D that has made the process very efficient.

By contrast, the efficiency of gasoline-powered internal combustion engines comes out to a measly 20% on average. Assuming a very conservative 65% efficiency of the steam reformation process combined with the roughly 60% efficiency of basic PEM fuel cells, the overall process going from natural gas to hydrogen to electricity still yields a more impressive 39% efficiency.

The takeaway
Critics will cite that given the current methods used for hydrogen production, hydrogen-powered vehicles are not an emission-free solution worth considering for the replacement of fossil-fuel vehicles. The same critics make the same arguments against electric vehicles that utilize electricity derived from coal. In both cases, efficiency is the forgotten, game-changing element of the story.

Due in part to the high efficiencies of hydrogen as an energy carrier, hydrogen-powered vehicles are being developed for consumer vehicles and may be available as soon as 2015 from several major automobile manufacturers, making now a great time to invest in the so-called hydrogen economy.


Fool contributor Shamus Funk has no position in any stocks mentioned. The Motley Fool recommends BMW. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.