For more than a decade, the thought of a clean hydrogen-based economy has been the dream of engineers and environmentalists. In theory, hydrogen seems like a logical clean-energy source that can be used to power everything from lawnmowers to power plants.
But hydrogen hasn't taken off on a large scale, and outside of big visions from Honda (NYSE:HMC) and a few other automakers the hydrogen market is pretty small today. Here's a look at where we stand now and where hydrogen fuel may go in the future.
What we use hydrogen for now
The use of hydrogen to power vehicles or other electrical devices is currently pretty limited.
Honda makes a hydrogen concept car, and over the next few years Toyota and Hyundai are expecting to join that market. Even when they're released it's expected that they'll only be available in California, where there's some hydrogen infrastructure. Autos are a high-potential market, but hydrogen isn't even as developed as electrical vehicles, so there's a long way to go.
FuelCell Energy (NASDAQ:FCEL) and Ballard Power Systems (NASDAQ:BLDP) both make the fuel cells that turn hydrogen into electric energy. FuelCell Energy makes primarily natural gas fuel cells and is targeting larger energy-backup services and large scale fuel cells. Ballard is more aggressive in the direct hydrogen-fuel space, providing everything from backup power to bus power systems to material handling fuel cells.
Plug Power (NASDAQ:PLUG) is using hydrogen fuel cells to power primarily indoor-material-handling equipment like forklifts. The advantage over batteries is that there's no need to constantly remove fuel cells for a recharge; you just refuel like a car. The output from the equipment is just power and water.
The vision is to expand into other equipment like transportation-refrigeration units, ground-support equipment (think airport-baggage vehicles), and range extenders for electric vehicles. FedEx recently gave some credence to the EV concept, ordering 20 fuel-cell range extenders for delivery trucks. Transportation is where a big opportunity is for fuel cells, but making hydrogen affordable and readily available for the industry is a challenge.
You can see that the companies making hydrogen-fuel cells are currently focused on relatively narrow markets. Even success in forklifts and backup power aren't exactly a guarantee that larger-scale applications will work for fuel cells.
Most hydrogen comes from natural gas
One problem with the argument for broader hydrogen use is that it's not as clean as people think. Most of the hydrogen produced today comes from natural gas, with some CO2 given off as a result. Sure, the hydrogen vehicle you drive may be 100% emissions free, but the fuel you're burning still comes from fossil fuels.
In the future, the goal would be to turn clean energy power sources like solar and wind into hydrogen by using electrolysis or another chemical method, although that's proven difficult. If made economically viable, this would help these intermittent energy sources store energy and allow for it to be transported around the country. But we're years, if not decades, from that happening.
The bottom line is that hydrogen isn't as clean as the industry wants you to think.
You still need a battery to go hydrogen
The other challenge for expanded use of hydrogen is that it isn't as easily converted into energy as gasoline or electricity in a battery. It's a chemical process that usually requires a battery to store energy for on-demand use.
Honda's fuel-cell drivetrain includes a battery, so what's the advantage over an electric vehicle? Hydrogen is really just adding more components to the process, and when you consider hydrogen is a dirtier source of energy than electricity, in many cases it hinders the value proposition.
What hydrogen needs to go big time
Despite the challenges facing hydrogen, this is definitely the highest potential of all alternative energy fuel sources. If technology advances far enough to allow truly renewable energy to be stored and transported with hydrogen, then the fuel cell that's available today for forklifts may be viable in your typical passenger car.
Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.