Fuel Cells Are Getting Hotter

The technology is advancing, but huge roadblocks remain

Environmentalists and auto executives don't agree on many issues. But both groups view fuel cells as a technological miracle that could solve two of the nation's most pressing policy dilemmas: carbon emissions linked to global warming and oil dependency. Fuel-cell-powered cars run on electricity generated from hydrogen. They emit water instead of exhaust, and they could help ween the nation of its addiction to Middle Eastern oil. What's more, the technology is tried and true. Contemplating General Motors Corp.'s (GM ) new fuel-cell concept car, the Autonomy, Chief Executive G. Richard Wagoner Jr. crows that it could be "the start of a revolution in how automobiles are designed, built, and used."

This is rousing theme music, and it sounds a little better every time Detroit plays it. But when it comes to commercialization, fuel cells remain a long shot. For one thing, there are several varieties, and none of them comes cheap. Auto makers can't agree on which fuel-cell technology to use or which method to select for storing hydrogen on board. Nor has anyone advanced a compelling scheme to get filling stations to supply the hydrogen.

Given this background, why are GM and others suddenly turning up the volume on fuel cells? In the cynic's view, a commitment to this far-future technology lets Detroit earn environmental bragging rights without incurring the costs of actually building fuel-efficient cars. And sure enough, just as Detroit started pushing its latest batch of fuel-cell concept cars last December, its lobbyists were prowling Washington trying to sway lawmakers against tougher fuel-economy regulations.

This explanation, however, tells only part of the story. On the engineering side, the auto industry's enthusiasm is grounded in real advances. GM's Autonomy, for example, packs the entire fuel-cell system, hydrogen storage tank, and electric motors in seven-inch-thick chassis on which GM's designers could style a sports car, sport utility, minivan, or sedan. Having car bodies that could be built interchangeably on just a few different chassis resembling nothing so much as large skateboards would give the carmaker greater flexibility on the assembly line, allowing it to quickly crank up production of popular models and pull back on slow-sellers. A prototype of the Autonomy should be fit to drive in a year and could be ready for market by 2010, predicts Lawrence D. Burns, GM's vice-president for research.

GM isn't the only one with such visions. In Europe, DaimlerChrysler (DCX ) is already testing hydrogen-powered buses in 10 cities. And the company's U.S. unit recently unveiled a fuel-cell minivan called the Natrium that has solved one of the toughest challenges in this business: how to store the fuel onboard. The Natrium gets hydrogen by cracking sodium boro-hydride--a cousin of borax, used in laundry soap. The minivan can drive 300 miles before refueling--not too far from the 400 miles a Dodge Caravan can go on a tank of gasoline. The only trouble: Natrium produces a gooey waste product that must be removed every time the car refuels. Meanwhile, at Ford Motor Co. (F ), engineers have put together the Focus FC5 concept car, which extracts hydrogen from methanol stored on board.

Beguiling as these developments may be, none of them has come cheap. GM spends "hundreds of millions a year" on fuel-cell research, says one company official. DaimlerChrysler has spent $1 billion on research over the past 10 years. These sums are mirrored in the sky-high estimated costs for finished vehicles. GM says that even assuming some level of mass production, a single finished car would probably run 10 times the $22,000 sticker price of the average gas guzzler. At Chrysler, a single component--the hydrogen tank--runs about $5,000 per vehicle. "These technologies are still too expensive," complains Bernard I. Robertson, Chrysler's senior vice-president for technology. "Somebody has to subsidize them."

The Bush Administration is responding to such pleas. On Jan. 9, Energy Secretary Spencer Abraham--an auto industry ally who's a former Republican senator from Michigan--announced the Energy Dept.'s Freedom Car initiative, which will help fund fuel-cell research to the tune of $150 million in the 2003 federal budget. Then, in February, President Bush announced his desire to give tax incentives of up to $5,000 to consumers who want to buy these supercars, once they are available.

Tax benefits, however, won't help clear the huge technical hurdles that remain. GM's Burns says the storage of hydrogen will still require a major breakthrough. The best bet, according to some scientists, is storing gaseous hydrogen under heavy pressure on board. Ford will begin selling a small number of Focus compacts in 2004 that can go 200 miles on a tank of compressed hydrogen. The problem: Such tanks are cavernous and expensive. For Chrysler's minivan to get 300 miles on one filling of hydrogen requires five bulky tanks that consume all of the vehicle's storage space behind the second row of seats. "Fuel cells are inevitable, but I don't know if they'll be selling in high volumes in 2010 or 2050," says Thomas Moore, Chrysler's vice-president for technical affairs.

Hydrogen distribution is another formidable challenge. Filling stations don't sell hydrogen, and oil companies won't invest in newfangled hydrogen infrastructure until there's a market for the fuel. Some auto makers have toyed with using liquid or gaseous hydrogen, methanol, or even gasoline to power their fuel cells. But their very experimentation highlights another obstacle: Until the technology advances to the point where all carmakers can settle on a single fuel, oil companies would be foolish to bet on one source for fuel cells. And oil companies are in no hurry to replace gasoline. "We have enough petroleum out there for another century," asserts John Felmy, chief economist of the American Petroleum Institute.

This sort of pro-fossil-fuel talk makes environmentalists see red. For too long, they charge, the Big Three have had a schizophrenic approach to cleaner, fuel-efficient cars. While GM was busy showing off its Autonomy fuel-cell concept car, its executives were exhorting workers to lobby their senators against an increase in fuel-economy standards, known as corporate average fuel economy (CAFE). Ford Chairman William Clay Ford Jr. presents himself as an environmentalist, but his company also came out against increasing CAFE.

Such maneuvers define and complicate the landscape in which fuel cells are struggling to evolve. The National Highway Traffic & Safety Administration, for example, might use its administrative powers to raise CAFE for 2005. But Detroit has been pressuring the Bush Administration to keep the increase slim. If CAFE doesn't rise and fuel cells continue to loom at least 10 years out on the horizon, more investment and energy will flow into hybrid electric cars as the industry's best tool for reducing fuel consumption.

That's where the Japanese see a real market. Toyota Motor Co. (TM ) is banking on its Prius four-door compact, which pairs a small gas engine with an electric motor to get 50 mpg. Honda Motor Co. (HMC ) has the 60-mpg, two-seat Insight at dealerships now and will soon offer a 50-mpg hybrid Civic for sale. Hybrids are already a vibrant niche market, says John German, Honda's general manager for environmental and energy policy, while fuel cells "are 30 years out."

In the interim, Detroit has plenty to worry about. The Japanese have leaped ahead in squeezing better fuel economy out of ordinary gasoline engines. Toyota and Honda both sell high-tech transmissions and electronically timed engines to boost fuel economy. Detroit is just getting such hardware in its cars. Meanwhile, Big Three executives have dismissed hybrids as too expensive to sell profitably. "How will the economics of hybrids ever match that of internal combustion engines?" says GM's Wagoner. "We can't afford to subsidize them."

The Japanese, however, would have no trouble turning that question around. They plan to sell hybrids until fuel cells are more reality than hype. How long, then, can the U.S. continue to pump billions into fuel-cell cars with no promise that the political and economic planets will ever be in alignment? For at least the next 10 years, a lot of eyes will be watching this patch of sky.

By David Welch in Detroit

Before it's here, it's on the Bloomberg Terminal.