No self-respecting automaker would have dared appear without a zippy-looking plug-in prototype at the annual Frankfurt Auto Show in September. Amid all the hype about electric cars, it was a surprise to hear Daimler Chief Executive Officer Dieter Zetsche declare that hydrogen fuel cells, not batteries, are the ultimate way to move beyond oil. "The chances further down the road seem to me better on the fuel-cell side than on the battery-electric side," Zetsche told reporters at the show on Sept. 15. Hydrogen, he said, beats electric batteries at moving cars long distances without refueling. Hydrogen can also power big, roomy sedans much more readily than batteries.
Hydrogen was much hyped early in the decade only to be upstaged by hybrids and electrics. Yet on Sept. 10, the German government, along with Daimler (DAI) and a group of energy companies including Royal Dutch Shell (RDS.A) announced plans to build 1,000 hydrogen filling stations in Germany by 2015. Two days earlier, automakers including Toyota (TM), Ford (F), General Motors, and Hyundai called on energy companies to build an international network of hydrogen filling stations. By then, automakers say, there could be hundreds of thousands of vehicles on the road that use fuel cells to convert hydrogen to electrical power, with no emissions except steam.
Electric cars will probably be commercially available sooner than hydrogen cars, and they certainly enjoy higher public awareness. But little-noticed advances have helped hydrogen regain credibility with carmakers. Daimler and other companies like Honda Motor (HMC) have reduced the size of hydrogen fuel-cell systems to the point that they fit into a standard midsize car. Honda has 35 test versions of its FCX Clarity fuel-cell cars on Japanese and U.S. roads. Daimler's prototype, a hydrogen-powered Mercedes B-Class compact, can travel 240 miles before taking three minutes to refuel.
A New Kind of Hybrid? By contrast, battery-powered test versions of BMW's Mini can travel a little over 100 miles before they need a three-hour recharge. The ideal combination may turn out to be a hydrogen hybrid that runs on a battery for shorter trips, while drawing on the fuel cell for longer jaunts. The technologies complement each other since both use electric motors to drive the wheels and require sophisticated software to work.
Government money helps drive the technology. Germany is expected to cover half of the $2.6 billion cost of creating a hydrogen-fueling network. And the cost of generating an hour of electricity with a hydrogen fuel cell has recently dropped more than 20%, to $78. A drop to $30 is possible by 2015, which would make hydrogen competitive with gasoline.
Plenty of people still doubt that fuel cells are practical. "Explain to me where the energy comes from to produce the hydrogen," says Rupert Stadler, CEO of Volkswagen's (VOWG.DE) Audi unit. The central problem is to produce hydrogen in a way that doesn't cancel out the environmental gains. Most hydrogen available today is refined from natural gas. Deployed in a fuel-cell car, such hydrogen cuts CO2 emissions 30% more than a diesel engine—significant, but hardly revolutionary. That's why U.S. automakers put more emphasis on battery-powered cars such as GM's Volt: Its gasoline engine provides power on longer trips.
But automakers continue to invest in hydrogen, since they fear batteries will be practical only for short-range city runabouts. Car execs also doubt that drivers, especially in the U.S., will give up their long-distance land yachts. "Although batteries are evolving, I don't think they can catch up with fuel cells," says Honda CEO Takanobu Ito. So what technology do you pick? Both. To ignore either one, Zetsche warns, "would be extremely risky."