A Daimler AG Mercedes-Benz F-Cell vehicle is fueled at a public hydrogen pumping station outside the Orange County Sanitation District waste-treatment facility in Fountain Valley, California, U.S., on Wednesday, Feb. 5, 2014. California plans to spend $20 million a year for a decade for dozens of new hydrogen stations as carmakers including Hyundai, Toyota, Honda and Daimler’s Mercedes-Benz try to entice Californians to buy fuel cell vehicles. Photographer: Patrick T. Fallon/Bloomberg

Once relegated to the realm of science projects, hydrogen fuel cells are starting to displace fossil fuels as a means of powering cars, homes and businesses.

On Tuesday, in the latest addition to mainstream fuel-cell use, Hyundai Motor will begin deliveries of a consumer Sport Utility Vehicle (SUV) in Southern California. The technology is already producing electricity for the grid in Connecticut. AT&T is using fuel cells to power server farms, and Wal-Mart Stores uses hydrogen-powered fork lifts. Later this summer, FedEx will begin using hydrogen cargo tractors at its Memphis air hub.

“This is the most exciting time for fuel cells in my career,” Daniel Dedrick, the head of hydrogen and combustion technologies at Sandia National Laboratories in California, said. The hydrogen market “is starting to accelerate”.

Fuel cells produce electricity from hydrogen in a process that dates back to the 1830s, yet high costs have historically made the technology better suited for Apollo space missions and Soviet submarines. In recent years, the technology has made big strides, and prices are falling. And because the process produces little or no greenhouse gases, hydrogen power stands to get a boost in the wake of President Barack Obama’s recent call for tighter controls on carbon emissions.

It’s still early days for hydrogen power. Prominent sceptics, including former energy secretary Steven Chu and Tesla Motors chief executive Elon Musk, have questioned whether the technology will ever catch on.

Hydrogen provides less than 1 percent of power worldwide, while coal and gas produced 67 percent of US electricity in 2012, according to the Energy Information Administration. Chu, who was appointed by Obama, called for a 44 percent reduction in funding for hydrogen research.

“People have been working to improve fuel cells for over 150 years, and it’s still not commercially viable,” said Joseph Romm, a senior fellow at the Center for American Progress, a Washington-based think-tank.

There are only about 1 000 cars and buses in operation worldwide today using hydrogen technology. There are nine hydrogen filling stations in California, with 48 more under development. California promises to boost that number to about 100 over the next several years. By comparison, there are 160 000 traditional filling stations across the country.

Advocates argue that the hydrogen landscape could quickly evolve as corporations’ use of hydrogen spreads. The infrastructure for corporate fuel cells has been quietly spreading. Across the US, there are now tanks of hydrogen and fuelling systems for fleet vehicles and forklifts. There are pipelines delivering the fuel to refiners that use it to make petrol. As more companies adopted hydrogen power, the needed equipment would come, Andy Marsh, the chief executive of Plug Power in New York said.

Yet even industry leaders say that, without a national pipeline network, it will be a long time before the nascent industry will enjoy widespread development.

“You have to get critical mass to build a business case,” said Ed Kiczek, the global business director for hydrogen at Air Products and Chemicals in Pennsylvania, the world’s largest supplier of hydrogen. “That could be 30 years away.”

For now, local pockets of hydrogen use are flourishing. Plug supplies fuel-cell powered forklifts for customers including Wal-Mart, the grocery chain Kroger and BMW. Plug also provides hydrogen-fuelling systems. Once a company had a flock of forklifts at a warehouse, it was a short leap to installing larger fuel cells that could produce both hydrogen on site and electricity for the entire building, Marsh said.

The company is supplying the systems for FedEx’s airport tractors in Memphis, another location where stationary fuel cells might eventually become either a primary or back-up source of electricity.

AT&T is the largest non-utility fuel cell customer in the US. It has 17.1 megawatts (MW) of fuel cells operating at 28 sites in California and Connecticut. The systems offered cleaner power that was more consistent than electricity supplied by the grid, John Schinter, the assistant vice-president of energy and smart buildings, said.

“For us, reliability is so critical and these help us ride through power disruptions,” Schinter said. “We deploy fuel cells in our high-cost markets, so these actually reduce our operating costs. We’re definitely planning to expand.”

Proponents of hydrogen say all this activity will soon spill over to the automotive market, and it’s already happening in Southern California. Hyundai will begin deliveries of its fuel-cell Tucson SUV next week. Honda already offers one there and Toyota will follow next year.

“The shift to hydrogen is inevitable, and it’s happening faster than we expected,” Amory Lovins, the founder of the Rocky Mountain Institute, a non-profit clean energy research organisation based in Colorado, said.

Not everyone agrees. Elon Musk, a critic of fuel cell technology, particularly in vehicles that compete with Tesla’s Model S, revisited his opposition to the power-generating devices earlier this week. “I’m not the biggest fan of fuel cells,” Musk said at the company’s annual meeting on Tuesday. “I usually call them ‘fool cells’.”

Even so, California is participating in an eight-state effort to get 3.3 million zero-emission cars on the road by 2025, powered by either fuel cells or batteries. Also participating are Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont, which together account for 25 percent of all US vehicle sales.

Some analysts are predicting steady if modest growth. Vehicle makers may be selling 1.76 million fuel-cell vehicles a year worldwide by 2025, according to Deloitte Tohmastsu Consulting.

Cars that run on hydrogen can typically go more than 400 kilometres on a tank of the gas and then must be refilled. They differ from battery electric vehicles like Tesla’s Model S or the Nissan Leaf, which use lithium ion batteries to store electricity. When those batteries are drained, they must be recharged.

After decades of losses, fuel cell makers are finally closing in on profits. Ballard Power Systems expects to report break-even earnings before interest, taxes, depreciation and amortisation (Ebitda) for this year, after posting one profitable year since 1992. The Vancouver-based company supplies power systems used in buses and Plug’s forklifts.

FuelCell Energy, a supplier of large stationary systems that run buildings and factories, said on Wednesday that it would have break-even Ebitda by the end of this year. The company’s systems are running the world’s biggest fuel-cell power plant, a 59MW facility in South Korea, and the first utility-scale plant in the US, in Connecticut.

Investors are taking note. Plug is up more than 1 000 percent in the past year, the best performer on the Nasdaq composite index. Ballard has doubled and FuelCell has gained 49 percent, compared with a 23 percent gain for the broader market index.

In the future, suppliers might tap excess power from wind and solar farms to make hydrogen, reducing the carbon emissions that come when it’s derived from gas, said Michael Beckman, the vice-president of hydrogen fuelling at Linde, the world’s largest industrial gas supplier.

“In three to five years you will see that become more prevalent,” Beckman said. “Wind and solar can make hydrogen cheap when the grid doesn’t need the power.” – Bloomberg