June 29, 2005

Fuel Cell Cars Face Bumpy Road Despite $60 Oil

FRANKFURT -- Astronomical costs for delivering hydrogen-powered cars and the network to run them mean clean vehicles are years away from competing against today's polluting rivals, even if oil prices stay at record highs.

Proponents of the technology still insist that 5 million to 10 million cars running on hydrogen-fed fuel cells and emitting only water vapour could be on the road within 15 years, with the number ballooning to 350 million by 2050.

But the dream will only come true if the companies driving the change can make fuel cells better and cheaper, while securing the billions of dollars needed to finance comprehensive hydrogen infrastructure at a time of stretched public coffers.

"I am very, very confident that that kind of technology will come and that we will have the chance to drive with that kind of technology and fuel, but it needs a little bit more time," said Herbert Kohler, DaimlerChrysler's head of body and powertrain research and the group's chief environmental officer.

The German-American carmaker has over 100 demonstration fuel-cell cars, vans and buses on the road around the world.

"We will expect to have a (commercial) start-up in 2012, 2015," Kohler said in a telephone interview. "We would be glad to have 100,000 (fuel cell) cars in 2015."

The question is whether such cars can compete on cost and quality against standard gasoline- or diesel-powered cars, even if oil prices remain around their record $60 a barrel now.

Better and Cheaper 

Lars Peter Thiesen, head of hydrogen fuel cell deployment strategy at General Motors in Germany, said a decade of serious work by pioneers has now shown fuel cell cars work in a variety of climates and under real-world conditions.

But efforts to boost performance by adding more platinum to fuel cells, for instance, will only increase already high costs that experts say must fall by at least a factor of 10.

"The decisive point is that these two goals -- durability and costs -- have to be met at the same time," Thiesen said.

GM aims by 2010 to have fuel cell cars run for 5,500 hours -- the equivalent of driving 160,000 to 240,000 km (100,000 miles to 150,000) -- and cost $50 per kilowatt of power versus $30-$70 now for conventional combustion engines, Thiesen said.

As an abundant, clean energy source, hydrogen is natural choice for a world facing a limited supply of increasingly expensive fossil fuels.

But customers won't buy cars that are more expensive and less convenient than what they have now, as the flop of electric cars has shown.

Many experts see a start-up phase at which some sort of subsidy, like cheap public loans for infrastructure or freeing hydrogen fuel or cars from taxes at first, will be needed to encourage suppliers to swallow early losses.

How Much?

Estimates for the cost of setting up a hydrogen-fuel production and distribution network vary wildly.

German industrial gases group Linde AG sponsored one study that found it would cost just 3.5 billion euros ($4.24 billion) over 15 years to build 2,800 hydrogen filling stations across Europe in urban areas and along motorways.

The study aimed to explode the idea that hydrogen infrastructure was unaffordable, spokesman Stefan Merz said. The main challenge now is one of organization, he said.

Linde plans to build its own fuel stations along a ring of German autobahns linking Berlin, Leipzig, Munich, Stuttgart and Cologne, forming a giant test track for fuel cell cars.

Jeremy Bentham, chief executive of Shell Hydrogen, estimated it would cost around $20 billion to supply hydrogen to an area the size of Europe or the United States.

But he said industry could foot most of the bill.

"Whilst some form of governmental encouragements and incentives are needed to get the ball rolling in the infrastructure area, we would treat this in the same way as we would treat any commercial business," he said.

"We see the opportunity for this to be sufficiently attractive for us as a commercial business to invest in it."
Energy companies already produce some 50 million tonnes of hydrogen each year around the world for industrial customers who use it for making clean fuels or fertilizer, he said, so the challenge is channelling this to retail outlets.

Adding production sites could lower distribution costs so that hydrogen would eventually cost some $2 or $3 per kg versus $15 now for small batches delivered to a customer's door.

"...The challenge to the fueling is not going to be the determining step going forward," Bentham said. "The challenge is going to be the mass production of fuel cell vehicles."

DaimlerChrysler's Kohler disagreed. Energy companies have a long way to go to make hydrogen competitive against conventional fuels and to improve the purity of hydrogen, he said.