[BETA] Fortnightly

Hydrogen is hot, but whether it really will fly is another story.

Hydrogen. Lighter than air, ubiquitous, and energy dense. Its use as a fuel results only in water and heat emissions, which sure sounds better than the NO _X, SO ₂, mercury, and carbon dioxide emissions from today's power plants. Yet the hoopla surrounding hydrogen is more hype than real, at least for now. Although much has been made of President Bush's proposal to spend $1.7 billion over five years on hydrogen research, currently there are less than two dozen fuel cell vehicle prototypes on the road in the United States. And while stationary fuel cells show increasing promise, there are no existing pilots, or any planned, that approach commercial scale. In fact, none of the experts interviewed by believed that a commercial-scale, hydrogen-fueled power plant would become a reality in the next decade, if ever.

Furthermore, to get from here to there is going to take money-a lot of it. But so far, the utility industry isn't plunking down any serious research and development (R&D) money. There's a long way between the now of fossil-fueled energy and the nirvana of hydrogen-powered vehicles and electricity.

"Utilities are not spending much at all on research relating to the hydrogen economy," says David Walls, a director at Navigant Consulting. The sector, he observes, has been somewhat of a follower so far on hydrogen, waiting to see how the infrastructure and technology to produce, transport, and store hydrogen develops.

Sure, there is money being spent on researching fuel cells. "You'd be hard pressed to find an investor-owned utility not spending something on fuel cells," says Steven Taub, director of distributed energy at Cambridge Energy Research Associates. That "something" is, often, a demonstration project, which likely runs a tab of a couple million dollars annually, according to Taub. Particularly in today's economy, $2 million can seem like a lot to cash-strapped utilities. But compared to the billions being invested in hydrogen R&D by automakers and oil producers, a couple million isn't much.

There are two ways utilities can think about investing in hydrogen R&D, Taub says. One is simply to view the investment like a venture capitalist would-there's no guarantee that the investment will pay off, but if it does, the reward will be high. Or, he says, utilities can view hydrogen investment as a hedge. Automakers in particular, Taub says, view their hydrogen R&D money this way-that they cannot afford to not have a stake in a hydrogen future. "It's fairly cheap insurance-but utilities don't see it that way," Taub observes. Of course, most utilities don't have the $6 billion in quarterly earnings that the GMs of the world do, which makes a $1 billion investment over several years much more palatable.

Automakers, though, differ from utilities in that they are largely agnostic about how the hydrogen gets produced, or what technology ultimately will work to get hydrogen in vehicles. For utilities, the question of how hydrogen is manufactured, stored, transported, and distributed matters very much, according to Taub. "How hydrogen happens