Hydrogen as the way toward sustainability.

Hermina Morita has a grand vision for Hawaii's energy future. A state representative, Morita chairs a legislative committee to reduce Hawaii's dependence on oil, which accounts for 88 percent of its energy and is mainly imported on tankers from Asia and Alaska. In April 2001, the committee approved a $200,000 "jumpstart" grant to support a public/private partnership in hydrogen research and development, tapping the island state's plentiful geothermal, solar, and wind resources to split water and produce hydrogen for use in fuel cells to power buses and cars, homes and businesses, and military and fishing fleets.

The grant grew out of a consultant study suggesting that hydrogen could become widely cost-effective in Hawaii this decade. The University of Hawaii, meanwhile, has received $2 million from the U.S. Department of Defense for a fuel cell project. Possibilities include Hawaii becoming a mid-Pacific refueling point, shipping its own hydrogen to Oceania, other states, and Japan. Instead of importing energy, Morita told a San Francisco reporter, "Ultimately what we want ... is to be capable of producing more hydrogen than we need, so we can send the excess to California."

Leaders of the tiny South Pacific island of Vanuatu have similar aspirations. In September 2000, President John Bani appealed to international donors and energy experts to help prepare a feasibility study for developing a hydrogen-based renewable energy economy. The economically depressed and climactically vulnerable island, which spends nearly as much money on petroleum-based products as it receives from all of its exports, hopes to become 100 percent renewable-energy-based by 2020. Like Hawaii, it has abundant geothermal and solar energy, which can be used to make hydrogen. And like Hawaii, it hopes to become an exporter, providing energy to neighboring islands. "As part of the hydrogen power and renewable energy initiative we will strive to provide electricity to every village in Vanuatu," the government announced in its October 5, 2000, issue of Environment News Service.

Hawaii and Vanuatu are following the lead of yet another island, Iceland, which amazed the world in 1999 when it announced its intention to become the world's first hydrogen society. Iceland, which spent $185 million--a quarter of its trade deficit--on oil imports in 2000, has joined forces with Shell Hydrogen, DaimlerChrysler, and Norsk Hydro in a multimillion-dollar initiative to convert the island's buses, cars, and boats to hydrogen and fuel cells over the next thirty to forty years. The brainchild of a chemist named Bragi Arnason and nicknamed "Professor Hydrogen," the project will begin in the capital of Reykjavik, with the city's bus fleet drawing on hydrogen from a nearby fertilizer plant and later refilling from a station that produces hydrogen on site from abundant supplies of geothermal and hydroelectric energy--which furnish 99 percent of Iceland's power. If the project is successful, the island hopes to become a "Kuwait of the North," exporting hydrogen to Europe and other countries. "Iceland is already a world leader in using renewable energy," announced Thorsteinn Sigfusson, chair of the venture, in March 2001, adding that the bus project "is the first important step toward becoming the world's first hydrogen economy."

Jules Verne would be pleased--though not surprised--to see his vision of a planet powered by hydrogen unfolding in this way. After all, it was in an 1874 book entitled The Mysterious Island that Verne first sketched a world in which water--and the hydrogen that, along with oxygen, composed it--would be "the coal of the future." A century and a quarter later, the idea of using hydrogen--the simplest, lightest, and most abundant element in the universe--as a primary form of energy is beginning to move from the pages of science fiction and into speeches of industry executives. "Greenery, innovation, and market forces are shaping the future of our industry and propelling us inexorably toward hydrogen energy," Texaco executive Frank Ingriselli explained in April 2001 to members of the Science Committee of the U.S. House of Representatives. "Those who don't pursue it, will rue it."

Indeed, several converging forces explain this renewed interest in hydrogen. Technological advances and the advent of greater competition in the energy industry are part of the equation. But equally important motivations for exploring hydrogen are the energy-related problems of energy security, air pollution, and climate change--problems that are collectively calling into question the fundamental sustainability of the current energy system. These factors reveal why islands, stationed on the front lines of vulnerability to high oil prices and climate change, are in the vanguard of the hydrogen transition.

Yet Iceland and other nations represent just the bare beginning in terms of the changes that lie ahead in the energy world. The commercial implications of a transition to hydrogen as the world's major energy currency will be staggering, putting the $2 trillion energy industry through its greatest tumult since the early days of Standard Oil and Rockefeller. Over 100 companies are aiming to commercialize fuel cells for a broad range of applications--from cell phones, laptop computers, and soda machines to homes, offices, and factories to vehicles of all kinds. Hydrogen is also being researched for direct use in cars and planes. Fuel and auto companies are spending between $500 million and $1 billion annually on hydrogen. Leading energy suppliers are creating hydrogen divisions, while major carmakers are pouring billions of dollars into a race to put the first fuel cell vehicles on the market between 2003 and 2005. In California, twenty-three auto, fuel, and fuel cell companies and seven government agencies are partnering to fuel and test drive seventy cars and buses over the next few years. Hydrogen and fuel cell companies have captured the attention of venture capitalist firms and investment banks anxious to get into the hot new space known as ET, or energy technology.

The geopolitical implications of hydrogen are enormous as well. Coal fueled the eighteenth- and nineteenth-century rise of Great Britain and modern Germany; in the twentieth century, oil laid the foundation for the United States' unprecedented economic and military power. Today's U.S. superpower status, in turn, may eventually be eclipsed by countries that harness hydrogen as aggressively as the United States tapped oil a century ago. Countries that focus their efforts on producing oil until the resource is gone will be left behind in the rush for tomorrow's prize. As Don Huberts, chief executive officer of Shell Hydrogen, has noted: "The Stone Age did not end because we ran out of stones, and the oil age will not end because we run out of oil." Access to geographically concentrated petroleum has also influenced world wars, the 1991 Persian Gulf War, and relations between and among Western economies, the Middle East, and the developing world. Shifting to the plentiful, more dispersed hydrogen could alter the power balances among energy-producing and energy-consuming nations, possibly turning today's importers into tomorrow's exporters.

The most important consequence of a hydrogen economy may be the replacement of the twentieth-century "hydrocarbon society" with something far better. Twentieth-century humans used ten times as much energy as their ancestors had in the thousand years preceding 1900. This increase was enabled primarily by fossil fuels, which account for 90 percent of energy worldwide. Global energy consumption is projected to rise by close to 60 percent over the next twenty years. Use of coal and oil are projected to increase by approximately 30 and 40 percent, respectively.

Most of the future growth in energy is expected to take place in transportation, where motorization continues to rise and where petroleum is the dominant fuel, accounting for 95 percent of the total. Failure to develop alternatives to oil would heighten growing reliance on oil imports, raising the risk of political and military conflict and economic disruption. In industrial nations, the share of imports in overall oil demand would rise from roughly 56 percent today to 72 percent by 2010. Coal, meanwhile, is projected to maintain its grip on more than half the world's power supply. Continued rises in coal and oil use would exacerbate urban air problems in industrialized cities that still exceed air pollution health standards and in megacities such as Delhi, Beijing, and Mexico City, which experience thousands of pollution-related deaths each year. And prolonging petroleum and coal reliance in transportation and electricity would increase annual global carbon emissions from 6.1 to 9.8 billion tons by 2020, accelerating climate change and the associated impacts of sea level rise, coastal flooding, and loss of small islands; extreme weather events; reduced agricultural productivity and water availability; and the loss of biodiversity.

Hydrogen cannot, on its own, entirely solve each of these complex problems, which are affected not only by fuel supply but also by such factors as population, over- and under-consumption, sprawl, congestion, and vehicle dependence. But hydrogen could provide a major hedge against these risks. By enabling the spread of appliances, more decentralized "micropower" plants, and vehicles based on efficient fuel cells, whose only byproduct is water, hydrogen would dramatically cut emissions of particulates, carbon monoxide, sulfur and nitrogen oxides, and other local air pollutants. By providing a secure and abundant domestic supply of fuel, hydrogen would significantly reduce oil import requirements, providing the energy independence and security that many nations crave.

Hydrogen would, in addition, facilitate the transition from limited nonrenewable stocks of fossil fuels to unlimited flows of renewable sources, playing an essential role in the "decarbonization" of the global energy system needed to avoid the most severe effects of climate change. According to the World Energy Assessment, released in 2000 by several United Nations agencies and the World Energy Council, which emphasizes "the strategic importance of hydrogen as an energy carrier," the accelerated replacement of oil and other fossil fuels with hydrogen could help achieve "deep reductions" in carbon emissions and avoid a doubling of preindustrial carbon dioxide concentrations in the atmosphere--a level at which scientists expect major, and potentially irreversible, ecological and economic disruptions. Hydrogen fuel cells could also help address global energy inequities--providing fuel and power and spurring employment and exports in the rural regions of the developing world, where nearly two billion people lack access to modern energy services.

Despite these potential benefits, and despite early movement toward a hydrogen economy, its full realization faces an array of technical and economic obstacles. Hydrogen has yet o be piped into the mainstream of the energy policies and strategies of governments and businesses, which tend to aim at preserving the hydrocarbon-based status quo--with the proposed U.S. energy policy, and its emphasis on expanding fossil fuel production, serving as the most recent example of this mindset. In the energy sector's equivalent of U.S. political campaign finance, market structures have long been tilted toward fossil fuel production. Subsidies to these energy sources--in the form of direct supports and the "external" costs of pollution--are estimated at roughly $300 billion annually.

The perverse signals in today's energy market, which lead to artificially low fossil fuel prices and encourage the production and use of those fuels, make it difficult for hydrogen and fuel cells--whose production, delivery, and storage costs are improving but look high under such circumstances--to compete with the entrenched gasoline-run internal combustion engines and coal-fired power plants. This skewed market could push the broad availability of fuel cell vehicles and power plants a decade or more into the future. Unless the antiquated rules of the energy economy--aimed at keeping hydrocarbon production cheap by shifting the cost to consumers and the environment--are reformed, hydrogen will be slow to make major inroads.

One of the most significant obstacles to realizing the full promise of hydrogen is the prevailing perception that a full-fledged hydrogen infrastructure--the system for producing, storing, and delivering the gas--would immediately cost hundreds of billions of dollars to build, far more than a system based on liquid fuels such as gasoline or methanol. As a result, auto and energy companies are investing millions of dollars in the development of reformer and vehicle technologies that would derive and use hydrogen from these liquids, keeping the current petroleum-based infrastructure intact.

This incremental path--continuing to rely on the dirtier, less secure fossil fuels as a bridge to the new energy system--represents a costly wrong turn, both financially and environmentally. Should manufacturers "lock in" to mass-producing inferior fuel cell vehicles just as a hydrogen infrastructure approaches viability, trillions of dollars worth of assets could be wasted. Furthermore, by perpetuating petroleum consumption and import dependence and the excess emission of air pollutants and greenhouse gases, this route would deprive society of numerous benefits. Some 99 percent of the hydrogen produced today comes from fossil fuels. Over the long run, this proportion needs to be shifted toward renewable sources, not maintained, for hydrogen production to be sustainable.

In the past several years, a number of scientists have openly challenged the conventional wisdom of the incremental path. Their research suggests that the direct use of hydrogen is, in fact, the quickest and least costly route--for the consumer and the environment--toward a hydrogen infrastructure. Their studies point to an alternative pathway that would initially use the existing infrastructure for natural gas--the cleanest fossil fuel and the fastest growing in terms of use--and employ fuel cells in niche applications to bring down their costs to competitive levels, spurring added hydrogen infrastructure investment. As the costs of producing hydrogen from renewable energy fell, meanwhile, hydrogen would evolve into the major source of storage for the limitless but intermittent flows of the sun, wind, tides, and Earth's heat. The end result would be a clean, natural hydrogen cycle, with renewable energy used to split water into oxygen and hydrogen, with the latter used in fuel cells to produce electricity and water--which then would be available to repeat the process.

There are no major technical obstacles to the alternative path to hydrogen. As one researcher has put it, "If we really decided that we wanted a clean hydrogen economy, we could have it by 2010." But the political and institutional barriers are formidable. Both government and industry have devoted far more resources to the gasoline- and methanol-based route than to the direct hydrogen path. Hydrogen receives a fraction of the research funding that is allocated to coal, oil, nuclear, and other mature, commercial energy sources. Within energy companies, the hydrocarbon side of the business argues that oil will be dominant for decades to come, even as other divisions prepare for its successors. And very little has been done to educate people about the properties and safety of hydrogen, even though public acceptance--or lack thereof--will in the end make or break the hydrogen future.

The societal and environmental advantages of the cleaner, more secure path to hydrogen point to an essential --and little recognized--role for government. Indeed, without aggressive energy and environmental policies, the hydrogen economy is likely to emerge along the more incremental path, and at a pace that is inadequate for dealing with the range of challenges posed by the incumbent energy system. Neither market forces nor government fiat will, in isolation, move us down the more direct, more difficult route. The challenge is for government to guide the transition, setting the rules of the game and working with industry and society toward the preferable hydrogen future.

This catalytic leadership role would be analogous to that played by government in launching another infrastructure in the early years of the Cold War. Recognizing the strategic importance of having its networks of information more decentralized and less vulnerable to attack, the U.S. government engaged in critical research, incentives, and public/private collaboration toward development of what we now call the Internet. An equally, and arguably even more, compelling case can be made for strategically laying the groundwork for a hydrogen energy infrastructure that best limits vulnerability to air pollution, energy insecurity, and climate change. Investments made today will heavily influence in what manner and how fast the hydrogen economy emerges in coming decades. As with creating the Internet, putting humans on the moon, and other great endeavors, it is the cost of inaction that should most occupy the minds of our leaders now, at the dawn of the hydrogen age.

Seth Dunn is a research associate at the Worldwatch Institute, where he is a member of the climate/energy team and for which he has written extensively, lie holds a B.A. in history and studies in the environment from Yale University. This article is excerpted from Hydrogen Futures: Toward a Sustainable Energy System, published as paper 157 by the Worldwatch Institute (www. worldwatch.org).