At the recent Group of Eight summit, leaders projected that global energy demand will increase 50 percent by 2030. President Bush's Hydrogen Fuel Initiative, launched in 2003, called for "technology readiness" for implementation of hydrogen fuel cells in vehicles by 2015.

Yet as government funding for and interest in developing the technology has increased, research realities and companies' concerns over making the fuel commercially viable has tempered hopes for a hydrogen-based economy in the near future.

At a hearing of the Senate Energy and Natural Resources Committee July 17, David Garman, undersecretary of energy at the Department of Energy, said that the current pace of research is in step with the president's goal.

Since the launch of the initiative, which promised $1.2 billion over five years to support fuel research and development, researchers have doubled the lifetime of an automotive fuel cell stack and brought down the cost of fuel cells from $275 per kilowatt to $110 per kilowatt.

To reach parity with gasoline and thus become a competitive option, fuel cells must further decrease in cost to $30 per kilowatt. Researchers must also find a safe and commercially attractive way to compress the amount of hydrogen fuel necessary to operate a vehicle for hundreds of miles without refueling.

Mark Chernoby, vice president for advance vehicle engineering at DaimlerChrysler, said at a news conference at the National Press Club July 18 that the industry needs five to 10 years of intensive research and development before it can consider producing hydrogen-fueled cars on a mass scale.

"Customers are adjusting very quickly to the technology," Chernoby said. "They're not intimidated by the thought of using an alternative powertrain. One very important thing is that they do not tolerate compromises in performance, they do not tolerate compromises in utility, and they absolutely do not have the patience to deal with the glitches in the new technology."

Achieving "technology readiness" will be more a preliminary than final success, said Byron McCormick, executive director of fuel cells activities for General Motors Corp, at the hearing. McCormick estimated that it would take about 20 years to sell enough cars to transition the entire U.S. fleet to hydrogen power.

"Since low volume equals high cost in the automotive business, early vehicles -- even at moderate volumes -- will still be expensive, even if our techhnology can compete at high volume," McCormick said. "So we face the proverbial 'valley of death' for new technologies as we attempt to grow the market.

"This is where we see the need for creative policies, incentives, and governments as customers to support the development of the market and creation of a high-volume-capable supply system."

Congress is now considering a $289 million request for additional research funding. In May, the House passed the H-Prize Act of 2006, promising a financial reward for advances in research on hydrogen fuel storage, production, utilization or distribution, including a $10 million grand prize for the development of "wells-to-wheels" technology. But automotive companies have identified generating investment and market interest, not funding, as their primary concern.

Tim Leuilette, chairman, president and chief executive officer of Metaldyne, a leading automotive supply company, attended both the conference and the hearing and compared the needs of hydrogen researchers with the development of the Internet. Monetary support for research is important, he said, but the government needs foremost to act in a facilitating role, setting the underlying policy structure that encourages investor confidence in the potential industry.

"Private equity is an incubator of change, and we are at the cusp of change in this industry," Leuillette told United Press International. "As long as a plan starts to develop, we can start investing in it. And that's what's important here, because no government, no single company or group of companies can afford to do it by themselves."

Another obstacle to the development of a hydrogen economy is the lack of infrastructure in place to support it, said Mark Rodekhor, a visiting fellow at the energy program at the Center for Strategic and International Studies, a centrist Washington think tank, and director of the Energy Markets and Contingency Information Division at the Energy Information Administration, the Energy Department's data arm. Cars that have been developed to use hydrogen fuel will be useless without hydrogen fuel suppliers and fueling stations. Investors must, in turn, be assured of hydrogen technology's potential to be willing to build the necessary infrastructure.

Until hydrogen fuels become a commercial reality, fuel diversification is one short-term solution suggested by G8 leaders and experts.

"We need a consistent international policy that helps us to diversify our sources of supply," Rodekhor told UPI. "In this market, we have a lot of buyers, but 55 percent of world oil sources are developed by state-owned companies, and we need to develop a policy that will open us up to a lot of sellers.

"The resources are there. The issue is government policies and willingness to bring those resources to market, to allow private sector companies and other companies to bring them to market."

Hydrogen is the most versatile of all the alternative energies under research. Fossil fuels, biomass, nuclear energy and renewable energy such as solar power are all possible hydrogen sources. Substituting a hydrogen fuel cell for a car's internal combustion engine eliminates all the car's emissions, but water. This potential has pushed experts to sustain a focus on commercialization of hydrogen rather than on short-term solutions.

"Hybrid vehicles won't get us there," McCormick said. "We look at the world and the pressures that will be there both environmentally and energy-wise, and we're going to need every pound of energy we can get. We've got to use it the most efficiently, and that inevitably means hydrogen fuel cells. What we want to do is get away from incrementalism."