The House Ways and Means Committee is considering a similar bill, backed by Speaker Bobby Harrell, higher education and industry leaders, including the Savannah River National Laboratory.

"We've really got to push a knowledge-based economy, using intellectual capital," said Sen. John Matthews, D-Bowman.

Supporters call hydrogen a "fuel of the future" because it is environmentally friendly and widely available. Hydrogen and fuel cells can be used to generate electricity and power vehicles, decreasing the need for gasoline and dependence on foreign oil.

South Carolina already has taken a lead role in the hydrogen-power industry, including the establishment of the Center for Hydrogen Research in South Carolina.

But there are hurdles to be overcome, notably the cost-efficiency of technology and the lack of hydrogen "fueling" stations that would be needed for owners of hydrogen cars to take long, cross-country trips.

Lawmakers hope the House and Senate bills begin to address those issues by encouraging companies and individuals to invest in hydrogen research, technology and infrastructure.

The bills would create the South Carolina Hydrogen Infrastructure Development Fund within the state treasurer's office.

The fund would pay for $15 million in grants to the nonprofit South Carolina Hydrogen & Fuel Cell Alliance and others, no later than mid-2012, to support the development of hydrogen fuel cell technology.

Senators amended the bill, though, to give the General Assembly leeway to withhold funding, addressing concerns that the bill committed the state to funding an annual appropriation, at least for the next three years.

Taxpayers who contribute to the fund also would get a tax credit equal to 25 percent of their fund donation.

Supporters say hydrogen technology has the potential to create high-paying jobs for South Carolina and be a clean alternative to electrical power that would help limit the United States' reliance on foreign sources of oil.

Senators did question who would oversee the disbursement of grants and the limited role of the Center for Hydrogen Research in Aiken County.

The South Carolina Research Authority would disperse the grants, based on guidelines established by a number of higher education institutions, the Savannah River National Laboratory and the Center for Hydrogen Research.

The research authority has several members, but the only voting members are from the state's research institutions, the chairman of the board of trustees, two legislative designees and one designee from the governor.

"It looks like another pot of money for the universities," said Sen. Greg Ryberg, R-Aiken.

The committee approved the legislation without dissent. It now heads to the full Senate. The House version is still in committee.