Japanese industrial giant Mitsubishi Corp. is investing $14 million in a new Vancouver-based spinoff company to make hydrogen fuel-production systems. 

H3 Energy, to be based at the University of British Columbia's research park, will develop its patented technology that produces high-pressure hydrogen gas from water electrolysis without a compressor. 

The company will have only a handful of employees initially but will partner with others in the hydrogen-fuel industry and could have a commercial unit available within a year, H3 president Ken Tojima said Tuesday. 

The B.C. government welcomed the announcement that another international player will join the Vancouver-based cluster of hydrogen fuel technology companies, led by fuel-cell developer Ballard Power Systems Ltd. 

"Mitsubishi's choice to locate its hydrogen-production equipment business in B.C. demonstrates that our local industry is at the vanguard of developing high-efficiency hydrogen technologies," said Energy Minister Richard Neufeld. 

Fuel cells convert hydrogen to electricity without combustion and no byproducts except water and heat if pure hydrogen is used. 

The cells can power a variety of devices, from automobiles to homes and even computers and mobile phones. 

But one of the many stumbling blocks to viable commercial products is the ability to produce and store hydrogen at high pressures. Without it, for instance, fuel-cell cars can't travel more than 100 kilometres before refuelling. 

H3 said it plans to target small-scale industrial applications, hydrogen refuelling stations for fuel-cell vehicles, back-up stationary power units and systems that use renewable energy such as wind and solar to produce electricity to make the hydrogen. 

In its news release, Mitsubishi said H3's technology could help put high-pressure fuel-cell vehicles on the road as early as next year or 2007. 

That's welcome news in a sector suffering yet another round of hand-wringing from analysts and investors impatient with the pace of commercial fuel-cell development. 

Some critics say it will be decades before hydrogen fuel cells make commercial sense. A few naysayers claim they will never be economically viable, in part because it takes too much electricity to produce the hydrogen. 

"People do have a view that energy should come for nothing and of course it doesn't," said Ron Britton, president of Fuel Cells Canada, a government-industry partnership. 

"There's no form of energy that's available at 100 per cent efficiency. What Mitsubishi's attempting to do is improve the efficiency of the current technologies for making hydrogen at high pressure." 

He said the technique reduces the cost of capital and improves production efficiency "which starts to answer some of the critics around the high cost of hydrogen technology and fuel cells."