The National Research Council has completed a new study on the future of hydrogen fueled vehicles in the United States. The study suggests that fueling the population of hydrogen vehicles to reach a critical mass could cost up to $200 billion in government and industry subsidies.

If the money is spent and technological hurdles are overcome, the study estimates that by 2020 as many 2 million fuel cell vehicles could be on the road. Production volumes of hydrogen fueled vehicles are expected to ramp up significantly by 2015 as costs of the hardware are reduced. By 2023, the cost of owning and operating a hydrogen fueled vehicle is projected to be competitive with conventionally driven vehicles.

When that cost parity point is reached subsidies can be eliminated, the NRC research concludes. However, before that can happen, government will need to spend $55 billion over the next 15 years with a further $145 billion coming from the private sector. That money will need to be spent on research and development of the vehicles and fueling hardware, deployment of the vehicles and fueling infrastructure. Under current policies, government subsidies for ethanol could reach up to $15 billion annually by 2020, the NRC notes.

Even though the cost of fuel cell drivetrains is expected to drop significantly by 2015, manufacturers will still have to subsidize the cost  to make them affordable to consumers.

As hydrogen vehicles become cost competitive and a fueling infrastructure is deployed, the volumes would reach a critical mass and begin to grow at a rapid pace reaching 25 million vehicles by 2030.

The study suggests over the long term hydrogen could be an important element of reducing both petroleum consumption and CO2 emissions in combination with biofuels and more efficient conventional vehicles. In the near term the volumes of hydrogen vehicles would be such a small percentage of the total vehicle fleet that they would have a minimal impact on total consumption and emissions. Biofuels and more efficient vehicles are an important transitional technology until hydrogen vehicles become a mainstream product.

Over the long term, as volumes increase hydrogen-fueled vehicles could reduce greenhouse gas emissions from light-duty vehicles by 80 percent and almost completely eliminate petroleum use by vehicles by 2050.

All of this is predicated on both government and industry making the necessary investments in both vehicles and distribution. Neither of these is a given in the current economic environment. The U.S. government is struggling to pay for wars and to bail out banks. Most of the major automakers are struggling with declining sales as they try to speed up the transition to more efficient vehicles.

The only segment of the private sector that may be able to finance a transition to hydrogen is the oil industry.

JULY 2008