TRAVERSE CITY, MI – Volkswagen is developing fuel-cell vehicles for the market, although it has not always believed in them.

“We are following the path,” says Oliver Schmidt, general manager-Engineering and Environmental Office at Volkswagen Group of America.

California’s support for a growing infrastructure, and the fact Toyota has made great progress in fuel cells, has encouraged the Wolfsburg manufacturer to put test cars on the road.

While there is no commitment to a launch year, work is advancing in the laboratory.

However, says Schmidt, Volkswagen remains heavily committed to finding solutions for its internal-combustion engines, for which the company has an annual production capacity of 10 million units.

Part of VW’s strategy is to lobby regulators to give more credits for using sustainable liquid fuels. In Hobbs, NM, Volkswagen’s Audi division is using a microscopic organism to make ethanol and diesel substitutes from carbon dioxide, water and sunshine.

The refinery can take CO2 from any source and use any kind of water. The microorganism needs sunshine to work a sort of photosynthesis on the mixture, creating complex hydrocarbon molecules.

Annual output is up to 8,000 gallons (30,283 L) per acre per year for ethanol, compared with 370 gallons (1,401 L) per acre for corn-based ethanol and 775 gallons (2,934 L) per acre for sugar cane.

Biodiesel should provide a similar result, Schmidt says, compared with 100 gallons (379 L) per acre for rapeseed and 500 gallons (1,893 L) per acre for palm oil.

“We are a strong supporter of renewable fuels, and we need standards,” he says. “We would like to see these activities rewarded.”

The problem is that regulators don’t agree on how biofuels should be handled. In the past, rules assumed flex-fuel vehicles would run half the time on E85, but they don’t. New rules will reduce that credit.

Regarding biodiesel, VW has developed a new engine that works well with B20 diesel. But the fuel in the U.S. is not as stable as the product elsewhere, so the new engine will be available in Canada but not the U.S.

“The renewable-fuel standard needs biofuels,” he says. “We think we should get a kind of credit for greenhouse-gas reduction, and we need a consensus on what to do with these biofuels.”

Volkswagen’s coming fuel-cell vehicles will join with its battery-electric vehicle programs, including the soon-to-launch electric Golf and Audi A3, to meet zero-emission-vehicle requirements in the future.

But Schmidt suggests regulations may need changes allowing automakers to meet the targets for 2025.

California expects 50,000 FCVs in 2025, and “we need to make tremendous efforts to achieve this,” he says. “There needs to be a total shift.”

And while California has had success with electric vehicles and plug-in hybrids, other states that have adopted the California rules have not copied the state’s successful subsidy program.

“We see a very low penetration in other states, where there are fewer or no subsidies as in California, and there is a poor charging infrastructure,” Schmidt says. “We need subsidies in all those states for ZEV. We need a public charging infrastructure and a political commitment from ZEV states.”