Skeptics say hydrogen-powered fuel-cell vehicles (FCVs) are either an environmentalist pipedream or a scam by auto makers and politicians that promises a long-term solution to the world's energy problems so they can avoid immediate action.

Even some advocates say hydrogen-fuel technologies will not be ready for two or three decades, held back by fundamental problems with cost, storage, fuel-cell durability and a non-existent distribution network.

What's more, the most popular commercial method for producing hydrogen, separating it from natural gas, is an environmentally dirty process that negates many of the benefits of using hydrogen as a fuel.

But you won't find many hydrogen skeptics in Iceland, a ruggedly beautiful island nation in the North Atlantic known for its glaciers, waterfalls and volcanoes. It is the first country in the world to commit to developing a hydrogen-based economy.

Isolated from the rest of Europe and lacking fossil fuels of its own, Iceland has been studying hydrogen technologies and other renewable resources for three decades.

It currently generates all of its electricity from geothermal and hydroelectric power, and it has eliminated fossil fuels from all stationary energy use, leaving only vehicles and its fishing fleet dependent on petroleum.

Renewable resources account for 72% of Iceland's energy supply, which the country claims is the highest share in the world.

For years, Iceland has contemplated exporting its clean and cheap electric power to the European mainland, and, in one sense, it already does, by smelting primary aluminum and exporting ingots.

But Iceland now plans to use its abundant geothermal and hydroelectric power-generating capacity to become a major user and environmentally friendly producer of hydrogen.

“In 1998, the government made a clear statement toward a sustainable hydrogen economy,” says Valgerour Sverrisdottir, Iceland's minister of Industry and Commerce.

“The long-term aim is that renewable hydrogen fuel will replace the fossil fuels as soon as it becomes economically and technically possible.”

Even though Iceland is a tiny country with only 300,000 inhabitants and 190,000 vehicles (many of them SUVs), it could serve as a prototype for all nations seeking to reduce their dependence on fossil fuels.

With gas and diesel prices nearing the equivalent of $8 per gallon, Icelanders would be riding in hydrogen-powered vehicles tomorrow if they could. Some already are: A DaimlerChrysler AG hydrogen-powered fuel-cell bus plies a daily route through the capital city of Reykjavik, refueling every day at the world's first hydrogen filling station, built in 2003.

The bus is part of a European Union project launched in 2003 that placed fuel-cell buses in 10 European cities. The project recently was extended for another year in seven of the 10 cities: Amsterdam, Barcelona, Hamburg, London, Luxembourg, Madrid and Reykjavik.

The buses have withstood the cold winters of Reykjavik and Stockholm as well as high heat in Madrid, and survived more than 2,000 operating hours without any power losses, bringing fuel-cell lifetimes closer to those expected of conventional bus engines.

Officials of the Clean Urban Transport for Europe project say the durability of the fuel-cell stacks has been much better than anticipated.

Despite its economic troubles, General Motors Corp. remains among the most bullish on the potential of fuel-cell propulsion systems.

The auto maker recently used Iceland as a backdrop for the start of a new campaign aimed at demonstrating hydrogen-powered vehicles are closer to reality than commonly perceived, and that huge amounts of hydrogen easily can be accessed in the future to support hundreds of millions of hydrogen-powered vehicles.

The Paris-based International Energy Agency (IEA) warned late last year that even under the most favorable market conditions, hydrogen FCVs would enter the mainstream by 2025 and power about 30% of the global vehicle population — about 700 million vehicles — by 2050.

Even ardent supporters at the National Hydrogen Assn. annual conference in Long Beach, CA, in March predicted it would take until 2020 or so before mass production allows affordable FCVs.

GM is more optimistic. It already has invested $1 billion in fuel-cell development and has earmarked another $1 billion for future work. The company says its technology is advancing rapidly, and roadblocks are overblown with regard to storage, durability, distribution and commercial production of hydrogen.

GM is not alone in its frustration over hydrogen's flagging image. Despite billions of investment dollars by most of the world's largest auto makers and numerous clever public-relations gimmicks, hydrogen as a fuel gets little respect in the public debate over energy independence and global warming.

Detractors insist the technology is too far-fetched. Hydrogen also is being overshadowed by more practical technologies that already are being implemented, such as hybrid-electric vehicles (HEVs) and ethanol fuel.

In addition to commercially leasing some fuel-cell vehicles, Honda Motor Co. Ltd. is leasing an experimental fuel-cell-powered car (whose real cost is in six or seven figures) to an ordinary family in California to show it's serious about bringing hydrogen-powered vehicles to consumers.

In March, BMW AG vowed to start serial production of luxury sedans with conventional internal combustion engines capable of burning either hydrogen or gasoline “within two years.” A spokesman insists it is BMW's goal to offer hydrogen-fuel capacity in all its cars.

Toyota Motor Corp., DaimlerChrysler AG, Ford Motor Co., Mazda Motor Corp. and others have touted hydrogen-fueled prototypes in recent years. Dozens are in test fleets around the world.

Meeting with Icelandic officials and reporters in Reykjavik in mid-May, Britta Gross, manager-hydrogen infrastructure at GM's Program for Fuel Cell Technology Research, says the auto maker will design and validate an automotive fuel-cell propulsion system by 2010 that has the performance, durability and cost (relative to volume) of today's combustion engines. An actual vehicle with the propulsion system is expected to be introduced a year or two later.

In an effort to emphasize its commitment to hydrogen, GM brought its HydroGen3 fuel-cell prototype to Iceland for media test drives and to fill up at Reykjavik's hydrogen fueling station.

Larry Burns, GM vice president-research and development and strategic planning, says the Sequel, GM's latest generation FCV, currently is undergoing testing and soon will be available for test drives.

In early May, Burns told reporters the auto maker has doubled fuel-cell power density in seven years and demonstrated durability equivalent to 150,000 miles (241,000 km).

Perhaps most important, he says GM has developed “a novel storage concept” that shows the potential to store 15 lbs. (7 kg) of hydrogen that will provide a 300-mile (483-km) driving range.

GM's current HydroGen3 Opel Zafira minivans store hydrogen as 6.8 lbs. (3.1 kg) in a gaseous state compressed at 10,000 psi (700 bar) or 10 lbs. (4.6 kg) in a liquid cryogenic state and have a range of 168-248 miles (270-400 km) depending on the fuel storage system.

GM and other auto makers are considering storing hydrogen onboard vehicles in metal hydrides that absorb the gas like a sponge. So far, they show promise, but they are heavy and difficult to refuel quickly.

GM's newest public-information gambit, dubbed “Energy Pathways to Hydrogen Fuel Cell Vehicles,” suggests to consumers and the media that substituting hydrogen for conventional fossil fuels is not such a daunting task.

A global hydrogen infrastructure already exists today that produces 50 million tons (45 million t) of hydrogen per year, Burns says — enough to support 200 million FCVs.

Most of this hydrogen currently is used in petroleum refining and fertilizer production. About 95% of U.S. and 50% of world hydrogen production is derived from natural gas using a reforming process.

GM says if hydrogen derived from natural gas were used to fuel 10 million vehicles in the U.S., natural gas demand would increase by less than 2%.

While this process does produce large amounts of global-warming gases as a byproduct, Burns says it is the most cost-effective process and shows hydrogen can be produced and used economically and safely on a huge scale.

A similar reforming process also can be used to transform gasoline, coal, ethanol, biomass and even organic waste into hydrogen, Burns says.

However, he says another key “pathway” to hydrogen is using cheap electricity to electrolyze water. An electrolyzer operates like a fuel cell in reverse. Fuel cells use a chemical reaction between hydrogen and oxygen in the air to create electricity, with water as a byproduct.

An electrolyzer uses electricity to separate hydrogen from water, creating oxygen as a byproduct. As the cost of fuel cells comes down, so will the cost of electrolyzers, Burns says. This will enable more low-cost, environmentally friendly processes for creating hydrogen, including geothermal energy, nuclear, wind, solar, biomass and others.

Using electricity from geothermal power plants to produce hydrogen is particularly attractive because it is a clean, fast-growing and almost limitless energy source.

Currently, 24 countries generate power from geothermal resources, and there is a global installed capacity of 8,900 megawatts supplying power to more than 60 million people.

World geothermal resources are larger than that of coal, oil, gas and uranium resources, combined. The U.S., alone, has an installed geothermal capacity of 2,850 megawatts, which is comparable to burning 25 million barrels of oil, GM says.

According to most estimates, global installed capacity of geothermal power plants has increased 12% in the last five years and is forecast to increase by more than 20% by 2010, based on current technology.

However, countries such as Iceland also are investigating new technologies, including so-called supercritical geothermal systems that could yield 10 times as much energy as current geothermal plants, says Olafur G. Flovenz, general director of Iceland GeoSurvey. Supercritical geothermal systems are believed to be located deeper in the earth's crust, below the current geothermal fields being exploited today. Because temperatures and pressures are far higher, they are expected to contain much more energy.

Iceland's financial system still is based mostly on commercial fishing and related industries, but it has big plans for its growing hydroelectric and geothermal capabilities.

Almost 90% of all houses and buildings already are heated with hot water pumped from the country's geothermal power plants.

Geothermal energy is natural heat from the earth. A geothermal field is created when the tectonic plates of the earth's crust slowly move apart or push together. The movement causes “plumes” of molten magma to be shoved toward the earth's surface.

Most magma does not reach the surface, but it does heat up large regions of underground rock. Rain water can seep down fractures in the rock and flow miles into the earth where it can become trapped in porous rocks under a layer of impermeable rock. When this happens, it can form a geothermal reservoir.

If the hot water and steam can find an escape route, they form a geyser. If not, hot water and steam can build up tremendous pressure.

Geothermal powerplants exploit this energy by boring holes into these areas and using the escaping steam to drive large turbines that produce electricity. Some powerplants in Iceland separate steam from hot water, using the steam for power generation and the hot water for heating buildings.

After the water is used to heat homes and buildings, it is piped underneath roads and sidewalks to melt snow. Geothermal energy even is used to heat Iceland's many outdoor swimming pools.

While it sounds exotic, California already uses geothermal energy for 5% of its energy requirements.

Electricity created from hydroelectric and geothermal power generation is so cost-effective in Iceland, Alcan Inc. imports alumina all the way from Australia to smelt into aluminum that then is exported to the mainland and used in products such as the all-aluminum Audi A8.

The Iceland smelter figures heavily in arguments between the steel and aluminum industries in the battle over which material creates less carbon dioxide over the lifecycle of a vehicle.

The aluminum industry argues its light metal prevents a significant amount of CO2 being released into the atmosphere because it reduces vehicle weight and improves fuel economy.

The steel industry counters that environmental benefit is negated because aluminum smelters use huge amounts of electricity from carbon-belching coal-fired generators to create primary aluminum. Smelters that use electricity from hydroelectric or geothermal power plants throw the argument back in aluminum's favor.

For years, the government of Iceland has considered selling electricity to mainland Europe via underground cables.

Now, Iceland is contemplating using its abundant electric power to mass-produce hydrogen by the environmentally friendly electrolysis process, using it locally to fuel vehicles and fishing fleets and exporting it in cryogenic liquid form in tankers, as with liquefied natural gas.

Iceland's total electric production capacity of hydroelectric and geothermal energy is 50 terawatt-hours (50 trillion watts) per year, but the country uses only 12-14 terawatt-hours annually. That surplus feasibly could produce hydrogen for more than 2 million fuel-cell vehicles, officials estimate.

With such resources already in place, Iceland is considered an example of a society ready for mass production and sale of FCVs. The country is home to 190,000 vehicles and 150 conventional filling stations. Only 20 hydrogen stations would be required to support 90% of daily drivers, GM says. (It only has one now.)

Although hydrogen filling stations similar to the one in Reykjavik that generates its own hydrogen remain prohibitively expensive, one station can create surplus hydrogen and pipe it to several others in the surrounding area to lower overall costs.

A GM study shows that if 400 stations costing $1 million each were placed in the greater Los Angeles/Southern California area, a hydrogen station would be within two miles (3.2 km) of any residence or business. And that $400 million investment would be spread over five to 10 years, the study says.

Officials in Iceland's power-generating industry estimate the current cost of hydrogen to consumers is roughly the equivalent of $10 per gallon before taxes are added, but their ultimate target is $3 per gallon.

Considering fuel cells are twice as efficient as conventional internal combustion engines, hydrogen proponents argue that $10 per gallon already is the same as $5 per gallon.

Clearly hydrogen-powered fuel cells will not be competitive today or tomorrow. But with the industry making surprising advances in cost, durability and fuel storage and distribution, the hydrogen economy may not be as far away as skeptics think, especially as fossil fuels grow more expensive and risky by the day.