By Doron Levin
FORTUNE -- Toyota Motor is getting set to defy naysayers once more. This time, Toyota's initiative is the first commercial hydrogen-powered fuel-cell car, which the Japanese automaker said it will sell starting next year.
Toyota (TM) showed a prototype it calls FCV at the North American International Auto Show in Detroit last week and at the Consumer Electronics Show in Las Vegas earlier in the month. Many are hoping the company can think of a catchier name by the time the car is introduced.
The first production run of fuel-cell cars will be small (fewer than 10,000), costly (between $50,000 and $100,000) and sold mostly in California, where Toyota says a small chain of hydrogen filling stations will satisfy demand for the fuel.
But the automaker also contends the potential for the technology is enormous, because hydrogen, which doesn't occur naturally, can be derived from fossil fuels like methane. Fuel cells, meanwhile, are clean, generating electricity and emitting only water vapor and heat. In essence, a hydrogen fuel cell is another type of battery.
Elon Musk, the founder of Tesla (TSLA) battery-powered cars, in an interview in May referred to the new technology as "fool cells" and a "stupid" idea. Musk is reminiscent of General Motors (GM) executive Bob Lutz, now retired, who regularly dismissed gas-electric hybrids as "dumb" -- until he became an apostle.
Toyota elicited deep skepticism when it unveiled Lexus luxury cars in the 1980s. In the late 1990s the automobile industry likely was dubious about its oddly named Prius gas-electric hybrid. Both initiatives have been grand slams.
Chemistry tutorial alert! At its heart, a fuel cell consists of a polymer electrolyte membrane (PEM) through which hydrogen and oxygen pass. As they do, electrons are stripped from the hydrogen and become electric current -- the hydrogen molecules combine with oxygen to form water vapor.
Scientists and engineers have known how to build fuel cells for some time and have demonstrated them in space programs and in experimental vehicles. The main obstacles to their commercialization have been their size, complexity, and high cost. GM, Ford (F), Daimler and most other carmakers have been working to develop a small, durable and affordable fuel cell. Several manufacturers are partnering to reduce research cost.
Hydrogen must be stored under pressure and will explode if ignited. To show that it had developed a reasonable storage tank for its FCV, Toyota fired bullets at it, without an explosion.
Another obstacle to practical use of fuel cells (which Toyota says it's solved) has been low temperature, which causes water vapor to freeze, thereby inhibiting the flow of hydrogen across the PEM.
But the major complication has been infrastructure. Will Toyota's FCV be interesting and affordable to consumers in large enough measure to attract innovation in terms of production and distribution? Energy companies know how to convert methane to hydrogen in industrial quantities. Filling stations could add hydrogen pumps if enough demand exists.
"If others want to tune out this technology, that's fine," said Bob Carter, Toyota senior vice president of operations, noting that his company has sold six million Prius hybrids since its introduction.
Once upon a time, automotive executives would crack that hydrogen was the fuel of the future -- and always would be. Toyota may be on the brink of putting their joke out of its misery.
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