In October 2010, Proton OnSite’s subsidiary SunHydro opened a hydrogen fuel station at its Wallingford, Connecticut, headquarters. The station was the first of at least nine that the company planned to build up and down the East Coast to supply hydrogen-powered fuel-cell electric vehicles. Yet SunHydro has not built a single additional station since.

Despite the stall, Proton investor and SunHydro cofounder Tom Sullivan, who made his fortune with the Lumber Liquidators hardwood flooring chain, sees only opportunity.

Fuel-cell cars are ultimately electric cars, but they use hydrogen as fuel. The fuel cells convert the energy stored in hydrogen into electricity, yielding water vapor as the only byproduct. SunHydro also uses water as its starting point for producing hydrogen, splitting the molecules into hydrogen and oxygen by means of solar power, theoretically making the whole fuel chain ecologically sound.

Proton’s cofounder and CEO Robert Friedland says the company is still planning to roll out SunHydro stations, but in clusters within cities rather than as individual stations hundreds of miles apart. He explains the change as having been dictated by the needs of carmakers. “[A cluster] would allow automakers to sell their vehicles in that geographic location because the refueling need for the local vehicles would be satisfied,” Friedland says. But clearly the company is also responding to the less-than-humming hydrogen-energy business climate. The company, founded as Proton Energy, rebranded itself as Proton OnSite in April when it increased its offerings from hydrogen production systems to include nitrogen generators, tanks, and compressors.

Friedland admits the cluster model is a departure from the original “hydrogen highway” plan. “While [that plan] might work in terms of allowing someone to drive from Maine to Miami, it does not resolve the day-to-day, week-to-week need of filling up,” he says. Since opening that first station, SunHydro has begun working with carmakers to synchronize plans for station openings with those for rollouts of hydrogen fuel-cell cars on the East Coast. Carmakers say their markets are likely to include New York, New Jersey, Connecticut, and Washington, DC. “This does not imply that clusters will not evolve in other states along the East Coast,” Friedland says.

Yet, he concedes, plans remain tentative. “Tom [Sullivan] is pragmatic at the end of the day, and I think he expected a higher level of engagement from the auto manufacturers to bring vehicles to the East Coast,” Friedland says. “We speak to the car people several times a month, and plans for East Coast vehicles are still up in the air.”

Friedland says automakers have expressed definite intentions to introduce production fuel-cell vehicles sometime in 2014 or 2015. But, he adds, “they have also been clear that early rollout will be in areas that have adequate refueling infrastructure.” This demonstrates the chicken-and-egg problem that has plagued fuel-cell cars for over a decade: carmakers fear there won’t be a market unless consumers have easy access to hydrogen fuel stations, but there’s little incentive for entrepreneurs to build stations without cars to fill.

Although the automotive industry continues to insist that fuel-cell vehicles will be retail-ready in the next few years, hydrogen is simply not the alternative fuel of choice, even for companies seeking to burnish their image.

Energy giant BP, for example, has abandoned hydrogen. A spokesperson for the company said in an e-mail that its highly publicized Singapore retail station stopped producing hydrogen a while back, and the company is now favoring biofuels.

Price is another reason hydrogen seems to have fallen out of favor. Consumer fuel-cell vehicles will initially cost much more than comparably sized non-hydrogen vehicles. Toyota’s hydrogen-powered car costs more than $120,000. Its target for a consumer rollout a few years hence is $50,000—but a new gasoline-hybrid Prius starts at around $23,500, and the company plans to launch a version that also allows “plug-in charging” in 14 states next spring. The announced starting price for the plug-in Prius Plug-In is just $32,000.

What’s more, the technology isn’t quite living up to the hype, according to Timothy Maxwell, a mechanical engineering professor at Texas Tech University. One problem is that the transmission systems in fuel-cell vehicles use a lot of energy, cutting efficiency. Maxwell says GM’s last estimates for its Chevrolet Sequel, a prototype fuel-cell SUV revealed in 2007, were that the vehicle would travel 300 miles on about 8 kilograms of hydrogen compressed to 700 bar—twice the pressure, and hence twice the effective fuel capacity, of any other fuel-cell vehicle at the time.

Meanwhile, according to Patrick Serfass, vice president of the Hydrogen Education Association, the American political climate has stymied progress on fuel-cell vehicles. “We need to eliminate negative rhetoric about fuel-cell electric vehicles from elected officials in the federal government,” he says. “And we need to restore confidence in American companies to make the investments needed to graduate from our current level of deployment—preproduction vehicles and few fueling stations—to production vehicles with clusters of stations to allow the first several thousand early-adopter customers to conveniently refuel near where they live.” He believes government financial support could accelerate both installation of the infrastructure and manufacturing of vehicles, spurring the public to open its pocketbooks as well.

Countries including Japan, Norway, and Germany are adopting fuel-cell technology faster than the United States. Friedland says this is not because these countries have more money to support hydrogen fueling stations but because of government leadership. He points to Germany’s plans to have 1,000 hydrogen fueling stations operating by 2020, and a commitment by Japan’s government, national energy companies, and major automakers to coöperatively build an infrastructure for fuel-cell vehicles by 2015. 

“The U.S. government broadly does not have a similar will to move forward,” Friedland says. “The international community is moving forward with alternative energy at a much more rapid pace, not because they have necessarily stronger economies but they have much stronger political will.”

Indeed, a year ago the Obama administration often came up in conversations about hydrogen fuel, but that’s not always the case anymore. Herb Dwyer, an analyst with the consulting firm Kevin Kennedy Associates, in Indianapolis, says, “I don’t know what the Obama administration’s policy is at this point, and I am not sure they know. I think the bottom line is there are other potential applications, such as compressed natural gas,” that the administration is looking at first.

Unfortunately, Serfass says, the Obama administration has been promoting electric vehicles and ramping up funding for battery-powered plug-ins by factors of 10 while repeatedly cutting funds for fuel-cell electric vehicles. But to take full advantage of electricity for transportation, he says, “one needs more than batteries, unless you’re only going to design a small urban vehicle optimized for short trips at relatively lower speeds.”

Even assuming that the technical and price problems are solved, though, will the American public buy into fuel cells?

Dwyer says he doesn’t expect fuel-cell vehicles to take off unless they can directly replace existing gas-powered cars without any loss of performance, comfort, or safety, and for the same price. Still, he says, “the major challenge will be the infrastructure that is required to support it.” So far, that’s a problem that not even Tom Sullivan’s enthusiasm has been able to solve.