Tucked away in a corner of an industrial park in the western Shanghai suburb of Jiading is something that could be the solution to the country's deepening energy dilemma. The Anting hydrogen refuelling station, officially opened last November, is part of the mainland's efforts to develop a sustainable alternative to polluting coal and oil, which dominate the nation's energy consumption and contribute to smoggier air and dirtier waterways in the world's fastest-growing economy. 'Carbon dioxide and climate change is a global issue and China takes it seriously,' said Science and Technology Commission Minister Wan Gang at the station's launch ceremony. 'The push for energy conservation and the application of advanced technologies for clean and renewable energy go hand in hand.' While hydrogen energy is still at least a decade away from commercialisation, it has caught Beijing's attention because it could be the most promising clean fuel of the future owing to the ubiquitous nature of the colourless and odourless gas. With fears the world's supply of coal, crude oil and natural gas would dry up by the end of the century, the race for new forms of fuel is heating up on the mainland. To produce energy from hydrogen, it must either be combusted in an engine, or mixed with oxygen to produce water and electricity in a fuel cell. However, hydrogen combustion produces high levels of nitrogen oxides which cause smog and existing technology has yet to provide a solution that is economically viable. Most of today's efforts by global vehicle-makers towards clean hydrogen energy are therefore concentrated on developing fuel-cell technology. The challenge is to find an economical and environmentally acceptable way to produce enough hydrogen for mass consumption in the transportation and power-generation sectors. Unfortunately, hydrogen is not just waiting in the environment to be bottled. Producing hydrogen requires large amounts of energy before it is re-combined with oxygen to generate energy via a fuel cell. The problem with using coal and gas to generate the energy required is that it produces huge amounts of carbon dioxide, even assuming other pollutants like sulphur dioxide and nitrogen oxides are sufficiently filtered out. This means hydrogen is only as clean as the energy sources used to manufacture it. While hydrogen can be generated using wind and solar energy, the pace of renewable energy's development will not be enough to meet demand in the next few decades. Still, many countries see hydrogen as the holy grail of future energy development, since technologies exist to capture and store carbon dioxide. The question is when they can be commercially deployed. 'A quarter to one-third of the world's energy demand could be supplied by renewable sources by 2050,' said Duncan Macleod, vice-president of Shell Hydrogen, the hydrogen energy arm of Royal Dutch Shell which is a technical partner for the Anting refuelling station. 'We are forming partnerships for the production of hydrogen from clean energy sources, but in the short term it will be expensive and unlikely to satisfy demand.' Only a few firms are using renewable energy to generate hydrogen, including Norway's Norsk Hydro which is harnessing wind for the process while solar energy is deployed by Canada's Solar Hydrogen Energy. With global warming set to be one of this century's major issues, governments around the world are committing funds to hydrogen research. The United Nations has invested US$3 billion globally on the promotion of hydrogen vehicles. The United States has budgeted an average US$243 million annually over the past three years on hydrogen and fuel-cell research, while Canada has granted US$200 million to British Columbia province to develop a so-called 'hydrogen highway', a network of recharging stations for fuel cell-powered vehicles. Germany said in 2006 it would invest Euro500 million (HK$5.77 billion) over the following decade in developing vehicles powered by hydrogen, while Japan spent US$75 million to build hydrogen refuelling stations. Part of the allure of hydrogen energy from the environmental point of view is that the combustion of fossil fuels is moved from the vehicles to centralised hydrogen-generating power plants in which the pollutants can be more efficiently captured and managed than at exhaust pipes. But the huge costs involved could be a huge barrier to the wider adoption of hydrogen energy. According to the UN Inter-Governmental Panel on Climate Change, the infrastructure and storage costs required to equip a coal-fired power plant with carbon-capture facilities will raise the cost per kilowatt hour of power generated by 30 per cent to 60 per cent depending on the methods used. On the mainland, where the government has been dragging its feet on raising power tariffs for more than a year because of concerns it may stoke inflation now running at an 11-year high, the idea of raising prices by that amount is untenable even if it had mastered the technology. Even in the technologically advanced US, a government and private sector-funded demonstration coal-fired power plant to produce hydrogen and electricity using carbon capture and storage facilities is only in the development stage with construction slated to begin next year and commissioning in 2012. On the mainland, Greengen, founded two years ago by the nation's largest power producer China Huaneng Group and seven other companies in the power and coal sectors, plans to spend two billion yuan between 2006 and next year to build a demonstration clean-burning coal-fired power plant that gasifies coal and extracts pollutants. Greengen will also conduct research on building a plant similar to the hydrogen-producing demonstration project in the US. Commercialisation is expected after 2020. Carmakers, under pressure to produce more fuel-efficient and environmentally friendly vehicles, are playing their part in shaping a future hydrogen economy. BMW, Daimler, Volkswagen, General Motors and Ford as well as Honda and Toyota have launched various demonstration fuel-cell car models but a commercial roll-out has yet to begin. Daimler said last November that it expected to mass-produce fuel-cell vehicles starting between 2012 and 2015. But that is assuming the cost of hydrogen will fall to levels competitive with petrol. Then there is the cost of the cars themselves. With the cost of existing prototype fuel-cell vehicles running not far short of US$1 million, it will take a lot of scaling up at the production level to bring them down to affordable levels. Yu Zhuoping, dean of the School of Automotive Studies at Tongji University, which co-built the Anting refuelling station, said fuel-cell prototypes to be demonstrated during the Beijing Olympics would not be costlier than 'expensive sports cars'. While they wait for fuel-cell technology to be commercialised, carmakers are pursuing other avenues to improve engine efficiency to meet increasingly stringent pollution control requirements and consumers' desire to save fuel. Volkswagen's Beijing-based spokesman said the company had been developing gear boxes that can save 10 per cent in fuel consumption as well as downsized engines that maintain the same power output. General Motor's Shanghai-based spokesman said the firm had cut the fuel consumption of its entire mainland product line by more than 20 per cent between 2002 and 2006.