The small north Atlantic island nation Iceland is rich in natural energy sources. Geothermic power plants supply residents with heat for their homes that has risen as steam from beneath the earth's hot subsurface and the country's rivers yield electricity from hydraulic power.

Despite deriving all of their heating energy and electricity from such natural sources, Iceland’s residents still need gasoline and other petroleum products for their cars and their fishing fleet, one of the biggest in the world and the island's most important industry.

But that's about to change, because Iceland is aiming to free itself entirely from dependence on fossil fuels. It intends to run the county’s motors with the fuel of the future, hydrogen, which is derived from renewable energy sources. "Icelandic New Energy" program was founded in 1999 to help the country reach its ambitious goal.

"We can basically say that the first ten years, meaning from the year 2000 until roughly 2008, 2012 will be a kind of demonstration period," General Manager Jon Björn Skulason explained. "Hopefully after a positive experience from this demonstration stage, we hope to see serial production of vehicles, ship engines and other technologies in the hydrogen sector, and this will go on until maybe 2015, 2020, when, as I am convinced, full commercialization will start. And then we can really start exchanging the current transport fleet and the current ship fleet with hydrogen."

Transforming water

Opening the world's first public hydrogen filling station in Iceland's capital, Reykjavik, was a first important step toward moving away from fossil fuels.

At the station hydrogen is generated by using electricity to break water down to its basic elements, hydrogen and oxygen. Hydrogen is released as a gas, and a compressor pumps it under high pressure into a reserve tank. When a car comes to refuel, the hydrogen is channeled through a hose into the pressurized tanks in the vehicle. There the reverse process takes place in a fuel cell engine: hydrogen and oxygen combine into water and produce electricity that runs the car's electrical motor.

So far only one vehicle in Iceland tanks up at the hydrogen filling station, and it's just used to demonstrate how the station works. But in the fall three fuel cell-powered city buses developed by German-American carmaker DaimlerChrysler are meant to start operating on the island.

CUTE in future

DaimlerChrysler hopes to test its fuel cell-powered cars and buses in action over the next year, Herbert Kohler, the company's research head and chief environmental officer, told DW-RADIO. The buses will be tested in nine European cities, in addition to Reykjavik. The European Union is supporting the project, called Clean Urban Transport for Europe (CUTE), with €21 million ($24.2 million). By the end of this year 30 emission-free buses are supposed to be plying the streets of Barcelona, Hamburg, London, Stockholm, among other cities.

"Compared to Iceland, the situation in Europe is naturally more complex. We are making a start with the project in nine big cities in Europe in 2003 too, also for two to three years. I'm convinced it will take longer in Europe,” said Kohler. “While I think it’ll be ten to 20 years in Iceland, I believe for Europe itself it will take more like 20, 30, 40 years. But making a start is important and learning from these experiences to then transfer them to Europe."

But many problems still have to be solved before it gets that far. A fuel cell-powered bus costs around six times as much as a diesel-run bus. The cost of hydrogen power can't compete with gasoline or diesel, and a network of filling stations must still be built.

One problem, above all, prevents fuel cell-powered motors from being employed in private cars: the fuel cells are temperature sensitive. They are ruined when the water in their membranes freezes. Still DaimlerChrysler's engineers are optimistic about overcoming this hurdle. And despite its frosty winters, Iceland is convinced that hydrogen energy is on its way and oil is on its way out.