As California looks to clean technology to cut its greenhouse gas emissions, hydrogen fuel cells have come into focus. Governor Schwarzenegger has tried to promote a "hydrogen highway"--with little success.

But what about running your house with some home-grown hydrogen? Residential fuel cells are still a rarity in California, but they're becoming more common in Japan. The Japanese government is pouring billions of dollars into the technology, and the investment should get fuel cells into a quarter of all homes in Japan by midcentury.

Homemade Hydrogen Power

Ever since Shunskei Ugajin got a hydrogen fuel cell, he's been the most popular guy on his block. Neighbors come over just to gawk at it. It stands proudly behind his house in this otherwise drab alley in Urawa, about 12 miles north of Tokyo.

It's made up of two stainless steel boxes that look like refrigerators: one full size, and a shorter one, like a fridge you might see in a freshman dorm room.

In a presentation he's delivered countless times to friends, Ugajin explains how it works. The small box takes natural gas from the gas line in his home, separates the hydrogen, and uses it to generate electricity. The large box takes the heat given off in the process and uses it to heat the house and the water the family uses.

At full capacity, the fuel cell generates one kilowatt. The Ugajins are using 400 watts, so they're selling 600 back to the grid. The family's spending a little more on natural gas to power the fuel cell, but they're now spending a third of what they used to on electricity.

"I find myself watching the control panel screen a lot," said Ugajin. "We're now more aware of leaving the lights on, the air conditioning, and we're better about turning the lights off."

Industry experts estimate that a typical home fuel cell will cut carbon dioxide emissions by more than a ton per year. What they won't save--yet--is money.

The Ugajins are leasing their cell as part of a government study to test the machine's durability. Buying one will set you back about $30,000 U.S. Even with a government subsidy footing half the bill, it would take decades of energy savings to pay it off. But that subsidy has prompted some manufacturers of prefabricated homes to commit to buying them, and that, in turn, has spurred three major Japanese companies to start building assembly lines.

Building a Hydrogen Society

At Panasonic's fuel cell assembly line outside of Kyoto, talking computers bark instructions to a row of 16 workers. This factory is so new that workers are still learning how to assemble the more than 1,600 parts that go into making a fuel cell. Manager Mikihiko Matsui watches them through a window.

"At the beginning of the year, we were only able to make four units per day," said Matsui. "We're now doing 16. Next year, we plan to double that."

Companies just started selling residential fuel cells this past spring. As sales pick up, analysts expect the price to drop to $5,000 within five years.

Ikutoshi Matsumura is director of Japan's Fuel Cell Association, which doles out the government subsidy. He says by 2030, one in ten homes in Japan will have fuel cells--by 2050, one in four. By then, Matsumura says Japan will have the infrastructure in place to take natural gas, remove the carbon from it and bury it underground, then pipe the hydrogen to homes with fuel cells.

Matsumura says Japan is building a "hydrogen society." And, he says, this will pull the country out of the current recession.

"Each of these fuel cells has more than a thousand parts that are manufactured by more than 200 companies," Matsumura explained. "If our market expands to a trillion-yen market by 2020, like we foresee, that will be a significant contribution to the Japanese economy."

California's Hydrogen Challenge

That kind of potential growth is worrying observers across the Pacific, including Scott Samuelson, director of the National Fuel Cell Research Center at UC-Irvine. "The Japan market has been very impressive," said Samuelson. "And the U.S. market for residential fuel cells should be inspired by the success, but also very concerned by it."

Samuelson says California has made strides in fuel cell technology for the industrial sector, but Japan, he says, is a decade ahead of the U.S. in the more lucrative residential market. He says California has an opportunity to catch up and compete with Japan for billions in potential revenue globally. But to do so, he says, would require government support and leadership.

"California is getting pushed off course, clearly, with very substantial challenges financially, and as a result we're losing that leadership and opportunity as well. So that's my hope, but the leadership that's needed to underwrite this hope is not clearly obvious at this moment in time in the U.S.," said Samuelson.

That kind of leadership is obvious in Japan. Newly elected Prime Minister Yukio Hatoyama has grabbed international headlines with his ambitious greenhouse gas--cutting goals for Japan, and for the last decade, Japanese companies have led the world in patents for green technology--a sign that in a world focused on global warming, Japan's prospects are red hot.