Here’s another game-changer in the making brought to you by America’s burgeoning supplies of shale natural gas: alternative fuel vehicles and distributed power generation using fuel cells.

Emboldened by low prices and booming supplies of natural gas in the U.S , the American fuel cell industry is clawing its way back from the brink.

The industry’s leaders are gearing up to tackle one of the country’s most daunting energy challenges — and opportunities: building out a network of refueling stations that supply natural gas today — and, hopefully hydrogen tomorrow — for individual vehicles. (Hydrogen is produced from natural gas.)

While they’re at it, industry leaders are working to persuade utilities and commercial, government and institutional energy buyers that stacks of hydrogen fuel cells are clean, cost-effective on-site sources of electricity and back-up power.

Let’s rewind briefly to 2009 when Nobel laureate and newly-installed Secretary of Energy Stephen Chu told Technology Review magazine that fuel cells could not be produced or stored efficiently.

In recommending significant cuts in hydrogen research from the Department of Energy fiscal 2010 budget, Chu joined a chorus of skeptics who doubted the infrastructure for hydrogen fuel cell vehicles made it “unlikely” this industry would ever get off the ground.

Today, with natural gas prices at near historic lows, hydrogen fuel vehicle makers see a potentially very bright future IF natural gas prices stay low AND they can persuade local permitting officials to allow hydrogen fueling stations.

“The development of America’s tremendous shale gas resources is  . . . helping to reduce the costs of producing hydrogen and operating hydrogen fuel cells,” DOE spokesman wrote to The New York Times in late May. See reporter Jim Motavalli’s report here.

The Energy department now predicts hydrogen could be produced, compressed and dispensed at the pump for a gasoline-cost equivalent of less than $4 per gallon.

Honda, Toyota, Hyundai and Daimler are betting serious money on this transportation option for individuals. Each says it will will have fuel-cell cars in commercial production by 2015. The question then becomes: were, especially outside of California, will fuel cell vehicle owners go to fill up?

One of the biggest problems hydrogen fuel stations face is earning the same exemption from siting hazardous materials storage tanks and dispensing equipment that grandfathers all gasoline stations. Intellectually the difference would seem a de minimus one. But politically the process is something this nascent industry is ill-equipped to execute on its own. Besides, why would purveyors of gasoline want to compete with net another product now that electric vehicles are making serious inroads in the consumer market?

General Motors is among the car markers yet to be convinced the recent drop in natural gas prices and boom in U.S. supply will be enough to build a business even around early adopting motorists.

This bus in Burbank, CA is powered by hydrogen and fuel cells. While the U.S. is now the top producer of natural gas in the world, it has but 1% of the natural gas or hydrogen-fueled vehicles on the road today. CREDIT: LAist.com

It should be noted that hydrogen has been a fuel for commercial and government vehicle fleets including buses (photo). There has to be experience to draw on that can prudently be applied to the corner refueling station.

For power generation, the market potential seems a bit murky despite low natural gas prices.

But don’t tell that to Chip Bottone, President and CEO of FuelCell Energy in Danbury, CT. As one of the industry’s leading cheerleaders, he is quick to challenge utilities for what they could weave into their power generation mix.

Bottone is searching for a way to begin a dialogue with utilities and tell the industry’s story “with more clarity.”

“We need to do more with what we have,” Bottone said at the recent Washington Fuel Cell Summit in the nation’s capital this week. And, he added, marketing should be executed with a rifle – not a shotgun – approach to connect with realistic prospects.

Bottone said he thinks fuel cells can begin to stand on their own economic merits selling power at 13 to 15 cents per kilowatt-hour. Such a price, some skeptics point out, does not include the fully amortized cost of the a fuel cell stack.

Fuel cells increasingly are being deployed as onsite backup sources of power. Wireless communications companies are depending on fuel cells to keep cell phone networks operating during regional power outages.

Kathryn Clay, who heads up the Drive Natural Gas Initiative, said there is now tangible demand from the market for  compressed natural gas (CNG). And the infrastructure to serve it can help lead the way for hydrogen-powered vehicles in the future.

“There are synergies directly applicable to the hydrogen infrastructure,” Clay told attendees at the Fuel Cell Summit. Safety standards, training and emergency response to accidents all are very similar, she said.

Compressed natural gas emits 30% fewer tailpipe pollutants. Hydrogen-fueled vehicles would emit even less. The average price for CNG is about $2.40 on a per gallon-equivalent basis.

Clay cited work at the University of Missouri-Columbia’s Alliance for Collaborative Research in Alternative Fuel Technology to develop low-pressure, high-capacity storage technologies. One such approach involves deploying “adsorbed” (sic) natural gas which exerts about one-sixth the pressure of compressed natural gas on tanks and other delivery equipment.

Research initiated by Peter Pfeifer, now chair of the Physics department at the University of Missouri-Columbia, could lead to a major breakthrough for natural gas- and ultimately hydrogen-fueled vehicles. CREDIT: University of Missouri-Columbia.

Mizzou’s research began when Physics Professor Peter Pfeifer (photo) earned a four-year grant from the National Science Foundation beginning in 2004. That lead to research funded by the U.S. Dept. of Defense for the Navy beginning in 2007 and most recently funding from Southern California Gas and the California Energy Commission.

Brett Maland, an attorney and spokesman for the Alliance, said the research’s technology could be shipped to auto manufacturers within two years.