The reasons behind the decades-long effort to developing vehicles powered by hydrogen are noble: greatly reducing emissions while weaning ourselves from (foreign) fossil fuels.

However, while efforts to commercialize fuel cell cars and develop a hydrogen refueling infrastructure have stalled because of prohibitively high costs, plug-in hybrid and all-electric vehicles are racing ahead. If PHEV/EVs start shipping by the hundreds of thousands within three years, the poor hydrogen car may never catch up.

Electric vehicles offer most of the benefits of hydrogen cars at a fraction of the price tag, both for the vehicles and the infrastructure. While $40,000 PHEVs may seem pricey to many consumers, hydrogen vehicles are having trouble cracking the $200,000 mark.

Setting up regional networks of electric charging stations won’t be cheap at several thousand dollars a pop, but that’s nothing compared to the billions it would take to set up the proposed “hydrogen highway” just on the West Coast. I’m guessing Governor Schwarzenegger wouldn’t mind having some of the millions California spent on hydrogen infrastructure back.

Nonetheless, new hydrogen fueling stations are popping up in places like South Carolina and Long Island.

GM could also use a mulligan from when eight years ago it bet a billion dollars that it could have a commercial fuel cell vehicle ready by 2010. Oops.

Yes, most PHEV’s will require occasional petroleum refueling today, but they pave the way for battery technology to improve sufficiently to power affordable EVs. Hydrogen may not even be cleaner, as most of the hydrogen produced today comes from fossil fuels, and a recent DOE press release admitted that “in the long term, hydrogen will be produced from coal.”

The federal government is reportedly backing off its funding for hydrogen vehicles in favor of PHEVs, so research funding will likely further slow down. Vehicle makers are still marching on though, with Mazda trying its own hybrid approach with a battery/hydrogen ICE powertrain combo.

Hydrogen vehicles may make sense for fleets that go home every few hours to refuel, but their overall market appeal is shrinking with every new plug-in hybrid that is announced.