HyPower hydrogen powers a Volkswagen GTi

HyPower have fitted a Volkswagen GTi with their H2 Reactor (H2R) hydrogen system to show that it can power the vehicle using only water. Designed to use electrolysis on the fly to split water into hydrogen and oxygen, the system then uses the hydrogen/oxygen gas to power its original internal combustion engine.
It would appear the system uses onboard batteries to run the H2R leaving the vehicle's motion to be powered entirely by hydrogen. In-car electrolysis has the advantage of doing away with the need to store highly compressed hydrogen in special storage tanks. Further, you would never need to head to your local gas station either as the only input beyond electricity for batteries would be water.

The H2R uses a highly efficient electrolysis process to produce 1 litre / 0.26 gallons of hydrogen per 1 watt hour. HyPower bills this as being around 2 to 2.5 times more efficient than the current performance of competing technologies. Live demonstrations will be held on February 28, 2007 to demonstrate the H2R in operation for independent experts to confirm the results. A web cast of the event will also take place via YouTube.

[Source: Wired News]

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