State officials soon will begin seeding local researchers with $8.7 million in an effort to jump-start hydrogen-based technologies that can reduce Hawai'i's dependence on oil.

Lawmakers authorized the creation of a hydrogen investment capital special fund in 2006 in hopes of fueling interest and development of clean-burning hydrogen fuel from renewable resources such as wind and water. Hydrogen is a renewable fuel that can be used in fuel cells, internal combustion engines and in future power plants. Hydrogen is plentiful, but researchers have yet to find cost-effective ways to manufacture and use the fuel.

The launch of Hawai'i's hydrogen fund was delayed as state officials figured out how best to implement the program. Details of how the program will work still remain unresolved and depend largely on who is ultimately picked to manage the program.

Five consortia have proposed to run the program, and the state hopes to decide which one will get the job sometime after July.

The Department of Business, Economic Development and Tourism will manage the program and oversee decisions made by a fund manager with greater expertise in hydrogen technology.

"We thought the best thing to do would be to select the best possible fund manager to manage these assets," said Ted Liu, DBEDT's director.

Lawmakers actually set aside $10 million for the fund; however, $800,000 of that money already has been given to the University of Hawai'i to help fund a Big Island hydrogen power park. Another $500,000 has been set aside to cover administrative costs.

That leaves $8.7 million the state could start disbursing in the form of seed capital investments and matching grant money as soon as this fall.

The state hopes to land matching government and private sector money that could result in investments of $40 million to $50 million in local hydrogen projects during the next three to four years.

The goal is to produce tangible results within six to seven years, Liu said.

"Hopefully we can deploy four to five times more capital into this area," he said.

While large by local standards, Hawai'i's hydrogen investment fund is eclipsed by projects such as a $1 billion power plant project involving BP Plc and Edison International. The two companies have announced plans to build a hydrogen-fueled power plant in Southern California by 2011.

Still, Hawai'i's $10 million commitment is sizable in its own way, Liu said.

"It does indicate a level of commitment on the part of the state — to put some skin in the game," he said.

However, Lowell Kalapa, head of the Tax Foundation of Hawai'i research group, questioned the wisdom of creating a $10 million hydrogen fund when the practical use of hydrogen in areas such as transportation remains years away at best.

"The technology is still developing," he said. "Who's got the tome of knowledge? Who's got the idea of what to fund and what not to fund?

"I think it's just an example of the Legislature wanting to do something, so they do this," Kalapa said.

Reach Sean Hao at shao@honoluluadvertiser.com.