Taras Wankewycz, founder of Horizon, prepares for the demonstration of the company's hydrogen-powered model car in Shanghai, China. This month, the company will begin sales in the U.S. and other major markets of a tiny hydrogen fuel cell car, complete with its own solar-powered refueling station, that Wankewycz and his partners say is a step toward making the technology commercially viable for the mass market.

Shanghai, China ? It’s a dream that’s been pursued for years by governments, energy companies and automakers, so far without success: Mass-producing affordable hydrogen-powered cars that spew just clean water from their tailpipes.

So Shanghai’s Horizon Fuel Cell Technologies decided to start small. Really small.

This month, it will begin sales of a tiny hydrogen fuel-cell car, complete with its own miniature solar-powered refueling station. The toy is a step toward introducing the technology to the public and making it commercially viable.

“Public awareness and education are the first steps toward commercialization,” said Horizon founder Taras Wankewycz, 32. “We want to make sure this technology gets adapted globally.”

Automakers and energy companies view hydrogen fuel cells as a promising technology that could wean the world from its addiction to crude oil. But it’s expensive, and technological hurdles remain despite billions of dollars that have been poured into research.

There’s the cost and challenge of building fuel cells that convert hydrogen to electricity, and the question of how to cleanly generate the gas and distribute it to yet-to-be built fueling stations. Though prototype hydrogen cars exist, they’re far from practical or affordable.

Horizon’s H-Racer and fueling station solve those problems on a very small scale. The price: $80 for the set.

The toy’s fuel cell, like those envisioned for real cars, relies on an electrochemical reaction to generate the current that powers the gadget’s electric motor. Unlike a gasoline-powered internal combustion engine, the only byproducts are electricity, heat and water.

A Horizon worker assembles parts of hydrogen-powered devices this month in Shanghai, China.

The fuel is supplied by its alarm clock-sized refueling station. A small electric current, generated by the solar cells, extracts hydrogen from water. (A battery backup is available for cloudy days.)

When the vehicle is hooked up to the refueling station, a balloon inside the 6-inch long car slowly fills.

With the flip of a switch, the car takes off and runs for 4 minutes on a full tank. The gas never ignites – and any would-be recreators of the Hindenburg disaster are likely to be disappointed by the toy’s negligible amount of the gas.

Horizon has bigger plans for the technology. Wankewycz said it was working on ways to make fuel cells more efficient, so that they can be used to power cell phones and laptop computers, and eventually vehicles and households.

Still, what works for a toy isn’t close to being ready for full-size cars. For one, it’s extremely expensive, said Daniel Nocera, a Massachusetts Institute of Technology chemistry professor and one of the world’s leading researchers in exploring how sunlight can be used to extract hydrogen from water.

Taras Wankewycz, Horizon founder, left, shows a prototype of a hydrogen-powered electric bicycle.

“Technologies exist to split water with solar cells,” he said. “It’s just not market-viable yet. … To say that it’s going to be upscaled or commercialized for an energy society, that’s a leap of faith for me.”

Still, he admires Horizon’s raising awareness about alternative energies through a toy.

“It’s a great message to send,” he said.

At Horizon’s headquarters on the top floor of a nondescript warehouse-type building in a bleak suburban district of Shanghai, Wankewycz and former Eastman Chemical Co. colleague George Gu demonstrated prototypes of a hydrogen-powered electric bicycle and a golf caddy they are converting from lead acid batteries to hydrogen power.

“We’re working on the smaller things until the infrastructure is ready,” he said.

Unlike the solar-powered toy, the bike and caddy rely on hydrogen extracted from metal hydride canisters. It generates more gas, but it’s less environmentally friendly than the technique used for the H-Racer.

Wankewycz, who was born in France but raised in California, says the company has raised about $5.5 million from venture capitalist investors since it was founded in 2003. Horizon’s revenues in 2005 were $170,000 but are forecast to exceed $3 million this year, the company said.