SAN FRANCISCO (CNN/Money) - Viewers who watched last week's State of the Union speech may have been caught off-guard by President Bush's proposal to fund hydrogen-powered automobile development research.

Some were surprised to see the initiative coming from Bush, a man whose personal fortune comes from oil money. Others pointed out that the president's most recent economic stimulus proposal paradoxically includes tax cuts for small businesses that purchase gas-guzzling SUVs. And finally, some argued that the gasoline-electric hybrid -- not hydrogen -- is the next step in the automobile's evolution.

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But sure enough, Bush surprised them all. "I'm proposing $1.2 billion in research funding so that America can lead the world in developing clean, hydrogen-powered automobiles," he said. "With a new national commitment, our scientists and engineers will overcome obstacles to taking these cars from laboratory to showroom, so that the first car driven by a child born today could be powered by hydrogen, and pollution-free."

The announcement wasn't Bush's first nod toward hydrogen-powered cars. In January 2002, Bush called for a hydrogen initiative entitled FreedomCAR, but pledged only $125 million toward it. Now, with the president proposing to increase the initiative's budget by an order of magnitude, it's likely that more companies will try to grab federal funding.

Who will get a slice of the pie? It's too early to tell, as the proposal must still make its way into the final budget presentation -- the first version of which will be delivered this week. But a few candidates are very likely to receive some research money.

For the sake of argument, let's leave pure research facilities out of the discussion. Concentrating only on for-profit companies and industries, the most likely recipients of the government's largesse fall into three camps.

First there are the hydrogen-power component manufacturers. Some leading companies include Ballard Power Systems (BLDP: Research, Estimates), Hydrogenics (HYGS: Research, Estimates), and Proton Energy Systems (PRTN: Research, Estimates).

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The president's address had an immediate impact on their stock prices. Since the speech, Ballard has seen 6 times its normal trading volume. Hydrogenics's stock price shot up 17 percent, with trading volume up 15 times its pre-speech level. Proton Energy Systems's trading volume is more than 3 times above its normal level.

The second group consists of large industrial-energy technology concerns, as one way to create hydrogen power is to use fossil fuels as raw materials. These companies include Praxair (PX: Research, Estimates), Teledyne (TDY: Research, Estimates), and United Technologies (UTX: Research, Estimates), all of which have also seen big increases in trading activity.

The final group is composed of carmakers, some of which have been supporting and developing hydrogen technology for several years. DaimlerChrysler (DCX: Research, Estimates), for example, in 1999 announced a $1.4 billion, five-year program to develop hydrogen-based fuel cells. BMW, General Motors (GM: Research, Estimates), Honda (HMC: Research, Estimates), and Toyota (TM: Research, Estimates) also have been actively exploring hydrogen's potential.

Experts in hydrogen and fuel-cell technology say they appreciate the attention their cause received in the State of the Union address. But many chafe at the dollar amounts mentioned in Bush's speech: "$1.2 billion over five years is a pittance," says David Redstone, editor and publisher of the Hydrogen and Fuel Cell Investor newsletter. "We should be talking about something on the scale of the interstate highway system to bring the country's energy program into the 21st century."

Moreover, according to a recent paper sponsored by the Progressive Policy Institute and coauthored by Peter Hoffman, editor of the Hydrogen and Fuel Cell Letter, in recent years the private sector has invested between $1 billion and $2 billion in hydrogen and fuel cells annually, dwarfing the amounts suggested by the president.

Still, "this is a big moment, if for no reason other than the psychological boost it gives the hydrogen industry," Hoffman says. Conveniently, it has also given a nice boost to the stock prices of a few companies that stand to gain if hydrogen power takes off.

Eric Hellweg is a contributing writer at Business 2.0.

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