(FORTUNE Small Business) – In college Leroy Ohlsen was the kind of kid who watched Discovery Channel documentaries about fuel cells for fun. "I was watching this hydrogen-powered bus running around Vancouver, and a light bulb went off," says the 29-year-old founder of Neah Power Systems, who then decided to become a fuel-cell engineer. Did we mention that even the nerds wanted nothing to do with him?

Ohlsen and a high school buddy, Michael Fabian, raised between $50,000 and $100,000 from friends and family and worked out of a house in Seattle. With money scarce and little equipment, all they could do was brainstorm about portable fuel cells, the niche Ohlsen had targeted. In August 1999 an engineer sitting in on a session raised a novel idea: silicon. Fuel-cell basics are as old as Morse code: A reaction between hydrogen and oxygen--both are abundant and cheap--produces clean electrical energy. But the smallest fuel cells, which used liquid methanol to get hydrogen, were notoriously inefficient and still too big to "fit within a notebook PC." By etching microscopic pores into silicon and filling them with a platinum catalyst, Ohlsen believed, he could create more power in a smaller space.

His idea attracted $300,000 in December 1999 from then--Microsoft exec Dan Rosen (Ohlsen's high school chemistry teacher had suggested Neah submit its business plan to Rosen's Alliance of Angels group in Seattle). Silicon's promise was still theoretical, and even Ohlsen sometimes doubted it. "We were etching at a depth even Intel doesn't do," he notes. Yet by May 2000, Ohlsen and his team had generated power from the porous silicon--nothing that could power a laptop, but enough to validate the concept. Ohlsen went back to Rosen, now a VC, and landed over $1 million. Last year Neah's prototype cell powered a mobile phone (Ohlsen's first call was to Rosen, his "Christmas present").

Don't plan on daylong battery life just yet. Neah's fuel cell has yet to power a laptop (it hopes to do so by the end of the year), and once it does, it must be squeezed into a package that fits inside a battery bay and must be comparable in cost to today's lithium ion batteries. "If it's much more, they won't be in the game," says Atakan Ozbek, director of energy research at Allied Business Intelligence, a market research firm in Oyster Bay, N.Y. Laptop vendors will have to sign up as well, and some, notably Toshiba, are developing their own fuel cells. Other competition, like PolyFuel, based in Mountain View, Calif., is plugging away too. All are homing in on what Ozbek estimates will be a $2 billion to $5 billion market by 2011. "The pressure to be first is definitely driving development," says Dave Dorheim, Neah's CEO, a former GE executive.

But Neah is the only one using silicon, and that, says Ohlsen, gives it the edge. "People have been working with, miniaturizing, and optimizing silicon for three decades." If Ohlsen's right, it will fuel your laptop--and Neah's future.