Steam re-forming, the most common and cheapest method of collecting pure hydrogen, is a technique whereby hydrogen is separated from methane, CH4. Hydrogen collected this way is used for fertilizers and chemical products, or to upgrade petroleum products, but isn't in a pure enough form to be used as a fuel itself. Of course, it's valuable even then. According to the US Department of Energy, adding a mere 5% H2 to gasoline lowers NOx emissions by 30 - 40%, a significant amount in a nation ever-conscious of its poor air quality.
But what we really need in order for hydrogen to be a viable fuel alternative is an efficient and affordable way to produce electrical power from it. Right now, fuel-quality hydrogen is produced by electrolysis, and the electricity for that ultimately involves combustion of fossil fuels (it takes about 0.14 kWh of electricity to produce one cubic foot of H2). Opponents of hydrogen fuel research argue that we're just spinning our wheels here, since using fossil fuels for the electrolysis that provides H2 is counter-productive. After all, we're talking about using hydrogen in order to avoid using fossil fuels, right? Fortunately, current research is focusing on using sustainable energy sources like solar or wind rather than fossil fuels for the electrolysis procedure. What we would require would be an energy source such as solar that provides for the base needs of a population, plus some extra for peak needs. Using the solar energy for electrolysis would convert the solar energy to chemical energy in the hydrogen, which could then be either transported more cheaply, or stored until needed.
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