The following issues are at the core of the looming problems surrounding energy use, now and in the future.
It is useful to think of energy as two classes - dynamic and static. Dynamic energy is in movement and includes electrical flows, wind, solar radiation, water falling, etc. Static energy is stored such as the chemical energy stored in hydrocarbons, batteries, reservoirs, capacitors, hydrogen etc.
We have ample sources of flowing, dynamic energy from which to extract our energy needs. We also have multiple technologies with which to accomplish this end. The difficult problem is storage. The energy stored in petroleum, as a result of solar, geothermal and gravitic energies was put there over billions of years and did not cost us anything to store there. It is clear that with population increases and at projected rates of usage and improvements in efficiency that we will deplete the economically retrievable petroleum energy stores in the next hundred years. However, long before that time comes, due to the side effects of burning fuel, we may well have made the planet, climatologically unstable, consigning future generations to a hellish polluted world which is in constant warfare over diminishing energy resources. That is unless we can identify an alternative method for filling our energy requirements.
The reason that hydrogen is attractive is based on two unassailable technical facts.
Used as a fuel supplied to fuel cells in transport vehicles, a significant energy efficiency advantage is realized. Internal combustion of fuels, whether hydrogen or fossil fuels is inherently inefficient. In internal combustion engines, the thermal losses from fuel to rolling motive power are up to 85% of the stored chemical energy. More than 3/4 goes up in smoke and heat!! The reason that hydrogen technology is now attracting billions in investment is that fuel utilized in a fuel cell is up to 50% efficient, a 2-3 fold efficiency increase over internal combustion engines. It is compact, lightweight fuel cell technology that offers great hope for the future of transportation.
If you utilize hydrogen as the fuel in a fuel cell, there is virtually no pollution as a byproduct of the chemical to electrical energy conversion.
However, while fuel cells attached to electric motors are a more efficient than internal combustion engines, they are not a means of energy storage but rather are for converting stored energy to mechanical motive power. For storing and converting energy, fuel-to-fuel cell conversions are not nearly as efficient as industrial electrochemical batteries which can be operated at efficiences as high as 90%. But these batteries being quite heavy are only appropriate for stationary applications.
The trick going forward will be to increase energy resource use efficiency, reduce the poisonous by products of energy systems and do so at a cost which is competitive with fossil fuel based energy systems.
It is true that the hydrogen energy stored in water is only accessible at a net energy loss. But it is the same for fossil fuels (Its just that we had no costs in their creation - but they will run out) . The best technology for freeing hydrogen from water is 90% efficient. Because hydrogen used in fuel cells in vehicles is the most efficient option, were it put into mass production, it is already competitive with gasoline in terms of the costs of extracting the energy as well as potentially being competitive in capital costs.
However we will need cheap, renewable sources for the electricity needed to accomplish this. Wind power is already there, concentrated solar photovoltaics is almost there, hydropower, geothermal and other renewables are definitely in the picture. Plus current renewable sources which the utility now turns off during low demand periods are going begging so there are lots of energy sources to draw upon for making hydrogen.
The real issue is the storage and transport of hydrogen which amounts to many significant technical hurdles. Current methods of compression, cooling, and absorption in solid materials, have economic, safety, and technical hurdles which may not be easy to overcome. The issue of energy storage is what keeps us locked into the current fossil fuel energy regime. If we want to live in a clean, healthy and prosperous world, this is the problem that must be solved.