One of the big issues with Hydrogen is the misconception that it is an energy source. It's not really, there isn't much floating around in usable form, so it has to be created from some type of input. Many of us might remember the old high school experiment, where electrolysis was use to extract Hydrogen from water into a couple of upside down test tubes. This normally was dramatically displayed with a flame and a little tiny explosion.

It works, but it very energy inefficient. To do so at a commercial scale would require lots of energy, and would be very expensive. Hydrogen can also be made from natural gas, which is better, but still far from perfect. In an article on Green Car Congress, they report on a new process for making Hydrogen. It's pretty heavy on the science, but the gist of it is that they use microbes to extract hydrogen from dirty sewer water, getting a high percentage of Hydrogen recovered with a relatively low energy cost and without using expensive cathode materials.

GreenCarCongress.com