While most car manufacturers believe that hydrogen fuel cells are the long-term solution to reducing petroleum consumption and automotive air pollution, a number of problems remain unsolved at present. Two of the biggest are how to produce hydrogen efficiently, and how to store it in a vehicle.
A recent article in Wired points to a possible solution for hydrogen production-- bioengineered algae. Developed at the U.S. National Renewable Energy Lab, the green hydrogen generators use energy from photosynthesis to produce hydrogen. Now that the algae's energy efficiency has been pumped up to useful levels, researchers are working on increasing the efficiency of hydrogen production. Ultimately, algae farms in the desert could be used as hydrogen factories.

The storage problem is also a major obstacle, and one of the goals of the Department of Energy's FreedomCAR program is to develop a hydrogen storage material capable of holding six-percent of its total weight in hydrogen. (Given that hydrogen is the lightest element, this isn't as easy as it sounds.) Recently, researchers at the Stanford Synchrotron Radiation Laboratory have enjoyed promising results using carbon nanotubes as a storage medium, although considerable work will be required to make them practical for routine, rechargeable storage applications. Nonetheless, early experiments have already achieved  five-percent hydrogen storage by weight.

Looks like we may be on the road to finding two pieces of the puzzle.

[Thanks for the tips, Keith!]

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