The surging price of oil will lead to a shift to alternative sources of energy, particularly hydrogen, a government adviser has said.

Andrew McCree, chief executive of AEA, an energy consultancy that reports to the Department for Business, said: “With oil at $200 a barrel, the economics of hydrogen energy look increasingly compelling.”

Last month, Enel, the Italian energy group, inaugurated the first hydrogen power station, near Venice, where the regional government has established a Hydrogen Park to attract industry pioneers. The €50million (£39.8million) plant will power 20,000 homes.

A £1billion project is under way in Abu Dhabi involving Rio Tinto and BP. California has established a network of hydrogen filling stations serving a few hundred prototype cars.

Hydrogen can be used to power vehicles in two ways - by using a modified internal combustion engine or in fuel cells that generate electricity directly from the gas. The latter is more efficient and releases more energy by volume.However, while hydrogen energy has long been the stuff of science fiction, there is nothing particularly advanced about it. Until the 1950s, hydrogen was widely used as a domestic fuel in Britain as a 50 per cent component of town gas.

Johnson Matthey estimates that at least £1billion is being spent on hydrogen energy annually by companies including Shell, Rolls-Royce, Ford, BMW and Honda.

Martin Green, development director at Johnson Matthey Fuel Cells, argues that there is no shortage of hydrogen production capacity. “The US alone makes nine million tonnes a year - enough to power 40 million cars,” he said

At present, hydrogen is made generally from natural gas, undermining its green credentials, but advocates point out that there are other ways of manufacturing it, including extraction from water using electrolysis driven by nuclear, solar or wind power. It could also be made from biomass or produced by genetically modified algae.

In theory, hydrogen produced using renewable or nuclear energy could form the basis of a zero-carbon energy system and, because it can be obtained from water, there is a compelling energy security argument. Unlike oil and gas, it would not need to be imported from world trouble spots.

Nevertheless, there are practical challenges. Hydrogen contains more energy by weight than any other substance, but because it is the lightest gas it has very low energy by volume. At 200 times atmospheric pressure, one litre of natural gas contains five times more energy than hydrogen gas.

Even so, BMW has opted to use liquid hydrogen stored at -253C in a pressure tank to power a prototype car that it has built. However, the volumes required are huge. The vehicle's fuel tank has a capacity of 170 litres and yet can hold barely enough for a 124-mile journey.

Mr Green said: “The real challenge is building the infrastructure to support an economy based on hydrogen.”

The United States has more than 167,000 service stations, each dispensing an average 2,000 gallons of petrol a day. Exxon/Mobil has estimated that switching to hydrogen would cost as much as $1trillion.

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