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as long as coal and oil are going to be burned to produce the electricty that will be used to seperate hydrogen from water, there's no real point
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I suppose that depends on what you assume about the overall efficiency of the system. If the coal/oil are burned (relatively) efficiently at a power plant, and not too much energy is lost in between that point and when the power hits the pavement, then the system could be more efficient than burning the fuels inefficiently (relatively) at the vehicle. Some would say that you also have more options for handling the pollutants if you produce them all in one location, especially if it happens to be a location that you're not particularly fond of. Furthermore, there are "cleaner" power generation technologies available which may not be particularly well suited to vehicular use, but which can be used effectively in a fixed location. I'd put solar, biomass, geothermal, wind, hydro, and nuclear power (fission and/or fusion) into this category (plus perhaps some things we've not come up with yet).
You've also assumed that the hydrogen would need to come from hydrolysis of water. There are other methods to "produce" hydrogen, such as splitting hydrocarbons into carbons + hydrogens. It is my understanding that water moderated nuclear reactors (and maybe light-water moderated reactors too) produce a significant amount of hydrogen in operation, but I'm not sure whether that comes from mashing up water molecules, or from spitting off excess protons during the nuclear reactions. Either way, nuclear reactors generate some hydrogen, and it might not come from the water.
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we still need to produce the vast amounts of hydrogen needed for widescale use of fuel cells, and then build the infrastructure to distribute it.
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Fuel cells with built-in reformers get around both of these hurdles by using some clever chemical processes to separate hydrogen from hydrocarbon fuels (CH4 comes with 4 H's, etc), which have a broader supply chain already in place.