TODAY, HYDROGEN is made industrially -- for such uses as petroleum refining, silicon crystal formation and fertilizer -- chiefly by extracting it from natural gas in a process called steam-reforming, the most economical method so far.

But hydrogen can also be produced without the use of dwindling, polluting fossil fuels. The most common way is by electrolysis, which splits the water molecule into its component parts. When the elements combine, they release energy: Hydrogen and oxygen burn together, forming water and producing heat. Conversely, energy -- in the form of electricity -- must be applied to break up the molecule. Hydrogen bubbles up at the negatively charged cathode and oxygen at the positive anode. (See illustration above.) The quantity of water electrolyzed is proportional to the amount of current employed.

(If the process is reversed, the combination of hydrogen and oxygen produces a current, plus water. This is the principle of the fuel cell, which can function as a sort of battery. Used now in space vehicles, it may eventually power automobiles and trains.)

At present, hydrogen is relatively expensive to produce because of the energy costs involved. One method under development is electrolysis of steam at around 1,000

C, which requires less voltage than processing liquid water. But if the steam were produced by, say, concentrated energy from sunlight in a "solar tower" (see illustration) or other source, the price would fall.

Japanese and American laboratories have been looking for years for semiconducting materials that can use sunlight to make electricity which would in turn be used for electrolysis. Some designs use photovoltaic cells submerged in water in such a way that oxygen evolves on top, and hydrogen on the bottom. Other scientists are looking at hydrogen-producing photosynthetic bacteria common in tropical oceans.

Texas A&M's John Appleby thinks the way into a hydrogen economy is by extracting it from coal, but without the attendant carbon-dioxide pollution problems -- perhaps through a modification of an existing California gasification system which is already being used to make clean (sulfur-free) hydrogen-rich gas. Part of the overall economics include selling or burying the unavoidable carbon dioxide byproduct so that it does not contribute to the greenhouse effect. "Based on what we know today," he says, "it would be cheaper than hydrogen produced via solar power."

In any event, hydrogen is not going to be cheap. But then no alternative fuels will be inexpensive in the post-fossil world. Appleby cites projections for hydrogen in the range of $45 per million BTUs (British thermal units, a measure of heat) in the mid-1990s -- the equivalent of $6 per gallon gasoline. But he also believes the California approach could produce hydrogen at about $9 per million BTUs, roughly equivalent to $1.35 gasoline, a price that does not include credits for the sale of carbon dioxide and electricity.

In fact, assuming more efficient fuel-cell cars in the future, the costs per mile might not exceed today's: Appleby says such a vehicle might operate at four times the efficiency of internal-combustion engines in urban use: "It has all the advantages of the electric car without the disadvantages of having to recharge the batteries."