In recent months, government and public concern about the availability of oil in the Middle East has intensified because of the escalating violence between Israel and the Palestinians, the likelihood of more terrorist attacks by Al Queda, and at press time, the prospect of war with Iraq. But a deeper worry is beginning to surface whose consequences could be more far-reaching. Experts had been saying we had another 40 or so years of cheap oil left. Now, however, some of the world's leading petroleum geologists are suggesting global oil production could peak and begin a steep decline much sooner, as early as the end of this decade, sending oil prices through the roof. Non-OPEC oil-producing countries are already nearing their peak production, leaving most of the remaining reserves in the politically unstable Middle East. Increasing tensions between Islam and the West are likely to further threaten U.S. access to affordable oil. In desperation, the U.S. and other nations could turn to dirtier fossil fuels-coal, tar sands and heavy oil-which are believed will only worsen global warming and imperil Earth's ecosystems. Looming oil shortages make industrial life vulnerable to massive disruptions and possibly even collapse. While the fossil-fuel era is believed to be entering its sunset years, a new energy regime is being born. Hydrogen is the most basic and ubiquitous element in the universe, the stuff of the stars and the sun. When properly harnessed, it is the "forever fuel" because it never runs out and produces no CO2 emissions when burned; the only byproducts are heat and pure water. A new economy, powered by hydrogen, would fundamentally change the nature of markets and political and social institutions, just as coal and steam power did at the beginning of the Industrial Age. A hydrogen economy means natural gas. But not forever. Today, nearly half the hydrogen produced in the world is derived from natural gas via steam reformation. Although this has proven the cheapest way to produce commercial hydrogen, gas still is a hydrocarbon and emits CO2 in the conversion process. Moreover, global production of gas is likely to peak sometime between 2020 and 2030, creating a second energy crisis on the heels of the oil crisis that has been forecast. There is, however, another way to produce hydrogen: splitting water. Alternative fuel sources-such as the sun and wind-can be used to generate electricity to do this. People often ask why generate electricity twice, first to produce electricity for the process of electrolysis and then again to produce power, heat and light by way of a fuel cell? Electricity cannot be stored. If the sun isn't shining, the wind isn't blowing or the water isn't flowing, electricity can't be generated. The real question, then, is one of cost. Wind, hydro and biomass are already cost-competitive in many parts of the world and can be used to generate electricity for the electrolysis process. Photovoltaic and geothermal costs, however, are still high and will need to come down considerably to make the process competitive with the gas steam reforming process in the production of hydrogen. Energy sharing Commercial fuel cells powered by hydrogen are just now being introduced into the market for home, office and industrial use. The major automakers have spent more than $2 billion developing hydrogen cars, buses and trucks. The first mass-produced vehicles are expected to be on the road in just a few years. At the 2002 North American Auto Show, General Motors unveiled its prototype hydrogen fuel-cell car. Today's flow of energy from producer-to-consumer will become obsolete. In the new era, consumers could become producers as well as consumers-so-called "distributed generation." When millions of end-users connect their fuel cells into local, regional and national hydrogen energy webs (HEWs), using the same design principles and smart technologies that made possible the Internet, they can begin to share energy-peer-to-peer-creating a new decentralized form of energy use. In the new hydrogen fuel-cell era, even the automobile itself is a "power station on wheels" with a generating capacity of 20 kilowatts. Since the average car is parked most of the time, it can be plugged in during nonuse, to the home, office or the main interactive electricity network, providing premium electricity back to the grid. If just 25% of drivers used their vehicles as power plants to sell energy back to the grid, all of the power plants in the country could be eliminated. Virtual utilities Whether hydrogen becomes "the people's energy" depends to a large extent on whether end users can better dictate the terms with commercial suppliers of fuel cells for lease, purchase or other arrangements. Eventually, the end users' combined generating power via the energy web will exceed the power generated by the utility companies at their plants-a revolution in the way energy is produced and distributed. Once this happens, power companies will have to redefine their role if they are to survive. In the new scheme of things, power companies would become "virtual utilities" assisting end users by connecting them with one another and helping them share their energy surplus profitably and efficiently. Coordinating content rather than producing it becomes the mantra for power companies in the era of distributed generation. Utility companies, interestingly enough, serve to gain from distributed generation although, until recently, many have fought the development. Because distributed generation is targeted to the very specific energy requirements of the end user, it is less costly and a more efficient way of providing additional power than is relying on a centralized power source. It costs an electric-power provider $365 to $1,100 per kilowatt-hour to install a six-mile power line to a three-megawatt customer. A distributed generation system can meet the same electricity requirements at $400 to $500 per kilowatt hour. Generating the electricity at or near the end users' location also reduces the amount of energy used because 5% to 8% of the energy transported over long distance lines is lost in the transmission. U.S. power companies are anxious to avoid making large capital investments to expand because under the new utility restructuring laws, they can no longer pass the costs on to their customers. Because the field is now very competitive, power companies are reluctant to take funds from their reserves to finance new capacities. The result is that they stress existing plants beyond their ability to keep up with demand, leading to more frequent breakdowns and power outages. That is why a number of power companies are looking to distributed generation as a way to meet the growing commercial and consumer demand for electricity while at the same time, limiting their financial exposure. But, before the energy web can be fully actualized, changes in the existing power grid will have to be made to assure easy access to the web and a smooth flow of energy services over the web. Connecting thousands and then millions of fuel cells to main grids will require sophisticated dispatch and control mechanisms to route energy traffic during peak and nonpeak periods. Encorp has already developed a software program for remote monitoring and control that would automatically switch local generators onto the main grid during peak loads when more auxiliary energy is required. Retrofitted existing systems are estimated to run about $100 per kilowatt-hour, which is still less costly than building new capacity. The problem with the existing power grid is that it was designed to ensure a one-way flow of energy from a central source to all end users. State-of-the-art computer hardware and software transforms the centralized grid into a fully interactive intelligent energy network. Sensors and intelligent agents embedded throughout the system can provide up to the moment information on energy conditions, allowing current to flow exactly where and when it is needed and at the cheapest price. Another new product, Aladyn, allows users to monitor and make changes in the energy used by home appliances, lights and air conditioning from a Web browser. Empowering the poor Incredibly, a large portion of the world population has never made a single telephone call, and much of the human race has no access to electricity or any other form of commercial energy. The disparity between the connected and the unconnected will become even more pronounced during the next half-century with the world's population expected to rise from the current 6.2 billion to 9 billion. Most of the increase will take place in developing nations where poverty is concentrated. Lack of access to energy, and especially electricity, is a key factor in perpetuating poverty around the world. Conversely, access to energy means more economic opportunity. In South Africa, for example, for every 100 households electrified, 10 to 20 new businesses are created. Electricity frees human labor from day-to-day survival tasks. Simply finding enough firewood to warm a house or cook meals in resource-poor countries can take hours out of each day. Electricity provides power to run farm equipment, operate small factories and craft shops, and light homes, schools and businesses. Today, the per-capita use of energy throughout the developing world is one-fifteenth of the consumption enjoyed in the U.S. The global average per-capita energy use for all countries is one-fifth the level in the U.S. Shifting to a hydrogen regime by using renewable resources and technologies to produce the hydrogen-and creating distributed generation energy webs that can connect communities-is the only way to lift billions of people out of poverty. As the price of fuel cells and accompanying appliances continues to plummet with new innovations and economies of scale, they will become far more broadly available, just as was the case with transistor radios, computers and cellular phones. The goal ought to be to provide stationary fuel cells for every neighborhood and village in the developing world. National governments and world lending institutions can help provide the financial and logistical support for the creation of a hydrogen energy infrastructure. New laws will need to be enacted to make it easier to adopt distributed generation. Public and private companies will have to guarantee distributed generation operators access to the main power grid and the right to sell energy back or trade it for other services. The hydrogen economy is within sight. How fast we get there will depend on how committed we are to weaning ourselves off oil and the other fossil fuels. What are we waiting for? M Jeremy Rifkin is the author of The Hydrogen Economy: The Creation of the World Wide Energy Web and the Redistribution of Power on Earth. He is president of the Foundation on Economic Trends in Washington, a columnist and author, and a fellow at the Wharton School's Executive Education Program for CEOs.