updated to include using hydrogen in place of natural gas/gasoline, instead of solely to produce electricity.
Note that while this question is somewhat about law, lawyers cost money, and I don't intend on trying this. I find this subject fun to think/argue about, and I figured others might too. My goal is to obtain some logical ammunition for my pursuit in convincing a friend, and not necessarily to find real legal information (I doubt it exists anyway).
A friend of mine is convinced that it is against the law to build a hydrogen burning car, or a small hydrogen power plant to power your house for "free." His reasoning is that, because fuel and energy are such a large part of the economy, the government doesn't want everybody becoming the wiser and cutting their power lines and converting their cars to hydrogen (I don't know anything about the feasibility of burning hydrogen gas in an internal combustion engine, or of converting an electric car to use fuel cells) and avoid paying fuel and electrical taxes forever. I mention his reasoning because he framed it like a conspiracy-cover-up magnitude "law," where it's not really a law, but that The Man will swoop down and lock you up if you try this, to keep the idea quiet.
I think the premises that energy taxes are extremely valuable to the government, and that governments wish to protect this resource, are true. But the conclusion seems absurd.
He referred to this as "free" energy -- and since in many cases producing hydrogen is expensive, I assume he was referring to a cheap method of obtaining hydrogen such as electrolysis which can have somewhere between 50-70% efficiency according to some reports. His reason for believing that this method was so illegal (instead of say, wind generation) is that water can be readily obtained from any creek or lake and is untaxable, and that hydrogen gas could be produced by electrolysis by another freely available energy source such as solar or wind.
He cited a case (which I couldn't find a record of) in which a farmer set up a makeshift hydrogen power plant to save money. He was thrown in jail shortly thereafter for producing hydrogen for the purpose of generating electricity. I argued that if this is true, the arrest was probably for other reasons, such as not being qualified to engineer such a beast, not having a licence (if one is required in this case) to operate a power plant, or having built it in an way which is dangerous. He assured me it was because of the hydrogen.
I would assume that you do need a licence of sorts in order to generate lots and lots of power, to use the equipment necessary to build a hydrogen power plant, or to own equipment which has been re-tooled to run on hydrogen gas. Since hydrogen has such a high energy density, and electrolysis is relatively simple and cheap, this would be a worthwhile endeavor for a hobbyist. I again argued that it would be extremely dangerous for people to do this and therefore of course illegal, but he maintained that they would be arrested even if they were qualified and had proper equipment. I said that I doubted you could even run such an operation in a residential zone, but he said it would only serve a single household, so wouldn't need a special zone, and referred again to the case of the poor farmer where neighbors would be few and far between (and I believe people do operate wind generators on farms).
Does this idea hold water? Is the government even concerned with how much they can tax you vs. how much energy/fuel you are able to obtain?