Nah, you’re on a good train of thought, the idea just needs some adjustments. The game currently does not lack for powerful engines or fuel sources. What it does lack is fuel STORAGE, which is where a “water->hydrogen” converter would actually be useful as a type of high tech “battery” aka “fuel cell”.
Water->Hydrogen based fuel cells are a real life thing, their only limitations are low efficiency (it takes a lot of power to store a little power) and the problem of handling explosive hydrogen gas. Such a system could easily fit into the lore of the game, while also filling a need (high storage batteries) that is not yet in the game.
As far as game mechanics, I’m thinking a “fuel cell” would have 5x the energy storage of a Storage Battery but half the durability, and would store electric charge at half efficiency (every 2 charge received is 1 charge stored). Note: Fuel Cells would only begin charging after all batteries are charged. The result would be a (relatively) light high tier battery that takes longer to charge but stores a lot more power. This would allow for small electric vehicles that take awhile to charge but can easily go to a new city on a single charge, as well as a “battery” suitable for massive electric vehicles with ridiculous power generation.