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Dow and GM's Power Play

Ready to party like it's 1999? A news item hit the wires yesterday evening that might remind investors of a different place and time. Dow Chemical (NYSE: DOW  ) and General Motors (NYSE: GM  ) announced they'd joined forces to power a plant using fuel-cell technology. It's being touted as the largest commercial venture of its kind to date.

Conspicuously missing are the companies that were once the usual suspects in fuel cells -- names like FuelCell Energy (Nasdaq: FCEL  ) and Plug Power (Nasdaq: PLUG  ) . While those stocks generated excitement several years ago, the possibility loomed that bigger companies with a financial incentive toward development would really make the sector move.

Through the deal, Dow provides the hydrogen -- a byproduct of its chemical plant -- while GM provides the fuel cells to generate electricity. The initial fuel cell will generate 75 kilowatts of power, which is enough to power up 50 homes. Going forward, the two companies plan to install 400 such fuel cells to generate 35 megawatts of electricity -- enough for 75,000 homes, or 2% of the energy needed to power Dow's Texas site.

The interest in fuel-cell technology should come as no surprise. The Bush administration's fiscal 2005 budget included more funds allocated to hydrogen fuel initiatives, in a nod to the idea of reducing the need for foreign oil.

It's important to GM, though, given the company's interest in developing fuel-cell technology for cars. Most of the big auto makers see the writing on the wall when it comes to the traditional internal combustion engines. Ford Motor (NYSE: F  ) , Toyota Motor (NYSE: TM  ) , and DaimlerChrysler (NYSE: DCX  ) are all working on using fuel cells in automobiles.

The deal is expected to bring the cost of fuel cells down, as GM tries to reach its goal of producing such a car by 2010. However, as W.D. Crotty said recently, GM's work in fuel cells and hybrids may be interesting to follow, but won't garner much of a financial benefit for a long time to come.

In other words, while building for the future is always smart, the future isn't now, yet. We may all see the "hydrogen economy" in our lifetimes, but there's still plenty of time to watch the space.

If you don't really want to wait for the hydrogen economy to help your portfolio, you should considertaking a free trialto Motley Fool Hidden Gems, where Tom Gardner is beating the market fivefold since inception.

Alyce Lomax does not own shares of any of the companies mentioned; her preferred form of alternative energy is caffeine.

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