The 1 Thing That Could Put Fuel Cell Stocks' Future in Jeopardy

Imagine an electric vehicle like the Tesla Model S with a range greater than 1,000 miles. Sounds crazy, right? It may not be as far off as you think. Hydrogen fuel cells in place of tradtional batteries could actually make this possible, and fuel cell system companies like Plug Power (NASDAQ: PLUG  ) and Ballard Power Systems (NASDAQ: BLDP  ) are starting to test the waters with this very idea. For it to be possible, though, there is one great challenge that fuel cells will need to overcome: infrastructure. Let's take a look at why fuel cells could make batteries obsolete and why it will be so difficult to implement.

The science of fuel cells
A fuel cell is like a battery, but at the same time it isn't. Like a battery, it uses a chemical process to generate electricity, but instead of charging a fuel cell with electricity like a battery, it consumes pure hydrogen and oxygen. This means that a fuel cell can continuously create energy and be charged with hydrogen at the same time. 

There are several potential benefits to this type of technology. Not only does it make the time to recharge a fuel cell similar to the time to refill a gas tank, the energy density of hydrogen fuel cells -- the total amount of energy that can be stored in a certain weight of that material -- has been shown to be six to eight times greater than the most advanced lithium ion battery on the market today. 

The golden fleece
So far, fuel cells have proven to be effective options in some rather niche markets. Plug Power has developed a fuel cell system for material handling equipment such as warehouses, and it is starting to see some commercial success. It recently announced that it had secured an order for more than 1,700 of its fuel cell systems -- a device that can replace lead-acid batteries in existing equipment -- from Wal-Mart. However, the markets that have shown to be receptive to fuel cells so far have been very limited ones. The entire North American market for material handling equipment is only $800 million, and it's hard to imagine Plug Power capturing 100% of that market.

The true prize that fuel cells would like to capture is to replace batteries in electric and hybrid vehicles. According to a recent outlook report from Royal Dutch Shell, electric, hybrid, and hydrogen powered vehicles will represent more than 40% of all vehicles on the road by 2050, and these technologies along with natural gas engines will completely replace liquid hydrocarbon fueled vehicles (gasoline and diesel) by 2070. 

In no way are either Ballard or Plug Power ready for a market of that size, but they are starting to test the waters. Plug Power also recently signed on to do a test project with FedEx to use Plug's fuel cell system in electric hybrid package delivery trucks

What's holding back fuel cells?
As promising as fuel cells may seem, you would be surprised to know how difficult it is to secure hydrogen. Even though hydrogen is one of the 10 most abundant elements on this planet, the only way that we have found to successfully produce hydrogen gas is through a process that transforms methane to hydrogen, and the infrastructure for hydrogen is weaker than any other alternative fuel out there.

Just take a look at these three images, all are from the Department of Energy's Alternative Fuels Data center.

These are all of the publicly accessible charging stations for electric vehicles:

And here are the publicly accessible compressed natural gas fueling stations:

Both electric and electric vehicles have struggled mightily to break through as a fueling option for the everyday consumer, and so companies in this space have turned to alternatives. Tesla Motors has been both building its own fueling infrastructure as well as selling at-home charging stations. Natural gas engine supplier Westport Innovations, on the other hand, has focused its efforts on fleet vehicles and long-haul trucking because it will be easier to build out infrastructure for these groups of the transportation market than for the everyday consumer.

Just to get a sense of how far these fuels have to go, a study by Morgan Stanley estimates that it will require 53,000 fueling stations nationwide before we start to see universal adoption of either of these fuels as viable alternatives to gasoline for vehicles. 

As much ground as these options have to cover before they can be seriously be considered competition for gasoline, they are both light years ahead of hydrogen fueling infrastructure.

These are all of the publicly accessible hydrogen fueling stations in the U.S.:

Photo source for all images: US DOE Alternative Fuels Data Center.

And the lack of fueling infrastructure is only half of the issue. There is also a severe lack of hydrogen production capacity in the U.S. Despite the small size of Plug Power, its fuel cell systems already account for more than 2% of the entire nation's consumption of liquid hydrogen. Another fuel cell manufacturer, Fuel Cell Energy (NASDAQ: FCEL  ) , is looking to take that problem on. It hopes to use its current direct fuel cell power generation stations -- a system that produces its own hydrogen using methane -- into systems that produce excess hydrogen that can also be used as hydrogen fueling stations. It helps, but it is a drop in an ocean compared to the total hydrogen and fuelings stations that will be needed to make fuel cells a more viable technology.

What a Fool believes
The potential is there for fuel cells to have a huge impact on the way we produce and use energy, but we are still a long ways off before any significant changes. Plug Power and Ballard have found a way to make fuel cells viable for a couple of niche markets, and those small amount of sales will certainly help keep buoy these businesses from needing to dip into the equity markets again and again like they have over the past several years. For any fuel cell company to become a major player in the energy space, though, it will need to seriously address the lack of hydrogen and hydrogen infrastructure. 

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Read/Post Comments (13) | Recommend This Article (9)

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  • Report this Comment On March 23, 2014, at 1:35 PM, otto156 wrote:

    "only way that we have found to successfully produce hydrogen gas is through a process that transforms methane to hydrogen"

    this is not really true , there are more possibilities to create hydrogen , it`s possible by biomass biogas , and in many chemical processes hydrogen is came out as on unused byproduct , so only in plants around colonge 40000 car could be fuelled a hole live long . It`s just to organise it right .

  • Report this Comment On March 23, 2014, at 2:38 PM, Ericb1220 wrote:

    What the fool believes about lack of Hydrogen Infrastructure would be true if fuel cell were solely hydrogen dependent. The fact is that they are not. Hydrocarbons such as natural gas amongst others, may be used to sustain the reaction needed for the cells to produce electricity. The DOE chart for natural gas infrastructure appears to show a head start for Fuel Cells until Hydrogen conversion becomes more advanced.

    That advancement is already taking place with other Fuel Cell Companies such as FCEL which is more broadly focused on producing localized power plants not fork lifts.

  • Report this Comment On March 23, 2014, at 7:29 PM, jaketen2001 wrote:

    Tyler,

    It wouldn't matter if there were 10,000 h2 'gas' stations all over the country for Plug, Ballard, or FCEL's applications.

    First, you focus on a single FCEL application to generate hydrogen from methane. That is a single, minuscule piece of their business. Their primary business, by far, is creating power in a fuel cell application that only requires natural gas. The natural gas itself is the fuel that is reformed directly inside of FCEL's molten carbonate fuel cell stack. It requires NO hydrogen feedstock. It is as simple as supplying it with natural gas.

    Even if Plug's forklifts were running on gas, you see, they would need to build a gas station at the facility to fuel them. It wouldn't matter if there was a gas station a mile away at the town corner. But instead of building a gas station, you see, they build a hydrogen station. Hydrogen production is an easy, easy proposition for the several large gas industrial gas companies in the US. AirGas, Air Liquide……will sell you all the hydrogen you want.

  • Report this Comment On March 23, 2014, at 7:41 PM, jaketen2001 wrote:

    ....as far as Ballard goes, they have begun offering a methane liquid fueled cell tower back up product. This is an unpressurized liquid akin to gas in it easy ability to be stored and transported. Even where buses are concerned for Ballard, you are talking about a centralized fueling station for multiple buses. You can conceivably run an entire city bus fleet off of 2-3 fueling stations that could handle hundreds or more buses per day.

    Your article only pertain's to Ballard's outlook as far as it relates to the roll out of fuel cell autos. You won't be able to drive x country in a fuel cell car for a long long time to come. But for CA and a few other locations (primarily overseas in Germany and northern Europe) that will develop a network of hydrogen fueling stations, hydrogen fuel cell cars will be a zero emission alternative for local and more regional trips. Fuel cell cars are already obtaining ranges of nearly 400 miles, and 5 minute refueling times.

  • Report this Comment On March 23, 2014, at 11:43 PM, Pagapa wrote:

    Tyler, you state that FCEL is looking to take on the problem of producing hydrogen for fuel cell cars by using its molten carbonate fuel cell to produce hydrogen using methane but that the amount of hydrogen that this will produce is "a drop in the bucket when compared to the total amount of hydrogen that could be needed for fuel cell cars.

    That is a very incomplete picture of what FCEL brings to the challenge of producing hydrogen for fuel cell cars.

    To explain why, I'll start by noting that in California, the only US state with a comprehensive plan for building out the infrastructure for zero emission vehicles (ZEVs), fueling stations that sell hydrogen will be selling two kinds of hydrogen: (1) non-renewable, which I'll discuss momentarily, and (2) renewable, which means (a) produced from an renewable feedstock such as biomethane and (b) produced using an eligible form of alternative energy (e.g., fuel cells that convert a renewable fuel, geothermal, solar, wind...) State law requires at least 33% of the hydrogen sold in the state to be renewable.

    The FCEL process you refer to involves using molten carbonate fuel cells to turn biomethane from sources such as waste water treatment facilities or landfills into renewable hydrogen. In other words, it is not a process that is intended to answer the question "Where will the hydrogen that hydrogen filling stations need come from?" It is intended only to answer the question, "Where with the RENEWABLE hydrogen that hydrogen filling stations need come from?"

    So now let's determine if the amount of renewable hydrogen it will produce is significant. A scientist from the National Fuel Cell Research Center at UCLA Irvine estimates that if this process were used at most waste water treatment facilities in California, it could produce enough renewable hydrogen to fuel 10% of the cars in California. (http://tinyurl.com/ndcvhyr).

    That, sir, equates to more than 2 million cars and based on California's plan for transitioning to ZEVs, it is unlikely that there will be that many fuel cell cars on the road in California before 2035. So this is a solution which, by itself, could ensure that fueling stations in California can not only meet but exceed the state mandate for 33% of the hydrogen sold in the state to be renewable for years to come. Furthermore, since there are waste treatment facilities in every state, it is a solution that can be replicated in all 50 states. Another replicable model for producing similarly large quantities of renewable hydrogen involves using renewable power to produce hydrogen from electrolysis. HYGS is a pioneer in this area

    Now lets turn to California's plan to allow up to 67% of the hydrogen sold in the state to be from non-renewable sources. As noted in the article referenced above, most of it will be produced by converting natural gas to hydrogen. The same process FCEL uses to convert biomethane to hydrogen can be used to convert natural gas to hydrogen so there is a market for the company's products for both renewable and non-renewable hydrogen production.

  • Report this Comment On March 24, 2014, at 9:19 AM, chrisafd wrote:

    Hi what about MTI MicroFuel Cells Inc. They are working on Fuel cell for mobile devices. Cell phone,laptops, tablets. I would love to see this happen. The fuel cell runs on a replacable buthane cell.

  • Report this Comment On March 24, 2014, at 10:12 AM, ICanFool wrote:

    Your map by DOE for Hydrogen fuel stations is wrong. Look at this google map for hydrogen stations. there are more than 10.

    nfrastructure is growing and these will be opened up to public soon.

    https://maps.google.com/maps/ms?msa=0&msid=2153949723845...

  • Report this Comment On March 24, 2014, at 3:47 PM, Wiggletoe wrote:

    Reformers are currently available over-the-counter but refineries produce hydrogen for more gasoline/diesel production from crude and since fuel cells can get 2 - 4 times the mileage then displaced refinery hydrogen production could produce a significant amount of the hydrogen required for fuel cell car. Trucks/trains could just use LNG in their fuel cells. Also reformed ethanol can provide very signicant amounts of hydrogen and cellulosic ethanol is a source of renewable hydrogen.

  • Report this Comment On March 29, 2014, at 2:08 PM, cmalek wrote:

    "only way that we have found to successfully produce hydrogen gas is through a process that transforms methane to hydrogen"

    There's also electrlysis of water. Do your research before attemting to (mis)inform others.

  • Report this Comment On March 29, 2014, at 3:06 PM, lowmaple wrote:

    How much energy does it take to produce hydrogen from water compared to what you get out?

  • Report this Comment On March 29, 2014, at 3:22 PM, jaketen2001 wrote:

    lowmao--

    there is about a 16% loss in conversion from water to h2 when you electrolyze it

  • Report this Comment On March 30, 2014, at 12:26 AM, darvant wrote:

    Excellent, informative, realistic assessment of fuel cell energy. Thanks so much for the info. Hydrogen has great promise, but no gold stars today. Invest accordingly.

  • Report this Comment On March 30, 2014, at 5:56 AM, Ladydidi wrote:

    Have been invested in Ballard for 11 years and in Air Liquide since I started investing and I have kept doing my homework on them all the way through.

    Thanks for the comments which have brought interest to this very poorly informed article.

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