Will Plug Power Be King of the Hydrogen Pump?

Gasoline is a driving force for the economy, largely because it and its variants power most of the vehicles on the road. It's one of the reasons why a technology like Tesla's (NASDAQ: TSLA  ) all-electric vehicles face such an uphill climb. But by focusing on the industrial sector before the retail arena, Plug Power  (NASDAQ: PLUG  )  is solidifying its position as a hydrogen supply leader well before trying to push hydrogen into the mass market.

The real fight
Tesla's Elon Musk recently announced that his company was opening up its patent treasure trove to competitors. Why share proprietary technology? Because, in Musk's own words, "Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world's factories every day." In fact, "far less than 1%" of the autos being built by the major car makers are electric or powered by other noncarbon technology.

That's because of all of the infrastructure in place to support our carbon-based world, and specifically gasoline-powered vehicles. There's little incentive for companies or customers to start again from scratch. When you look at it this way, Elon Musk's efforts at Tesla take on a truly Herculean light.

Source: ReubenGBrewer, via Wikimedia Commons

That said, Musk is a big thinker and likes a challenge. But that doesn't change the fact that he started a car company before there was a reliable way to fuel the car on the road. That's why Tesla built a coast-to-coast quick-charge network (around 100 "stations" right now) at its own expense. By the end of next year, it hopes to have "98% of the United States" covered. These recharge "stations" are analogous to a gas station and give a half charge in a still relatively slow 20 minutes. It's building similar networks in Europe (56 "stations") and Asia (13).

To be fair, Tesla has created a well-known and respected brand, which has immense financial value. But in many ways it put the cart before the horse and is still fighting an uphill battle to change the world's gasoline focused mindset. It looks increasingly likely that Tesla will succeed in its efforts to push all-electric cars into the mainstream, but the process of attacking the consumer market has required Tesla to build out the supporting, and costly, infrastructure on a large scale.

A different approach
That's where hydrogen player Plug Power has taken a different approach. Hydrogen-powered automobiles are often cited as a clean alternative to gasoline-powered cars, and Plug Power CEO Andrew Marsh recently told Bloomberg that he sees this as a long-term opportunity. But it isn't where the company has focused.

Instead, Plug Power has keyed in on the $5 billion U.S. market for forklifts. That's a $40 billion worldwide market. And it pales in comparison to the U.S. and global auto markets. But where Tesla is essentially trying to sell a niche vehicle to a general public still largely pleased with gasoline, Plug Power is selling a niche vehicle to industries willing to spend money for a better product.

Source: Patsy Lynch, via Wikimedia Commons

And as hydrogen technology has improved, Plug Power's sales proposition has gotten pretty compelling. For example, Plug Power's Marsh believes Wal-Mart (NYSE: WMT  ) will see a payback time of about a year for its recent purchase of Plug Power gear. Along the way the notoriously cheap retailer will improve its green footprint and get more reliable forklifts. (Batteries can be destroyed if overcharged by careless employees and cause unpacking delays if they are left uncharged.)

Like Tesla, Plug Power is starting to build out a hydrogen fueling network to support its customers. Only unlike Tesla, Plug Power has a smaller and more focused customer base and fleet around which to construct a fueling network. Thus, the network doesn't have to span the entire world, it can start small and build naturally, one customer at a time. If hydrogen autos come to fruition, Plug Power will be ahead of the curve. If hydrogen never takes off in passenger cars, as Elon Musk suggests it won't, Plug Power still has a nice, and expanding, niche and the infrastructure to serve it.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Read/Post Comments (6) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 04, 2014, at 10:45 AM, ICanFool wrote:

    you made Elon, the God Almighty!

    You also said it right..

    If hydrogen autos come to fruition, Plug Power will be ahead of the curve. Japan Inc and Toyota, and Korea Inc with Huyndai will make it happen.

    In 1977, Honda introduced fuel efficient cars when the Giant Detroit Auto industry ignored tthem. Detroit is dead. The same thing is gonna happen. Just watch.

    Japan Inc, along with India Inc, will forge ahead with HFC fuel vehicle to the dismay of Elon Musk.

    If hydrogen never takes off in passenger cars, as Elon Musk suggests it won't ( who made him the God of Auto Industry!?), Plug Power still has a nice, and expanding, niche and the infrastructure to serve it.

    Fools Beware... Elon has not shown us the LiIon battery that will go for 400 miles without the burden of heavy weight and charge in 10 minutes ... but he is building a factory ? Give me a break. Verification and validation testing of his technology is key before building a billion dollar factory. If the states are willing to let him suck up all that tax payer money, show me another Fool... with a Brooklyn bridge to sell..

  • Report this Comment On September 04, 2014, at 11:22 AM, dallas75216 wrote:

    Even if electric cars are limited to the daily commute, what percent of that is that is total usage?

    For example in the NYC area, I could travel to Manhattan from New Jersey, travel to the New Jersey Shore or commute to my job with current electric technology.

    What percent of the total auto population really needs a car that can go 400 miles on a tankful of fuel.

    Gasoline could be for the "coal rollers" , those who live in rural areas, and unreconstructed brown technology people.

    Musk needs to populate urban areas.

    I now live in Dallas and my commute is 30 miles day. If electric costs are 3.5 cents per mile my daily cost is at !.05

    What are my repair costs for electric motors?

    No transmission, no gears, no oil changes, no radiator leaks no broken hoses

    How many moving parts in an electric motor v an internal combustion engine.?

    people need to put the pencil to the paper and look at overall costs per mile.

    Musk should focus on urban areas

    Austin Texas has free electric charge stations.

    Its a lot easier complying with EPA regs. If you could reduce carbon usage

  • Report this Comment On September 04, 2014, at 1:06 PM, ICanFool wrote:

    For daily commuters like Dallas, a hybrid or electric car is ideal. But those who travel long distance wvwey month, especially senior citizens who love to travel without the hazzle of Airline "packed Herd Shipping " mentality , long range cars with hFc is ideal. It is just a matter of time, there will will be one of each at each home.. For countries like inida, where gasoline price is more than 5$ a gallon and where there is abundance of solar energy, HFC will become practical.

  • Report this Comment On September 05, 2014, at 9:47 AM, holidayday wrote:

    What is not said is the process to create the Hydrogen. You can burn natural gas to get the hydrogen out of the hydrocarbons (the cheapest way to do it today), or you can use electrolysis to extract Hydrogen from water. Each of these uses a lot more energy than it gets out.

    It's more efficient to just use the energy (electricity) to charge batteries than to create Hydrogen and then move Hydrogen to filling stations to power cars. Until the cost of Hydrogen comes way down, and isn't as dirty as a regular electric unit, then it just makes a lot more sense to charge batteries with the energy than to take 2 more steps (losing energy at each step) to put Hydrogen into cars.

  • Report this Comment On September 05, 2014, at 5:13 PM, First1 wrote:

    Why is your article about Plug Power so heavy on Tesla? They're not even competing. Compare Plug Power with electric fork lift manufacturers or traditional fork lifts, but Tesla?! Are you guys so kool-aid drunk that you can't post one hydrogen article without the T-word?

    And @Holidayday, how efficient is the generation of electricity? Coal plants are at 30% efficiency and lower, comparing that with natural gas reformed hydrogen, hydrogen wins out. And for renewable generation, guess what? You can store electricity as hydrogen quite well, but electricity storage, especially in large scale, is very costly. So there are many facets one needs to consider before bashing on tech over another.

  • Report this Comment On September 05, 2014, at 7:18 PM, BenjaminSamuel wrote:

    I thought this was a hydrogen / fuel cell / plug power article.

    Come to find out, (as Elon suggested) it's about Tesla.

    Obviously the stock market and the real world have a conflict of interest here.

    In the real world, we need reliable, universal, sustainable infrastructure.

    In the stock market, they love commodities (batteries) and 'game changers' that get ridiculously over-valued. Tesla is holding back deliveries practically on purpose to build hype over a back-log that has been artificially created.

    I'm sure Elon would get along with Bernie Madoff VERY well. They know hype tactics like none other.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3081234, ~/Articles/ArticleHandler.aspx, 8/31/2015 12:50:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Reuben Brewer

Reuben Gregg Brewer believes dividends are a window into a company's soul. He tries to invest in good souls.

Today's Market

updated 2 days ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
PLUG $1.76 Up +0.01 +0.57%
Plug Power, Inc. CAPS Rating: *
TSLA $248.48 Up +5.49 +2.26%
Tesla Motors CAPS Rating: **
WMT $64.94 Down -1.14 -1.73%
Wal-Mart Stores CAPS Rating: ***