2020 has been a booming year for hydrogen stocks. Shares of Bloom Energy (BE +9.04%), Ballard Power Systems (BLDP +0.47%), and FuelCell Energy (FCEL +0.89%) have all gained more than 110% this year, while Plug Power (PLUG +0.82%) is up an incredible 648%. While that's good news for investors, the cold reality is that over most of their history, hydrogen stocks have been terrible investments. Since this year's surge is almost entirely due to investors willing to pay more for the companies -- not to any meaningful improvement in their results this year -- things could end badly if these companies don't deliver on the promise of hydrogen as a zero-carbon fuel.
One analyst thinks that hydrogen's prospects might be turning a corner. On the Nov. 2 edition of "The Wrap" on Motley Fool Live, host Jason Hall pointed out that NextEra Energy (NEE +0.68%) has recently given the green light to a clean hydrogen project powered by the falling costs of wind and solar. The company plans to produce green hydrogen at competitive prices that will make it a formidable challenge to hydrocarbons. Investors shouldn't be quick to dismiss this move.
Transcript:
Jason Hall: NextEra Energy is a utility. It's not something...it (utilities) doesn't really get a lot of play in The Motley Fool premium services. But this is a special utility that's also just been an enormous winning growth stock. Part of that's geographically because where they're located, Florida Power and Light, were their biggest subsidiaries. Florida is a really serious growth market, growing population, growing industry.
But here's another big part of the secret sauce that's made NextEra Energy so successful as an investment and as a business to grow, is because it has a really forward-thinking management and executive team that has seen the opportunity to invest in renewables, not just for use within its own business, but also from subsidiaries that are wholesalers that sell power to other utility customers. I think it's the largest solar producing utility in the world, and they're taking a look at something else.
They're taking a look at hydrogen, clean hydrogen more specifically. Because the dirty little secret for hydrogen, is that most of it comes as a byproduct of producing hydrocarbons. So you can produce it out of refineries. That's not really good if you're looking for a clean fuel. NextEra Energy, in their most recent quarter, they announced that they are starting to develop some green hydrogen. They have a $65 million pilot project that's going to utilize solar energy to generate hydrogen and the idea is they're going to use that hydrogen to replace some of the natural gas that's being consumed as a feedstock at one of its electric power plants. They're planning on starting that up in 2023.
That's a big deal when you have a major utility. They're starting to look at our way to monetize hydrogen, coming from renewable energy to offset natural gas to produce electricity.
