What happened 

Shares of fuel cell stocks followed much of the renewable energy industry lower on Thursday as earnings continued to come out and investors wondered just how much upside there is for the industry. 

Shares of Nikola (NKLA 2.84%) fell as much as 6.9% and are down 4.9% at 2:40 p.m. EST. Bloom Energy (BE -5.10%) dropped as much as 9.8% and is now down 7.3%. FuelCell Energy (FCEL -7.60%) was down as much as 16.4% this morning and is now off 13.9% for the day. Why the wave of losses for this high-potential industry? It comes down to competition. 

Bubble with "H2" inside floating in the air.

Image source: Getty Images.

So what

The most important news today is that Norwegian company TECO 2030 announced it aims to build a major fuel cell manufacturing facility with Austrian engineering company AVL. The "ambition" for the factory is to build 1,200 megawatts of fuel cells each year and serve the shipping market and other heavy-duty industries. 

For perspective, Bloom Energy had 45 megawatts of its fuel cells accepted by customers in the fourth quarter, so this would be a sizable addition to the fuel cell market. Bloom Energy could also be a target of the TECO 2030 deal because it has a partnership with Samsung Heavy Industries to develop a hydrogen fuel cell-powered ship.

As a fuel cell semi-truck company, Nikola could be another target for fuel cell manufacturers. As they lower costs and increase scale, the trucking business is a natural market for them. 

As a utility and industrial scale power company, even FuelCell Energy could see TECO 2030 as a new competitor given the sheer scale of the company's ambitions. 

On the political front, Texas Gov. Greg Abbott's claims that renewable energy was responsible for the blackouts in the state have also generated headlines that may not be good for clean energy stocks. Ironically, it's the lack of backup power from a source like hydrogen that has kept the lights out in many areas and that's where companies like Bloom Energy and FuelCell Energy specialize in providing power. 

Now what

This is the third consecutive day that fuel cell stocks have fallen and the biggest story may be that the air has been let out of the balloon holding these speculative stocks up. Investors have bid up fuel cell stocks on hope that the Biden administration will provide subsidies or other policy help for the industry as well as general optimism for the industry's improved competitiveness. But that growth potential isn't going to be lost on competitors, who are ramping up capacity to meet the potential growth in demand. 

It's not shocking to see a pullback in hydrogen stocks right now and I wouldn't change my investment thesis based on a few new competitors entering the market. But it's worth keeping an eye on whether or not the economics of the fuel cell business live up to expectations because in solar energy even high growth couldn't overcome the drop in prices, resulting in solar stocks underperforming the market as the overall solar industry grew. It's possible that trend will happen in fuel cells, which is worth keeping an eye on.