The automotive industry is going green, and it appears over the next few decades the tried and true internal combustion engine will become a thing of the past.
Right now, electric vehicles are the primary replacement. But there are other options. Hyundai Motor Group (HYMTF 5.20%) this week said it plans to offer hydrogen fuel cell versions of all of its commercial vehicles as soon as 2028, and predicted fuel cell vehicles could hit cost parity with battery electric vehicles by the end of the decade.
Hyundai's claim was met with a good bit of skepticism, and to be sure fuel cells have a long way to go if they are to reach the company's ambitious 2030 goal. But if it is right, there are a lot of companies that would benefit. Here's why three Fool.com contributors will be paying close attention to General Motors (GM 0.87%), Bloom Energy (BE -0.90%), and Plug Power (PLUG 1.62%) as fuel cell tech continues to develop.
Invest in fuel cells and a whole lot more
Lou Whiteman (General Motors): Hydrogen fuel cells in theory sound great. The idea of powering vehicles with clean water as the only emissions would go a long way to fix the greenhouse gas problems we face. The issue is producing the hydrogen is difficult, and storing it safely is no easy task.
General Motors has been working on fuel cells for more than 50 years, giving it the foundation and technical knowhow to quickly adapt if fuel cells go mainstream as soon as Hyundai hopes. It also has a range of battery and other green powertrains to fall back on in the meantime, and is spending more than $35 billion on various forms of clean tech through 2025 to build on the research it has done.
I'm not convinced hydrogen fuel cells will ever be the big winner some hope they will be when it comes to passenger vehicles. What makes GM the best fuel cell stock is the company's work to expand the potential total addressable market for its tech as widely as possible. The company has a deal with Navistar to supply its Hydrotec fuel cell power cubes for use in commercial trucks. It has also partnered with Westinghouse Air Brake Technologies to use its battery and fuel cell technologies on a new generation of freight locomotives. It even is involved in a demonstration project with privately held Liebherr Aerospace to explore the use of hydrogen to power aircraft.
If the transportation industry's green revolution plays out how I think it will, with batteries replacing gasoline vehicles and hydrogen replacing larger diesel-powered vehicles, General Motors has the potential to win in both areas.
Investing in new technologies is exciting, and can be lucrative. But it is important to remember that a lot of great ideas never materialize as bulls hope. With General Motors you get a solid automotive business that is investing for the future, and the chance to benefit if fuel cells emerge as an important part of the answer.
A commercial and industrial partner
Rich Duprey (Bloom Energy): Hydrogen fuel cell powered vehicles get most of the attention, most notably Hyundai's recent announcement it plans to introduce commercial models by 2028, but Bloom Energy is taking a different route.
It makes stationary fuel cells for commercial and industrial users to generate electricity, and counts among its customer base companies including Adobe, AT&T, Google, Intel , and Walmart.
Like all fuel cell technology, Bloom's units create no greenhouse gases, but its power plants rely upon solid oxide fuel cells instead of the proton exchange membrane, molten carbonate, or phosphoric acid fuel cells used in other applications.
The U.S. is Bloom's biggest market, but South Korea is a world leader in utility-scale deployment of fuel cells such as those Bloom makes. In July it reported it will develop a solid-oxide fuel cell combined heat and power installation in South Korea in partnership with SK Ecoplant. The first-of-its-kind 4.2 megawatt plant will produce 35,000 megawatt-hours per year.
Because global governments are intent on implementing policies to reduce greenhouse gases, hydrogen fuel cells have an especially promising future. President Joe Biden's multi-trillion-dollar infrastructure proposal has the potential to pour hundreds of billions of dollars into the industry, and Bloom Energy, because of its focus on reducing or eliminating commercial and industrial carbon emissions, could benefit greatly.
Bloom's stock, though, has ridden the waves of investor interest and ennui surrounding hydrogen's promise. Shares are trading at half the all-time high they hit in February even though Wall Street estimates Bloom will grow earnings at a 25% compounded rate annually for the next five years.
Bloom Energy should be one name in the space that cashes in for investors.
Cash is king -- and Plug Power is king of fuel cells
Rich Smith (Plug Power): Let me be upfront about this: Personally, I do not plan on buying any fuel cell stocks in the near future -- my reason being that I prefer to invest in companies that are profitable, and right now, there aren't any fuel cell stocks that fit that bill.
That being said, if I were going to invest in a fuel cell stock, Plug Power would be at the top of my list.
Why? Cash. That's why.
Plug Power stock went on a tear last year, if you recall, eventually rising from less than $4 a share in mid-January 2020 to top out north of $66 a share in mid-January 2021. Now, you can argue that this rise in stock price wasn't justified. (Indeed, many investors would agree with you. Plug Power today trades for less than half its January 2021 price.) What you cannot deny is that Plug Power made hay while the sun shone. From August 2020 through January, Plug completed three separate stock offerings raising a total of $2.98 billion in cash.
As a direct result of these actions, Plug Power now sits atop a pile of cash $4.5 billion deep (and its debt load is only $705 million). Compare that to Ballard Power's $1.2 billion in cash (with negligible debt), Bloom Energy's $204 million (with a $1.1 billion debt load), and FuelCell Energy's mere $139 million in cash (offset by $92 million in debt), and it's quite clear -- Plug Power is far and away the fuel cell company with the most financial firepower at its disposal.
It's also quite clear that, if success in the fuel cell industry can be bought, Plug Power is the company most likely to be able to afford the purchase price. For that matter, even if Plug ultimately fails to dominate in hydrogen fuel cells, at its current cash burn rate of $368 million per year, it will take the company 10 years to run out of cash.
In the long-term race to make hydrogen fuel cell power a global reality, my advice is to bet on the company with the most staying power. Right now, there's no doubt that Plug Power is that company.