What happened
Shares of hydrogen fuel-cell pioneer Plug Power (PLUG 0.87%) sold off in early Tuesday trading, falling 3.4% through 10:05 a.m. ET on news that a tiny rival may have a big advantage over the company.
As Reuters reported this morning, Canadian penny-stock company Loop Energy -- which, according to S&P Global Market Intelligence, has been in business nearly as long as Plug Power -- now has a fuel-cell technology that delivers "better fuel economy than a diesel engine" at prices better than what Plug Power can beat.
NASDAQ: PLUG
Key Data Points
So what
Here's how the math works: According to Reuters, Loop Energy has a new fuel-cell system that can drive a tractor-trailer truck 109 miles on $100 worth of hydrogen gas, produced by renewable power (known in the industry as "green hydrogen"), as long as that green hydrogen is priced at about $10 per kilogram. At current prices for diesel, a diesel-powered truck can drive a similar 111 miles.
That's great news for Loop, but what does it mean for Plug?
In a recent statement, Plug Power CEO Andy Marsh told CNBC that his company's products will be "competitive with diesel fuel" only when the price of green hydrogen falls to "$6 or $7" a kilo.
Now what
The logical result: Loop Energy's fuel cells appear to be roughly 50% more efficient than Plug Power's fuel cells (at least when Loop tells it). So how worried should Plug Power investors be about this?
If all Plug did was produce fuel-cell systems, and Loop did that job better than Plug does -- and if it was beyond debate that Loop does do it better than Plug -- then I'd say investors would be right to worry today. But in recent years, Plug has placed even bigger bets on producing green hydrogen to supply both its own and other companies' fuel cells than on the production of fuel cells, period.
Viewed from that perspective, it may not even matter if Loop's fuel cells are better than Plug's, as long as they run on green hydrogen that Plug produces. Viewed from that perspective, I don't believe the Reuters report on Loop changes the investment thesis on Plug at all.
