Plug Power (PLUG 1.26%) is one of the more popular stocks in the energy sector. The main draw is the company's ambitious plans to become a leader in producing green hydrogen. The emission-free fuel could be a game-changer for the environment and economy, making it a potential major growth driver for Plug Power.

However, given its financial issues, I am concerned about Plug Power's ability to deliver on its immense promise. Because of that, I won't touch its stock. On the other hand, I'm very intrigued by hydrogen's potential. That's why I'm looking for companies that could benefit from that sector's growth. One intriguing emerging hydrogen stock is Brookfield Renewable (BEPC 0.09%) (BEP 0.19%). Here's why I'd buy shares hand over fist.

Problems with the promise

Plug Power has grand ambitions. The company is investing heavily in building a complete hydrogen ecosystem, including production, transportation, storage, and distribution systems. These investments grew its revenue to $1.2 billion last year. Plug expects its revenue to reach $6 billion by 2027 and $20 billion by 2030. That's an astounding 50% compound annual growth rate from last year's level.

However, the company has a potentially big problem that could stall its growth. Near-term challenges in the North American liquid hydrogen market have caused delays and other issues. They've also created liquidity issues at the company. It has gotten to the point where Plug Power issued a warning in November that it might not be able to continue as a going concern. The company said it's "projecting that its existing cash and available for sale and equity securities will not be sufficient to fund its operations through the next twelve months."

Because of that, Plug Power needs to raise additional capital to fund its growth, which will likely be highly dilutive to existing investors. It's also possible that the company might need to restructure its balance sheet. As a result, there's a real risk the stock could go a lot lower (it lost nearly two-thirds of its value in the past year), potentially going all the way down to zero.

A lower-risk way to bet on hydrogen

While Plug Power could go bust by going all in on green hydrogen, Brookfield Renewable is taking a much broader approach to the transition to lower-carbon energy. It's a global leader in renewable energy with a diversified portfolio across hydrogen, wind, solar, and storage. On top of that, it's making smaller investments in emerging sustainable technologies, including hydrogen.

As a leader in renewables, Brookfield will benefit from the growth in green hydrogen because companies like Plug Power will use its emissions-free electricity to power their hydrogen projects. In 2020, Plug Power signed a deal to source 100% renewable energy from Brookfield to power its first green hydrogen production facility. They also established a broader relationship to pursue additional green hydrogen development opportunities. That led to a second deal for a Brookfield-powered facility in 2021.

In addition to working with Plug, Brookfield Renewable teamed up with Enbridge on a green hydrogen plant in Canada. Enbridge will inject the emissions-free fuel produced at the plant into its natural gas distribution network in Canada. That will help reduce emissions by replacing some natural gas with green hydrogen.

Brookfield also agreed to invest up to $1 billion in Avaada Ventures Private Limited through its first Global Transition Fund. That investment will help Avaada fund its green hydrogen and ammonia investments in India.

Unlike Plug Power, Brookfield has the capital to continue investing in green hydrogen projects. The company generates lots of cash flow and has a strong balance sheet. It also routinely sells assets to recycle capital into higher-returning opportunities. That gives it lots of financial flexibility to make new investments. In addition, the company and its parent, Brookfield Asset Management, are raising a second Global Transition Fund. They expect to raise more than $20 billion, significantly more than the first fund ($15 billion). That will give Brookfield more capital to invest in energy transition projects, like green hydrogen.

A higher probability of creating shareholder value

Plug Power has been a terrible investment over the years. Shares have lost 96% of their value from their IPO in 1999. They could fall further if the company can't raise the capital it needs to fund its ambitious growth plan. While that growth plan could fuel a rising stock price if Plug reaches its revenue goals, there's a high risk the company might fail.

On the other hand, Brookfield Renewable is a proven value creator. It has generated a more than 230% total return over the last decade (12.8% annualized). It's in an excellent position to continue creating value for shareholders in the future as it grows its renewable energy business and seeks to capitalize on emerging opportunities like green hydrogen. That's why I wouldn't hesitate to buy more shares of Brookfield Renewable.