Today investors throw around phrases like "game changer" and "disruptive technology" with reckless abandon. True game changers are an elite group. Think Microsoft. Wal-Mart was a game changer in the retail world, and Starbucks changed the game for coffee drinkers and growers all over the world. No doubt you can think of other good examples.
What about disruptive technology? Disruptive technologies are not necessarily new technologies but are more often applications of technology that disrupt entire markets. The book on fuel cell firms contains chapter after chapter of losses and lackluster performance. But the book is still being written, and advances in fuel cell technology still have the potential for disrupting the energy production market. Which fuel cell companies have survived years of false promise and have the potential to disrupt the markets for energy production today?
The company
Hydrogenics (HYGS) is a company headquartered in Mississauga, Canada. Does this little company have the technology to disrupt energy markets? Hydrogenics describes itself as "a world leader in engineering and building the technologies required to enable the acceleration of a global power shift ." The shift is happening. Without getting too technical, Hydrogenics is pioneering a Power-to-Gas technology that makes renewable energy such as wind more efficient and practical. Hydrogenics calls Power-to-Gas "the world's most innovative way to store and transport energy." The company holds 121 patents and has 24 patent applications pending. New applications of technology disrupt markets.
Emerging story
Hydrogenics acquired Stuart Energy Systems in 2004. Stuart Energy traces its roots back to 1948 when Alexander T. Stuart started the company with his vision for a hydrogen economy. Stuart was a pioneer in applications of hydrogen technology. Combined with Stuart Energy, Hydrogenics has been working on applications of hydrogen technology for over 60 years.
Hydrogenics has been delivering technology for hydrogen filling stations around the world for over ten years. There are currently 45 facilities across the globe using Hydrogenics technology to meet the needs of hydrogen-based transportation. Look for these numbers to grow. The European Union's "Clean hydrogen in European Cities" project is committed to hydrogen-based public transportation in Europe. This past June, Hydrogenics was awarded a contract to utilize proprietary technology in a hydrogen fueling station under construction in Italy.
Data centers and telecommunications stations require backup power. A Federal Communications Commission mandate calls for at least eight hours of power backup at cell sites. Telecommunications stations are replacing banks of batteries and/or diesel generators used for backup power with fuel-cell technology. Using hydrogen fuel cells not only lowers operating costs, but also offers virtually limitless runtime. The cell tower and data center market for backup power is estimated at $2 billion. The company's products cell themselves. (Sorry I couldn't resist.)
The future
Here is where the story really gets interesting. The fuel cell companies have been losing money for decades. Last year, Ballard Power (BLDP -2.23%) lost $18.5 million on revenue of $59.2 million. Fuel Cell Energy (FCEL -5.01%) lost $38.7 million on revenue of $120.6 million. Hydrogenics lost $12.6 million on revenue of $31.8 million. While all three companies are showing healthy increases in revenue this year, Hydrogenics is alone in expecting to turn a profit when revenue reaches $50 million. The company closed out 2012 with $16.8 million in cash and almost no debt. According to CEO Daryl Wilson, "We remain on track to become profitable at around $50 million of revenue run rate and believe that 30% gross margins are clearly achievable as we reach that revenue level."
Just last month, the Governors of eight states announced an initiative to put 3.3 million zero emissions vehicles on the road in the next twelve years. In California Hydrogenics has built 12 fueling stations and services eight active stations.
Last year, Europe's largest gas and integrated energy utility known as E.ON contracted with Hydrogenics to develop a Power-to-Gas facility in Europe. In June of this year the two megawatt energy storage facility went "live." A second facility is currently under construction in Hamburg. Six month 2013 revenue of $22.1 million was up 58% over 2012.
The National Fuel Cell Research Center (NFCRC) is currently evaluating the operation of a Hydrogenics HomeFueler prototype. The HomeFueler could be located at a residence to support the operation of 1-2 hydrogen powered automobiles. An individual hydrogen fueling system could hasten the introduction of fuel cell vehicles by eliminating the need for a "hydrogen highway" with large fueling stations.
The American Society of Civil Engineers reports that the U.S. needs to invest $11 billion a year over the next seven years in electricity infrastructure to meet the needs of business and avoid troublesome blackouts. While this is only an estimate, you get the idea. As global warming becomes impossible to ignore, cleaner sources of energy will be at center stage. Whether it is the hydrogen highway or the path to renewable energy sources, Hydrogenics has been on this road since 1948. This could be the start of an exciting ride for the little company from Mississauga.
