How Close is the Fuel Cell Dream?

There’s good news and there’s bad news about fuel cell technology. The good news is that it’s cheaper and more widely used than ever before. The bad news is that we’re still very far from the widespread adoption of fuel cell technology in consumer vehicles. Let’s take a look at the successes and the challenges faced by the industry.

Current Applications

Fuel cells are out there and working in industrial and commercial applications every day. They are routinely employed in providing continuous power to remote locations with scientific and military installations. They are found in ships, buses, spacecraft, and forklifts. They’re being installed in conjunction with solar power and wind turbine sites to smooth the bumps in uneven energy production schedules. There are even hydrocarbon fuels that can be used with certain types of fuel cells to produce clean energy. However, even with this all said, there is still a clear lack of consumer applications for fuel cells.

Still a Dream: Fuel Cell Vehicles

To be fair, major car manufacturers have already produced and sold hydrogen fuel cell vehicles. The Hyundai Tucson is one example, and it can be powered up at a growing network of stations around Los Angeles and San Francisco. Honda and Toyota have been in the game with their own offerings as well. But these, as well as the Tuscon, are barely more than proof of concept. The challenges facing the technology mean that the only viable alternative will be pure Electric Vehicles like the Nissan Leaf and plug-in hybrids like the Bolt for the foreseeable future. What exactly are those challenges?

The first, and most important from the environmental perspective, is that hydrogen fuel production just isn’t green yet. There are two major methods of production. The more environmentally friendly method is water electrolysis, which requires significant sources of heat to be conducted. The less environmentally friendly method is extraction from natural gas. This method results in about 80% efficiency, though the process does release CO2.

The second challenge is the price of platinum. Current fuel cell designs require a significant amount of the precious metal. Gold is also used as a catalyst in some designs. We believe that the inclusion of these metals provides a significant hurdle to the economic viability of fuel cell solutions on a consumer scale.

Investment Considerations

The Chimps see several important factors impacting the future success or failure of fuel cell technology:

  1. Current fuel cell designs use platinum (and to a lesser degree gold) as a catalyst. Although other designs with low-cost metals as replacements are in the works, until these are proven viable, platinum prices will be a significant factor in the cost of fuel cells. This means you should also keep your eye on South Africa, the world’s largest platinum producer.
  2. The fracking boom in the US is a positive for hydrogen fuel cells, but current methods of extraction are still too dirty to be ramped up to the large scale. Producers will need to implement methods to recapture CO2 emissions first.
  3. Fuel cell charging stations are extremely costly to build and operate. Storage and delivery of hydrogen fuel is complicated. Even with the growing network of stations available in California, it may take decades for the infrastructure to allow the mobility that even pure Electric Vehicles offer today.

With that said, there are a number of companies that are in the commercial space for fuel cells that you may want to keep your eye on for the very long term. Ballard Power [stock s=”bldp”] produces a wide variety of fuel cells for small and large scale commercial and industrial operations, while Plug Power [stock s=”plug”]designs systems that fit into warehouse and industrial vehicles such as forklifts. Hydrogenics [stock s=”hygs”] sells electrolyzation systems (the “clean” solution) for hydrogen production, and has installed their systems in the growing network of hydrogen fueling stations.

Caveat

Looking at the business track record and price history of the aforementioned companies, you can probably already tell that there is massive risk in fuel cell plays. The Chimps do not specifically recommend any current investment in the technology. The future of fuel cell technology is far from settled, and unforeseen solutions may at some point make its further development unnecessary. We suggest keeping your eye on the aforementioned factors, as well as the development of Tesla and other EV car efforts. Their success or failure will also have a significant impact on the future viability of fuel cell solutions.