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The Fuel Cell Is Back

Written By Christian DeHaemer

Posted May 30, 2013

Ten or so years ago, I visited the Ballard power plant up in Canada where they made hydrogen fuel cells.

They had a bus there and made a big to-do about offering me a glass of water that dribbled out of the tailpipe. It tasted like water.

Hydrogen-powered fuel cells have been around a long time and have lost much of their gee whiz factor.

In fact, over the past few years, they have become the red-headed stepchild of the alternative energy field — mostly because it costs more in terms of BTUs to produce hydrogen than it does to burn it.

But there are some real benefits to hydrogen fuel cells, and the costs have dropped dramatically in the past decade.

I’ll tell you more about that today.

Fuel Cell

As you know, a fuel cell is simply a device that converts fuel such as hydrogen into electricity.

The most widely used type is the Proton Exchange Membranes (PEM). PEM fuel cells have high power density and weigh a lot less than a traditional battery or an internal combustion engine, which makes them promising for vehicles.

In a PEM cell, hydrogen and oxygen gas are fed to catalytic electrodes at opposite sides of a membrane. This membrane is porous to protons, but not to electrons.

The protons and electrons are separated by the action of a platinum catalyst in the electrodes. The protons can diffuse directly through the membrane, but the electrons have to make their way through an external circuit to reach the other side, and this provides the power for an electric motor.

One nice benefit is that there is zero damaging emissions in this process — just pure water.

Game On, Man

Hydrogen fuel cells have been used in cars, buses, and other transport vehicles. Most interesting, however, is that they are starting to become cost effective.

Procter & Gamble, for example is converting its battery-operated forklift fleets at three plants to models powered with hydrogen fuel cells supplied by Plug Power (NASDAQ: PLUG).

P&G’s Vice President, Stefano Zenezini, is quoted as saying: “Our internal analysis shows that we cannot only achieve the sustainability benefits, but can also achieve an attractive rate of return on our investment at the same time.” That’s right, it now makes fiscal sense.

But we aren’t just talking forklifts here…

A UK automotive start-up called Riversimple is starting a one-year trial of hydrogen fuel cell cars. The test vehicles go 0 to 30 mph in five seconds and have a maximum speed of 50 mph. They get the equivalent of 300 mpg. If the trial is successful, the company may set up manufacturing in the area to produce 5,000 vehicles annually.

Hyundai recently unveiled the ix35 Fuel Cell, the world’s first hydrogen-powered vehicle slated for mass production. It’s a redesigned Tuscon for the European market. Denmark is getting 15 of the fleet vehicles at over $100,000 a pop.

Toyota says it can beat that. They claim they have cut the cost of building fuel-cell vehicles by 90% and could sell their first hydrogen vehicle for $50,000 in 2015.

Toyota thinks they can further reduce the cost of a fuel cell by another 50% in the next few years. Most of the savings comes from reducing the amount of platinum, which is used as a catalyst. Toyota’s goal is to sell the cars at cost.

Beaten, Battered, and Left for Dead

There are two main publicly-traded companies in the fuel cell world: Plug Power, mentioned above, and Ballard Power Systems (NASDAQ: BLDP).

At one point, Plug was a $1,000-plus stock. Shares closed yesterday at $0.33. And back in the early 2000s, Ballard ran from nothing to more than $100 a share before it came back to Earth. Today it trades just above a dollar.

But something is up… These stocks are starting to peculate. Ballard was up more than 10% yesterday after it signed a $1 million deal with its Chinese partner. It has more than doubled since March.

Plug Power’s CFO quit after he questioned whether they had enough cash to last a few more months. Then out of the blue, the company got a strategic investment from Air Liquide of $6 million.

Nobody puts down $6 million for the fun of it… Maybe Liquide saw that Plug’s GenDrive fuel cells used in forklifts increased by 36% in 2012.

Plug’s share price has more than doubled in the last two weeks as well.

So perhaps the fuel cell idea isn’t over. In fact, it might be coming back from the dead, all zombie-like.

Tilting at Wind Mills

What really gets me excited about fuel cells has nothing to do with cars or forklifts…

It has to do with the solution for one of the world’s greatest problems: storing energy.

There has been tremendous growth in the use of wind turbines and solar power to produce energy in the past few years. Wind power now produces about 2.5% of all electricity and has been growing at 25% per annum. Solar has been growing at 30% per annum. And these stocks have been hot. (First Solar (NASDAQ: FSLR) has doubled in the past three months.)

The problem with wind power is that it is intermittent power. The wind doesn’t blow when it is most needed, and it blows a lot when it isn’t needed at all. You have the same problem with solar.

The industry has been searching for some way to store electricity for use at a later time. There have been lots of failed or partial solutions, such as using batteries, pumping water uphill, or using flywheels. None of these has been a game-changer, due to problems such as cost and scalability (remember Beacon Power (OTC: BCONQ)?).

Fuel cells might be the answer.

There are some companies working on building huge 100MW fuel cell storage towers. The idea is to use the off-hours electricity that is normally wasted, zap some H2O, separate the hydrogen, and store it in fuel cells…

This hydrogen can then be transported in natural gas pipelines, which means you don’t lose the 7.5% of electricity that is lost to entropy as it is sent over power lines.

Sounds good to me.

Sign me up,

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Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.

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