One year ago, Ballard Power Systems (TSX, NYSE:BLDP) was selling at around $6 per share. In mid-July, Ballard stock hit $28, before settling down to around $19 per share.
Nothing in Ballard’s financials or news releases fully explains why the Burnaby hydrogen fuel cell maker would have seen its stock roughly quadruple in one year, although it has had a number of follow-on orders this year for fuel cells it makes for buses, which suggests it is gaining a toehold in that space.
But Ballard isn’t the only fuel cell maker to experience a stock pop.
“Wall Street discovered hydrogen this year,” analyst Bill Alpert wryly noted in Barron’s in July and then declared the sector was in a bubble.
Plug Power Inc. (Nasdaq:PLUG) has also seen its stock roughly quadruple since the beginning of this year. Ben Gallagher, emerging-technology analyst with Wood Mackenzie, points to the stock debut this year of Nikola Corp. (Nasdaq:NKLA) as emblematic. Nikola plans to become a major manufacturer of both electric and fuel cell heavy duty vehicles.
“Even though they hadn’t made a single hydrogen fuel cell truck, their stock price went up to almost US$70 per share right after the IPO,” Gallagher said. “There has been a lot of activity around hydrogen stocks in the past few months.”
The trend may be partly attributed to investors fleeing oil and gas. But really, it’s more about hydrogen.
“Hydrogen generally is receiving a lot of attention globally, and that’s being translated into this anticipation that these companies could be the next Tesla,” Gallagher said. “No one wants to miss out on opportunity.”
“I think fuel cells are getting a lift because hydrogen is getting a lift,” added Matthew Klippenstein, an engineer and clean-energy consultant.
“Hydrogen is getting a lift because maybe you can get 60% or 80% of the win to net zero with mainly batteries and electricity, but there is zero chance on God’s green earth that you can get to net zero without a gobsmacking amount of hydrogen.
“Governments are actually taking climate change seriously, which is why they’re taking hydrogen seriously, which is why fuel cell companies are getting more interest,” Klippenstein said.
In June, Valuates Reports put the current global fuel cell market at US$5 billion and projected it to grow to US$40 billion by 2026. Much of that market growth will be driven by various government decarbonisation policies, with hydrogen fuel cells seen as critical for decarbonizing certain sectors that hard to electrify.
“The European Commission has published a hydrogen strategy that’s quite aggressive, as has Spain, Germany, the Netherlands and Portugal,” Gallagher said.
“There are around 50 targets, mandates and policy incentives in place today that [directly] support hydrogen, with the majority focused on transport,” the International Energy Agency reported.
The marine sector is one area that Ballard is flirting with. Ballard last week launched a new product – the FCwave – a fuel cell designed for certain marine applications, like ferries.
But analysts expect it will take some time before there is any significant switch to fuel cells in the marine and rail sectors. The most immediate market is buses, followed by heavy duty trucks.
The market for conventional bus engines is $14 billion a year, said Guy McAree, director of corporate communications for Ballard. Ballard expects the lion’s share of its revenue to come from the bus market over the next three or four years.
“But then what’s going to happen, we think, is the commercial truck market is really going to become an important part of the revenue picture in the next three years or so, and the commercial truck market is even much bigger than the bus market,” McAree said.
That market is about $120 billion per year.
“As you get into the second part of this decade – 2026, 2027 – what we see happening then is that you can start to add revenue from the marine market and also from the train and tram markets.”
British Columbians should not expect to see hydrogen fuel cell buses on the road any time soon; however, despite the fact one of the biggest fuel cell makers in the world is based here.
They might expect to see some heavy duty long-haul trucks operating on fuel cells between Calgary and Alberta, however, depending on the outcome of a new demonstration project. The Alberta Transport Association is working with Ballard, Freightliner-Daimler, and Vancouver’s Zen Clean Energy Solutions to test fuel cells in long-haul trucks in the Calgary-Edmonton corridor.
While California transit authorities are embracing hydrogen fuel cells for buses, B.C. transit authorities aren’t – they are going with electric buses. Part of that is cost: A hydrogen-powered bus is simply more expensive than an electric bus.
But it may also have something to do with B.C.’s grid power being nearly 100% renewable (mostly from hydro power), whereas about 38% of California’s power is produced with natural gas (35%) and coal (3%). So a bus powered by electricity in B.C. would meet zero-emission standards, while a similar bus in California might not be considered quite as green.
Also, California has more interurban buses.
“The hydrogen buses excel when you have longer ranges,” Klippenstein said. “Vancouver, as a dense city with shorter routes, might be a bit more amendable on the battery side.”
While fuel cells have a lot of advantages as a zero-emission form of propulsion, they can’t currently compete, cost-wise, with diesel and gasoline engines. But governments around the world are adopting policies aimed either at forcing vehicle makers and fleet operators to lower their vehicles’ emissions, or phase out the internal combustion engine altogether.
In July, for example, 15 U.S. states signed a memorandum of understanding to require 30% of new trucks to be zero emission by 2030 – a move aimed at phasing out diesel engines.
While rechargeable batteries can be expected to dominate the passenger car space, as well as some other sectors of transportation, hydrogen fuel cells could conceivably capture a big chunk of the heavy duty vehicle market, and even rail – basically anything with heavy payloads.
The heavier the load, and the longer the distance a vehicle has to travel, the more challenging it becomes to power a vehicle with battery power, since the batteries would end up making up so much of the vehicle’s weight, although Tesla (Nasdaq:TSLA) shareholders can be counted on to argue that point.
Hydrogen vehicles are also quicker to refuel and have longer ranges than electric vehicles. One barrier to adoption is the need for fuelling infrastructure and the availability and price of hydrogen, something that may not be a major obstacle truck and bus fleet operators, since they usually have their own fuelling facilities.
And the price of hydrogen may come down in the coming years, as various countries move on plans to develop hydrogen production industries.
Last week, the B.C. government announced $10 million towards the installation of 10 new hydrogen fuelling stations in B.C. and plans to release its new hydrogen strategy later this fall.
(Editor’s note: The online version of this story contains updates not covered in the original print version.)