Show Me the Money Hydrogen

You can’t help notice Tesla’s stock taking off like a rocket ship during the COVID era we’re living through. What’s to make of it? Is it due to perceived world domination of Tesla (NASDAQ: TSLA) EVs or the fact that the markets are awash with the Federal Reserve brrrrrr machine … or Robinhood traders putting their stimulus checks to work? Are there other transformative energy companies that actually might have meaningful valuations?

Hype Cycle

Meet hydrogen and meet the emerging technologies hype cycle. Hydrogen is nothing new, but we can glean some great insights from Gartner’s hype cycle chart. We’ve seen hydrogen companies hit their peak of inflated expectations during the dotcom days … the question is what are we seeing today?

Hype cycle for emerging technologies

Hydrogen companies like Plug Power (NASDAQ: PLUG) hit almost a $1,200 share price back in 2000. Then again, any company that had a cool sounding name and mission statement realized massive share appreciation and then had their bubbles popped in dramatic fashion. After being a cellar dweller for quite some time, many investors are taking notice of the traction being built in the hydrogen space. There’s something tangible here this time.

Real Hydrogen Future

With the growth in adoption of environmental policies by governments and corporations and the rise in ESG, energy choices are changing significantly. As decarbonization is being focused on, the growth in solar and wind generation has taken off. Many utilities with increasing renewable energy capacity and declining reliance on fossil generation are looking at battery storage to fill the gap. Investment in battery storage has been spurred by the vehicle industry leading the charge and we’re witnessing similar declines in battery costs that we saw in solar over the years and which will continue to drop further in the future.

Declining costs for battery storage
NREL Cost Projections for Utility-Scale Battery Storage

The opportunity for hydrogen is where battery storage falls short. Hydrogen storage and fuel cells allow the decoupling of energy vs power, enabling longer duration storage and optimizing storage for specific use-cases. Hydrogen storage also has higher energy density than Li-ion batteries, an advantage for heavy duty vehicles. Faster refueling is also a major consideration for high-duty cycle applications.

Plug Power

While Plug Power has cut its teeth in indoor forklift applications, recent acquisitions of Giner ELX and United Hydrogen, make it now a leading vertically integrated hydrogen solutions provider from fuel to utilization. This paves the way to seize opportunities in the utility industry that needs help navigating renewables integration and vehicle electrification.

The Giner ELX acquisition is key as it now provides them with a PEM electrolyzer solution that can be coupled directly to solar/wind for green hydrogen production. The electrolyzer can be used as a controllable load to smooth and perhaps at some point baseload solar/wind resources. The hydrogen produced can be stored and then used for fuel cell electric vehicles (FCEVs) or put back on the grid via stationary fuel cells or combustion. This flexibility is important in addressing a hurdle that utilities may have not anticipated with greater battery EV adoption and higher throughput charging – stranded asset cost risk. Distribution upgrades needed to handle high power, low utilization factor requirements, don’t mesh well in the utility industry that is capital intensive with assets having long depreciable lives and facing stagnant load growth.

Now hear this … utilities are the missing link in jump starting the hydrogen economy. Plug Power is geared to take advantage of this transformational opportunity. PLUG had a pretty good year … not as good as TSLA, but where is real long-term growth going to be?

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