- Methanol-powered systems might become an attractive proposition for the company due to the better profile than Hydrogen.
- The severe weather conditions might force the telecom companies to move to alternate backup systems, which will result in increased demand for Ballard's systems.
- The stock price will remain volatile until the company is able to show consistent growth in revenues and customers.
The stock price of Ballard Power Systems (NASDAQ:BLDP) has been extremely volatile over the past few months - it was trading close to $7 per share in March, but after a steep fall over the last two months, the stock is currently trading close to $3. Volatility is normal in the stock price of companies working on revolutionary technologies - the prices usually normalize when the company is able to demonstrate continued growth in revenues. As we mentioned in the previous article, at present, the volatility in the revenues of the company is high, which will continue to cause the stock price to be volatile. However, the prospects of the technology look good, which is a positive sign for Ballard Power Systems. The company has an order backlog of Methanol power systems, and the potential of Methanol might make it an attractive proposition in the future.
Methanol vs. Hydrogen Fuel Cells
Hydrogen is considered the most efficient fuel there is in the market. Unfortunately, its expensive preparation method has always kept it from being popular. The problem might have been solved by the use of steam reforming, but there are more things to worry about as well. This is because Hydrogen is a hazardously inflammable gas and has to be transported with great care. In addition, it is a gas which is pressurized to convert into liquid for the use of fueling. Therefore, it has to be kept under suitable temperature in order to maintain its state. These are a few problems which still make Hydrogen transportation expensive and its availability less likely.
On the other hand, Methanol is a liquid which stays operative for fuel cells under temperatures between 50 Celsius and 120 Celsius. In fact, Hydrogen is extracted through steam reforming with the help of Methanol. Only the conversion is done through a separate process, after which, Hydrogen can be used in the fuel cells. Methanol fuel cells have built-in mechanism to convert the liquid into Hydrogen inside the cell and use it to produce electricity. The efficiency of the fuel cell is compromised in this process, and the output energy is lesser than the fuel cells which use pure Hydrogen. However, the advantages outweigh this lack of efficiency. Its lesser transportation cost and easy handling and storage makes it useful fuel for backup generators.
ElectraGen, Ballard Power Systems' product for backup power system, runs on a mixture of Methanol and water, branded as HydroPlus. This mixture is said to minimize the shortcomings of Methanol usage instead of Hydrogen. However, unlike Hydrogen, it is easily available in the market, and transportation is not an issue. ElectraGen can provide 100 hours of power generation with a 225 liter fuel tank. IdaTech has reported that its ElectraGen system can run up to 40 hours at 5 kW power with 59 gallons of HydroPlus. 24 Standard Hydrogen cylinders would be needed to get the same output with Hydrogen. The energy density of Methanol is greater than highly compressed Hydrogen, which makes it one of the top three on the highest-density list i.e. right below Uranium and Thorium, which power nuclear reactors.
Backup Power Systems
Ballard Power Systems recently disclosed its order of 20 backup power systems through AECi, the company's channel partner in Philippines. This order fulfills the backup power requirement of a major network company in the country. These backup power systems are called ElectraGen systems, 12 of which have already been deployed in the region. The company received the order in the third quarter of 2013, but due to severe weather conditions in Philippines, the operations were halted. As the company completes the order, this backlog will contribute to growth in the company's revenues.
The extreme weather conditions in Philippines has created an opportunity for the company - due to strong winds, power grids are either severely damaged or completed detached in some areas, which will cause disruption in the supply of electricity. Telecom companies in south-east Asia are increasingly considering to go for this newer alternative for their network backup generators, as the transportation is easy and the cost is almost the same as traditional generators, but has higher efficiency.
Plug Power (NASDAQ:PLUG), with its acquisition of ReliOn, is also looking to develop a Methanol-based fuel cell. It is collaborating with Hy9 to have a Methanol fuel processor developed for it. Although, with ReliOn, Plug Power would come as a competitor to Ballard Power Systems, but this shows the true potential of the market. However, Ballard Power Systems is catering to a different market at the moment, and the willingness of the telecom companies to move to alternate backup systems might result in increased orders for the company.
Companies working on disruptive technologies always cause a lot of debate, and investors in these companies should be ready for large swings in stock price. The risk in companies like Ballard Power Systems and Plug Power is always high - however, if the technology gets traction; these stocks can prove to be winners and bring substantial gains for the investors. However, for the time being, the volatility in the stock price will remain high.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. IAEResearch is not a registered investment advisor or broker/dealer. This article was written by an analyst at IAEResearch and represents his/her personal opinion about the companies mentioned in the article. The article is for informational purposes only and it should not be taken as an investment advice. Investors are encouraged to conduct their own due diligence before making an investment decision. I am not receiving any compensation (other than from Seeking Alpha) for this article, and have no relationship with the companies mentioned in the article.