I am an engineer; I have been trained to strive for efficiency when finding solutions to problems. Due to their low power efficiency compared to batteries, the notion of fuel cells for automobiles bothers me.
Plug Power (NASDAQ:PLUG) may very well have a bright future ahead of it. But it is priced for explosive growth, and stockholders should ask themselves if the forklift industry (and other applications) can provide the earnings needed to justify the price. Many, perhaps most, of PLUG's shareholders seem to see meaningful adoption of fuel cells in cars as an inevitability - the only question being when it will happen. The likely answer to that is somewhere between decades and never.
The largest stumbling block to fuel cell adoption in cars is the power efficiency of the technology itself. Yes, I consider that a larger problem than the non-existent infrastructure. An electric car is far more efficient. Going forward, I expect fuel cells to increase efficiency, but they can never reach batteries in that regard.
The following two sections explain why fuel cell vehicles are less efficient than electric battery vehicles. There is simply no way around this fact due to the physics involved.
Where the Hydrogen Comes From
"Hydrogen is the most abundant element in the universe." This is a common theme from those advocating fuel cell use. What they sometimes forget to tell you is that hydrogen does not exist in an elemental form on planet Earth.
Most hydrogen produced in the U.S. comes from natural gas reforming. This is an energy-intensive process whereby natural gas is mixed with steam-producing hydrogen, carbon monoxide, and carbon dioxide. There are other methods (i.e. electrolysis) of producing hydrogen, all of which require high amounts of energy.
Future hydrogen production processes will surely use less energy, but those are years, if not decades away. For the foreseeable future, all methods of hydrogen production use high amounts of energy. This is problem #1 for fuel cells.
To get power into an electric car, power from the grid is put directly into a battery that powers the car. This results in about 80%-90% efficiency. To get power into a hydrogen car, energy is used to produce the hydrogen, energy is used to compress the hydrogen, and then more energy is used to transport the hydrogen to filling stations. Finally, in the fuel cell itself, the conversion to electricity requires energy. After all that, the final efficiency is about 25%-50%.
Using batteries to power a car will always be more efficient than using a fuel cell. There is no "green" argument for fuel cells over batteries. While fuel cells have advantages over batteries in other ways, efficiency is not one of them.
A complete analysis of comparative efficiencies could easily be book-length, but I invite you to search for "fuel cell well to wheels" or "fuel cells vs. electric" for more information.
Fuel Cells in Cars
I can hear the howls already - fuel cells are already being put into cars. Yes, they are. The first prototype was GM's (NYSE:GM) Electrovan in 1966.
Fuel cells do offer some advantages over batteries, including:
- Less charge time
- Longer running time
- No "memory effect"
These are notable advantages, and car manufacturers are naturally producing prototypes to determine whether the pros of fuel cells can overcome the cons. However, looking at the above list, it is easy to see that batteries are narrowing the gap in every way.
On the flip side, the huge downside of lower efficiency in fuel cells can simply never be changed. Other major obstacles like infrastructure could be addressed (obviously at enormous cost), but the hurdle of efficiency is one that fuel cells cannot overcome.
A fuel cell can be thought of as a battery that is refueled instead of recharged. This has plenty of advantages in applications that don't depend on the best efficiency.
As any follower of the industry knows, forklifts are a great application of fuel cell technology. With no local emissions, a long running time, and quick refueling, it is no wonder that this segment of the industry has shown excellent growth and should continue to.
Iceland has an initiative in place to use fuel cells on fishing boats. First as backup power, but eventually as primary power. I love this one - it's a great use of fuel cells.
In space and on submarines (in the German and Italian navies) fuel cells have been successfully used for a long time - more fantastic uses of this technology.
Shareholders of PLUG who believe that fuel cells will become widespread in automobiles any time soon and propel the stock to new lofty heights are incorrect. I feel that it is unlikely to ever happen, but if it does, we are looking at a timeframe measured in decades, not in years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.