Hydrogen Fuel’s Promising Future: Is Plug Power a Smart Investment?
A Trillion-Dollar Industry in the Making
Plug Power, a company operating in the hydrogen fuel industry, has seen its sales skyrocket by 2,000% since 2021. With the world transitioning away from fossil fuels, hydrogen fuel-cell systems could play a crucial role in reducing carbon emissions. But does this promising technology make Plug Power a buy?
The Hydrogen Advantage
Hydrogen fuel-cell systems offer a cleaner alternative to fossil fuels, with the potential to power industries that are difficult to decarbonize, such as cement and asphalt production, and aviation. According to McKinsey, global clean hydrogen demand is projected to grow significantly by 2050, but infrastructure scale-up and technology advancements are needed to meet projected demand.
Plug Power’s Decades-Long Experience
Founded in 1997, Plug Power has been building hydrogen fuel systems for decades, with several successful pilot projects under its belt. The company recently received a $1.7 billion loan guarantee from the U.S. government, highlighting hydrogen’s importance for our long-term energy future.
The Cost Competitiveness Conundrum
Despite its promising technology, hydrogen fuel systems are not yet cost competitive with competing alternatives. While technological improvements and rising regulatory constraints on fossil fuels could change this, a world dominated by hydrogen fuel systems remains years away.
A Promising Company, But a Terrible Investment
Plug Power is still losing a significant amount of money every quarter, with losses totaling roughly $1.4 billion over the past 12 months. To survive, the company has aggressively pursued government grants and loan guarantees, and consistently sold more stock, diluting its shareholders. Unless there is a seismic shift in regulations, Plug Power’s mounting losses will continue to be a reality.
A Future Powered by Hydrogen, But Not Yet
While Plug Power is an exciting business to monitor, it’s not a good investment for now. The company’s reliance on one-off subsidies and ongoing share sales to survive, combined with the risk of its technology becoming obsolete, makes it a risky bet.
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