Nikola truck

Nikola hopes to transform the trucking industry through hydrogen technology in vehicles like the Badger, though its stock price has taken a hit in recent days.

Change is finally coming to energy, and environmentally-focused governments, companies and investors are eyeing alternative fuel sources like hydrogen to play a role in decarbonization.

Hydrogen fuel cell companies saw their stock prices balloon in recent weeks, but the question is whether the tech is ready this time. Shares of Ballard Power Systems, Plug Power and Bloom Energy went up at least 10% each in a single day. Plug Power made headlines in June when it acquired United Hydrogen Group and Giner ELX. Other hydrogen stocks heating up this summer are Tortoise and Workhorse Acquisitions. 

But arguably the most famous is Nikola Corporation, which builds trucks that are powered by hydrogen fuel cells, went public in June, and investor hype abounded. Nikola’s stock price peaked around $90 — more than double its IPO, but slipped under $40 after filing for stock sales relating to warrants, which means the market was flooded with millions more shares

The company doesn't plan to turn a profit until 2021 after the release of its fuel cell-powered Badger truck. RBC automotive analyst Paul Spak said the company is “still more of a business plan than a business.

The science behind the revolution

A fuel cell generates power through an electrochemical reaction using hydrogen and oxygen. It splits hydrogen into protons and electrons, which generate current. The byproducts are water and heat. A typical engine generates power through combustion, and the fuel cell process is much cleaner, provided it uses clean hydrogen. Fuel cells are stackable, which makes them scalable for different applications ranging from stationary power stations to transportation. 

Hydrogen is seen as a solution for long-haul trucking and maritime shipping; hydrogen could replace natural gas for heating and is also considered as an option for storing wind and solar — intermittent forms of energy — through electrolysis. It flows more quickly than fossil fuels through pipes, but it requires more storage and modified infrastructure.

Hydrogen is the most common element in the universe. However, there's little free hydrogen on Earth where it’s most commonly found in water. 

There’s little free hydrogen on Earth because of how light it is — it can escape the earth’s gravity. Because of this, hydrogen has to be produced before it can be used in fuel cells. 

To help the climate, hydrogen has to be produced efficiently. The majority of hydrogen in the U.S. is produced through steam-methane reforming — a process that releases carbon dioxide. To solve this, manufacturers can implement carbon capture technologies, and the resulting hydrogen is known as blue hydrogen. Green hydrogen is often produced through electrolysis — extraction from water. 

Right now, green hydrogen isn't produced at a competitive cost. Studies from Bloomberg NEF, IEA and IRENA all predict optimistic results for hydrogen that the cost of clean hydrogen production from electrolysis will fall. Data from BloombergNEF published in the Economist predicts the cost of clean hydrogen production in the global range will decrease through 2050. BNEF predicts that delivered costs of hydrogen could fall as low as $7.40 per million Btu given a cumulative $150 billion of global subsidies toward the efficient production of hydrogen by 2050. 

“Hydrogen bubble”: How it formed, burst and rebounded

The idea of hydrogen as an alternative energy source has been around for a while. There was first hype for hydrogen after the oil crisis of the 1970s and again in the 1990s, but the stars didn’t align. The stock price of Plug Power, which makes hydrogen fuel cells, skyrocketed to nearly $1,500 as the result of a hydrogen “bubble” in 2000 and has traded almost exclusively under $10 since.

Hyundai and Toyota both introduced hydrogen options for individual cars, but the infrastructure is less widely available than battery power for smaller vehicles. Hydrogen would require three to four times the storage space if it replaced natural gas because it’s less energy-dense than fossil fuels, according to Bloomberg New Energy Finance. Elon Musk, CEO of Tesla, called fuel cell powered vehicles “fool sells.”

Hydrogen technology seems to make sense in larger, heavy duty vehicles. It’s affordable for the general public to switch to electric vehicles, but this technology doesn’t seem as practical for heavy-duty vehicles. Batteries have a low energy density — they take up more space to propel a vehicle. James Morris, a transportation writer for Forbes, writes that hydrogen power will never take hold in individual vehicles, but the technology may have a promising future in commercial and mass transit.

What’s next for hydrogen fuel cells?

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Global demand for hydrogen is expected to go up. According to the International Energy Agency, China has set a pledge for a million hydrogen powered cars, and the EU has set carbon-neutral targets. Is hydrogen really moving toward a part of the economy, and are these investors justified in taking an interest in hydrogen stocks? 

Ballard Power Systems, which makes hydrogen fuel cells for a variety of industries, recently closed a $7.7 million order of fuel cell components from Synergy-Ballard JVCo in China’s Guangdong province. The deal reflects the formation of markets for hydrogen in China. 

The formation of markets and mandates for low-emission products is a signifier that hydrogen is really taking hold — based on Bloomberg NEF’s signposts of the emergence of a hydrogen economy — an environment where hydrogen can be produced at a competitive cost and on a large scale. 

Alfred Wong, the managing director of Ballard Asia Pacific said the order is an indicator of market demand for fuel cell technology in heavy and medium duty applications in China and reflects an increasing prioritization of decarbonization and zero emission solutions. However, China is still the world's largest coal consumer and invests heavily in coal plants. 

California’s passage of the Advanced Clean Trucks regulation in June will require clean energy to be phased in to heavy duty pickups. An analyst from Barron’s said the law might be bullish for the stocks. California’s Innovative Clean transit program also includes programs for public transit which requires a percentage of busses to be zero-emission. 

Another sign of the formation of a hydrogen economy is emerging legislation for net-zero climate targets. This is happening in Great Britain, which plans to cut carbon emissions by 100% by 2050. They revised this goal in 2019. The EU also has a carbon neutral pledge by 2050. The U.S. doesn't have a 100% decarbonization target. 

Even though Britain and the EU are setting stricter regulations, according to the Hydrogen Economy Outlook report, “there is still insufficient policy to support investment and scale up to a clean hydrogen industry. But with a growing number of countries getting serious about decarbonization, that could change.” 

According to the 2020 Hydrogen Economy Outlook, by BloombergNEF, increased demand and more infrastructure is required through government policies and programs that will drive down costs. The global adoption of hydrogen and its integration in the global market could abate up to one third of global emissions, according to BloombergNEF. 

As more countries adopt full decarbonization standards and set regulations, hydrogen technology will become part of the process. 

BloombergNEF said when stringent heavy transport emissions standards are set, they incentivize manufacturers to use fuel cell trucks and ammonia powered ships. The NREL works to set standards for hydrogen, and CORSIA sets green regulations in aviation. 

For countries that set 100% decarbonization targets, battery power won't be practical in some polluting applications. For full decarbonization, hydrogen might have a role to play in the toolbox of options for Britain, David Joffe, member of Britain's Committee on Climate Change, said to the Economist. 

Hydrogen can help transform the hardest-to-decarbonize sectors, such as large transportation. Some industries need a “fuel,” and electric power isn’t practical. Some manufacturing processes require the physical and chemical properties of a fuel in heavy shipping and manufacturing sectors, according to the Hydrogen Economy Outlook report by BloombergNEF. 

Hydrogen will likely become one of the many tools in the global effort to mitigate climate change, but it won't be considered a practical alternative to battery electric vehicles. It may not be the tool we use in personal cars, but it's a likely pick for commercial transport and manufacturing.

Jillian Lynch is a senior international affairs major. Contact Jillian at

Disclaimer: 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’m not receiving compensation for it, and I have no business relationship with any company whose stock is mentioned in this article.