Is FuelCell Energy Stock Driven by Facts or ‘Weird Science?’

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FuelCell Energy (NASDAQ:FCEL) could very well be one of the greatest innovators of our time — and I’m not being facetious. According to the company’s white paper, FuelCell has found a way to catalyze the energy production process without using precious metals, most commonly platinum. So naturally, this is a huge catalyst itself for FCEL stock. However, my question to the management team is this: why aren’t you advertising the heck out of this innovation?

Is FCEL Stock Driven by Facts or ‘Weird Science?’

Source: Kaca Skokanova/Shutterstock

Furthermore, I think it’s a question that every prospective buyer of FCEL stock should ask before taking a position. In previous articles about FuelCell, I was skeptical about the organization primarily because of the industry’s economics. As I’ll explain later, hydrogen fuel cells require energy to create energy, which somewhat defeats the purpose.

Moreover, one of the biggest impediments to replacing fossil fuels with hydrogen is the catalysis process. As I said above, it requires expensive metals like platinum. And that’s why, according to Phys.org, scientists have invested countless hours researching mechanisms to make more efficient use of such metals.

But according to FuelCell’s white paper, the company has replaced platinum altogether with a porous nickel catalyst. This is possible due to the high temperatures associated with FuelCell’s proprietary catalyzing process. Therefore, from face value, FCEL stock is a gold mine.

However, I remain skeptical. During the crazy internet bubble, FCEL stock was priced well into the thousands of dollars. For much of last decade, though, shares were priced in the hundreds. And today, they’re under $3.

Granted, the equity has exploded from when it was around a quarter a few months ago. But with such a profound innovation, FuelCell should return to its glory days.

Does FCEL Stock Have a Science Problem?

Although I’m skeptical, I’d like to get to the bottom of this so that readers fully know what’s going on here. Therefore, if somebody from FuelCell objects to my incredulity, I would wholeheartedly welcome correction.

But in the absence of this correction, here’s what I see. In 2010, MIT Technical Review contributor Prachi Patel wrote the following:

“Platinum and platinum alloys are the most efficient catalysts for speeding up chemical reactions in hydrogen fuel cells. Platinum is the only metal that can withstand the acidic conditions inside such a cell, but it is expensive, and this has limited the broad, large-scale applications of fuel cells.” (emphasis mine)

Last year, Princeton University declared that they’re searching for “mundane materials” that can effectively replace platinum. According to Bruce Koel, professor of chemical and biological engineering at Princeton, finding a platinum alternative has previously vexed scientists because the metal is so effective.

“Right now, the best catalysts…are platinum group metals. The researchers don’t think that will change because “platinum is almost perfect,” Koel said. With platinum group metals, the electrochemical reactions to draw out the hydrogen are quick and efficient, plus the metals can stand up to the harsh acidic conditions currently required for such reactions.

The problem, though, is that the platinum is rare and costly. ‘You can’t really imagine replacing the transportation infrastructure with fuel cells based on platinum,’ Koel said. ‘It’s too rare and too expensive to use at that scale.'”

Apparently, rarity and expense are no longer problems. Again, that’s because FuelCell has found a way to replace platinum catalysts with porous nickel — resulting in their white paper’s words, “significant cost savings.”

So, why aren’t we hearing about this 24/7 regarding FCEL stock?

Hydrogen Is Both the Cause and the Cure

Even if FuelCell legitimately discovered a platinum alternative, the company and other related firms have a problem: hydrogen isn’t found in nature.

While hydrogen is the most abundant element in the universe, it’s not found in isolated form. Instead, it forms covalent compounds with most non-metallic elements. Isolating hydrogen typically requires a process called electrolysis. Basically, this is the use of electricity to break up water into its constituent parts: hydrogen and oxygen.

However, like traditional platinum-based catalysts, electrolysis is an expensive process. Therefore, many scientists argue that hydrogen will never become a clean-energy solution. Why? Because you need to expend energy to make energy.

And if that’s the case, why not cut out the chemical middleman and go straight with electricity? Also, hydrocarbon fuels (i.e., natural gas) are used to extract hydrogen. FuelCell deploys this method, but through a chemical reaction, not combustion. But again, the point remains: why bother with the middleman?

It’s a question that has actually haunted FuelCell in recent years. Although the technology apparently works, other alternatives such as solar and wind farms, are more economically feasible. Additionally, FCEL has encountered significant competition in the fuel cell space.

So for me, the bottom line is this: if FuelCell’s innovations are truly as good as advertised, FCEL stock is a huge winner. If not, though, I’d think carefully before gambling too heavily.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


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