audioundwerbung/iStock via Getty Images
audioundwerbung/iStock via Getty Images
The zero-emission vehicle market is on the verge of a major shakeup as manufacturers catch on that there is not enough lithium in the world to sustain a global market of lithium battery-powered electric vehicles ("EVs"). We have known for some time that lithium is a rare metal, and now the electric battery vehicle market is on the verge of learning just how rare. The amount of lithium in the universe provides the biggest clue. According to astronomers, the Milky Way contains 1,000 solar masses of lithium, which sounds like a lot until you factor in the size of the galaxy-1.5 trillion solar masses. This means lithium makes up considerably less than one one-billionth of the overall mass of our galaxy.
According to the United States Geological Survey, there are 22 million tons of land-based lithium reserves in the world. The global demand for lithium is projected to rise from 300,000 tons a year in 2020 to 2.4 million tons a year by 2030. If you add in the amount of lithium used between now and then, that means by 2030 there will be less than a decade of lithium reserves left to feed the soaring demand for EVs.
USGS World Mine Lithium Production and Reserves
Lithium Global Reserves (US Geological Survey)
Lithium Global Reserves (US Geological Survey)
Some argue lithium is plentiful insofar there is 180 billion tons of it suspended in our planet's oceans. However, it's currently cost-prohibitive to extract lithium from ocean water as it is considerably more dilute than that found in the lithium brine pits that are currently being pumped and processed in Chile, Nevada, China, and other lithium hot spots. Even if scientists developed a process to bring the costs of ocean extraction down, if the global demand for lithium continued apace, the ever-increasing rate of extraction would further dilute the remaining lithium, which would make the process increasingly expensive. Very soon, the marketplace would still relinquish lithium to the laws of diminishing returns, so there is really no point to investing in the process. And contrary to popular opinion, merely recycling lithium will not bridge the gap between what the automotive industry would demand and what our planet can provide.
Annual Lithium-ion Battery Demand (US Dept of Transportation)
Annual Lithium-ion Battery Demand (US Dept of Transportation)
In short, lithium batteries are an unsustainable source of energy, paradoxical though this may seem to some environmentally-minded consumers. For this reason, lithium battery-powered vehicles will have to be replaced in the coming years.
When you were a kid do you remember other kids prophesizing, with bulging eyes, that one day we would all be driving cars powered by water? That day has come. Hydrogen fuel is created by hydrolyzing water to break the hydrogen atoms away from oxygen atoms. In an HFC-powered car, hydrogen gas from a tank is combined with oxygen gas from the surrounding air to produce energy, creating water vapor as a byproduct. While few consumers have even heard of HFC vehicles, before the decade is out there could be millions of them on the roads all over the world as their lithium battery-fueled counterparts fade away, much like DC electrical wiring at the beginning of the century.
Being the most abundant element in the universe, as well as on Earth, hydrogen is a highly sustainable source of fuel. However, since hydrogen atoms contain just one electron which is easily taken up by larger atoms looking to fill in their outer quantum orbits, the element is generally locked up in a large variety of molecules, including water, and this requires a method of extraction.
Scientists and engineers are still working on various processes to reduce the cost of electrolyzing hydrogen from water. However, enough progress has been made in this regard, most experts agree that HFC passenger cars could be financially viable right at this moment if manufacturers simply had the advantage of economies of scale. According to the Hydrogen Council of California, the HFC industry could achieve 90 percent cost reduction for HFC passenger vehicles simply from scaling up the supply chain.
Modeled Cost of Fuel Cell System Over Time (DOE Hydrogen and Fuel Cells Program Record)
Modeled Cost of Fuel Cell System Over Time (DOE Hydrogen and Fuel Cells Program Record)
Due to the surging popularity of EVs powered by lithium batteries, it would take two decades of excruciatingly slow growth before HFC vehicles reached market viability. What's clearly needed is a type of angel investor willing to put up billions of dollars to help HFC manufacturers stay afloat while they sell their product cheaply enough to compete in the marketplace.
Fortunately, there is a little-known clause in the recently signed Inflation Reduction Act that carves out a generous portion of funds for developing the U.S.'s hydrogen fuel cell industry. The legislation provides a tax credit of up to 60 cents per kilogram for manufacturing processes that produce less than one pound (0.45 kilograms) of CO2 per kilogram of hydrogen. Moreover, if companies pay "wages not less than the prevailing rates in the locality in which such facility is located" to their construction workers and mechanics who build any new facilities, those companies will be eligible for a 500% bonus multiplier. This amounts to a hydrogen fuel tax credit of $3.00 per kilogram (equivalent to one gallon of gasoline).
Green hydrogen in the U.S. Northwest costs $3.73/kg to produce. Once a hydrogen fuel company subtracts the $3.00 subsidy, the cost is a mere 73 cents, making U.S. hydrogen fuel the cheapest in the world.
In March of this year, U.S. Senators Chris Coons (D-Del.) and John Cornyn (R-Texas) introduced a bipartisan bill to address the gap between the capacity for auto manufacturers to produce HFC passenger cars and the availability of fueling stations. The Hydrogen for Trucks Act acknowledges that the U.S. could switch from fossil fuel-powered cars to hydrogen-powered cars within years if the U.S. government assisted the roll out of hydrogen fueling stations.
One thing that could make this process go more swiftly and with less bureaucracy, is to place hydrogen pumping stations at gas stations in urban and residential areas to take advantage of pre-existing infrastructure. Sandia National Laboratories recently completed a study that concluded a significant number of California gas stations could safely support hydrogen fuel pumps. Of the 70 stations examined in the study, 14 were found to be qualified to safely install the pumps, and 17 more could qualify with property expansions. That is a significant 44 percent. California currently has 54 hydrogen fueling stations, more by far than any other state in the nation. If this rate of infrastructure expansion continues throughout the entire country, facilitated by both the IRA and the Hydrogen for Trucks Act, providing enough hydrogen fuel pumps to support fleets of HFC vehicles rolling off factory floors all over the nation could be accomplished within a decade.
Last week, California announced it will ban the sale of gas-powered cars by 2035, just a dozen years away. California tends to be a trend setter for the rest of the country. Europe has already passed laws to ban the sale of passenger vehicles that emit carbon by 2035 as of June of this year.
The chart below is a projection of how many hydrogen gas stations will be deployed around the world over the next decade.
Author Created Chart (Data gathered from ResearchGate.net)
Author Created Chart (Data gathered from ResearchGate.net)
The most significant indication that HFC vehicles will soon overtake lithium battery-powered cars is the automotive industry itself. BMW is currently developing a mass-market HFC prototype car that it intends to introduce in 2030. The German government is subsidizing the project.
Toyota has already rolled out the Mirai, a mid-size HFC passenger car that they debuted in November 2014 at the Los Angeles Auto Show. From then till the end of 2021, global sales have amounted to 17,940 units, most of them sold in the U.S. and Japan. This past July, Toyota announced they are partnering with Isuzu and Hino Motors to develop light-duty fuel cell electric trucks. The trucks will be manufactured as fleet vehicles for food and merchandise transportation.
Hyundai debuted the Nexo, an HFC powered SUV, in January of 2018 at the Consumer Electronics Show in Las Vegas. The Nexo has a 354-mile drive range on a tank of hydrogen gas. From 2018 until October 2020, Hyundai has sold over 10,000 Nexo automobiles in South Korea.
Hyundai is also producing fleets of large delivery trucks. They've already exported thousands of the XCIENT Fuel Cell heavy-duty trucks to Germany and Switzerland.
The table below shows the fuel economy of both the Nexo and the Mirai expressed in miles per gallon gasoline equivalent (MPGe).
The chart below shows the projected growth of hydrogen fuel cell vehicles in the global market over the coming decade.
Author-created chart (Data gathered from HydroCarbonProcessing.com)
Author-created chart (Data gathered from HydroCarbonProcessing.com)
The topic of Peak Oil is a broad and lengthy one, so I'll sum it up. The U.S. is far past the point of drilling price-competitive oil. We drill mostly shale, tar sand, and off shore oil, all of which is more expensive to extract. Moreover, tar sand oil must be sold at a steep discount to refineries because of its low quality, which further reduces the profit margins. Shale oil, which must be drilled vertically, and then horizontally, is so expensive to extract that shale oil companies stop production when the price falls to a level most consumers consider reasonable.
The U.S. is hardly alone in having reached Peak Oil. This past July, The Washington Post reported that Saudi Arabia's "ultimate maximum capacity (for pumping oil) is 13 million barrels a day," according to Prince Mohammed bin Salman. The prince made it clear that beyond that, there was no room for expansion. Some experts found this information jarring insofar Aramco announced in 2004 that Saudi oil fields could sustain a production level up to 15 million barrels of oil per day for 50 years. The downward revision of these figures may be an indication that Aramco can see the beginning of the end of Arabian oil supply.
According to the Russian government, Russia is on track to achieve Peak Oil sometime between 2027-2029 before their fields' production capacity gradually wanes. The U.S., Russia, and Saudi Arabia taken together produce almost 45% of the world's total oil output.
The Peak Oil graph below was proposed in 1956 by American geologist Marion King Hubbert. While the prediction that oil production would peak in the year 2000 was premature, it might not be far off.
Marion King Hubbert's Peak Oil Graph (U.S. Energy Information Administration)
Marion King Hubbert's Peak Oil Graph (U.S. Energy Information Administration)
Air Products got its start at the onset of WWII, focusing on industrial gases such as oxygen, nitrogen, argon, carbon dioxide, and hydrogen. Now that hydrogen gas is in demand thanks to the increasing popularity of HFC-powered cars and industrial fuel cells, Air Products is currently well-placed to take advantage of government subsidies in regard to the expansion of hydrogen fueling stations.
The problem with Air Products is most of the hydrogen they produce is "grey" hydrogen, that is, it's produced with fossil fuels which does little to reduce the carbon foot-print and thereby disqualifies their product as green energy. This may be why their stock price was flat over the past year.
However, the company recently signaled its intention to go all-in on green hydrogen fuel. In July, 2020, Air Products announced a partnership with ACWA Power and NEOM to build a large-scale ammonia production facility powered by green hydrogen. Air Products promises this project will reduce global CO2 emissions by three million tons per year. While this announcement is a bit late in the day, insofar this hydrogen plant won't go online until 2025, it still puts Air Products in a position to receive government subsidies promised by the recently passed environmental legislation.
Just last month on August 30, Air Products announced their partnership with Associated British Ports (ABP) to build a green hydrogen production plant in the UK. Much like the plant described above, this new plant will use green ammonia to produce green hydrogen for both transportation vehicles and industrial use. The fact this British company chose Air Product because there were no local companies eligible for the job is an indication that Air Products may experience wide-spread growth in this sector. Expect more global projects in the future.
Air Products is also ideally suited to installing hydrogen fueling stations, which will likely be popping up like mushrooms in the coming years. In regard to fossil fuel, keep in mind newly installed solar panels are now the cheapest form of energy-cheaper than coal, petroleum, and LNG. Air Products decision to go green is not about politics, it's about the bottom line.
Seeing the green-energy writing on the wall, last November Bloom Energy announced a partnership with Heliogen, Inc. They intend to use Heliogen's concentrated solar energy system as a power source to create clean hydrogen. This puts Bloom Energy in line to receive funding from the recently passed environmental legislation, and possibly more funding from the upcoming Hydrogen For Trucks Act.
In addition to producing hydrogen, Bloom Energy manufactures a patented solid oxide industrial fuel cell called "Bloom Energy Servers." They have an impressive list of clients including Bank of America (BAC), Coca-Cola Company (KO), FedEx (FDX), Google (GOOG, GOOGL), Walmart (WMT), and numerous other flagship companies.
While Bloom Energy has just recently made a move to switch to green hydrogen, FuelCell Energy has been focused on providing green energy for over a decade. This U.S.-based international company specializes in installing Direct Fuel Cell power plants utilizing molten carbonate fuel cell tech. The company prides itself on its SureSource 3000 and SureSource 1500 power plants, designated as "Ultra-Clean" by the California Air Resources Board. FuelCell Energy has installed their Direct Fuel Cell power plants in over 50 locales around the globe. They operate the largest fuel cell park in the world-South Korea's Gyeonggi Green Energy Fuel cell park. They also operate the largest fuel cell park in North America in Bridgeport, Connecticut. Their customers include utility companies, municipalities, universities, and other large entities both public and private.
Having already established itself in the hydrogen-powered forklift sector, Plug Power introduced ProGen fuel cell engines for electric delivery vehicles in February of 2017, making them an early hydrogen fuel cell contributor to the automotive industry. They also provide fuel cell engines for trucks and heavy-duty off-road equipment. But their product and services don't end there.
Plug Power has the broadest array of green hydrogen power products of any American company. This includes hydrogen electrolyzers, liquified hydrogen, gas hydrogen, hydrogen cyrogenic trailers, mobile hydrogen storage equipment, hydrogen automotive fuel pumps, as well as their line of transportation vehicles. Plug Power has even developed a drop-in fuel cell to replace lithium batteries in existing electric delivery vehicles.
Plug Power's services include hydrogen procurement, transport systems, and turnkey handling systems for both liquid and gas hydrogen.
Cementing its position as a major player in the hydrogen fuel industry, Plug Power recently announced a deal with Amazon. The contract stipulates that Amazon will buy $2.1 billion worth of Plug Power products over the next seven years. This helps put Plug Power on track for its goal of $3 billion in revenue by 2025. This would mark an increase in revenues of over 500%. If they pick up more large customers, the increase could be even higher.
Of all the companies mentioned above, Plug Power stands out as the hydrogen fuel company positioned to grow its business the most over the coming decade.
The following table shows which of these companies have demonstrated the best momentum in terms of revenue over the past four years.
HFC Company Momentum (Author Created Table)
HFC Company Momentum (Author Created Table)
Since these companies are not household names, I included the table below to show how long they have been in operation and where they're headquartered.
HFC Company Years of Operation (Author Created Table)
HFC Company Years of Operation (Author Created Table)
The comparative chart below shows the momentum in stock price. Notice that Plug Power (dark blue line) demonstrated the strongest momentum in stock price over the past two years, increasing over 115%. While FuelCell Energy (purple line) put on an impressive display in the post COVID-19 bounce-back, Plug Power came out ahead in the end.
HFC Company Comparative Graph (Yahoo)
HFC Company Comparative Graph (Yahoo)
Air Products turned in a lackluster performance, missing out entirely on the post-COVID bump and actually ended down at -12.15 percent. This could change as Air Products rolls out green hydrogen fuel infrastructure in both U.S. and global markets, but it should still be taken into consideration. The S&P 500 is shown in the pink line for comparison.
The 2022 Tesla Model 3 has a driving range of 272 miles on a single charge for an entry-level model. The range increases to 358 miles for an upgrade to the mid-level Long Range trim. By comparison, the 2021 Hyundai Nexo has a range of 380 miles on a full tank of hydrogen fuel, and the 2021 Toyota Mirai has a range of 402 miles. (See table above)
It takes between 8-12 hours to charge a Tesla Model 3 on a home charger. But it can charge from roughly 10-80% in 30 minutes at a 120kW Supercharger, if you can find one. However, experts caution Tesla owners to only charge at a Supercharger when absolutely necessary since it can wear out your battery faster.
All in all, it seems Tesla might have some stiff competition once hydrogen fuel cell vehicles and pumping stations become ubiquitous, which could happen within the decade. This swiftly changing landscape has garnered a strange reaction from Tesla CEO Elon Musk who has been scathing in his criticism of hydrogen-powered cars.
In a June 2020 tweet, he claimed "fuel cells = fool sells." He followed up the next month with "Hydrogen fool sells make no sense." However, on April 1st of this year, he sent out this tweet:
Musk April Fools Tweet (Twitter)
Musk April Fools Tweet (Twitter)
But the following May, Musk was back to claiming "hydrogen is a bad choice."
It's hard to believe that someone as brilliant as Musk would ignore the rarity of his raw materials, i.e., lithium, and allow nearly every auto manufacturer in the world to bypass Tesla's signature product, a vehicle that is relatively range-bound and still takes far too long to refuel.
Musk may be working furiously behind the scenes to create the Tesla Model H mentioned in his April Fool's tweet, but is playing it close to the vest out of chagrin that he didn't better research his supply chain and crunch the numbers before betting on the wrong horse. And like many of us, he may have resisted the bad news for too long before taking action. Musk is either missing the boat entirely, or his April Fool's tweet was a Trumpian stunt to deflect charges of duplicity once he unveils his Tesla Model H. If such is the case, expect a high price tag.
I would not encourage investors to go long in any equities while the Fed is doubling down on its determination to drain excess liquidity from the economy via quantitative tightening. Even the strongest companies' stocks can suffer a sell-off during such market turmoil. It would be advisable to keep your eye out for a market bottom in the form of either a reverse head-and-shoulders formation in the S&P 500, or for the major stock indexes to move above their 50-day moving average. That event could be as long as a year away.
You also want to take account of legal troubles that Plug Power is currently contending with. In March of 2021, Plug Power informed the SEC that it couldn't file its annual report for 2020 until it completed a review intended to sort out the costs involved in Research and Development versus Costs of Goods Sold, as well as other financial issues. The announcement apparently triggered a class-action lawsuit the following May on behalf of Plug Power shareholders who had bought the stock between November 9, 2020 and March 16, 2021. This lawsuit is still ongoing. This is another good reason to wait a year or so before diving in. While such lawsuits are not unusual, it would be a good idea to look into updates on Plug Power before buying its stock after the stock market turns around.
Another risk is Plug Power's losses in 2021, which came in at $171 million. Bear in mind it is not unusual for a company's costs of producing revenue to outstrip their revenue when they're in the process of expanding their line of products and services as well as their market base, which is what Plug Power is currently doing.
While many of us thought that lithium-ion batteries were the wave of the future in regard to clean power, the geological fact that there is simply not enough lithium on our planet to sustain a huge global market of lithium-powered cars and home batteries. This has sent governments, auto-manufacturers, and power companies alike back to the drawing board. Furthermore, solar power is now the least expensive form of energy. When you combine that fact with cost-reducing advancements in hydrogen electrolysis and government subsidies for hydrogen power in both the U.S. and Europe, the obvious solution is switching to hydrogen fuel.
Plug Power stands out as the best investment due to its broad scope of products and services as well as its momentum in regard to revenue and stock price.
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The content of this article is intended for experienced investors capable of conducting their own market research and making well-informed investment decisions. This information should not be construed as advice or a recommendation for any particular security, transaction, or investment strategy. If you need investment advice, please contact a licensed financial advisor.