Hydrogen may not be the best energy source for passenger vehicles, but it has found a valuable place in materials handling and regional delivery truck markets. So far, Plug Power Inc (NASDAQ: PLUG) and Ballard Power Systems Inc (NASDAQ: BLDP) have been the biggest names in hydrogen fuel, and they're building off a small base of materials handling customers.
One new hydrogen product worth watching is an on-site hydrogen production system using electrolysis. Electricity turns water into hydrogen, and if wind and solar power plants are being used to generate the energy it can be 100% renewable.
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The on-site electrolysis option
IVYS Energy Solutions is rolling out an electrolysis system that can produce 8.8 kg of hydrogen per day, enough to fuel about eight forklifts or one or two vehicles. That's not high output for a system that can cost over $250,000, but it's an innovative solution for a company looking to have self-produced renewable energy.
Despite the fact that hydrogen gets credit for being clean energy, most is produced from natural gas. Electrolysis is one of the most effective ways to produce hydrogen renewably, and on-site production may be an attractive option, particularly in remote locations.
Taking hydrogen to the next level
One of the first major use cases for this electrolysis system is at Toyota (NYSE: TM), which is using it at its Motomachi Plant in Toyota City. Toyota makes its own materials handling products, and has partnered with Plug Power in the past for fuel cell technology. But it also makes its own fuel cells, and with electrolysis it could replace any hydrogen supply agreement.
Now that the fuel cells for passenger vehicles appear to be dead on arrival, the companies that were developing fuel cell technology will be looking for applications to use fuel cells. Materials handling has proven to be a viable option, and Toyota may prove that it can be a self-sufficient hydrogen forklift facility.
What electrolysis changes for fuel cells
Self-produced hydrogen doesn't just make 100% renewable material handling and transportation possible, it disrupts the business hydrogen companies have been building. Plug Power, for example, has been selling fuel cells to factory and warehouse operators to retrofit forklifts and tying hydrogen supply agreements to the deals. The fuel cells themselves don't make money, but the hope was that hydrogen supply would be a cash cow long-term. If self-supply is possible, that may not be the case.
If customers can make their own hydrogen, the value of such agreements may not be as high. And with companies as large as Toyota, Honda, and Hyundai de-emphasizing fuel cell technology, it doesn't seem cells themselves are going to be scarce on the market either. It may seem like a small shift, but self-producing hydrogen from nothing more than water and electricity could change the power dynamics in hydrogen energy.
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