With our planet's need for more energy exponentially increasing, more and more focus is being placed on renewable methods. New sources such as algae-based fuels and advances in solar technologies are quickly becoming Wall Street darlings. Even older technologies are getting a second look in the wake of this demand. While the promise of a fuel cell revolution has come and gone, investors shouldn't disregard the technology yet. Many fuel cell firms have struggled with profitability and dependability issues. However, there are still plenty of opportunities for fuel cells in today's energy mix.

IN PICTURES: Top 10 Green Industries

Gaining Traction
The desire for energy independence and a commitment to preventing climate change are helping the resurgence in the adoption of fuel cells. Analysts at SBI energy research estimate that the fuel cell market reached nearly $598 million over the course of 2010. They predict the market will grow to $1.22 billion by 2014 or grow at an annual rate of 20%. Japan has achieved a fuel cell growth rate greater than 100%, as the nation has added the majority of the planets stationary installations.

Domestically, the sector saw a boost as the Energy Policy Act of 2005, included R&D, demonstration and market transition programs for fuel cells and hydrogen. It also contained tax incentives for the purchase of fuel cells. These credits have been extended to 2016 and are seen by the industry as a positive sign towards the wide-spread adoption of the technologies.

Power Up
The largest demand for fuel cells is currently for power generation units. As the economic and political advantages of using renewable energy sources are becoming well known, various commercial and public entities are leading the way in the adoption of fuel cell power sources.

However, much growth is also stemming from niche segments. The transport sector has seen tremendous growth over the past few years. Recently, Daimler has partnered with the Department of Energy to contribute twenty Mercedes-Benz fuel cell vehicles to the Technology Validation Project fleet. The goal of the project is to achieve fuel cell transportation readiness by 2015. Other members to such projects include Ford (NYSE:F), Chevron (NYSE:CVX) and Hyundai-Kia.

In addition, The National Renewable Energy Laboratory (NREL), in partnership with Xcel Energy (NYSE:XEL) has launched a wind-to-hydrogen program. The project hopes to improve the efficiency of producing hydrogen from renewable sources at costs low enough to compete with coal, oil and natural gas. So far the project has been a success.

Adding Exposure
Looking towards the future, fuel cells could find their way into more municipalities, remote off-grid locations and automobiles such as Honda's (NYSE:HMC) new FCX Clarity. While the sector is nowhere near as booming as it was during the dotcom days, adding a speculative dose of fuel cells to a portfolio may do it some good.

One of the biggest growth drivers for the industry has been in forklifts and other materials handling vehicles. Ballard Power Systems (Nasdaq:BLDP) has moved away from the automotive fuel cell industry and into these more lucrative motive cells. The company is quickly becoming a leader in the sector. Other fuel cell makers such as Plug Power (Nasdaq:PLUG) and Hydrogenics (Nasdaq:HYGS) have also moved into this area.

While stationary fuel cell manufacturer Fuel Cell Energy (Nasdaq:FCEL) has moved closer to profitability with its latest earnings report, it's still far off from being an investment. For investors wanting more of a fuel cell "sure thing", both industrial giants Siemens (NYSE:SI) and United Technologies (NYSE:UTX) have large business lines dedicated to commercial fuel cells. Investors gain the safety net of dividends and a diverse product lines to help cushion the blows. (Discover the issues that complicate these payouts for investors. Check out Dividend Facts You May Not Know.)

The Bottom Line
With more nations and municipalities focusing on finding cleaner and renewable sources of energy, many technologies are being looked at. Moving past the previous hype, fuel cells are once again returning to the forefront of alternative energy. New advances in technologies and cheaper costs are helping the systems compete versus other forms of energy. Although growing, those wanting to play the sector should keep in mind that it is still in its infancy, and investors should tread lightly.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  2. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  3. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  4. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  5. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  6. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  7. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  8. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  9. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  10. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Trading Center