There is little doubt that the world — or at least most countries — are actively trying to be greener and more environmentally friendly. They are focusing on reducing emissions and their dependency on fossil fuels and paving the way for renewable power generation and electric vehicles (EVs) since these two are the largest sources of emissions around the globe.
However, despite the ample dedication and resources put into these initiatives, several technological and feasibility limitations prevent a smooth transition. Making things a bit more complicated is the parallel development of certain green technologies, which is confusing states, corporations, and even individuals focused on ESG (environmental, social, and governance) investing about where their money should go.
If you (as an investor) are in the same boat and are looking for alternatives to the mainstream EV, renewable, and battery metal stocks, Ballard Power Systems (TSX:BLDP) is worth considering.
The green technology
The first thing to understand is that Ballard Power Systems’s primary technology, i.e., fuel cells, isn’t something new or revolutionary. Most industrial and academic stakeholders have understood for decades that hydrogen (which fuel cells rely upon) is the fuel of the future as it’s clean and burning. It produces virtually no harmful emissions, especially when compared to traditional fuels.
The fuel cells enhance this “benefit” because they technically don’t burn hydrogen but convert it into water to generate electricity. So, fuel cell-based vehicles are essentially EVs, but instead of being charged, which can take a lot of time, they need to be refuelled with hydrogen.
Most importantly, a fuel-cell vehicle doesn’t need to carry hundreds of kilograms of batteries (an average EV has roughly 450 kilograms of batteries).
So, they don’t carry the secondary emissions associated with the supply chain of batteries, which contain metals from all over the world and the energy used in the mining process. Fuel cells are easily the more environmentally friendly and convenient technology, but the problem is hydrogen.
It’s costly to extract, dangerous to transport and difficult to store. This is why conventional EVs are seeing a much more rapid adaptation than fuel-cell vehicles around the globe.
However, countries and corporations around the world are investing significant resources in solving these hydrogen-related problems, as a major breakthrough could position them as forerunners in the new era of energy.
Loading up on Ballard stock
For Canadian and even many international investors, Ballard is one of the best (if not the best) investments in fuel cells. It’s a mature business with a global footprint and offers more than just fuel cells for EVs. It also provides fuel-cell-based power solutions to a wide range of companies. It’s also a research-oriented business that’s constantly improving its fuel cell technology.
From an investment perspective, saying that Ballard is currently in a bear market phase would be an understatement.
The stock is brutally beaten down and is trading at a 92% discount to its 2021 peak. The financials aren’t healthy, but the company has minimal debt and a sizable sum in cash and investments, which can easily give it enough cushion to sustain its operations until the right breakthrough makes it financially viable.
Foolish takeaway
Ballard Power Systems offers an opportunity but comes with ample risk, and you have to gauge both to determine if you are comfortable with this investment. If you are and the stock delivers on its potential, you may enjoy excellent returns.
If it doesn’t, you may be able to minimize your losses by taking advantage of its predictable (so far) and steady decline and exiting the position whenever it becomes unfeasible for you.
