Is FuelCell Energy’s Business Truly Sustainable?

[Editor’s note: This article was updated on Jan. 22, 2020, to remove erroneous information about materials used by FuelCell.]

This may be a strange question to ask of a renewable energy company. But analysts are asking it anyway. Is FuelCell Energy (NASDAQ:) sustainable? That is, has this maker of hydrogen fuel cells found a niche it can grow into, or are its recent successes a one-time thing? And after we answere these questions, what exactly are the longer-term implications for FCEL stock?

FuelCell Energy had been in a long-term trading range at about 25 cents per share, but opened for trade Jan. 17 around $2.25 with a market cap of $443 million. The catalyst seems to have been a two-year, $60 million deal with Exxon Mobil (NYSE:) involving carbon capture technology.  The deal is nearly twice the company’s annual revenue.

A New Way to Look At FCEL Stock?

The company has been loudly proclaiming that it’s no longer a penny stock, , ahead of reporting earnings Jan. 22 for the quarter ending in October.

While rival Plug Power (NASDAQ:) has been pushing fuel cells as a solution for forklifts and other factory vehicles, FuelCell Energy has been aiming at big contracts in the utility and energy space.

Fuel cells make energy by combining hydrogen gas with oxygen. Water is the “waste” product. Fuel cells are also quiet, meaning utilities can place them in residential neighborhoods. But the chief source of hydrogen fuel has always been natural gas. Utilities have usually decided just burning the gas is cheaper.

While the Plug Power story is easy to understand, , the FuelCell Energy story is all over the map.

Are they offering a way to reduce the carbon footprint of , as ExxonMobil suggests? Is this a solution for with the biogas found on-site? Or is this a microgrid solution for electric utilities, as FuelCell’s latest press release proclaims? Is it all three? Is it also a breath mint?

Trust Utilities?

FuelCell reported a backlog of $2.1 billion in its third-quarter report, but just in revenue. The backlog resulted in a press offensive, as FuelCell management sought the capital needed to fulfill its orders.

The question remains whether the current momentum is sustainable. In theory, I buy all of it. I buy using biogas to produce hydrogen. I buy carbon capture at power plants. I have long supported microgrids as a better way to guarantee electric service.

What I’ve been unable to buy, because of the track record, is the word of oil companies or utility companies that they’re serious about climate change. Exxon Mobil, for instance, has been banging the drum on TV for . They were saying the same thing 10 years ago and little has happened.

The same is true for utilities. Al Gore wrote about microgrids as over a decade ago. But PG&E (NYSE:), the most progressive of the big utilities in accepting solar and wind power never adapted this secondary technology. It kept its unitary system with long power lines in place, and went bankrupt when they, predictably, caused forest fires.

The Bottom Line

I wish I weren’t writing this, but FuelCell Energy remains a speculation.

The company isn’t just offering a succession of press releases. It is trying to execute a long-term strategy that makes sense. But that strategy relies on very big partners staying the course, and utility companies being willing to change.

That’s the bet you’re making when you buy FuelCell Energy stock today. It should be a slam dunk, but sadly it’s not.

is a financial and technology journalist. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at  or follow him on Twitter at @danablankenhorn. As of this writing, he owned no shares in companies mentioned in this story.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.