Is There Hope for Alternative Fuels?

Feb 8 13:01 2009 Michael Lombardi Print This Article

Gasoline prices are well down from the $3.00-plus prices we saw last year. Under President Obama's new focus,Guest Posting there will be more capital spent on developing cleaner energy and reducing the current reliance on foreign oil. Automakers have been introducing more hybrid vehicles that combine gasoline and electricity, which creates less dependence on gasoline. But a trend that I feel will develop is the use of a real and viable alternative to fossil fuels, something that has been in discussion for over a decade, but so far nothing significant has developed. Maybe under Obama, the prospects for this will improve.

A decade ago, there was a growing belief that the future of the auto industry was going to shift from fossil-fuel-burning vehicles to those that run on hydrogen fuel cell technology. Carbon dioxide released into the atmosphere was polluting our air and causing a greenhouse-like atmosphere to form around the earth, thereby increasing global warming and killing our air quality. Moreover, there was an effort in theory to want to reduce our dependence on oil and save the earth's environment.

Governments around the world were behind the concept. The U.S. government firmly put its support behind the development of fuel cell technology for vehicles. In the U.S., General Motors Corporation (NYSE/GM), Ford Motor Company (NYSE/F) and DaimlerChrysler AG (NYSE/DCX) has thrown research capital into fuel cell development and has formed alliances, yet nothing of significance has happened. To make matters worse, these companies (except Ford) are now running out of cash and receiving bailout funds from the government. Given this, there will likely be less spending on alternative technology, so the key may lie with other companies.

Key companies in this space include FuelCell Energy, Inc. (NASDAQ/FCEL), Fuel Systems Solutions, Inc. (NASDAQ/FSYS), Fuel-Tech, Inc. (NASDAQ/FTEK), and Ballard Power Systems Inc. (NASDAQ/BLDP). Note that this list should not be considered as one of stocks to buy, but is only for illustrative purposes.

In the case of Ballard, the problem is that things have not unfolded as planned, as fuel cell technology remains at this time a concept that cannot seem to catch. Fuel cells technology exists and has been tested to success in buses, but Ballard has not yet developed a fuel cell that is small and cost-effective enough to become mainstream.

So, is there any hope? The answer is yes, but the odds for success are low, unless Obama funds more research capital into these areas. The reality is that the fuel cell development sector is continuing to lose vast amounts of money and, unless there is a renewed concerted effort to fund these companies, it may just become a dead technology that once held promise.

Losses in the fuel cell industry in North America are massive. Revenues are minimal and non-material. We are seeing a rise in hybrid cars that run on both gasoline and electricity.

As an investment, the potential of fuel cell stocks are what I consider a long shot unless the government and automakers put more capital towards making a fuel cell that can work in everyday vehicles.

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Michael Lombardi
Michael Lombardi

George Leong, B. Comm., Senior Editor at Lombardi Financial, has been a technical analyst for 12 years and a financial analyst for seven years. His overall market timing and trading knowledge is extensive. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. He has written technical columns for stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as an analyst with Globe Information Services.

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