Bloom Energy's recent high-profile unveiling of a new fuel cell technology has raised the sector's profile, but its perennially loss-making companies need more than visibility to register any short-term gains.
Bloom, a Silicon Valley start-up, last month launched its solid oxide fuel cell that can power buildings and potentially offer an alternative to the electricity grid.
A fuel cell is an electrochemical device that combines hydrogen and oxygen to produce electricity and heat -- a clean source of energy that can be used in buildings, schools, telecoms towers and hospitals. However, they have so far failed to receive universal acceptance.
Analysts believe spillover gains from Bloom are unlikely for companies like FuelCell Energy, Plug Power and Canada's Hydrogenics Corp.
If anything, it's more likely to be a negative, considering that Bloom is positioned to become a very well-funded competitor, Raymond James' analyst Pavel Molchanov said.
Bloom has managed to raise more than $400 million from investors and has attracted some high-profile early adopters like Google Inc, eBay Inc, Coca-Cola, Wal-Mart Stores Inc, FedEx Corp.
FuelCell Energy has its major clients in South Korea and Japan. Twenty four megawatt of its power plants are already operating in South Korea.
Plug power counts Coca-Cola Bottling Co Consolidated, FedEx and Wireless TT Info Services as its customers while Hydrogenics has contracts from United Nations Industrial Development Organization and India's Bhushan Power & Steel Ltd.
Despite some big-ticket clients, the dollar value of the deals leave much to be desired. And the fanfare surrounding the announcement of the Bloom Box was required to renew interest in fuel cell technology, which has had few instances to cheer.
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I think this is a good thing that gets people excited about fuel cells, because prior to this, especially after the market crash, investors were not that interested in fuel cells, Ardour Capital Investments' Meghan Moreland said.
But there are fears that eventually Bloom could face the same fate as the other companies in the sector.
Some investors, after several years of generating very significant losses and cash burn, put their hands up in the air, she said. It will be the same with Bloom. They are going to have high sales, but when they are going to reach profitability is really questionable.
Questions on the viability of the technology and the lack of a mass market adoption have bogged down the sector, which has been posting losses for more than 5 years now. Faced with a cash crunch, their lobby for more government support grows stronger.
The industry does need ongoing support, including legislation and favorable regulations, said Katrina Fritz Intwala, a vice president at Plug Power.
Even with increased attention, ongoing effort is needed to encourage government to maintain subsidies for clean energy products and funding for fuel cell R&D, keeping us competitive with incumbent technologies and fuels.
As of now California has a policy in place that is conducive to the fuel cell firms, but the industry is looking for more support at federal level.
Support for the industry has been few and far in between. The Obama administration has earmarked $174 million for hydrogen and fuel cells out of the $33.5 billion spending bill to fund government energy and water programs for the fiscal year that began on October 1.
Plug's Intwala said the visibility raised by Bloom is good for all fuel cell companies, as long as Bloom maintains a realistic perspective about its products.
The bad thing would be if this high profile company fails two years from now or three years from now, Janney Montgomery Scott analyst John Roy said.
(Reporting by Krishna N. Das; Editing by Jarshad Kakkrakandy and Savio D'Souza)