Elon Musk vs. Plug Power Stock: Here's What the CEO of Tesla Thinks About Hydrogen Energy

As far as I can tell, Elon Musk has never commented directly on Plug Power (PLUG +1.99%) stock. He has, however, commented plenty on the potential of hydrogen energy. After all, Musk is the CEO of Tesla (TSLA 0.49%) and SpaceX – two businesses that are attempting to reimagine how the world creates and uses energy. Understanding how alternative fuels like hydrogen fit into the overall landscape is simply part of Musk’s job. Plus, he has billions of dollars riding on the answer.

What does Musk think of hydrogen fuel, and thus hydrogen-centric businesses like Plug Power? His historical comments are quite revealing.

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NASDAQ: PLUG

Plug Power

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Musk thinks hydrogen-powered cars are “extremely silly”

Hydrogen fuel can be used in a wide array of use cases. Cars and other forms of transportation – a category Musk knows plenty about – are a key potential market fit for hydrogen fuel. And yet it’s clear that Musk doesn’t see hydrogen fuel as a potential answer given how Tesla has positioned itself over the years. Tesla vehicles run on lithium-ion battery chemistries, and its supercharger network locations are often paired with solar power.

In short, Tesla has made almost no investment in powering its cars with hydrogen. Indeed, when you look at the specific words spoken by Musk about hydrogen over the years, this minimal investment makes a lot of sense.

“It’s just very difficult … to make hydrogen and store it and use it in a car,” Musk observed in 2015. “The best-case hydrogen fuel cell doesn’t win against the current-case batteries.”

Musk didn’t stop there. He added that hydrogen’s inferiority within the transportation sector will “become apparent in the next few years.”

In 2020, he tweeted “fuel cells = fool sells” and later added that “hydrogen fool sells make no sense.”

But it’s important for hydrogen investors to understand that Musk is only speaking about hydrogen-powered cars. There are many other potential use cases. Around the time that Musk was tweeting about hydrogen “fool sells,” the CEO of Volkswagen tweeted that “green hydrogen is needed for steel, chemical, aero,” though he agreed that it “should not end up in cars.”

Image source: Getty Images.

Will artificial intelligence save hydrogen fuel?

When Musk and the CEO of Volkswagen were tweeting about hydrogen fuel back in 2020, the AI revolution had yet to take off. The AI industry is currently in dire need of new fuel sources. There’s a reason there’s such strong renewed interest in novel approaches to energy like small modular nuclear reactors. Hydrogen fuel, too, could help power the $7 trillion global buildout of data center infrastructure.

There’s just one problem: cost.

In most cases, hydrogen fuel was never as affordable as traditional fuels and conventional forms of renewable energy like wind and solar. But experts hoped that hydrogen’s costs would come down over the years to make adoption possible. That hasn’t come to pass – at least not at the magnitude some experts predicted.

While Plug Power doesn’t report exact installed cost estimates for its systems, we can get a sense of how economic its technology is by looking at other industry standards. Plug Power primarily uses proton exchange membrane (PEM) technology for its electrolyzers. According to multiple estimates, total installed system costs for PEM systems is between $1,500 and $2,500 per kilowatt. Natural gas systems, for comparison, often come in with total installed system costs of under $1,000 per kilowatt.

As a whole, hydrogen fuel simply isn’t viable for most industries. And cost competitiveness could be years or even decades away. That makes hydrogen stocks like Plug Power reliant on government regulations and subsidies to survive. In this regard, I’m inclined to agree with Musk and other hydrogen critics – I’m simply not confident we’ll see this fuel type scaled in any meaningful way over the near term, making any investment case difficult to argue for stocks like Plug Power.