Ballard Power Systems (BLDP.TO)(BLDP) shares climbed in early trading Wednesday as investors embraced a deal with Canadian Pacific Railway (CP.TO)(CP) to use the company’s fuel cells in hydrogen-powered trains.
Components from Vancouver-based Ballard will deliver power to a locomotive converted from diesel, the two companies said in a news release after the closing bell on Tuesday. The fuel cells will work with batteries to power electric traction motors.
Once operational, CP Rail said it plans to test the technology’s readiness for hauling freight. The Calgary-headquartered company said the program represents “North America's first hydrogen-powered line-haul freight locomotive.”
Ballard’s Toronto-listed stock jumped around 10 per cent Wednesday morning, before dipping into negative territory. The stock closed down 0.44 per cent at $29.63 per share. CP Rail’s Canadian stock closed virtually flat at $470.21.
“This technology holds the possibility of eliminating emissions from freight train operations, which already represent the most efficient method of moving goods over land,” CP Rail CEO Keith Creel said in a statement on Tuesday.
CP Rail announced the creation of a new hydrogen-powered pilot project last December aimed at making the company a leader in decarbonizing freight transportation. CP Rail said at the time that it is also testing biofuels, natural gas and battery power. The company claims to have improved its fuel efficiency by 40 per cent since 1990.
Ballard plans to deliver six of its 200-kilowatt fuel cell modules to CP Rail in 2021, and will provide support to integrate the modules into the trains. The modules will provide a total of 1.2 megawatts of electricity to power the locomotive.
“CP's Hydrogen Locomotive Program in North America underscores the strong fit for zero-emission fuel cells to power heavy and medium-duty motive applications, including trains, for which it is otherwise difficult to abate emissions,” Ballard CEO Randy MacEwen added in the statement.
Currently, the vast majority of North American railway operators run on diesel power. Ballard believes nearly any train route served by diesel trains can be served by a hydrogen fuel cell-powered train, from regional and commuter train routes to shunt and yard systems.
Ballard estimates that by 2030 the total addressable market for hydrogen-electric trains will reach $4 billion; still far behind power components for trucks ($100 billion), busses and coaches ($14 billion), and marine transportation ($13 billion). The company has already used its hydrogen power modules in the UK’s first full-sized train refurbished with hydrogen power. It has also partnered with companies, including German industrial conglomerate Siemens (SIEGY), on hydrogen rail projects in Europe and Asia.
Ballard is scheduled to report fourth quarter and full-year 2020 financial results after markets close on Wednesday.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.