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Ballard Power Systems testing facility in Burnaby, B.C., on Oct. 26, 2020.

Rafal Gerszak/The Globe and Mail

Shares in Ballard Power Systems Inc. (BLDP-T) surged to their highest level in nearly 19 years after the Canadian producer of hydrogen fuel cells signed a train deal in Scotland, the latest sign of industry momentum for alternative energy.

Burnaby, B.C.-based Ballard said on Tuesday it will supply fuel cell modules for the demonstration project to test a retrofitted passenger train in Scotland.

The hydrogen-powered train will be unveiled in November at the United Nations climate conference in Glasgow. Ballard and British-based Arcola Energy are part of a consortium that will showcase the converted ScotRail electric train at the UN’s 26th Conference of the Parties, also known as COP26.

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Separately on Tuesday, Plug Power Inc. of Latham, N.Y., announced a new joint venture with Groupe Renault to provide hydrogen fuel cells to the French automaker.

Industry analysts say a series of recent announcements in the hydrogen sector contributed to Tuesday’s rally in the stock prices of Ballard, Plug Power and FuelCell Energy Inc.

On the Toronto Stock Exchange, Ballard shares climbed 18 per cent to close at $43.59, hitting their highest level since April, 2002.

Ballard’s participation in the Scottish train project is a small but significant transaction, said MacMurray Whale, an analyst with Toronto-based Cormark Securities Inc.

“This order itself is a positive sign of the development of the train market,” Mr. Whale said in a research note.

The vision for the long term is to replace diesel-powered locomotives with trains that run on hydrogen and don’t emit carbon dioxide.

Plug Power shares soared 22 per cent to close at US$66.02 on the Nasdaq Stock Market. The joint venture with Groupe Renault follows last week’s news that South Korean conglomerate SK Group is acquiring a 9.9-per-cent stake in Plug Power for US$1.5-billion.

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“These initiatives are positive for Ballard as they confirm that the market opportunity is large and growing, rather than competition is getting stiffer,” Mr. Whale said.

Shares in Connecticut-based FuelCell – which specializes in onsite power generation and local hydrogen production – jumped 21 per cent to US$19.05 on Nasdaq, though the company didn’t make any announcement on Tuesday.

Raymond James Ltd. analyst Michael Glen said China’s Weichai Power Ltd., which bought a 19.9-per-cent stake in Ballard in 2018, plays an important role in the fuel-cell maker’s growth spurt during a “watershed moment in the history of the hydrogen economy.”

As part of Weichai’s plans to raise US$2-billion in equity, the Chinese auto equipment manufacturer is “emphasizing the importance of fuel cells as part of its growth strategy over coming decades,” Mr. Glen said in a research note this week.

The prized market for Ballard is in commercial transportation. Ballard is largely betting its future on what it calls heavy-duty motive — supplying fuel cell products for commercial vehicles that tend to travel much longer distances than passenger cars. Hydrogen fuel cells power vehicles by creating electricity without spewing carbon dioxide.

Ballard foresees a total addressable global market worth at least US$100-billion a year for fuel cell engines in commercial trucking alone by 2030, and another US$30-billion a year for bus, train and marine applications.

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Ballard has diversified over the years, expanding well beyond the niche market for forklifts.

Sales of fuel cell products for forklifts accounted for just 6 per cent of Ballard’s revenue in the first nine months of 2020. Over the past 11 years, Ballard has supplied more than 12,000 fuel-cell stacks in the market for forklifts used by North American distribution centres, such as those run by Amazon.com Inc. and Walmart Inc.

Rob Campbell, Ballard’s chief commercial officer, welcomed the deal with the train consortium in Scotland. “This project is an example of the growing global interest in fuel cells for the medium- and heavy-duty motive market, including rail applications, where heavy payload, long range and rapid refuelling are key customer requirements,” Mr. Campbell said in a statement.

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