Fuel cell stocks offer the promise of new technology and innovation, but they are characterized by smaller market caps and increased volatility. At the same time, China is starting to be a hot new option for energy companies, whether it is solar or even some of these fuel cell companies. Ballard Power Systems Inc. (NASDAQ: BLDP) is paving the way with its most recent deal.

Ballard has announced that the world’s first hydrogen fuel cell powered, fixed-rail electric tram was successfully demonstrated at the production and testing facility of CSR Qingdao Sifang company.

CSR is a Chinese rolling stock manufacturer based in Qingdao, Shandong province, that was established over 100 years ago. Also note that the company has a yearly production capacity of 200 high-speed electric multiple units, 1,000 mass transit vehicles and 300 high-grade passenger cars. Additional testing of the fuel cell-powered tram is being completed at CSR Sifang’s facility in Qingdao.

Randy MacEwen, president and CEO of Ballard, commented on the announcement:

This is an exciting demonstration of our world leading fuel cell power modules in a new application. Clean urban transportation is a high priority in China and this zero-emission prototype fuel cell tram is an important step in demonstrating one solution.

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In February, Ballard breathed some life into other alternative energy stocks, but currently it is taking some of the air out of FuelCell Energy Inc. (NASDAQ: FCEL), which Tuesday was trading down about 1.5% at $1.31, in a 52-week trading range of $1.05 to $2.84. However, Plug Power Inc. (NASDAQ: PLUG) responded positively to this news and was up 1.5% at $2.57.

Back in February, Ballard got a contract worth about $80 million that added about $140 million to its market cap. Following that announcement, shares traded nearly 63% higher than the previous closing price at the intra-day high of $2.78 on February 11.

That deal with Volkswagen and Audi called for the transfer of some auto-related fuel cell intellectual property and a two-year extension to an existing engineering services contract that Ballard Power has with the companies.

Last year, Plug Power announced a contract to supply more than 1,700 fuel-cell powered forklifts to Wal-Mart Stores Inc. (NYSE: WMT) and Plug Power, Ballard and FuelCell all hit multiyear highs. Ballard traded at its 52-week high above $8 a share on Plug Power’s announcement. Before that previous announcement, only Plug was trading higher for the year to date, and that by just 2%.

Shares of Ballard were up 10% Tuesday, at $2.38 in a 52-week trading range of $1.41 to $4.52. The stock has a consensus analyst price target of $2.31.

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