Plug Power Inc. (PLUG, Financial) is a global company specializing in developing scalable, end-to-end hydrogen solutions. With a market cap of $7.61 billion, this growth stock is a member of the Nasdaq Composite Index. As such, it is no surprise the stock has fallen nearly 50% in the last year. However, it appears to have found a floor at $10 per share and now trades just over $13.
In this two-part series, I will take a deeper look at green hydrogen technology and Plug Power itself.
Green hydrogen technology
Electrolysis
Hydrogen has many purposes. To begin, hydrogen can be used as a raw material to manufacture ammonia and fertilizers, refine petroleum and in metallurgy to obtain steel. It can also serve as an energy storage system due to its large volume and long lifespan. This could be used to support the electricity grid. Additionally, the element can be used as a clean fuel for transportation.
Green hydrogen refers to the generation of hydrogen using electrolysis and renewable energy. Electrolysis (Figure 1) refers to the breaking down of a substance using electricity. In the case of hydrogen, this refers to the breaking down of water into its two elemental components, hydrogen and oxygen. If renewable energy is used to provide the electric current, then the entire process does not emit carbon dioxide.
Figure 1
The main type of electrolysis used by Plug is polymer electrolyte membrane (PEM) electrolysis.
Hydrogen fuel cells
A fuel cell works in the opposite direction to electrolysis. It uses the chemical energy of hydrogen and oxygen to produce electricity, with water and heat as the only byproducts. Advantages of fuel cells in comparison to combustion engines include the potential for zero emissions, higher efficiencies and no air pollutants.
Plug uses PEM fuel cells, which have been developed mainly for transportation, stationary fuel-cell and portable fuel-cell applications.
Liquid hydrogen stations
Liquid hydrogen fuelling stations are used to refuel hydrogen fuel cell vehicles. They have three key components:
- A cryogenic storage tank which holds 15,000 to 18,000 gallons of liquid hydrogen.
- Compression pumps, which compress liquid to gaseous hydrogen.
- Gaseous storage tubes.
Issues
Though promising, hydrogen has many issues. While the cost of hydrogen storage can be low and technically feasible, there are losses from energy transformations and high cost from equipment. This makes hydrogen an expensive solution in comparison to alternatives.
Further, large scale transport of hydrogen is inefficient and causes huge energy losses along the supply chain. Liquification of hydrogen consumes 30% of the energy in hydrogen. Estimates suggest that only 23% of the original energy remains at the end of the transportation process.
Business model and strategy
Plug’s strategy relies on creating comprehensive hydrogen solutions for companies, from generation of hydrogen from water to delivery and storage. Acquisitions have accelerated it vertical integration. The company has also entered many joint ventures and strategic partnerships with major companies.
Its future strategy revolves around expansion. In 2021, Plug announced four new hydrogen plants planned to be constructed in New York, Georgia, Texas and California. Further, Plug has entered a joint venture with SK E&S Co. Ltd. to open a gigafactory in South Korea and a joint venture with Fortescue Future Industries Ply Ltd. to open a gigafactory in Australia.
Plug’s products and services primarily serve the North American and European material handling markets, and mostly support mid-to-large-sized fleets, multi-shift operations in high-volume manufacturing and high throughput distribution centres. The company plans to expand further into North America, Europe and Asia. It is currently constructing a 100 megawatt green hydrogen plant in Antwerp-Bruges in Belgium.
Plug also plans to expand into four new markets: on-road vehicles (delivery vans, cargo vans, trucks and buses), large scale stationary power (data centres and microgrids), aviation (commuter and cargo planes and drones) and large-scale stationary power fields for critical operations, data centres and generation facilities.
Key objectives include to decrease product and service costs while expanding system reliability.
Products and services
Plug is focused on green hydrogen, providing comprehensive, ready-for-use hydrogen fuel cell solutions used to power electric motors in the electric mobility and stationary power markets. Having developed the first commercially viable fuel cell, the company offers electrolyser solutions that cover a variety of applications, from mobility to power to chemical industries. Plug Power has sold over 50,000 fuel cell systems as of Dec. 31, 2021.
The company says its PEM electrolyser hydrogen production products are safer, smaller, lighter and more responsive than alkaline technology alternatives. Further, it notes that using pure water instead of corrosive potassium hydroxide means far less maintenance and lower cost of ownership.
It has seven main products and services.
The first is GenDrive. The hydrogen-fuelled PEM fuel cell system provides power to material handling electrical vehicles, including forklifts, automated guided vehicles and ground support equipment.
The second offering is GenFuel. Its services include the design, construction, commissioning and maintenance for all components required to store hydrogen at a variety of sites without disrupting operations. The business also delivers and dispenses hydrogen.
The GenSure division provides hydrogen fuel cell backup power solutions for markets in the telecommunications, transportation and utility sectors.
Next is GenKey, a turnkey package combining either GenDrive or GenSure fuel cell power with GenFuel fuel and GenCare aftermarket services. This creates a simple solution for customers transitioning to fuel cell power.
Another product is ProGen, a fuel cell stack and engine technology used in mobility and stationary fuel cell systems, as well as engines in electric delivery vans. Customers include Mulag and FedEx (FDX, Financial).
GenFuel electrolysers are modular, scalable hydrogen generators optimized for clean hydrogen production. These electrolysers generate hydrogen from water using electricity, PEM and renewable energy inputs.
Finally, GenCare is a cloud-based maintenance and on-site service program for GenDrive, GenSure, GenFuel and ProGen.
Further, the company is focused on expanding its product offerings and services to include the handling, transportation and liquification of hydrogen.
Revenue
Revenue is primarily generated from the sale of fuel cell systems, related infrastructure and equipment. This includes sales of GenDrive units, GenSure stationary backup power units, cryogenic stationary and on-road storage, electrolysers and hydrogen fuelling infrastructure.
Plug expects high levels of expansion, with revenue nearing $4 billion in 2030.
Strategic partnerships
Strategic partnerships have allowed Plug Power to gain access to the on-road vehicle market and large-scale stationary market, as well as various international markets.
The company currently has three highly important strategic partnerships:
- Plug Power France entered a joint venture with Renault (XPAR:RNO, Financial), called HyVia, in the second quarter of 2021. HyVia intends to manufacture and sell fuel cell-powered electric light commercial vehicles (FCE-LCVs). It will aslo supply hydrogen fuel and fuelling stations to support the FCE-LCV market in Europe.
- Plug Power Spain entered a joint venture with Acciona (XMAD:ANA, Financial), called AccionaPlug S.L. (AccionaPlug), in the fourth quarter of 2021. AccionaPlug will develop, operate and maintain green hydrogen projects throughout Spain and Portugal.
- The company entered a joint venture with SK E&S, called HALO Hydrogen Co. Ltd. (HALO Hydrogen), in the first quarter of 2022. HALO Hydrogen plans to accelerate the use of hydrogen as an alternative energy source in Asian markets. The two companies will provide hydrogen fuel cell systems, hydrogen fuelling stations, electrolysers and green hydrogen to South Korea and other Asian markets.
Additional strategic partnerships include:
- A strategic partnership with Airbus SE (XPAR:AIR, Financial) to study the feasibility of bringing green hydrogen to aircraft and global airports.
- In April 2021, Plug announced an investment of 160 million euros ($170 million) in FiveT Hydrogen, a private infrastructure fund for delivering clean hydrogen infrastructure projects.
- A strategic partnership with Lhyfe (XPAR:LHYFE, Financial) to develop green hydrogen generation plants throughout Europe.
- A strategic partnership with Edison Motors to develop prototypes for Edison’s fuel cell electric bus using ProGen.
- A strategic partnership with FFI to build a gigafactory in Queensland, Australia.
- A strategic partnership with Phillips 66 (PSX, Financial) to develop low-carbon hydrogen business opportunities.
- A strategic partnership with Apex Clean Energy to develop a green hydrogen production facility in Virginia.
- A strategic partnership with BAE Systems (LSE:BA., Financial) to supply powertrains to heavy-duty transit bus original equipment manufacturers in North America.
- A strategic partnership with Universal Hydrogen Co. to develop cost-competitive green hydrogen in comparison to jet fuel.
- A strategic partnership with Niloco Hydrogen Holdings, called Hidrogenii, which will support supply reliability and speed to market for hydrogen in North America.
Additionally, Plug is currently collaborating with McDermott International Ltd. (MCDIF, Financial) to develop a 1 gigawatt concept design which provides an adaptable framework to accelerate the development of green hydrogen plants. The design unlocks multiple benefits through integrating modular technologies and optimizing the balance of plant through standardization and centralization. Plug’s liquefaction products in addition to McDermott’s storage expertise should make storage and transportation of hydrogen safe and efficient.
Up next
In the second and final part of this analysis, I will look at Plug Power's recent acquisitions, manufacturing supply chains, customers, financials, competitors, overall strengths and weaknesses, opportunities and threats, as well as provide a conclusion for investors.
