Plug Power has a $1 billion revenue goal — and that's going to require a lot more hydrogen
For Plug Power to get to its goal of $1 billion in revenue by 2024, the Latham fuel cell manufacturer will need a lot more hydrogen — estimating it will use about 85 tons per day in the next five years, up from 20 tons per day today.
CEO Andy Marsh has said much of Plug's growth will come from its sales of fuel cells for vehicles like forklifts and delivery trucks, but some could come from expanding Plug Power's hydrogen production and finding potential reoccurring revenue there.
"Today, we're the largest user of liquid hydrogen in the world. By 2024 we’re going to be using four to five times more hydrogen," Marsh said in an interview with the Business Review following the company's two-day investor symposium earlier this fall.
"When you look at growing into on-road vehicles for [electric vehicles], there's no reason Plug can't provide the hydrogen," Marsh said.
To prepare for that increase, Plug in September announced a new hydrogen supply agreement with United Hydrogen — a company based in Georgia with a production facility in Tennessee. As part of the three-year agreement, United Hydrogen will supplement Plug Power’s hydrogen delivery operation with a supply of liquid hydrogen.
Almost all of the hydrogen produced in the United States currently comes from natural gas. Plug gets about 20% of its hydrogen from renewable energy sources now — and it's aiming to increase that share to 50%.
Plug and its suppliers plan to use a process called electrolysis, in which electricity splits water into hydrogen and oxygen, to expand production of "green" hydrogen. If the electricity splitting the water is produced by renewable sources — say, excess electricity from solar or wind — the hydrogen will be considered renewable as well.
"With the price of solar energy declining so rapidly, it starts being a cost effective way for generating hydrogen," Marsh said. "One of the challenges with renewables is either the wind is not blowing or its blowing too much, and another part of the issue with storage is how do you manage that. If you're creating a fuel with it, you're creating something of greater value. Electrolysis through wind or solar is a viable way to generate hydrogen."
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The primary business for Plug Power (Nasdaq: PLUG) has been making hydrogen fuel cells that power forklifts in warehouses and distribution centers. The fuel cells are an alternative to lead-acid batteries.
Plug has shipped more than 28,000 fuel cells to dozens of warehouse customers, including Amazon (Nasdaq: AMZN) and Walmart (NYSE: WMT). Along the way, it surpassed NASA to become the world’s largest user of liquid hydrogen.
Plug said growth will come from its anchor customers — including Amazon and Walmart — and the addition of one new multisite customer annually. The company expects to be selling more than 25,000 units a year by 2024.
Since Marsh joined the company in 2008, Plug Power shifted its model from a focus on research and development to manufacturing fuel cells for the material handling industry. More recently, Marsh has been mapping out a diversified future for the company beyond material handling.
For example, Plug secured a deal earlier this year to supply hydrogen fuel cell-powered engines for 100 electric delivery trucks for DHL in Germany. The company also started a pilot program last year in which electric FedEx trucks delivering packages in the Albany area were outfitted with hydrogen fuel cells.
As part of its five-year plan, Plug expects to generate $200 million of annual revenue from the on-road electric vehicle market and $50 million of revenue from stationary applications (like power stations or data centers) by 2024.
Plug's stock was selling at $2.82 on Monday morning. The company will release its third quarter earnings this week.
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