Hydrogen Giant’s Money Problems Show Industry Growing Pain

by Christine Mui (E&E News Energywire) A fuel cell developer aiming to build North America’s first “green” hydrogen supply network is running into financial troubles and facing skepticism from Wall Street analysts, dealing a setback to a technology at the center of the Biden administration’s efforts to decarbonize the economy.

Plug Power has invested hundreds of millions in its production capabilities, striving to open multiple green hydrogen plants so it can make 500 tons of liquid fuel a day by the end of 2025. A front-runner in the emerging industry, Plug Power is a corporate sponsor of five of seven hydrogen hubs selected by the Department of Energy for funding last month with $7 billion from the 2021 bipartisan infrastructure law.

But the company alarmed investors earlier this month by suggesting it could run out of cash over the next year after “unprecedented supply challenges” that have caused deployment delays.

Yet Plug Power CEO Andy Marsh brushed off the Wall Street reaction as “overstated” and called the challenges part of the learning curve built into all pioneering endeavors. The language in its warning was based on “a very technical accounting rule,” he said in an interview this month after the filing.

“I have zero debt, and I could go out today and raise capital, which would resolve any of those issues,” Marsh told E&E News. “Two months from now — when you got the first [plant] of its kind running at this size; it’s producing hydrogen — everybody is going to sit back and forget the challenges along the way.”

Frank Wolak, CEO of the Fuel Cell and Hydrogen Energy Association, echoed that view, saying “at some point, everybody’s got to be a first mover.”

Green hydrogen is not yet widely available in the U.S. or profitable, although the Biden administration is looking to the fuel to help the U.S. economy reach net-zero emissions by 2050. Marsh has projected that his firm is on the verge of breaking even after years of heavy losses.

The company is expanding into different parts of the hydrogen supply chain. That involves selling fuel cells for various applications, supplying hydrogen to customers and manufacturing equipment like electrolyzers, which are used to make hydrogen from renewable electricity.

Currently, Plug Power sources hydrogen from industrial gas companies but sells it at a loss to honor fixed-price contracts with customers, according to analysts. In 2021, the company moved to boost its financials by announcing its own network of production plants to make green hydrogen at one-third the cost of its purchases.

If it reaches 500 tons of green hydrogen daily by 2025, the company claims it will save 4.3 million metric tons of carbon emissions. But scaling up swiftly has proven difficult.

The delays have been costly. The budget for constructing the Georgia plant has nearly doubled since initially announced, noted Morgan Stanley analysts in a research note this month. The cost spikes are on top of cash Plug Power is burning as it struggles to generate its own green hydrogen and continues buying from third-party suppliers to meet customer contracts.

The company had set a highly ambitious timeline for the plant, aiming to complete it in under a year — about half the time as typical construction of a production facility.

Bagri (Citi analyst Vikram Bagri) said the credibility of the company is “now somewhat in question” after the missed timelines.

Marsh attributed the delays to extreme heat during the summer, a shortage of available labor and technical issues.

“To fully shift to its own green hydrogen supply, [Plug Power] needs to complete the construction of its Texas and New York facilities,” Morgan Stanley analysts wrote in the research note, suggesting the two plants will require $500 million and will “likely not be fully operational before 2025.”

Plug Power is in the running to receive a $1.5 billion loan from the Department of Energy, according to the company. The loan will be “important” to support the New York build-out, according to Marsh, who said the plant there could experience “months delays, not long-term delays.” Without the DOE loan, he said, he “won’t spend more money in New York” at this time.

His company has been an advocate in lobbying the Biden administration to consider a wider definition of “clean” hydrogen — a view that is not shared by many environmentalists who are concerned that the fuel may not be low-carbon without stringent standards, such as those requiring that hydrogen producers source clean electricity within the same region they operate.

As for DOE’s hydrogen hubs, Marsh said its projects for them have “not seen a pushback yet” from the recent financial challenges, but he argued that if the Treasury implements strict regional requirements, “you’ll never get the hubs off the ground.” READ MORE