Paul Rodden • Season: 2024 • Episode: 352
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Welcome to The Hydrogen Podcast!
In episode 352, In this episode, Paul discusses whether Plug Power will remain a major player in hydrogen over the next three years. He examines the challenges facing the hydrogen industry, including cost, infrastructure, and long-term business strategies, while highlighting the need for innovation and strategic investments.
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Transcript:
Will Plug Power still be with us in three years, and if so, what will it look like? And is hydrogen a good business? I’ll go over these questions and give my thoughts on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally, and where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
In an article in The Motley Fool Ryan Vanzo writes, Where will plug power be in three years? It’s not hard to paint a rosy picture for hydrogen stocks like plug power, According to a recent report by global consultancy McKinsey & Co, “global clean hydrogen demand is projected to grow significantly by 2050, but infrastructure scale-up and technology advancements are needed to meet projected demand.” As a company that provides that infrastructure and technology, Plug Power is in the driver’s seat to meet this growth in demand that could be sustained for decades.
With a market cap of just $1.8 billion, there is certainly plenty of upside potential to Plug Power stock. Deloitte, another global consultancy, predicts that the global market for hydrogen could reach $1.4 trillion by 2050. But what about the next three years? The true growth potential of Plug Power stock might surprise you.
While wind and solar power get most of the attention, hydrogen power has a large opportunity to help the world transition away from fossil fuels. That’s because hydrogen fuel is particularly good at decarbonizing what economists call “hard to abate” sectors. Asphalt, cement, steel, shipping, aviation — these are just a few areas where replacing fossil fuels with renewable energy remains very difficult.
Hydrogen fuel is a viable substitute for two reasons. First, it has a much higher energy density than batteries. This makes it a suitable option for trucking and aviation, where hauling voluminous, heavy batteries isn’t practical. Additionally, sectors like steelmaking, cement production, and petrochemical require very high temperatures to operate, sometimes in excess of 1,000 degrees. Hydrogen can create this level of high heat, whereas electricity — whether produced by clean or dirty forms of energy — struggles.
If we want to decarbonize hard-to-abate sectors of the economy, hydrogen has a strong case. But demand is still very much in its infancy. There’s a reason why research from Deloitte and McKinsey & Co focuses on timelines all the way out to 2050 — it will take that much time for the hydrogen economy to take off.
Hydrogen fuel in general still isn’t cost-competitive with fossil fuels. And hydrogen can be produced with cleaner or dirtier methods, meaning that a transition to hydrogen fuel won’t necessary decarbonize the sector in question. Plus, hydrogen requires a lot of infrastructure — everything from production and transportation to distribution. It also needs a fleet of end users ready to accept it as a fuel source.
Hydrogen fuel has a lot of promise. But there are clear hurdles that make this a multi-decade story. Don’t expect this equation to change over the next three years. There’s no doubt that Plug Power has an early start. The company was started in 1997, and went public in 1999 at the height of the dot-com bubble. Suffice it to say, it’s been a long journey. Long-term investors haven’t been that satisfied. If you had invested in the company during its IPO, you’d have just 1.25% of your original capital left.
The issue facing Plug Power over the next few years is no different than the challenges that have plagued the company since its founding. Hydrogen power, for all its promise, is still ahead of its time, and an inflection point is nowhere close. Goldman Sachs estimates Plug Power’s equity duration — or the weighted average duration of its cash flows — to be roughly 26 years.
That’s a long time to be waiting. And during the interim, expect heavy dilution. Over the last few decades, Plug Power shares have struggled due to a lack of profitability, but also due to the massive share dilution necessary to keep the company afloat.
Over the next three years, there aren’t many major catalysts to look forward to. Raising capital will continue to be a challenge, and expect management to continue touting the potential of the hydrogen economy as a whole. But even if the hydrogen economy does unexpectedly take off, there’s no guarantee that Plug Power’s technology in particular will win.
Where will Plug Power be in three years? Likely in the same place it is today: Struggling for financing, hoping that a hydrogen inflection point arrives much sooner than expected.
Okay, so great question, Where will plug power be in three years? This company has ridden the hydrogen train for 27 years. That’s not a small feat in this industry. Now, with this latest hydrogen boom, many are looking at plug as the barometer for hydrogen, at least here in the US. But they should remember, plug has several verticals within their company that are successful.
Take a look at their fuel cell line, for instance, and now, with their expansion into green hydrogen and hemorrhaging cash to expand operations, their stock has been on a declining roller coaster for a while now. But here’s the thing, those looking for a quick turnaround thought they would find that in plug power. But this article has it right, and it’s also something I’ve been saying since the beginning. We are looking at a 2050, timeline at minimum, and it’s highly doubtful we’ll see something sooner. The massive amount of infrastructure needed for development is in the decades, not months or years. So for those investors looking for a near term hydrogen payday. It’s not going to come from a single company or a single project. These are broad scopes right now, and yes, things are changing rapidly, and some major breakthrough could ramp up timelines, but it’s doubtful.
That’s why, on this show, I talk about a transition, not a light switch. Develop projects with long term hydrogen supply and offtake baked into the deal, and don’t fret over some magical reduction in green hydrogen pricing. Even if there is a breakthrough technology that drastically reduces the price point for green hydrogen, it will need several years of testing and development updates to make it profitable at scale.
Next in an article in tech explorer, Tom Leslie writes, hydrogen is touted as a climate solution, but can it be good business? Tom writes, hydrogen is often seen as a key element in the global energy transition, offering a cleaner alternative to fossil fuels—in particular for difficult-to-decarbonize sectors such as heavy-duty transportation and steel and cement manufacturing. But turning hydrogen into a globally traded commodity requires more than just production.
According to new research from UBC Sauder School of Business, hydrogen’s commercial success hinges critically on innovation, strategic government policies, and long-term contracts to ensure cost-effective production and scalable trade.
The work is published in the Journal of Environmental Economics and Management.
The study developed an international trade model to examine factors that would make hydrogen producers competitive on the global scale, such as transportation costs, government policies and technological advances.
“Hydrogen has tremendous potential to reshape energy markets,” said Dr. Werner Antweiler, associate professor at the UBC Sauder School of Business and co-author of the study. “But making it profitable requires coordinated efforts across governments, industries and markets to reduce costs and build the infrastructure for trade.”
Hydrogen’s commercial viability depends heavily on reducing production costs, particularly for green hydrogen, which is produced from renewable energy sources like wind and solar. While green hydrogen is the cleanest option, it’s currently the most expensive compared to blue hydrogen (produced from natural gas with carbon capture) and turquoise hydrogen (produced by splitting methane).
“We’re seeing progress with cheaper solar power, but we also need breakthroughs in electrolyzers to make green hydrogen viable at scale,” said Dr. Antweiler.
Transportation is another major challenge. Hydrogen is costly to move.
“Hydrogen can be transported in two ways: using converted natural gas pipelines or liquefying it, either by cooling it like natural gas or converting it into ammonia for shipment by tanker,” said Dr. Antweiler.
Instead of just subsidizing production, governments will need to invest in infrastructure—pipelines, export terminals and storage facilities—to support cost-effective hydrogen trade.
“Hydrogen producers want to focus on production, not building export facilities. There’s a lot of development needed outside the hydrogen industry itself,” noted Dr. Antweiler.
Government policies would also need to prioritize innovation. Countries investing in research and development for cheaper electrolyzers or methane pyrolysis for turquoise hydrogen will gain a competitive edge in the emerging market.
“Innovation is the real game-changer. There’s significant potential for hydrogen to transition from locally interesting to globally traded as these technologies develop,” said Dr. Antweiler.
A key finding was the importance of long-term contracts in the hydrogen market, where capital-intensive production plants require long-term certainty. These contracts stabilize prices and ensure reliable demand, providing security for both producers and buyers.
“Hydrogen won’t operate like the spot market for oil and gas,” said Dr. Antweiler. “Developers need guarantees of customers for years to come, which is why long-term contracts are crucial.”
However, these contracts also carry risks. A country might commit to blue hydrogen today, only to find that green hydrogen becomes cheaper later. Balancing stability with flexibility will be key to the hydrogen market’s long-term success.
The study found that hydrogen trade is likely to involve both exporting and importing, unlike oil markets where countries typically do one or the other. Many countries have the potential to produce hydrogen with renewable energy, while the supply of fossil fuels is concentrated in a handful of large producer countries.
“Hydrogen trade could evolve into a system where countries both buy and sell,” explained Dr. Antweiler. “As demand increases, nations will need to secure supply from multiple sources, making hydrogen a flexible, globally traded commodity.”
Dr. Antweiler noted that major energy companies in Europe and the Middle East are already investing billions in hydrogen infrastructure as they prepare for a future where hydrogen plays a central role in energy markets beyond fossil fuels.
Okay, so is hydrogen good business in a word, I would say yes, but it must be done the right way. And I would say for the most part, innovation and strategic project management are moving in the right direction, and as those two pieces move forward, long term contracts will develop. But again, what’s missing in this article is the inclusion of the support infrastructure that needs developing along with everything else. People talk of production and offtake without mention of the support solutions that need to be developed at the same time, safety systems, engineering, materials, fabrication, manufacturing, inspection protocols and so much more. But what does this article finally include methane pyrolysis and the need for investment in that technology. Thank you Tom for finally addressing that point.
All right, that’s it for me, everyone. If you have a second, I would really appreciate it. If you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, YouTube, whatever it is, that would be a tremendous help to the show. And as always, if you ever have any feedback, you’re welcome to email me directly at info@thehydrogenpodcast.com. So until next time, keep your eyes up and honor one another. Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
