Paul Rodden • Season: 2024 • Episode: 374
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Welcome to The Hydrogen Podcast!
Join Paul Rodden on The Hydrogen Podcast for an exclusive conversation with Sanjay Shrestha, President of Plug Power. In this insightful episode, Sanjay shares Plug Power’s ambitious vision for green hydrogen, their strategies to drive growth, and how they’re navigating challenges in the hydrogen industry.
Discover key topics like:
• Plug Power’s roadmap to profitability by 2025
• Competing globally with electrolyzer technology
• The impact of U.S. policies on the hydrogen market
• Exciting advancements in hydrogen infrastructure and partnerships
Don’t miss this in-depth exploration of Plug Power’s role as a trailblazer in the clean hydrogen economy.
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Paul Rodden
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Transcript:
Paul Rodden 0:00
And welcome to the hydrogen podcast. I’m your host, Paul Rodden, and today we have a very exciting conversation. I’m joined with Sanjay Shrestha, a key figure in the hydrogen industry. Sanjay joined plug power as Chief Strategy Officer back in 2019 as of this year, he has stepped up into the role of president under his leadership, plug power is focused on driving growth, expanding value for customers and shareholders, and continuing its momentum as a leader in the green hydrogen economy. Sanjay, thank you so much for joining us.
Sanjay Shrestha 0:32
Well, Paul, thank you so much for having me. Really appreciate it.
Paul Rodden 0:35
So let’s dive right in. Plug Power has made some significant strides over the past few years. And I know our listeners are eager to hear what’s next. What is plug power’s vision for the next year, and which milestones are you prioritizing?
Sanjay Shrestha 0:48
Yeah, so, so Paul, as you know, right? I mean, look, we’ve been a journey at plug for quite some time. Yeah, right. So, you know, obviously we’ve been very focused on making sure that we get the first viable and a large commercial market right for the hydrogen fuel cell industry, right? And it’s such a matter of such a great pride for us that, you know, we got the material handling market right, and only just that right. Working with some of the amazing customer, the learnings that you have when you work with the likes of Amazon and Walmart just has been tremendous. And with that, that really sets the stage, if you really want to kind of call it maybe that’s sort of like the phase one of our companies growth, if you would, right? And that’s where we really went from sort of, you know, trying to explore the right market, getting the first one right, and really getting that nice growth to a point where, you know, as you now know, we have the highest number of fuels our system in the field, right? We’ve been running them for over 1 billion hours, and not just that. I mean, we now have become the world’s largest user of liquid hydrogen to support this fuel cell application, right? So that’s really your phase one, if you would, right? Yeah. And then when you think about us, sort of the Phase two would be leveraging all of that, know how, understanding of that hydrogen ecosystem, having built that first vertically integrated turnkey solution for the material handling market. We’ve expanded our business quite a bit, between 2019 till now, if you would, right. So we’ve made a lot of strategic acquisition and then we put the pieces together. We are today. Now, you know, there’s not a single company in this world that can provide that end to end solution for your green hydrogen or your clean hydrogen. You know, we are we have the world’s largest electrolyzer manufacturing facility. We have the fabricated network on a global basis. We have the inner most energy efficient liquefaction technology in the market. We are producing some of the best payload hydrogen tankers that are moving hydrogen on the road, we have our storage solution. And to supplement all that, one of the things we feel really good about it is we’re also using this technology for our own hydrogen plants, so our customer gets that added benefit of our learning. The cost curve that we’ve already gone down, you know, the EPC experience that we have had in terms of building these plants, and we get to pass that on also to our customers, right? So I would say that’s sort of like you phase two, if you would, right, growing from a solely focused fuel cell hydrogen, you know, turnkey solution company to becoming a global green and clean hydrogen ecosystem company right now, let’s look next five years, right? You know, to your question, where are we gonna go from here? So we’re kind of compartmentalizing that into two buckets. Okay? I mean, look, and I think those of you who might have had a chance to listen to our symposium, we talked about the fact that, you know, we’re laser focused on, really 2025 right? Why is that? The reason it look last two years for the industry, even for us, has not been easy, right? I’m not gonna kind of say it anyway. Other than that, policy uncertainty pushing things to the right. You know, demand not materializing as quickly as thought. Lots of force majeure, of hydrogen supply in the industry in 2023 it has not been easy, right? So in 2025 our focus, and especially as a new mandate for me in my new role, if you would, is, how do we really get our not just the top line growth going, but also, how do you really start to demonstrate that margin progression throughout the year, right? And how do you make sure that we are consistently reducing our cash burn down? And that’s why we’ve set out this goal where exiting 2025 we want to make sure that we are able to and are targeting to exit the year by being gross margin positive, which we believe will be a pretty big milestone, not just for plug, but for the entire hydrogen industry, you know, as a trailblazer, if you would right, when you’re a trailblazer, you know, you do a lot of great things, you run into a lot of uncharted territory, sometimes some challenges, and you just have to navigate that. And once we set that right, then I think, you know, looking next, five years out, we’ve talked about 30% top line growth. We. Which really takes into consideration that there is going to be some policy benefit. But we have really not just looked at that number from a top down perspective, but we’ve really done a lot of bottoms up work, looking at what each segments of the business can contribute, how much of that is being driven by the backlog, how much of the new bookings we feel pretty good about. And we’re even thinking more notes, is that 30% top line growth, but how do you really get the margin leverage? How do you really get the labor and overhead leverage? You know, because we built the platform, right? You know, we’ve got the Gigafactory that can do one plus gigawatt electrolyzer a year, and multi gigawatt, if the need be. You know, we have an assembly plant in VISTA that can support a much bigger revenue, right? We have a manufacturing facility here in Houston, so looking beyond 2025 we’re targeting to be EBITDA positive in 2026 we’re looking to be operating income positive sometime in 2027 and we are not, as I said, Right? Paul top line growth, sales acceleration, needless to say, is very important. Working with a lot of customers, and we’re a customer obsessed company, at the end of the day, we listen to customer we make sure that we’re providing them an unbelievable value proposition. But we’re also implementing some of the SWAT team efforts that are focused on improving and consistently getting our product reliability better, life of our product better on our fuel cell stack side, on our electrolyzer side. And also thinking about, how do you improve the efficiency on our hydrogen business from a delivery perspective, generation perspective, end use perspective, put all that together. The goal here is to keep driving the top line, but drive that sustainable profitable growth for the company, you know, exiting 25 with positive gross margin, EBITDA positive in 2026 sometime by the second half, or hopefully by q2 of that year, and really looking at OI positive sometime in 2027 and overall, profitable for the for the company beyond that.
Paul Rodden 6:57
Fantastic, absolutely fantastic. So, and it does sound ambitious in terms of market growth. What key sectors or regions are you focusing in on in the US to drive that adoption and demand?
Sanjay Shrestha 7:10
Yeah, so great question. Paul, right, as I said, we had done a lot of bottoms up work when we rolled out this file, you know. So the plan till 2030 This is how we see it, right? I mean, we are a global company at the end of the day, right? And today, we actually have our electrolyzer systems running in five different continents. Now, why am I bringing electrolyzer topic up here? Because for next several years, given our funnel of the business, what we refer to as the lot of work we’ve done for basic engineering design packet, which is really like a front end study, where you work with the customer, yeah, we have over eight gigawatt in that front end funnel, if you would, right. Well, look, some of them will probably not go to final investment decision, right, and some of them will get to final investment decision, but we’ll keep adding to that, right? That eight gigawatt number is also not going to stay stagnant, if you would, electrolyzer is likely going to be one of the big revenue driver here for the next several years. And you know, and it’s not just the top line growth, as I said, right with the SWAT team effort focusing on driving our electrolyzer stack cost down, really thinking about optimizing balance of plan cost. We’re very, very focused on profitable growth in that business. And second, business that we think that is actually going to start to see some pretty meaningful growth continuously, which is already margin positive in a meaningful way. By the way, is our cryogenic business, and what do I mean by that? It’s really all of our non hydrogen and hydrogen tanker and trailer business supporting a lot of large customers in that area, right? That business should deliver continuous growth like it has done. This was an acquisition we made about three years ago. Manufacturing here is in Houston. We also have a manufacturing facility in Lafayette, Indiana, for that business. We expect that business to continue to grow. And there is one particular product that I think is really going to help with both top line as well as margin benefit for plug, it’s a mobile refueler product, right, which is a fantastic product for customer that are looking to do a lot of early stage deployment of transit, busses using fuel cell, right? Long Haul Trucking using fuel cell. It takes a long time to permit a new station, right? But this product is really like, Hey, let me give you hydrogen on wheels, so you can do what you need to do to really get this products in the market, right. So that business should do well next year, the year after and again, contribute and supplement the growth that already exists in that business, right? And by the way, we also think material handling business is going to start to come back up again, because 2024 was a year of reset might not honestly be the right choice. Award is, I would say, recalibration right now, because we hadn’t really raised hydrogen prices to our customers, right? We obviously did a lot of that, given all the force majeure and the supply short is a hydrogen. That the industry was faced with in 2023 because, you know, we had plug. We want to support the customer. We want to make sure that we provide them the right total cost of ownership, but at the same time, we also need to demonstrate a clear path to profitability and cash flow, right? So that’s why that business obviously had an impact from a growth standpoint in 2024 right? But looking into 2025 we actually do see growth accelerating in that business, in that 20 to 30% kind of a range, right? And then after that, we think, you know, there’s also a big refresh and an upgrade cycle, right? Because these systems are, you know, you actually go through that upgrade cycle with your existing customer every five to six years, right? And there’s a pretty big install base that is obviously going to supplement the growth. And with continuous focus on driving our infrastructure costs down, continuously improving our, you know, improving the reliability of our fuel cell stack, we also see, you know, addressable opportunity in the middle market where you don’t necessarily need to have 150 you know forklift trucks for the for the economics to work, you can actually go after the segment of the market that actually is even larger. We’re starting to get some traction in Europe as well, right? So, and then beyond that, you know, you should also expect to see our stationary product kind of continue to grow, but it will be a faster growth, because it’s growing off of a low base, right? But from a revenue mix standpoint, it might not be as big. Then look, and we’re also looking at some energy transition opportunity to supplement our liquefaction business, right? So when you then think from 2025 till 2028 or 2029 growth number one, electrolyzer growth. Number two, cryo business growth. Number three, material handling, continuous growth in the stationary product that we do, obviously, you know, also increasing growth, also in our hydrogen fuel business, especially as Texas plant comes online, right, right? And then sometime, it’s very hard to say exactly when, but sometime before the end of this decade, we believe there’ll be a step change in the growth in our stationary product, which will also have a double whammy of an effect, because that’s going to create and drive a lot of hydrogen demand, right? So that’s how we kind of see things unfolding between now until the end of the decade,
Paul Rodden 12:12
And stationary demand I see ramping up also…
Sanjay Shrestha 12:15
Absolutely, and I think that’s really again, I just want to make sure we’re being, you know, sort of thoughtful and, you know, realistic about the timeline of it, right? I mean, I think it’s, it’s really a 2820 sometime, 2728 type of a really acceleration. But that doesn’t mean that it’s not going to grow between now and then. It will continue to grow. But from a mixed perspective, I think it actually has a huge potential, given it can serve data center market, right? It is something that is being, you know, asked for as a product that can really help with EV charging, given the challenges we have with our electric grid. And think about how big this business could be once you start to think about potentially going after peaking power needs, right? You know, especially as you think about a grid that is faced with all sorts of challenges that we have here in North America.
Paul Rodden 13:01
Absolutely. So now I’ve heard a lot about the new facilities that plug power is planning, especially the new plant here in Texas. Like you mentioned, how is Plug Power planning to collaborate with other American manufacturers to expand and build these new facilities, and what role does this collaboration play in achieving your goals for the next year?
Sanjay Shrestha 13:19
Look, I mean, collaboration is super critical, right? I mean, I think especially at this stage of the industry growth, the way we’re thinking about it is, right? What we did in Georgia, right? We obviously bought a lot of different pieces of the equipment, like compressors, right, and things like that, from other domestic manufacturing companies here, right? And we actually, in case of our plant in Georgia, we also bought a liquefier from a company here in the US, right? And in case of Texas, and given what we’re able to do in Georgia, I think what is going to be very, very valuable is working with a very large engineering and construction company to be able to do a turnkey EPC. And again, that’s a domestic company here, right, which actually also reduces the risk of cost overrun and things like that on projects of the scale and size, right? Look, I mean, I think, I mean, this is where I think we as an industry, obviously, will make sure that we’re doing our part to educate and help a new administration also understands the importance of the section 40 5v, and I know this is not the question you asked me, but it’s important, right? Because, look, hydrogen and clean and green hydrogen is really all about energy security at the end of the day, right? If we want to think about, you know, a world where we can actually, in fact, have 100% renewable grid here in North America, it is possible. We can actually have a lot more solar, lot more wind. We can then think about nuclear and hydro as other source of base load power, right? And then, if you can think about hydrogen pipeline, hydrogen storage from a long duration standpoint, in salt cavern, really farming up the grid, think about what this section, 40 5v is. PTC, domestic job creation, right? High paying job, a perfect landing and the launching pad, if you would, for people coming from an oil and gas industry. It’s the same skill set at the end of the day. And by the way, 30% of the workforce at plug comes from the traditional oil and gas industry, right, everything you’re doing here is very similar. So look, I mean, I think we’re a big believer that we are. Look, I mean, we’re our plant in Vista, right, sligelman, which is in upstate New York, our plant in Rochester, right? Our plant here in Houston. We want to make sure that we’re really creating a lot of that domestic job and really, really focused on providing that energy security from a national perspective, which is so mission critical and without hydrogen, I think, you know, there’s a lot of, you know, look, there is no silver bullet at the end of the day, right? Hydrogen has to be a major part of this energy mix. You know, when we think about it, where this energy landscape will go nuts over next couple of years, but in multi decade, if you would
Paul Rodden 15:55
Absolutely… Plug power is one of the key players in the electrolyzer market, sure, but there’s been fierce competition, especially from China and India. How does Plug Power Plan to compete with these countries on electrolyzer production in terms of scale and also cost efficiency?
Sanjay Shrestha 16:11
Yeah, so couple of things on that, Paul, right. So look, I mean, when you’re thinking about capital equipment business and when you’re thinking about the size of the prize, which is pretty substantial, it’s natural that you’re going to see a lot of competition, right? There’s no question about that. And, you know, we had a couple of things, right? I mean, we’re not just selling our product on, hey, here is my dollar per kW. We’re really trying to sell value, if you would, at the end of the day, right? And you know, and when you think about especially the electrolyzer business, right, I mean, the levelized cost of hydrogen from that electrolyzer business is more about the renewable electron, right, rather than the capex. Right? Capex probably represents somewhere around 25 to 30% of the cost, and as the technology cost continues to go down, that number only goes down, not up, right? So the energy cost ends up becoming even a bigger piece of that cost, right? So now, if a customer is focused on long term service, long term value, long term reliability, and a being able to take advantage of the learnings and the know how that plug has gone through in its own existing plant. You know, look, I mean, is it really going to be a fierce pricing discussion between plug PEM electrolyzer versus electrolyzer coming from Asia? There’s always a potential for that. But are you better off paying the same price or even paying maybe a 5% premium for something that you know is going to be much better serviceable. So we do believe that customer will not just be 100% focused on just the price of that product, but also will think about the value and the solution that can having said that, let’s take a step back and think about what has happened in some of the other renewable energy industry, right? So when you think about some of the so wind turbine market, for example, right? You know, we built a lot of wind farms here in the US. Do you know of any Chinese or Indian wind turbines here in the US? Yeah, I don’t. Right, so to to us, electrolyze is a little bit more like wind industry, but not maybe so much solar industry, because you’re talking about hydrogen, right? I mean, think about it, if I am a refining industry, right? And the hydrogen is something I need for the hydro treating application, yeah, and the cost of that component is probably not as important as making sure the refining runs. Well, what are you going to go for? Are you going to go for value, or are you going to go for the lowest possible cost of the product, right? Right? So that’s kind of how we look at it. But then again, having said that, solar industry is an industry where there’s obviously been a lot of look, I mean, lot of you know, lot of innovation from the companies out of Asia as well. There’s a lot of players out of Asia that have actually done well here in the US too. You know, not just the US company, right? So look, and at the end of the day, I think Paul, right, we’re focused on continuing to drive costs down. We certainly have a long lead time advantage versus other players in the market. You know, we’re going to stay focused on it. We’re going to keep driving our cost down, keep improving the value of our product. And one last thing, right? I mean, we’re not as focused on how big of a pie can I get of an existing pie, the focus of the entire industry needs to be let’s grow the size of this pie, right? So you can actually grow the size of the market, grow the size of that opportunity set. I’m hopeful, frankly, from a global perspective, that there’ll be a company or two out of Asia that’ll be successful in this industry. It’s a good thing, right? It’s such a big opportunity that at plug, we just want to make sure that we remain an industry leader and get our fair share, my friend, right.
Paul Rodden 19:43
Fantastic. Are there any unique technological advantages or advancements or strategic partnerships you’re leveraging to maintain competitiveness?
Sanjay Shrestha 19:51
Look, we do. We spend a lot of time thinking through supply chain, obviously, right? I mean, I think, how do you keep thinking about supply chain from COVID? Cost reduction perspective, to working capital management, cash flow perspective, right? And even on the hydro, for example, right, on the electrolyzer side. I mean, you know, we produce our stack in Rochester. We work with a lot of fabricators who know how to do that better, right, while supplementing some of that fabrication capability at Vista, right? I mean, obviously, I think we don’t believe that we have to do everything on our own right. We want to focus on excellence of what we bring to the table. But more importantly, it’s really about, how do you help drive levelized cost of hydrogen down so the economic value proposition for fuel selling all this different product line keeps getting better, right? That’s really what this is about. I mean, look, we actually work with various supplier on the precious metal side, right? And, you know, we certainly have a lot like, for example, right? When it comes to some of the long haul trucking market or the mobility market, you know, our approach there is really work with customers that are already in that business so that we can support them with infrastructure needs, right? Or be the preferred choice of hydrogen supplier, right? And when it comes down to, you know, some of the other areas, like stationary product, right? We’re going to continue to work with the right partners here that are already in the business of building this hyper scale data center and things like that. Let’s work together, you know. So you know about our three megawatt product that we worked with Microsoft, right? Which has obviously been a great test case to really get this industry going. So look, I mean, partnership, collaboration is absolutely critical and crucial in this industry, right? And we frankly, don’t think about customers or customers, they’re our partners, right? Yeah, think about the level of learnings and the collaboration that has allowed us to become even a better company working with Amazon and Walmart, right? That’s how we think about it, and that’s our philosophy in terms of how we grow and where we go, my friend.
Paul Rodden 21:47
That’s great. That’s great. Great. Now, turning to policy landscape here in the US, it’s been changing quite a bit lately, little bit, and with all the movement, how will plug power align its strategy to effectively meet policy requirements and market incentives?
Sanjay Shrestha 22:02
So look, I mean, obviously we have a new administration coming in, right, and we are looking forward to collaborating and working with them. And as we just talked about it, Paul right, hydrogen has always had a bipartisan support, right? I’m sure there’s gonna have to be some education and learnings, and we really look forward to collaborating and working with them. And section 40 5v production tax credit, I think, is such a powerful policy incentive that can really make us as a nation, a leader in this clean and green hydrogen industry. Yeah, also ship, you know, green ammonia and blue ammonia industry, frankly, right? We can actually be such a big exporter of that, which is such a huge benefit from the fund flow and the energy perspective, right? We can actually create an energy security, you know, much better than what we would have been able to do otherwise. So look, I mean, you know, and if anything, this might be a controversial comment, but I’m gonna go ahead and make it frankly speaking, I’m actually hopeful, right? Because when we had this Ira come in, right? This three pillars, which somebody said they try to actually learn how to spec spell pillars. I’m trying to figure out how to unspell it honestly, right? So if there is some simplification of three pillars, you know, under the new administration, because I think one of the things new administration is talking about is really creating a lot of efficiency in the government. We hope that’s a piece they’re going to trying to tackle and address as well. That would be a great thing for the industry, not the other way around, right? Because we do need, it kind of like we need a lot of different sources of energy to make sure that we’re being, you know, we’re energy independent, and it’s all about energy security, and we’re creating a lot of great jobs. So, but look, but I’m sure we are, you know, while this is a bipartisan issue, lot of like our manufacturing facility, right? What we make all this equipment, it’s in Houston here, right? It’s in Indiana. Our plant is in Tennessee. Our plant is in Georgia. We’re building a 45 ton plant in Texas, right? It’s in a lot of red state, but it’s even beyond red and a blue state, you know, I think, you know, it’s been a bipartisan topic. We’re hopeful that the new administration will keep an open mind, and especially the governor of North Dakota, which was such a big proponent of the hydrogen hub. Him being an energy czar, that’s fantastic. Hopefully we’ll see great things from him. Yeah. So we’re cautiously optimistic, and we’re more than happy to work collaboratively and help explain and educate both policy and makers in terms of why this is so important. We have such an amazing momentum. We cannot derail this, and we gotta keep pushing this ahead.
Paul Rodden 24:29
I couldn’t agree more. And how do you see the current and future policies impacting hydrogen market demand in the US, and what steps is Plug Power taking to capitalize on those opportunities?
Sanjay Shrestha 24:42
Look, I think section 45 is important me. Let’s just say, as I said, right this, ITC, and the 30% ITC, which is part of the energy storage tax credit for the hydrogen plant, is pretty important. I think low carbon fuel standard credits, LCFS in places like California, making, you know, hydrogen more economical. From long haul trucking and the mobility market perspective is very important, right? So there is obviously a demand piece, right, and there is a supply piece, right? Production tax credits is really addressing the production piece, right? Which, I think, and Paul, I think, what it really comes down to, right, is everybody sort of talks about long term off take, really needing to build the industry and all that you know, which, by the way, we agree. But I think what is more, also critical is really focusing on getting that levelized cost of hydrogen right, because there is already a lot of existing demand. If the price is right, right, and there should be some premium, frankly, doesn’t have to be a lot, but some premium, right? And look, and I think I you know, so going from 300 tons of liquid opportunity to 25,000 tons per day of gaseous hydrogen, potentially starting to displace gray with green, I think, is a pretty substantial opportunity, right? So, and I think anything that actually from the government policy standpoint, whether in the form of low low Fuels Standard LCFS, right, low carbon fuel standard credit or something like that. That can really help make economics of hydrogen better, PTC, making the economics of production for green hydrogen better. Combine the two, I think that could be a very, very powerful combination.
Paul Rodden 26:14
I agree, fantastic. I think, I think you’re the right person for this job.
Sanjay Shrestha 26:17
I appreciate it, my friend. Thank you so much.
Paul Rodden 26:20
Thank you for sharing your insights today. It’s clear that plug power has an ambition and inspirational vision for the future of green hydrogen. And I know our listeners will be excited to see how things unfold in the coming year.
Sanjay Shrestha 26:31
Paul, I really appreciate the time and again to all the listeners not sure exactly when the when this is going to go out, but But look, wish everybody happy holidays. And you know, hydrogen is very important piece of addressing our energy transition. And look we at plug we’re heads down, focused on making sure that we’re doing our part. thank you, everybody.
Paul Rodden 26:50
And so again, to everyone tuning in, thank you for listening to the hydrogen podcast. If you found today’s discussion insightful, please make sure to subscribe and leave us a review. Stay tuned for more conversations with industry leaders as we continue to explore the incredible world of hydrogen. Until next time, I’m Paul Rodden and this is the hydrogen podcast.
