Production

Plug Power expects to produce green hydrogen at a third of cost of volumes purchased from industrial gas companies

The company anticipates easier access to subsidies in US than Europe, but continues to call against rules that could bump up the cost of producing green H2

Plug Power CEO Andy Marsh.
Plug Power CEO Andy Marsh.Photo: CQ-Roll Call/Getty/CQ-Roll Call, Inc via Getty Images
Green hydrogen company Plug Power expects to produce and deliver liquid H2 at a third of the cost of its current third-party purchases from industrial gas companies from the second half of this year, CEO Andy Marsh told a Q2 earnings call yesterday (Wednesday).

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With the clean hydrogen production tax credit, guidance for which is set to be published imminently, Marsh predicts that Plug could deliver liquid green H2 to its customers for around $4.50-5.00/kg “in the best case”.

The company is currently in the final stages of commissioning a 15 tonne-per-day green hydrogen production and liquefaction plant in Georgia, expected to reach full capacity in Q3. And it has a further three projects in New York, Texas and Louisiana due to be completed next year.

These plants are expected to allow Plug to produce hydrogen in-house at a cost that is a third of purchased volumes from industrial gas companies, which can exceed $10/kg.

As such, it anticipates a “notable improvement in fuel margin beginning in the second half of the year” as its green H2 plants come on line. The company also anticipates a reduction in electrolyser production costs with the ramp-up of its gigafactory in New York towards a 100MW-per-month capacity as of May.

While Plug raked in $260.2m in revenue for the second quarter of this year, it also reported a net loss of more than $263m (around 31% further in the red year on year), with $45m of costs due to these “multiple scale up activities” during Q2.

However, it has reaffirmed its revenue guidance of $1.2-1.4bn for 2023. And the company tracks a $5bn pipeline of potential electrolyser sales to 7.5GW of projects likely to reach final investment decision within 12-18 months.

Plug is also in the final stages of progressing a $1bn loan from the US Department of Energy, with the aim of finalizing it between the middle of November and early December.

Easier access to US subsidies

Plug has also re-affirmed that it believes subsidies on offer for H2 in the US will be easier to access than those in Europe, even as the Treasury prepares to publish what could be similar guidelines restricting which volumes will be eligible for the full $3/kg production tax credit.

“The advantage the US has is the fact that it's much more of a public market activity so that, since it's based on tax credits, it's easier to navigate,” said Marsh.

The CEO continues to speak out against additionality, which would require green hydrogen projects to source electricity from newly installed renewable assets, although he admits that it is likely reports that the government will end up taking a compromise position will bear out in the final guidelines.

“I stand with Senator Carper and Senator Manchin where Senator Carper, [who] wrote the bill, says additionality was not included. So, I'm going to stand by that,” he said, adding that even if included, “the longer additionality is pushed out, the better it should be”.

“It’s bad for US jobs, it’s bad for climate, it’s bad for national security,” he argued.

“To put requirements on the hydrogen industry, which the government has not put on their own buildings as they drive to be net zero, just doesn't make sense. So, the longer it's out, the better. But I see no reason for Plug to publicly take a compromise position.”

Additionality and other measures to match green hydrogen production to renewable electricity generation are controversial among prospective H2 producers, as they limit the number of hours an electrolyser can be operated and thereby increase the cost of production.

However, proponents of these rules note that without strict measures, hydrogen plants could end up drawing zero-carbon electricity off the grid and lead to more gas- or coal-fired power generation to fill the gap.

And while Plug anticipates subsidies will be easier to access in the US, “we do see in Europe that the overall dollars between now and 2030 could exceed the US,” Marsh said, estimating that around $870bn could be on the table — albeit mainly in the form of difficult-to-access government grants.

“For a company like Plug, you really need the right European partners to really leverage that expansion,” he added, referring to partnerships with Spain’s Acciona and the Port of Antwerp.

The company has also announced plans to develop three green H2 projects in Finland, totaling 2.2GW in capacity, and is eyeing potential development on land owned in Denmark.

“The key item with Denmark and Finland is both of them are looking to put hydrogen pipelines into Central Europe, so that is a real focus of Plug,” Marsh said.

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Plug PowerUSAGreen H2
Published 10 August 2023, 13:50Updated 10 August 2023, 13:50