This Monday, January 11th, 2021 Plug Power (PLUG) closed at $53.97 in the latest share trading session, it has gained 98% over the past month. Today with a fresh expansion announcement it is standing at $64.02 at this moment of time. Clearly, Plug Power is outpacing the Industrial Sector. It belongs as one of the alternative energy company stocks that focuses on green hydrogen, the present ultimate answer to as close as you can get to a zero-carbon fuel.

So what is going on? What is causing this incredible jump and market sentiment?

To add a little more to this “what is going on” let me do something else.

Why do I compare Plug Power to Apple in past years? It is simply how its stock has rapidly accelerated away in the past year or perhaps the growing expectation of sizable growth to come, on new products and market penetration. 

A year ago, Plug Power struggled to raise money, but it has been executing on a plan consistently in the past few years that is beginning to pay off.

Plug Power has still yet to make a profit, the likelihood is even in its next quarterly round it will still not be making a profit, but the “market sentiment” for all clean energy is very bullish, and the work Plug Power has put into its 2020 activities is generating this market excitement.

What’s going on? Time to delve a little deeper. Let me offer my longer read evaluation taking 10 to 12 minutes of your time.

A short story of Plug Power, background and some crystal gazing

To quote Jim Cramer, host of Mad Money on CNBC, this week states: “ Plug Power needed money for years and years. Now, though, because of a combination of fund-raises in the stock market and SK, Plug Power doesn’t need the money. It’s free to become a large energy company itself enjoying the lowering electric costs that make its technology too cheap to be mind-bogglingly stupid. You could have called me a hydrogen doubter. Now that it has scale call me a hydrogen believer and I believe in the Plug Power solution to make it all happen.” (source)

Now that enthusiasm needs a fair amount of ‘rowing back’ as current market evaluation needs to be equated in sustaining product delivery.  But, yes, Plug Power can be at the (next) beginning of growing, as a large energy company, it is certainly in the right place at the right time.

Green hydrogen is seen to be a critical enabler of resolving the carbon issues we are facing in a rapidly warming planet. Plug Power has been selectively ‘picking off’ segments of the market that need fossil-free solutions to be part of the clean fuel economy. That focus on customer satisfaction points of speed, scaling and seeking best-in-class status is building a sound winning formula.

The  Plug Power reputation builder: Material Handling

Plug Power has gone after the material handling market, especially replacing the batteries on forklift trucks and all the big players who have real needs to bring their carbon footprint down, such as Walmart, Home Depot, and Amazon warehouses, have replaced their batteries with hydrogen fuel cells.

Getting to this point has required Plug Power to achieve scale in converting hydrogen to clean fuel into the fuel-cell battery and made its technology and deployment to be convenient and easy to apply in demanding operational environments. A little like Apple went after scale, pervasive, easer to use (or apply in this case) and ever-present or available to simply adapt to the job on hand.

Plug Power has also been focusing on e-Mobility.

As Plug Power has been rapidly developing a reputation for having the real experience to deploy fuel cells and handle hydrogen. Its USA focus and perhaps success recipe is now at the point of “going global.”

Hydrogen refuelling stations will be a huge business as LCV’s, Trucks, Buses, FC Trains all gather for providing hydrogen momentum. Plug Power is presently expanding in Europe and already aligning with different partners like Alstom delivering a growing Green Hydrogen Network and product solutions in fuel cells that build out their portfolio.

Today, 12th January 2021, in a press release a joint venture between Groupe Renault and Plug Power join forces to become leaders in Hydrogen LCV.

• Memorandum Of Understanding (MOU) signed to launch a 50-50 joint-venture (JV) based in France by the end of the first half of 2021, targeting over 30% share of the fuel cell-powered light commercial vehicle (LCV) market in Europe.
• Joint-venture will establish in France state-of-the-art innovation and manufacturing capabilities for hydrogen fuel cell systems and their integration in vehicles.
• The partnership provides a unique value proposition: turn-key fuel cell vehicle solutions with hydrogen fuel, refuelling infrastructures and services.
• This strategic project supports the decarbonization of mobility in Europe with the adoption of clean energy solutions, and the creation of innovating value-generating activities in France, including an industrial footprint in a promising market, business know-how and intellectual property in this new field of technology

This strategic JV will position Groupe Renault and Plug Power to become key players in Europe in the research and development (R&D), transformation, manufacturing and sale of fuel cell-powered vehicles and hydrogen turn-key solutions in the coming years.

The JV intends to offer unique, comprehensive, differentiated products and solutions to the LCV market, designed around 3 key pillars:

• R&D: Groupe Renault and Plug Power intend to establish an Innovation Center for the development of fuel cell technology and hydrogen fuel cell LCV vehicles based on existing and future Groupe Renault platforms. The initial focus will be on the heavy van segment utilizing the Traffic and Master vehicle platforms. This centre will be unique in combining R&D efforts of fuel cell and vehicles with integrated engineering teams.
• Manufacturing: the joint-venture will combine the vehicle manufacturing capabilities of Groupe Renault with the fuel cell and hydrogen system manufacturing knowledge of Plug Power, establishing a vertically integrated fuel cell stack and system manufacturing centre in France for integration into LCV vehicle platforms. In addition, this manufacturing centre will provide hydrogen refuelling systems, a key part of the hydrogen ecosystem.
• Sales: this partnership will create a hydrogen vehicle eco-system solution company that offers vehicles, hydrogen fueling stations, hydrogen fuel, and services to customers. This comprehensive solutions approach will accelerate adoption by commercial fleets.

The further ambitions beyond fuel cells are ambitions in the future

Focusing on bringing Hydrogen to the market, refuelling stations for fuel cell vehicles can also be a building out to being a source at Sea Ports and Airports to build out hydrogen or derivatives.

Then the big ones for Industrial Green Hydrogen Solutions

The P2P, P2X and P2M are opening up as diverse markets for Hydrogen as decarbonization initiatives “kick-in” and cost-competitive hydrogen to existing fuels (H2$/kg decreases markets open up).

These possible markets are seen by Plug Power in Stationary Energy Storage, Off-Grid Applications for P2P, and Ammonia, Steel,  Chemicals forming the P2X markets where alternatives need to find technology and fuel replacement application solutions, and finally, P2M of a rapidly growing fuel cell market for Electric Vehicles globally.

Plug Power also sees Data Centres, Micro Grids for Energy Storage ideal for applying green hydrogen. It turns them all green or carbon-free. No issue there.

The Hydrogen Markets potential is huge.

Some estimates put the size of Green Hydrogen at a $200 billion addressable market. There are even larger numbers I have seen.

Yet Electrolyzers are going to be the key for delivering to this potential.

Like the Smart Phone for Apple, the Electrolyzer( read Show me the Electrolyzer)  is the catalyst for the whole Energy System.

The price of H2 determines each market entry point. As Wind and Solar continue to gain scale and forces reductions in energy prices, the renewable presence across all energy sectors brings the potential for significant hydrogen to be added into the renewable mix. The triggering in prices depends on each market, but for hydrogen needed to be converted as a viable, sustainable fuel alternative that needs to get to Euro 2.50/kg and at real scale towards Euro 1.75/kg are the target points example, here in Europe.

The input cost, be this electricity, wind and solar need to keep falling to work with Hydrogen solutions to be competitive. Clearly, to achieve green hydrogen, Plug Powers end focus point, the conversion to Hydrogen needs a highly competitive Electrolyzer in price and what it can produce as output.

Plug Power is committed to the proton exchange membrane (PEM) for its electrolyzer solutions as this is where by using green electricity, from Wind or Solar to electrolyzer water into hydrogen offers a carbon-free alternative.

This PEM Electrolyzer solution applies electricity to water, splits water and oxygen to separate for the final fuel need of hydrogen. Most hydrogen today is from steam reforming methods by natural gas or coal and carry very significant carbon emission footprints. Other Electrolyzer solutions are fossil fuel-driven.

Solving the PEM Electrolyzer to be able to scale at a commercially attractive price (affordability) so it can be applied to all the Hydrogen markets is the Smart Phone equivalent in the Energy sector. A real solution to the energy transition.

individual electrolyzer units, called stacks need to become increasingly efficient to process one gigawatt of electrolysis per year.

Today that efficiency of electrolyzers is still really at a “pilot ramping up learning scale”stage,  with tens of megawatts per stack. Technology needs to change away from stacks or stacks need to get into in the range of hundreds of megawatts each by 2025, and eventually move to even larger units.

The next decade will see the evolution of technology and engineering to bring scale to the Electrolyzer. The companies equipped to invest in the research and development will be the new Wind equivalents like today’s Vesta or Gamesa.

Plug Power is building a PEM Giga factory but so are many others building their hydrogen presence. It is not the manufacturing of Electrolyzers per se,  it is the technology breakthrough needed to scale these. Has Plug Power got the necessary “technical and scientific chops” to deliver breakthrough solutions?

This technology breakthrough on the Electrolyzer is my point of concern for Plug Power.

They are going the stack route by simply working on increasing stacks based on existing, proven solutions. Still, I wonder, without any great detailed technical understanding from my side, if they have the answer to scaling hydrogen outputs away from simply stack building? Or are they simply just increasing the existing stacks? That will not work for the sheer amount of hydrogen needed globally.

They are investing in a new PEM Technology Center that will focus on the parts of an Electrolyzer but is this application of thinking in stacks being locked into the existing “seen” solution? I feel so, but time will tell.

Competing with the Industrial Solution Giants

For me Siemens or ThyssenKrupp as two Industrial solution giants, both known for their industrial-scale solutions. At present they are more likely to find the abilities internally for technology breakthrough, and greater understanding for larger-scale industrial application in segments such as P2P, P2X and P2M as they both have the known capabilities and competencies that the Energy Industries have come to rely upon and trust.

The move to a Mature Energy solution provider is Plug Powers major challenge.

Plug Power’s difference is it has focused on specific segments where existing solutions of Electrolyzer output for Hydrogen works to build fuel cell capabilities. To think big industrial scale for being the solution provider for Iron and Steel, Chemicals or any of the worlds huge industry plants is a totally different ball game. Can they? I feel not in their present form or organizational design.

Will we be seeing a Nokia and Apple transformation moment? 

If Plug Power sees itself as the leader in the deployment of green hydrogen solutions (present vision statement), then I can relate to this if it focuses on Fuel Cells only, but I struggle on the greater green hydrogen potentials where the Power-to- X as the bigger prize.

Will Plug Power stay with Fuel Cells, and Green Hydrogen solutions (electrolyzer sized to this market segment) or will they venture into the huge Hydrogen market that industrial solutions give. The Electrolyzer thinking needs a giant step change for Plug Power. Still, why not?

Like Apple, it is all about visions, imagination, determination, focus, application and bringing together the technology and manufacturing solutions together in groundbreaking solutions and strategic partnerships,  at a point of time access to money and gaining financial market sentiment.

Plug Power is focused exclusively on Green Hydrogen, it has a fighting chance through imaginative partnerships and staged focus points.

Both Siemens Energy and Thyssenkrupp have “wicked” legacy in their present energy solution portfolio’s. As established large Energy solution providers, with a huge legacy of past Energy Solutions, can they be agile enough, inventive enough or able to plough the money into green hydrogen and PEM Electrolyzers in a dedicated fashion? Plug Power possibly can, but it is a bigger, more demanding stretch than their current plans or resources to compete in engineering, technology and application understanding.

Visions come and go, a new one needs to be articulated by Plug Power now.

Yet all things change within a few short months. In listening to Plug Powers CEO, Andy Marsh where he outlined their vision last September in their symposium, it already seems really inadequate to what has happened to them in these past few months. Forging new global or regional partnerships can radically change the positioning.

Plug Power needs a rapid update of its vision now.

Why? Plug Power raised $1 billion in bought equity to fund its plan to complete the first US-wide networked green hydrogen production facilities to supply fuel-cell products. The capital raised with Morgan Stanley gave Plug Power total cash post-closing balance to $1.7 billion.

Plug Power is well funded for its next rapid expansion from recent announcements.

Early this year (2021) Plug Power raised $1.5 billion from South Korea’s SK Group to enter the Asian market. SK Group is the third-largest company in South Korea. It has formed a strategic partnership to accelerate the hydrogen economy in South Korea and the plans to have six million fuel cell electric vehicles and 1,200 refilling stations in place by 2040. 

SK Group liked the Plug Power turnkey solution for using green clean hydrogen. That injection of $1.5 billion gives 9.9% stake in the fuel cell provider as part of this partnership to reach Asian markets.

To quote Andy March, the Plug Power CEO ” “SK Group has an established strategy for building out the hydrogen economy in South Korea and beyond,”. He goes on to say “The current relationship with SK Group offers immediate strategic benefits to Plug Power to accelerate its expansion into Asian markets – and is intended to result in a formal joint venture (JV) by 2022.”

Combined with the already outlined plans for Europe detailed in that September Symposium Plug Power are accelerating their Fuel Cell core business of EMobility and Material Handling significantly, why beyond market expectation.

The market sentiment is high for Plug Power, now they need to deliver

The market reaction was not just the significant jump in Plug Power share, but it still struggles to make profits due to its recent expansion plans and inability to scale to meet demand.

Market valuations, comparing apples with pears or are we?

Presently Plug Power market value is $24.9 billion, bigger than utility giants like PG&E Corp and Consolidated Edison Inc.  Remarkably Plug Power was worth about $1 billion (Bloomberg) a year ago!.

Siemens Energy recently spun off from Siemens AG and has a present market worth of Euro 24.2 billion or $29.4 billion at the time of writing. Still, the market believes it is trading well below its true market value.

Today the market valuations for Plug Power looks high, and the Siemens Energy seem low.

The pulling away point comes in managing the portfolio, and the energy focuses each has. Plug Power is exclusively focused on green hydrogen solutions and fuel cells. Siemens has a diverse portfolio of past, present and future energy solutions. Gas-Power generation and grid transmissions make up over 50% of the portfolio.

Hydrogen will be the accelerator, as it is the renewable clean energy future and the markets are focusing on this energy transition as where the “smart energy money” goes. The one that focuses on hydrogen seen by the market is where the money is going.

Market sentiment can change overnight.

If Siemens has a PEM Electrolyzer solution covering all green hydrogen demands from fuel cells, networks of hydrogen needs, and industrial solutions, it pulls away from its current market valuation.

If Plug Power pulls its “smartphone” equivalent of its Electrolyzer solutions out of its portfolio hat, it continues towards that suggested positioning offered by Jim Cramer of being “free to become a large energy company.”

Will it? It is all to play for, for both. Scale, technology innovation and scope of renewable offering makes the difference

2021 is the big scaling year for Plug Power

2020 has been an amazing year for Plug Power, maybe moving towards scale in Hydrogen and the solutions but the sheer scale of its task to come is the challenges it sets itself in 2021 for the next five years.

The present ones articulated by Andy March, the CEO, back in September 2020, need to be less visionary and aspiration to attract the finance. It needs to switch to a roadmap on focused execution.

It needs to extend out in why its Plug Power turnkey solution for using green clean hydrogen is proving highly attractive to its future relationships and partnerships to grow the business.

Plug Power in my mind can hit real scale but…..

 This will be determined by its detailed roadmap and its portfolio resolutions and progress with its clarity on its market focus on solutions (fuel cells vs industrial, for example). This is the biggest call Plug Power will be making this year. Sizing up to market sentiment and expectations. A really major shift for the top management to outline succinctly.

To realize that ambition of being both a leader in fuel cell technology and green hydrogen and the bigger scope of green hydrogen beyond fuel cells, it has eluded too is the call needed.

The building blocks to drive growth need a sharper clarity now that raising equity, possibly beyond internal expectations has taken place.

Watch Plug Power with growing interest, I am even more than in the past

 

**Note: the announcement between Groupe Renault and Plug Power added later in the day of posting this and parts of the post relating to Electrolyzers was updated or corrected on 14th January 2021.