Is Green Hydrogen The Fuel Of The Future? This CEO Is Betting On It

It’s nearly one hundred degrees on a baking Los Angeles afternoon but mercifully cool inside the bustling Beverly Hilton where Plug Power CEO Andy Marsh just finished speaking at a tech conference to tout so-called green hydrogen. Dressed casually in a short-sleeve shirt, he’s upbeat and preparing to meet with a member of Congress he won’t name who wants to hear about an aspect of this promising carbon-free energy source that cuts across political lines: jobs.

“Solar and wind projects don’t create a lot of jobs on a continuous basis,” Marsh tells Forbes in a distinctive southeast Pennsylvania accent. “There's jobs in producing hydrogen. Much more than if you build a battery plant.”

For decades hydrogen has been a “water on the road” mirage: an enticing, limitless clean fuel that’s always just up ahead but never quite in reach. Critics like Elon Musk think it always will be. Billions of dollars were funneled into hydrogen fuel cell programs by major carmakers starting in the 1990s, yet today in California, the top market for such vehicles, fewer than 15,000 are in operation—compared with the Golden State’s nearly 900,000 battery and plug-in hybrid autos. But powering transportation is not the direction Marsh, who’s led Plug Power for 14 years, is taking.

At 66, an age when many long-time CEOs might be looking to wind down their careers, he’s repositioning the long-time maker of fuel cells for zero-emission forklifts and stationary power generators. His goal is to turn it into a leading producer of the hydrogen he’s been buying for Plug’s fuel cells and supply it to heavy industrial users. But not just any form: He’s scaling up a zero-carbon way to produce and liquefy the universe’s most abundant element by extracting it from water to make hydrogen a major factor in the fight to slow climate change.

Plug Power’s three-megawatt hydrogen fuel cell system in Latham, New York, developed as a backup generator for a Microsoft datacenter in Latham, New York.

And as Plug scales up sales of hydrogen and the technology to produce it, the company expects sales to jump from $900 million this year to $5 billion in 2026 and $20 billion by the end of the decade. It also predicts operating income will be in the black by late 2023 as the company shifts from being a buyer of hydrogen from other companies to a producer and seller, with net profitability in the years to follow. Globally, Plug estimates the overall market for green hydrogen will grow to $10 trillion in the years ahead.

Hydrogen is produced in massive quantities mainly by using steam to pull it from natural gas, releasing carbon dioxide in the process. The Energy Department estimates the U.S. makes about 10 million metric tons of hydrogen a year, out of more than 100 million tons globally, for industrial applications like steelmaking, oil refining and agriculture and nearly all of it is “gray” hydrogen: made from natural gas and emitting carbon pollution.

But improved technology to produce the fuel using electrolyzers—devices that split water into hydrogen and oxygen using electricity from renewable sources—is shaking up the clean energy world. Marsh wants Latham, New York-based Plug to be not only a top producer of the fuel but also a manufacturer of specialized tankers to ship it to customers and a seller of electrolyzers that let others make their own.

If all goes well, Plug’s green hydrogen plants will be pumping out 500 tons of fuel a day by the end of 2025. Amazon AMZN plans to purchase over 10,000 tons of it a year in a deal worth up to $2.1 billion and Plug Power will also provide Walmart WMT with enough fuel for 9,500 warehouse fuel cell forklifts. The company is also preparing to sell electrolyzers to customers including New Fortress Energy, billionaire investor and Milwaukee Bucks owner Wes Edens’ energy venture, for an industrial-scale hydrogen plant in Beaumont, Texas.

“I’m in the camp that (Plug) can hit it and have the right pieces of the puzzle.”

To date, Marsh has raised $5 billion, including a $1.9 billion investment round with South Korean conglomerate SK Group. Along with making a few strategic acquisitions, Plug has used the funding to build 13 hydrogen refineries across the U.S. and Europe, with construction underway in Georgia, New York, Tennessee, Texas, Louisiana and California, and projects being readied with partners in Belgium, France, Spain, Portugal, South Korea and Australia.

But a key roadblock for hydrogen, whether it’s made from water and renewable energy or methane, is that it’s inherently inefficient, requiring more energy to produce, compress or liquefy and keep it super chilled than simply using the same electricity to power a battery.

Advocates note there’s already a surplus of electric power produced by large-scale solar and wind farms, especially in the U.S. Midwest and Southwest, that’s more than the grid can handle at peak. And far more is being added as the cost of solar panels and turbines drops. That overabundance of green energy would seem to trump hydrogen’s inefficiency problem.

Paul Martin, a Toronto-based chemical engineering consultant and member of the Hydrogen Science Coalition, disagrees. “A low-efficiency approach can work, but only if it's low capital cost,” he said. “The problem with the green hydrogen thing is that the capital cost is high and the efficiency is low. So as a consequence, the resulting energy is very expensive.”

Nevertheless, Marsh says he sees support for green hydrogen even in U.S. states like Texas, Louisiana and West Virginia. The hydrogen refineries Plug Power is building “look like oil and gas plants,” says Marsh, who’s spent a lot of time in Washington in the past year making his case. They use pipelines similar to those for natural gas plants, meaning construction and ongoing maintenance jobs, and will be shipping out liquified fuel via trucks and trains, requiring drivers and other support staff. “About 20% of our workers came from the oil and gas industry,” he says.

Workers at a Plug Power facility in Latham, New York, assemble fuel cell components for forklifts.

Plug has a lot of competition in the nascent green hydrogen space, including from engine giant Cummins CMI , which is also building up its own electrolyzer business, clean-energy powerhouse Nextera, and startups like Nikola, which is scaling to make green hydrogen to fuel its electric trucks. General Motors GM , which has been developing hydrogen fuel cell technology since the 1990s, is also moving to be a player in the green hydrogen space by partnering with Norway’s Nel, a leading producer of electrolyzers, to find ways to lower the cost of that technology.

“I’m in the camp that (Plug) can hit it and have the right pieces of the puzzle,” says Cowen COWN equity research analyst Jeffrey Osborne, who rates Plug Power shares Outperform. “They control all the pieces and have the cash to pull it off. The challenge is all those (green hydrogen plant) sites need interconnections and new green energy built out from partners. That can take time.”

What’s brightening the outlook for Marsh and Plug is the landmark Inflation Reduction Act, or IRA. When President Joe Biden signed it into law in August, the bill got attention for its generous incentives for electric vehicles, domestic battery production and wind and solar power to curb carbon pollution. A first-of-its-kind tax credit for green hydrogen was also tucked into the bill. It provides up to a $3 per kilogram tax credit for producers of that fuel.

“IRA is the gravy on top as (Plug Power) started this process before IRA was announced,” said Osborne.

Unlike the auto industry’s past efforts to commercialize hydrogen-fueled vehicles, Marsh isn’t initially targeting the transportation industry. Instead, he’s going for things, he says, “which are not all that exciting” but that are major sources of carbon pollution. Nearly all of this hydrogen will be used for stationary electricity generation, fuel for forklifts, agriculture and “green” steel rather than automobiles. Combined carbon emissions from steel making other industrial applications account for “about 26% of the world's carbon emissions versus 26% for mobility,” Marsh says.

“The problem with the green hydrogen thing is that the capital cost is high and the efficiency is low.”

Marsh also sees trucks as a good candidate for hydrogen, particularly later this decade, and Plug is working with Renault on fuel cell delivery vans.

Both Martin and Robert Howarth, a professor of ecology and environmental biology at Cornell University, believe green hydrogen has a role to play, but that its best use is as a replacement for the dirty industrial variety made from methane used to make ammonia for agriculture.

“About 80% of the population on the earth today is alive because we make synthetic nitrogen fertilizer. It's critical,” Howarth says. “If we can do that in a cleaner way, and green hydrogen is a lot better than gray or brown hydrogen for that purpose, then that’s a good use.”

Developing power systems has been a priority for Marsh, an electrical engineer with degrees from Temple and Duke universities and an MBA from Southern Methodist, for four decades. He began his career in the early 1980s at the legendary Bell Laboratories in New Jersey, which is credited with developing the transistor, the laser, photovoltaic cells and radio astronomy, among other technologies, and whose scientists won nine Nobel Prizes.

“If you were a geeky engineer, it was a place that you revered. It was the place to go,” Marsh says from his office at Plug headquarters in Latham.

After 17 years at Bell, he started and ran venture-backed Valere Power which made electric power equipment for the telecom industry until its sale in early 2008. He then joined Plug Power as its CEO to build up its fuel cell business. Fourteen years later, Plug has deployed over 50,000 fuel cell systems, mainly for forklifts used by companies including BMW, Amazon and Walmart, which it claims is more than any other company in the world. It also estimates it’s the largest buyer of liquid hydrogen to fuel forklifts and stationary power systems, gaining expertise in working with all aspects of making, shipping and using hydrogen.

Marsh is convinced the U.S. is poised to become the world’s green hydrogen superpower, with its abundant and growing renewable energy infrastructure and IRA-fueled incentives.

“It’s freaking out people around the world that the U.S. has such a distinct competitive advantage,” Marsh says, citing recent comments from a European hydrogen industry group. “Hydrogen Europe is saying the U.S. has taken such a huge leadership lead in creating green hydrogen and green ammonia that it will be tough for the world to compete.”

Given the urgent need to wean industry, power generation and transportation off of fossil fuels as rapidly as possible as the risk of severe climate change from carbon dioxide worsens, green hydrogen is looking like an increasingly attractive option. But critics like Martin aren’t convinced that Plug Power and its competitors are pursuing the best solution given hydrogen’s efficiency problems.

“The devil’s in the details and in this case, he has a pitchfork that's labeled ‘thermodynamics’ and he's waving it at you and poking you in your sensitive bits every time you walk by,” says Martin.