Plug Power lands $1.7B DOE loan guarantee to boost hydrogen production

Fuel cell and electrolyzer manufacturer and would-be ​“green” hydrogen supplier Plug Power has won a conditional commitment for up to a $1.66 billion loan guarantee from the U.S. Department of Energy, providing a boost to its plans to build six large-scale hydrogen production sites across the U.S.

CEO Andy Marsh said in a Tuesday statement that its federal loan guarantee ​“will prove instrumental to grow and scale not only Plug’s green hydrogen plant network, but the clean hydrogen industry in the United States.” Plug Power must still meet certain milestones before the loan guarantee is finalized. If approved, the loan guarantee would cover any losses to loans Plug Power receives from private-sector lenders, allowing it to lower its cost of capital.

Plug Power recorded a $1.4 billion loss in 2023 and a $296 million loss in the first quarter of 2024. The company has been a longtime supplier of fuel cells for forklifts and other vehicles but has anchored its hopes for future growth and profitability on becoming a major supplier of electrolyzers for the still-nascent clean hydrogen industry. It also plans to reach 500 tons per day of liquid hydrogen production by next year.

Now the question is whether Plug Power, which has never turned a profit in more than 20 years as a publicly traded company, can utilize the federal financial backstop to bolster its multibillion-dollar buildout — and whether the hydrogen it will produce at facilities across the country ends up being eligible for key federal tax credits.

In December, the U.S. Treasury Department issued guidance on how it intends to administer the Inflation Reduction Act’s 45V production tax credit, which offers a lucrative $1-per-kilogram credit for hydrogen produced with very low to zero greenhouse gas emissions.

The proposed rules require that hydrogen producers using electricity to split water into hydrogen and oxygen — as Plug Power does with the electrolyzers it builds at its Rochester, New York, factory — use clean power and measure the carbon intensity of that power on an hour-by-hour basis. The clean electricity must also come from newly built generation facilities and those facilities must be connected via existing power grids.

Those rules, dubbed the ​“three pillars” by their proponents, are critical to ensure that hydrogen produced with electricity doesn’t end up causing more greenhouse gas emissions than the fossil fuels it is meant to replace, according to analysis from a majority of government, academic, and industry studies on the impacts of large-scale hydrogen production.

It’s far from clear whether Plug Power’s existing and proposed electrolysis facilities will meet that standard, however. The company’s first site is in Georgia, a state that produces most of its electricity from fossil fuels. Another site in its home state of New York would rely on existing hydropower, which would not meet the Treasury Department’s proposed ​“additionality” rules for newly built zero-carbon power.

Other Plug Power electrolysis facilities, such as those it plans to build in Texas and California, may be better positioned to secure newly built solar and wind power and therefore meet the Treasury’s proposed 45V rules. James West, senior managing director and head of sustainable technologies and clean energy research at investment banking advisory firm Evercore ISI, said in a Tuesday research note that Plug Power is likely to use its federal financing first at its Texas site.

Whether the proposed three pillars make it into the final 45V rules, which the Treasury is expected to issue later this year, remains an open question. The Biden administration faces a lobbying blitz from fossil fuel companies, utilities, and a subset of hydrogen and clean energy trade groups that are asking Treasury to use existing clean energy crediting structures that operate on an annual averaging basis and do not bar the use of existing carbon-free resources such as nuclear power and hydropower.

Plug Power has been one of the more outspoken opponents of the three-pillars rules. The company belongs to the Fuel Cell and Hydrogen Energy Association, a trade group with more than 100 members including utilities, automakers, and manufacturers of fuel cells, engines, and turbines, which has argued that the three pillars will prevent U.S. companies from investing in an industry it sees as vital for reducing carbon emissions in steel production, heavy industry, aviation, shipping, power generation, and other ​“hard to decarbonize” sectors.

The company is also a participant in four of the seven ​“hydrogen hub” consortiums that have been awarded $7 billion in federal grants to build clusters of large-scale hydrogen production, storage, and transport for a variety of end uses. The seven hydrogen hubs have asked Treasury to ease the three-pillars rules, warning that their plans ​“will no longer be economically viable” if the rules are put into effect.

Other prospective green hydrogen producers have been far more supportive of the three-pillars rules, and have been planning to build electrolysis sites that comply with them. Those companies include competing electrolyzer manufacturers such as startup Electric Hydrogen, hydrogen project developers such as Hy Stor Energy and Synergetic, major hydrogen producer Air Products, and renewable energy developers Acciona, CWP Global, and Intersect Power.

The up to $1.66 billion in loan guarantees for Plug Power would come from DOE’s Loan Programs Office, which has issued $42.1 billion in loans and loan guarantees as of December 2023 to back battery manufacturers, battery materials mining, processing and recycling facilities, virtual power plant developers, and other clean technology investments.

Other hydrogen projects winning Loan Programs Office backing include the Advanced Clean Energy Storage project in Utah, which received a $504.4 million loan guarantee, and Monolith, a company expanding a Nebraska facility that uses renewable energy to power a pyrolysis process that converts fossil gas to hydrogen, which received a $1.04 billion loan guarantee.