Earlier this fall, Latham- New York-headquartered fuel cell manufacturer Plug Power (NASDAQ: PLUG) announced plans to boost revenues from around $240 million today to $1 billion by 2024.

A pioneer in the fuel cell space, the company said it would achieve that goal by growing its materials handling business and diversifying into on-road vehicles, drones and other next-generation fuel cell applications.



Plug Power CEO Andy Marsh revealed more details about how the company aims to hit the $1 billion mark during a conversation with FreightWaves on Nov. 21.



That exchange took place a couple of weeks after Plug Power met analysts’ third quarter earnings expectations by reporting an $0.08 per-share adjusted loss. The manufacturer lost $13.2 million in the third quarter but was positive $2.5 million on an EBITDA basis (earnings before interest, taxes, depreciation and amortization).



Slow but steady evolution



Founded in 1997, Plug Power has always taken a practical approach to fuel cell product development, Marsh said. After launching as a research and development enterprise, it moved into making Membrane Electrode Assemblies (MEAs) – the core component of a fuel cell – followed by fuel cell stacks and systems, as well as hydrogen infrastructure.



“That approach has given us a unique position to move into other applications,” Marsh said. “We think about where fuel cells work and where fuel cells aren’t ready yet. That’s how we built the first commercial market and continue to build other markets in this industry.”



Unlike some flashier companies in the hydrogen fuel cell space, Plug’s core business is no frills – making fuel cells that power forklifts in warehouses and distribution centers. The company has shipped more than 28,000 units to dozens of warehouse customers, including 20 Amazon (NASDAQ: AMZN) and 40 Walmart (NYSE: WMT) locations.



That business will continue to grow over the next five years in tandem with warehouse expansion, said Marsh. Technology development agreements with the two shippers aimed at exploring new yet-to-be revealed applications are expected to drive additional revenue.



A three-pronged approach

Growing its materials handling division to $750 million by 2024 is one of several action items in the company’s five-year plan, Marsh said.



Daimler and Plug Power have a longstanding relationship in this area, with the auto manufacturer deploying 400 Plug fuel cell systems in forklifts located at its Mercedes–Benz plant in Vance, Alabama. Other automobile industry customers include BMW, GM and, most recently, Fiat Chrysler; the latter signed a deal with Plug Power during the third quarter of 2019.

Marsh hinted at an expanded partnership with Daimler in Germany but declined to offer specific details.



A second bucket of revenue will come from manufacturers’ stationary power systems, which provide backup power for telecoms and data center customers. That division is expected to generate $50 million by 2024, Marsh said.



A shift to on-road vehicles



The final $200 million chunk will come from its emergent on-road commercial vehicle program. Plug is already supplying hydrogen fuel cell-powered engines for 100 electric delivery trucks for DHL in Germany. Another five or six commercial vehicle partnerships are underway, according to Marsh, but DHL is the only one that has been publicly announced.



Ever more stringent policies restricting fossil fuel use in Europe will continue to drive market adoption of fuel cell vehicles, said Marsh, who serves on the hydrogen technical advisory committee for the U.S. Department of Energy.



“Soon there won’t be any other solution but to have a vehicle that is decarbonized to make deliveries,” Marsh said.



“If we look at just the work we are doing for DHL and StreetScooter,” he added, “they could satisfy 25%-30% of that [$200 million] goal, just that one program.”



StreetScooter is an electric vehicle manufacturer owned by the German logistics giant.



Hydrogen fuel cell vs. battery electric



In the race to develop alternatives to the internal combustion engine, fuel cell vehicles have lagged compared to battery electric, as batteries become more efficient and less expensive. But recently a new flurry of activity has hit the hydrogen sector, with heavy-duty commercial vehicles leading the way.



Earlier this month, at the North American Commercial Vehicle Show, Hyundai Motor Company introduced two hydrogen concepts, a Concept Class 8 heavy-duty truck and refrigerated trailer.



And just this week, Daimler’s Chinese truck venture partner, Beiqi Foton Motor, announced it aims to sell 200,000 new energy commercial vehicles a year by 2025.



The new concepts are driven in part by prevailing industry sentiment about the advantages of hydrogen as a fuel in certain vehicle use cases.



With increased power density and faster fueling times, fuel cells do better in long-haul trucking applications. Battery electric vehicles are better suited to short-haul vehicles maneuvering in dense urban environments.



Saying he is “not a purist who thinks fuel cells solve everything,” Marsh reaffirmed that perspective. “I like to think: What would I buy if I were a customer?’ Marsh mused. “If I were delivering packages in a range of 25 miles a day in the city, I’d use battery. If I was going city-to-city or delivering in a large city like Houston or Philadelphia, I would use fuel cells.”



On China, a cautious approach



China is also fueling market interest in hydrogen fuel cell vehicles. To meet its ambitious goal of putting one million hydrogen vehicles on the road by 2030, the country has put in place incentives for new energy cars and trucks, along with penalties for fossil fuel transport.



Nevertheless, unlike a majority of fuel cell manufacturers, Plug has no immediate plans to target market share in the world’s biggest vehicle market.



“China is a gold rush for many companies,” Marsh said. “But we have a good business already and can be successful without China.”



One of the China-bound companies is competitor Ballard Power, a Canadian firm that last year closed a Chinese joint venture deal that will build trucks for the Chinese market.



Marsh said Plug is “very concerned about issues like intellectual property,” and that “most of the deals with the Chinese require giving them equity and ownership in your company, with their ultimate goal is to own the company.”



He then said, “Quite honestly, that’s not who we are.”



Committing to clean hydrogen



In addition to meeting the revenue goals, Plug has other initiatives underway. A top priority is increasing the amount of hydrogen Plug sources from renewable energy. Plug is the world’s largest user of liquid hydrogen, with 20 tons used daily. Like the rest of the world, the manufacturer sources most of its hydrogen from natural gas. Only 20% comes from renewable energy.



That will change by 2024, when Plug aims to be using four times more hydrogen, Marsh said, but with an expectation that 50% of the liquid fuel will come directly from solar through a process known as solar electrolysis.To accelerate that transition, Plug is pursuing partnerships that will enable large-scale hydrogen generation using clean energy.



“Renewable sources are really, really critical,” Marsh said.