Plug Power, which supplies fuel cells for electric forklifts used by Amazon and other companies, said the retail giant plans to buy thousands of tons of carbon-free “green” hydrogen from it per year in a deal that also includes an option to acquire a stake in the company worth up to $2.1 billion.
Under the agreement Plug will begin providing Amazon with 10,950 tons of liquified hydrogen per year that will be used to fuel transportation and building operations, starting in 2025. It’s the biggest such deal to date for the Latham, New York-based company, which expects to hit an annual revenue target of $3 billion by 2025 as a result.
“It’s a huge deal … it’s a huge deal for the (hydrogen) industry,” Andy Marsh, Plug Power’s CEO, tells Forbes. Along with fuel for forklifts, Amazon may also use hydrogen to power a range of vehicles used in delivery operations, including long-haul trucks, he said. “It’s the first, much larger-scale hydrogen ecosystem for Amazon where they’re really thinking about all the applications they can use hydrogen in.”
Hydrogen is expected to become a major source of electric power, along with batteries, for both vehicle propulsion, as well as an option for stationary power generation and storage. While most industrial hydrogen that’s used for oil refining, food processing and the chemical industry is currently made by extracting the element from natural gas, that method emits carbon dioxide. Companies including Plug, Cummins, Nikola, Nel Hydrogen and many others are shifting to a new technique using electrolyzers that can make a “green” form of the fuel from electricity–ideally from renewable sources–and water that has no climate-harming carbon emissions.
Hydrogen also gets a boost from the new Inflation Reduction Act signed into law this month by President Joe Biden, which includes a production tax credit for green hydrogen worth $3 per kilogram of carbon-free fuel.
Plug, which will benefit from that credit, has sold Amazon fuel cells for its warehouse forklifts since 2016, and estimates it’s provided more than 15,000 units to date. The company aims to expand its hydrogen fuel supply business and is adding production capacity to do that. Plug has said it will be able to make 500 tons of green hydrogen per day at facilities in North America by 2025, up from a goal of 70 tons per day by the end of this year. By 2028, it hopes to produce 1,000 tons of hydrogen per day.
Amazon said the deal is part of efforts to achieve net-zero carbon emissions across all its operations by 2040. It believes “scaling the supply and demand for green hydrogen, such as through this agreement with Plug Power, will play a key role in helping us achieve our goals,” Kara Hurst, Amazon’s vice president of sustainability at Amazon, said in a statement.
As part of the deal, Plug granted Amazon a warrant to acquire up to 16 million shares, with an exercise price of $22.98 for the first 9 million. It vests in full after Amazon spends $2.1 billion on Plug products over the seven-year term of the deal.
Shares of Plug Power rose 9% to close at $30 in Nasdaq trading on Thursday.