What happened

Shares of Plug Power (PLUG 5.69%) shot up 14.7% at the market's opening this morning and were trading 9.2% higher as of 10:30 a.m. ET on Thursday. The hydrogen fuel cell specialist just signed a huge supply agreement, answering critics who have been dismissive about the role that green hydrogen can play in the global transition from fossil fuels to clean energy. This deal could also pave the way for bigger things for Plug Power, which is why investors are pumping money into the hydrogen stock today.

So what

Plug Power has signed an agreement with Amazon (AMZN -0.17%) to supply 10,950 tons of liquid green hydrogen per year beginning in 2025.

Plug Power and Amazon have been partners since 2016, with Amazon deploying more than 15,000 fuel cells to replace batteries in its forklifts across several distribution centers.

That said, Plug Power is aggressively expanding its hydrogen applications beyond GenDrive forklift fuel cells, and Amazon's new agreement is a big boost for the company in that direction. Amazon said it'll use the hydrogen supply from Plug Power to replace diesel, gray hydrogen (derived from natural gas in a process that emits a lot of carbon dioxide), and other fossil fuels, and expects to have enough supply to power 30,000 forklifts or 800 heavy-duty long-haul trucks each year.

There's a chance Amazon could consider other hydrogen applications, like using electrolyzers at its fulfillment centers. Plug Power is hugely bullish about electrolyzers -- devices that produce hydrogen -- and is even building the world's largest fuel cell and electrolyzer gigafactory in Rochester, New York.

Now what

Although Plug Power didn't specify the value of its liquid hydrogen deal with Amazon, it has granted Amazon a stock warrant to buy up to 16 million shares in Plug Power at an exercise price of roughly $22.98 per share for the first 9 million shares. Amazon will vest the warrant if it spends $2.1 billion on Plug Power products across a term of seven years.

This deal, therefore, could play a key role in steering Plug Power toward its 2025 revenue goal of $3 billion. Earlier this month, the company said it had already chalked out a "clear path" to its 2025 goals, which also include a gross margin above 30%. The stock surged by a double-digit percentage that day. With Amazon putting more of its weight behind Plug Power now, it's not surprising to see the stock surge.