What happened
Plug Power (PLUG 11.84%) shares spiked as much as 10% higher Wednesday. The stock gave back some of that gain, but was still up by 5.8% as of 3:52 p.m. ET. Even so, shares of the hydrogen fuel cell company remain down by more than 20% year to date.
So what
Wednesday's jump came after Plug Power announced it had entered into a deal to provide hydrogen fuel cells to replace the diesel generators that the small city of Calistoga, California, uses for backup power during wildfires and other emergencies.
Investors may see this sale to a municipality as a sign that Plug Power is developing a new use case for its products as a replacement for the currently ubiquitous diesel-fueled stationary backup generators. The company also said this project will be the largest hydrogen-powered fuel cell installation in the country.
Now what
Plug Power expects to begin construction of an 8-megawatt energy storage system for the wine country municipality in the fourth quarter, with operations expected to begin in the third quarter of 2024.
The agreement is with energy storage provider Energy Vault Holdings, which previously announced it was building a community microgrid for California utility Pacific Gas and Electric (PG&E) to be used by Calistoga. Energy Vault will own, operate, and maintain the system under a tolling agreement with PG&E.
Energy Vault normally rents mobile diesel generators to supply backup power for the city during emergency power shutoff events and other power interruptions.
Plug Power's revenue has been steadily increasing over the last year, but its bottom-line losses have also mounted. Net revenue jumped 40% in 2022, and its growth continued with a nearly 50% revenue increase year over year in the first quarter of 2023. Wednesday's news has investors feeling more optimistic about the company's prospects, but I will want to see its costs decline, and more use cases for its fuel cells emerge.
