Plug Power (PLUG 34.63%) held its IPO in 1999. At the time, investors were enthusiastic about the company's business model, which promised to usher in a new era of renewable energy using hydrogen fuel cells. Within months, shares zoomed higher from a split-adjusted $160 per share to more than $1,300 per share.
The excitement did not last. The dot-com bubble soon burst, and Plug Power's stock price gradually fell in value by more than 99%. However, we are in a much different world more than 25 years after Plug Power's IPO. Hydrogen fuel cells are arguably more powerful and efficient than ever. Demand projections, meanwhile, have picked up given a growing global emphasis on clean-burning fuels.
How will the next 25 years play out for Plug Power? There are three important questions to monitor.
1. Will hydrogen demand finally materialize at scale?
The global hydrogen revolution is just around the corner -- or at least that's what hydrogen companies have been telling investors for decades. Indeed, every now and again we get research reports suggesting that global hydrogen demand is about to scale significantly. A 2023 report by McKinsey & Company, for example, stated that "global clean hydrogen demand is projected to grow significantly to 2050." Within 12 months, the consultancy firm was forced to lower its long-term demand estimates by 10% to 25% across the board.
In theory, hydrogen fuel is a fantastic tool for realizing a carbon-free future. So-called "green hydrogen" can be produced using renewable energy sources, generating an energy-dense and portable fuel source that can be used in carbon-intensive applications like aviation.
The problem, for the most part, has been cost. When McKinsey lowered its demand forecast, it did so largely because hydrogen technologies simply aren't very cost-competitive with existing fuel sources. The company noted that hydrogen costs have risen by 20% to 40% since its original forecast, leaving potential adopters little incentive to ramp usage. Some experts believe hydrogen may be cost-competitive by 2030, but that would still require government incentives. And as we'll discuss next, which specific type of hydrogen fuel technology will succeed is still up for debate.
2. Which hydrogen technologies will actually succeed?
Several major types of hydrogen energy technologies exist today. Proton exchange membranes are suitable for applications that require quick start-up times and high power density, like cars, buses, and planes. Solid oxide fuel cells, on the other hand, are more suitable for stationary, large-scale power generation, such as powering a factory or supplementing grid variability. Anion exchange membranes, meanwhile, sport lower production costs but face durability and efficiency challenges.
As with any emerging technology, dozens of companies around the world are investing to drive costs lower, push efficiencies higher, and create form factors that could gain real world adoption over time. Which technology will win over the long term remains unknown. For its part, Plug Power specializes in proton exchange membrane systems. There is a possible future, however, where hydrogen fuel demand skyrockets, but the demand is driven by the growing electricity demands of data centers -- an application that isn't as well suited for Plug Power's specific technology.
So, over the next 25 years, it won't just matter what happens to hydrogen demand. Investors must also understand which applications are driving this demand, and whether or not they will benefit Plug Power specifically.
Image source: Getty Images.
3. Can Plug Power survive financially for another 25 years?
The first two questions regarding long-term demand growth and the specific hydrogen technology being adopted will have huge consequences for Plug Power. Whether or not Plug Power can survive financially to see these questions answered is another issue altogether.
Over the last 25 years, Plug Power has struggled to achieve profitability. Huge government subsidies, plus massive share dilution, have kept the company afloat for now. But there's no denying the obvious: Plug Power is surviving on borrowed time. The company posted a net loss of $227 million last quarter. That's nearly 10% of its entire market cap.
Of course, a huge bump in demand for Plug Power's hydrogen systems could change all of this in a hurry. But as we've seen, there are huge questions surrounding when and if that will happen. So while envisioning another 25-year run for Plug Power is an interesting exercise, whether the company can survive financially for that long remains an open question.
