HomeUSAAmazon strikes green hydrogen deal with fuel cell maker Plug Power

Amazon strikes green hydrogen deal with fuel cell maker Plug Power

Plug Power hydrogen delivery truck.

Source: Plug Power

Shares of hydrogen fuel cell maker Plug Power closed up 9% on Thursday after Amazon said it struck a deal with the company to power some of its operations with green hydrogen.

Amazon said Plug will supply 10,950 tons of green hydrogen per year for its transportation and building operations starting in 2025. Amazon expects Plug to provide enough green hydrogen to power 30,000 forklifts or 800 long-haul trucks. As part of the deal, Plug said it granted the e-commerce giant a warrant to buy up to 16 million shares at an exercise price of $22.9841 for the first 9 million shares. Amazon agreed to spend $2.1 billion on Plug products over the seven-year term of the contract in order for its warrants to fully vest.

Hydrogen is potentially useful to fight climate change because burning it doesn’t generate greenhouse gas emissions. But the hydrogen has to be synthesized first which requires energy. One way of making hydrogen employs electrolysis, with an electric current splitting water into hydrogen and oxygen. Green hydrogen is produced when the energy used to power this process comes from renewable sources such as wind or solar. It is a way to store energy from renewable energy sources for times when the sun isn’t shining or the wind isn’t blowing.

Experts remain divided on its effectiveness to fight climate change, with some believing it’s neither efficient — it could make more sense simply to use renewable electricity directly when it’s available and rely on other sources when it’s not — nor green enough. A lot of hydrogen produced today is so-called “gray” hydrogen, which means it’s generated from burning natural gas or other fossil fuels.

Amazon said the agreement will help further its sustainability goals, as it will start to use green hydrogen to replace gray hydrogen, diesel and other fossil fuels. Amazon hinted it hopes to use green hydrogen in its operations beyond just powering forklifts, citing technology such as hydrogen fuel cells. In order to do so, “more hydrogen-powered equipment needs to be made commercially available,” it added.

Amazon unveiled its “Climate Pledge” in 2019. As part of the plan, it committed to be carbon neutral by 2040 and pledged to move away from gas-guzzling delivery vans by agreeing to purchase 100,000 electric vehicles from Rivian Automotive.

The retail giant had already been using Plug’s technology prior to Thursday’s announcement. In 2017, Amazon acquired the right to buy up to 23% of Plug. At the time, Plug said it would supply Amazon with hydrogen fuel cells to be installed on forklifts in a handful of its warehouses.

Shares of Amazon closed up 2.6% on Thursday.

— CNBC’s Cat Clifford contributed to this story.

WATCH: Green hydrogen could help us cut our carbon footprint, if it overcomes some big hurdles

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