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Operator
Greetings. Welcome to the Plug Power second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Teal Hoyos, Director of Marketing and Communications. Thank you. You may begin.
Teal Hoyos
Thank you. Welcome to the 2021 second quarter update call. This call will include forward-looking statements. These forward-looking statements contain projections of future results of operations or of our financial position or state other forward-looking information. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward-looking statements, and such statements should not be read as a guarantee of future performance or results. Such statements are subject to risks and uncertainties, that could cause actual results to perform or differ materially from those discussed as a result of various factors, including but not limited to risk factors and uncertainties discussed under item 1A risk factors in our annual report on Form 10-K for the fiscal year ending December 31, 2020, as well as other reports we file from time to time with the SEC. These forward-looking statements speak only as of the day in which the statements are made, and we do not undertake or intend to update any forward-looking statements after this call or as a result of new information. At this point, I would like to turn the call over to Plug Power's CEO, Andy Marsh.
Andy Marsh
Thank you, Teal, and thank you, everyone, for attending our call today. This quarter had a mixture of successes and challenges. The successes were easy to rattle off. Revenue increased dramatically by over 75% versus the prior year. Shipment of DrenDriveU into new sites dramatically increased versus the prior year. We closed to Hy-Vee at JV with Renault, targeting the light commercial market for vehicles in Europe. This market is expected to be 500,000 vehicles in 2030, with over 30% of the market captured by the JV. We did have some challenges in the quarter associated with hydrogen costs. There are two major drivers. The cost of ending our relationship with air products. This had a short-term impact on pricing and construction costs to replace air products liquid tanks. This is about two-thirds of the increase of the hydrogen cost for the quarter. There also was a Crisis with the availability of hydrogen due to a force majeure. The force majeure was due to a major hydrogen plant going down for two months in the southeast. This local disruption impacted the U.S. hydrogen network. What I think is really important, we at Plug Power made sure our customers had hydrogen throughout this event. Let me talk briefly about our near and mid-term corrective actions. The air product changes were a one-time event and now won't be duplicated. We're also now not strangled whole by having industrial gas companies own equipment at any of our customer sites, giving us greater flexibility in making sure we have cost-effective hydrogen solutions for our customers. Second, the force majeure for hydrogen was an unprecedented event. In July, additional capacity was brought online by our partner, Linde, over 30 tons per day, which will alleviate future issues, just to give people a feel this is an increase of over 10% of U.S. capacity. We're also increasing our own capacity in October by 3.5 tons in our Tennessee plant. Plug Power will have an additional 70 tons online in the third quarter of 2022, and additional sites online in early 2023. And just to remind folks, we use about 50 tons of hydrogen a day at the moment. And we've already announced additional green hydrogen sites across the board in New York, Pennsylvania, Georgia, and Texas. This week, we broke ground at our Georgia site, and the site to New York and Texas will be the largest green hydrogen plants in the world. Some may ask, Why did we absorb the cost of the force majeure? We believe in the near term, protecting our customers from the challenges in the market today will pay off in the near term. We want our customers to know they can count on hydrogen being available, and more importantly, can count on plug power meeting their needs. They will be critical in helping us fill up our new plants. We have exciting news coming up in the coming quarters. We're increasing our gross billing guidance in 2021 to $500 million. This means we'll be increasing our gross billings by over 50% from our 2020 numbers. We will close our JV with SK this quarter as planned. We're working on the final details of the relationship. Both of us are really quite excited. And, uh, We'll also be closing our JV with Axiona in the Iberia Peninsula. We plan to build 30 tons of liquid hydrogen capacity with Axiona, making us one of the largest liquid hydrogen producers in Europe. We're also targeting bookings of 250 to 500 megawatts of electrolyzers in 2021, with 250 megawatts shipping out of our new gigafactory. We'll be making announcements in the second half. for additional takeoff agreements for our hydrogen plants. Finally, and this is really important, with the Gigafactory, we're utilizing state-of-the-art automated equipment in our new manufacturing processes. We're planning to match our unprecedented capabilities in sale and design of fuel cells and electrolyzers and become not only a leader in manufacturing those devices, but a global manufacturing leader. That's why we hired Dave Midrich, who ran the Tesla Gigafactory in Nevada. We remain incredibly excited about the future. We'll be holding our third annual Plug Power Symposium on October 14th. We're moving to a virtual event because of the recent uptick in COVID cases. You'll be able to sign up online next week And we expect to have an in-person event in the spring once this pandemic recedes to show off our facility in Rochester. I was there yesterday. It's just great. Finally, we're operating now with four general managers for our different businesses. Keith Schmidt for new markets. That includes stationary and on-road vehicles. Keith's done a marvelous job closing out the Hy-Vee at JV. And as you know, Keith has been Plug COO for seven years. Ole Hoffman, running our electrolyzer business. Ole worked at Air Laquite for 29 years and ran their U.S. hydrogen business for many, many years. Jose Crespo, as a lead, has led our sales efforts for six years and is now the head of our material handling business. And Sanjay Shrestha, with a long career in renewable energy, is running our energy business. Quarterly, I'll ask one of them to join the call. You know, they're focused on building the business, and I'm sure the analysts would like to speak with them. And this quarter, I've asked Sanjay to join me as well as our CFO, Paul Middleton. We're ready now to take questions.
Operator
Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Colin Rush with Oppenheimer. Please proceed with your question.
Colin Rush
Thanks so much. Guys, you know, well done on the revenue guide hire here. But what I would love to understand in more detail is what's going on with your customers in terms of the growth trajectory into 22 and beyond, you know, what sort of foundation are you laying at this point? What can you point to in terms of, you know, customer activity, conversion rates, and order size that would give us some comfort on the continued growth as we go forward?
Andy Marsh
Yeah. So, Colin, as you know, we've committed to – first, let me take a step back. I'm sitting here, and it's beginning of August, and We have the $500 million in-house for shipping this year. That's really unprecedented. For next year, we feel incredibly comfortable with the $750 million. I expect the electrolyzer business to be $150 million of that. I expect material handling. This year will be $457 million. And we expect that number to go up and continue to grow. And the energy business and new markets have great potential. Before this call, Sanjay and I had a long talk about whether we should be upping guidance for 2022 today. We have this symposium on October 14th. And I think you'll see us lay out a new plan and some new insight into the how the business can be significantly bigger in 2021 and 2024, 2022 and 2024. Okay.
Colin Rush
Thanks so much for that. And then the follow-up is really around the class six truck and, you know, the progress that you've made on that in terms of, you know, finishing up designs, qualification of suppliers, you know, and your ability to start building some of those things with your partners.
Andy Marsh
Yeah, you know, Colin, we expect things are progressing well. Unfortunately, we're not having the in-person event. We're going to have some vehicles there, both for the light commercial vehicles and the Class 6 to show off. I've seen the vehicle that we've done for our JV. You know, we're remaining in line at... We will do 10 significant pilots next year for on-road vehicles. And I think probably more important, you know, we are in discussions about the model for heavy-duty vehicle trucks. And I think, you know, I didn't mention that in my opening remarks, but I think you'll be certainly hearing a lot more about that in the coming six months and certainly at the Plug Power Symposium.
Colin
Perfect. Thanks so much, guys. Good talking to you, Colin.
Operator
Thank you. Our next question comes from PJ Juvicar with Citi. Please proceed with your question.
Andy
Yes, hi. Good morning. Good to be on your call.
Andy Marsh
Good afternoon, PJ. So I know we usually do this in the morning.
Andy
It's wonderful to talk to you. Good to talk to you, Andy. You know, I understand that you had to absorb some cost, hydrogen cost, for your customers this quarter. But as you build out your hydrogen network, would you have cost pass-throughs built into your future contracts?
Andy Marsh
I will let Sanjay take that. Sanjay, I know you run this and do this every day.
Sanjay
Sure. I'm happy to do that, Andy. Thank you. Hey, PJ, how are you? So, TJ, a couple of points, right? Our goal is to really think about making green hydrogen as economical as gray hydrogen, right, number one. Number two, the way we're building this green hydrogen generation network, we're really thinking about how can you tackle force majeure like this so that any another plant shut down because of the force majeure disruption in the industry is not as big of an event for the entire hydrogen industry as well as for flood power and our customers, right? So the way we're looking at it, our goal is to be as transparent as we can, but we're really not looking to take a view, frankly, of being opportunistic if you would, for a lack of a better word, if there is a disruption in the industry, this is the time to hike up the price, you know, deal with situation like that. Look, our goal is to make sure that, you know, we keep driving the cost and price of hydrogen down. So more and more application opens up, right? So that's the approach we're taking. That's how we think about it. And really, you know, we're not looking to sort of make sure that we're maximizing the profit opportunity. Of course, we want to make sure we have the right return profile built into this, right? And again, one of the key things that we have said it in the past, we are really looking to make sure that our end customers get green hydrogen at the same price that they're paying for gray hydrogen today. And more importantly, we're focusing about really build the ecosystem. More apps come online where hydrogen becomes more and more ubiquitous and folks aren't concerned about having apps like long road, middle mile vehicle, and things along those lines. That's how we think about this feature.
Andy
Great, great, Sanjay. Thank you. And, you know, as you get closer to building out your new hydrogen network, you know, cost of construction is going up everywhere. So do you have a good handle on your building costs as well as your green power costs? And given all that, are you still sticking to your gross margin targets for hydrogen fuel that you've highlighted before? Thank you.
Andy Marsh
Sanjay, you want to take that one too?
Sanjay
Sure, Andy. Happy to do that. So, PJ, let me break that into two parts, right? First part of the question is the power component. Absolutely, yes, right? So there is no change to that. You know, if anything, we're continuously looking to see, you know, where else can we lock in more location where there is an attractive renewable sources as well as expansion potential, and which is why we're working with a lot of different partners on that front. Now, you bring up an excellent point, which is commodity prices are up, right? And, you know, are we concerned about potentially EPC costs being maybe marginally higher than what we thought? when you're doing big projects like this, there's always going to be some pluses and minuses, right? But at this point in time, given that the biggest component of the cost is variable cost and that's electricity, right? CapEx, is still a relatively small component when you think about the total cost per kilogram of green hydrogen molecule, right? So even if there were to be some escalation, even what's happening to the commodity prices, labor prices, we really don't see any changes to what we've talked about from our cost target as well as our margin targets.
Andy
Great. Thank you. I'll pass along. Thank you, PJ.
Operator
Thank you. Our next question comes from James West with Evercore ISI. Please proceed with your question.
James West
Hey, good afternoon, guys.
Andy Marsh
Hey, James. How are you today?
James West
I'm doing well, Andy. So, Andy, your increased confidence in raising guidance, and then it sounds like increased confidence in next year as well, is that driven more by your base materials handling business just gaining some more initial momentum, or are you getting momentum in some of the other areas you've been targeting, like data centers?
Andy Marsh
So, you know, let me tell you, James, yes, yes, and yes. But, you know, let me just give you a good deal of my increased confidence for next year has to do with the continuous performance of our material handling business. which I think it's probably fair to say will continue to grow at the rates we've seen before. We have now five pedestal customers. When I started talking about pedestal customers two years ago, we had two. And as Jose Crisco pointed out to me, we've already hit the number of pedestal customers we expected in 2024 this year. I mean, that's a huge accomplishment. The electrolyzer business, you know, I believe will be at least $150 million next year. And just to give you a feel for that, I spent seven to 10 days in Europe with Oli Hoffelman and David Bowe, who run our electrolyzer business. And just in those seven days, seven to 10 days, We booked $30 million worth of business for next year. So, you know, that just gives you a feel. And we're working on some rather huge, large projects. You know, one of the advantages we have versus, and James versus other folks, is we actually have a factory that can make stacks at that pace, which is needed for that market. It provides us a unique advantage, I think, versus the competition. And, you know, I look at the funnels and, you know, I didn't even touch in the stationary market. And in the stationary market, we have activities and data centers. First units will be getting deployed now. You know, what we also found two other markets, which the first one I never really thought about, which is counterintuitive to me, but we're seeing for EVs that folks are having difficulty bringing the electricity to the grid. And we actually probably next year could just do $25 to $30 million in business providing stationary products to power EV vehicles, which is in some ways kind of counterintuitive. And our present customers in material handling at the end of this year will be at 165 sites. They have hydrogen on site. And I can tell you, because of some of the issues with siting diesel, some of the issues with California, there's limits to how long you can run the diesel engine. We actually see and been talking to our five big customers about deploying stationary power products to back up their building. And those applications, they're low-hanging fruits because We have the hydrogen there.
James West
Right, right. Makes sense. Congratulations on that. A follow-up for me on your green hydrogen. As you bring production online, how should we think about the pace of takeoff agreements? Should those be coming on kind of consistently as you start out the production? Should we hear about them well before? And I guess, do you think you'll basically have sold most of your hydrogen before it actually comes online?
Andy Marsh
Sanjay, I will let you take that one.
Sanjay
Yeah. So, hey, James, how are you? Great question, right? This is something, obviously, we're spending a lot of time on now because, you know, our initial priority was to lock in the sites, write renewable sources, cost of green hydrogen molecule. That's been our focus, right? How do you make sure you get these things done on time, on budget, stay with the schedule, right? Now, that part, as Andy mentioned, right, it's now becoming a lot more reality. We just broke ground. in Georgia plant, which will actually be the gas plant by the end of this year, the first green hydrogen gas plant, and then 15-ton liquid plant by the summer of next year. So we obviously have a lot of those discussions going on, and we look forward to providing a lot more update, obviously, at our upcoming symposium. So the way we're thinking about this is as follows. Our goal is to really make sure that Our customers are getting the benefit of this green hydrogen, number one. Number two, our goal is to expand more applications so that the pie becomes bigger. We're not looking to go after the existing pie of the hydrogen market, if you would, right? Our goal is to really make sure that the pie gets bigger. For example, James, right, material handling consumes one kilogram of hydrogen a day. If you have Class A trucks, that's going to consume 40 kilograms of hydrogen a day. If you have 10,000 Class A trucks, you're going to need – 400 to 500 tons per day of hydrogen capacity. Today, you have 285 tons per day of liquid hydrogen merchant capacity in the U.S. We're trying to tackle that topic, right, that issue, and not to mention the fact the incremental demand from stationary data center opportunities. So you will see us start to get these plants loaded as we go forward, as these plants are going to start to come online by the summer of next year, in Q4 of next year, Q1 of 2023, and we'll have a lot more to share over next quarter or two.
James West
Okay. Got it. Great. Thanks, Dante. Thanks, Andy. Thanks, James.
Operator
Thank you. Our next question comes from Craig Irwin with Roth Capital Partners. Please proceed with your question.
Craig Irwin
Good evening, and thanks for taking my questions.
Andy Marsh
Good evening, Craig. How are you?
Craig Irwin
I'm great. I'm great. Congratulations on that really nice revenue guide. It's good to see the traction. Andy, I remember many years ago in Albany when you were working on the cost out of your systems. You really did an impeccable job by engineering the product. And then there was a little bit of a, let's just say, technology substitution, technology evolution in there as well. This gigafactory you're going to be building, this is more innovation on the manufacturing side, not just on the technology. So it's a more holistic approach. Can you maybe help us understand the potential cost improvement on stack production out of this facility and electrolyzer production, I should say, too? Are we looking at very material cost down in overall system economics? Is this something that you see as key to unlocking the longer-term margins of the company?
Andy Marsh
Craig, I think you hit it on this. hit it on the head. And I'm going to say, I brought Dave in from Tassel to automate that factory and help us significantly drive down costs. When I look at the cost of MEAs, when I look at the fact that we're moving to metal stamped plates for our stacks, When I look at we're changing the whole manufacturing process for how you manufacture electrolyzers by going from a wet to a dry bill, you know, we see step changes in cost. So, you know, I think, you know, before we do other work, I think you're probably thinking about the, you know, costs on a typical fry can drop 20%. But there's still so much more. You know, we've been in our Latham factory, Craig. One of the areas is, you know, I kind of opened this call and I talked about that, you know, improving our manufacturing both at the Gigafactory and in Latham. You know, we're looking at all sorts of tracing systems to make sure we're on top of everything. Not only will it drive down our material costs, It will make our quality better, our service better, and predictability better. You know, I was there at the Gigafactory yesterday, you know, watching the construction process, and I think it's going to be a game changer for our costs.
Craig Irwin
Excellent, excellent. So my follow-up question is around the heavy-duty market, right, trucks and buses, or I guess medium-duty as well. There seems to be a misperception out there that this market is several years away. You know, I know you've been talking about this now, I guess, for close to two years, and it's unusual for you to talk about something unless there's material action. Can you maybe scope out for us I know you're not ready to talk about individual customers or commitments on the part of customers, but can you maybe scope out for us roughly how many stacks you've supplied for potential customers to evaluate either as engineering bench systems or to build test vehicles or prototypes that would be evaluated to put together business plans? Are we talking about single digits, or is there potentially, you know, a much wider experience base that's already been developed?
Andy Marsh
Craig, I would say the experience is wider. And look, you know, we've already built, you know, we're building vehicles at our Hy-Vee and JV. I mean, and, you know, these are, you know, you know, you look at the master van product and you look at it, it's the real deal. And, um, you know, we do have, um, let me try to make sure I phrase it right. Um, we do have, uh, I'll say MOUs, which, uh, based on trials we have, which could expand rather rapidly for vehicles beyond like commercial vehicles. And, uh, As you can see with VAE, we have activity going on in the bus, which quite honestly, I put a lower priority long term. I expect that we'll be, I know I'm giving a presentation coming up in the next month about everything we're doing with vehicles. And I think I'll be able to answer your questions probably even better then, but it is a significant activity. What's really nice about it, it's completely tied to our stationary product activities too. I look at our 125 kilowatt module, and it's really a system. It's not just a module. I think from a density and performance point of view, we think it's the best in the industry when we look at Toyota numbers. When we look at Hyundai's numbers, we think we're well, well positioned. And look, Craig, after it dies down here with COVID, after this Delta virus goes away, I'd love to have you come up and kind of show off a little.
Craig Irwin
Sounds like fun. Hey, congratulations on the progress.
Andy Marsh
Thanks, Craig.
Operator
Thank you. Our next question comes from Eric Stein with Craig Hallam. Please proceed with your question.
Eric Stein
Great. Thanks for taking the questions. It's Aaron Spahalon for Eric.
Andy Marsh
Hey, Aaron. How are you?
Eric Stein
Doing good. Thanks, Andy. You know, maybe first on the pedestal customers, you know, you kind of touched on it a little bit and congrats on being ahead of the timeline. But with that fifth customer, is that still... you know, the thought process of $25 million in the back half, and can you just maybe talk a little bit about potential for other auto customers and then maybe switching over to Europe as well? You've kind of talked about three pending customers. You know, can you just give us an update there?
Andy Marsh
Sure. Good question, Aaron. So, you know, it'll be the fifth pedestal customer is $25 in the second half, and we expect to – well over 50 for what, uh, for 2022 already, uh, with sites that have been identified and, uh, you know, they're targeting, uh, they're really rolling off around their factories around the world. Um, in Europe, we're making a big commitment there. Um, we're, uh, and by the way, you're going to get a, uh, scoop here. You know, we're, uh, you know, we're putting a facility in, in, um, in Dusseldorf, Germany, uh, where we'll be, um, you know, have over 50,000 square feet to support, uh, the material handling customers in, in Europe where we'll, uh, you know, we'll do final assembly and do stocking levels for Europe because, uh, you know, that's really the target. I, uh, I know that there's, uh, um, customers, uh, you know, and I've spoken about them before car for which, uh, at the sites that have material handling equipment from Plug Power doing COVID to perform better than others in their network. And that's how we usually convince people because they could see they could move more goods with less people and faster. And that value proposition is really valuable. The activity we're doing with Axiona in Spain is also closely tied to that work. By putting 30 tons of capacity in Spain, we'll be able to provide those customers cost-effective hydrogen, not only for the material handling fleet, but stationary products, as well as on-road vehicles. So we're really trying to package and sell all the activities as a group, not as an individual item.
Eric Stein
Great. Thanks for the color. Yeah, that's, that's really interesting. Um, you know, second question for me on the electrolyzer side, you know, can you just give us a little bit more detail on the pipeline? You, you kind of gave some, some really good news on, on that 10 day trip you had out there. Just what are you seeing on the highs of kind of deployments as, as we look into next year, given the capacity you're bringing on?
Andy Marsh
Yeah. Yeah. We have a, um, bundle today that exceeds $2 billion for electrolyzers. And, uh, As you can see, I put out relatively modest numbers for next year based on that. We are in negotiations with plants which are as large, with customers who are looking for sites as large as one gigawatt. Just to give you a feel, that one project would be somewhere in the $500 to $600 million range. There's huge, huge opportunities. And, um, you know, we've, um, we've really established, um, a strong, uh, leadership team there with only hopefully men from air to key and David bow, uh, to real free who work in now, uh, to really, um, you know, exploit the market is, you know, exploits that real big, that good word really, uh, engage the market. And we have sales folks across the world, Europe, the U.S., as well as working with SK in South Korea and, you know, for use in Asia. We have activity going on in Oceania. You know, it's really a global sales effort. And I think the fact that we can actually put stacks out there. You know, the remarkable thing about what we've done with the Gigafactors, and it's really the team, people like Dan O'Connell and Keith Schmidt, is that we have a footprint that can be leveraged over and over again. There's 256 pieces of unique equipment. And just like how Sanjay is designing the hydrogen plant, the view is this is a modular setup. We can build smaller and larger plants using the same methodology over and over again. It's really, really, I sit there in awe with how the team thought about that.
Eric Stein
Great. Great. Thanks for the color and best of luck on all the exciting opportunities.
Colin
Thanks, Aaron.
Operator
Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Amit Dayal with HC Wainwright. Please proceed with your question.
Andy
Thank you. Good afternoon, everyone. Good afternoon, Amit. How are you? I'm good, Andy. Great caller on the call so far. Great. Just one question with respect to sort of the, you know, margin challenges, et cetera. Can we assume that the bottom was in with the 2Q gross losses?
Andy Marsh
and we see improvements going forward? Sure. I'm going to let Sanjay take that since really that was the challenge. So, Sanjay, you want to go through that?
Sanjay
Yeah, happy to do that, Andy. Hey, Amit, how are you? So, short answer to your question, Amit, is yes, you should expect margin trend to improve as we go through the year and obviously into the 2022. But as Andy mentioned and as he alluded in his opening remarks as well as the details we provided, yeah, in our shareholder letter, right? Let's just take a step back and think about what really happened here in Q2. First, obviously, we transitioned from, as Andy talked about, from air products to, you know, Lindy in terms of all the hydrogen we're sourcing from our industrial gas company, right? That's one. That was a pretty substantial cost, you know, transitioning that. That really was almost two-thirds of the cost of increased hydrogen molecule in Q2. The second thing we had was one of these unprecedented events where a plant went down for almost two months where we actually had to mobilize our high pressure tube trailers to support our existing industrial gas partner. But more importantly, make sure that any disruption you know, that did not happen to our end customer and any disruption was very, very minimal because as you've heard from Andy, many times we're a very customer obsessed company. That is our top priority. That is our top focus. But guess what? That cost us money as well. And then on top of that, you know, we had to go even ourselves, pick up hydrogen from the other location at the higher prices, right? So when you really look at our Q2 and sort of the margin impact, it was multiple of these factors. One of these unprecedented event from a force majeure perspective, how long this plant stayed down, right? And how it continued. Essentially the industry had almost 50 ton of capacity that was destructed for almost two months. That's obviously all have come back online. Now, normally just that Lindy's added over 30 tons of capacity in Texas, which obviously helps the market. And you will see as our green hydrogen plants come online and the cost numbers that we've talked about that will help the entire industry, obviously our customer and plug power as well. So short answer to your question. Yes, I mean, I think Q2 hopefully marks the bottom here and short of any major force majeure again in the second half of the year, we should really see this trend to improve.
Andy
Well, that's really good to see here, you know, taking care of customers, It was a big priority for you guys right now as you sort of commercialize everything, so that's good to know. Just one more question from me, maybe, Sanjay, directly for you. How far away are we from green versus gray hydrogen parity?
Sanjay
I mean, you've heard us say this many times, right? Out of the gate, when we will have our first liquid hydrogen plant come online in summer of 2022, we plan to sell that green hydrogen at the same price that our customers are paying for gray hydrogen today and still see pretty meaningful improvement in the margin profile. The way we see it, the time for green hydrogen is today. It's not five years later. It's not 10 years later. But you have to keep things in context, right? When you talk about hydrogen, when we're referring to our green hydrogen at parity with gray hydrogen, we're strictly talking about liquid hydrogen in the market today, right? So we're comparing liquid green hydrogen with liquid gray hydrogen. And if you then start to think about green hydrogen for the gaseous hydrogen, you have to compare that with the gaseous gray hydrogen. So from our viewpoint, I think price will continue to go down, but the time is here. It's now. And our goal is to make sure we make hydrogen ubiquitous. That's green.
Andy Marsh
that's cost competitive with gray hydrogen out of the gate starting in the middle of 2022 and keep making improvements thereafter you got it thank you so much guys appreciate it you know amid as you know it really all comes down to the feedstock and i think the work that sanjay and his team has done to procure long-term low-cost ppas is really the reason that green hydrogen will be on parity with gray hydrogen in the near term. So it really comes down to what's the cost of the feedstock.
Colin
Thank you. Thank you, Andy. Yeah.
Operator
Thank you. Our next question comes from Chris Souther with B. Reilly. Please proceed with your question.
Chris Souther
Hey, guys. Thanks for taking my question here. Maybe just one last one here on the fuel cost in the quarter. Is anything in that $31 million additional cost, incremental cost you talked about, something that would continue to repeat in the next couple quarters until we get that internal supply starting to come online? If you back that out, your fuel margins go to mid-teens, and that would obviously be a huge kind of incremental step here. So I'm just kind of curious, you know, how good can we get those margins before the internal capacity comes online?
Andy Marsh
Chris, I'm going to let Sanjay answer it, but it's good hearing from you. Chris, Sanjay?
Sanjay
Thank you, Andy. Hey, Chris, how are you? So a couple of things, right? You're right, obviously, we would not have two-thirds of what happened in this quarter, right? Obviously, the transition away from know air products and the cost associated with that that certainly would not repeat itself right that's one um second item here is look and we fully expect the price of hydrogen from our you know we obviously have a you know very strong relationship with lindy we are working with them on a variety of different things even beyond the supply of hydrogen right we do have a partnership to even provide them with our plastics vehicle as well as the Class A vehicle. So we are obviously in a constant dialogue to see how we can continue to drive the cost of hydrogen down so that we can continue to propel the growth of multiple end markets. So that should be an incremental positive as well. On top of that, our capacity in Tennessee goes from 6.4 to 10 tons a day by the end of October. That will also help from the overall cost perspective. So look, direction of the price will go down. One big caveat, that we cannot handicap at this point in time until our own capacity comes online is, is there another force majeure as we go into the peak season to support our customer in Q4 of this year? If there is one, that could certainly be a negative impact. We will be using a lot more of our high-pressure tube trailer. Price could be negatively impacted by that. But short of something like that, you should absolutely expect directionally, you know, fuel margin to start to go up and certainly will be meaningfully better as our capacity comes online. Is there anything you would like to add, Andy?
Andy Marsh
No, I think that's right. I mean, what we're doing is making sure that what we did the last quarter was making sure the hydrogen economy will happen soon. And I think that it'll have great incremental benefits, Chris, and you'll see huge improvements. And, you know, I kind of want to take a step. I haven't had a question on policy. And I think that one item people should remember when listening to our discussions today, we're not even pricing in the opportunities in the U.S. associated with items like the infrastructure bill. The infrastructure bill includes $8 billion for hydrogen hubs. for generation of hydrogen for natural gas networks, for generation of hydrogen, you know, generation of hydrogen to blend in the natural gas networks, for on-road vehicles, for fueling stations. No company in the world is better positioned to take advantage of that large opportunity. On top of that, when you look at reconciliations, here in the United States. There's work going on which will allow the tax credit to extend for 10 more years. There's work going on which would suggest a $3 tax credit for green hydrogen. These are all game changers to make sure that will really be another accelerant to this hydrogen economy. And quite honestly, It's going to be green, especially with green hydrogen, lower costs than gray. The world's going to change much more rapidly than people can imagine. We're out there at $1.7 billion without all this exciting work going on in the U.S. and Europe, as well as the potential in Asia. So I think the pie and the opportunity to accelerate this company is even quicker, and this hydrogen industry even quicker is really, really important. It's critical Sanjay gets these hydrogen plants online, both from a cost point of view, but also how you make this pie as big as possible, as rapidly as possible. When the President of the United States is sitting there saying he wants to see 30% of vehicles in 2030 being zero emissions, whether they hit it or not, Those kind of goals and those kind of aspirations are just completely in line with Plug Power's broader vision. I don't think anybody could be better positioned.
Chris Souther
That's great to hear. Maybe just the next one on the Hy-Vee at JV. and the strategy as far as hydrogen supply in the French market. It sounded like the Acciona deal is more around industrial and on-road type stuff within Spain, Portugal. What are the plans for French production of hydrogen for you guys? Is that something that's on the table here, or are you planning on supplying from Spain?
Andy Marsh
Absolutely, Chris, and yes and yes. So, Chris, if you look at the Hy-Vee at JV, it does include using our electrolyzers to generate hydrogen for customers. That'll be controlled 100% by plug. It includes, you know, fueling stations. It includes, of course, the vehicle and aftermarket service. And we do believe that we will be developing, fueling hydrogen generation in France and throughout Europe over the coming years. We'll be leveraging our electrolyzers. I would expect that you'll see announcements of activity in France. But we will be supporting some of the French activity, especially initially with the liquid hydrogen we're putting in place with Axiona. What's really interesting is it's a really huge opportunity there because in Europe, the availability of liquid is not nearly as significant as it is here in the States. And I think that people are beginning to realize for storage capability just at customer sites, you need to have liquid. And with the plant we're building with Axiona, will become a major player in liquid hydrogen almost overnight. And I think the applications there and our ability to build on that based on our experience here in the state will really help us grow that market even quicker.
Chris Souther
That's great. And maybe just the last one here. If you could talk about the timeline for the bus powertrain and fuel cell module kits that you guys are working on with that new partner. And are any OEMs in kind of advanced discussions to purchase the system? And then, you know, are there plans beyond North America, you know, for collaborating with those guys or others on the bus side?
Andy Marsh
Sure. I mean, BAE has a global footprint. They already have units from Plug Power. And I think there's a huge, you know, and they have a huge sales network, Chris. that not only includes the U.S., but globally.
Colin
We think they're a great partner. That's great. I'll hop in the queue. Thanks, guys. Okay.
Operator
Thank you. Our next question comes from Jed Dorsheimer with Canaccord Genuity. Please proceed with your question.
Jed Dorsheimer
Hi, thanks. Good evening, Andy.
Andy Marsh
Good evening, Jed. How are you?
Jed Dorsheimer
Good. So I guess first, The force majeure, I guess, what triggered the force majeure shutdown during the, I guess, the first half of the year or the quarter?
Andy
Sajay, do you want to take that one?
Jed Dorsheimer
Sure.
Sanjay
Happy to do that, Andy. Hey, Jed, how are you? Good. Good. So, Jed, what happened is, you know, sometime the first week of May, there was basically a plant outage at one of the plant, you know, essentially supplying, you know, one of our key industrial gas suppliers, right? And then that was supposed to be a two-week event, but essentially they had some additional mechanical issue where the plant that was supposed to come online did not end up coming online for additional two weeks. It was a start and stop. They ended up having some additional challenges. That's really where it went from what was supposed to be a plant outage industry being an allocation to an absolutely and completely unplanned event triggered by some of the additional mechanical challenges, right? So that really caused the, so typically what happens yet is a industrial gas customer do have a certain amount of storage onsite to deal with situation like this. And if it was something that occurred like for the two weeks and you know, storage was depleted, plants comes online, but you probably wouldn't feel the pressure, like the pressure that was felt, you know, in the industry at that time. Furthermore, there was an additional plant that was supposed to come online, and typically in the commissioning phases of this plant, you know, plus or minus three, four weeks are things that tends to happen, right? So the plant, new plant in Texas, you know, ended up coming online, you know, really by the end of June rather than in the beginning of June, right? So we were anticipating that that plant might even come online a little bit sooner. Now, on top of that, you had some other industrial gas customer where they also had additional ramp-up issues in terms of their facility. You know, even in our Tennessee plant, we had about 18-hour outage because feedstock supply got curtailed by our feedstock supplier, Olin, right? So you had all this trifecta of an event that basically took what was supposed to be something somewhat manageable to an industry event where you almost had about 50 tons per day of capacity that was essentially offline. But again, looking back now and given where we are today, we're really looking at a situation not only that all of that capacity have come online. One, we're adding capacity in Tennessee. Two, Lindy's obviously added this big capacity in report Texas, right? So industry obviously has a lot more hydrogen to support some of the activity to really weather the storm like the one that we just faced in May, June, and really some part of July as well. So that's really what happened here, Jeff.
Jed Dorsheimer
Well, thanks for... for that extra color. I really appreciate it. And maybe Sanjay, probably more directed at you here too, I guess. But Andy, happy to broadly... I'm not insulted yet. So I guess if I think of costs and I kind of split that between sort of the the costs associated with the building of the plants and capex that are being, you know, that are weighing on you because you're not producing anything from these plants. If I start to look at the sort of the materially higher costs that you're incurring, how much do you attribute to sort of the overhead burden that should abate Is you start to ramp production and then how much are tied to sort of manufacturing inefficiency that that you hope to, you know, to improve as you go along? I'm just wondering, is it kind of an even split or is it more of like 70 percent on the on the capex burden right now?
Sanjay
So let me take that question in two parts, Jed, right? So where this is somewhat meaningful today for us is really in the expansion of our Tennessee plant, right? So we have 6.4 tons of capacity. Obviously, we're adding more storage. We're adding more, you know, human resources, right? We're obviously spending more in CapEx to take that to 10 tons a day, right? So today, the cost of that molecule is not what we anticipate it to be on a fully loaded plant, right? Which is really going to have to be about at 10 tons a day versus it being at 6.4 tons. But frankly, Jed, that is not the biggest contributor in terms of what really hurt our fuel margin or the higher cost of the fuel in Q2, right? Now, as you then, and I fully recognize the point you're making, as you then start to think about What is the impact to our cost of hydrogen when some of the newer plants come online? You know this pretty well, right? A lot of that is really going to flow through the CapEx. It's going to become more about the CapEx. So the only additional hiring we would do would really be training the plant managers at our Tennessee facility before the new plant comes online, right? So from the higher labor cost perspective, it would not be that meaningful. Having said that, there is one thing that we are doing even though this is going to add to the cost from a labor perspective, as well as, and you could argue that's a slightly higher cost of hydrogen in the near term, is given what the industry has gone through and given how important it is for us to make sure, which is what we have done all along, that hydrogen is available all the time, 24-7 per our end customer, we have actually gone ahead and planned so that we're adding more assets in form of high-pressure tube drainage. We're adding more liquid tankers even before some of these plants come online because we can react if there is another force majeure like this in the month of October or November when our customers are going through the peak season so that their work is not disrupted. Now, is that an incremental cause that is going to be flowing through the fuel margin here in Q4, yes it is, but it would still not be as pronounced as what we saw in Q2, given we're dealing with so many factors at once. So that's an incremental color I can share with you right now.
Jed Dorsheimer
That's really helpful. Hey, if I can squeeze one more, Ren. I heard today a new manufacturing process on catalytic decomposition of methane from garbage. Just curious your thoughts on that. I was unfamiliar with it, quite frankly, or always thought of it as more R&D, but other commercial companies seem to suggest that it's more closer. Curious your thoughts on that. Obviously, from a competitive perspective, it would have impact.
Andy Marsh
Essentially, you're feeding with R&G, right? Right, Jed? You know, I think one has to step back and think about the availability of RNG nationwide. And, you know, I know from some experience with it, you know, that's, I think, regardless of what the issue is, I think that's a bigger issue. I think, where are you going to get the documents to go?
Colin
Great. Thanks, guys. Okay. Take it easy, Jed.
Operator
Thank you. Our next question comes from Bill Peterson with J.P. Morgan. Please proceed with your question.
Bill Peterson
Yeah. Thanks for taking my question. Nice to speak with you, Andy and team. Thanks, Bill. My question. Yeah, my question is, you know, you announced this plug symposium. We're certainly looking forward to hearing more about the progress. And I fully understand the move to virtual. That's definitely understandable. But it was delayed by a month. I'm just wondering if the delay is related to any sort of production move-in timing or any other delays. You know, how does the manufacturing plan compare to your original plan? And the reason I'm asking this is you didn't speak to it, but it's pretty apparent that supply constraints are impacting a number of industries and Perhaps maybe some lead times have been extending. I'm just curious if there's anything that's changed in your manufacturing plan.
Andy Marsh
It hasn't. I think that's a good question, Bill. I was there yesterday with our board. It is proceeding as planned. I think, look, the ship, $126 million last quarter and the ship over 150 in the third quarter, uh, boy, we've had to, um, you know, we've had to really push hard and, um, you know, and I, you know, I, I was sitting with the team yesterday and we were reviewing the scheduling activity. Uh, we're on schedule and we're on plan. I, you know, the equipment's coming in, you know, for example, um, when the key, uh, Addition to that plan is the metal stamping equipment for our stacks. And I know we were in Europe last week signing off on the equipment before it was shipped to us. So, you know, let me just put it this way. I think during this crisis, project management, supply chain management has become incredibly You have to be at it all day long and intense, and the team there is doing that. I can tell you every day at 8.30 in the morning, I go through any supply chain issues and understand what we can do to make sure we can support our customers. And we've been successful, and we'll continue to be successful at doing it.
Bill Peterson
That's great, and somewhat of a lead into my next question. A lot has been asked about the hydrogen cost and those things, but I'm actually curious more about how we should think about your margin trajectory here in the second half and in the next year as it relates to more of the systems cost. You got close to 20% here in the June quarter. How does that progress as we move through the year and into next year? Mr. Paul, I'll let you take that one.
Paul
Thanks, Andy. And thanks for the question. Yeah, I think if you're talking about equipment in general, you know, I think routinely over the last few years, we've hit the 35% mark. I expect, you know, to continue to hit that mark routinely. There are ebbs and flows, things like the freight impact in the global supply chain, material cost impact from, you know, the supply chain issues with COVID-19. So there's lebs and flows, and then there's also the new product ramps that are going on. So I expect it to get a little stronger with the volume, particularly the volume in the second half. It's, you know, one and a half times, you know, the first half. And I expect as we move into next year, you know, it's going to continue routinely in that 35% plus margin as we move forward.
Colin
Thanks for that, Culler. Okay.
Andy Marsh
Great. I think we got one last one here before we have to sign off.
Operator
Yes. Our final question comes from Greg Lewis with BTIG. Please proceed with your question.
Greg Lewis
Yeah, hi. Thank you for squeezing me in here. I'll just keep it to one. Andy, I wanted to touch a little bit on your comments around, you know, the infrastructure bill. Clearly, that's a huge opportunity. And kind of looking through it, it looks like they're trying to set up a couple hydrogen hubs, with some of that being natural gas focused, a little bit being clean energy focused, and a little bit being nuclear. As you think about positioning plug to win that business, knowing that, hey, you're going to do what you're going to do. You're not going to be beholden to the government. But as we think about natural gas and that blue hydrogen opportunity, Is that something that Plug is going to be targeting or just because it's not green hydrogen, we're just going to kind of stay on the sidelines for that opportunity?
Andy Marsh
I think that we certainly are very, very interested in the apps that will support that hydrogen. I fundamentally believe that green hydrogen wins in the end because of cost. I think because of the environmental impact, you know, and if you, if you take a look at the, um, there's a real good question, Greg, if you take a look at, for example, Senator Carper's bill, um, the delta between, um, support for blue hydrogen versus green hydrogen is dramatic. And, uh, And quite honestly, I think that in the House, support for, and even the Biden administration is not all that committed to carbon capture, that the opportunity for us, we believe, is in green. We know when you speak with people like Amazon and Walmart and Home Depot and others who are targeting net zero, Microsoft, you're not going to get there with carbon capture. And so, you know, I, you know, my belief is that, you know, if you look out, you know, when you look at the cost of renewable energy, I think carbon capture is going to go the way of coal.
Colin
Okay. Thank you for the thoughts. Okay. Sounds good.
Operator
Thank you.
Andy Marsh
Well, I really appreciate all the questions today and the engagement. And, you know, we have the Plug Power Symposium, as I mentioned, coming October 14th. And not only will we be updating 2024, we'll be telling you about 2025 and everything we have going on from our energy business to our electrolyzer business to new markets like on-road vehicles, and, of course, our base business and material handling. I really appreciate everyone taking the time tonight, and you can register next week, so please register. So thank you, everyone.
Operator
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful evening.
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