by Stephen Lacey
April 25, 2017

Stephen Lacey: We've been hearing a lot about record breaking prices in utility-scale solar. Well, get ready for more records in offshore wind. In the last two months we've seen offshore project developers in Europe bidding for pennies per kilowatt-hour. Now the Europeans want to export that learning to America.

Then, Secretary of Energy Rick Perry wants to know if renewable energy is a danger to America's grid, and he's asking his staff to study it. Finally, Plug Power's deal with Amazon. It's not just about fuel cells, it's about dominance in the ultra-competitive retail sector.

Just a few days ago, Germany held an offshore wind auction for over 1,500 megawatts of project capacity. Four bids were accepted at an average price of 4 euro cents per kilowatt-hour. We've seen similar pricing in Denmark and the Netherlands, and in the UK the government said last month that prices for offshore projects are coming in below what they expected to see in 2020. The cost of building an offshore wind farm has dropped around one third in Europe in just the last few years. Installation techniques are getting better, and the turbines and the blades are getting much bigger.

Jigar, what exactly are we witnessing here? How important is this moment for offshore wind when we look at these bid prices?

Jigar Shah: Well, for a second there I just needed to make sure that this wasn't the impact of national weed day today.

Stephen Lacey: It is 4/20, yes. Maybe we're all a little stoned, and the offshore wind prices are a lot higher, and we're just imagining things.

Jigar Shah: Look, I've said this before in this podcast and I'll say it again here, the Europeans absolutely want to overpay for technology to get the costs down for us, which is great. They did that in solar, they did that in onshore wind, now they're doing it in offshore wind. The US has built only one offshore wind plant, and the vast majority of our offshore wind capacity is going to benefit from this extraordinary amount of development that the Europeans are undertaking in offshore wind. Kudos to them, and I really want to thank them for it.

Stephen Lacey: Since really the early '90's, Denmark started supporting this sector, when wind turbines were part of tractor components. They were made up of equipment from the agricultural sector, and they started experimenting with offshore turbines. Then as the US started grappling with the build out of Cape Wind, the Europeans doubled down and got really serious, and since then they've developed 13 gigawatts of projects and we're now seeing record prices.

This isn't about the Europeans saying, "Oh yes, we want to drop the cost for everybody." This is about them having a much higher price threshold, and saying, "We want to dominate this industry." Hey, guess what? The companies that are dominating this space are now European companies, and they're going to come over here and reap the benefits.

Jigar Shah: Right. I think when you think about the US, we do the same thing in drug prices. We have tons of subsidies through the National Institutes of Health, and we say it supports our industry, and we export those drugs around the world. Siemens and Vestas and other companies I think are really taking the lead in offshore wind technology, and they're going to reap the rewards of that, which is good. I want to thank my European colleagues.

Katherine Hamilton: I think there are a few factors. In addition to these low reverse auction bids, they're getting the wholesale power price plus whatever they bid, so in some cases they've even bid zero euros, but they still get the wholesale power price. They are getting free onshore and offshore interconnection and sub-sea cable connection, so that's kind of the benefit that they're getting.

In addition to competitive auctions, which then also takes away the need for feed-in tariffs, there's been a step change in turbine size. Turbines are a lot bigger, there's a higher load factor for offshore than there is for onshore because the winds are more constant, and also there's rising investor confidence. That, all of those factors combined are allowing them to be competitive. You can see then that being competitive in the US would be less of a reach, even without that auction.

Stephen Lacey: Yes. There has been some decent reporting on these auctions, but I think generally a lot of folks have gotten this wrong. The way you described it is exactly right, Katherine, but a number of publications have said that this is subsidy-free offshore wind electricity. In fact, the New York Times had a piece last week saying that Germany for the first time was supporting subsidy free offshore wind. That is just not true.

First of all, again, these prices come on top of established wholesale prices. Secondly, Germany and other European countries have basically said that they will build out the transmission themselves, and that utilities have to offtake the electricity from these offshore wind farms. The developers themselves have zero risk when it comes to building out transmission, and of course those transmission lines are supported by rate payers and tax payers.

There's just far less risk across the board for European developers than there is here in the United States. Saying subsidy-free offshore wind power is wrong, but in fact it is low subsidy offshore wind power, and it's certainly competitively priced power, at least in Europe.

Jigar Shah: Yes, I think that's right. I do think that this framework that Europe has put together does put their developers at a disadvantage when they work in the US and India and other places, because you do find that the government really does work more hand in hand with the developers in Europe than they do in places in the US and other places.

Stephen Lacey: That's probably the most interesting point. Whether or not we can recreate the same offshore wind boom in the United States. I recently had a good conversation with Alicia Barton, who's the former CEO of MassCEC. She worked at SunEdison, she's a lawyer who specializes in cleantech, she's been around the sector for awhile, and very early on recognized the need to put the infrastructure in place for offshore wind.

A lot of folks now believe that the European companies, well they don't believe, they are actually seeing that the European companies are eyeing the US market. Massachusetts and New York in particular, and saying, "Ok, there's starting to be some policy interest, and the infrastructure is getting built out a little bit. We're ready to start thinking about building projects here and bidding on leases."

The question is whether the successes can be recreated in those states, because really the developers are out on their own. I just wonder if either of you have any thoughts on that, whether we're comparing apples with oranges when we look to the similarities and differences between the US and European markets. There really isn't a US market, let's be fair.

Jigar Shah: Well, the way we do business in the US is dramatically different than the way they do business in Europe. Europe really is about giving people very low cost of capital, 5 to 6 percent interest rates because all the risks have been taken out through government contracts and mandatory purchase agreements and that kind of stuff. Whereas in the US it really is more of a free market, so for the very low risk contracts with utility companies you do get the same interest rates, but for higher risk contracts or distributed generation contracts, you're generally paying 8, 9, 10 percent interest rates, which I think is the way the free market should work so I'm not opposed to that.

I think separately, I do think that there are many opportunities for coastal cities to sign power purchase agreements directly with these offshore wind farms, and I do think that this concept of corporate PPAs and now moving to municipal PPAs will actually help accelerate these offshore wind farms on the east coast.

Katherine Hamilton: Yes, and as states put mandates, like Maryland and their renewable portfolio standard has a 2.5 percent mandate for offshore by 2020, they're going to need those incentives because the production tax credit, the expiration of it after 2019 is not great for offshore, because it doesn't give them much of a timeline. You can of course take the investment tax credit in lieu of the production tax credit to get that up front, but these projects take so much longer to develop. There's such a permitting process that you need some other types of incentives to be put into place.

Stephen Lacey: That seems to be the biggest risk. In fact if you compare the experiences of the few states that are actually considering offshore wind, you can see how important public policy is. Not just federal tax policy, but actual state targets. New York and Massachusetts have specifically said, "We want lots of offshore wind," and they're hoping for hundreds if not thousands of megawatts of projects. They're putting a framework in place for developers to be able to sell that power to utilities as part of a target.

Meanwhile, in North Carolina where there were some lease areas that were recently auctioned off to European companies, to AVANGRID, which is a subsidiary of Iberdrola. There were a number of people in North Carolina after that auction who said, "Yes, it was great that we saw competition, but we're not going to get anything built for a decade or more because there's literally zero public policy here in North Carolina that gives developers any certainty." They're just going to kind of sit on that lease hold.

It just goes to show you that there's still such an extraordinary public policy component to this. The few states that are really ambitious are going to be the ones that see the initial projects and even then, they're not going to come for years.

Jigar Shah: Yes, but given the costs of offshore wind and how fast they're coming down, I don't think they're going to be very expensive in 2020 or 2022. I'm somebody who's tired of the tax credit framework that the United States has developed, and I actually don't think it's a bad thing for the state of Maryland or Massachusetts or New York to pay $100 a megawatt hour for power, and I think they're willing to do that.

Stephen Lacey: Well, I'm not saying that the tax credit is always going to be the optimal policy, but whatever it is, whether or not you have some sort of interconnection guarantee, whether there are guarantees for offtake agreements, there are certain things that you need to put into place to provide consistency. A state like North Carolina doesn't have any of those. It doesn't have to be just tax policy.

At the same time, I don't know that we can say that those, just because the prices are dropping in Europe we're going to see those same price drops in the US. We need to get projects in the ground now and get some learning now in order to start seeing $100-per-megawatt-hour projects here in the US, because it's all very localized. You have to have the port infrastructure, you have to have ships because of the Jones Act, you can't just bring over European ships to operate in US waters. There are localized needs here that mean we're not going to see dramatic price drops right away.

Katherine Hamilton: And also remember the jurisdiction for offshore, the outer-continental shelf development for renewable energy is with the Department of Energy's Bureau of Ocean Energy Management, so they're the ones that have to run this commercial leasing process. They do assist, they help on planning and analysis, they help with lease issuance, they help with site assessment and construction and operations for all these projects; but it is a federal authority that every project needs to go through for the outer-continental shelf.

Stephen Lacey: Well, certainly a landmark moment for offshore wind in Europe, and we will start to see some of those learnings applied here to the US market, even though there are still plenty of differences.

One final stat I think is important to mention before we move on to the second topic, and that is the levelized cost of energy for offshore wind projects in the UK has dropped to about $125 per megawatt-hour, again before 2020 estimates. The levelized cost of energy for the Hinkley Point C nuclear reactor is going to be $187 per megawatt-hour, and that will get built in the next 7 to 10 years. Lots of learnings still left to be done in offshore wind. One more dramatic example of how different the technology landscape will look when a big nuclear reactor like Hinkley Point C comes online.

Stephen Lacey: Well, governor of Texas Rick Perry oversaw one of the country's first major wind booms. He also oversaw a dramatic expansion of fracking. Today, natural gas and wind are putting pressure on coal and nuclear power plants, and now Perry, the newly-minted Secretary of Energy wants to know if those same subsidies he supported are disrupting the power system. Hint, yes, there is a lot of disruption. The question is how are they disrupting the power sector?

On Friday, Secretary Perry sent a request to his staff. He wants a report on his desk in 60 days that will look at how wholesale markets are changing, and whether renewable energy subsidies are speeding those changes at the expense of baseload power plants. The memo was only a page and a half long, but it was packed with a lot of assumptions, which we are going to try to unpack here. Katherine, what did this memo call for exactly and what's its significance?

Katherine Hamilton: First, let me just put in perspective that Brian McCormack is the chief of staff for the Department of Energy, and he recently came from Edison Electric Institute, EEI. This looks like something EEI would have been very supportive of and would have worked hard to get through DOE, so that's kind of the background on this. No confirmation there, just saying this looks like a lot about what the investor-owned utilities are asking as well.

Basically it has statements like, "A reliable and resilient electric system is essential to protecting public health and fostering economic growth and job creation," that, "baseload power is necessary to a well functioning grid." A lot of the underlying statements here are basically saying, in order to have a reliable and resilient grid, you need to have strong baseload power. They want to look at what is baseload, affordable baseload power look like, is it being somehow threatened, especially coal and nuclear power.

The way that this memo is set up is really leading to answers that would say, "Oh yes, it's very important to have baseload power." Whereas we can discuss how that doesn't always work out well, and in many instances more flexible resources are going to be much more resilient and stable than baseload.

Stephen Lacey: Yes, there are actually a lot of good questions to be asking here. What is the role of specific technology support in impacting the broader market? Particularly in the wholesale markets where Europe has seen a lot of turmoil, and now we're staring to see the same story play out in the United States. Also the idea of baseload is an important one to consider as well. Last week we featured our conversation with Jesse Jenkins who outlined the concept of flexible baseload power and the need to consider a certain set of technologies to get us beyond 50 percent decarbonization to 80 percent, to 100 percent.

There are actually really good questions in here, the question is how Perry is framing this? It is a very leading document, you can tell that he sort of knows or wants to know what the answers will be. For example in some of the language he says, "Regulatory burdens introduced by previous administrations that were designed to decrease coal-fired power generation have destroyed jobs and economic growth, and threaten to undercut the performance of the grid well into the future." That's a statement, that is not a question. He is very clearly asking for the department to prove what he thinks is happening.

Katherine Hamilton: Yes, and so a couple things, one is because of his April 19th date that he wants this report in hand, this could potentially feed into a conversation that FERC is having on May 1st and 2nd, a technical conference to look at wholesale markets, capacity markets, energy and capacity markets, to look at what is going on in state versus federal jurisdiction, and what can participate?

At the same time though, there's some other things that are going on at DOE, so it may be less coordinated than you would assume based on the memo. One is that DOE is holding with the Siebel Energy Institute a future markets workshop in July, and they're looking for abstracts by May 12th, which is looking at flexibility and saying, "All right, what does flexibility look like? What are all of the different ways that consumers can interact? What are the policy and regulatory processes that need to be put into place for flexibility on our grid?"

I think that there are a lot of things going on at DOE, I don't know that they're completely coordinated. I think they will all feed into the way we're thinking about how markets need to evolve, and how they are evolving in real time. It sort of remains to be seen what will come out of this report.

Jigar Shah: I'm shocked that the Trump administration is not coordinated. I mean, in all seriousness, do you actually think that Rick Perry and DOE should be more coordinated because of his experience in the governor's office, or do you think that this is just a feature of this administration where everyone is sort of out for themselves and there is no coordination?

Katherine Hamilton: I don't think that they've staffed up a lot of their leadership at DOE, so I actually do think that there are not that many people there thinking about these issues. There's still some staff that are in place working on them on the ground, but on a leadership level for coordination, I think you're right, that that's not really there.

Stephen Lacey: Well, the question of coordination is quite interesting to me because in the last few years of the Obama administration, the Department of Energy across almost all of its departments that had anything to do with electricity talked pretty explicitly about the grid edge transition. Their investment thesis, their research theses, they all kind of fed into this idea that the grid was changing, it was becoming more distributed, it was going to cause turmoil, and we need to figure out how to support reliability within the context of the rapidly changing distributed grid.

This is a dramatic reversal. Whether or not it turns into policy, and whether or not it's coordinated at all, it's still a pretty dramatic reversal and is a contrast to the coordinated effort of the Obama administration to talk about the transition that we of course discuss every week on this show.

Jigar Shah: As someone who's worked at DOE for a very long time, DOE was really I would say, particularly on the grid side, anti-renewables for the better part of ten years, I think really Andy Karsner led the charge under George W. Bush to actually force them to be less anti-renewables. The Obama administration sort of took their time to get coordinated, but then got there at the end. I think this study is actually a great opportunity.

I ultimately think what's going to come out of this study is a greater understanding by Rick Perry that there's literally nothing the Trump administration can do to reverse the trend. Short of basically paying these coal plants to stay in business, which is what First Energy has been asking the Ohio Public Service Commission for, and has been rejected multiple times. In some ways I think it's a good thing that they're doing this, because it'll shed light on how impossible the task is to save to coal industry.

Stephen Lacey: Jigar, I could not disagree more with that. I don't necessarily think it's going to be a bad thing, because a lot of these reports tend to sit on shelves, but what it does feed into is the potential conversation around tax reform. Within 60 days if you get this report that focuses exclusively on subsidies, and cherry picks the subsidies that support renewable energy without looking broadly at the subsidies that have propped up conventional power, then you get this skewed report, this garbage in, garbage out report that doesn't holistically look at the entire picture, and just tells Rick Perry that renewable energy subsidies, particularly tax policies are skewing power markets, and therefore we should suggest to members of congress that we get rid of them.

Jigar Shah: I think that's a great fight. That would be such an amazing fight. Could you imagine the Trump administration coming out and saying, "We'd like to get rid of wind and solar policy," and then having all these Republican senators and congressmen saying, "That's the number one job creator in my county in the last five years." When you look at Tom Kiernan's tweets and all the stuff that he's coming out with right now, the wind energy has been on fire in terms of talking about the economic development stuff, etc.

It's amazing how suddenly our industry has actually gotten their big boy pants on and has figured out how to promote themselves. I would love that fight, and I would love for this to be another black eye in the Trump administration's inability to do anything.

Katherine Hamilton: Yes, you're supposing first the tax reform in a real way is going to happen, and second that these credits are going to be used at all. Members of congress that don't like renewable credits, they don't need DOE to tell them why they don't like renewable energy credits. They're not going to change, those are going to still be out there. I think these credits are already phasing down, I just don't think that that's going to be a major piece of it. Certainly they're going to have maybe some more talking points for the people who don't like it, but I still think that those will hold tight.

What I think it's going to do is move us a little past renewables. I think we need to, I think we need to look at all flexible resources holistically. For example, demand response. I know this sounds like very untechnical, but during the polar vortex baseload did not appear. It didn't show up because all the natural gas was being diverted to heat homes, and instead demand response had to show up and save the grid. It did the same thing in ERCOT.

When we look at flexible resources and what's out there that can really make the grid resilient and reliable, we have to look at a whole host of things; not just renewables but storage, and demand response, and efficiency, and everything kind of working together. I think the more that we can work on that conversation holistically, the better it is for everybody because that really does push us to ask how we function on the grid. Rather than what is it specifically that is on the grid?

Stephen Lacey: Yes, both of those are really good points, and I definitely agree that I'm making a lot of political assumptions about how this report could be used. I do agree that it opens up a really interesting conversation about the diversity of technologies. I do see a couple of other good things coming out of this.

Now, let's assume that this is an objective report, and they do look at the swath of subsidies both for conventional power and renewable power, and how that distorts markets. If you get a clear idea of how to compare subsidies over time, direct and indirect subsidies, which I don't think this report is going to do, but let's assume that they're taking an objective look and attempting to do that. That is great. We want to know how policy support distorts or pushes markets, so I wholeheartedly support that.

The question is how political this document becomes and what the assumptions are going into it.

Jigar Shah: Oh, it's still going to be a hatchet job, let's be honest. This is not going to be an objective review. The beauty is that like I think Katherine's exactly right, I thought the podcast last week covered a lot of that, that you and Shayle and Jesse Jenkins did. Then Jesse and I actually had a big Twitter conversation yesterday about all these things. The one thing is as someone who took a lot of classes in power engineering in college, to be clear, baseload is not a defined term in any literature in any place in the engineering spectrum.

The reason for that is because these power plants, particularly thermal power plants, have an extraordinary amount of unplanned outages for unplanned maintenance, and so there is no such thing as baseload power. I just wanted to make sure all of our listeners understand that that term is not defined, it is made up by reporters, and it is just completely not used in engineering at all.

Stephen Lacey: Guilty of making it up.

Jigar Shah: Right? Just making sure that everyone understands that. I think Jesse has done a good job of trying to figure out how to create new nomenclature, which Katherine has also been doing, around fast ramp technologies, flexible technologies, and that kind of stuff.

Stephen Lacey: Yes, he calls it flexible baseload, I think.

Jigar Shah: Those technologies do not have to have the feature of burning fuel, and that's the argument I was having with Jesse politely on Twitter yesterday, which is that those technologies could be demand response and load control, which Ohmconnect and others are trying to do in the residential sector, now Opower, etc. Which Enernoc has been doing for years, and as Katherine said it was EnerNOC's prowess that really saved us during the polar vortex. It was not those generators because many of them were shut down or didn't have enough natural gas supply to run during the polar vortex.

I really do think it matters that we all get a little bit more fluent in all of these technologies, and recognize that this isn't going to be a natural gas future. I truly believe that this tech is way cheaper than keeping natural gas plants around, using very expensive capacity payments.

Stephen Lacey: Well, we've got 60 days, and then this report will likely be out. I am fascinated by how this is going to come out. We're all going to be eagerly awaiting this one. There's tons of literature out there too on grid integration costs, on the historical impact of subsidies and comparative subsidies between conventional generators and renewables. When you look at Texas for example, a report from the Brattle Group a couple years ago showed that it was 50 cents per megawatt-hour to integrate wind into the Texas grid.

PJM, two or three weeks ago released this report, once again updating its assumptions about how much wind and solar and natural gas it could handle on the grid, and it showed that it could maintain, "unprecedented levels of wind and solar resources, assuming a portfolio of other resources that provides a sufficient amount of reliability services." Again, distributed energy resources like demand response, load controllers, natural gas, cogeneration, a wide swath of resources. They could integrate a ton of renewable energy cost effectively and reliably. There's tons of literature and experience out there that already gets to the heart of what the Perry DOE is trying to do now.

Ok, I think we've sufficiently covered that theoretical report. Let's go on to a real business deal. Amazon's latest product announcement isn't a new home device or a fancy new web service, it's a fuel cell; a device designed to get those products off the shelf and to your door faster. Well, Amazon isn't making the fuel cells itself of course, it's partnering with Plug Power for up to $600 million worth of fuel cells for its forklifts, with an option of owning nearly a quarter of the company down the road.

Jigar mentioned this briefly at the end of our show a couple weeks back, and his firm, Generate Capital has invested in Plug Power's deployments with Walmart for fuel cell forklift operations. This deal is important for a couple of reasons. Plug Power has been around for a while, and they've had some pretty high highs and pretty low lows. Like every other fuel cell firm, profitability has been elusive, so this is important for Plug's prospects. Secondly this investment by Amazon is a pretty big competitive deal, as we'll have Jigar explain as well.

Jigar actually wrote about this on his LinkedIn page, and Matthew Klippenstein, an auto and fuel cell expert, wrote about this on GTM. Basically by trying to force outlet acid batteries, fuel cells can make warehouse operations a lot more efficient, and you can open up more space, and at a time when competition between these mega retailers is getting more intense, Amazon sees this as an easy way to improve the bottom line. It's also a way to spite Walmart, potentially, the world's biggest retailer which has been working with Plug Power.

Jigar, remind us, who exactly is Plug Power? It produces proton exchange membrane fuel cells for handling applications like forklifts, and also stationary applications. The company's been around since the late '90's, it saw a massive spike in its stock price in 2000 to around $1,400 a share, and has since dropped way down and underperformed. It's kind of chugged along, and now this Amazon deal is a reversal of fortunes. Where does it stack up with Plug Power's history?

Jigar Shah: Wow, that's a tall order.

Stephen Lacey: I know, I know. I tend to go a little deep on my questions there.

Jigar Shah: So Plug Power is a company that was formed in the '90's and then went public in 1999 during the dotcom boom, and did have that meteoric rise. I was at BP at the time, and we had this hydrogen interactive actually in Canada that was led by Jeff Rinker, and Plug was there, lots of other people were there, it was a pretty amazing time.

They then have gone through I think three or four cycles since then, but I think what's happened as of late, Plug is based in Albany, New York, has some technology that came out of General Electric and some other places. This particular technology really came out of Ballard, and they bought the technology out of Ballard, and they've really reoriented the entire company around this technology. I would say that the vast majority of their other applications while important are not really driving their revenues. It's really this one.

The thing that I love about this, and honestly didn't know anything about this stuff until Generate invested in some of these deployments for Walmart, is that between 5 and 10 percent of the entire square footage of an average warehouse is reserved for lead acid battery charging, and forklifts and stuff.

Stephen Lacey: I learned that for the first time too, I was completely amazed.

Jigar Shah: It's nuts, and then I've talked to Ikea, I've talked to some of the other customers, and they're saying that this is literally the bane of their existence. There are entire days when enough lead acid batteries fail that they can't run their warehouse. This is more a conversation of how much everyone in the entire country hates lead acid batteries for warehouse applications, for forklifts, than it is really about fuel cells.

Stephen Lacey: Right, so like if you have an eight hour shift, Matthew Klippenstein mentioned this in his article, if you have an eight hour shift you see forklift speeds drop 14 percent in the second half of that eight hour shift, so performance problem and a storage problem.

Jigar Shah: Right, and so now, as I've said multiple times, clean energy technologies have to solve a pain point, they can't be a vitamin pill. This is definitely a pain point, people want to buy this because it's the equivalent of pain medication. Walmart has been testing it and rolling it out slowly but steadily since 2006, and really accelerating their deployments in the last four years.

Amazon started with one location in October of last year, it went really well, and they said, "Hey, we really want to build out this nationwide, and so let's do it." At the same time the tax credit for fuel cells ran out at the end of 2016, and so they were saying, "Well, how do we make this work?" This was really a creative way of making the numbers work, so Amazon said, "Hey, if we borrow money from our banks and pay cash for these items at a much lower interest rate, will you refund some of that money back by giving me stock in your company?" Or warrants in their company.

Because Plug Power was only worth I think $240 million or something like that, or $200 million at the time, they had to give Amazon like 23 percent of their company to be able to make this transaction work, and I think that's basically how this deal got struck.

Katherine Hamilton: Jigar, the fuel cells are part of those orphaned tax credits that did not get into the omnibus deal, like the solar and wind credits did. If those had been in it, would the economics have been better in this deal, or do you think it would have gone forward nonetheless?

Jigar Shah: Well, I think Amazon like many companies are looking for a replacement to their lead acid batteries, so I think that they would have moved forward anyway, but they may not have gone through the extraordinary effort of taking 23 percent of the company in warrants. They may have instead allowed someone like me to monetize the tax credits for them and finance the deployment using a PPA, which is similar to what Walmart's using.

Stephen Lacey: This structure here, it's unique because of the tax credit situation and because of Plug Power's valuation. This is probably not something we'll see in future deals. Is this a one time thing?

Jigar Shah: Yes, I think that's right. There may be one other customer that gets this deal, but basically when you're offering someone who's worth $200 million a $600 million contract, you can imagine that aligning interests, which is what Amazon's really doing here, I think made a lot of sense both for Plug and for Amazon. I don't think this was just a give for Plug, I think also Plug now realizes that Amazon realizes the value of that 23 percent stake is dependent upon that stock price going up. Now Amazon has a vested interest in Plug Power being a healthy company.

Stephen Lacey: Do you agree with the argument that this is a way for Amazon to take control of the fuel cell supply chain and embed itself into Walmart and other retailer's supply chains? Eventually if it starts owning more and more of Plug Power, then it can do as, again, Matthew Klippenstein argued, which I thought was a really fascinating argument. It can do what it did with AWS, which was basically control a whole different industry, and then embed itself into its competitors' business in a way that they couldn't foresee. Does this do that in any way?

Jigar Shah: I thought Matthew's article, while interesting, was more science fiction than real. For firsts, Amazon would have to actually buy Plug. The 23 percent stake doesn't give it a controlling stake, so it doesn't actually run Plug Power. Plug Power also has extraordinary contracts that they've partially announced in China, because China is subsidizing an amazing amount of deployment of fuel cells in a big way. Plug is doing a lot of business there, so I don't know whether Amazon wants to do that, but it would be outside of what Amazon has done in the past.

Because, AWS is really sort of tech, where this is really hardware. You and I both know that Plug has three or four competitors. They're not doing very well, so Plug really is I think on its own doing well, but if Amazon bought out Plug, my sense is those other competitors would suddenly get a bunch of love from Walmart and some of these other companies.

Stephen Lacey: Then, what does this mean for fuel cells generally? It's been a really difficult space, companies made a lot of promises, they haven't been able to drop costs, they've faced financial turmoil. As Eric Wesoff loves to write, "The list of profitable public fuel cell companies is very short; it is zero." What does this say about prospects for the fuel cell industry generally and the types of applications that could help these companies succeed?

Katherine Hamilton: I talked to somebody in the fuel cell industry earlier today who said that they think that because Plug and others have done millions of refuelings, and have really gotten folks used to using hydrogen, that this will in the end help the larger hydrogen vehicle industry.

Jigar Shah: Yes, so I also think that that is probably more fiction than fact. Look, the payback for Walmart on employing fuel cell forklifts is like two months. This is not like a PPA, Bloom Energy, whatever. Walmart has so much difficulty with their lead acid forklifts that this is like a quick payback. The guy at Walmart basically said to me when I was doing due diligence, "This is the number one thing that we have done that has improved productivity at our warehouses in the last five years." That is a big thing for Walmart to say.

I think there are a lot of other niche applications that are super, super cost effective. For instance, Travis Bradford is launching a fuel cell company called Watt that does a 500-watt fuel cell for the home space, but it actually has combined heat and power built in for water heaters. It feels to me like there are some applications where you have two-year paybacks, three-year paybacks, four-year paybacks, which is where fuel cells really need to be.

I think this notion that fuel cells are going to make it on ten-year paybacks using the largess of the government subsidy regime, I think those days are gone and it's really more about this other piece. Automotive could work, but only if I think the fuel cell could actually power your house, which I'm not quite sure the Mirai is doing yet.

Stephen Lacey: Well, it sure as heck ain't the hydrogen economy, but good news for fuel cells, and if anyone's going to make this happen, it's going to be Amazon and Walmart, which are also I believe customers of stationary fuel cells like Bloom.

I think that about does it for the conversation, let's tell our listeners something they don't know. Katherine, I'll go to you first. What's your story?

Katherine Hamilton: Yes, I have two quick things. One is that the general assembly of Maryland just passed a 30 percent tax credit for energy storage, and when we think about tax credits for storage, they really only exist right now in conjunction with solar unless the IRS issues some guidance to really suss that out. On the federal side, we just really haven't had anything for storage, but states are starting to look at it, and it's great news that Maryland has passed this bill. We'll make sure it gets to the governor's desk.

The other thing I just wanted to put a plug in for National Park Week, and it is free park entrance to every National Park for this week, and there's a park in every state. You have no excuse, you can get out to a National Park in the United States. Sorry for those of you who aren't in the United States, but come visit. Earth Day is April 22nd, this Saturday, and it's a good time to get out to your park.

Stephen Lacey: That's easy for you, you can just go look at the cherry blossoms and go down to the park there.

Katherine Hamilton: I can go to Roosevelt Island, one of my favorite places.

Stephen Lacey: That is absolutely one of my favorite places in DC, yes. Jigar, what park are you going to go to?

Jigar Shah: Well, I'll be at the National Mall this Saturday, speaking at the March for Science and then also at the Smithsonian Museum Earth Day Conference, the Earth Optimism Conference. Look forward to seeing many of you there, and if you see me then give me a shout out.

The article I want to talk about -- I love Jess Shankleman's work at Bloomberg, and she has this extraordinary article about just how many coal plants are scheduled to be shut down in Europe over the next five years. We talk about it in the US all the time, but it is just mind blowing to see. I think there's like seven countries in Europe that will be going coal free by 2020 or 2021.

Stephen Lacey: Wow, that's incredible. Few ones for me. Again, as Jigar mentioned, it's 4/20 so for anybody who's in the marijuana growing business, go back and listen to our episode with Tim Hade, where we talk about microgrids for marijuana growing. That's a very relevant episode for today.

Secondly, we've got some live shows coming up. They're going to be at the Solar Summit on May 18th in Scottsdale, Arizona. That's our tenth anniversary, we've been doing that conference for ten years. We've also got an extra day, the Software Summit, which is going to be really fantastic. Then our Grid Edge World Forum, we're doing another live Energy Gang about changes at the grid edge, whatever news happens to be relevant that week, on June 28th. That's in San Jose, so go to greentechmedia.com/events to learn more.

Then I have a story that I wanted to talk about quickly. You might have heard about this coal museum in a small Kentucky town going solar because it's going to save $10,000 yearly in energy costs from the grid. Kentucky is 97 percent coal by the way, so an extraordinary story, it went viral. It's this sweet, sweet anecdote that encapsulated the moment of transition we're in.

Then New York Times columnist Tom Friedman comes along, a guy with one of the biggest soap boxes in the world, and he ruins it. This week he ran an editorial about why Trump is ignoring the clean energy transition, the transition away from coal. Instead of clearly laying out the crazy growth in solar jobs, and the improvement in the economics of distributed energy, he goes off on this tangent about Syria, and about dismantling budgets, and Trump being unpresidential. It's this totally Tom Friedman thing to do, and it's an extraordinary example of how to botch a storytelling opportunity.

I mention it because I read a lot, I like to read good and bad writing, and we on this show talk a lot about the importance of good communication. If you want to know what not to do if you're trying to argue your case, read this column from Tom Friedman. It's called Coal Museum Sees the Future, Trump Doesn't. I was just really appalled by it. I thought it was probably one of the worst pieces of writing I can think of trying to argue to a mass audience of why this transition is important.

Jigar Shah: The other thing that just happened, which I think is extraordinary, is a big coal company just planned with EDF to build 100-megawatt solar farm.

Stephen Lacey: Yes, right in the coal mine.

Jigar Shah: I mean, he could have tied that in, he could have tied lots of stuff in. He missed the boat, but I still love Tom, The Lexus and the Olive Tree is such a great book.

Stephen Lacey: All right, well that's a positive note to end on, even though I was really down on that piece. I do recommend you go check it out. Big thanks to all of you for listening, big thanks to my co-hosts Jigar and Katherine, and thanks to KACO New Energy for supporting this show. They've been a dedicated sponsor, we do appreciate their support.

You've got access to hundreds of our shows in the archives on iTunes, SoundCloud, Stitcher Radio, NPR One, any podcast app of your choice. You can access us on Twitter or through emails, [email protected]. Twitter's probably a better place for it, email can get a little bit tough, but we really do want to hear from you. Of course if you can rate us and review us on iTunes or on Stitcher, it's so helpful for getting people to see this show.

Pass the link along. Word of mouth is really important for podcasts, and I'm sure that you have colleagues and friends who want to geek out about energy and learn about the latest in US and international news in energy and clean tech and environment during this very strange time. Please just pass us along. Katherine, enjoy your spring day there, your perpetually spring day there in DC.

Katherine Hamilton: Thanks, you too.

Stephen Lacey: Jigar, enjoy the west coast, travel safe, we'll catch you next week.

Jigar Shah: Yes, and I hope that Brian McCormack is listening and is going to take notes at our Grid Edge live show later for his report.

Stephen Lacey: Well, we've got a ton of utilities and folks in the power sector coming to that event, so they'll be there for the spirited discussion on stage for the Energy Gang and everything else. We look forward to that. With Jigar Shah and Katherine Hamilton, I'm Stephen Lacey and we are the Energy Gang, a production of Greentech Media. We'll catch you next week.