Plug Power taking green power toward profitability at Latham facility

For many people, the potential of hydrogen as an alternative fuel of the future is clouded by a single event in the distant past: The Hindenburg disaster.

The famous image of the giant airship collapsing to the ground in a fireball creates for many an indelible impression of hydrogen as unstable or dangerous.

It’s part of what Latham-based Plug Power works to overcome as it works to get its hydrogen-powered fuel cells into more businesses and get itself into a profit-making position. Plug’s products are safe — the devices have logged about 2 million hours without incident — but the company nonetheless has to combat a misconception of danger.

More recently, a 2006 James Bond movie featured an explosion of a hydrogen tank that was spectacular but completely unrealistic, said Teal Vivacqua, a spokeswoman for Plug Power, who tried to get the Discovery Channel to demonstrate how unlikely hydrogen explosions are.

“I tried contacting ‘Myth Busters.’ I thought it would be a good way to talk to people and show hydrogen is safe,” she said.

But Plug Power, which sells cutting-edge hydrogen fuel cells, is busting the myths on its own and reducing its clients’ carbon footprint — one hydrogen-powered forklift at a time. Powering these small, unglamorous vehicles is the stepping stone for Plug Power to make the company and hydrogen power profitable, something the company has been struggling with since its founding.

And with sales on the rise, forklifts may also be Plug Power’s first step in the race to popularize hydrogen-powered cars.

Using energy from one of Earth’s most abundant elements, Plug Power set up for business in Latham in 1997. The company planned to replace natural gas and electricity in homes with hydrogen power.

The mechanisms were safe and quite simple, said Reid Hislop, vice president of marketing communications and investor relations.

“We could put a hydrogen fuel cell together in a garage for a class science project. It’s the most prolific element on the plant,” he said.

By taking hydrogen and mixing it with air, the hydrogen combines with oxygen to produce water and heat. With the right technology, that heat can power anything from the lights in a house to a motor vehicle.

The technology may have been “cool,” Hislop said, but innovation, even green technology, can’t replace carbon-based fuels until people have economic incentive to switch.

It was in this spirit that Plug Power decided to move away from its status as a research-based company and find a market from which to become profitable. With a new goal, the board of directors realized the company needed new leadership. In 2008, they hired as chief executive officer Andy Marsh, a veteran engineer and, more importantly, a successful entrepreneur.

Under Marsh the company has narrowed down its disparate projects in the last two years to focus on a single market.

Though the switch originally cost the company jobs, 117 in May alone, and a consolidation of its offices, Plug Power now controls 85 percent of its market sector and sales have been steadily increasing.

And in the third quarter of 2010, powering forklifts brought in more sales than total sales in any previous year. Marsh said the company expects sales to be just as strong in the fourth quarter of 2010, if not better, when announced next month.

The increase in sales caused the company, which had previously downsized its work force, to hire 125 temporary workers in the fall. Half of these have since become permanent.

Usually a quiet time for the company, Christmas season was so busy that some workers had to wait to take their holiday vacation time until January. The manufacturing floor cranked fuel cells out as the company pushed to finish all the orders before the year’s end.

Marsh has set a goal of turning profits by 2012, with sales increasing steadily each quarter until then. To reach profitability, the company must reach 3,000 to 4,000 sales a year. Sales reached around 650 in 2010, and the company expects that number to double in 2011.

Marsh sees this goal, making Plug Power profitable, as his reason for being there.

“I was hired for a specific reason,” Marsh said. “How to turn a research development company into a commercially successful company.”

Plug Power has proved hydrogen fuel cells can be less expensive than cumbersome lead-acid batteries when operating forklifts. Food supply companies like Wegmans, Sysco, Coca Cola and Central Grocers have found installing hydrogen infrastructure and ditching battery power has saved employees time spent changing heavy batteries and warehouse space where they were stored.

Marsh leads seven sales representatives running operations across North America. Marsh said sales have been strongest in population hubs on both coasts and in Chicago.

If Plug Power’s new single-market strategy succeeds, Marsh doesn’t credit himself for the idea. “CEOs don’t make every decision,” he said.

The continued success of this niche industry requires Plug Power to continue to expand sales. The company has relied mainly on food suppliers, who need forklifts to organize giant warehouses. The company also powers forklifts for BMW, which uses them along the assembly line.

Rick Mason, director of operations, said there is also talk of expanding to airport luggage trolleys or small vehicles at United States Postal Service facilities. Past the manufacturing floor, a series of labs test how the technology can withstand the more volatile outdoor environment of an airport hanger or possibly working on the docks of an ocean port.

Tweaking the forklift engine to make it more versatile is essential to expanding sales and reaching profitability, Mason said. Profitability is a milestone after which the company might start taking on more unique projects and research, he said.

Looking out over a manufacturing room making strides in providing alternative, renewable energy, Mason said he sees hydrogen-powered cars as the ultimate purpose of Plug Power technology. Though he said that is a very long-term hope, almost everyone, including Marsh, agrees that replacing automotive combustion engines is where company’s technology is headed.

“Like the guys that created the first cars, these guys will be trying to explain to their grandchildren how they created a business from nothing,” he said.

In a sense, Plug Power’s focus on materials handling has made the company recession-resistant, as the majority of its clients are grocery store warehouses. People need to eat no matter the economic climate, Hislop said.

Likewise, the technology retains — possibly gains — attractiveness as an alternative to fossil fuels during bad economic times. In the past several years, local and federal project grants and subsidies have targeted sustainable technologies, including Plug Power, in their efforts to stimulate a sluggish economy. Marsh said Plug Power has benefited from an increasing number of politicians, from all sides, supporting renewable energy.

“Everyone wants a world without dependence on foreign oil,” Marsh said.