LATHAM — By noon Wednesday, the snow was ankle-deep in the parking lot and the workers had abandoned the factory floor at Plug Power to escape the storm. Hydrogen-powered fuel cells meant for forklifts in Amazon or Walmart warehouses sat half-finished in steel casings.
The empty plant was a weather fluke, but to the 300 employees in this town outside Albany, it might have been an omen of the company’s fate, which was resting in the hands of Washington lawmakers.
The $1.5 trillion tax bill President Donald Trump signed into law last year failed to extend a crucial tax credit for fuel-cell makers such as Plug Power, putting the company’s domestic future in jeopardy. As workers drove home that afternoon to ride out the storm, a flurry of hope was swirling as Congress hashed out a bipartisan budget deal that company leaders hoped would reinstate the fuel-cell tax credit.
An extension of the credit would allow Plug Power’s executives to continue their recent expansion in the United States. Without it, the 20-year-old company would shift resources to China and Germany, potentially leaving the workers here out in the cold.
The giant tax bill ushered in the most significant changes to the tax code in decades, with the aim of helping businesses grow and flourish. But Washington has a long history of picking winners and losers through the tax code — even in bills meant to simplify it — and Plug Power’s experience demonstrates just how much power Congress wields over companies who build businesses based in part on policy decisions.
For more than two years, Plug Power’s president and chief executive, Andy Marsh, had spent a chunk of his working hours advocating a long-term extension of the credit. The company spent more than $750,000 during that period to lobby Congress. Early in the day Wednesday, Marsh said he was 65 percent certain the tax credit would make it into the budget deal. Around lunchtime, he put the odds at 35 percent.
While Marsh prepared to follow his workers out the door, his chief operating officer, Keith Schmid, took a visitor on a last walk across the now-silent plant.
“I’m a little spooked by how quiet it is today,” he said.
An hour later, his reprieve arrived. Congress cut a deal to extend the credit.
An Endless, and Damaging, Dance With Temporary Tax Policy
For years, Washington has set tax policy in fits and starts, creating targeted tax breaks for particular industries and often setting them to expire, to minimize the projected loss to federal revenues. Yet those credits are routinely extended on a temporary basis, creating a maddening dance for companies who struggle to plan and invest for the long term.
Economists generally agree that the process is detrimental to companies and the economy. Expiring tax breaks give companies an incentive to plow money into lobbying to retain those preferences, rather than putting that money toward research and development, worker training or other investments that might improve their productivity. Free-market purists also contend that targeted tax breaks distort markets, propping up firms that otherwise might fail, just because they have government connections.
But try as they might, policymakers in Washington cannot quit the short-term credit game.
In 2005, President George W. Bush signed a law that created a 30 percent credit for investing in fuel cells, which combine hydrogen and oxygen to create an electric current. Congress extended the credit twice after that. But it eventually set the credit, along with similar incentives for solar, wind and other clean energy sources, to expire at the end of 2016.
Industry lobbyists worked hard to prevent the expiration, and in 2015, lawmakers extended some solar and wind credits but allowed the fuel cell credit to die as scheduled.
The industries whose credits expired never stopped working to get them back. Some members of Congress took up their cause, such as Rep. Tom Reed, R-N.Y., who drafted a bill to reinstate — and gradually phase out — the energy credits that had been “orphaned” by the 2015 bill.
Reed nearly succeeded in getting those extensions attached to the sprawling tax bill that Republicans sped through Congress last fall. But his provision was dropped from the bill as it moved through the Senate, and thus never made it to Trump for his signature.
The disappearance of the credit threatened the domestic expansion of Plug Power, a company founded in the late 1990s in the midst of the tech boom, whose stock briefly topped $1,000 a share. The bubble popped, the firm’s shares sunk to single digits and the company burned through money, seeking a marketable use for its fuel cells, which cost more than conventional competitors but emit nothing but water as a byproduct. Marsh took over in 2008 and finally steered the firm into what has become a profitable niche: replacing the large batteries that power forklifts in warehouses.
Forklifts that run on fuel cells do not need to swap out batteries every shift, like those that run on lead-acid batteries. They plug into a fuel station that looks like a gasoline pump, connect a few hoses and quickly fill up with hydrogen. Plug Power has found a growing market in selling or leasing those fuel cells to Amazon, Walmart, Kroger and BMW, among others, and it has begun piloting fuel-cell powered delivery trucks in China and around Albany.
When the credit expired, Marsh said, the price of buying one of the company’s fuel cells immediately jumped 30 percent for customers. Some of those customers, he added, have budgets set aside for alternative energy spending — and in those cases, solar and wind projects, which still were backed by credits, were suddenly more attractive.
The recent tax law compounded the problem, because it made it more expensive for Plug Power to get financing. When the law was signed in December, Marsh said one of his lenders called and told him his borrowing costs were going up.
Flurry of Lobbying, and a Long Wait
“We just want a level playing field,” Marsh said Wednesday. He occasionally checked his phone for updates from his lobbying team in Washington. He loves the Albany region and hopes to expand here, he said, but he noted that China and Germany loomed as attractive markets, and said the company would more aggressively explore expansion there — and perhaps resource relocation — if the tax credit did not return.
“We have a business plan if it goes one way, and a business plan if it goes the other way, and we’ll execute what makes sense,” Marsh said. “I don’t get paid to be nervous.”
In Washington, the lobbying team had little ability left to sway the outcome. Trade groups representing Plug Power and other energy companies had pressed for two years to extend the credit, as had the lobbyists on contract for the company. They had lined up powerful allies for the measure, including Sen. Chuck Schumer, D-N.Y., the minority leader. The lobbyists spent Wednesday mostly trying to scare up news from the closed-door negotiations in the Capitol to see if their work had paid off.
At midday, Marsh was told that the fuel cell credit was not yet in the bill, but discussions were ongoing. Around that time, executives decided to send Plug Power workers home to escape the snow.
Word finally arrived from Washington later that day about the deal: The credit was in the budget deal, retroactive to 2017 and phased down through 2022. The industry had gotten exactly what it wanted — at least for now. Marsh, in an email, said that he was excited and thankful: “It is time for our sales team to let our customers know that our products are now available with the tax credit, and go push sales and growth in the U.S.”
Many conservative groups protested the inclusion. Several groups in the powerful Koch network sent a letter to congressional leaders, saying the budget deal had “opened the floodgates to massive increases in government spending and corporate welfare for powerful and well-connected special interests.”
Some of those interests fared better than others: Most of the 48 “tax extenders” tucked into the budget deal — including special tax treatment for racehorse owners and timber companies — were one-year extensions retroactive for 2017 only. Congress will presumably take them up again in future negotiations.
The deal passed the Senate and House early Friday morning, after a brief but contentious debate. Marsh was off to Argentina for vacation, but he reported that the roads had been cleared around Albany, and the factory floor was humming again.