Bloom Energy Corporation (BE) Earnings Call Transcript & Summary

All right. Good morning. Welcome back, everyone. Thanks for the opportunity to connect again. Appreciate everyone's time and patience. So we're joined by the team over at Bloom this morning. Excellent opportunity to connect with them on their latest efforts to commercialize their own hydrogen technology. So we got Scott Reynolds on the line, really expert, not just fuel cell, but really in this transformation of their underlying technology. So as usual, if you've got questions, ping me on e-mail and chat, probably the best way to go about this. And Scott, I'm going to pass it over to you. I know we're a couple of minutes behind here.

Where do we stand? Tell us. I'm all ears. I know you've got a couple of slides here as well. Please, status update and all?

Yes. So Julien, thanks as always for the time. I know you've got a great audience here. We're really excited to talk about what we have going on. There's a lot of news in the space. I've never been more excited. I've been in Bloom for 17 years, you know about it. I've never been more excited about what we're doing. The world is changing so quickly, and hydrogen is going to be a huge part of the transition. As you know, it's something I've been working on for a really long time, come back to the early 2000s. So I'm really jazzed right now. And what I was thinking about we might do, not everyone -- I'm sure the audience knows about Bloom, maybe even knows about fuel cells. So maybe we can take a couple of minutes. I'll just -- I'll give you a quick summary of where we are and talk about the technology a little bit. And then we can do Q&A. I know you like to ask a lot of questions. So hopefully, everyone can see the slides up on the screen here. But let me just put up the standard caveat about forward-looking statements and so forth and then just jump right in here. So if you don't know about Bloom Energy, we are a solid oxide-based fuel cell and electrolyzer company. Solid oxide is a kind of brand or a species of technology in the fuel cell space. If you don't know fuel cells, fuel cells are a lot like batteries. You can put in electrical energy and get stored chemical energy and go in the other direction, turn chemical energy back into electricity. But unlike batteries, you can supply a constant stream of fuel and make a constant stream of power or you can supply a constant stream of power and make a constant stream of fuel like hydrogen. So that technology platform that we've built over the last, I said, 17 years. The company was founded in 2001. As we've been commercial over the last decade or so selling fuel cell-based power plants on a distributed basis. So power plants that sit next to buildings and run on biogas or run on, these days, hydrogen or run on natural gas. That business for us over the last decade is about a 30% CAGR. So the business has grown really, really quickly. The market likes what we're doing. We've given guidance to the Street that we'll do between $950 million and $1 billion of revenue this year. So a very sizable company. Not easy to keep up that growth rate for a long period of time. And our base is quite large, 0.5 gigawatt of installed generating capacity in the U.S., in Korea. You'll hear me talk about that a little bit. So the size and scale has allowed us to really make a robust technology platform built on the solid oxide technology that's got some real advantages compared to other ways of making power or making hydrogen, and I'll explain those in a second. But the point here is that this is a -- the Bloom is the size of the company in the space, I think lastly I looked larger than our 5 or 6 biggest competitors combined, so we got off a scale in the industry. We've got a robust supply chain to develop that scale. And so we're really excited about where solid oxide has come from and where it can go. Let me explain a little bit about one of the key features of solid oxide here. So the company got started, there was a huge focus on all these different kinds of chemistry and fuel cells. So solid oxide is one, PEM is one, alkaline is one. There's a long list if you know the space. Our technical team has done a lot of work for NASA going way back into the '60s and '70s. And they looked at the landscape and said, this solid-oxide technology among all these choices is the best technology to build a company and a platform on. And one of the big reasons for that is what's up on the screen, which is when you look at the chemistry of what's actually in the device. You're talking about low-cost materials. You're talking about things that scale very well. You're talking about things that are easy to manufacture. You're talking about sort of rinse, repeat in terms of getting the cost down. In some ways, a lot like if you know the story on solar and wind power. So when you go back and you look at our actual product cost for our fuel cell that makes electricity, 60% reduction since 2015. And as that cost comes down, then so, too, is our delivered cost of power to our customers. So if you've got a -- I don't know, a big corporate or a hospital buying power on-site, obviously, they like to save money. And so as our costs come down, their power costs come down. Our margins are improved. That allows us to go into new markets, be they in the U.S. or internationally. So this kind of fast cost down is a reason that we picked solid oxide technology in early days because it's really got no precious metals, like other kinds of technology, and that allows us to really bring those costs down. And so one of the byproducts of this cost reduction is that we've spent a lot of time growing new markets. Most recently, we've had a lot of success in Korea. Korea is kind of neck and neck with what the Europeans are doing on hydrogen in terms of decarbonization. And that market is very, very bullish on fuel cells. So on the slide here, you have huge national targets for fuel cell deployments, especially when they can run on hydrogen. And we've announced just recently that we are shipping assets to Korea to run on hydrogen. We've also announced a project to ship electrolyzers, which is the fuel cell running in reverse and still making power making hydrogen. Same basic technology that is running in a different direction, kind of like a battery can charge and discharge. And we've announced that we won a project, the Changwon RE100 project, to supply not only hydrogen fuel cells, but also electrolyzers. And we're doing that with a huge partner, SK. So SK has been fantastic for us. It allows us to drive scale. And maybe you're getting a sense by now that Bloom thinks at scale because scale is what gets you low cost. So we've already delivered 150 megawatts a day in that market. So we'd like to go after big markets and win in a big way. We go after that market. And what's nice is if we get more volume in Korea, it allows us to look at what's going on, for example, in the U.S. and take that cost down or another way of thinking about it is the learning rate, which is how fast my costs come down as my volume goes up. Our learning rate if you think in those terms is 28%, which is another way of saying that our costs are coming down about the same pace as what you see with solar. So that's kind of keep that mental model. What that means is when I look at my markets in the U.S. where I'm operating in more expensive markets now like California and New York, where the power prices are higher, what that means is, as my costs come down, then I can go up to the middle of the country that has bigger loads, bigger CO2 reduction. Really, really attractive market for us. We think by 2025, that's a $200 billion TAM. That's a 4x increase in today's TAM just by continuing to get that cost down. So what's nice about our technology platform is as I ramp volumes of 1 product, say, the fuel cell that runs on natural gas or fuel cell that runs on hydrogen, it also really drives my business for electrolyzers. So electrolyzers, as I said, is just -- it's a different configuration of the same technology platform. So a lot of my installations, I'm putting in fuel and getting out electricity. Electrolyzers are putting in electricity and getting out fuel, not exactly the same, some technology change is required, but same basic platform, same cells, same core technology, sort of like same chip inside a computer. And when we look at electrolyzers, Bloom has really 4 distinct advantages versus other kinds of chemistry. So one is efficiency. So efficiency means how much power do I have to put in to get out a kilogram of hydrogen. And so when you look at all these different technologies, you'll see, and this is in the academic literature, that solid oxide, depending on whether you can do something like capture waste industrial heat, and we'll talk about that more in a second. It can be up to 31% more efficient, we think, than other kinds of electrolyzers. And that's a huge driver on what matters for hydrogen, which does levelize cost of hydrogen. But in addition to that, because our costs are coming down so quickly, we think that our electrolyzer, if we stay on that trajectory, it can be under $600 a kilowatt, just going to make it very competitive in terms of the levelized cost of hydrogen or capacitizing for this by 2025. We've got sort of targets of a gigawatt of capacity. And we've set our revenue target for hydrogen to $750 million by 2025. So that's a high-level picture of our advantages. I'm going to talk a little bit about not only efficiency but also our scale and experience, which is our huge fleet. Our substantial supply chain or substantial partner network, our ability to develop projects, all these kinds of experience built over the last decade of being a commercial fuel cell company, really lend itself to being a successful electrolyzer company. And what's more is as we continue to scale and then you look at the history of cost reduction for these different technologies, you'll find that solid oxide is really coming down the cost curve the fastest. And so again, what really matters in hydrogen is levelized cost of hydrogen. The faster my costs come down, the better I'm going to be able to deliver economic and competitively priced hydrogen. Then one of the really neat things, the final point here, number four, in terms of key differentiator is that we're not just looking at one kind of hydrogen. There's all sorts of different applications here that we're focused on. I'll go through a few of them today, but there's more. And what's neat about the solid oxide platform is, can I electrolyze intermittent renewables? Yes. Can I hook this up to a nuclear power plant, grab some of that heat, boost my efficiency and make power from a very large nuke fleet in the U.S.? Can I do that? Yes. Can I hook up to an industrial application to make industrial hydrogen? Yes. Can I make transportation hydrogen? Yes. I'll even talk about some applications where we can easily do carbon capture to make blue hydrogen. So this is a really robust, flexible technology platform that we're developing. And as we look at all these different ways to go to market, we've done because of our scale and experience. We've done a lot of economic modeling, very detailed, kind of, project modeling, if there's any project finance nerds like in the audience. And as we look at these different ways of delivering hydrogen, as Julien calls it, different colors of the rainbow, different ways of making hydrogen. And we compare ourselves to other kinds of electrolyzing technology, looking at levelized cost of hydrogen, whether it's green hydrogen from renewables or zero carbon, sometimes people call pink hydrogen, we don't love that term, but from nuclear power or even using carbon capture and making what's called blue hydrogen or putting in biogas. We've got a really great business in biogas. We think you can make carbon-negative hydrogen with biogas and carbon capture. We look across the board, all these different kinds of hydrogen. We think that we're the cost leader 2025, 2030 because of this cost down. And what's nice about this approach is that we're not banking on 2025, 2030 for these kind of long-term pie in the sky ideas. These are things that we can do today. So we've got a way to bridge this huge transition where today, even running on natural gas, we can substantially reduce the customers' CO2 emissions. A lot of our big corporate customers, and we think we've got something like 1/4 of the Fortune 100 on our logo sheet. Those folks are looking at real projects they can do today to substantially reduce their CO2 footprint. Some of our customers can plug in biogas and be zero carbon today. We've got big customers that do that. And of course, we've got customers looking longer term at running big infrastructure on hydrogen. We've got customers looking at all sorts of things around carbon capture. So we've got this nice way of a substantial business today that transitions to the future well. And so if you start to think about the future -- and just to kind of give you all a visual of what we're thinking about it, we really see these electrolyzers and our fuel cells, this technology platform that's coming in, in a whole variety of ways across the energy ecosystem. So imagine a Bloom electrolyzer sitting next to a nuclear power plant that sometimes might have uneconomic power because renewables are pushing down power prices and pushing down capacity prices. So instead of making power that nuclear power plant starts taking hydrogen sort of an optionality, and that gives it more revenues, it allows the plant to stay in operation. A lot of folks have been focused on renewables, where the intermittency is a problem for interseasonal storage. So imagine these electrolyzers either sitting at a wholesale power facility that maybe even has a hard time getting a transmission connection. Now they've got a way of monetizing hydrogen revenue stream. So that's something we certainly imagine. Or imagine these sitting at a steel facility to make green hydrogen, to make green or what some people call blue steel, putting these at hospitals where hospital needs usually power 24/7. And they can run that and say hydrogen that's blended into the natural gas grid. So we can talk about more of these. But the point is we really -- we see these electrolyzers, we see these fuel cells, we see this technology platform plugging into all different parts of this energy transition. We've got this optionality to allow us, given the flexibility of the technology, given the cost, given the size and scale, plug in different ways and different applications. And so when we get really specific about that, to kind of wrap things up here, we're looking at a number of key segments right now. I can go through these, Julien -- if Julien's interested, but ranging from industrial hydrogen to working with nuclear power operators. The list is up on the screen here getting hydrogen into the gas grid. We think that's a TAM of $300 billion by 2030. So these are really big numbers that we're going after. And again, don't miss the scale and experience to execute on that. So we're really excited. We announced about a year ago that we were going to commercialize our electrolyzer. We've made a lot of progress against that. We've made announcements around working with INL to test a nuclear power-coupled electrolyzer so that they can simulate what that looks like and sort of put a stamp of approval on it, as it were technically -- we're really excited about that. We've made an announcement to work with Baker Hughes to think about things like compression and work with their gas turbine technology. So we're really excited about that. I mentioned earlier, some announcements for hydrogen going on with our partner, SK in Korea, really excited about that. It's a little bit of a flurry of activity. But the world is changing quickly. This transition, I think, is happening faster than what was expected. We feel like we're very well-positioned to capitalize on that transition with a great technology platform that's robust and scaled up. So maybe with that, I'll stop talking. Maybe I'll leave a pretty picture of Julien. It could be a fodder for conversation. And I'll turn it back to you to maybe get some Q&A going here.

I love it. Thank you, Scott. I love the energy. I love the pace. So -- and I love the pretty pictures as you say. So let's come back here. So let me just say -- let me pick it up where you left it off. So Baker Hughes, for instance, you guys made this announcement, I think, a couple of months ago back in May. What exactly is contemplated there? 2 to 3 years out, I think, was the press release language. I mean how does this help your commercialization? I imagine -- again, I don't want to channel you too much that you're looking for all different ways to leverage your technology. And if Baker Hughes wants to engage, great, another counterparty. But can you elaborate a little bit?

That's exactly right. So when you see us making partnerships, we're talking about partnerships that's scale. So whether it's looking at combining a solid oxide fuel cell with gas turbines, which is something that's been looked at for a long time to boost overall efficiency, you look at working with them on electrolysis, look at working with them on compression, particularly with respect to electrolysis. There's -- they're an energy technology company. And they look at what we're doing and say, "This is a fantastic technology. You're a partner I want to work with." We've -- I've heard this as an energy project finance guy from a lot of folks where, if you're looking for hydrogen at scale, it's very difficult to bet on a brand-new technology to the world. 10 years ago, when we had brand-new technology to the world, you go through wrong paths. You go through needing to prove that it works. You need to get things like independent engineer's reports to pull over all your data and opine that your stuff is going to work to say -- work the way that you say it will. So when Baker Hughes is looking at folks to partner with, they look at Bloom and say, "billion dollars revenue, 500 megawatts in the field, billions of dollars of assets financed, demonstrated ability to bring cost down, demonstrated ability to deliver volumes and manufacturing expertise that's growing. That's a company I want to partner with. That's a technology platform I want to bet on." And there's lots of applications here up on the screen. You see there are a lot of applications. So let's work together, uncover those market opportunities and really find a way to operate at scale together.

And Scott, just to elaborate on this. I mean, is this more about finding new end markets? Or how does this fundamentally sort of improve upon the SOFC as you talk about it in terms of electrolyzer solution?

Yes. There's a couple of different ways. I mean, let me just take compression, for example. They've got -- to back up for those of you that are maybe not as technical. When you make hydrogen, you often have to move hydrogen. Let's say you make hydrogen at a -- we'll take our -- I don't know if my cursor is showing up at the intermittent renewables application. So I've got to figure out how to get the hydrogen from where it's made to an industrial application or to another power plant. And that can often mean that you'll have to compress it, depending on if you're going to put it in a truck and move it or eventually put it into pipeline. Compression has energy parasitics associated with it, and there are ways potentially to couple the way the electrolyzer works with a compressor to minimize parasitics to make sure that your delivered cost of hydrogen is as low as possible. So there's a lot of technical integration work that goes along with that. And so if you're going to optimize the design to deliver the lowest possible cost of hydrogen, best product for the customer, then looking at compression as one example, is one of the things that you really want to focus on to make sure that when you look at that end delivered cost of hydrogen and you factor in all the things that you need to do in a very detailed way that you've looked at all those pieces and minimize the cost. And so Baker Hughes is going to be a great partner in that respect as one example.

Excellent. All right, Scott. So let me come back to this, where you talk about commercializing, in fact you say a second ago, right? You said it takes a while. You got to pour over documents, prove the technology works. I mean you say that sort of in a legacy sense. You're saying we're established and large. Where are you in the commercialization of your electrolyzer solution, not the fuel cell that, again, like this -- I feel like at times, there's sort of a confusion of you have this big fuel cell opportunity. The billion dollars that you talked about this year is fuel cell numbers, right? How do you see that commercialization trend going right now? You talked about it going back almost a year now of saying, "We're going to go commercial on hydrogen." Where do you stand in that technical review, that process to scale it and finding tangible offtakers to say we're going to buy this product?

Yes. So there's a couple of proof points going on now in terms of going from product design to commercialization. So let me talk about a couple of those proof points. What it matters, I mentioned a minute ago. So we've got a great partnership going with Idaho National Labs, where one of the steps to -- for example, if a big nuclear power operator or utility is going to buy electrolyzers and integrate them with a nuclear power plant, there's a lot of integration work that goes into that, first of all safety work, things like that. And so one major step that we're undertaking knowing how -- from our scale and experience knowing how that integration has to be very carefully handled is what we're working with INL to give them the product to demonstrate it, beat it up, kick it around, make sure that it does what we say that it will do so that they're in a position to opine on the technology to the community of nuclear power operators. It's a very tangible step in terms of that going from the idea to the lab, to the prototypes to getting stuff in the field and testing it. So we've made that announcement recently. We've made announcements recently about getting electrolyzers to Korea, for example. But what we've said previously, Julien, is that we announced last year that we had entered the market. We announced this year that we would be doing first projects, which is when we announce that, and now we've done that. And that commercial deployment would be next year with a ramp, '23 through '24 with the goal of having a gigawatt of capacity by 2025. So that's the rollout plan. Certainly, we'll be sharing updates as we go in terms of, I think, you're asking some about the technical piece. So we'll certainly be sharing updates about that for a time, but we're making really, really good progress against looking at these applications and determining what's the right go-to-market, what are the right proof points so that when those proof points are set, then we're in a position to be ready to scale.

Great stuff. All right. So let me ask you this. So against that gigawatt target, when do you think you'll start to get those orders in? How is that going to trickle in? And then maybe the punch line, as you think about it, right, you've got $1 billion today. Your guidance, 25% to 30% would imply north of 2, 5 years out. What portion of your business by then, ballpark, as you think about that gigawatt translating into revenues out there, again, trying to tie back some of the financials of what you're talking about. But since you're kind of tagging the guidance yourself a little bit, there I try to sort of bring the 2 conversations together, if you will.

What we've talked about is by 2025, $750 million of hydrogen revenue by 2025. So that's what we've said publicly. I don't think we've updated that since we shared it back in November. So I'll let you drill, Greg, on breakdown by 2025 when you talk to him next. But we're -- like I said, we're really optimistic about this. What we've heard from a number of folks in the market is that one of the big determinants for volumes is going to be your ability to scale. So maybe one thing you can touch on is our ability to not just generate demand, but generate supply. And so for folks that don't know much about Bloom, I've talked about our growth history, but it's useful maybe to talk a little bit about how our supply chain operates, the kind of people that operate our supply chain. So we've got a fantastic Chief Operating Officer, Susan Brennan. She's got an incredible background in the automotive industry. I think she built the biggest automotive plant in the U.S., worked with the Nissan, and she is an ex-Nissan executive. So as we've designed our supply chain, our manufacturing capabilities, we've designed it for scale. We've designed it to be copy exact. We've designed it to be replicable to have no single point of failure. And one of the nice things about solid oxide technology is that the manufacturing process is relatively simple. So once things are back up and running, and it's safe to do so. And all folks that are interested certainly get you a visit to Bloom where you can see it in action. But we're doing things like screen printing to make cells. We're doing things like robotic assembly to put stacks together, which is like kind of a chip inside the computer, if you will. We have a fantastic operation in Delaware with -- I think that site is 40 acres with room to expand. So we've really got the infrastructure, the supply chain set up to be able to deliver significant volumes in the future, which is not insignificant. Building supply chain is -- I think, one person called it manufacturing hell to really know how to scale, but that's behind us, not in front of us. We wish those well that we're going to go through that, but we feel like we know how to make stuff in order to release for manufacturing, what we're going to do with quality. We've got the tactical things like we've got the quality infrastructure in place to make sure that we make things to quality. So we really feel like we're in a position with the transition happening and the demand coming online, not just in places like Korea, but increasingly in the U.S., there's all sorts of policy talk in the U.S. to substantially move hydrogen forward. So whether it's the U.S., Korea or Europe, we feel like we're really well-positioned to capitalize on that demand and use our hefty supply chain to deliver that volume.

Scott, this is Aric. I just wanted to ask a more clarifying question. Maybe if you could elaborate a little bit more on where you see the near-term opportunities for that deployment of your electrolyzer solution, whether you've highlighted a few different groups like whether it's high heat distributed industrial applications, the various green opportunities you highlighted? Where would you expect to begin scaling that electrolyzer solution first and foremost on geography?

That's a really good question. So maybe just to -- let's use a couple of things that I -- a couple of the slides that I talked about before. So -- we -- if you look at our kind of strategic road map here for the places that we're focused where we think our competitive advantages are quite high. I'll take a couple of the items on this list. If you look at pink hydrogen or green hydrogen from nukes depending on how you want to describe it, but zero carbon hydrogen from that application. We've been talking about the INL partnership, for example. We think that's an early winner because of a really critical piece that I glossed over before. But when you take a solid oxide device, one thing that I did mention is that it runs at a high temperature. And that's part of the reason that's more efficient. If I can supply some source of heat, whether it's industrial heat from, I don't know, let's say, a metals process or I can supply heat from a nuclear power reactor and relatively low temperature heat. We're not talking about super critical heat. If I can use that to offset some of the energy to make hydrogen that I would get from electricity, that's what boosts my efficiency. And so that's one of the reasons we've been focused on this partnership with INL is because when I talk about a 31% efficiency advantage versus other electrolyzers, that metric is for applications where I have some heat. So we think those are early winners. And what's nice about nuclear power is that last I checked, the nuclear power fleet and the solar power fleet are about the same size in terms of capacity. But nuclear power plants run at a 90-ish percent capacity factor, which means there -- if it's like gigawatt plant, it's running at a gigawatt 90% of the time versus a gigawatt solar plant is running at that maybe 15% or 20% of the time, depending on how much sun there is. And so one of the real economic drivers for the levelized cost of hydrogen, efficiencies matters, we've been talking about that; the cost of the electrolyzer matters, we've been talking about that. But is the cost of the input power and nuclear power plants have very low power prices. Although what's been happening in new market lately is that those power plants are increasingly more expensive than renewables. And what that means is they've got extra capacity because if you want you can run these plants all the time. They've got extra capacity where they can actually make hydrogen. And what's nice is that the higher capacity factor, combined with the higher efficiency resulting from heat, we think can really drive low-cost hydrogen. So I'm belaboring the economic point here to get into the details a little bit. We really think that, that application makes a ton of sense, which is why we've made the announcement about INL. And when you look at the fleet of nuclear power plants and the fleet of solar power plants because the capacity factor is so much higher, you just have, call it, 4x more potential for generating hydrogen today. Now the solar fleet is certainly getting bigger. But that near-term advantage, we think, is really important, and it drives attractive economics. So that's a big one. Another one that I mentioned is Korea. So as I said, there's been a lot of focus on Europe as really investing in hydrogen and driving the energy transition through hydrogen through incentives, but the South Koreans are spending almost as much money as the Europeans are. And so we've been in that market for a long time. We've already announced shipping hydrogen-powered fuel cells, which is another kind of species of hydrogen that we think is high potential, but also talk about the win around hydrogen fuel cells and electrolyzers. So we think that market has a lot of potential and a whole different set of applications. So those are 2 good examples of things that we think are really, really near term and really exciting. Of course, my pretty picture has more of them, so we think that there's more to come. But those are 2 near-term things that we think make a lot of economic sense and kind of real tangible today.

But if I can elaborate on the 2 quick, Scott, because I think what's fascinating, especially in the last few months even, we've seen a real evolution in the nuclear industry and how they think about this opportunity, right? We're seeing NextEra will be very explicit about this with Point Beach. Obviously, you've got Talen in Pennsylvania, like front and center. They are pursuing a C&I strategy to get offtake. If there's not a federal carbon policy, well, we are going to create 1 synthetically with offtakes.

Right.

So I suppose, given that clear evolution in the nuclear space right now, the real question is, "Okay, that's great. But is that in a location that is relevant for any kind of offtake?" Or how do you see the business model evolving here? I mean, certainly, they need, as you say, more expensive power. $0.04 kilowatt of power is not necessarily what the PPA would be with the renewable, but albeit it's much more baseload, much more attractive, I think, in terms of heat profile back for your application. So maybe on balance, a little bit more the efficiencies help this altogether. But anyway, let me know. I mean, I'm curious on your reaction because at the end of the day, they're not necessarily located in obvious use cases for hydrogen on-site, if you will, but go for it.

Well, I mean, if you look in Pennsylvania, for example, I think within a few hundred miles, there's huge industrial demand for hydrogen, refinery operations, other consumers of hydrogen. So if you look at Pennsylvania and Talen, for example, the PJM capacity market is seeing much lower capacity bids because of the impact that renewables are having and folks bidding basically zero and being price taker around capacity. So capacity price is down, wholesale price is down. There are certainly potentially other avenues to make use of that power. We think that the -- in the long run, the demand for hydrogen is going to be significant, whether it's a few hundred miles or eventually going pipelines because if you think about natural gas moves all around this country at a very, very low cost. And your challenge is to move hydrogen around. But at the end of the day, especially if we see policy really support this, we've been a huge advocate for policy, needing to drive the hydrogen economy just like it's driven fuel cells, just like it's driving batteries, just like it's driving wind, just like it's driving solar. So we're bullish on the regulatory environment pushing us towards more hydrogen. But we see the demand for hydrogen being there. It's a replacement that is not going to be available with decarbonization elsewhere, so you need chemical energy. That demand is going to drive new plants to create this kind of optionality where they'll -- it might be that there's a PPA offtake that's willing to pay $40 a megawatt hour some of the time, but they might have cheap renewables, another $20 a megawatt hour another half the time. So what does the new plant operator do then? So the trend of downward of renewables pushing down power prices is going to create this issue no matter what and going out and signing up gigawatts and gigawatts of 20-year fixed price contracts that have an escalator when wholesale power prices are coming down. My sense is that's probably hard to do. So we think that there's a strong economic reason why nuclear operators are going to be looking for offtake contracts that are focused on hydrogen. And the industry has been very aggressive to pursue that, I would say, so far.

That's great. Excellent. So if we can speak a little bit -- I want to come back to Aric's question and push a step further, if you don't mind. I mean, how do you think about sort of that medium-term and near-term deployment case? And you kind of alluded to it again in your response here on the nuclear front, right? We've got, should we say, amenable and complementary energy in the form of nuclear. We've got this technology we're trying to commercialize. We've got targets out to 2025. But obviously, in the interim, you talked about like a refinery offtake, for instance, is something that you're looking. What are those sort of first wins, if you will, in terms of getting 1 of these integrated packages together using your technology when you think about it, whatever you would think here. And obviously, I know you mentioned South Korea, maybe you can talk a little bit more tangibly about what that might look like in terms of how it's even structured. But, again, you know maybe for the purpose of fuel folks listening, right. Obviously, your fuel cell, you don't just sell the box, there's more than that. So that's what I'm trying to ask here is, how is the whole package going to come together? And what we should be expecting, one of these initial deals look like?

Yes. I mean -- so the way we think about -- let's take a step back and talk about decarbonization, because I think one of the challenges with hydrogen is there's this focus on the future. We're talking about 5 and 10 years out. And I think if we were starting with first principles, and all the progress hadn't happened with wind and solar, there'd be a lot of skepticism about things that happened 5 and 10 years in the future. And we have a business to run today as a public company. And so our approach to the transition and our approach to decarbonization has a couple of key, we call them, growth pillars. We've been talking about the electrolyzer. That's certainly one of them. What we haven't spent much time on are things like biogas. We haven't spent much time talking about carbon capture. We haven't spent that much time talking about hydrogen fuel cells. We talked about that a little bit. And we haven't spent much time talking about shipping. So as I said before, one of the really special aspects of our technology is you can take the core platform and you can customize it to be a power plant for a ship. You can customize it with an add-on module to be zero carbon because we grab the CO2, and we can sequester it or make it available for industrial use. We have the ability to run a system either on-site on biogas or undirected biogas as it's called where you can put the biogas through the natural gas system, which we think is going to happen one day with hydrogen. So now to answer your question, we're very focused in the near term on the things that make the most economic sense for our customers. So for some customers -- and we've built a huge business on this, those customers will run on natural gas or increasingly they'll run on biogas. So we think biogas is a big opportunity. We've made announcements with CalBio, for example. We're working with them to develop biogas projects and run on biogas in Central Valley. That's decarbonization. And depending on what the source of the biogas is, that can actually be carbon negative. And so whether it's running on biogas or even take customers in the Midwest that are in a heavy coal state, and they want to run on some blended biogas and natural gas and bring their CO2 scores way down, that's something that we're very focused on. And one of the new things about the technology is same technology can start running on natural gas today. And then 5 and 10 years from now, it can be running on natural gas, could be running on biogas, could be running on hydrogen or some blend of all 3. So we see opportunities today that allow us to put assets in the field that can transition into the future. We see opportunities today to put carbon capture on some of those assets, for example, where a customer might grab the CO2 on-site and then truck it off-site and sell it to a beverage company or sell it to somebody who's going to put it underground. So my point is we see a broad portfolio of opportunities. And so what do these things look like? It's a large suite. So some of the things are going to look like straight-up electrolyzer going to Korea, maybe we pair it with the hydrogen fuel cell like we have. So that's one configuration. Or maybe we've got a customer in the Central Valley that has this biogas or there's a landfill that's flaring biogas, and they want to do a zero carbon or negative carbon project on biogas. That's all stuff that we can do today. Or could you see a renewables developer that says, "I want to wait until this is ready for prime time and then I want to do large projects and electrolyze large volumes." We could see that as well. So the way to think about it is we've got this technology platform that we can customize to applications. And what we're going to do is we're going to focus on areas where the economics make sense, where the carbon savings are high and where customers are interested in as we upgrade the technology, adding new features and functionality, whether it's running on hydrogen, running on a mix of hydrogen and natural gas, adding carbon capture. And we haven't talked much, Julien, about microgrids. A lot of those customers say, "I want all that. I don't want to be super resilient because I'm in California. I'm worried about the wildfire season coming up. So not only do I want it to run on hydrogen, I want it to be a resilient microgrid. So give me all the equipment that makes it a resilient microgrid. Because in the hospital, I can't afford to let patients go untreated when the power goes out." So there's lots of these different applications, and our team is really good at taking all these opportunities and turning them into -- we've been doing this for a decade, turning them into real revenues with real margins. These projects make economic sense. We're not pricing to win deals and losing money on every trade. When you look at our -- just look at our margins, we've had huge -- almost a doubling of margins versus quarter-over-quarter versus last year on top of acceptance is going up 40%. And that's real business coming together that where the real economics make sense. So that will be our focus. We're proud of the economics where the project makes sense, where we help drive a decarbonization agenda with our customers. And we continue to build the business to bring costs down, to do more projects, to produce value for our shareholders.

And then biogas application, that was with hydrogen or that was a fuel cell application that you're talking about there?

That would be biogas goes in, makes power, delivers power either to a customer or to the grid.

Okay. So fuel cell rather.

Yes.

Okay. Got it. No, no, that makes sense. Excellent. All right. We are at 11:15. That was really fast.

Just like that.

Just at the pace you talk, right? I love it.

That's right.

Scott, thank you so very much again for taking the time with us. Great to see you. Great to chat. Keen to see you in 6 months, see where you guys are at on this, all right?

Always a pleasure, my friend. Take care.