Walmart partnering with Plug Power on green hydrogen

Walmart has agreed to an option to buy green hydrogen from startup Plug Power, the companies announced Tuesday.

Why it matters: Walmart has implemented hydrogen fuel at some of its distribution and fulfillment centers, but the agreement with Plug Power marks the first time the retailer will be specifically sourcing green hydrogen, a spokesperson tells Axios.

What's happening: Walmart has the option to buy up to 20 tons of green hydrogen from Plug Power, or enough to power 9,500 lift trucks.

The details: "Option" is the key word in the agreement. Plug Power will only be able to start supplying the green hydrogen once its plants are up and running, Sanjay Shrestha, Plug Power's chief strategy officer and general manager of energy solutions, tells Axios.

• "Once we start to produce ... out of these plants, Walmart will see where it makes sense to start using it," Shrestha says.
• Plug Power's plant in Georgia is expected to begin producing green hydrogen at the end of this year. Until then, it is providing Walmart with so-called "gray hydrogen."

Catch up fast: Green hydrogen uses renewable energy to power the electrolysis process that separates hydrogen and oxygen atoms. Other colors such as blue and gray along the "hydrogen rainbow" are less climate-friendly, relying on natural gas for example.

Reality check: Producing hydrogen with renewable energy remains relatively costly — last year, it cost about twice as much as other methods.

Of note: Even as Walmart's labor practices continue to attract scrutiny, the company has announced relatively ambitious goals to reduce its emissions, including taking steps to reduce Scope 3 emissions along its supply chain.

• Because the lift vehicles operate in Walmart facilities, their emissions would be considered Scope 1, or those that are controlled or owned by an organization.
• Notably, Walmart so far has committed to reducing its Scope 1 and Scope 2 emissions, which amount to about 5% of the company's total emissions.

What they're saying: "Customers are increasingly asking for green hydrogen rather than gray hydrogen," Shrestha tells Axios.

• "It further reinforces and further validates that as we build our green hydrogen network, there will be more appetite for it."