Startup Series: Fossil Free Hydrogen at Fossil Parity with Electric Hydrogen

Today's guest is Raffi Garabedian, Co-Founder and CEO of Electric Hydrogen.

Electric Hydrogen is creating a new generation of electrolyzer technologies to enable clean, abundant and low cost hydrogen to end the age of fossil fuels. They closed an A round of financing back in 2021, including participation from Breakthrough Energy Ventures, Prelude Ventures, Capricorn's Technology Impact Fund, and Energy Impact partners.

I was excited for this one as one, hydrogen is such an important topic and a controversial one. Two, I really wanted to learn more about Electric Hydrogen's approach. They've raised a bunch of money early in their journey from high caliber climate investors, and they have quite an experienced team. Raffi himself was the Chief Technology Officer of First Solar before jumping in as Co-Founder of Electric Hydrogen. We cover a lot in this episode, including the state of heavy industry, what makes it so hard to decarbonize, the role that hydrogen can play, where it is in its evolution, some of the barriers holding it back, some of the approaches that seem promising, and of course, Electric Hydrogens approach. We cover where electrolyzers fit in, how their electrolyzer is different and better, what types of target customers they focus on, how close they are to going to market, what some of the biggest risks are, what scale looks like, and how it will be financed.

Enjoy the show!

As always, please consider giving us a rating or leaving a review. We heard that helps spread the word about our little show and engages more folks in the climate fight!

Jason Jacobs: Raffi, welcome to the show.

Raffi Garabedian: Thank you, Jason, great to be here.

Jason Jacobs: Great to have you. I got an inbound, I think from your PR firm. And most PR firms, I ignore their requests, but you've actually been on my hit list for a while because you've been working in these areas at a high level for a long time. And you've been pretty stealthy with what you're up to now. Uh, but you've raised a bunch of money from some really reputable places, and I was kind of itching to learn more anyway. So the stars aligned here. I'm so glad that you agreed to come on the show.

Raffi Garabedian: Thank you, Jason. This is the first time anyone's admitted to me that I'm on their hit list. That's a first for me.

Jason Jacobs: Yeah, well, in the most positive sense.

Raffi Garabedian: [laughing]

Jason Jacobs: It's not a hit list like, you know, I'll knock you off, but no, but it looks like someone smart and well placed in the space where I hadn't had the good fortune to cross paths yet with who I was excited to meet, and also to learn from.

Raffi Garabedian: It's awesome to be here. And when you did respond to our inbound, I was thrilled to have the opportunity to speak with you. So thank you for having me.

Jason Jacobs: Also cool that you would listen to some episodes before. So even though we hadn't crossed paths you were aware of little MCJ which, as essentially an early stage startup founder never gets old.

Raffi Garabedian: Well, you're famous in our little world.

Jason Jacobs: Yeah, in our little world. Yeah, for whatever that's worth. I'll see how far that gets me at the school playground or something. [laughing] At any rate, what is Electric Hydrogen? Well just take things from the top.

Raffi Garabedian: Well, the name is true to form. We're not that creative in picking names, at least. So Electric Hydrogen is the young venture backed startup. We are making electrolyzers. We're reinventing electrolysis really, to solve two problems, scale and cost. And the two are tightly linked, they're interconnected. The company's mission driven, we're building this company, specifically with the goal, the desired outcome of having measurable impact on a very, very large problem, which is largely speaking, industrial or infrastructure scale, fuel use and related carbon emissions. So that's the North Star of the company. In order to have an effect on such a big thing, the energy system is we can talk about the numbers as we get further into the conversation, but it's mind bogglingly big.

In order to have that kind of an impact, you have to use economics to advantage. And so hence, low cost. Low cost is not an end, in and of itself, from our point of view, it's a means to an end. We want to sell a lot of electrolyzers. And we want to sell really big electrolyzers to convert renewable energy and a little bit of water into hydrogen, which can be used in a broad range of applications, as you know, both as a fuel line of feedstock, chemical feedstock. And so to have that desired effect, we have to be able to deploy at very, very large scales.

Jason Jacobs: And of course, we can go into why this opportunity and the origin story for the company and things like that. But before we go there, to build a mission driven company like this, and correct me if I'm wrong, but it sounds like it was mission first. And then it was the best way to bring about that mission is to do X because X aligns with both what's needed and where the gaps are, and my skills and interest and passions. But where did that mission come from in the first place? When did that become your mission? And why did that become your mission?

Raffi Garabedian: That takes me way back to 2008. And to for this to make sense, I'm gonna have to give you just a little bit of context. So I'm an electrical engineer by training, grew up in the northeast in Boston actually, went to school in upstate New York, Rensselaer Polytechnic, got my EE degree, and hightailed it out west, mostly because of the weather, but also because I wanted to experience something new. And you know, the Golden State called me. Got a Master's at UC Davis, actually was in the Ph. D. Program, and I dropped out to start a company literally invented something in the lab and decided, you know what, I'm done with school, I want to start a company, I want to build this thing.

Now, what is this thing doesn't really matter that much. But most of my career has been in startups, either building them myself, or being part of the team that builds them in and around semiconductor technology. So I'm a micro guy for most of my career, thinking about semiconductors, manufacturing processes, structures, and productizing those things, one way or another, either in automotive sensing and actuation, telecommunications, optical switching devices, semiconductor test equipment, a whole bunch of different applications for that kind of core technology.

That period of my career was really defined by a love for the tech. And now it's called deep tech or hard tech, back then we just call the tech before you IT people took over the term.

Jason Jacobs: Now apps are tech right?

Raffi Garabedian: Yeah, now apps are tech, and we need an adjective in front of our tech. So we call it hard tech now, right? So I do a lot of hard tech stuff. And it was all about the tech, it was all about, wow, that's a really cool technology to be able to do such a thing at such a small scale, that's incredible. I woke up one day and this was shortly after my son, my son was about four or five at the time, my daughter was just born. We were living down in around Pasadena, California, which is a beautiful place when there's no smog. And when there's smog, it's awful because you can't see any of the beautiful stuff around you. I got the feeling, it had been welling up in me. You know, people have midlife crises, and they express it in different ways. So like I didn't buy, no, I did buy a fun car. But that aside, um, that wasn't really satisfying the edge of my midlife crisis.

I got a call from a recruiter. And you know, we were in the midst of selling the last company I had started. So it was an opportune time to be thinking about it a next thing. I got a call from a recruiter from this funny company, based up in Ohio called First Solar. I had never heard of it. But I picked up the call, I talked to them and they connected me with the hiring manager who is the CTO effectively at the time guy by the name of Dave Eaglesham. And I had pitched my deal to Dave in a former life. He was in Applied Materials, helping ventures people over there. You know, he didn't like my deal, but apparently he liked me. And he was trying to recruit me into the company for a really cool position, position called director of disruptive technologies, which I still don't know what that is.

As I talked to Dave, he pitched me with incredible passion around the mission of the company for Solar, what the thing was trying to do, what it was all about. And it woke me up. It was like waking me up from a slumber of sorts, like I was telling you before I had my nose down in the minutia of cool tech that I was really passionate about, but none of that tech really had a mission to it, kind of overarching something that mattered to me more deeply than just it itself for its own end. And Dave kind of showed me that. I wasn't a climate guy at the time. I believed the science, I knew it was a problem. I didn't think it was my problem. I didn't think it was mine to solve. But what the opportunity first of all showed me, it showed me, wow, there might be actually a path to have both, to have passion about what I'm doing and why I'm doing it. And that was revelatory for me. So I took the job. And that was the beginning of my addiction to mission oriented technology. So I don't know if I actually answered your question.

Jason Jacobs: Yeah, you did. That is essentially it wasn't mission first, it was that you're almost flailing around seeking one at the time that one showed up. But once you got a taste of working on a meaningful one, you not only realize that you don't want to not work on a mission oriented company, but also you found a cause that really deeply resonated and that you wanted to pursue consistently from venture to venture. I don't want to put words in your mouth, but that's what I just heard.

Raffi Garabedian: Yeah, you know, Jason, I'm gonna be a little, maybe some of your audience doesn't think this way, but I think there are a lot of really important missions in the world. And affecting climate change in a positive manner, is one of them. And so I'm dedicated to that in no small part because I believe it's super important, and I believe I'm an optimist, I'm a technology optimist at heart, I believe we can be effective in mitigating the effects and ultimately cleaning up our act. But I don't really think it's the only thing that people should be thinking about working on. It's, it's one of a small handful of really, really important problems that humanity faces, or maybe optimistically, I could say, opportunities, humanity has to move forward to be better than we've been in the past.

This is a mission I chose, it was circumstantial, in no small part, but once you get into something, you learn about it, you get knock on wood good at it, you build a network and a reputation in something, it's great to ride that. And, you know, that's really the roots of of what I'm doing now. I could pick another important mission and maybe be much less effective in it. Or I could keep on going down the path I'm going down, which I believe deeply in, and can be very effective in. So back up, I joined for Solar in 2008. While that was a turbulent ride, and I learned an awful lot about myself, about people, about leadership, about energy, which I knew nothing about going in, about Solar, of course. Dave, who hired me, in into First Solar, he left the company in 2012. He elected me, well, the company gave me the opportunity to be CTO at that time. So I took that job and became CTO. And I was in that role until the end of 2020, when I resigned from the company.

And you know, it was a very amicable resignation. I decided some months back that it was time for me to do new things. And actually, my plan, Jason, was to hang out with a bunch of smart venture capitalists and get to see what else is going on in the world of climate tech, so that I could choose my path very consciously, very, um, very intentionally. Right about that time, we announced at First Solar that I was leaving the company. And my old boss, Dave gave me a call and said, Yeah, you know, you could do that. I've been doing that for the last two years as an EIR at Breakthrough Energy ventures, I already know the answer. This is what we need to do. And he pitched me on the idea of starting Electric Hydrogen.

No secret, at First Solar, we had looked at electrolysis a number of times, it's an obvious thing. You can't be the CTO of a large solar company and not be thinking about markets for solar that can address the constraints of solar adoption, that can allow more solar to be used in order to increase the penetration of renewables into our energy system, right? So electrolysis has been that topic for many, many years. People broadly call it P to X, but X generally goes through hydrogen via an electrolysis route. And as we have looked at it over the years, we have done our own math on it, it never made economic make sense. You know one thing about First Solar, it's the utility scale solar company, the company kind of made a name for itself by focusing on very, very large scale systems, hundreds of megawatts kind of systems, and deploying them in bulk to provide bulk generation on to the grid.

Why did the company choose that strategy, because the two things I started out saying, it's scalable, you can deploy a lot of solar that way, because the costs of project acquisition are relatively low on a per megawatt basis, unlike residential solar, for example. And the thing that you realize when you're in that business is that the economics of the product, so the levelized cost of energy effectively, they're really more importantly, the IRR is or the rates of return that the financial owners of the plants can generate, that's what really drives adoption. So scale matters, but really, what drives the adoption is economics. Taking that to heart, that's a deep lesson for me as a technologist. You know, I never thought about the numbers and the money side of things much until I really learned the ropes at First Solar. And you know, I, I have a minor in project finance now. Thanks to First Solar. So that's what taught me about economics and why economics matter.

And looking back at hydrogen over the years, we could never make the numbers pencil, we could never make ourselves convinced that hydrogen could be produced economically relative to the alternatives. And the alternatives are fossil resources. So, now fast forward to the end of 2020, we started talking, Dave and I, and the situation had changed. Well, there's two components to that change, renewable electricity generation, both solar and wind, are now in good resource locations, cheaper than any other form of generation, actually, frankly, new or marginal cost of generation in many places. So it's an incredibly cost effective energy resource. You know, that wasn't true forever, that really only has become true in the last five, maybe even four, three years, because of the declining costs and increasing efficiencies of solar plants.

That's a key input to the production of renewable hydrogen. The missing link is a conversion technology, an equipment platform, if you will, a conversion plant, an electrolyzer plant that can perform that electricity to breaking water, to generating hydrogen conversion in a really cost effective manner. And so that's all about the capex, right? It's all about how much money you have to spend per ton of hydrogen produced per year. Dave had a hypothesis, a deep technical hypothesis around how electrolysis can be driven in the same kind of way that we drove very successfully over the decades solar technology. By improving in solar by improving conversion efficiency. You drive down the cost of solar directly, is directly proportional.

The same thing is actually true in electrolysis, is different parameter, but there's a parameter that controls the cost of conversion. You know, with those technical, deep technical hypotheses, we scrutinized them, he had looked at the literature, we talked it all through and decided it had enough merit, that it's worth actually taking a swing at it. And so we launched Electric Hydrogen at the beginning of 2021. And raised a Series A, I think, in March of '21, March of last year, led by Breakthrough Energy Ventures.

Jason Jacobs: And this is not an Electric Hydrogen specific question, but when you think about climate tech, since it's not really a vertical, but it, I mean, we need to transition our economy across essentially, every vertical and each vertical, you got vertical specific expertise that may or may not, you know, really be driven by helping address the problem of climate change. How important is that burning mission inside of the founding team to starting a company that can help in these areas? I mean, does it matter if someone is a mercenary or not, for example?

Raffi Garabedian: Yeah, we don't hire mercenaries. Why? You've been there, you've been a founder. You know how hard it is. It's really hard. So we want people on our team who are deeply committed to what we're doing, because that commitment provides the fuel, the energy, that you have to burn to get something really hard done. There are all sorts of challenges. There are all sorts of near death experiences. You can't predict how a startup is going to evolve. Doing that, without mission orientation is really deeply troubling for me. It's very, very difficult. And to be frank, you know, I spent a long time again, at a sea level in a public company at First Solar. I don't need to be doing this. I want to be doing this because of the mission orientation, and to be really really frank about it, I want to be surrounded by and working with people who share that orientation. That's what makes it fun to come in and work.

Jason Jacobs: So was that missing when you were building companies in the semiconductor world?

Raffi Garabedian: Yeah, for sure.

Jason Jacobs: Uh-huh. And, and did it impact the ability of those companies to be successful?

Raffi Garabedian: We do what we do for all sorts of different reasons. And we can be extremely passionate about things that don't necessarily align to a mission. Why? Well, because of culture, because of leadership, because of team, there's all sorts of reasons. And those attributes of a company, they're still necessary in a mission driven company. You still have to have a strong team spirit, you still have to have a very productive culture, a very supportive culture. All those things still translate over, mission is an umbrella that goes over all of it.

You know, Jason, I'm 55 about to turn 56. For a lot of people in my generation, we didn't grow up thinking about mission first, we grew up thinking about our careers, thinking about technology, in my case, thinking about our families, and making good in the world. Mission is a relatively new thing. In the landscape of corporations and startups. It was a bit of a revelation to me back in 2008, that such a thing could exist, that you could connect your, this is a clumsy word to use, instead of searching for a better words, I'll say you could connect your morality to your work. That was a revelation for me. And once I saw that, I wanted to keep on doing it.

Jason Jacobs: Yeah, I do want to get into some Electric Hydrogen stuff, but this is such a fascinating topic. I'd love to stick with it for one more question here, which is just, when you talk about mission, and I'm with you on mission alignment. And it's important, I mean, it's important to me too. And actually, I discovered it also around 2008. But what are the implications that as it relates to B Corp, double bottom line. Do you need a separate wing of, a separate class of companies to do good to the world or is mission enough? And how do you tell which companies are serious about mission and, and which ones are just using it for the brand Halo and for the hiring assistants?

Raffi Garabedian: Yeah, I mean, talk to the founders, it's pretty transparent, pretty quickly. Look, there are two things, profits and mission. In the case of Electric Hydrogen, and I think in the case of many, many businesses, it's a false dichotomy to say that they have to be separate or should be separate in any way. And let's go back to our guiding principle, we're trying to have a positive effect on anthropogenic climate change. We're trying to reduce the amount of carbon we emit as a society via our energy system, and reforming our energy system. That's what drives us. Now, let's talk about how to do that. So when we look at that problem, I don't know the number of giga joules, but it's of such a scale, that the only way to actually have a measurable impact is to be really big and successful.

So do I care about the bottom line? Do I care about generating profits? Heck, yeah, absolutely, I care. Because for this company to be worth having built, it has to grow really, really large, and do so very quickly. And why does it have to grow? Because we want to deploy a lot of electrolyzers, right? So the two are deeply connected, they can't be divorced from one another. That's a function of how human society functions, how it works. We use money as our equalized, levelized means of creating value. And so the money, the success in the financial front, in our terms represents actually success in our mission. We can't have one without the other.

Jason Jacobs: So then given that, I mean, you're making the case how an investment in Electric Hydrogen, as an example, is not concessionary in any way, it is strictly a profit seeking investment. Put that same filter on the mission alignment of the investors then and if so, why, and if not, why not?

Raffi Garabedian: I think the best investors do see it exactly the way you articulate it. And it comes from the realization or the acceptance of the reality, that again, in order to have an impact on very large economic systems, on big swaths of our economy, which are generating all the emissions that we want to mitigate, that we talked about, right, in order to do so at that scale, the solution can't actually be concessionary, it has to be economic, because we have to leverage many, many people across many societies in many parts of the world. And the only way humanity knows is ever devised to do such things is through economics.

Jason Jacobs: So can investors be mercenary then? Or is there the same allergy for investment from mercenary dollars?

Raffi Garabedian: So I have the same allergy. And the reasons are because, again, as you know, you've been there, startups go through growing pains. There are many, many bumps in the road. And sometimes the bumps are near fatal. We need to be surrounded, I think every, every company like ours needs to be surrounded by investors who are supportive, and who can see past the bumps and ride through the really hard times with us. Now, we could say, and you could point to many examples of mercenary investors with 'mercenary companies' not mission driven companies who have done just that, who have stuck with it together and succeeded. Okay, there's a model out there, that can be copied, right? That's not really the way I want to do business. Again, back to having fun at work, I like my board meetings. I like them because we are really aligned around common goals. And so that alignment of incentives and motivations between all the various stakeholders in a startup, whether it's the investors in the board, the management team, and the members of the team underneath, that alignment of mission, orientation, incentives, it all has to tie together for the avoidance of unnecessary conflict.

Jason Jacobs: And coming back around so you realize it was time for new challenges. And you were starting down the path of looking to evaluate different ideas, maybe in a venture capacity, or at least hanging out in a venture capacity while you figured it out. It sounds like pretty early in that journey, you got sucked into this one, given that you didn't necessarily have a chance to boil the ocean. No, maybe that's a bad choice of words. But you didn't have a chance to really explore the landscape fully. What gave you the conviction that you weren't going to find a more compelling place to anchor than Electric Hydrogen, and hydrogen in general?

Raffi Garabedian: When I was thinking about what to do next, I'm an engineer, so in my head I see a Venn diagram with circles that kind of intersect. What are those circles? Well, there's what I think I can be good at, what are my skills. There's what other people think I'm good at, my network and the network effect that I can leverage. And there's the opportunity set, which in my terms, has to be mission oriented around climate tech, and has to be at a big enough scale, that it's worth trying to do. Those are the circles and I was looking for the intersection of the circles. What I realized in my own introspection was that there was a fourth circle as well, which was the people, which surprised me.

Again, I'm an engineer, I'm an introvert. It's hard for me to look outwardly at myself look from outside and say, oh, yeah, you should be really concerned with liking the people you work with. But I realized over the years that it, it really is true, it was hard for me to admit it to myself, but once I did, then the choices became much clearer, right? Working with people I love, who I enjoy being around, and I resonate with, that makes hard things easy. And so, so those are the four circles I was looking for the intersection of, and the Electric Hydrogen vision that Dave and his compatriots breakthrough kind of started while he was an EIR there, and now we've taken developed and, and are scaling as a company, it really satisfied that intersection of goals.

So amazing people who I had experience with, who are rock stars in their domain of expertise, who I would love to work with, aligned to mission with the potential to make a really, really big impact on a super important problem. And, and in an environment where I think I can be personally successful. So no need to look any further than that.

Jason Jacobs: Before we get into the specific approach at Electric Hydrogen, if you can just frame the landscape. So you talked about the rise of renewables, and how they're in areas where they can be the cheapest form of power generation, assuming that they're in good locations. And then you talked about how hydrogen wasn't historically able to be cost competitive to fossil fuels. Maybe talk a bit about what was holding it back, and what Electric Hydrogen can do to address that and why nothing else has been able to do that prior.

Raffi Garabedian: Thanks for that cool question. And interrupt me if I ramble on too long, like I have a tendency to do.

Jason Jacobs: Yeah, it wasn't the most succinct question in the world. I think I baked three or four in there, which I tend to do. Sorry about that.

Raffi Garabedian: It's good. Gives me free rein. If I go back to the last number of N years at First Solar, I was personally less and less satisfied with my role and it's not because of the company, it's a great company, I love the company, love the people there. It's because technology was less than less a critical driver in the proliferation also. That took a lot of head scratching for me to ultimately realize, because we went through in Solar, a period of very, very rapid technological progress both on efficiency and cost, and even on deployment cost. There were a lot of innovations in solar, mostly in modular manufacturing, but then also propagating into the field. That was fun. That was a really, really fun period for tech nerd like me to be in that industry. Lots of opportunity for my work to materially make a difference, not only in the company's success, but in the industry success. So super fun period.

As time went on, we started to see a pattern more and more of emerging constraints in solar deployments. So, you find a region where there's a population density and political will to deploy solar and a great solar resource, you deploy a bunch of solar, eventually, you kind of penetrate the grid to a point where the grid starts to struggle accepting more and more variable renewables that can't be dispatched. Maybe the regulations change. Okay. There's some curtailment that's allowed, but you hit your head up against the ceiling, and things get harder. And technology doesn't fix that problem. You could say battery storage could fix that problem. Yes, that's true. And it's a super important area of technological innovation. But sitting in the seat as CTO at First Solar, that's not something we do or we're going to be very good at. It's a very, very different business.

And so what are the other constraints to adoption, things like interconnection, things like permitting, they're things like capital access, a whole bunch of constraints that are not technological. And so that became frustrating. And why hydrogen, takes me to your question. Well, as I thought about it more and more and then discussed with my co founder, Dave, it really crystallized for me that power from renewables to a molecule such as hydrogen can decouple or unconstrain both solar and wind from much, much larger scale deployment in many more places, serving many more industries and use cases.

So the notion, 'the notion of electrify everything' is a really cool soundbite, but it's just that, it's just a soundbite. Electrifying stuff at night, doesn't make any sense whatsoever from a carbon perspective. It's actually one of the worst things you can do. Why, because nighttime generation is fossil generation. Batteries are way too expensive, and they are going to continue to be way too expensive for the foreseeable future. In fact, if you think about a world where battery production technology is constrained, batteries are far far more useful in vehicles, particularly lithium ion than they are on the grid. So yes, there are other battery technologies. I'm on the board of a company called ESS. It's a hybrid flow battery designed specifically for the grid. There are other solutions, but nonetheless, time shifting bulk energy is extremely expensive on a delivered basis.

So electrify everything, it's not the panacea. What do we actually do in the world, we burn stuff. We burn stuff to make heat, we burn stuff to make steam, we use that steam or the heat directly to make electricity. We use it in industrial processes to produce bulk materials. We use it to make glass we use it to make steel, we use it to make aluminum. We make our fertilizer, out of feed stocks like hydrogen. There's massive sectors of industrial society, which really support our population on this planet. We couldn't be as many of us as there are, you know, Malthus could have been right, save for the invention of the Haber–Bosch ammonia process.

And by the way, Malthus is going to be wrong again. The belief I hear sometimes in our community around the inevitability of radical climate event, near extinction event, it strikes me as Malthusian, and you know what, Malthus has never been right. So that's why I'm an optimist. When we turn our attention as a species to a problem, and finally we are doing so now I'm really emboldened by it. And really optimistic, we will find solutions. So anyway, sorry, I'm rambling on here. But where were we?

Jason Jacobs: You were talking about how, are renewables getting deployed at huge scale, there's constraints that inhibit it to do so more broadly, more effectively. And one of those is that batteries are expensive. And I think you were going to start to get into how hydrogen could help but what's been holding it back and then get into how Electric Hydrogen will address that.

Raffi Garabedian: Thank you very much, Jason. That's exactly right. So why did I get into Electric Hydrogen? Why did this resonate for me? Frankly, because it's a pathway to deploy a lot more solar and wind. And that's an, maybe an oddball way of thinking about it, but that's really how I got into it. It's in service of deploying a lot more renewable generation, and then making good use of that renewable generation across sectors. So crossing from the electric sector, electric power sector, into other sectors of our economies, which are even larger net emitters than the electric power sector.

So when you look at it, from that point of view, you start to realize, hey, wow, you know, this is actually an amazing, amazing chance to leverage this very low cost, emergent, generating technology, power generating technology, to do things we never used to be able to do with electric power in a seamless way that doesn't require retooling all of industrial society. Industrial economies, our society is based on basically burning stuff. And that stuff has been methane, coal, oil. We now with power to X, X, again, passing through hydrogen in almost all cases, have the opportunity to continue burning stuff, but the stuff we burn is clean, it's fossil free. And that's what renewable hydrogen is all about.

Jason Jacobs: Uh-huh. And so what are you doing to enable renewable hydrogen and why wasn't able to be done before Electric Hydrogen came along?

Raffi Garabedian: Well, as you and your listeners know, there's a lot of clamor around hydrogen today. There's a lot of hype in our industry. It's talked about almost every day in the press in Europe, Europe's a bit ahead of us, here in the US, but it's starting to become a big deal in the US to both politically from a policy perspective and economically. Why is that? It's because you know, I'm not the only smart guy out there who sees this as a pathway to deep decarbonization and deleveraging renewables into other sectors. That's been around for decades, people have been talking about that for a long time. Back to where we started, it's all about economics. For this to be successful, it's got to be cheap. And what does cheap mean, it's got to be on par with the fossil resource.

Now, we can sit around and wax on philosophically about Gee, wouldn't it be great if there were a carbon tax? Gee, wouldn't it be great if we could monetize or somehow internalize the externalities, the societal costs of CO2 emissions. I'm not waiting around for that, right? I'm too old to wait around for that. We've been waiting for a long time. We finally have the technology, we believe at Electric Hydrogen, and the resource to achieve cost parity in the next few years with the fossil resource, without actually having to have all those other great policy things that could accelerate adoption even further.

Jason Jacobs: And how are you doing that?

Raffi Garabedian: Yeah, I know, you want to know how. There's two keys here, okay? Let's start with the energy resource. Because when you think about the cost of producing renewable or fossil free hydrogen via electrolysis, there's two components to the cost, broadly speaking. There's the cost of the energy, and done right, the cost of making hydrogen is dominated by the cost of energy. Well, let's, we can question that. And then there's the cost of the capital equipment. That's basically like the amortized cost of the equipment that you have to build to perform the conversion, right?

So let's start with the energy cost. I said the solar and wind are dirt cheap, they're the cheapest form of energy we know of, well, electricity anyway. That's true, but only if you take them where and when they're produced. So if you firm either resource by trying to store at one way or another, or by taking energy off of the grid, to provide higher capacity factor to fill in the times when the sun isn't shining, or the wind is blowing, your price of energy becomes much higher. And that's just an economic fact. It's because storage is expensive, and it's because the grid is much more expensive than the bulk resource un-firm. So to put numbers to it, in many parts of the US and even many more parts of the world, we have clear line of sight over the next five years to both solar and wind that are substantially cheaper than $20 a megawatt hour, so two cents a kilowatt hour.

The best PPA, power purchase agreement price that I know of is right around 10 cents, or one cent a kilowatt hour, $10 a megawatt hour, that's in the Middle East. But, you know, we're between 10 and 20 in a lot of parts of the world. Now, the issue with that energy is, as I said, it's not firm, it's low capacity factor. So it's somewhere between 30% capacity factor in the case of solar, to maybe 45% capacity factor in the case of wind, but it's a decent range to think about conceptually. So the implications of that on electrolysis technology are actually quite significant. If you want to harness that energy resource, and have it be cheap, you've got to have an electrolyzer that's extremely flexible, that can operate on-off, kind of go ramp up and ramp down with the generating resource to take the energy when and where it's produced, that can do so reliably and is from a capital perspective is cheap enough that you can afford to run it only a third of the time.

That's the problem we're solving. We're solving that technological problem. And part of the solution is also necessary in terms of market scale. So the typical use cases we're trying to address, we're not trying to make electrolyzers to produce hydrogen at a filling station to fill a fuel cell vehicle. We're trying to produce electrolyzers that are bulk infrastructure scale producers of hydrogen, the equivalent of that is a steam methane reformer. If you go down to Texas, you'll see many of these. They're kind of chemical plant looking things, they take natural gas in, they um, crack the natural gas catalytically, they emit the CO2 in the air and they produce hydrogen. And that hydrogen is usually either goes, you know, through a pipe either to a refinery for hydro-cracking or hydro-forming in the refining process of of oil, or it goes to a Haber–Bosch ammonia plant.

Let's just take the Haber–Bosch ammonia plant as an example. These things are big. They operate at substantial scale in order to be economic. If we were to provide hydrogen to a Haber–Bosch plant, a typical large scale Haber–Bosch plant, via solar powered electrolysis, it would require just under a gigawatt of solar powered electrolysis. So that's a gigawatt of new solar and a gigawatt of electrolyzer. That's just one ammonia plant. If we think about the use of fuels in really hard to mitigate applications, applications where direct electrification isn't going to work anytime soon, when we do the math on that, we see a market opportunity that is measured in tens of terawatts of new generation, solar and wind and new electrolysis builds. That's the kind of scale it takes to actually address CO2 emissions from these industries. It takes thinking at terawatt scale.

Jason Jacobs: And what does the electrolyzer market look like today? I mean, is it fragmented? Are there a few players that have the lion's share of the market?

Raffi Garabedian: Yeah, so globally, I think, forgive me, I don't have the latest number off the top of my head, but maybe it's like 350 or 400 megawatts of electrolysis exist operating in the world today. So we're at the very, very tip of an iceberg of, of activity. We're just beginning on this journey of deployment.

Jason Jacobs: These electrolyzer companies, are they upstarts? Are they companies that have been around a long time? Are there just a few of them? Or, or are they a bunch of little players? What does that landscape look like in terms of who's providing this equipment?

Raffi Garabedian: You got into renewables back in, what was it, 2012 or so? No.

Jason Jacobs: For me, it's just been three and a half years.

Raffi Garabedian: Okay, three and a half, three and a half years. Okay, sorry. So if I go back to 2008 in solar, I think electrolysis looks a lot like that from a supply base perspective. So there are a few large industrial companies, industrial equipment providers, you know, think Siemens, thinks Tyson crew, think Cummins, who make electrolyzers. And, you know, some of them have been making electrolyzers for quite a while. So they're in the market. There are pure play column mature startups. So public companies like Plug Power, companies like [inaudible 00:44:05] electrolyzer company. There are folks who've been, again in the market for a while, but are smaller, they're not big multinational, multi product, industrial companies.

And then there's a bunch of startups and they range from they range from sciencey materials companies all the way to companies like us who are thinking at the system level, product scale. It's a big landscape. The technology choices haven't been shaken out. We're just on the beginning of a process of competition between different technologies, not just different companies, but different technologies in the various application segments. And you know, that's going to evolve over time. Again, just like we saw in solar, there's going to be a very intense competition around capabilities, scale and price, ultimately, which will decide who wins and loses.

Jason Jacobs: Are you an equipment company? Would you categorize yourself as an equipment company?

Raffi Garabedian: Yeah, we're an equipment company. You know, we call ourselves a technology provider. What does that mean? That means equipment and the associated services to support that equipment.

Jason Jacobs: Uh-huh. And in terms of the piece of the market that you're focused on, how would you describe your target customer? And then what is it about working with Electric Hydrogen that is better than the existing alternative? And I guess there's a third question there, which is, are you unseating incumbents? Or are you finding company... Are these greenfield projects that are getting built where there is no incumbent tech already there?

Raffi Garabedian: So there are a lot of small projects, there are a lot of demos, I like to say, you know, hydrogen, everybody says the hydrogen economy, it's growing so fast, there is no hydrogen economy, let's just be clear about it. It's a nascent idea, um, but it hasn't really happened yet. There are a lot of pilots going on. And the pilots are typically 10, 15, 20 megawatts to scale 5 megawatts to scale. So little things just people are doing to get comfortable with technology and deployment. And in parallel, there are large, really massive kind of gigawatt scale projects, either being developed or in discussion, where technologies have been selected, but they've been selected for a first phase, for a start of such a large project.

That's the landscape today. What are we looking for at Electric Hydrogen, in terms of applications and customers? I'm gonna interpret your question that way. We're looking for really, really brave customers who are willing to deploy at scales that have not been done here before. So to be very specific, the product that we are designing and building that we ultimately will produce and sell is a 100 megawatt minimum scale. So this is not for the faint of heart. This is not something you can deploy five megawatts of, and then maybe another five. Now, what do you get for that, you get two things, you get a scale that makes sense for the real infrastructure applications. And you get a capital intensity. So effectively a price per ton per year of hydrogen production, that enables really, really amazing economics.

And those two things go hand in hand, right? You can't achieve that capital intensity without the scale. So it's a different kind of customer we're seeking. And I'll tell you, the response in the market is profound, and really, I'm super optimistic about it. The people who are serious about deploying renewable or fossil free hydrogen in the applications we've kind of touched on, they are in fact, thinking at multi hundreds of megawatts per project scale. That's the right project deployment footprint for these folks. And so we have, we have really good traction out there.

Jason Jacobs: And when you think about starting from zero, which it sounds like you did, and then navigating the different phases to wide scale deployment, I mean, are there clean phases? Does it, do they, do they fit in a box? And what phase are you in now, as you think about taking this to market and ultimately serving lots of customers?

Raffi Garabedian: Yeah, we're a young company. We're moving really, really fast. We'll be piloting the technology next year. And we hope to be producing and selling actually commercial units in 2024. Now, for members of your audience who know a bit about electrolyzers and might be in the market or thinking about it, that sounds insane, and it should sound insane. Which is one of the characteristics of the industry. We're in now. The electrolyzer business has historically moved at a very, very slow pace, kinda like the solar industry looked back in the mid 2000s. Very, very slow development cycles, characteristic of technologically intensive niche products into unskilled markets.

We're bringing kind of a solar mindset to the electrolyzer business. What is that mindset? That mindset is, man, if you weren't moving fast and reinventing yourself and pushing yourself forward, very, very quickly, you're going to be eaten alive, you're going to die. That's how First Solar survived, right? First Solar is the, really the only western solar module manufacturer to survive the Asian rise and solar manufacturing, right? And we did it in no small part because we took technology innovation, and pushing ourselves down that cost curve extremely seriously. That's what we're doing in Electric Hydrogen, too.

Jason Jacobs: And how capital intensive is to scale a business like this, and then how much of that cost falls on you versus on partners? Is collaboration a big piece of the strategy here?

Raffi Garabedian: Yeah, so downstream collaboration is a huge piece of the strategy. It turns out that one of the attributes of the technology that we've developed is that it is extremely low in manufacturing capital intensity, which means that we can build out volumes and scale our capacity quickly and cheaply. Where the capital intensity is really a topic of great interest is downstream, in deployments. And you know, as you know, Jason, there's a lot of pent up demand for good projects in the world of infrastructure capital. I'm not too worried about where the capital comes from, once we demonstrate the capability and unlock the potential of low cost, renewable hydrogen production.

Jason Jacobs: And so those early pilots, does that all get funded with equity?

Raffi Garabedian: There will be some equity participation from various players. As you know, there's also sources of, there's also great sources of of debt capital, both from the government and from private sources, kind of risk forward debt capital resources now. So we got a bunch of options there.

Jason Jacobs: Uh-huh. And with the money that you raised, I think in mid '21, what are the key goals with that capital and in the phase that you're in? And then to the extent that you've thought about it, and are open to sharing what does that next phase look like?

Raffi Garabedian: I won't share too much about the financing history of the company other than what's public, which you already referred to kind of raising capital, or series A in in 2021. Funny story, we call it a Series A that that's how old I am. I think these days, it's fashionable to call those rounds a seed, but uh, [laughs] we used to call it an A, so we call it an A. As I said, we're moving very fast towards commercial deployment. So where we are right now we're scaling the technology up to the, both the physical and throughput footprint of the actual product. We'll be piloting it, as I said, next year, and really, the next couple of years is about debugging, proving out the manufacturing process, getting independent engineers, kind of owners engineers comfortable with the technology, with its characteristics, its performance, its durability, you know, thereby opening the path to commercial deployments and make '24.

Jason Jacobs: Uh-huh. Got it. And when it comes to people, how do you think about technological expertise versus commercial and how are you resourcing for that in the phase that you're in now?

Raffi Garabedian: What do you mean by versus commercial, technological versus commercial?

Jason Jacobs: So how much go to market horsepower is on the team?

Raffi Garabedian: Oh, yeah. Okay, you're talking to it.

Jason Jacobs: [laughing]

Raffi Garabedian: [laughs] No, we're, bad joke. We have a small but really, really talented team of folks in our product management group, which is really all about product market fit. So it's all about discovery of what customers really need, and making sure that the product we design and build satisfies those needs, sometimes in unexpected ways. So for example, this 100 megawatt scale comes out of that group's activities. No one asked us for 100 megawatt minimum size, but when we actually talk to people about the trades between cost, deployment velocity and scale, it became clear to us that that is actually a really important piece of the answer. So that's just an example of what we do in our product group.

And we recently brought on board a great Vice President of Sales, Jason Mortimer. He comes to us from LevelTen Energy, prior to that SunPower. So we're now building up a commercial go to market team. So what I left out was that implicitly, but also clearly true, most of the team today is technical in nature. So, we're full of scientists and engineers working hard both in the lab and in the shop, designing and building the world's most productive, lowest cost electrolyzer.

Jason Jacobs: And what do you worry about the most if Electric Hydrogen is not ultimately successful, sitting in that seat, looking backwards, why do you think that was? What didn't work?

Raffi Garabedian: So we're serving a really exciting, fast growing market that doesn't exist. And that doesn't exist piece, is the piece I worry about every day. So it's finding the counterparties the customers who have a very, very clear vision and ultimately lead to contract for renewable hydrogen for fossil free hydrogen, at reasonable price points that we think we can hit, that market creation is the piece of it that I worry about. I don't actually worry about the ultimate end, will it happen? I worry about how quickly is it going to happen. And so that go to market that you alluded to, Jason, that's something that we think long and hard about.

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