New Mexico startup Pajarito Powder expands to new location with excelling business

As the nation amplifies its efforts to generate hydrogen energy, a New Mexico startup that makes materials needed for green hydrogen production is expanding its footprint in hopes to corner a greater share of the market.

Pajarito Powder is a company that makes what’s called a catalyst, a type of powder needed in the process of creating green hydrogen. The powder is used in electrolyzers, which produce hydrogen, and in fuel cells, which use hydrogen to create electricity.

Demand for these materials has shot up in the last year or so, and Pajarito Powder recently expanded into a new, much-larger facility that’ll allow the company to scale up production. The new Albuquerque complex will also serve as the company’s headquarters.

“I think one of the reasons why Pajarito is unique, not just to New Mexico but to the United States, is that we are one of the very, very few catalyst producers for electrolyzers and fuel cells in the entire United States,” COO Michele Ostraat said.

She said most other catalyst producers are international. Pajarito Powder has been in the business in New Mexico since 2012.

The company is in the process of moving to a new facility in Albuquerque near San Mateo Boulevard and Montgomery Boulevard. CEO Tom Stephenson said there’s been a significant uptick in demand for Pajarito Powder products over the last year or so.

“We’re super excited about moving here because this is about four times the size of where we were before,” he said during an interview at the new location. “And it’s going to give us the room to expand dramatically our capacity for both the fuel cell and the electrolyzer catalysts.”

This new space is also better suited to the company’s technical needs, he said.

“The equipment that we’re putting in here will allow us to ultimately be at a scale that’s 100 times what we were able to do even a year, a year and a half ago,” Stephenson said.

The electrolyzer catalyst business, which has been growing more quickly than the fuel cell catalyst side of the business, will be a major reason for the increasing demand, he said.

Stephenson said the company currently has about 20 employees and has plans to hire another five employees soon, with another six to eight later in 2024.

Ostraat said Pajarito Powder is a great employer for the science, technology, engineering and math industries.

“When you think about New Mexico STEM employers, you can often think of Los Alamos. You think of Sandia. You’re going to think about the space and aerospace-type industry,” she said. “Pajarito is a catalyst company. We’re a materials company. And I think that also makes us relatively unique.”

Ostraat said the company is navigating what’s known as the “valley of death,” when a startup is operating but not yet seeing the cash flow back yet. That’s happening for Pajarito, she said, as the company has a material that works well on a lab scale and now customers want a much larger quantity.

“That process of actually taking materials that were invented at the lab scale and moving them to full commercial scale — that’s a very hard thing for a lot of businesses to be able to,” she said.

She said it’s a challenge, but Pajarito Powder has others helping. She said other companies and national labs are interested in Pajarito’s technology and want to invest .

“So I don’t feel like we’re doing some of these things alone,” she said.

Ostraat said the work Pajarito is doing is making an impact.

“We know what we’re making is really going to help change the world,” she said.

Energy independenceThe COVID-19 pandemic played a role in increasing the demand for hydrogen energy. Stephenson said other countries, like Japan, Korea and European nations, used economic rebounds from the pandemic as an opportunity “to accelerate their movement towards decarbonization.”

“And so it was in that timeframe, starting at the end of 2020 and 2021 through last year, when we started to see a significant increase in acceleration and interest,” he said.

Pajarito’s customers started asking for much larger quantities of materials, Stephenson said.

“Those conversations have turned to our customers saying, ‘Okay, here’s how much we’re going to want next year. Show us that you can make it,’” he said.

Ostraat said she thinks customers have moved from a theoretical standpoint of experimenting with hydrogen to actually making commitments to produce and use it, now that technologies are more real on the commercial side.

Stephenson said the number of hydrogen companies in New Mexico is starting to grow.

“Which we’re thrilled about,” he said.

Still, hydrogen energy is a relatively new concept for the U.S. Stephenson said there’s not a lot of green hydrogen production in New Mexico and nationwide.

He said Pajarito’s customer base is split nationally and internationally. He said about 1/3 is in North America, 1/3 in Europe and 1/3 in Asia.

The company’s sales in North America have increased in recent years, he said, because of legislative changes and general energy expectations. The Biden administration has been ramping up efforts to incentivize renewable energy initiatives, including clean hydrogen.

The Inflation Reduction Act created clean hydrogen production and storage tax credits, and the Bipartisan Infrastructure Law set aside $7 billion for the creation of seven hydrogen hubs, networks of hydrogen producers — something New Mexico applied for but didn’t get.

Stephenson said legislation in Europe also pushed a move toward hydrogen energy. While Europe already had plans in place in 2020 to increase hydrogen energy production and imports, the European Commission amplified the effort when Russia invaded Ukraine. The commission launched REpowerEU in May 2022 to help end its dependence on Russian oil and gas.

Europe aims to produce 10 million tonnes of hydrogen energy and import 10 million tonnes by 2030 through RePowerEU.

“They basically, in a matter of a few weeks, voted to more than double their targets for hydrogen production, both domestically and what they plan to import from places like North Africa,” Stephenson said.

It’s a matter of having energy independence amid global politics.

“It ought to be enough just to want to be able to prevent the increases in warming and a lot of the catastrophic events that we’re seeing associated with global warming,” he said. “But you throw on top of that … this has come up to be a huge element of our national security.”

The U.S. was slower to announce federal efforts pushing for hydrogen energy.

Stephenson said that’s because the nation didn’t have incentives like Europe did to get away from oil and gas or a lack of natural resources like Japan or Korea. Along with high domestic sources and low energy costs, he said, the U.S. has a substantial role in international affairs that ensures access to needed sources of energy.

“As a result, it presents us with a different circumstance than you see from a lot of the other countries in the world,” he said.

But the recent federal laws and grants could be changing that. Stephenson said he expects hydrogen production to continue growing.

“They’re just getting started,” he said.

He pointed to clean energy mandates in California that will ramp up the market even more. With the start of 2024, new large, heavy duty class trucks, known as drayage trucks, in California have to be zero-emission to register through the state’s Air Resources Board, which allows trucks to move cargo to and from ports and rail yards. All drayage trucks have to be zero-emission by 2035.

So the trucks will have to use either a fuel cell or a battery, Stephenson said, instead of the commonly used diesel.

He said for drayage trucks’ heavier loads and long distances, a fuel cell is more efficient.

California has the largest ports in the U.S., bringing in about 40% of all containerized imports, according to the California Legislative Analyst’s Office.

“So that’s kind of a big deal,” he said.

Transportation generates about a quarter of all global carbon dioxide emissions, which are a result of petroleum-based products, like gas and diesel. In the U.S., transportation is the largest national contributor of greenhouse gas emissions, responsible for 28% total of the nation’s C02 emissions, according to the Environmental Protection Agency.

“If you’re going to have a goal to reach carbon neutrality, you have to address transportation,” Stephenson said.

Hydrogen concerns

Green hydrogen is produced by splitting water through electrolysis, powered by renewable energy like wind or solar. It’s the most carbon neutral method to generate hydrogen.

Most hydrogen in the U.S. is gray hydrogen, produced using natural gas. Its dependence on fossil fuels often sparks controversy. The same is true of green hydrogen and its reliance on water amid a megadrought in the Southwest.

“There’s a lot of debate here in New Mexico in particular about how hydrogen should be created,” Stephenson said.

Stephenson said the water usage is actually much less compared to other industries like agriculture, the largest water user worldwide.

Some people also have safety concerns with hydrogen.

Stephenson said a lot of people are afraid because of the Hindenburg disaster, a 1937 airship that was venting hydrogen and caught on fire. He said elements of popular culture create a sense that hydrogen is extremely dangerous.

“It’s no more or less dangerous than the batteries are. It’s no more or less dangerous than gasoline is,” he said.

He said there’s also been a tremendous amount of work done to improve safety standards for hydrogen.

New Mexico’s roleOstraat and Stephenson said New Mexico has an opportune landscape for hydrogen energy.

For one, Ostraat said, New Mexico has a richness of renewable energy sources like solar, which green hydrogen uses.

Stephenson said hydrogen is also useful in a place like New Mexico where energy needs to be transported. The state’s population is spread out over vast distances, so energy has to be moved from where it’s generated — often in less densely populated areas — to where more people are living.

Transmitting energy as electricity results in a loss of some of the energy. Stephenson said transporting the energy as hydrogen instead would result in significantly less loss.

A boost in hydrogen energy in New Mexico could offer a more diverse energy market than the state currently has. New Mexico heavily depends on oil and gas revenue.

Stephenson said the government has to manage the fossil fuel economic driver carefully while also realizing the movement toward clean energy.

He said New Mexico has an opportunity as well as a need to be in a leadership position on this.

“We want to be careful that we’re not ultimately left behind,” he said.