Contrarian Ventures has the backing of Ignitis Group and seeks to invest across various categories in the energy space. You are also particularly interested in hydrogen technology and have created that map. How does hydrogen tech fit in your investment remit?
Hydrogen is indeed a great fit for our strategy and for the strategy of our LP.
A great increase in renewable generation will require more balancing and storage services. Moreover, the gas distribution grid has also the potential to play a
key role in infusing and blending hydrogen with natural gas. So, understanding the nature of the hydrogen technology and market is very important for us and we see a lot of potential in this space near term.
You have already invested in a company from the wider hydrogen tech space, H2PRO. Please tell me a bit more about the company and why you chose to invest in that one in particular?
Today, conventional hydrogen production from fossil fuels, such as extraction from natural gas, results in around 2% of annual CO2 emissions, and with over 99% of the hydrogen produced today derived from fossil fuels. Electrolysis – splitting water into hydrogen and oxygen using renewable electricity – is a clean alternative for producing hydrogen. However, it is not very efficient, requiring large amounts of electricity, and is costly. The world requires an efficient and green way of producing hydrogen at scale. That is exactly what the founders at H2Pro are working on. By developing E-TAC – an innovative, clean, inexpensive, and safe hydrogen production technology – the process produces 30% more hydrogen than traditional electrolysis per kWh and reaches 95% efficiency. What currently interests us most in the space is applications in the energy storage and mobility sectors – think distributed energy resource balancing and fuel cells.
What is the strategic value in hydrogen tech for Ignitis Group? Do you consider other sub-areas of hydrogen tech in the deal pipeline?
Currently, Ignitis Group is mostly interested in hydrogen production and its transportation via the gas grid, with the first step in the application to be blending of hydrogen to natural gas and utilising the existing infrastructure. As part of the innovation strategy, they are currently also exploring ways to produce hydrogen at more than pilot scale.
What are the risks you see in the hydrogen tech space as a whole?
Developing a business case for hydrogen use at the moment seems still unlikely, as most of the projects are currently (often heavily) subsidised and especially given the natural gas price is at such lows. Major technological improvements are needed as well as a regulatory push in promoting the production and use of green hydrogen, and we share the emerging technologies they could utilise.
What do you think would help make hydrogen (and green hydrogen in particular) a viable part of the energy mix of the future in terms of policies and regulations?
For the sizeable adoption of the technology, we have to look at unit economics. Sadly, as long as the alternatives are more cost-effective, we should not expect hydrogen to scale. At the moment it looks like the main drivers of development are various R&D and governmental support schemes for hydrogen production and usage, and of course early-stage venture investment. As can be seen from the previous technological waves of hydrogen, the support schemes will not be enough, so we should put an emphasis on reducing the use of fossil fuels [that] will have to take place as well.