Europe has redefined its strategy on renewables by placing hydrogen at the forefront with an eye to overtaking the current leader, China. The EU’s main financier, the European Investment Bank, openly defined itself at the GCV Digital Forum in June as the world’s largest green bank, operating within the EU’s next 2021-27 budgetary cycle.
The European Commission has formed a hydrogen alliance featuring industrial leaders, such as oil and gas major Shell, energy network operator Gasunie and energy infrastructure company SNAM, tyre manufacturer Michelin, carmaker Daimler, utility companies Vattenfall and EDF. The alliance aims to help decarbonise just about anything from steel and chemicals producers that cannot easily be electrified, through energy storage to trucks, trains and ships.
This environmental-oriented goal is likely to need a lot of financing and institutional support. Much of the hydrogen produced today is what some call “grey hydrogen”, produced mainly by reforming natural gas in industrial operating like the production of ammonia and fertilisers or oil refining and heavily emits CO2.
In contrast, there is “green hydrogen” from renewable energy sources like solar and wind, though the main way of producing is it by splitting water molecules into oxygen and hydrogen atoms via electrolysis (and that process has been subject to criticism as it is often powered by electricity produced by fossil fuels). The intermediate step between “green” and “grey” has been defined as “blue hydrogen”, where much of the CO2 emissions in the hydrogen production are captured.
Corporate investors are alive to the potential of the budding innovation space around hydrogen tech. There are examples of corporations, governments and state-backed enterprises engaging in hydrogen-related R&D projects across Europe and the globe – from heavy industry decarbonisation applications through energy storage to transport and mobility. The same holds true for corporations taking minority stakes in emerging businesses.
Hydrogen technology is still in its infancy as far as the wider investor community is concerned but could make up 24% of global final energy demand and 5.4 million jobs by 2050, according to the European Commission’s summer report, which planned a six-fold increase in production capacity over the next four years.
Getting there, however, will require significant investment and overcoming some scepticism after three false starts for the technology over the past 50 years. Data provider PitchBook found there had been some nascent interest among venture capital investors but private equity deals have been few and far between.
Developing the innovation and scaling a hydrogen ecosystem will require deeper pockets and the creation of an integrated market helped by large corporations and governments.
On supply, oil and gas companies view hydrogen as part of a mix of assets in their future as it can use otherwise stranded fossil fuel assets with carbon capture to reduce emissions and leveraging existing fuel infrastructure.
For demand, industrial companies see hydrogen in their long term-decarbonisation strategies as it can provide power or elements to fire steel mills or cement factories, similar to the use of hydrogen in large transporters, such as ships and trucks with the capacity to store hydrogen. Hydrogen is often an integral input into these industrial processes, for example in the formation of synthetic fuel, green ammonia or synthesis gas (syngas).
The use of hydrogen for propulsion of ships, planes, trains or vehicles relies on the use of fuel cells, such as proton exchange membrane fuel cells or solid oxide fuel cells, which convert hydrogen fuel into electricity and emit only water. They often have hybrid versions with conventional fossil fuel-based propulsion technologies. While the fuel cells are considered inefficient compared with electric vehicles using battery power, for long-distance trucks with space to store the hydrogen cells there are potential merits, which is why Mercedes-Benz is stopping production of its only hydrogen fuel cell car, the GLC F-Cell, and will roll its technology into a Daimler Truck-Volvo joint venture.
Alstom’s Coradia iLint trains are already in use in Germany and are being piloted in the Netherlands, while Toyota is developing hydrogen trains with the East Japan Railway Company. The University of Birmingham is testing similar technology in the UK. The UK has also provided grant funding to ZeroAvia to fly a small aircraft using hydrogen power while US-based peer HyPoint has partnered with Israel-based Urban Aeronautics to use hydrogen fuel cells in the latter’s CityHawk vertical takeoff and landing taxi.
Hydrogen can also be used to make food. Finland-based Solar Foods uses electricity to split water cells to produce hydrogen before adding carbon dioxide and nutrients, such as potassium, sodium, and phosphorus, to feed soil microbes and so produce food cells containing 50% protein. The company has partnered with the European Space Agency to develop a system for producing proteins for space flights to Mars.
And this is encouraging collaboration between corporates and with technology startups. AP Moller–Maersk, Ørsted and SAS are among seven groups developing an industrial-scale hydrogen fuel production plant in Copenhagen while a Shell-led consortium is building the world’s largest hydrogen electrolysis plant at Germany’s Rhineland refinery.
Funds
These supply and demand needs are encouraging the raising of corporate-backed venture funds, such as the UK-based HydrogenOne Capital, which is due to be launched with $315m by the end of the year.
Mirai Creation Fund II, a venture capital fund backed by carmaker Toyota and financial services firm Sumitomo Mitsui Banking Corporation (SMBC), contributed an undisclosed sum to the second fund of UK-based VC firm AP Ventures.
AP Ventures II reached its $90m initial close in 2018 with contributions from mining firm Anglo American Platinum and South African government-owned Public Investment Corporation, before adding manufacturing conglomerate Mitsubishi as an investor in December 2018.
The fund targets applications that exploit platinum group metals of the kind Anglo American produces, including hydrogen-based technologies such as hydrogen storage systems and fuel cell vehicles.
AP Ventures II had added several hydrogen-related startups to its portfolio and Mirai expects to benefit from increased exposure to hydrogen-related technologies, while also earning investment returns.
Spain-based natural gas supplier Enagás and investment banking firm Alantra launched a €150m ($170m) vehicle called Clima Energy Transition Fund to back renewable energy companies in Europe.
The fund will acquire minority stakes in late and growth-stage developers of products and technologies in the biogas, decarbonisation, energy digitisation and efficiency, green hydrogen and sustainable mobility sectors. A management company will be created to oversee the fund’s activities, with 30% of its shares being owned by Enagás and the remainder by Alantra.
The new entity falls under Alantra’s alternative asset management group and the firm will provide investment know-how in areas including venture capital and private equity. Enagás reportedly provided at least $22.7m for the fund and will offer insights from its experience in the gas industry.
Enagás already runs a corporate venturing unit called Enagás Emprende, led by Emilio Martínez Gavira, which has invested roughly $17m across a dozen startups in the innovative energy space.
Automotive manufacturer Hyundai Motor and Yield Capital, the investment firm set up by Beijing-Tsinghua Industrial R&D Institute (BTIRDI), launched investment vehicle Hydrogen Energy Fund with a target size of $100m.
Hydrogen Energy Industry Fund will make investments in hydrogen technology and infrastructure developers, combining the expertise of Hyundai and BTIRDI to assess deals. The vehicle sought to raise money from venture capital firms in China, Europe and the US when it was first reported in 2018.
BTIRDI was established by Tsinghua University and the municipal government of Beijing in 1998 to help the university in incubating scientific and technological breakthroughs and to serve as a consultant to the government. Yield Capital was formed by the institute in 2014 and has made a series of investments in the hydrogen energy ecosystem, with its portfolio including fuel cell technology developer Beijing SinoHytec.
A “carrot-and-stick” approach to solving “chicken-and-egg” issues
Many energy companies have set up venturing units that seek to help the transition to low carbon or no-carbon future.
This is the case for France-based Total and its Total Carbon Neutrality Ventures (TCNV), which in October invested in US-based Hyzon Motors, a supplier of zero-emissions hydrogen fuel cell powered commercial vehicles, including heavy-duty trucks, buses and coaches, spun-off from Singapore-headquartered Horizon Fuel Cell Technologies and with a European operation in partnership with Netherlands-based Holthausen Clean Technology.
Girish Nadkarni, president at TCNV, said hydrogen would play a key role in energy transition. “At the end of the day, Total considers itself an energy company not [just] an oil and gas company, as we are offering other forms of energy, including solar and wind and moving into other areas like carbon capture. Hydrogen is a natural extension and part of our strategy to be a broad and responsible energy company. We want to help create an ecosystem in the hydrogen space.”
Last year, Total signed a co-operation agreement with Germany-based electrolyser specialist Sunfire to develop technology for industrial-scale production of synthetic methanol from green hydrogen and concentrated CO2.
Through the deal, Sunfire will provide a megawatt-scale high-temperature HyLink 200 solid-oxide electrolyser system, which will split water molecules into hydrogen and oxygen, at the Total Raffinerie Mitteldeutschland.
According to Nadkarni, hydrogen tech is experiencing “the same growth pains you see in any emerging technology market” but he is optimistic about the overall prospects of the such technologies given institutional interest and support.
“The good news is there is a lot of interest and a sense of urgency in terms of climate issues and strong government involvement. It is a perfect environment for a coopetition – a term you here often these days, where the same players in a given space are both cooperating and competing.”
For Nadkarni, there are a lot of technical challenges that need to be solved before hydrogen tech mature sufficiently to become commercially viable.
“We have to address the chicken-and-egg issues, particularly in transportation – something that EVs have faced – no one buys enough electric cars until there are enough chargers but no one puts up enough chargers until there are enough electric cars. Somehow you have to break that.”
The solution to such issues? According to Nadkarni, it is a carrot-and-stick approach involving rewarding business endeavours in the space through funding for projects, subsidies, public-private partnerships and other means. He does not discard the use of some policies to disincentivise behaviour either. “And it is not just carrots. There are some sticks you may want to use to put more pressure to reduce diesel and other petroleum-based products.”
Nadkarni also revealed that TCNV is “working closely” with industrial gases producer Air Liquide to anchor and raise a $2bn Clean Hydrogen Fund which would invest in hydrogen-related projects across Europe, the US and Asia. “The initial focus will be on building the hydrogen transportation eco-system and addressing the chicken and egg problem,” clarified Nadkarni.
TCNV is in “serious conversations” to commit capital as an limited partner to Hydrogen Technology Ventures, a New York-based venture fund that seeks to invest in startups and hydrogen projects across various sectors and applications.
Vishal Shah, head and founder of Hydrogen Technology Ventures, sees hydrogen as the missing link to low carbon energy transition in the next decade.
According to Shah, we have already seen two phases of the evolution of cleantech: the first phase took place during the first decade of the century with the decreasing costs of solar and wind technologies and the second one with the decline of lithium-ion energy storage cost in the last decade.
“The third required phase of the transition is clean hydrogen. It would not have been possible 10 years ago because the cost of solar and wind was still very high but now we are at an inflection point in a lot of ways,” Shah said.
Shah expects a lot of countries to follow Europe’s example, as with solar and wind. “You had Germany, Spain and France take the leadership and the rest of the world followed them in promoting policies. For corporations it is not only a way to reduce carbon footprint but also an opportunity to participate in a fast-growing market.”
Shah added the existing cleantech sector would foster demand for hydrogen technologies. “There is a natural market for green hydrogen because there is so much renewable energy capacity that has been added. Returns in solar and wind projects have come down a lot. It would be easy to add an electrolysing unit and upsell your renewable energy asset.
“I think there is going to be a big push, which is required, from existing operators of solar assets to move into green hydrogen and there is going to be a natural demand from corporate buyers. We are already beginning to see some of this. Many big projects are being announced particularly in Europe as well as in Australia and the US. I think you will also see smaller projects that will act even faster.”
He is also a firm believer in the importance of having more smaller firms participating in this market.
“You do need a lot of private players in the sector and I think that is where the carrot comes in. Not necessarily replicating everything that happened to the solar space but a lot of incentives drove smaller businesses to come in and that just took the industry to a different level. If you look at some of the funding awarded by, say, the Department of Energy in the US, more than 60% of it goes to large corporations. So a large part of the innovation is still happening within larger companies and you need more [smaller] private players to come in and they will, when they see the market is at a point where there is real demand.”
While there is interest among investors, Shah does concede hydrogen is a technology that is yet to gain more momentum and attracting large institutional investors. “One of the challenges we have is getting investors that are used to [investing in] solar and wind to feel more comfortable with hydrogen. Ten years ago, there were not a lot of endowments or pension funds investing in infrastructure for clean energy but that has changed since.
“I think hydrogen is going to get there, it is just that many of these [large institutional] investors are not familiar with the technology. This is where we would come in. Having closely watched the technology, we can certainly derisk the investments in a lot of different ways.”
In this context, it is no surprise that, in addition to startups, Hydrogen Technology Ventures also seeks to deploy capital in promising greenfield projects.
A startup for startups
There is excitement about hydrogen tech even among corporate-backed funding initiatives that are just about to start.
One initiative of US-based energy services company Halliburton is Halliburton Labs, which defines its current phase as a “startup for startups”. It is still operating in pilot mode and selecting its first cohort of participants. The initiative aims to back early-stage companies that help provide clean and affordable energy.
Hydrogen is naturally one of the target areas. Scott Gale, executive director at Halliburton Labs, said: “Hydrogen is directly related to the idea of advancing affordable clean energy. If it plays a role, it is likely going to be an important role as a fuel in transportation.” Greg Powers, innovations mentor at Halliburton Labs, added: “We are agnostic about which technologies will win the alternative energy race. Our mission is not to pick winners and losers. Markets will determine who wins. It is a relatively limited playing field. Hydrogen maybe has a chance to win.”
Both Gale and Powers acknowledged the strategic fit of hydrogen tech in the wider Halliburton organisation at present appeared limited but there remained a chance for potential use cases once it had reached sufficient maturity and scale. Fuel cells may be used to replace hydrocarbon-consuming applications. Powers said: “Hydrogen will have to become inexpensive enough in order to be cost-efficient for Halliburton to adopt more widely.”
However, he recognised the longer-term opportunity it might present. “There are a lot of companies that are working on ideas about how to transport hydrogen but not, say, in pipelines. There is a services opportunity. There may be new industries that could pop up. We are an energy services company so if there is a big opportunity in the future, we will likely look into it, but I think it is still a long way away.”
Gale and Powers saw many technical challenges ahead for the mass adoption of hydrogen technology as a significant part of the energy mix. According to Gale, the technical hurdles in physics and thermodynamics are significant. “Transporting hydrogen is a big safety challenge and you also have to do it in a cost-effective way. It is not enough to just solve for a lower carbon footprint.”
Powers also pointed out: “On a net-net basis, hydrogen is still more costly than other alternatives. A lot of the infrastructure and industry is still either missing or in its infancy. If every car tomorrow is going to be equipped with a fuel cell and run on hydrogen, those cells will have to be reliable and safe. As of today, there are no bulk manufacturers to produce enough fuel cells to equip the millions of cars that are built every year. The infrastructure is missing. California has only a few dozen hydrogen fuelling stations. Japan has an estimated couple thousand hydrogen-powered cars and around 100 stations. There is also the issue of consumer habits that will have to be dealt with.”
Gale said the primary role for governments and policymakers to play had to do with subsidies for new technologies like hydrogen. “Obviously, the government plays a role in subsidising to help markets achieve a critical mass. The challenge is the underlying math of what longer-term economics of hydrogen will look like.”
Powers added: “Subsidies distort markets in the short run. The industry has to get to scale but ultimately markets need to be dominated by people’s choices. That is why we are aiming to help companies that bring cleaner and more affordable energy at the same time. The latter is the harder part.
“A clean solution is of little use if it hurts people’s pocketbooks or they simply cannot afford it. There are nearly two billion people without access to electricity in the world. We can sure come up with different solutions to that issue but if they are way beyond their means, they are not useful. We would not be sustainably solving a problem
that way.”
Technology driving forward
While some early-stage corporate investors are still being set up, others have already started investing in hydrogen tech.
A case in point is TDK Ventures, the corporate venturing unit of Japan-based electronics and materials company TDK. It recently made its first investment in the renewable energy space by betting on Israel-based hydrogen and ammonia fuel cell developer GenCell.
Founded in 2011 with the mission to enable people to say “no” to diesel, GenCell has developed alkaline fuel cell technologies that target long-duration backup telecom base stations, data centres, medical facilities, utilities and totally off-grid power. The company’s fuel cells are operational at extreme environments of -25°C to 95% relative humidity at 2,250m altitude. According to the company, they have been tested and certified to operate during earthquakes.
One of the major areas of interest for TDK Ventures is energy transformation, given the parent company’s footprint in battery and power supply technologies.
Anil Achyuta, investment director at TDK Ventures, explained that hydrogen is a particularly attractive alternative energy because its characteristics make it a very likely disruptor: “Hydrogen is going to take over because it follows the traditional model of distribution of fuel. It is a fluid and uses fuel stations. The oil companies that are looking for new energy sources are most likely to get into this space. We do not know that they will, but we feel they are likely. Hydrogen could be a real contender.”
Achyuta also said the TDK team has found the economic dimensions of GenCell’s solution attractive. “On the [capital expenditure] side, that almost any [fuel cell] device will have some expensive catalyst – platinum or something else really expensive. Any technology which reduces that is interesting.
“On the [operating expenditure] side, you do not want high temperature reactions because you have to keep replacing it and we have seen examples of startups that struggle with it. So, we gravitated towards low-temperature reactions.
“That brought us to what we call the catalysis companies and their interesting take on the market. We decided to start looking at companies that really excel at catalysts. It so happened that alkaline fuel cells are the fuel cells area where you can achieve those reactions at a much lower temperature. “We felt that the alkaline fuel space for stationary storage would have potential now without the chicken-and-egg issues on infrastructure development on the mobility side and that is where we can play as venture investors. It is a technology that can deliver in today’s markets at high-growth with a dotted line towards future applications in mobility.”
Achyuta also pointed out the potential social impact was alluring. “It was very apparent not just on the business side but also on the impact side because of the number of people without any primary power in the world. That has some goodwill to it and is a major component of TDK Ventures’ investing principles – to contribute to a meaningful and a sustainable future.”
VC is arguably the riskiest asset class of all, so it is important for every venture investor to keep risks in perspective. Achyuta noted the impact of the pandemic on supply chains and how that had made certain risks surge.
“These [fuel cells] are as deep tech as you get. Whenever you think about a deep tech product, every single component comes from a different country – the electrode, the coating, the membrane and so on. The covid-19 situation has made it horrible for the hardware companies where supply chains can get completely disrupted. If you are dependent on a few suppliers, you do not know how it is going to go.”
Another big risk that Achyuta sees is the lack of a strong consumer element and experience to hydrogen technology at present. “There needs to be a full-stack solution that comes with it. There is no consumer element or flashy appeal to it in the fuel cells space.”
When asked about potential catalysts, Achyuta acknowledged the role of public backing. “Government support is instrumental. If they gave credits like they do to EVs in the case of Tesla, then hydrogen might really take off in the future.”
However, he firmly believes it is technology that will ultimately push hydrogen forward. “I would like to think that technology will drive it. There are a lot of people out there obsessed with technology. If only could technologists see the value of really making green hydrogen and put their mind to it….” He also hoped emerging technologies that have been successfully employed in other fields would also be used in the materials space.
“We have seen an explosion in machine learning, artificial intelligence and even quantum computing, a lot of those have been applied in the pharmaceutical and drug discovery space, for instance. I wish that they would come to the materials and energy space and try to figure out ways to make green hydrogen with molecular simulations. I wish governments and other stakeholders could really bring together researchers and brain power from different areas. This is not an issue that just one professor can solve. Informatics, hardware and funding people just have to get together and create a coalition.”
Looking for constraints
One fund with significant corporate backing, AP Ventures, has a mandate centred specifically on hydrogen technology. Its founding managing partner, Andrew Hinkly, explained how the narrow specialisation of his firm came about with a simple realisation about the energy space. “It started with a recognition that the world was decarbonising and that would create both risks and opportunities.”
He stressed that the hydrogen investment theme of the vehicle revolves around the main question of: “how do we ensure the share of hydrogen in the future energy mix?”
Hinkly said opportunities were to be found where at the significant limitations of present-day technology. “The common theme of what we invest in is constraints. We try to identify where are the constraints along the value chain to growth in the hydrogen economy. And one area where we see constraints is in the transportation and storage of large volumes of hydrogen.”
He pointed to a Germany-based portfolio company of his, Hydrogenious LOHC Technologies, whose technology could enable the use of existing infrastructure for storage of oil to store hydrogen by modifying it slightly rather than building an entirely new one. He also added that in a world where the fossil fuels industry is largely liquid, “hydrogen in gaseous form is a major constraint to rapid and large scale adoption”.
Some technologies across the hydrogen value chain, however, are mature and have been around a long time. According to Hinkly, hurdles lie not necessarily in the maturity of hydrogen technology but in its use: “In many cases it is not about the maturity of the technology, it is about the use of the technology at scale and new applications which are not necessarily concentrated in an industrial setting, such as distributed mobility applications, for example.”
He also pointed out: “A large part of the technology that is used to produce and transport hydrogen has been around on industrial sites such as in the petrochemical industry, so rather than having it in a closed industrial environment, we are now distributing it out to the retail world. That has created some of these constraints.”
Tackling challenges sometimes brings unexpected opportunities. Greyrock Technologies, another AP Ventures portfolio company , which has developed a small-scale gas-to-liquid technology commercialised in the US, worked with Carbon Engineering, a CO2 capturing technology developer: “The idea is that you can combine the CO2 captured from the air with green hydrogen, produced from electrolysis, to create a syngas which is the precursor to developing e-fuels for key markets like aviation. You can have carbon neutral or carbon negative fuel that can be used in existing propulsion systems like aviation or other long-life capital-intensive systems which would be otherwise difficult and economically challenging to decarbonise.”
However, how does hydrogen benefit a mining corporation like Anglo American? The global mining company runs various assets that heavily consume fossil fuels, so the decarbonisation of some of the internal operations is an immediately obvious benefit for precious metal mining divisions. “The precious metals business could see an opportunity in a decarbonised future,” said Hinkly. But that is nowhere near the whole story.
The strategic benefits of hydrogen technology for a mining company have another dimension, involving decarbonisation-related solutions for the company’s customer base. “If your mining assets are in a renewable-rich environment – if you are doing iron ore mining in the desert which has a lot of solar radiation – and your customer is a steel company in, say, Japan that is thinking about how to decarbonise steel operations, you can start talking to them today about how you can help them decarbonise their operations thanks to your footprint in hydrogen. So, it is not only about your carbon footprint as a miner and consumer of diesel fuel or coal-fired electricity but also the opportunity to think about how to help your customers.”
“Anglo American is at the forefront of adopting fuel cells into their mining operations, specifically at their mine in Mogalakwena, South Africa. They are working with Ballard, another AP Ventures portfolio company, among others, to put in place hydrogen production from a solar farm that would power trucks to carry ore out of the mine. Those trucks presently are electric, but they have a diesel generator on board to produce the electricity.” Hinkly explained that the vision is to replace all trucks with hydrogen-powered fuel cell ones in such operations. “Renewables in mining is a well-trodden path already,” said Hinkly.
AP Ventures finds investment opportunities across the globe: “There are 120-150 hydrogen related opportunities we see each year, just over 40% come from the US, slightly more than that from Europe and the remainder from Asia, particularly China.” He also noted that “countries in Europe like Germany, France and the Netherlands have made great strides in the last 12-18 months in putting together thoughtful hydrogen strategies”.
At the edge of the world and innovation
While much hydrogen research and development takes place in the industrial core of continental Europe, impressive projects can be found even in remote areas of the continent. Such is the case of the European Marine Energy Centre (EMEC). Located in the Orkney Islands, an archipelago off the north of Scotland, the company operates the world’s only accredited open-sea testing facilities for marine energy convertors and an onshore green hydrogen production plant.
“Due to our remote location, we are seen by some as being at the edge of the world. However, we are also at the cutting-edge of innovation. Orkney is at the forefront of renewable energy and green hydrogen R&D hosting a number of pioneering demonstration projects. A lot of people see the work we are doing here which can hopefully help accelerate the scale up of these technologies and inspire” said Caron Oag, the EMEC’s hydrogen marketing officer.
Orkney is the northernmost part of the UK connected to the national electricity grid and, with its big waves and strong tides, is the perfect location to host EMEC’s grid-connected test facilities, putting wave and tidal energy convertors through their paces. EMEC has hosted 20 wave and tidal energy clients with 32 marine energy devices spanning 11 countries.
Clients EMEC has hosted include utility company Eon, power and automation group Alstom, Scotland-based tidal developer Orbital Marine Power and Spain-based peer Magallanes Renovables. In recent years, EMEC has diversified into other technology areas such as hydrogen, having set up an onshore production plant.
“The innovation around hydrogen in Orkney came as a response to the limitations of insufficient grid capacity,” said Oag. Since 2013, Orkney has met over 100% of its total electricity needs through renewables. “The idea of hydrogen was born of a local challenge which had to do with grid constraints and trying to store some of the renewable energy we were producing.”
The drive to decarbonise and achieve net zero targets has seen EMEC become involved in different hydrogen-related projects in marine and air transport. “We are now involved in a project related to demonstrating the potential of hydrogen technology in ferries. As a group of islands, ferries provide a lifeline service for Orkney residents but the current fleet are all powered on marine diesel which represents a significant portion of our overall energy consumption. Decarbonising marine transport is a huge challenge and opportunity and the HyDIME project should shed light on useful learning for the wider industry moving forward.” EMEC has teamed up for this project with shipbuilder Ferguson Marine and the local government.
“Another project we are involved in is in the aviation space, which aims to decarbonise small passenger aircraft by demonstrating hydrogen fuel cell powertrain technology. A small Piper M-class aircraft has been fitted with the hydrogen powertrain technology and is currently undergoing a test flight programme at Cranfield Airport in the south of England and by the end of the year, we expect to see a 250 mile demonstration flight out of an airfield in Orkney,” said Oag. The HyFlyer project is led by ZeroAvia, developers of hydrogen fuel cell powertrain solutions along with EMEC and Intelligent Energy.
The road ahead
Finally, there is something to be said about the road ahead for hydrogen tech and how regulations may need to catch up to the speed of innovation.
Remy Laurent, spokesperson of Fluxys, a Belgium-based operator high-pressure natural gas transmission network, said there was a need for proper policy framework locally. “In order to have a well-functioning hydrogen market in place, making it possible to move towards a carbon neutral economy in Belgium, there is a need for a framework allowing to organise it in a similar way as the natural gas and electricity markets.”
Hinkly of AP Ventures said that much progress has already been made: “There was a time when you could not take hydrogen through tunnels or under bridges in the United States. More broadly we see it in the EU strategy and the equivalent treatment of hydrogen as a decarbonised energy carrier the same way electricity in a battery form is treated. There is a very supportive environment for hydrogen in Europe and regulatory items at the microlevel are being addressed.”
What could pull it forward even more? Hinkly said: “I think stimulating the use of green hydrogen would be hugely beneficial, so providing some level of economic equivalency for the use of hydrogen in new applications would be very beneficial.
“I do not think, frankly, that large volume hydrogen into gas networks needs further stimulus but finding its way into maritime application, train networks, heavy-duty trucks and perhaps in some of the processing industries such as steel or cement does. Those applications need a stimulus to create an off-take and cause the technologies to move up the learning curve.”
Oag of EMEC explains how the new applications of hydrogen in marine transport are bound to require significant updates in regulation. “The marine hydrogen project we are working on takes innovative hydrogen technology into the marine space. This presents a challenge as regulators tend to be risk-averse despite having the technology and political will to safely deliver. Currently there are varying and sometimes contradictory regulations around hydrogen use in the maritime space, whether to transport as a cargo or for consumption as a fuel. More is needed to be done between regulators and government bodies to update the regulations and ensure future innovation is not stifled.”
Shah of Hydrogen Technology Ventures said some technologies in the space could see accelerated development even if green hydrogen was not widely available to work with. “There are so many applications that are going down the pilot path – such as in road or rail transportation – which will take time but in some cases, the uptake may be even sooner, where you do not even need to have green hydrogen to begin with, as in certain applications like data centres, it is better to have blue or grey hydrogen with a carbon-capture unit.”
Nadkarni of TCNV agreed with Shah’s stance. “You cannot wait for green hydrogen all the time. It is better to start with some hydrogen just to get proof-of-concept and make sure you can power a data centre with whatever hydrogen you can get, whether it is blue or grey. And then, once you know that it works, you can worry about what kind of hydrogen it is. I hope more people think that way rather than saying: ‘We are not going to do anything until we know it is green.’”
From green pilot to gold
A number of oil and gas groups are targeting net zero carbon emissions by 2050 or sooner. Spain-based refinery and energy producer Repsol is one of these and is building a pilot green hydrogen plant to make synthetic fuels.
Repsol’s pilot plant will use electrolysis to split water into hydrogen and oxygen using wind and solar energy. The hydrogen can then be combined with carbon monoxide (created from waste carbon dioxide out of its refinery) to make synthetic substitutes for vehicle, shipping and aircraft fuels.
Energy is about three-quarters of the cost of turning out the synthetic fuels, which is why the declining cost of renewable electricity is important. As AP Ventures said in its newsletter: “Regions of low-cost green hydrogen production (where renewables are cheap and abundant) are likely to become hydrogen production and storage hubs, servicing either domestic or international demand.”
“Using renewables in this project is critical,” Jaime Martín Juez, Repsol’s executive director of technology and corporate venturing, told Petroleum Economist. The value-add comes from turning the cheap electricity into a higher-margin product, such as jet fuel, that could still be cheaper than fossil-based fuels.
Martín added: “We would like to test the hydrogen for different purposes. It is wide open – there are very broad possibilities. We do not see hydrogen as only being used for a single process… This project could be a fundamental part of our route to net zero. If our synthetic fuels can be used for shipping and aviation, they will be very important to us becoming net zero. This hydrogen project is one of the wisest ways to use CO2 from carbon capture. We need to scale hydrogen.”
The pilot process will probably take around eight years. If successful, Repsol would expand the pilot into a commercial-scale enterprise producing 500,000 tonnes per year of fuels, saving two million tonnes of CO2.
Corporate-backed dealmaking
Agricultural and industrial equipment manufacturer CNH Industrial invested $250m in US-based hydrogen-fuelled truck developer Nikola Corporation, leading a series D round, while car maker General Motors took an 11% stake in Nikola in September.
Nikola will produce a range of electric and hydrogen fuel cell-powered heavy-duty trucks and powersports vehicles using GM’s batteries and technology but ran into controversy over the state of its development. Its founder and chief executive, Trevor Milton, resigned and was replaced by former GM vice-chairman Stephen Girsky.
Nikola had also received investments from hydrogen energy storage technology provider Nel Hydrogen in $210m series C round in 2018. Nel contributed $5m to that round.
Carmaker Hyundai Motor Company provided an undisclosed amount of funding for Germany-based hydrogen storage system developer Hydrogenious LOHC Technologies. Mining group Anglo American invested an undisclosed amount through AP Ventures in 2014, before the company added $18.9m from fuel tank maker Royal Vopak, conglomerate Mitsubishi, polymer and chemicals producer Covestro and another tranche from AP Ventures in 2019.
Hydrogenious’s liquid organic hydrogen carrier technology was also used by another AP Ventures portfolio company, United Hydrogen Group, which was acquired by Nasdaq-listed Plug Power in April 2020.
AAP, a subsidiary of mining business Anglo American, also joined Shell Technology Ventures, the strategic investment vehicle for oil and gas supplier Shell, to provide an undisclosed amount of funding for High-Yield Energy Technologies , a Netherlands-based solar module and hydrogen compression technology developer.
AP Ventures separately led an over-subscribed fundraising round in ZEG Power, co-investing alongside the Mirai Creation Fund and Nysnø Climate Invest in the Norway-based hydrogen production technology based on methane and featuring integrated carbon capture.
US-based sustainable chemicals and fuel producer LanzaTech received a $72m series E investment from pharmaceutical firm Novo Holdings in connection with a strategic partnership. Using special microbes, LanzaTech has developed a technology for gas fermentation that first enables ethanol to be produced from residual gases containing carbon monoxide and hydrogen. Earlier, LanzaTech had secured $60m in series D funding from sovereign wealth fund New Zealand Superannuation Fund.
LanzaTech also spun off the aviation-focused LanzaJet with $50m from investors including corporates Suncor Energy, Mitsui and All Nippon Airways (ANA). Oil and gas producer Suncor provided $15m, while conglomerate Mitsui injected $10m in addition to a $14m grant from the US Department of Energy, suggesting airline operator ANA supplied $11m. LanzaJet has developed a process that can turn any source of sustainable ethanol into airplane fuel, including ethanol generated from recycled pollution – the core application of LanzaTech’s carbon recycling technology.
Aliad, the corporate venturing arm of France-based industrial gases company Air Liquide, invested an undisclosed amount in France-based McPhy Energy. Air Liquide acquired stock issued by the hydrogen generation equipment producer in its IPO on the Euronext Paris stock exchange, which raised €32m ($40m). McPhy had raised €15.3m through 2010 from power producer Areva, Emertec, Gimv, Sofinnova Partners and Amundi Private Equity Funds.
Chemicals producer Evonik invested an undisclosed amount in HPNow, the Denmark-based developer of an automated hydrogen peroxide production system. The funding was part of a series A round. The company previously received approximately $430,000 in June 2016 from the Danish state-backed Innovation Fund Denmark’s Innobooster initiative.
Doosan Mecatec, the heat and pressure equipment subsidiary of industrial conglomerate Doosan, provided $7m of series B funding for ReCarbon, the US-based developer of a system that converts greenhouse gases into usable gases like hydrogen. It operates a commercial plant in the US and a pilot facility in Doosan’s home country, South Korea.
Energy utility Engie provided an undisclosed amount of funding for Spain-based hydrogen production system developer H2Site through its Engie New Ventures subsidiary. H2Site, spunout from Tecnalia and the Eindhoven University of Technology, has also entered into a research cooperation partnership with the corporate’s Engie Lab Crigen subsidiary.
Accor Group, Groupe Monnoyeur and Thélem Assurances have backed marine hydrogen generator and fuel business EODev, an offshoot of Energy Observer.
Europe’s opportunity
An updated version of the European Commission’s (EC) draft hydrogen strategy was issued in July and confirms the EU “priority focus” on clean hydrogen produced from renewable electricity longer-term.
“The choice for renewable hydrogen builds on Europe’s industrial strength in electrolyser production,” the EC argues in the document. At least 4GW of electrolysers would be deployed across the EU by 2024, with “at least 40 GW” installed by 2030 after €13bn to €15bn of investment.
In total, the EU executive projects that up to €180bn could be invested in clean hydrogen production by 2050. This is out of a €1.85 trillion EU budget, called the Multiannual Financial Framework (MFF), for the period 2021-27.
The EC, therefore, is working on funding startups to help complement the work being done at larger corporations.
Its European Innovation Council provided €114m for 35 projects in its latest funding round earlier this year, including CleanHME and Hermes, two projects to convert hydrogen into a metal by using pressure. Metallic hydrogen releases a huge amount of power when converted back to a gas and is predicted to be able to superconduct at room temperature, allowing electricity to flow without energy loss.
The CleanHME team, which includes 17 partners spread across Slovakia, Poland, France and the US was awarded €5.5m, the biggest grant in this funding round, while Hermes was awarded €4m.