European Hydrogen On The Right Track – OpEd

Hydrogen has become the go-to target for clean energy investment in both the public and private sectors. The European Commission recently approved €5.2bn in public funding for hydrogen projects, with significant private sector investment set to follow. With such widespread enthusiasm for hydrogen infrastructure projects, it would seem European hydrogen has a bright future as a sustainable green energy source.

Hydrogen has long played a pivotal role in numerous industrial processes, both when it comes to power generation and for storing renewable energy. Its versatility means it can be adapted and deployed to help confront many of the world’s critical energy challenges today. This potential has meant that it has not passed under the radar with regards to infrastructure investments. Private equity in particular has show real interest, and, couple with increased public funding, has meant that the hydrogen sector is on the brink of exploding onto the global energy scene. 

Hy24

It’s been a year since the French investment firm Ardian and the Swiss firm FiveT Hydrogen teamed up to launch their Hy24 initiative, the world’s largest and most ambitious clean hydrogen infrastructure investment platform. Now, things are speeding up. The fund has raised €2bn which will be funneled into clean energy projects, way above its €1.5bn target. This latest wave of investment should go some way to kickstarting hydrogen as a clean fuel solution in Europe and further afield.

The fund is supported by a number of global conglomerates keen to tapping into the potential of hydrogen as a clean fuel source, these include TotalEnergies, Baker Hughes and Axa. It has recently drawn investment from a wide variety of investors including Airbus, Snam, Air Liquide, Japanese trading house Itochu and South Korean group Lotte Chemical, as well as financial institutions such as Société Générale, BBVA and the Japan Bank for International Cooperation. “We know that hydrogen will play a key role in our future, but many people need to come together to make it happen. The hydrogen value chain is firmly a part of sustainable finance. [Now] everyone recognizes that hydrogen will play a key role in our future.”said Dominique Senequier, CEO of Ardian.

This acceleration in the move towards hydrogen is in no small part due to the war in Ukraine and the EU’s determination to end Europe’s dependence on Russian gas, transforming the European energy sector. The REPowerEU plan outlines how the EU plans to use 20 million tons of hydrogen by 2030, half of which would be produced within the EU itself. 

Indeed, Hy24 has set itself some far-reaching targets to be met within a decade, both within the EU and further afield. The investment will target the entire value chain, meaning areas of the globe that lack critical infrastructure will nonetheless be able to benefit from the scheme. “The only way to import massive, gigawatt scale of renewable power is to transform it by electrolysis into energy in a storable form, which is hydrogen, and ship it or pipe it,” Pierre-Etienne France, Hy24 CEO, told the Financial Times.

Hydrogen development on the rise

With such a substantial potential for value creation, growth and clean energy rollout, hydrogen investment has really picked up in 2022. Another private equity house that has shown real enthusiasm in the sector through its infrastructure firm is Andera Partners, whose recent investment in the French green hydrogen producer, Lhyfe, aims to kickstart and expand the firm, accelerating the deployment of green hydrogen across Europe. “This new financing comes at a time of strong market acceleration throughout Europe. We are delighted to be supported by a growing number of major players committed to the energy transition such as Andera Partners. Their valuable support allows us to continue to seize the opportunities that arise to help achieve the most virtuous and rapid transition possible on a European scale,” said Matthieu Guesné, President and founder of Lhyfe.

Indeed, such decarbonated energy projects are providing a glimmer hope in what has been an increasingly unstable fossil fuel energy market. Venture capital is quickly getting on board. The commercialization of solar and wind energy in the 2010s took many by surprise and many firms are betting on the same result with H2. Data published in Deloitte shows substantial investments in 2021, with the trend continuing well into 2022. This can also be explained by the plethora of different actors involved in a technology whose versatility means it can be expanded into many different sectors, driving value and job creation.

In the United Kingdom, for example, the Hydrogen Innovation – Future Infrastructure & Vessel Evaluation and Demonstration (HI-FIVED) consortium led by vessel provider ACUA Ocean in partnership with infrastructure provider Unitrove recently won a £3.8 million UK government grant for the development of its innovative autonomous vessel and bunkering infrastructure technologies for liquid hydrogen.

Japan is another country leading the way in the development of robust hydrogen infrastructure and supply chains. The Japanese Ministry of Economy, Trade and Industry (METI), for example, proposed the allocation of 300 billion JPY for the development of the hydrogen import and supply chain – including the development of transport and liquefaction technologies – of which 26 billion JPY to subsidies the demonstration of hydrogen co-fired gas turbine technology. 

These developments have confirmed certain players in the PE sector that hydrogen is a critical component of the energy transition. We are at a critical moment for the rollout of hydrogen infrastructure, which means the ecosystem is ripe for both private and public investment. “I am certain that hydrogen will be critical to humanity‘s success in this unprecedented challenge. Clean hydrogen has long been considered the energy of the future, but it must quickly become the energy of today. Ardian intends to pave the way,” saidDominique Senequier.