The global energy demand is expected to increase between 25 % and 30 % by 2040. This will undoubtedly raise the CO2 levels of our planet and its temperature which will have an extraordinary impact on the global environment and the economy.
Decarbonization has become a must for Europe as the EU aims to achieve climate neutrality by 2050. The objective is to achieve an economy with net-zero greenhouse gas emissions, in accordance with the European Green Deal. Today, hydrogen accounts for more than 2% of the global CO2 emissions, and its decarbonization into green hydrogen is crucial.
What is green hydrogen?
When hydrogen is obtained through a chemical process known as electrolysis (an electrical current that separates the hydrogen from the oxygen in water), it is regarded as green hydrogen. If electricity is retrieved from renewable sources, the resulting energy can be obtained without emitting carbon dioxide, which is more beneficial for the atmosphere and for the planet.
According to the International Energy Agency (IEA), green hydrogen can save up to 830 million tonnes of CO2 emitted annually. Nonetheless, replacing all gray hydrogen would require 3,000 TWh/year from new renewables.
EU’s commitment to decarbonization
Until today, Hydrogen has been mainly used in Europe to produce common chemical products (such as plastics). But 96% of the hydrogen production is made through natural gas, which implies significant amounts of CO2 emissions.
As an answer to this issue, Europe launched the EU strategy on hydrogen in 2020. The strategy aims to create a European hydrogen ecosystem based on research and innovation to boost production and infrastructure at an international level. Hydrogen is also an important part of the EU strategy for energy system integration which also intends to move away from fossil fuels imported from Russia.
The production and use of renewable hydrogen can contribute to the cost-effectively decarbonization of the EU economy in line with the European Green Deal, while boosting the post-pandemic economic recovery. In the first quarter of 2022, 20 action points listed in the strategy were implemented.
The REPowerEU plan implemented by the European Commission outlines the measures to create a hydrogen accelerator that intends to promote the use of renewable hydrogen to accelerate the EU’s energy transition and decarbonization.
The Hydrogen accelerator will facilitate the production and import of 10M tonnes of green hydrogen across the EU by 2030, which means an increase by almost 50% the quantities foreseen within the revised Renewable Energy Directive, published in July 2021 (that is, moving from 5.6M tonnes to 10M). Through this action, sectors difficult to decarbonize such as transport will be the target. In addition, the development of hydrogen infrastructures and investments in this area will be boosted.
Clean Hydrogen Joint Undertaking
The EIC, together with EISMEA (SMEs Executive Agency) and the Clean Hydrogen Partnership (or Clean Hydrogen Joint Undertaking) intend to collaborate on clean hydrogen so as to facilitate the knowledge exchange on grants, projects and companies that work on green hydrogen.
The Clean Hydrogen Joint Undertaking is the main instrument of the European Commission to perform research and innovation activities in areas related to the production of clean hydrogen. EISMEA and the EIC identify, develop and promote disruptive projects in the deep tech sector.
The EU Innovation fund has increased its budget by €3 billion to promote solutions aiming at decarbonizing Europe. It focuses primarily on the priorities of the REPowerEU Plan to decrease the EU’s dependence on Russian fossil fuels. This fund covers the following topics:
- General decarbonization (€1 billion): funding for innovative projects focused on renewable energy,
- Innovative electrification in industry and hydrogen (€1 billion): funding for electrification methods replacing fossil fuel use in industry as well as renewable hydrogen production or hydrogen uptake in industry;
- Clean tech manufacturing (€0.7 billion) funding for projects in manufacturing of components and final equipment for electrolysers and fuel cells, renewable energy, energy storage and heat pumps;
- Mid-sized pilots (€0.3 billion): funding for very innovative projects in breakthrough technologies in deep decarbonisation in all eligible sectors of the Fund.
European Innovation Council (EIC)
The European Innovation Council (EIC) has also invested more than 52M€ in hydrogen-related projects in over 34 projects across 18 countries. Within the green hydrogen projects funded by the EIC we find Sakowin (FR) in 2022. Its project, South Beach, produces a carbon-free H2 on demand at a cost that is competitive with gray H2. Also Hysilabs (FR) and Nanosun (UK) have received funds from the EIC.
European Investment Bank
In 2022, the European Investment Bank (EIB) launched the Green Hydrogen Fund to provide strategic advice and capacity so that more and more countries can share goals towards decarbonization, for example, through green hydrogen. However, as of March 2023, only a total of €25M donor funds are committed to achieve decarbonization.
In addition, on March 1st 2023 the EIB announced that it will support green hydrogen investment in Kenya as part of the Kenya Energy Roadmap 2040. To do that, it will provide €1.8M of grants from the EU and will appraise possible loan financing for larger green hydrogen related investment.
Private investments in green hydrogen
In 2022, Private Equity firms signed 37 deals where they spent $3.1 billion on hydrogen-related companies, and venture firms invested $2.6 billion in 192 startups globally. In a matter of nine years, VC hydrogen deals have tripled, and PE deals have quadrupled.
Hydrogreen is another project launched by T’air energies group, which intends to bring to the market a new energetic model to distribute green hydrogen for mobility, energy and industrial applications.
The firm Intersect Power has raised $750 million in growth equity from TPG, Trilantic North America, Climate Adaptive Infrastructure and others, making it the largest hydrogen PE deal of 2022.
The Australian electrolyser company Hysata is producing the world’s lowest cost green hydrogen thanks to the funding provided by Virescent Ventures, which launched a $40 million fund for Series A. This fund is led by Virescent Ventures on behalf of the Clean Energy Finance Corporation (CEFC), with a vertical on Clean tech.
Similarly, UK-based Kiko Ventures aims to be the world’s first evergreen cleantech venture investor. The investor launched a £375M platform in June 2022, and it also contributed to the round of of £23M in Hysata. Other investors included IP Group Australia, Vestas Ventures (Denmark), Hostplus (Australia), and BlueScope (via its ventures arm BlueScopeX TM) (Australia) participated in the round.
Finally, Cepsa will invest €5 billion to build two green hydrogen production plants in Spain. This project is the largest one in Europe focused on green hydrogen that has been announced. These plants are expected to produce up to 300,000 tonnes of green hydrogen per year.
Cover Image by Albrecht Fietz in Pixabay