Green hydrogen’s first unicorn won’t be the last as investment ramps up
Investors’ eyes are on clean hydrogen. This month, Electric Hydrogen (EH2), a Massachusetts-based electrolyser company, became the sector’s first unicorn following a funding round that took its valuation above $1 billion.
The $380 million Series C round brought its total funding to $600 million, according to data from Crunchbase. Investors in this round include Fortescue, Microsoft’s Climate Innovation Fund, BP and United Airlines.
Electrolysers are central to global ambitions to cut carbon emissions. Green hydrogen is created by passing water through electrolysers powered by renewable electricity and the cost and efficiency of the devices is central to the price of the resulting product.
One of the UK’s most successful hydrogen companies is ITM Power, which makes an advanced type of electrolyser based on proton exchange membrane (PEM) technology.
EH2 also uses PEM technology in its electrolysers and is seeking to benefit from generous subsidies offered by the Biden administration through the Inflation Reduction Act (IRA), which offers as much as $3 per kg for qualifying green hydrogen.
But while EH2 has been grabbing headlines with its raft of star investors and impressive valuation, it is far from alone in the clean hydrogen sector in attracting investment in recent years.
____________________
Related reading:
How clean hydrogen can make UK the ‘Saudi Arabia’ of wind
____________________
Private equity firms spent $3.1 billion on hydrogen-related companies across 37 deals in 2022 across the US, Europe and Asia, while venture capital invested $2.6 billion, in 192 start-ups, according to Pitchbook data. Since 2014, the number of annual VC hydrogen deals has more than tripled as PE deal count quadrupled.
The US is the world’s biggest economy, so it is probably not surprising that most of the biggest deals were over there. Oregon-based Intersect Power raised $750 million in growth equity last year from TPG, Trilantic North America, Climate Adaptive Infrastructure and others, making it the largest hydrogen PE deal of 2022, according to PitchBook data. Intersect is planning on diversifying from solar power generation and utility-scale battery storage assets into green hydrogen production.
VC-backed Monolith, which says it can split natural gas into pure streams of hydrogen and carbon in a cost-effective manner, raised a $300 million Series D in growth equity led by TPG and Decarbonization Partners.
Beneficiaries of UK hydrogen funding include Ballymena Hydrogen, the production facility being built by Hygen and Wrightbus in Northern Ireland, to support the rollout of zero-emission hydrogen buses.
However, a lot has been happening in Europe as well. In February this year, UK hydrogen power pioneer, GeoPura secured £36 million from VC funds led by GM Ventures the investment arm of General Motors. German electrolyser maker Sunfire raised €86 million in a Series D round last year.
The investment climate for hydrogen has been given a boost by the range of supportive policies being adopted by governments across the world. As well as the IRA, the US made $9.5 billion available for hydrogen, including $8 billion for hydrogen hubs, through the Infrastructure, Investment and Jobs Act (IIJA) in 2021.
The European Commission is creating a $850 million “hydrogen bank” to support investment in the sector, while the UK has created the Hydrogen Business Model, the world’s first hydrogen subsidy scheme, based on the contracts for difference (CfD) mechanism that has been so successful in making the nation a leader in offshore wind. Australia has pledged about A$1.6 billion ($1 billion) to accelerate its hydrogen industry development.
Along with £240 million Net Zero Hydrogen Fund, the UK has been funding promising early-stage hydrogen projects through the £26 million Industrial Hydrogen Accelerator Programme. Run by the Department for Business and Industrial Strategy, it has awarded millions of pounds already to projects aiming to decarbonise industries including asphalt, cement, steel and ceramics.
In December 2022, the government unveiled £25 million of funding for technologies for producing hydrogen from biomass and waste, while a £20 million competition in the Tees Valley to explore how hydrogen can be used to reduce emissions in the transport sector was launched in October 2022.
Beneficiaries of UK hydrogen funding include Ballymena Hydrogen, the production facility being built by Hygen and Wrightbus in Northern Ireland to support the rollout of zero-emission hydrogen buses. The hydrogen produced will be distributed in the area by Ryze Hydrogen.
A consortium led by Ryze has also won more than £3 million in government funding to develop mobile refuelling for construction sites. The project has been awarded £3,212,280.99 from the Department for Energy Security & Net Zero’s Red Diesel Replacement Programme.
Helped by support of the government, the UK has become a hub for hydrogen innovation in recent years and is well-placed to take advantage of the boom in interest in the hydrogen economy as the world scrambles to reach its net zero goals.
No wonder the UK hydrogen sector is attracting significant private investment as well.
To learn more about HYCAP, click here.