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Investment firm Ardian, FiveT Hydrogen launch $1.7-billion fund for clean hydrogen, world’s largest
Paris-based investment firm Ardian joined forces with Zurich-based FiveT Hydrogen on 1 October to create a €1.5-billion ($1.7 billion) fund known as Hy24 that will be dedicated to accelerating large-scale clean hydrogen projects and infrastructure.
Hydrogen, especially the "green" variety produced from renewable power sources, is increasingly being viewed as an alternative to carbon-intensive fossil fuels because in liquid form it can be transported in existing pipelines, in solid form it can be used in fuel cells for automobiles, and it can be used to produce steel and cement, two traditionally carbon-intensive industrial processes.
Expected to secure its first closing before the end of 2021, Hy24 plans to reach its funding goal by drawing on global chemical, energy, engineering, and construction companies as well as institutional investors that are already vested in finding clean hydrogen solutions. The partners say they will be creating "the industry's largest clean hydrogen infrastructure manager."
Hy24 already has commitments from two sets of investors: Air Liquide, TotalEnergies, and construction group Vinci being one, while New York-based Plug Power, original equipment manufacturer (OEM) Chart Industries, and Baker Hughes form the other.
Already secured €800 million
The fund has already secured initial commitments of €800 million ($927.5 million), the backers say. Air Liquide, TotalEnergies, and Vinci said 1 October they each will invest €100 million ($115 million). Lotte Chemical and financial services group Axa also have indicated a commitment to participate as anchor investors, according to Hy24.
The infrastructure fund will have the capacity to "unlock large-scale projects under development and accelerate the scaling up of hydrogen markets. With the announced support of public policies and some use of debt financing, the fund should be able to contribute to the development of hydrogen projects with a total value of about €15 billion," the partners say.
The fund's objective will be to "accelerate the growth of the clean hydrogen ecosystem by investing in large strategic projects and leveraging the alliance of industrial and financial players," according to the companies. It will invest in the entire renewable and low-carbon hydrogen value chain in the Americas, Asia, and Europe. The fund will "invest as a partner, alongside other key project developers and/or industry players, in large upstream and downstream clean hydrogen projects," they say.
"Seeing bespoke infrastructure funds is definitely a favorable sign," Alex Klaessig, director of IHS Markit's Hydrogen and Renewable Gas Forum, told Net-Zero Business Daily.
Given global decarbonization ambitions, "we anticipate investment over $250 billion by 2030, and that's on hydrogen production equipment alone. This is the type of private sector engagement in early deployment that will bring down the overall cost of using hydrogen," said Klaessig, drawing on IHS Markit data.
According to IHS Markit estimates, the cost of producing green hydrogen through splitting water molecules by electrolysis that is powered by renewable electricity is currently $4.00-$5.00/kg. In comparison, the cost of producing "blue" hydrogen from fossil fuels while sequestering the carbon or from renewable natural gas captured from landfills is estimated at $1.50/kg-$2/kg.
The US has set a goal of producing a kilogram of hydrogen using renewable electricity for $1.00 in a decade, but Brussels-based Hydrogen Council CEO Daryl Wilson said that task will be impossible unless the cost of generating the power is brought down considerably.
The International Energy Agency (IEA) Global Hydrogen Review 2021 finds the key barrier for widespread adoption of low-carbon hydrogen is the cost gap compared with hydrogen from unabated fossil fuels
Depending on the prices of natural gas and renewable electricity, producing hydrogen from renewables can cost between two and seven times as much as producing it from gas without carbon capture, according to the IEA report released 4 October.
The levelized cost of producing hydrogen from gas using carbon capture, utilization and storage (CCUS) technologies is around $1-$2/kg, the report said. In contrast, hydrogen produced from renewable power is estimated to cost $3-$8/kg, it added.
FiveT Hydrogen brings its own capital to the table
FiveT Hydrogen was launched in April by FiveT Capital, which began with an initial investment of €290 million ($345.07 million). The Hy24 structure allows FiveT Hydrogen to act as an equal partner with Ardian to build and finance commercial "clean hydrogen" projects.
Creating Hy24 as a fund manager allows a merger with FiveT Hydrogen and adding Plug Power, Chart Industries, and Baker Hughes.
Further investments are also expected from non-anchor partners that are expected to include airport operator Groupe ADP, Ballard, EDF, and German OEM Schaeffler.
"Hydrogen has become a central element of the energy transition," Air Liquide CEO Benoît Potier said in a statement. "The time to act is now, not only as companies on a stand-alone basis, but by joining forces with states, other industrial groups, and the financial community."
Air Liquide said it has already committed to invest approximately €8 billion in the low-carbon hydrogen supply chain by 2035.
"We believe that clean, renewable hydrogen will play a key role in the energy transition, and TotalEnergies wants to be a pioneer in its mass production," said CEO Patrick Pouyanné. "We are currently working on several projects, notably to decarbonize the grey hydrogen used in our European refineries by 2030. We are convinced that a collective effort is needed to kickstart the hydrogen sector and take it to scale."
--Contributions from Mark Thomas, Chemical Week.
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