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Swiss asset manager FiveT launches fund to scale up "clean hydrogen” infrastructure

09 April 2021 Amena Saiyid

Zurich-based FiveT Capital launched a fund 8 April to finance and build commercial scale "clean hydrogen" projects, just as IHS Markit projects global investment in hydrogen could reach $265 billion by 2030.

Starting with an initial investment of €290 million ($345.07 million), the FiveT Hydrogen fund hopes to raise $1 billion from a combination of financial and industrial investors.

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.

However, the prospects for green hydrogen from renewable energy sources are largely dependent on the price of electricity, with the cost currently in the $4-$5/kg range rather than the $1-$2/kg required to be economic, according to experts speaking at CERAWeek by IHS Markit panel discussions in early March.

Catalyzing production

The seed money from FiveT will serve as a much-needed catalyst, Alex Klaessig, director of the IHS Markit Hydrogen and Renewable Gas Forum, said 8 April.

"By gathering a portfolio of investors, FiveT can help companies share risk, opportunities and technology," Klaessig added.

The FiveT Hydrogen fund will exclusively finance projects in the production, storage, and distribution of clean hydrogen in countries with policies, regulations, and financing in place to enable clean hydrogen projects to be scaled up profitably. These will include the 37 member countries of the Organisation of Economic Co-operation and Development that span the globe from North America and South America to Europe and Asia Pacific.

To date, more than 30 countries have adopted national hydrogen strategies, so "the opportunities are huge," according to FiveT Hydrogen.

"We firmly believe that clean hydrogen, an energy carrier created from low-carbon sources, will help transform and decarbonize the world's economy, addressing the global climate emergency and making a positive change to our planet for future generations," Pierre-Etienne Franc, co-founder and CEO of FiveT Hydrogen, said in the 8 April announcement.

Green hydrogen generated from splitting water molecules in electrolyzers using renewable power sources is the cleanest form of hydrogen. The next cleanest source, known as "blue" hydrogen, is obtained from methane reformers at oil and natural gas refineries equipped with carbon capture and storage equipment.

Presently, most hydrogen production uses fossil fuels as its feedstock, such as gas, oil, and coal, that result in significant CO2 emissions.

The fund, however, is focusing primarily on producing hydrogen from electrolysis projects using renewable power sources and, in some countries, the complementary use of nuclear to support low carbon hydrogen production, Tom Pigott, a spokesman for FiveT Hydrogen, said 9 April.

"We are not targeting [carbon capture and sequestration] projects as the fund's catalyst role is less needed for those projects to develop," Pigott added.

FiveT Hydrogen already is having discussions on hydrogen production through electrolysis and development of fuel cell vehicles and refueling networks.

Significant investment

"Low-carbon hydrogen can replace fossil fuels across a variety of end uses. For supply to meet these ambitions, significant investment is required," IHS Markit analysts specializing in hydrogen wrote in a 6 April analysis.

Of the $265 billion in capital spending on hydrogen by 2030, IHS Markit anticipates $165 billion will be directed toward producing green hydrogen from electrolysis of water, while the remainder would be directed toward the blue variety.

And this is just production, IHS said. More funds would be required to build the supply chain, from installing renewables to modify existing pipelines and storage, as well as building new capacity to transport the hydrogen where it is needed.

In 2020, $50 million was spent globally in producing electrolyzers and another $4.4 billion of such projects are currently in the pipeline for the next decade, which is a "good start," Julia Wainwright, a senior research analyst with the IHS Markit Hydrogen and Renewable Gas Forum, and Klaessig wrote in that report.

But to truly achieve net-zero goals, the current level of funding will need to be increased a thousand-fold to $50 billion by the end of the decade, they added.

They also noted that the current production of low-carbon hydrogen is small, with less than 150 MW of electrolyzers and five large-scale stream methane reformers with carbon capture operational. Future projects could bring 150 GW of electrolyzers and 100 large-scale methane reformers with carbon capture online by 2030.

These include Enegix Energy's Base One green hydrogen project in Brazil, the Saudi NEOM project that will include a green ammonia project, and the Asian Renewable Energy Hub project in Australia.

Cornerstone investor in the FiveT Hydrogen Fund Plug Power has already committed €160 million ($200 million), while Chart Industries and Baker Hughes have each agreed to commit €50 million, respectively ($60 million).

FiveT Hydrogen hopes to announce a closing on one project towards the fourth quarter of 2021, but would not disclose further details.

Pigott said there are many ongoing project developments in the space, but not all are mature. "We are confident that that in the next coming months the fund launch will trigger the right dynamic to invest fast," he added.

Chart Industries disclosed in April that it is partnering with Indian firm Reliance Industries to commercialize hydrogen technology and develop a supply chain in collaboration with other private-sector partners and the Indian government.

-- Updated with additional comment from FiveT Hydrogen.

Posted 09 April 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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