Emerging space: hydrogen energy

The private markets are constantly evolving, and new spaces rise—then sometimes fall—in the span of a few years. Given this fluidity, it can be challenging to identify and track the most promising spaces of tomorrow. That’s why our analysts have developed a methodology to define and categorize these emerging spaces. In this post, we look at hydrogen energy—just one example of a space that is quickly taking off.

Is the path to net-zero and energy independence hiding in H20?

In the wake of the pandemic, the net-zero targets of the Paris Agreement have taken center stage, and the world seems to be rallying around a controversial solution—hydrogen.

Automakers, airlines, governments and industries are heralding the gas for its potential to replace fossil fuels and decarbonize the economy. In March, Delta and Airbus signed an agreement to develop a hydrogen-powered aircraft, and Joe Biden has allocated roughly $10 billion in funding to hydrogen—a fraction of Europe’s and Asia’s planned spending.

Intriguingly, support for hydrogen crosses political lines. Everyone from Joe Biden to big oil companies like BP and Shell is on board with hydrogen, and Republican and Democrat senators alike are lining up to have their states house one of Biden’s four hydrogen hubs.

And since hydrogen can be used to store and transport renewable energy, some also praise its potential to be globally traded as a commodity, redrawing current geopolitical lines and enhancing energy independence—a hot topic since Russia’s invasion of Ukraine.

But not everyone’s sold. Elon Musk has touted hydrogen fuel cells as “mind-bogglingly stupid” and critics question hydrogen’s “clean credentials” along with its ability to catch up in cost, technology and infrastructure to other renewables.

What is hydrogen energy and how does it work?

Hydrogen is one of the most abundant elements on earth, but it is almost always attached to other compounds. To use as a fuel, it must be in its gaseous state, H2. This requires using an energy input to extract it from naturally occurring molecules like water, or H20. When isolated, hydrogen can be burned to create electricity, used to store other renewable energy that would otherwise be wasted or used in fuel cells for transportation.

Is hydrogen renewable energy?

Herein lies hydrogen’s big asterisk—the answer is, it depends.

All hydrogen gas burns without producing greenhouse gas emissions. However, since creating hydrogen gas requires energy, hydrogen is only as green as the process by which it’s produced.

Hydrogen energy is named on a color scale with “black hydrogen” emitting the most CO2 and “green hydrogen” being fully renewable. When it comes to the hydrogen debate, the three most discussed forms are green, blue and gray.

This color pallet is behind much of hydrogen’s critique but also its wide-ranging support. Fossil fuel players view hydrogen as a promising way to repurpose existing infrastructure and reduce their carbon footprints, yet critics cite the importance of only using green hydrogen to meet climate targets.

What are the advantages and disadvantages of hydrogen energy?

Enthusiasts will credit hydrogen as the solution to some of the biggest challenges facing the path to net-zero, as it can decarbonize particularly challenging sectors of the economy, such as long-haul transportation, maritime shipping, air travel and heavy industry. This is a major potential step, considering that decarbonizing these sectors is essential to meeting emission targets and that there are currently no viable solutions from renewable alternatives.

But there are equal disadvantages to consider, including its lack of cost competitiveness and inefficiency compared to other energy sources. The uncertainty surrounding whether infrastructure, supply chains and technology can scale to support it is also at question. And today, most hydrogen is supplied from high-carbon sources—although this is changing with increased government support and funding.

Here we take a closer look at hydrogen energy, examining some of the active investors and trending companies in this space.

Quick stats

Key growth metrics

Trending hydrogen energy companies

Plug Power

HQ: Latham, NY
Leadership: Paul Middleton, Chief Financial Officer
Latest deal: February 2021

Founded in 1997, Plug Power is a developer of hydrogen fuel cell technology. The company has revolutionized the hydrogen industry with its full-service GenKey solution that allows customers to increase hydrogen productivity, lower operating costs and reduce their carbon footprint.

Ekona

HQ: Vancouver, Canada
Leadership: Christopher Reid, Chief Executive Officer & President
Latest deal: Series A (February 2022)

Founded in 2017, Ekona is a developer of renewable energy generation technology designed to produce industrial-scale hydrogen. Their technology produces hydrogen that is both low-cost and absolute through converting natural gas into hydrogen, enabling their clients to utilize clean energy for industrial processes.

In February 2022, Ekona completed their Series A funding in a deal led by Baker Hughes. The funds will be used to advance the development of a novel methane pyrolysis technology platform designed to produce cleaner and cheaper turquoise hydrogen.

Nel

HQ: Oslo, Norway
Leadership: Jon Løkke, Chief Executive Officer
Latest deal: Private placement (March 2022)

Founded in 1927, Nel is a hydrogen company that focuses on producing, storing and distributing hydrogen from renewable energy. Their solutions cover the entire value chain from hydrogen production technologies to the manufacturing of hydrogen fueling stations. In March, Nel received $1.5 billion NOK (roughly $170M USD) of deployment capital from undisclosed investors.

Most active investors

Innovate UK

HQ: Swindon, England
Hydrogen energy investments: 9
Latest deal in hydrogen energy: June 2021

Founded in 2007, Innovate UK is the United Kingdom’s national innovation agency based in Swindon, England. The firm is a non-departmental public body funded by a grant-in-aid from the government of the UK. The organization promotes productivity and economic growth by helping businesses grow through the development and commercialization of new products, processes and services.

The organization has invested in H2GO Power, the developer of hydrogen energy storage technology designed to supply a safe and reliable zero-emission power supply.

AP Ventures

HQ: London, England
Hydrogen energy investments: 9
Latest deal in hydrogen energy: January 2022

Founded in 2018, AP Ventures is a venture capital firm based in London, England. Since 2014, the firm has focused on developing high growth technology companies across the hydrogen value chain seeking to address the industry’s pain points. The firm invests in hydrogen production, storage and transportation along with hydrogen applications addressing current structural restraints.

AP Ventures recently participated in a later-stage VC round for EH Group, a company focused on developing innovative fuel cell technology to scale hydrogen fuel cell production at a cheaper cost.

Mitsui & Company

HQ: Tokyo, Japan
Hydrogen energy investments: 5
Latest deal in hydrogen energy: April 2022

Based in Tokyo, Japan, Mitsui & Co is a general trading company that invests in business activities within the metal resources, machinery, chemicals and energy sectors. On April 12, the firm participated in the fourth round of funding for Lhyfe, a developer of turnkey extracts designed to produce green hydrogen without any emissions.

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