Producing hydrogen from renewable energy is a key challenge on the path to decarbonization and fund managers such as Hy24 are confident that this technology will reach maturity within the next ten years. BBVA has invested ten million in one of Hy24’s funds, which uses its capital to finance large-scale clean hydrogen infrastructure projects. Notably, it is the world’s largest hydrogen fund.
The aim is to stop using fossil fuels and move the world with renewable energy. Decarbonization is one of the great challenges of the 21st century and the biggest challenge in addressing climate change. To make this happen, many agents have set their sights on hydrogen, an element from which energy can be obtained without emitting greenhouse gases (GHGs), in a process that leaves behind only one form of “waste”: water.
One of these hydrogen trailblazers is Hy24, a fund manager belonging to Europe’s largest private investment house—and in whose hydrogen fund BBVA has invested—and which has key talent specialized in hydrogen technology. Its main objective is to expand the global hydrogen economy through investment opportunities linked to the Sustainable Development Goals (SDGs).
Hydrogen is an energy vector, meaning that it is able to store and transport energy that can later be released in a controlled manner. Electrical, mechanical or thermal energy can be obtained through a chemical process known as electrolysis, without producing carbon dioxide (CO2) emissions in the process.
According to the International Energy Agency (IEA), hydrogen and hydrogen-based fuels can play a key role in decarbonizing industries in which emissions are hard to abate and where alternative solutions are unavailable or otherwise difficult to implement, such as heavy industry and long-distance transport.
The challenge in making hydrogen a genuinely sustainable option lies in how to produce it efficiently with renewable energy. When done successfully, the resulting product is known as green hydrogen. Over the past two and a half years, Hy24 has built up a reputation as a benchmark in the hydrogen ecosystem: through its The Clean H2 Infra Fund, it provides capital to finance large-scale clean hydrogen infrastructure projects all around the world.
“One of the greatest assets of the joint venture comprising Ardian (Europe’s largest private investment house) and FiveT Hydrogen (a firm specializing in hydrogen technology) is its human team, which boasts an impressive track record in infrastructure fund management, with experience and expertise in the hydrogen sector. The team is also in direct contact with the best agents in this field from around the world, enabling them to create synergies and unlock new opportunities,” explains Oihane Martínez Balagué, Investment Vice President at Hy24.
“Our idea is to invest at a fairly early stage in the life of the assets, and then bring them to maturity,” she explains. “This is quite a common approach when it comes to infrastructure projects, such as with renewable energies or data centers. “We are still in the early stages, but we expect hydrogen to be a fairly mature asset within 10 to 12 years.”
The fund invests in the entire hydrogen infrastructure ecosystem, from upstream, meaning hydrogen production, to downstream, meaning all the products and applications derived from hydrogen. In the middle of this process we have midstream, which focuses on distribution. Hy24’s activities include the financing of electrolyzers, stations and vehicle fleets, among other ventures.
“We like to diversify risk in our investments. Our ideal asset allocation would be 40% in mobility, 45% in upstream projects and the remaining 15% in midstream. By geography, half of the investments would be in Europe and the Middle East, 25% in the United States and the remaining 25% in Asia,” explains Martínez Balagué.
Over the past two and a half years, Hy24 has found that there are many opportunities to be had in the upstream segment. The mobility sector is still relatively immature, so investments there are expected to grow over the next decade.
Hy24 is currently present in 13 countries around the world and has four investments alongside Hy2Gen, Enagas Renovable, H2Mobility and Everfuel. “We don't have a boilerplate project—each one is different—, although we generally try to make sure they have an industrial use,” explains Hy24’s Investment Vice President.
In Europe, the Iberian Peninsula and the Nordic countries offer the greatest potential in unlocking the value of renewable energies
“In our project with Enagás in Spain, in which we invested in the summer of 2022, our shared goal is to achieve 6.1 gigawatts of electrolysis and 8.4 gigawatts of renewable power. We are also pursuing biomethane projects”, she adds. “Partnering up with Enagás gives us a clear edge that few other players can offer. At Hy24 we also know that Spain is a key country. In Europe, the Iberian Peninsula and the Nordic countries offer the greatest potential in unlocking the value of renewable energies.”
Accelerating decarbonization is essential and we need to achieve this over the current decade. Hy24 is quick to point out that fossil fuels still account for the majority of primary energy supply and for 84% of global emissions. Their ongoing use continues to increase greenhouse gas emissions, which in turn accelerate climate change.
If nothing changes and greenhouse gas emissions do not abate, the next few years will see a rise of 1.5 degrees Celsius compared to the pre-industrial era (1850–1900), i.e. the upper limit set by the Intergovernmental Panel on Climate Change (IPCC) if we are to avoid the worst consequences of climate change.
To prevent this from happening, countries around the world have been busy developing emission reduction plans in which new forms of energy generation play a leading role. However, significant challenges still remain, such as multiplying investment in renewable energies or electrifying sectors such as transportation and industry.
“Another problem is that the countries with the greatest renewable energy generation capacity are not the ones that consume the most energy,” adds Martínez Balagué. “Moreover, the hours of solar power generation tend not to coincide with hours of peak consumption. Hydrogen is here to help us help get around these problems.”
“Hydrogen allows us to reduce this volatility, as it can be transported efficiently and also used in sectors such as industry and shipping. Thus, it can help take some of the strain off the electricity grid, which is stretched to breaking point,” explains Hy24’s Investment Vice President.
And of course an investment is needed to achieve all this. An investment to make green hydrogen competitive, to develop the necessary technology and to create infrastructures that will allow it to be used all over the planet. “We are now the largest hydrogen fund worldwide, and we have a clear calling to develop the ecosystem, make it more mature and embrace the challenges that are now emerging,” concludes Martínez Balagué.
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