The FiveT investment fund launched this month. It aims to raise €1bn ($1.2bn) from financial and industrial investors to finance projects in the production, storage and distribution of clean hydrogen, and will receive initial funding from fuel cell firm Plug Power, engineering firm Chart Industries and energy technology company Baker Hughes.

The fund will be led by Pierre-Etienne Franc, who was the vice president of hydrogen energy for industrial gases company Air Liquide and co-secretary of the Hydrogen Council until becoming FiveT CEO. Hydrogen Economist spoke to Franc to find out more.

What will you invest in and where? 

Franc: We will look to fund scale projects in the hydrogen value chain. It is not time anymore for demonstration projects upstream or downstream, we need to see projects at size for which our typical investment would start at €20-30mn.

€20-30mn – Size of investments targeted

We would be seeking projects where there are support policies in place that enable sustainable economics.

The projects need to have a potential for delivering a double-digit return through the combination of revenues economics and the asset value. Really, it is an asset play, which is why it is an infrastructure fund. 

We are not going to invest into carbon capture and storage. Oil and gas players are better equipped to do so. But if some hydrogen is coming from a blue hydrogen scheme into infrastructure we have funded, of course that is not an issue. 

Initially, investments are likely to be in Europe because that is where we see the most support in terms of contract for difference (CfD) schemes and so on, although we will probably see the same kind of schemes in the US eventually and some US projects could have solid economics as well on their own.

On Asia the jury is out. Asia is supportive of the technology, but it is mostly downstream so far. There are scheme that could be well suited for investments, so we will keep an eye on it. 

Are there other funds? 

Franc: There are some funds that exist in the hydrogen space, but we are the first to focus purely on infrastructure.

How is awareness?

Franc: There is not one single week without a report coming out on hydrogen. Hydrogen is there to play a systemic role in the energy play of the future, and everybody is waiting for the right business model to get out there and invest heavily. 

They have invested in the stocks of companies in the hydrogen space already, and now hopefully they will invest in projects. These are the ones our fund want to foster. 

The fund is ticking a couple of the key boxes if you want to be a green investor, and we are aligned with the goals of the Taskforce on Climate Related Disclosures and the European taxonomy on green investments. 

"We would be seeking projects where there are support policies in place that enable sustainable economics"

We will have to develop the proper ESG key performance indicators in the way we manage the projects. 

The flow of money into the sector is still nascent. This is where hopefully initiatives like this fund will trigger further investment. You have to get infrastructure in place, and everything will cascade from there—scale is an important element to make costs go down. That dynamic should, in turn, help deepen access to financial markets and release further investments. 

If we demonstrate that the fund is the right one then there will be massive inflow of new players waiting to join the game. 

Will you be technology-agnostic?

Franc: We are going to be technology-agnostic. We are not going to choose one versus another. We are going to have in the fund some expertise to make sure we can evaluate what our partners are saying—but we just want the technology that works best at scale. 

What are the best policy mechanisms to support investment? 

Franc: On funding, CfDs are fundamental. They help customers shift to green hydrogen without having to support the financial burden initially. It could be linked to a carbon price, but the main thing is it needs to be secured for a certain period of time. 

We need mechanisms that enable mutli-annual support to cover the cost of producing green molecules rather than grey ones.We will need same other mechanism downstream to pay for distribution assets—potentially public-private partnership schemes are best for that sector. 

On capex there is a relatively solid support system in many countries. In the US, we hope there should be some more space for hydrogen support. 

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Author: Tom Young