London-based investment trust HydrogenOne Capital Growth has set its sights firmly on green hydrogen production projects after concentrating mainly on supply chain OEMs during its first full year in operation, managing partner JJ Traynor tells Hydrogen Economist.

The fund, which was founded by Traynor and Richard Hulf, raised £128mn ($160mn) via an IPO on the London Stock Exchange last year with a follow-on round this year. So far, £95mn has been deployed, mainly in privately owned firms in the electrolyser, fuel cell, midstream and distribution sectors. It aims to deploy about £200mn/yr, with the fund’s pipeline of potential investment targets standing at around £500mn.

“Over time, about half of the fund could be deployed in hydrogen production projects and half in the private equity supply chain sector” Traynor, HydrogenOne

“We want to be investing more in hydrogen production facilities,” Traynor says. “Over time, about half of the fund could be deployed in hydrogen production projects and half in the private equity supply chain sector.”

He points to recent investments in the production sector. Last month, the fund announced a £5mn investment in German green hydrogen project developer HH2E. The deal included a framework agreement allowing HydrogenOne to invest in future projects developed by the German company together with London-based investment firm Foresight Group. HydrogenOne and Foresight agreed to provide a “substantial” part of the development and construction capital covering five large projects at industrial locations across Germany.

“HH2E’s plan is to help with decarbonisation of Germany’s industrial sites in the Rhineland—the offtakers are the chemicals facilities in the industrial complexes there,” Traynor says.

In March, HydrogenOne announced a £3.3mn investment in Norwegian green hydrogen developer Gen2 Energy. This deal gave the fund a seat on Gen2’s board and the potential to co-invest in future projects.

Unlike HH2E, which is aimed at local consumers and powered by offshore wind, Gen2’s model is to tap Norway’s cheap hydroelectric power sources to produce green hydrogen for export.

“We like that diversity actually—two quite different approaches with electrolysis at their heart,” Traynor says.

Project pipeline

Several other production projects in Europe are on HydrogenOne’s radar.

“What we see are several interesting 20, 50, 80 and 150MW type projects which are absolutely right for a fund of our size in terms of the capital,” Traynor says.  “They are on the drawing board for investment decisions and construction starting next year. For us, this is coming down the tracks pretty quickly.”

Traynor believes big players such as oil majors will need to target much larger projects—which are more scarce—in order to generate sufficient scale of returns, leaving room for other investors to concentrate on the smaller projects.

“The [oil majors] need to deploy capital on a material, multibillion-dollar scale to generate the scale of returns they need for their shareholders,” says Traynor, who has previously worked for both BP and Shell.

£95mn – Capital deployed since launch

“[The] immediate growth opportunities for green and low-carbon hydrogen [projects] in Europe are in replacing grey hydrogen at sites such as refineries, steel plants and chemicals production complexes,” Traynor says. “Hydrogen projects that feed into industrial sites tend to have the most attractive offtake agreements and the best economics.”

HydrogenOne is also very interested in hydrogen storage infrastructure projects, although it has no specific projects in mind at present and considers the sector to be at an early stage of development.

“The projections are for 5pc, 10pc [and] 15pc of the energy mix coming from clean hydrogen. In that world you would expect large-scale industrial storage sites with hydrogen coming in from multiple sources and then being stored and blended and then sent out,” says Traynor.

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Author: Stuart Penson