Fit your technology to the current energy system, get the cost of green hydrogen under $1 per kilo and understand your funders.
Worldwide investment in hydrogen energy topped $3.7 bn last year. That is only set to grow.
Another $40 trn is expected to be invested over the next three decades in the move away from fossil fuels. With now more than 5000 pieces of legislation in place worldwide aiming to reduce greenhouse gas emissions, corporations are desperate to buy clean energy — and hydrogen will play a role in that.
But if you’re an entrepreneur eager for a piece of that market, where do you start? A collection of corporate investors, led by National Grid Partners and part of the Global Corporate Venturing Energy Council, have put together a guide to help hydrogen startups succeed.
Here are some of the highlights, and you can download the full white paper here:
1. Know your funders
The business model is tough. A hydrogen startup will typically take five to 10 times more capital to build than a typical Silicon Valley software venture. It will also take much longer to make a return or get an exit. You will need multiple sources of funding over multiple rounds. Get used to a lot of fundraising, but also evaluate the pros and cons of different funding sources carefully. The white paper has a table that evaluates these, from grants to private equity.
2. Find ways to fit into the existing energy system
Even green energy is a commodity and no customer will buy it if it causes them to incur extra infrastructure costs or other inconvenience.
3. The $1 per kilogram target
The goal for those working on producing green hydrogen is to get the price down to $1 per kilogram. At this price there would be immediate demand from chemicals producers, steel makers, mining companies and others. But even if you get to this price point, the hydrogen needs to be produced in sufficient volume, without huge additional capex or operational costs.
4. Focus on opportunities in hydrogen transportation
Some of the promising opportunities for startups in hydrogen is in converting hydrogen into forms that help facilitate its transport. Green ammonia, green methanol, and liquid organic hydrogen carriers have shown promise and much of this ecosystem is being developed to take the green hydrogen coming out of electrolysers at scale and deploying them in end applications such as marine transport, fertiliser, steel, and the chemical industry.
Contributors to the white paper included: National Grid Partners, Amazon Web Services, BP Ventures, TDK Ventures and Chevron Technology Ventures. You can learn more about the Global Energy Council here.