Today’s launch of the European Commission’s hydrogen and energy sector integration strategies reflects some of the first fruits of a more mission-oriented finance and investment approach to running the European Union.
The continent’s main financier, the European Investment Bank, described itself at the GCV Digital Forum last month as the world’s largest green bank, and the issue of climate change and social development through backing entrepreneurs runs through the initial plans for the EU’s next budgetary cycle from 2021 to 2027, the innovation part of which is called Horizon Europe.
The Commission is forming an industry-led hydrogen alliance that includes Shell, Gasunie and SNAM on energy production, Michelin and Daimler on mobility, and Vattenfall and EDF for electricity, in order to help decarbonise industries such as steel and chemicals that require high-temperature heat and cannot easily be electrified, as well as hydrogen-fueled trucks, trains and ships.
The hydrogen strategy states: “Full-scale industrial deployment requires systemic action along the whole value chain, from hydrogen production and transport to the industrial use as feedstock for energy-intensive industries, or as fuel for transport or balancing the renewable electricity output.”
The only issue is how to create hydrogen which, despite being the most abundant element, is hard to use as a fuel unless electricity breaks apart oxygen and hydrogen atoms from water or steam methane. If renewable sources of electricity power the electrolysers it is so-called green hydrogen, if the hydrogen comes from fossil fuels and the remaining carbon sequestered it is blue (grey being when the carbon is left in the atmosphere).
The challenges remain significant and the technology uncertain, which is why the hydrogen alliance wants to bring in the entrepreneurs. A number have already been corporate-backed, such as Lanzatech, Plug Power and Nikola, and the Commission is hoping to use its European Innovation Council (EIC) equity fund, formally launched at the end of June, to help bring to light others. The EIC has prequalified 102 startups, including some in the hydrogen space, and is expected to have invested about €500m by the end of the year, according to Science Business.
To give it the power of veto, EIC may “tak[e] golden shares in the company,” according to Jean-David Malo, the director of the EIC Taskforce, in an interview with Science Business.
While it’s politically smart to get the budgets approved, the experience of other types of strategic investors in setting conditions and tying entrepreneurs’ hands is a warning. The best companies will avoid these restrictions, just as some of the best venture capital firms avoid the EIB’s European Investment Fund commitments.
Throwing lots of capital at those who remain can work but, as with Napoleon’s strategy of the state funding local businesses, can lead to underwhelming results longer-term.
There is much to admire about joined-up, long-term thinking on mission-oriented innovations but the devil is in the detail and greater confidence is warranted.
