A new report by the Global Infrastructure Investor Association (GIIA) and consultancy Arup has revealed how uncertain institutional investors are about investing in hydrogen – despite the anticipated importance of the technology for the future of energy systems.
The report, based on a survey of GIIA investor members, found that 90% of participants believe hydrogen will play a role in future energy systems and 70% believe it will be important for some applications by 2030. But only 16% of those surveyed have already concluded deals or are currently engaged in hydrogen-related infrastructure transactions.
The report, Catalysing Hydrogen Investment, explores the discrepancy between the role investors think hydrogen will play and the current landscape to identify barriers to investment, including production, adoption, and transport and storage.
One in five respondents to the survey admitted that they were unsure how much investment their organisation would make in hydrogen by 2025. Of the 80% of respondents that indicated they expected their organisation would invest in hydrogen before 2025, the highest proportion expected to invest between US$100m (€86.5m) and US$250m by 2025.
The report said these findings were consistent “with some of the trends in hydrogen funds that are currently being set up”. It said: “This demonstrates that private sector capital is poised to invest in hydrogen production infrastructure, but investors are reluctant to commit funds without more certainty about future revenue streams.”
Filippo Gaddo, head of economics at Arup, said: “The findings show that investors are keen and poised to support the decarbonisation of the energy sector and they believe that hydrogen will have a significant role to play.
“Whilst our research has identified a number of barriers to investment, it also shows that there are many enablers that governments and regulators can consider which will, if implemented appropriately for their unique circumstances, enable private sector investment in hydrogen infrastructure.”
Last week, Ardian said it had teamed up with FiveT Hydrogen to create the world’s largest clean hydrogen infrastructure investment platform, raising €800m from investors.
Allianz Capital Partners (ACP) recently told IPE Real Assets that it is exploring hydrogen investments and is “spending a lot of time in discussions”. Co-head of infrastructure Michael Pfennig said: “We believe that hydrogen can play quite an important role, not only to store energy but also to transport energy. [It is] quite a nascent and innovative sector, maybe like renewables was 20 years ago.”
The Universities Superannuation Scheme in the UK is also exploring hydrogen. “It’s definitely something that we need to understand better before we take the plunge,” Gavin Merchant, co-head of direct equity, told IPE Real Assets.
ACP is among members of GIIA, which also include the Abu Dhabi Investment Authority, British Columbia Investment Management Corporation, California Public Employees’ Retirement System, Ontario Teachers’ Pension Plan and Caisse de dépôt et placement du Québec.
“GIIA members currently own and manage nearly US$1trn of infrastructure assets on six continents, $4bn of which is hydrogen infrastructure,” said GIIA CEO Lawrence Slade.
“There has been impressive growth seen in investment in renewables, and we estimate that at any given point in time there is at least US$200bn of new capital ready to invest in infrastructure. This is a positive indicator of investor appetite to kickstart a global effort to reach our climate goals.
“To meet society’s growing future energy needs whilst decarbonising the global economy, we need to combine government funds with private capital so we can achieve much, much more, and faster.”