Canada’s biggest pension fund, CPP Investments, has made its first bet on green hydrogen playing a growing role in cutting emissions, with a €130-million (about $189.3-million) investment and the purchase of a majority stake in a three-year-old Dutch firm.
CPPI’s investment is mostly in the form of capital that Amsterdam-based Power2X can use to develop new projects in Europe that seek to decarbonize hard-to-abate industrial assets by adopting green hydrogen.
The size of CPPI’s equity investment and the valuation given to Power2X, which is co-developing two projects and advising on others, was not disclosed.
Green hydrogen backers, including governments, hope using renewable power to split water molecules can cut pollution by replacing ‘grey hydrogen’ – or its derivatives methanol and ammonia – relied on by industries including refining, heavy transport, steel and fertilizers.
“Europe is generally seen as the leading industrial market or consumer for these green molecules. So we thought it was important to start with the consumers or the users of these molecules, and then build up from there,” CPPI’s Head of Sustainable Energies, Bruce Hogg, told Reuters.
Investor interest in Europe for tackling fossil fuel demand rather than just supply is growing, aided by the EU’s green industrial plan, which has pledged subsidies and faster permits to ensure the region keeps pace in the green tech race.
CPPI has already been providing Power2X with project-specific finance but Mr. Hogg said the new investment would offer “the flexibility of capital to allocate to the best projects.”
Power2X’s current projects include a green hydrogen and ammonia development in Portugal and a solar power and green hydrogen project in Spain.
“European industry is already using enormous amounts of hydrogen. We don’t necessarily need to invent a new industry to make an impact,” said founder Occo Roelofsen, a former McKinsey consultant, who owns the remainder of Power2X alongside other senior executives. “The initial focus is actually on replacing the grey with the green.”
Expanding green hydrogen production will require more renewable power generation, and some questions remain over its potential use cases versus other low-emission technologies.
CPPI manages $570-billion in assets for more than 21 million Canadians.
Other Canadian funds have also been backing Europe’s cleaner energy drive. Last month Canada’s Investment Management Corporation of Ontario announced a US$400-million investment in Sweden’s battery producer Northvolt.