What challenges did you face during the processes of obtaining private funding?
CEOG: A general challenge in privately financed projects such as this one is always the financial negotiations with equity and debt partners – especially for new technology projects that aim to be 100% privately funded.
HyWays for Future: As the lead entity on the HyWays for Future project, EWEs main task is the conflation of the willingness to invest of different investors in the Hydrogen Valleys and along the hydrogen value chain. This requires a continuously high degree of communication and coordination with all involved stakeholders and project partners (around 90 in total), especially in the run up of funding applications and funding approvals. The new element or the next "evolutionary step" of the HyWays4Future project is the combination of different value chain elements into one project (e.g. green hydrogen production, refueling stations, fleets of urban buses, FCEVs, etc.) – as it is for many German Hydrogen Valleys co-funded by the Federal Government and German State Governments (HyLand, HyStarter). Typically, each stakeholder individually is quite certain about his own project – the essential challenge is to bring all of them together to bring complexity, scale and commercial model to the next level (for example combining the volumes of hydrogen consumption of multiple mobility operators).
What specific measures did you take to overcome these challenges?
CEOG: We brought an infrastructure fund onboard very early in our overall project timeline; it is especially focused and experienced in energy transition projects. They contributed not only capital, but also project development know-how. We believe that having a strong equity partner on board at the stage during which capital-intensive development costs need to be funded is vital for projects that cannot or do not want to rely on public funding in the development phase.
HyWays for Future: In a nutshell, we considered two things important: Building a large-enough, high-quality partnership and focusing on a business case where clean hydrogen is closest to competitiveness, i.e. mobility. In the early phase of our project, we connected with a large number local and regional players that could become potentially valuable long-term partners – and that also could be part of short-term viable business cases in hydrogen mobility. As a result, we were able to meet our self-set targets of a strong partnership (meeting our minimum requirements for quantity and quality).
Furthermore, we ensured that our collaborations initiated a coverage of the whole mobility value chain, keeping in mind that investments into one part of the hydrogen sector will always depend on the development of the other parts, e.g. investments into FCEVs requiring simultaneous investments into hydrogen production, distribution and refueling stations.
What learnings can other projects take away from your experience?
CEOG: The key advice we can give from our experience: private funding institutions are usually not interested in small projects. Thus, don't waste time and money on starting a demonstration project on a small scale with a broad range of applications, but rather focus your project on one specific hydrogen application and scale it up to become interesting for private investors. In the end, it is not about the technology, but about what the funding investor thinks of and expects from your project.
HyWays for Future: HyWays for Future: The key learning for emerging Hydrogen Valleys is to build a growing network along the value chain very early on and to keep investing into the collaboration of stakeholders. Additionally, we believe that a high degree of "competition" among regional hydrogen players can become counterproductive in an early market phase. Instead, a sense of broad and cooperative thinking should be in focus to help get larger and more integrated projects off the ground. Here, "coordination" itself is a critical asset for a hydrogen valley project.The next step for us now is to connect our Hydrogen Valley with other regions that are already active in the hydrogen sphere. The overall hydrogen market will not scale up further as a mere agglomeration of "islands" – for the market, the value of the Valleys together will be larger than just the sum of all projects. Thus, the overarching goal of the Hydrogen Valley concept should be to ultimately provide links between Valleys and ensure a continuous expansion of activities.