Why We Invested in H2Pro: to accelerate green hydrogen opportunities in Chile
By: Brian Walsh, Head of Wind Ventures
Green hydrogen, produced from electrolyzers that use renewable electricity and water, is poised to be a significant industry, driven by the need to decarbonize large industries quickly. By 2030, it is projected to be a >$30B opportunity globally, serving the hydrogen gas, steel, ammonia/fertilizer and synfuels markets. Today, however, costs are high, anywhere from $5 — $10/kg. They need to come down significantly to <$3 /kg to realize this opportunity.
There are three primary drivers for the cost of green hydrogen. The cost of renewable electricity drives ~55% of the green hydrogen costs. The capacity factor of renewable energy projects drives ~15% of the green hydrogen costs. The electrolyzer solution drives the remaining ~30% of the green hydrogen costs.
Chile, where WIND Ventures’ helps the best global founders gain “unfair access” for total addressable market (TAM) expansion and additional revenue growth, offers some of the world’s best natural resources to accelerate the green hydrogen cost curve. Chile is home to some of the world’s best solar and wind natural resources and offers some of the world’s highest capacity factors for these renewable energy projects. Chile’s highest solar capacity factor is 37%, compared to 25% in the United States and in Europe. For on-shore wind, its highest capacity factor is 65% whereas it is only 50% in the United States and 35% in the UK. Chile also has the potential to combine solar and wind into renewable energy projects that would lower the renewable electricity costs even further.
The only cost driver that Chile does not have a natural advantage for green hydrogen production is the cost of the electrolyzer solution.
To help bring the best technology to Chile for leveraging its natural advantages, we took a close look at the electrolyzer landscape through 2021. From this work, we saw three distinct categories of investment opportunities. First are the mature electrolyzer companies that offer conventional types of electrolyzers: PEM (proton exchange membrane), SOEC (solid oxide electrolysis cell), and Alkaline. These companies have a maturing product portfolio with existing projects up and running.
Second are typically smaller startups that aim to improve aspects of the conventional types of electrolyzer technology. Some are reducing the thickness of the expensive membrane component. Others are optimizing the power electronics. Still others are trying to change the operating temperature required or attempting to streamline the manufacturing process.
The third category includes companies attempting to re-invent the electrolyzer from the ground up, creating a new class of technology beyond PEM, SOEC and Alkaline. In this category, we found a very compelling company called H2Pro.
H2Pro’s technology includes many tightly held secrets but what is public is that it has eliminated the expensive and limiting membrane that all other electrolyzer technologies require. With this innovation at its core, H2Pro has the potential to achieve breakout electrolyzer efficiencies and offer the world a fundamentally lower cost curve — as much as 70% lower compared upfront costs compared to all others.
Our excitement is around helping to combine H2Pro’s new, low cost, electrolyzer technology with Chile’s natural advantages in renewable resources and high capacity factors. The impact could be significant not only for Chile and H2Pro, but also for the world as projections show that Chile should be able to produce green hydrogen at a cost low enough where it can develop a sizable exporting business to other areas around the world. Naturally, this would help to economically decarbonize not only Chile but also Latin America and other important geographies.
WIND Ventures will be supporting H2Pro in its engagement in Chile. We look forward to partnering with them to deliver low-cost renewable energy at scale.
About Brian Walsh
Brian Walsh leads WIND Ventures in San Francisco — the strategic venture capital group for Copec, which is a leading energy and retail corporation throughout Latin America and the United States. Brian has two decades of venture capital experience in the San Francisco Bay Area, both in private and strategic venture capital. Most recently, Brian was an Associate Partner and Senior Expert at McKinsey&Company where he led the Firm’s corporate venturing advisory efforts with global Fortune 500 CEO clients. Brian holds an MBA from Massachusetts Institute of Technology (MIT) and a BS in Physics from Tufts University.
About WIND Ventures
Based in San Francisco, WIND Ventures is the strategic venture capital (CVC) arm of Copec, one of the leading energy companies in Central and South America and one of the most valued brands throughout Latin America. WIND Ventures leverages Copec’s significant resources to accelerate growth, primarily within Latin America, for startups and scaleups across the world within the new mobility, energy and retail sectors. Visit windventures.vc or follow us on Linkedin and Twitter.