CPP Investments Bets on Green Hydrogen Transition in Europe
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 euro ($143 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 decarbonise 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 fertilisers.
"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 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 C$570 billion ($429 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 $400 million investment in Sweden's battery producer Northvolt.
I'm sure many of you reading this for the first time are wondering what is Power2X and why is Canada's largest pension fund providing it more capital after acquiring amjority stake in the three year old Dutch company.
It was a little over a year ago that Sergio Goncalves of Reuters reported on a Portuguese-Danish-Dutch consortium which planned to build a $1.1 bln hydrogen plant in Sines:
Portuguese project developer Madoqua Renewables, Danish fund manager Copenhagen Infrastructure Partners (CIP) and Dutch firm Power2X announced plans on Thursday to invest 1 billion euros ($1.09 billion) in a green hydrogen plant in Portugal.
First production at the plant to be erected in the port city of Sines, 150 km (93 miles) south of Lisbon, and to be powered by wind and solar parks that will be built in parallel, is expected by 2025, they said in a statement.
So-called green hydrogen, produced using renewable electricity, is seen as a key power source that can reduce pollution from long-haul heavy transport, steel and chemical industries and power generation.
The companies said the plant would include a 500-megawatt electrolyzer to produce 50,000 tonnes of green hydrogen and 500,000 tonnes of green ammonia per year.
The partnership agreement will be formally sealed on Friday, with licensing expected to be completed by the end of next year. The plant should reach full capacity by 2030.
"Portugal is structurally well positioned to play a leading role in Europe's emerging energy transition space," said Rogaciano Rebelo, chief executive of Madoqua Renewables, which leads the consortium.
The hydrogen produced is expected to be used by local industry, but also transported by a pipeline currently being developed, injected into the existing natural gas network or processed to create green ammonia for export from the port of Sines, the statement said.
Portugal's largest utility EDP (EDP.LS) and oil and gas company Galp Energia (GALP.LS) are both planning to build green hydrogen plants in the same industrial hub of Sines.
In April 2022, Sanja Pekic of Offshore Energy also reported that MadoquaPower2X consortium will produce hydrogen and ammonia in Portugal:
Portuguese project developer Madoqua Renewables has partnered up with Dutch energy transition project developer Power2X and Danish fund manager Copenhagen Infrastructure Partners (CIP) to build MadoquaPower2X.
This is a €1 billion ($1.08 billion) industrial-scale project for the production of green hydrogen and ammonia in Sines.
MadoquaPower2X will use renewable energy and 500 megawatts of electrolysis capacity. It is the first project at the future energy hub of Sines, with an industrial-scale production of 50,000 tonnes of green hydrogen and 500,000 tonnes of green ammonia per year.
Moreover, this is an example of a new energy transition model, of which Portugal is an early mover.
The H2 from this project can be used by the local industry as well as processed to create green ammonia for export from the terminal at the port of Sines.
Electricity will be sourced from renewable power produced in Portugal; in particular from renewable energy communities for wind and solar plants that are being developed in parallel.
The project is currently under development and is expected to be fully permitted and ready for a final investment decision by the end of 2023. After that, the construction will start and the first hydrogen production is to take place by the middle of the decade.
MadoquaPower2X is to make significant contributions toward Portugal’s national hydrogen strategy by 2030. In particular, the project will contribute nearly 25 per cent of Portugal’s envisaged two-gigawatt electrolyser capacity by 2030.
Furthermore, at €1 billion of investment, the project will contribute ten to 15 per cent of Portugal’s hydrogen investment targets. Additionally, if preferred over ammonia production, MadoquaPower2X could meet 100 per cent of Portugal’s gas grid hydrogen injection targets.
The consortium members are exploring opportunities with stakeholders to further expand the project to potentially produce 1 million tonnes of green ammonia per year, reducing CO2 emissions by up to 1 million tonnes per annum. Subsequent phases will start development in 2024, with full commissioning before 2030.
Philip Christiani, Partner at CIP, said “Sines provides an excellent location for this project – proximity to local heavy industry, an existing export terminal and the political will demonstrated by Portugal to be a key green hydrogen leader in Europe. We look forward to working with our consortium partners to bring MadoquaPower2X to life.”
And Leigh Collins of Recharge also reported back in April 2022 that Iberia is fast becoming Europe's green hydrogen hub after fourth large-scale project unveiled this year:
A 500MW green hydrogen facility — one of Europe’s largest single-site renewable H2 projects — is to be built at the Portuguese port of Sines by 2025, its developers have announced.
Danish fund manager and offshore wind developer Copenhagen Infrastructure Partners (CIP) has joined forces with Portuguese developer Madoqua Renewables and Dutch consultancy Power2X to build the €1bn ($1.08bn) project, which will use 500MW of electrolysers to produce 50,000 tonnes of green hydrogen and 500,000 tonnes of green ammonia annually.
It is the second large-scale green hydrogen project announced in Iberia by CIP this year, following the unveiling of the 2GW Project Catalina in Spain in February.
An even larger renewable H2 project — the 7.4GW HyDeal España — was also announced in February, a month after the Repsol-led 2GW SHYNE plan in northern Spain was revealed. In total, 11.9GW of green hydrogen projects have been unveiled in Iberia in the past three months alone.
Portugal and Spain are expected to be able to produce green hydrogen more cheaply than other parts of Europe due to their high solar irradiation and relatively strong winds.
The renewable energy required for the MadoquaPower2X project will be sourced in Portugal, “in particular from renewable energy communities for wind and solar plants that are being developed in parallel”, CIP said in a statement.
“The hydrogen produced under this project can be used by the local industry as well as processed to create green ammonia for export from the terminal at the port of Sines,” it added.
The partners expect the project to be fully permitted and ready for a final investment decision by the end of next year, “with construction to commence thereafter and first hydrogen production by the middle of the decade”.
They are also looking into expanding the project to one million tonnes of green ammonia, which would presumably require 1GW of electrolysers.
“MadoquaPower2X will pave the way for decarbonization of critical industrial processes and reduced dependency on natural gas imports,” said Occo Roelofsen, CEO of Power2X, which also develops energy transition projects in Europe, Africa and the Middle East.
Portugal’s environment and energy secretary, João Galamba, added: “This important investment represents the actual implementation of Portugal’s National Strategy for Hydrogen, in line with the European Industrial Strategy, as well as the more recent measures proposed by the European Commission on REpower EU”.
I would invite my readers to visit the MadoquaPower2X website to learn more about this project:
MadoquaPower2X is developing a world-leading green hydrogen and renewable ammonia project. The project will be located in Portugal in the Sines industrial zone (Zona Industrial e Logística de Sines, ZILS). MadoquaPower2X is a consortium comprised of Madoqua Renewables, Power2X and Copenhagen Infrastructure Partners (CIP). The consortium is committed to develop, install and operate the project to the highest environmental and safety standards. The project generates economic growth with an economic activity classified as sustainable according to the latest EU Taxonomy and is an important factor to secure an independent power infrastructure.
Green hydrogen and renewable ammonia production
The project involves the production of green hydrogen using established alkaline-water electrolyzer technology and the production of green ammonia through the Haber-Bosch process. Hydrogen will be transported through the local hydrogen grid and can be used by other local players, as well as blended into the natural gas grid. The green ammonia will be transported by pipeline to the Port of Sines and loaded for export and/or used as maritime fuel and is an attractive option for European green fertilizer manufacturing.Renewable energy sourcing
The project will use renewable energy to produce the green hydrogen and green ammonia. The electricity will primarily be provided through a renewable energy community with access to dedicated solar and wind assets in Portugal which are being developed in parallel. This approach allows for a secure and dedicated renewable power supply for the full lifetime of the project.
And read more about the Project consortium here:
MadoquaPower2X is developing a worldleading green hydrogen and renewable ammonia project. The project will be locatedin Portugal in the Sines industrial zone (Zona Industrial e Logística de Sines, ZILS). MadoquaPower2X is a consortium comprised of Madoqua Renewables, Power2X and Copenhagen Infrastructure Partners (CIP). The consortium is committed to develop, install and operate the project to the highest environmental and safety standards. The project generates economic growth with an economic activity classified as sustainable according to the latest EU Taxonomy and is an important factor to secure an independent power infrastructure.
Madoqua is a project development company focused on industrial transformation by developing Power-2-X technology based decarbonization projects. Madoqua creates, delivers and operates projects to produce and sell hydrogen and hydrogen related derivatives such as green ammonia, green methanol and synthetic fuels. Madoqua is a proud pioneer in the energy transition sector of Portugal.Power2X is a project developer and consultancy for energy transition projects across Europe, Africa and the Middle East. The company is based in Amsterdam and works with several business partners on new projects in the energy transition. The focus is on sizeable projects in Green and Blue Hydrogen, Biofuels, as well as related conversion, storage and end use assets, all with a focus on decarbonizing industry.
Founded in 2012, CIP is a global leader specialized in offering tailor-made investments in energy infrastructure assets globally currently having EUR ~16bln under management. Through its Energy Transition Fund CIP invests in next generation energy infrastructure solutions, e.g., Power-to-X, to decarbonize hard-to-abate sectors such as steel, agriculture and transportation.
I am providing you this background so you understand why CPP Investments' Sustainable Energies Group headed by Bruce Hogg is committing an undisclosed sum of capital to fund the expansion of this important European energy transition project.
Europe is in the midst of a full blown energy transition. The war in Ukraine has just surpassed 500 days and European nations are scrambling to find alternative sources of energy.
Recall, it was a year ago when Prime Minister Justin Trudeau and German Chancellor Olaf Scholz signed what they called a "joint declaration of intent" that calls on the two countries to invest in hydrogen, establish a "transatlantic Canada-Germany supply corridor" and start exporting hydrogen by 2025.
The German chancellor also met with representatives of Canada's large pension funds to discuss possible investments in Germany, mostly in renewable energy projects.
I have a lot more confidence in MadoquaPower2X's project than a "transatlantic Canada-Germany supply corridor" in terms of delivering green hydrogen and green ammonia throughout Europe.
And it looks like CPP Investments agrees with me on that front, acquiring a controlling stake in Amsterdam-based Power2X and now providing it with capital to expand its investments.
This is all part of CPP Investments' commitment to investing billions in energy transition projects all over the world.
Below, a presentation on MadoquaPower2x's project in Portuguese and English.
And Hydrogen may be a solution for a climate-friendly form of energy. Bloomberg Green digs into the challenges of manufacturing hydrogen at scale and cost, plus the implications for the aviation industry. And Francine Lacqua speaks to Earthshot prize winner Vaitea Cowan about unlocking Hydrogen production at scale to create the energy of the future. Take the time to watch this.
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