The company, which makes electrolysers for hydrogen production, is targeting rapid expansion of installations to meet a forecast sharp rise in demand for green hydrogen, as countries strive to meet net-zero targets.
Sunfire, a German-based electrolyser manufacturer, has attracted €315m of financing from private investors and the European Investment Bank (EIB), as it seeks to cement its position in the highly competitive green hydrogen technology market.
Investment includes €215m raised in a Series E equity financing round and a venture-debt loan of up to €100m from the EIB. Sunfire also has access to €200m of previously approved, but, as yet, unused grant funding.
The equity financing round brought in new investors LGT Private Bank, GIC, Ahren Innovation Capital, and Carbon Equity. Existing investors that also increased their investment in the firm included Lightrock (which is backed by LGT, Liechtenstein’s investment vehicle), Planet First Partners, Carbon Direct Capital, the Amazon Climate Pledge Fund, and Blue Earth Capital.
London-based Planet First Partners co-led a €109m funding round for Sunfire in October 2021 and has been supporting the company’s drive to develop green hydrogen technologies. Planet First closed its own second funding round at €450m in early 2023.
Sunfire’s electrolysers, which are based on established alkaline and innovative solid oxide technologies, provide the means to produce hydrogen using electrolysis, which separates out hydrogen in water from the oxygen. The hydrogen can then be used to replace fossil fuels in energy-intensive industries such as chemicals, petrochemicals, and steel. This is classed as green hydrogen, so long as the power used for electrolysis comes from renewable sources.
Sunfire CEO Nils Aldag said the large size of the funding round was good news for Europe’s leading role in hydrogen production and for the European clean-tech industry, which would accelerate the company’s growth and industrialization plans to meet fast-growing demand for electrolysis technologies.
“The EU is rightly determined to future-proof its industry. This requires a two-pronged approach which helps energy-intensive industries decarbonize and improve the productivity and resilience of its operations, while supporting industrial clean-tech players like Sunfire to be competitive on the global stage,” he said.
Aldag said the EIB loan showed that Sunfire could also successfully access the venture debt market, giving it added confidence in its plans to expand electrolyser production.
Sunfire said it was targeting the installation of “several gigawatts” of electrolysis equipment by 2030 in large-scale green hydrogen projects, with the aim of taking a leading position in the global electrolyser market. The company currently employs more than 500 people in Germany and Switzerland.
Nicola Beer, a vice president of the EIB, said the development of a green hydrogen business environment was crucial to make the green transition work for energy intensive industries. “Scalable, reliable and efficient electrolysers are a cornerstone,” she said.
The EIB has also been active elsewhere in the European hydrogen sector recently, committing a combined €371m with the Nordic Investment Bank to the construction and development of H2 Green Steel‘s green hydrogen-powered steel plant in Sweden, as part of a project finance deal.
EU’s ambitious plans
The EIB’s backing underscores the European Union’s push to develop green hydrogen production using wind and solar power, in an effort to energise a sector it sees as central to efforts to reduce cut carbon emissions and reduce dependence on fossil fuel imports. More than 90% of all hydrogen is currently made using natural gas.
The European Commission has set a target of producing 10m tonnes of hydrogen within the EU by 2030, based on the deployment of at least 40 gigawatts of hydrogen electrolysers. That looks ambitious, given installed electrolyser capacity globally was estimated to be around 3 gigawatts in 2023, with only 130 megawatts of new electrolyser capacity entering operation globally in 2022, according to the International Energy Agency.
The sector also has its critics. Some, such as NGO Friends of the Earth, see a rise in hydrogen use in industry and potentially for home heating as way to prolong the fossil fuel era, rather than shorten it, given the current reliance on national gas to produce hydrogen. Further doubts are expressed over whether green hydrogen can be scaled up to the extent where it will make a significant contribution to decarbonisation efforts.
However, the green hydrogen sector is expected to grow rapidly and is regarded by those investing in it as a solid proposition. Jacqueline van den Ende, co-founder and chief executive officer of Carbon Equity, one of the new investors in Sunfire, told Impact Investor earlier in March that climate solutions such as electrolysers and green hydrogen were “very clear, double-digit growth markets” that offered the prospect of market-rate returns.
