The Ecosystem: the gap in Europe’s hydrogen innovation ecosystem is the lack of demand

17 Jan 2023 | News

Without end users for clean hydrogen, Europe risks squandering its innovation advantage, according to a new analysis of patents. Unless technologies to switch from fossil fuel-based hydrogen are widely accessible the market won’t take off

Europe is performing well in hydrogen innovation, with key research centres and companies leading the world when it comes to patenting new technologies. But there are gaps to be filled in order to complete the hydrogen ecosystem, according to a study of hydrogen technology patents, published by the European Patent Office and the International Energy Agency (IEA).

“This study shows that innovators are responding to the need for competitive hydrogen supply chains, but also identifies areas - particularly among end users - where more effort is required,” said Fatih Birol, executive director of the IEA.

Between 2011 and 2020 the study found there was a strong emphasis on hydrogen production technologies, with around half of international patent families (IPFs) filed in this area. An IPF is a group of patents filed at different international offices for a single invention. The rest of the IPFs were split between end-use applications of hydrogen and technologies for its storage, distribution and transformation.

The study says the emphasis on hydrogen production innovation is welcome, but cost and performance improvements are needed in areas such as the synthesis of hydrogen-based fuels and end use applications. “While cost reductions in these areas are widely anticipated in analysts’ economic models of the future energy system, patent data suggest that inventors are not yet incentivised to make them a reality,” it notes.

These incentives need to come from governments, in particular through the creation of more demand for low emission hydrogen. “Sending signals about the need to transition to cleaner fuels to companies in the iron and steel, aviation and shipping sectors will stimulate technology efforts among incumbents and also catalyse new start-ups,” the report says.

These signals could involve regulation, market incentives or financial transfers, coupled with support for innovative projects.

The EU’s hydrogen strategy includes some measures to support end user projects and encourage the adoption of renewable hydrogen and its derivatives, but its main focus is on ramping up production. And it is production rather than demand that is likely to hold the attention of European policymakers in the immediate future, given the impressive subsidies being offered to hydrogen producers through the US Inflation Reduction Act.

Willing purchasers

The report sees merit in governments steering innovation towards novel hydrogen manufacturing techniques, reducing reliance on critical minerals or the use of desirable inputs such as brine or contaminated water.

But demand is essential. “Investments into the deployment of these technologies depends on there being willing purchasers of low emission hydrogen, which in turn depends on the existence of appropriate and competitive transformation and end use technologies,” it says. “Unless so-called ‘drop-in’ hydrogen-based fuels are available on the market, or the technologies to switch from fossil fuel-based hydrogen are widely accessible to consumers and businesses around the globe, investment will be limited.”

Europe leads hydrogen patenting

The study shows Europe performing well, accounting for 28% of all IPFs in the period 2011–20. Germany was responsible for 11%, France for 6% and the Netherlands for 3%. Europe also shows a “revealed technology advantage” across the hydrogen value chain, which is to say that it is patenting more hydrogen innovations than the average for all technologies.

Japan is close behind Europe, with similar revealed technology advantage and 24% of all hydrogen IPFs. It is moving faster, however, with a 6.2% compound average growth rate in hydrogen patenting, compared to Europe’s 4.5%. The US contributed 20% of all hydrogen IPFs, but is the only major global region where the number of IPFs decreased during the past decade.

The report makes a distinction between incremental improvements to well-established processes, mainly in the chemicals and refining sectors, and emerging technologies that could help mitigate climate change by making hydrogen a clean energy product for a much wider range of sectors.

Innovation in established hydrogen technologies is dominated by the European chemical industry, and companies such as Air Liquide, Linde and BASF. These have an extensive background in the production and handling of hydrogen from fossil fuels, but are also diversifying into emerging technologies, such as carbon capture, utilisation and storage, that enable the supply of low emission hydrogen.

But the new hydrogen patenting heavyweights are companies from the automotive and chemicals sectors focusing on electrolysis and fuel cell technologies. Patent applications here are led by Japanese and Korean companies, such as Toyota, Hyundai and Honda.

Based on the location of the inventors listed in the published IPFs, the report identifies 120 innovation clusters around the world, 98 of which are located across Europe. Most of these European clusters are of a relatively modest size, but two in Germany, in Munich and the Ruhr, and one in Paris, feature among the top ten global hydrogen innovation clusters.

In the Ruhr, the fact that more work is needed on synthetic fuels and end use applications is already being followed up. “Due to the numerous possible applications of hydrogen and its derivatives, research for end use applications is very pronounced here,” said Niklas Reinert, project manager at Hydrogen Metropole Ruhr.

In Essen, for example, the Gas and Heat Institute is looking into the application of hydrogen in thermal baths, glass melting furnaces or industrial burners, while KWS Energy Knowledge provides complementary training in the use of this technology. “This ensures that new applications can be put into practice quickly,” Reinert said.

To build on the innovation success of European regions such as the Ruhr, greater coordination is required. “The Ruhr metropolis is already very well positioned in the individual areas such as application, infrastructure, research, but also innovation and development. It is now important to combine these activities into a model region and to coordinate activities and funding frameworks,” said Reinert.

The top three spots for hydrogen patenting in universities and public research organisations go to French institutions: the Alternative Energies and Atomic Energy Commission, IFP Energies nouvelles, and the National Centre for Scientific Research. The Forschungszentrum Julich in Germany also makes it into the top ten.

The list is completed by five Korean research centres and in the US by the University of California. No Japanese research institution makes the top ten, although Japanese companies are well represented in the list.

The report also picks up a mismatch in some global regions between patenting and investment in manufacturing to put innovations on the market. In Europe the growth in patenting in low emission hydrogen production methods such as electrolysis has been matched by investment in new manufacturing capacity. This has been lacking in Japan, while in the US and China investment in manufacturing has outstripped innovation.

Looking at hydrogen start-ups, the report finds a strong connection between patenting and fundraising. In the period of the study, 117 of the 391 start-ups identified as active in hydrogen filed IPFs, mostly in the EU (34%) and the US (33%), but they attracted 55% of the venture capital funding, at all stages of their development.

This association becomes more pronounced as the start-ups move to later funding rounds. “More than 80% of the later stage investment in hydrogen start-ups is received by companies which had already filed their first patent application,” the report says. This increases to 95% when funding raised in initial public offerings and beyond is taken into consideration.

The report finds venture capital investment in hydrogen technologies was booming in 2021. Three major trends appear in its analysis of early stage deals: the emergence and fundraising success of start-ups offering project development services; the strong performance of companies with technologies for non-automotive hydrogen users; and more interest in non-electrolysis routes to low emission hydrogen.

Elsewhere in the Ecosystem…

  • Multus Biotechnology, a start-up created in 2019 by students from Imperial College London, has raised £7.9 million from investors to support further R&D on growth media for cultivated meat and the transition to manufacturing its first commercial products. The announcement follows the company’s selection in June 2022 for a European Innovation Council accelerator grant, which in the absence of UK participation in Horizon Europe will be covered by the UK's Horizon Europe guarantee.
  • Erasmus for Young Entrepreneurs is launching the EYE Innovator Award, to honour exchanges in 2022 that produced an impact in terms of technical or process innovation, in any field. The deadline for submissions is 1 February, with the winners expected to present their achievements to the EYE Network meeting in Santiago de Compostela in March.
  • The UK appears to be losing out on its early stage investment in medical device and health technologies, according to a survey carried out by the Centre for Process Innovation (CPI) and the Association of British HealthTech Industries. Up to 24% of UK-based health technology SMEs questioned said they intend to launch their products in the US rather than at home, because of its market size and favourable regulatory environment. Regulation is a particular bugbear, with 70% saying the UK system is hard to navigate or puts a brake on commercialisation. A second CPI report on in vitro diagnostics, carried out with Cambridge Design Partnership, found similar pressures at work, so that much UK research is commercialised abroad.

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