Assessing hydrogen projects with Ardian’s analytical matrix

By Amir Sharifi, Managing Director - Energy Transition, Ardian Infrastructure

Ardian’s experience in the renewables sector has created confidence in our understanding of the development paths for technologies rolled out to replace fossil fuels.

We at Ardian see hydrogen as the green energy vector of tomorrow, and therefore a massive opportunity for investors. When we began our involvement in renewables almost 20 years ago, doubts about their future role remained. As we helped it mature, the experience we gained in the sector has given us real confidence in our understanding of the development paths for technologies rolled out to replace fossil fuels.

We have learned, for example, that early entrants earn a premium, not least because they are able to secure the best physical locations for deployment. We have incorporated all our knowledge into a highly sophisticated risk analysis tool that we deploy for any infrastructure investment.

Success in any nascent industry is more difficult when the only risk matrices and evaluation tools you are able to apply were designed for some other sector. Ardian has 25 year’s experience analysing energy projects. Over that quarter-century we have developed a measure of agility in adjusting our risk matrix for the energy arena. We have now developed an assessment and analysis template for hydrogen-project financing which takes into account all that we’ve learned through experience, plus the many variables unique to hydrogen and to specific project types.

Assessing A2A

We used the tool ahead of our recent commitment to invest €1.5 billion in A2A, the Italian green energy company, to evaluate the economic case for constructing a new electrolyser fuelled by our renewable energy plants in southern Italy. The system considered our cost of renewable energy production as a new entrant, the volumes generated (including intermittency), the cost of intermittency when buying top-up energy from the grid, load factors an optimal operating hours, and the possible roles of power purchase agreements and green certificates.

The plant itself was analysed, including the capital expenditure demands of electrolysers, their efficiency, and the forecast sale prices of the refined hydrogen generated (including in comparison to grey hydrogen, and consideration of the impact of the CO2 crisis on buying patterns). Another variable calculated is the impact of potential new subsidies of capital expenditure, offtake, or both.

Flexibility built in

Multiple further factors are considered and weighted within the analytical matrix, most of them project-dependent. We constantly change and extend the inputs to help us assess different funding opportunities in the hydrogen chain, upstream as well as downstream, by aligning target companies with our funds’ investment criteria.

For example, we are now applying the analytical matrix to a series of refuelling stations on a highway subject to heavy and predictable HGV traffic. The road links Portugal and Spain, is a doorway to southern Europe, and lies in an area where pressure to reduce CO2 emissions is rising. Some of the cargoes carried along it comprise hydrogen, which makes the project even more attractive. The analytical framework helps to quantify such benefits.

The analysis tool is an important part of Ardian’s three-stage process of leaning into the hydrogen opportunity. This begins with analysis by an ad hoc internal task force that includes our own experts and representatives from our operating partners. They evaluate each project together. We then examine potential beneficial relationships with existing portfolio companies. They span the entire hydrogen value chain from green electricity generation to midstream logistics, through to deployment, for example through static filling stations and captive fuel refining facilities at airports. Finally, we take the decisive step of engaging through investment. Informed by the knowledge of our experience, concentrated and applied through our comprehensive risk analysis matrix, we can proceed with confidence!

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